<PAGE> 1
As filed with the Securities and Exchange Commission on February 17, 2000
Registration No.__
================================================================================
U.S. Securities and Exchange Commission
Washington, DC 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. ___ Post-Effective Amendment No. ___
(Check appropriate box or boxes)
Exact Name of Registrant as Specified in Charter:
ARMADA FUNDS
(formerly known as "NCC Funds")
Area Code and Telephone Number:
(800) 622-FUND
Address of Principal Executive Offices:
One Freedom Valley Drive
Oaks, Pennsylvania 19456
Name and Address of Agent for Service:
AUDREY C. TALLEY, ESQ.
Drinker Biddle & Reath LLP
One Logan Square
18th and Cherry Streets
Philadelphia, Pennsylvania 19103-6996
copy to:
JOSEPH P. PENKO
National City Bank
National City Center
P.O. Box 5756
Cleveland, Ohio 44101-0756
Approximate Date of Proposed Public Offering: As soon as practicable after the
Registration Statement becomes effective under the Securities Act of 1933.
It is proposed that this filing will become effective on March 20, 2000 pursuant
to Rule 488 under the Securities Act of 1933.
Title of Securities Being Registered: Shares of Beneficial Interest (without par
value) of Armada Funds.
Calculation of Registration Fee under the Securities Act of 1933: No filing fee
is required because an indefinite number of shares have previously been
registered on Form N-1A by Registrant (Registration Nos. 33-488, 811-4416)
pursuant to Rule 24f-2 under the Investment Company Act of 1940. Pursuant to
Rule 429, this Registration Statement relates to Shares previously registered on
the aforesaid Registration Statement on Form N-1A.
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<TABLE>
<CAPTION>
ARMADA FUNDS
FORM N-14
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(a)
ITEM NO. HEADING
- ------- --------
Part A. INFORMATION REQUIRED IN THE PROSPECTUS
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<S> <C> <C>
1. Beginning of Registration Statement
and Outside Front Cover Page of Prospectus............ Cover Page
2. Beginning and Outside
Back Cover Page of Prospectus......................... Table of Contents
3. Synopsis and Risk Factors.............................. Summary; Comparative Fee Tables; Risk Factors;
Comparison of Investment Policies and Risk Factors;
Appendix D
4. Information About the Transaction..................... Summary; Risk Factors; Information Relating to the
Proposed Reorganization; Comparison of Investment
Policies and Risk Factors; Appendix D
5. Information About the Registrant...................... Summary; Risk Factors; Comparison of Investment
Policies and Risk Factors; Additional Information
About Armada; Additional Information About
Parkstone; Appendix D; Management's Discussion of
Fund Performance; Appendix B; Appendix C
6. Information About the Company
Being Acquired........................................ Summary; Risk Factors; Comparison of Investment
Policies and Risk Factors; Additional Information
About Armada; Additional Information About
Parkstone; Appendix D
7. Voting Information.................................... Summary; Information Relating to Voting Matters
8. Interest of Certain Persons
and Experts........................................... Additional Information About Armada; Additional
Information About Parkstone
9. Additional Information Required
for Reoffering by Persons Deemed
to be Underwriters.................................... Inapplicable
</TABLE>
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<TABLE>
<CAPTION>
Part B. INFORMATION REQUIRED IN THE STATEMENT OF ADDITIONAL INFORMATION
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<S> <C> <C>
10. Cover Page......................................... Statement of Additional Information Cover Page
11. Table of Contents................................... Table of Contents
12. Additional Information
About the Registrant................................ Statement of Additional Information of Armada Funds
dated December 10, 1999*
13. Additional Information
About the Company Being
Acquired............................................ Statement of Additional Information of The
Parkstone Group of Funds dated September 17, 1999*
14. Financial Statements................................... Pro Forma Financial Statements
</TABLE>
Part C. OTHER INFORMATION
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Items 15-17. Information required to be included in Part C is set forth under
the appropriate Item, so numbered, in Part C of this Registration Statement.
* Incorporated by reference thereto.
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March 20, 2000
Dear Shareholders:
Please take the opportunity to read this proxy statement regarding the proposed
Agreement and Plan of Reorganization (the "Reorganization") between Parkstone
Funds and Armada Funds. A special meeting of shareholders will be held on
Wednesday, May 10, 2000 at One Freedom Valley Drive, Oaks, Pennsylvania to vote
on this issue.
On November 17, 1999, the Board of Trustees of the Parkstone Group of Funds
unanimously approved this Reorganization. Both fund complexes are advised by the
National City Investment Management Company, a pool of talented investment
professionals from the former First of America Investment Co. and National
City's Asset Management Group.
The Reorganization would combine the portfolios of the Parkstone Group of Funds
into corresponding portfolios of Armada Funds. By consolidating substantially
similar portfolios, the funds may be able to achieve economies of scale that
could lower costs and shareholders' expenses. In addition, a reorganization of
these fund families is expected to be a tax-free event for our shareholders.
CASTING YOUR VOTE
One proxy card has been enclosed for each fund you own. Please vote your shares
by completing and signing the proxy card(s), and returning them in the enclosed,
postage-paid envelope. For information about alternative voting options
available to you, including touch-tone telephone and Internet voting, please
refer to your proxy card(s).
It is important that you vote each proxy card prior to the shareholder meeting
on May 10, 2000. As the meeting date approaches, you may receive a call from
Shareholder Communications Corporation ("SCC") encouraging you to exercise your
right to vote if you have not voted already. The Fund has enlisted the services
of SCC, a professional proxy solicitation firm, to assist shareholders with the
proxy process.
We value your relationship with the Parkstone Funds and hope you will vote
affirmatively on the proposed Reorganization. If you have any questions
regarding this proxy statement, please call our Investor Services line at
800-451-8377. If you would like to learn more about Armada Funds, you can visit
its website at www.armadafunds.com.
Sincerely,
Robert D. Neary
Chairman
<PAGE> 5
THE PARKSTONE GROUP OF FUNDS
One Freedom Valley Drive
Oaks, Pennsylvania 19456
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held on May 10, 2000
To Parkstone Shareholders:
NOTICE IS HEREBY GIVEN THAT a Special Meeting of the Shareholders
("Shareholders") of each investment portfolio ("Fund") of The Parkstone Group of
Funds ("Parkstone") will be held at SEI Investments Co., One Freedom Valley
Drive, Oaks, Pennsylvania, 19456, on May 10, 2000 at 3:00 p.m. (Eastern time)
for the following purposes:
ITEM 1. With respect to each Fund:
To approve or disapprove an Agreement and Plan of
Reorganization (the "Reorganization Agreement") and the
transactions contemplated thereby, including:
(a) the transfer of substantially all of the assets and
liabilities of each of the Parkstone Funds listed below into
the corresponding Armada Fund listed below in exchange for A
Shares, B Shares or I Shares, as applicable, of the Armada
Funds:
<TABLE>
<CAPTION>
Acquired Fund Acquiring Fund
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<S> <C>
Prime Obligations Fund Money Market Fund
U.S. Government Obligations Fund Government Money Market Fund
Tax-Free Fund Tax Exempt Money Market Fund
Bond Fund Bond Fund
U.S. Government Income Fund U.S. Government Income Fund
Limited Maturity Bond Fund Enhanced Income Fund
(to be renamed Limited Maturity
Bond Fund)
Intermediate Government Intermediate Bond Fund
Obligations Fund
Large Capitalization Fund Large Cap Ultra Fund
Equity Income Fund Equity Income Fund
Small Capitalization Fund Small Cap Growth Fund
International Discovery Fund International Equity Fund
Balanced Allocation Fund Balanced Allocation Fund
National Tax Exempt Bond Fund National Tax Exempt Bond Fund
Mid Capitalization Fund Mid Cap Growth Fund
Michigan Municipal Bond Fund Michigan Municipal Bond Fund
Treasury Fund Treasury Plus Money Market Fund;
</TABLE>
(b) the distribution of such Armada Fund shares to the
shareholders of the Parkstone Funds according to their
respective interests; and
<PAGE> 6
(c) the termination under state law and the Investment Company
Act of 1940, as amended, of Parkstone.
ITEM 2. With respect to Parkstone:
To transact such other business as may properly come before
the Special Meeting or any adjournment(s) thereof.
The proposed reorganization and related matters are described in the
attached Combined Prospectus/Proxy Statement. Appendix A to the Combined
Prospectus/Proxy Statement is a copy of the Reorganization Agreement.
Shareholders of record as of the close of business on February 28, 2000
are entitled to notice of, and to vote at, the Special Meeting or any
adjournment(s) thereof.
THE BOARD OF TRUSTEES OF THE PARKSTONE GROUP OF FUNDS RECOMMENDS THAT
YOU APPROVE THESE PROPOSALS. IT IS VERY IMPORTANT THAT YOU PUT FORTH YOUR VOTE
REGARDING THESE PROPOSITIONS.
IF YOU ARE UNABLE TO ATTEND THE MEETING, PLEASE CHOOSE THE VOTING
METHOD THAT IS MOST CONVENIENT FOR YOU.
1. VOTE BY MAIL: SIGN AND DATE YOUR PROXY CARD(S) AND RETURN IN
THE ENCLOSED POSTAGE-PAID ENVELOPE. NOTE: YOUR PROXY IS NOT
VALID UNLESS IT IS SIGNED.
2. VOTE BY TOUCH-TONE TELEPHONE: PLEASE REFER TO THE ENCLOSED
PROXY CARD FOR THE TOLL-FREE TELEPHONE NUMBER AND
INSTRUCTIONS.
3. VOTE VIA THE INTERNET: PLEASE REFER TO THE ENCLOSED PROXY CARD
FOR THE WEB SITE ADDRESS AND INSTRUCTIONS.
PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY
SUBMITTING TO PARKSTONE A WRITTEN NOTICE OF REVOCATION OR A SUBSEQUENTLY
EXECUTED PROXY OR BY ATTENDING THE SPECIAL MEETING AND VOTING IN PERSON.
W. Bruce McConnel, III
Secretary
March 20, 2000
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COMBINED PROSPECTUS/PROXY STATEMENT
DATED MARCH 20, 2000
THE PARKSTONE GROUP OF FUNDS
One Freedom Valley Drive
Oaks, Pennsylvania 19456
(800) 451-8377
ARMADA FUNDS
One Freedom Valley Drive
Oaks, Pennsylvania 19456
(800) 622-FUND (3863)
This Combined Prospectus/Proxy Statement is furnished in connection
with the solicitation of proxies by the Board of Trustees of The Parkstone Group
of Funds ("Parkstone") in connection with a Special Meeting (the "Meeting") of
Shareholders ("Shareholders") to be held on May 10, 2000 at 3:00 p.m. (Eastern
time) at SEI Investments Co., One Freedom Valley Drive, Oaks, Pennsylvania,
19456, at which Shareholders will be asked to consider and approve a proposed
Agreement and Plan of Reorganization dated November 17, 1999 (the
"Reorganization Agreement"), by and between Parkstone and Armada Funds
("Armada") and the matters contemplated therein. A copy of the Reorganization
Agreement is attached as Appendix A.
Parkstone and Armada are both open-end, management investment
companies. National City Investment Management Company ("IMC"), formerly named
First of America Investment Corporation ("First of America"), currently provides
investment advisory services to Parkstone and Armada. IMC reflects a combination
of National City Bank's investment management group and First of America, an
investment advisory subsidiary of First of America Bank Corporation. First of
America formerly provided investment advisory services to Parkstone. In
reviewing the proposed reorganization (the "Reorganization"), the Parkstone
Board considered the merger of First of America Bank Corporation and National
City Corporation, the parent corporation of National City Bank ("National
City"). National City and National Asset Management Corporation ("NAM") formerly
provided investment advisory services to some of the existing Armada investment
portfolios (collectively, the "Existing Armada Funds"). The Parkstone Board also
considered the effect of such merger on Parkstone; the recommendations of IMC
and National City with respect to the proposed consolidation of Parkstone and
Armada; the fact that the Reorganization would constitute a tax-free
reorganization; and the fact that the interests of Shareholders would not be
diluted as a result of the Reorganization.
The Reorganization Agreement provides that initially each of the
following eleven investment portfolios of Parkstone (collectively, the
"Reorganizing Funds") will transfer substantially all its assets and known
liabilities to the Existing Armada Fund identified below opposite its name:
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<TABLE>
<CAPTION>
REORGANIZING FUNDS EXISTING ARMADA FUNDS
------------------ ---------------------
<S> <C>
Prime Obligations Fund Money Market Fund*
U.S. Government Obligations Fund Government Money Market Fund*
Tax-Free Fund Tax Exempt Money Market Fund*
Bond Fund* Bond Fund
Limited Maturity Bond Fund Limited Maturity Bond Fund (formerly the Enhanced
Income Fund)*
Intermediate Government Intermediate Bond Fund*
Obligations Fund
Equity Income Fund Equity Income Fund*
Small Capitalization Fund Small Cap Growth Fund*
International Discovery Fund International Equity Fund*
Balanced Allocation Fund Balanced Allocation Fund*
National Tax Exempt Bond Fund National Tax Exempt Bond Fund*
</TABLE>
The Reorganization Agreement also provides that subsequently each of
the following five investment portfolios of Parkstone (collectively, the
"Continuing Funds") will transfer all its assets and known liabilities to the
newly-organized Armada investment portfolio (collectively, the "New Armada
Funds") identified below opposite its name:
<TABLE>
<CAPTION>
CONTINUING FUNDS NEW ARMADA FUNDS
---------------- ----------------
<S> <C>
Large Capitalization Fund* Large Cap Ultra Fund
U.S. Government Income Fund* U.S. Government Income Fund
Mid Capitalization Fund* Mid Cap Growth Fund
Michigan Municipal Bond Fund* Michigan Municipal Bond Fund
Treasury Fund* Treasury Plus Money Market
Fund
</TABLE>
In exchange for the transfers of these assets and liabilities, Armada
will issue shares in the 16 Armada investment portfolios listed above
(collectively, the "Armada Funds") to the corresponding Parkstone investment
portfolios listed above (collectively, the "Parkstone Funds"). The initial
transaction between the Reorganizing Funds and the Existing Armada Funds is
referred to herein as the "Reorganizing Funds Transaction" and the subsequent
transaction between the Continuing Funds and the New Armada Funds is referred to
herein as the "Continuing Funds Transaction." The transactions are expected to
occur on or after June 9, 2000.
Most of the Parkstone Funds have three classes of shares outstanding.
Armada will offer comparable classes of shares. Holders of each class of shares
of a Parkstone Fund will receive the class of shares of the corresponding Armada
Fund as set forth in the tables on pages 17 - 19
___________________
* Denotes the surviving or continuing portfolio for purposes of
maintaining the financial statements and performance history in the
post-reorganization funds.
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<PAGE> 9
under "Information Relating to the Proposed Reorganization -- Description of the
Reorganization Agreement."
The Parkstone Funds will make liquidating distributions of the Armada
Funds' shares to the Shareholders of the Parkstone Funds, so that a holder of a
class of shares in a Parkstone Fund will receive a class of shares (as described
herein) of the corresponding Armada Fund with the same aggregate net asset value
as the Shareholder had in the Parkstone Fund immediately before the transaction.
Following the Reorganization, Shareholders of the Parkstone Funds will be
shareholders of their corresponding Armada Funds, and Parkstone will be
terminated under state law and the Investment Company Act of 1940, as amended.
The Existing Armada Funds currently are conducting investment
operations as described in this Combined Prospectus/Proxy Statement. The New
Armada Funds have recently been organized for the purpose of continuing the
investment operations of the Parkstone Large Capitalization Fund, U.S.
Government Income Fund, Mid Capitalization Fund, Michigan Municipal Bond Fund
and Treasury Fund.
This Combined Prospectus/Proxy Statement sets forth the information
that a Shareholder of Parkstone should know before voting on the Reorganization
Agreement (and related transactions) and should be retained for future
reference. The Prospectus relating to the Class I shares of the Existing Armada
Funds dated September 28, 1999, and/or the Prospectus relating to the Class A, B
and C shares of the Existing Armada Funds dated December 10, 1999, which
describe the operations of those Funds, accompany this Combined Prospectus/Proxy
Statement. Additional information is set forth in the Statement of Additional
Information relating to the Existing Armada Funds dated December 10, 1999, and
this Combined Proxy/Prospectus. Additional information relating to Parkstone is
set forth in the Prospectuses dated September 17, 1999, and the Statement of
Additional Information dated September 17, 1999. Each of these documents is on
file with the Securities and Exchange Commission (the "SEC"), and is available
without charge upon oral or written request by writing or calling either
Parkstone or Armada at the respective addresses or telephone numbers indicated
on page 1. The information contained in the Prospectuses, the Armada Statement
of Additional Information and the Parkstone Statement of Additional Information
is incorporated herein by reference.
This Combined Prospectus/Proxy Statement constitutes the Proxy
Statement of Parkstone for the meeting of its Shareholders, and Armada Funds'
Prospectus for the shares of its Existing Armada Funds that have been registered
with the SEC and are to be issued in connection with the Reorganization. Because
the New Armada Funds will be deemed to be continuations of the Continuing Funds,
this Combined Prospectus/Proxy Statement does not constitute a prospectus for
the shares that will be issued in the Continuing Funds Transaction.
This Combined Prospectus/Proxy Statement is expected to first be sent
to Shareholders on or about March 31, 2000.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS COMBINED PROSPECTUS/PROXY
STATEMENT AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY REFERENCE AND,
IF GIVEN OR
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<PAGE> 10
MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY PARKSTONE OR ARMADA.
SHARES OF ARMADA ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED OR OTHERWISE SUPPORTED BY, NATIONAL CITY INVESTMENT MANAGEMENT COMPANY,
ITS PARENT COMPANY, OR ANY OF ITS AFFILIATES, AND ARE NOT FEDERALLY INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, FEDERAL DEPOSIT INSURANCE CORPORATION, OR ANY
GOVERNMENTAL AGENCY OR STATE. INVESTMENT IN ARMADA INVOLVES RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL. THERE IS NO ASSURANCE THAT THE ARMADA MONEY MARKET
FUND, GOVERNMENT MONEY MARKET FUND, TAX EXEMPT MONEY MARKET FUND OR TREASURY
PLUS MONEY MARKET FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF
$1.00 PER SHARE.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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IMPORTANT INFORMATION TO HELP YOU
UNDERSTAND AND VOTE ON THE PROPOSAL
QUESTIONS AND ANSWERS ABOUT THE REORGANIZATION PROPOSAL
1. WHAT PROPOSAL AM I BEING ASKED TO VOTE ON?
You are being asked to approve a reorganization of the portfolios of the
Parkstone Group of Funds ("Parkstone") into corresponding portfolios of the
Armada Funds ("Armada").
2. WHAT ARE THE REASONS FOR THIS REORGANIZATION?
In March of 1998, First of America Bank Corporation completed a merger with
National City Corporation. As a result of this merger, the investment advisor
for BOTH Parkstone and Armada fund families became National City Investment
Management Company (IMC). IMC is a registered investment advisor with a
distinguished heritage. As an affiliate of National City Corporation, IMC has
access to exceptional financial and technological resources. As a separate
entity, IMC is free to concentrate on the business of investing.
By combining the separate Armada and Parkstone mutual fund families into a
single, larger consolidated group of funds, shareholders will be offered a more
complete selection of portfolios. Additionally, by consolidating investment
portfolios that are substantially similar, the efficiency of certain operational
procedures can be improved, and the funds may be able to achieve economies of
scale that will lead to lower costs and expenses.
3. HAS THE FUND'S BOARD OF TRUSTEES APPROVED THE PROPOSAL?
Yes. The Board of Trustees has unanimously approved the proposal and recommends
that you vote to approve it.
4. WHICH PARKSTONE FUNDS WILL BE REORGANIZING INTO WHICH ARMADA FUNDS?
This proxy statement includes an overview of the Fund-to-Fund reorganization as
well as a detailed description of the similarities and differences which may
exist between each Parkstone portfolio and the Armada portfolio into which it is
being combined. Careful attention was paid to combining Funds with similar
investment styles and objectives.
Pending shareholder approval, the expanded Armada Fund family will consist of a
mix of 23 consolidated funds as well as five additional funds that have been
added to the family because of the reorganization.
5. IS THE REORGANIZATION A TAXABLE EVENT FOR FEDERAL INCOME TAX PURPOSES?
Typically, the exchange of shares due to a merger does not result in a gain or
loss for federal income tax purposes.
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QUESTIONS AND ANSWERS ABOUT VOTING
1. HOW DO I VOTE MY SHARES?
You can vote your shares by completing and signing the enclosed proxy card, and
sending it in the enclosed postage-paid envelope.
Please refer to your individual proxy card for information about other
convenient voting options which may be available to you, such as touch-tone
telephone and Internet voting.
If you need any assistance, or have any questions regarding the proposal or how
to vote your shares, please call Parkstone at 1-800-451-8377.
2. WHAT WILL HAPPEN IF THERE ARE NOT ENOUGH VOTES TO REACH A QUORUM BY THE
SCHEDULED SHAREHOLDER MEETING DATE?
In order to receive sufficient votes to establish a quorum, Shareholder
Communications Corporation (the proxy solicitor), Parkstone Funds, SEI
Investments Mutual Funds Services or State Street Bank and Trust Company
("BFDS") may contact you by mail or telephone. We encourage shareholders to vote
as soon as they review the enclosed proxy materials to avoid additional mailings
or telephone calls which could result in additional costs to the Funds. If there
are not sufficient votes to approve the proposal by the time of the shareholder
meeting (May 10, 2000), the meeting may be adjourned to permit further
solicitation of proxy votes.
QUESTIONS AND ANSWERS ABOUT SHAREHOLDER ACCOUNTS AND REPORTS
1. I HAVE AN IRA ACCOUNT WITH PARKSTONE. HOW WILL THIS REORGANIZATION
AFFECT MY INVESTMENT?
The current Custodian for all Parkstone and Armada IRAs is SEI Trust Company and
will remain the same. Having the same Custodian will help with a smooth
transition of accounts from Parkstone to Armada if the reorganization is
approved. No additional paperwork will be necessary to complete the transfer of
assets from your Parkstone IRA to an Armada IRA with the corresponding Armada
portfolio.
2. HOW WILL YOU DETERMINE THE NUMBER OF SHARES OF THE CORRESPONDING ARMADA
PORTFOLIO THAT I WILL RECEIVE?
Parkstone shareholders will receive the number of full and fractional shares of
the Armada portfolio(s) that correspond to their Parkstone portfolio(s), that is
equal in value to the net asset value of their shares of the Parkstone
portfolio(s) as last determined on the closing date of the reorganization.
Therefore, your market value will remain the same, although your share amount
may change. It is anticipated that the closing will occur in early June 2000.
3. WILL I STILL RECEIVE MY PARKSTONE FUNDS ANNUAL REPORT?
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The fiscal years for Parkstone and Armada end on May 31. It is anticipated that
the reorganization will take place closely following the end of the fiscal
period. Therefore, copies of the Parkstone Annual Report will not be distributed
to shareholders. Copies of both the Armada Funds Annual Report and plain paper
copies of the Parkstone Annual Report will be available free of charge after
July 30, 2000 by calling 1-800-622-FUND (3863). The Armada Funds Annual Report
will also be located on the website, www.armadafunds.com.
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C> <C>
SUMMARY .................................................................................................1
Proposed Reorganization.........................................................................1
Reasons for the Reorganization..................................................................1
Federal Income Tax Consequences.................................................................1
Overview of the Parkstone Funds and Armada Funds................................................2
Voting Information..............................................................................14
RISK FACTORS.............................................................................................15
INFORMATION RELATING TO THE PROPOSED REORGANIZATION......................................................16
Description of the Reorganization Agreement.....................................................16
Capitalization..................................................................................22
Federal Income Tax Consequences.................................................................26
COMPARISON OF INVESTMENT POLICIES AND RISK FACTORS.......................................................27
Parkstone Prime Obligations Fund and Armada Money Market Fund...................................27
Parkstone U.S. Government Obligations Fund and Armada Government Money Market Fund..............28
Parkstone Tax-Free Fund and Armada Tax Exempt Money Market Fund.................................29
Parkstone Bond Fund and Armada Bond Fund........................................................30
Parkstone Limited Maturity Bond Fund and Armada Limited Maturity Bond Fund
(formerly Armada Enhanced Income Fund)..........................................................30
Parkstone Intermediate Government Obligations Fund and Armada Intermediate Bond Fund............31
Parkstone Equity Income Fund and Armada Equity Income Fund......................................32
Parkstone Small Capitalization Fund and Armada Small Cap Growth Fund............................32
Parkstone International Discovery Fund and Armada International Equity Fund.....................33
Parkstone Balanced Allocation Fund and Armada Balanced Allocation Fund..........................34
Parkstone National Tax Exempt Bond Fund and Armada National Tax Exempt Bond Fund................35
Investment Policies and Risks -- General........................................................36
Investment Limitations..........................................................................38
Purchase and Redemption Information, Exchange Privileges, Distribution and Pricing..............42
Other Information...............................................................................42
INFORMATION RELATING TO VOTING MATTERS...................................................................44
General Information.............................................................................44
Shareholder and Board Approvals.................................................................45
Appraisal Rights................................................................................46
Quorum..........................................................................................46
Annual Meetings.................................................................................47
ADDITIONAL INFORMATION ABOUT ARMADA......................................................................47
ADDITIONAL INFORMATION ABOUT PARKSTONE...................................................................48
LITIGATION...............................................................................................48
FINANCIAL HIGHLIGHTS.....................................................................................48
Parkstone Prime Obligations Fund................................................................49
FINANCIAL STATEMENTS.....................................................................................72
OTHER BUSINESS...........................................................................................72
SHAREHOLDER INQUIRIES....................................................................................72
</TABLE>
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<PAGE> 15
<TABLE>
PAGE
<S> <C> <C>
APPENDIX A - AGREEMENT AND PLAN OF REORGANIZATION........................................................A1
APPENDIX B - FUND PERFORMANCE DATA.......................................................................B1
APPENDIX C - FEE AND EXPENSE TABLES......................................................................C1
APPENDIX D - SHAREHOLDER TRANSACTIONS AND SERVICES.......................................................D1
APPENDIX E - MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE - EXISTING ARMADA FUNDS.........................E1
</TABLE>
<PAGE> 16
SUMMARY
The following is a summary of certain information relating to the
proposed Reorganization, the parties thereto and the related transactions, and
is qualified by reference to the more complete information contained elsewhere
in this Combined Prospectus/Proxy Statement, the Prospectuses and Statements of
Additional Information of Parkstone and Armada, and the Reorganization Agreement
attached to this Combined Prospectus/Proxy Statement as Appendix A. Parkstone's
most recent Annual Report or Semi-Annual Report to Shareholders may be obtained
free of charge by calling 1-800-451-8377 or writing One Freedom Valley Drive,
Oaks, Pennsylvania 19456. Armada's most recent Annual Report or Semi-Annual
Report to Shareholders may be obtained free of charge by calling 1-800-622-FUND
(3863) or writing One Freedom Valley Drive, Oaks, Pennsylvania 19456, or by
viewing on, or downloading from, the Armada Internet web site at
www.armadafunds.com.
PROPOSED REORGANIZATION. Based upon their evaluation of the relevant information
presented to them, and in light of their fiduciary duties under federal and
state law, Parkstone's and Armada's Boards, including their members who are not
"interested persons" within the meaning of the Investment Company Act of 1940
(the "1940 Act"), have determined that the proposed Reorganization is in the
best interests of Parkstone's and Armada's Shareholders, respectively, and that
the interests of existing Shareholders of Parkstone and Armada, respectively,
will not be diluted as a result of such Reorganization.
The Cover Page and pages 1 - 15 hereof summarize the proposed
Reorganization.
PARKSTONE'S BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL
OF THE REORGANIZATION AGREEMENT.
REASONS FOR THE REORGANIZATION. The primary reason for the Reorganization is the
merger of First of America Bank Corporation and National City Corporation. The
merger was completed March 31, 1998. The Reorganization presents the opportunity
to combine the separate Parkstone and Armada mutual fund families into a single,
larger, consolidated group. IMC and National City have recommended that each of
the Parkstone Funds be reorganized as described in this Combined
Prospectus/Proxy Statement. In light of this recommendation, after consideration
of the reasons therefor and the proposed operations of the combined funds after
the Reorganization, and in consideration of the fact that the Reorganization
will be tax-free and will not dilute the interests of the shareholders of
Parkstone (the "Parkstone Shareholders"), the Board of Trustees of Parkstone has
authorized the Agreement and Plan of Reorganization and recommended approval of
the Reorganization by Shareholders.
FEDERAL INCOME TAX CONSEQUENCES. Drinker Biddle & Reath LLP, independent counsel
to Armada and to its Board of Trustees, and to Parkstone and its Board of
Trustees, will issue an opinion (based on certain assumptions) as of the
effective time of each of the Reorganizing Funds Transaction and the Continuing
Funds Transaction that the transactions will not give rise to the recognition of
income, gain or loss for federal income tax purposes to the Parkstone Funds or
Armada Funds or their respective shareholders. See "Information Relating to the
Proposed Reorganization -- Federal Income Tax Consequences."
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<PAGE> 17
OVERVIEW OF THE PARKSTONE FUNDS AND ARMADA FUNDS. Since the merger of First of
America Bank Corporation and National City Corporation, Parkstone and Armada
have acted to align their organizations. Accordingly, at this time both
Parkstone and Armada have the same: investment advisor; administrator;
distributor; transfer agent; and custodian, as described in more detail below.
There are no material differences between the investment objectives and policies
of the Continuing Funds and the corresponding New Armada Funds. The investment
objectives and policies of the Reorganizing Funds are similar to those of the
corresponding Existing Armada Funds.
PARKSTONE PRIME OBLIGATIONS FUND AND ARMADA MONEY MARKET FUND
Parkstone Prime Obligations Fund seeks to provide current income, with
liquidity and stability of principal. Armada Money Market Fund's investment
objective is to seek as high a level of current income as is consistent with
liquidity and stability of principal. Each pursues its investment objective by
investing in a diversified portfolio of high quality money market instruments
and other comparable instruments.
PARKSTONE U.S. GOVERNMENT OBLIGATIONS FUND AND ARMADA GOVERNMENT MONEY
MARKET FUND
Parkstone U.S. Government Obligations Fund seeks to provide current
income, with liquidity and stability of principal by investing at least 65% of
its total assets in short-term U.S. Treasury bills, notes and other obligations
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities. Armada Government Money Market Fund's investment objective is
to seek as high a level of current income as is consistent with liquidity and
stability of principal by investing in obligations issued or guaranteed as to
payment of principal and interest by the U.S. government, its agencies or
instrumentalities.
PARKSTONE TAX-FREE FUND AND ARMADA TAX EXEMPT MONEY MARKET FUND
Parkstone Tax-Free Fund seeks to provide as high a level of current
interest income free from federal income taxes as is consistent with
preservation of capital and relative stability of principal. Armada Tax Exempt
Money Market Fund's investment objective is to provide as high a level of
current interest income exempt from federal income tax as is consistent with
liquidity and stability of principal. Each pursues its investment objective by
investing at least 80% of its assets in municipal securities the interest on
which is considered exempt from federal income tax.
PARKSTONE BOND FUND AND ARMADA BOND FUND
The investment objective of both Parkstone Bond Fund and Armada Bond
Fund is to provide current income and preservation of capital by investing in a
portfolio of high- and medium-grade fixed-income securities. Both Funds will
normally invest at least 80% of the value of their total assets in investment
grade debt securities of all types, and expect to maintain a dollar-weighted
average portfolio maturity of four to twelve years.
-2-
<PAGE> 18
PARKSTONE LIMITED MATURITY BOND FUND AND ARMADA LIMITED MATURITY BOND
FUND (FORMERLY THE ARMADA ENHANCED INCOME FUND)
In connection with the Reorganization, Armada Enhanced Income Fund is
expected to change its name to Armada Limited Maturity Bond Fund. References in
this Combined Prospectus/Proxy Statement hereinafter will be to the Fund's new
name.
The investment objective of both Parkstone Limited Maturity Bond Fund
and Armada Limited Maturity Bond Fund is to provide current income as well as
preservation of capital by investing in a portfolio of high- and medium-grade
fixed-income securities. Both Funds will normally invest at least 80% of the
value of their total assets in investment grade debt securities of all types,
and expect to maintain a dollar-weighted average portfolio maturity of one to
five years.
PARKSTONE INTERMEDIATE GOVERNMENT OBLIGATIONS FUND AND ARMADA
INTERMEDIATE BOND FUND
Parkstone Intermediate Government Obligations Fund seeks to provide
current income as well as preservation of capital by investing primarily in U.S.
government securities. Armada Intermediate Bond Fund's investment objective is
to provide current income as well as preservation of capital by investing in a
portfolio of high- and medium-grade fixed income securities. Both Funds expect
to maintain a dollar-weighted average portfolio maturity of three to ten years.
PARKSTONE EQUITY INCOME FUND AND ARMADA EQUITY INCOME FUND
The investment objective of both Parkstone Equity Income Fund and
Armada Equity Income Fund is to provide capital appreciation with a diversified
portfolio of publicly traded equity securities which, in the aggregate, provide
an above-average current yield. Both Funds normally invest at least 80% of their
total assets in common stocks, and securities convertible into common stocks, of
companies that have the ability to pay dividends with a yield above the S&P 500
Composite Index.
PARKSTONE SMALL CAPITALIZATION FUND AND ARMADA SMALL CAP GROWTH FUND
The investment objective of both Parkstone Small Capitalization Fund
and Armada Small Cap Growth Fund is to provide capital appreciation with a
diversified portfolio of publicly traded smaller cap equity securities. Both
Funds will normally invest at least 80% of their respective total assets in
securities of companies with small stock market capitalizations.
PARKSTONE INTERNATIONAL DISCOVERY FUND AND ARMADA INTERNATIONAL EQUITY
FUND
The investment objective of both Parkstone International Discovery Fund
and Armada International Equity Fund is to provide capital appreciation by
investing in equity securities of foreign issuers. Both Funds will normally
invest at least 80% of their respective total assets in equity securities of
foreign issuers.
-3-
<PAGE> 19
PARKSTONE BALANCED ALLOCATION FUND AND ARMADA BALANCED ALLOCATION FUND
The investment objective of both Parkstone Balanced Allocation Fund and
Armada Balanced Allocation Fund is to provide long-term capital appreciation and
current income. Each pursues this investment objective by investing in any type
or class of securities, including all types of common stocks, fixed income
securities and securities convertible into common stocks.
PARKSTONE NATIONAL TAX EXEMPT BOND FUND AND ARMADA NATIONAL TAX EXEMPT
BOND FUND
The investment objective of both Parkstone National Tax Exempt Bond
Fund and Armada National Tax Exempt Bond Fund is to provide current interest
income exempt from federal income tax as is consistent with conservation of
capital. Each pursues this investment objective by investing at least 80% of its
total assets in debt securities that generate income exempt from federal tax.
See "Comparison of Investment Policies and Risk Factors" below and the
Parkstone and Armada Prospectuses, which are incorporated by reference herein,
for a description of the similarities and differences between the investment
objectives and policies of the Reorganizing Funds and the corresponding Existing
Armada Funds.
CERTAIN ARRANGEMENTS WITH SERVICE PROVIDERS - PARKSTONE. IMC serves as
investment adviser for each Parkstone Fund and is entitled to receive advisory
fees from them, computed daily and paid monthly, at the following annual rates,
expressed as a percentage of average net assets:
-4-
<PAGE> 20
<TABLE>
<CAPTION>
ACTUAL ADVISORY
CURRENT FEE FOR FISCAL PERIOD
GROSS ENDED MAY 31, 1999
PARKSTONE FUNDS ADVISORY FEE (AFTER WAIVERS)
- --------------- ------------ ---------------
<S> <C> <C>
Prime Obligations Fund 0.35%* 0.40%
U.S. Government Obligations Fund 0.35%* 0.40%
Tax-Free Fund 0.35%* 0.40%
Bond Fund 0.55%* 0.70%
Limited Maturity Bond Fund 0.45%* 0.55%
Intermediate Government Obligations Fund 0.55%* 0.70%
Equity Income Fund 0.75%* 1.00%
Small Capitalization Fund 1.00% 1.00%
International Discovery Fund 1.15%* 1.16%
Balanced Allocation Fund 0.75%* 0.75%
National Tax Exempt Bond Fund 0.55%* 0.55%
Large Capitalization Fund 0.75%* 0.80%
U.S. Government Income Fund 0.55%* 0.45%
Mid Capitalization Fund 1.00% 1.00%
Michigan Municipal Bond Fund 0.55%* 0.55%
Treasury Fund 0.30%* 0.40%
<FN>
-----------------------------------------------------------------
* The contractual Advisory Fees for these Funds were changed in October, 1999.
</TABLE>
-5-
<PAGE> 21
Pursuant to the Parkstone investment advisory contract, and subject to
such policies as Parkstone's Board of Trustees may determine, IMC furnishes a
continuous investment program for each Fund. IMC also directs the investments of
the Parkstone Funds in accordance with each Fund's investment objectives,
policies and limitations, and creates and maintains all necessary books and
records.
SEI Investments Mutual Funds Services (the "Administrator") serves as
the administrator for each Parkstone Fund. For its services, the Administrator
receives a fee, calculated daily and paid periodically, at the annual rate of
0.10% of the average daily net assets of each Parkstone Fund, or such other fee
as may be agreed upon from time to time in writing by Parkstone and the
Administrator. National City Bank serves as sub-administrator for each Parkstone
Fund under a Sub-Administrator Agreement with the Administrator and provides
certain services as may be requested by the Administrator from time to time. For
its services as sub-administrator, National City Bank receives from the
Administrator a fee not to exceed 0.02% of each Fund's average daily net assets.
State Street Bank and Trust Company serves as Parkstone's transfer
agent and dividend disbursing agent. Effective April 13, 2000 the Administrator
also provides certain fund accounting services to Parkstone. Prior to that date,
those services were provided by BISYS Fund Services Ohio, Inc. ("BISYS Ohio").
Union Bank of California, N.A. provides custodial services to the International
Discovery Fund and the foreign equity portion of the Balanced Allocation Fund.
National City Bank serves as custodian for all other Parkstone Funds.
SEI Investments Distribution Co. (the "Distributor"), with principal
offices located at One Freedom Valley Drive, Oaks, Pennsylvania 19456, serves as
the principal underwriter and distributor for Parkstone. The Distributor
receives no fee under its distribution agreement with Parkstone, but it may
retain some or all of any sales charges imposed upon the Investor A or Investor
B Shares, and may receive compensation under the distribution and shareholder
services plans described below.
Parkstone has adopted various distribution and shareholder services
plans (the "Plans") pursuant to Rule 12b-1 under the 1940 Act. Parkstone has
adopted an Investor A Distribution and Shareholder Service Plan (the "Investor A
Plan") and an Investor B Distribution and Shareholder Service Plan (the
"Investor B Plan"). Under each Plan, each Fund is authorized to pay or reimburse
the Distributor for certain expenses that are incurred in connection with
shareholder and distribution services. Such amounts may be used by the
Distributor to pay banks and their affiliates (including IMC and its
affiliates), and other institutions, including participating broker-dealers
("Participating Organizations") for administration, distribution and/or
shareholder service assistance. Under the Plans, a Participating Organization
may include the Distributor, its subsidiaries and affiliates.
The Investor A Plan authorizes each Fund to pay the Distributor a
shareholder and distribution fee in an amount not to exceed on an annual basis
0.25% of the average daily net assets of Investor A Shares of such Fund. The
Investor B Plan authorizes each Fund to pay the Distributor a distribution fee
in an amount not to exceed on an annual basis 0.75% of the average daily net
assets of Investor B Shares of such Fund, plus a service fee in an amount not to
exceed on an annual basis 0.25% of the average daily net assets of Investor B
Shares of such Fund.
-6-
<PAGE> 22
Pursuant to the Plans, the Distributor may enter into agreements with
Participating Organizations for providing shareholder and distribution services
to their customers who are the record or beneficial owners of such shares. The
shareholder and distribution services provided by Participating Organizations
pursuant to the Plans include: promoting the purchase of shares; processing
purchase, exchange or redemption requests from customers and placing orders with
the Distributor or the transfer agent; processing dividend and distribution
payments from a Fund on behalf of customers; providing information periodically
to customers, including information showing their positions; providing
sub-accounting; responding to inquiries from customers; arranging for bank
wires; and providing other similar services as may be reasonably requested.
The Plans are "compensation" type plans as opposed to "reimbursement"
type plans. Accordingly, payments under the Plans are based on the expressed fee
rather than on the specific amounts expended by the Distributor for distribution
purposes. The Distributor may be able to recover such amounts or may earn a
profit from payments made under the Plans.
Prior to September 11, 1998, BISYS was Parkstone's distributor. For the
fiscal period from September 14, 1998 to May 31, 1999, SEI received $845,227
pursuant to the Investor A Plan to compensate dealers for their distribution and
shareholder service assistance, which represented 0.25% of the Parkstone Funds'
Investor A Shares average net assets during that period. For the fiscal period
from June 1, 1998 to September 20, 1998, BISYS received $612,647 pursuant to the
Investor A Plan to compensate dealers for their distribution and shareholder
service assistance, which represented 0.25% of the Parkstone Funds' Investor A
Shares average net assets during that period.
For the fiscal period from September 21, 1998 to May 31, 1999, the
Distributor received $226,863 pursuant to the Investor B Plan to compensate
dealers for their distribution and shareholder service assistance, which
represented 0.75% of the Parkstone Funds' Investor B Shares average net assets
during that period. For the fiscal period from June 1, 1998 to September 20,
1998, BISYS received $469,426 pursuant to the Investor B Plan to compensate
dealers for their distribution and shareholder service assistance, which
represented 0.75% of the Parkstone Funds' Investor B Shares average net assets
during that period.
PricewaterhouseCoopers, LLP ("PWC") has resigned as independent auditor
of Parkstone and will not provide an audit for the fiscal year ending May 31,
2000. Ernst & Young, LLP, which provides similar services for Armada, has been
retained to provide this audit as of February 16, 2000. PWC's reports for the
past two years did not contain any adverse opinions, disclaimer of opinions,
modifications or qualifications. There have been no disagreements during the
past two years between PWC and Parkstone regarding any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure.
CERTAIN ARRANGEMENTS WITH SERVICE PROVIDERS - ARMADA.
IMC currently serves as investment adviser to each Armada Fund listed below. IMC
is entitled to receive advisory fees from the Armada Funds computed daily and
paid monthly, at the following annual rates, expressed as a percentage of
average daily net assets:
-7-
<PAGE> 23
<TABLE>
<CAPTION>
ACTUAL ADVISORY
FEE FOR FISCAL YEAR ENDED MAY
GROSS 31, 1999
ARMADA FUNDS ADVISORY FEE (AFTER WAIVERS)
------------ ------------ ---------------
<S> <C> <C>
Money Market Fund 0.35% 0.25%
Government Money Market Fund 0.35% 0.25%
Tax Exempt Money Market Fund 0.35% 0.15%
Bond Fund 0.55% 0.55%
Limited Maturity Bond Fund 0.45% 0.22%(1)
Intermediate Bond Fund 0.55% 0.40%
Equity Income Fund 0.75% 0.75%
Small Cap Growth Fund 1.00% 0.93%(1)
International Equity Fund 1.15% 1.04%(1)
Balanced Allocation Fund 0.75% 0.71%(1,3)
National Tax Exempt Bond Fund 0.55% 0.04%(1)
Large Cap Ultra Fund 0.75% N/A(2)
U.S. Government Income Fund 0.55% N/A(2)
Mid Cap Growth Fund 1.00% N/A(2)
Michigan Municipal Bond Fund 0.55% N/A(2)
Treasury Plus Money Market Fund 0.30% N/A(2)
<FN>
- ---------------
1 Advisor fee or waiver changed during the period.
2 These are the New Armada Funds which have not commenced operations as of the date hereof.
3 This is a new portfolio which commenced investment operations on July 10, 1998.
</TABLE>
Subject to the general supervision of Armada's Board of Trustees and in
accordance with each Fund's investment policies, IMC manages the investments of
each Fund, makes decisions with respect to and places orders for all purchases
and sales of a Fund's securities, and maintains certain records relating to such
purchases and sales.
See "Investment Advisers" in Armada's Prospectuses accompanying this
Combined Prospectus/Proxy Statement which are incorporated herein by reference,
for additional information on Armada's advisers and sub-adviser.
-8-
<PAGE> 24
Administrative services are provided to Armada by the Administrator.
For its services, the Administrator receives a fee, calculated daily and paid
monthly, at the annual rate of 0.07% of the first $18 billion of the combined
net assets of each Armada Fund, and 0.06% of the combined net assets in excess
of $18 billion. The Administrator is also entitled to be reimbursed for its
out-of-pocket expenses incurred on behalf of the funds. IMC serves as
sub-administrator for each Armada Fund. For its services as sub-administrator,
IMC is entitled to receive from the Administrator a fee, calculated daily and
paid monthly, at an annual rate of up to a maximum of 0.01% of the aggregate
average daily net assets of all of the investment funds of Armada up to $15
billion and 0.015% of the aggregate average daily net assets over $15 billion.
See "Administrator" in Armada's Statement of Additional Information,
which is incorporated herein by reference, for additional information on the
Administrator.
State Street Bank and Trust Company serves as Armada's transfer and
dividend disbursing agent. Custodial services are provided to Armada by National
City Bank. Foreign Custodian Services are provided by Union Bank of California.
See "Custodian Services and Transfer Agency Agreements" in Armada's Statement of
Additional Information, which is incorporated herein by reference, for
additional information about Armada's transfer agent and custodian.
SEI Investments Distribution Co. also serves as distributor of the
shares of Armada's Funds. Pursuant to Armada's Distribution Agreement dated May
1, 1998, and Rule 12b-1 under the 1940 Act, Armada adopted a Service and
Distribution Plan relating to the I and A classes of shares ("I and A Plan") and
a separate B Shares Distribution and Servicing Plan relating to the B class of
shares ("B Shares Plan"). Under the I and A Plan, Armada reimburses the
Distributor for services provided and expenses assumed in providing Armada
advertising, marketing, prospectus printing and other distribution services at
the annual rate not in excess of 0.10% of the average net assets of its I and A
classes. Additionally, the Distributor may receive front-end sales charges in
connection with the sale of A Shares.
Under the B Shares Plan, Armada pays the Distributor up to 0.75%
annually of the average daily net assets of each Fund's B Shares for the same
types of services provided and expenses assumed as in the I and A Plan.
Additionally, the Distributor is entitled to receive all contingent deferred
sales charges received in connection with the redemption of each Fund's B
Shares. Such compensation is payable monthly and accrued daily by each Fund's B
Shares only. Because theses fees are paid out of a Fund's assets on an on-going
basis, over time these fees will increase the cost of your investment and may
cost you more than paying other types of sales charges.
Under the Shareholder Services Plan relating to each Fund's A Shares
and the B Shares Plan, Armada enters into shareholder servicing agreements with
certain financial institutions. Pursuant to these agreements the institutions
agree to render shareholder administrative services to their customers who are
the beneficial owners of A or B Shares in consideration for the payment of up to
0.25% (on an annualized basis), with respect to the Bond, Intermediate Bond,
U.S. Government Income, Equity Income, Small Cap Growth, International Equity,
Balanced
-9-
<PAGE> 25
Allocation, Mid Cap Growth and Large Cap Ultra Funds, up to 0.15% (on an
annualized basis), with respect to the Money Market, Government Money Market,
Tax Exempt Money Market and Treasury Plus Money Market Funds and the Limited
Maturity Bond Fund (B Shares only), and up to 0.10% (on an annualized basis),
with respect to the Michigan Municipal Bond and National Tax Exempt Bond Funds
and the Limited Maturity Bond Fund (A Shares Only), of such respective shares'
average daily net asset value. Persons entitled to receive compensation for
servicing A or B Shares may receive different compensation with respect to those
shares than with respect to I Shares in the same Fund. Shareholder
administrative services may include aggregating and processing purchase and
redemption orders, processing dividend payments from Armada on behalf of
customers, providing information periodically to customers showing their
position in A and B Shares, and providing sub-transfer agent services or the
information necessary for subaccounting, with respect to A and B Shares
beneficially owned by customers.
The I and A Plan is a "reimbursement" type plan whereas the B Shares
Plan is a "compensation" type plan. Accordingly, payments by A and I Shares
under its Plan are based on direct and indirect costs and expenses incurred, and
payments by B Shares are based on the expressed fee rather than on the specific
amounts expended by the Distributor for B Shares distribution purposes. The
Distributor may be able to recover such amounts or may earn a profit from
payments made by B Shares of Armada under the B Shares Plan.
For the fiscal year ended May 31, 1999, Armada paid, in the aggregate,
fees to the Distributor pursuant to the prior Distribution Plans of $801,528,
$34,077, and $3,099,926, respectively, which represent 0.04%, 0.75% and 0.04%,
of the A, B and I Shares average net assets during that period.
COMPARATIVE FEE AND EXPENSE TABLES. The tables presented at Appendix C show (i)
information regarding the fees and expenses paid by each class of shares of each
Parkstone Fund and of each class of shares of each Armada Fund as of their most
recent fiscal years, restated to reflect expenses the Parkstone Fund and the
Armada Fund, respectively, expect to incur during the current fiscal year and
(ii) estimated fees and expenses on a pro forma basis giving effect to the
proposed Reorganization.
-10-
<PAGE> 26
OPERATING EXPENSE RATIOS -- PARKSTONE. The following table sets forth the ratios
of operating expenses to average net assets of the Parkstone Funds for the
fiscal period ended May 31, 1999 (a) after fee waivers and expense
reimbursements, and (b) absent fee waivers and expense reimbursements:
<TABLE>
<CAPTION>
FISCAL PERIOD ENDED MAY 31, 1999
--------------------------------
RATIO OF OPERATING RATIO OF OPERATING
EXPENSES TO AVERAGE EXPENSES TO AVERAGE
NET ASSETS AFTER NET ASSETS ABSENT
FEE WAIVERS AND FEE WAIVERS AND
EXPENSE EXPENSE
REIMBURSEMENTS REIMBURSEMENTS
-------------- --------------
PARKSTONE FUNDS
<S> <C> <C>
Parkstone Prime Obligations Fund
Investor A Shares 0.76% 0.93%
Investor B Shares 1.66% 1.67%
Institutional Shares 0.65% 0.67%
Parkstone U.S. Government Obligations Fund
Investor A Shares 0.75% 0.92%
Institutional Shares 0.67% 0.69%
Parkstone Tax-Free Fund
Investor A Shares 0.77% 0.94%
Institutional Shares 0.68% 0.70%
Parkstone Bond Fund
Investor A Shares 1.19% 1.28%
Investor B Shares 1.94% 2.03%
Institutional Shares 0.94% 1.03%
Parkstone Limited Maturity Bond Fund
Investor A Shares 1.08% 1.32%
Investor B Shares 1.83% 2.07%
Institutional Shares 0.84% 1.07%
Parkstone Intermediate Government
Obligations Fund
Investor A Shares 1.24% 1.33%
Investor B Shares 1.99% 2.08%
Institutional Shares 0.99% 1.08%
Parkstone Equity Income Fund
Investor A Shares 1.59% 1.59%
Investor B Shares 2.34% 2.34%
Institutional Shares 1.34% 1.34%
Parkstone Small Capitalization Fund
Investor A Shares 1.61% 1.61%
Investor B Shares 2.37% 2.37%
Institutional Shares 1.36% 1.36%
</TABLE>
-11-
<PAGE> 27
<TABLE>
<S> <C> <C>
Parkstone International Discovery Fund
Investor A Shares 1.82% 1.82%
Investor B Shares 2.57% 2.57%
Institutional Shares 1.57% 1.57%
Parkstone Balanced Allocation Fund
Investor A Shares 1.36% 1.61%
Investor B Shares 2.11% 2.36%
Institutional Shares 1.11% 1.36%
Parkstone National Tax Exempt Bond Fund
Investor A Shares 1.02% 1.31%
Investor B Shares 1.77% 2.06%
Institutional Shares 0.77% 1.06%
Parkstone Large Capitalization Fund
Investor A Shares 1.35% 1.35%
Investor B Shares 2.11% 2.11%
Institutional Shares 1.10% 1.10%
Parkstone U.S. Government Income Fund
Investor A Shares 1.00% 1.34%
Investor B Shares 1.75% 2.09%
Institutional Shares 0.75% 1.09%
Parkstone Mid Capitalization Fund
Investor A Shares 1.57% 1.57%
Investor B Shares 2.32% 2.32%
Institutional Shares 1.32% 1.32%
Parkstone Michigan Municipal Bond Fund
Investor A Shares 1.01% 1.29%
Investor B Shares 1.76% 2.05%
Institutional Shares 0.76% 1.05%
Parkstone Treasury Fund
Investor A Shares 0.67% 0.91%
Institutional Shares 0.58% 0.68%
</TABLE>
-12-
<PAGE> 28
OPERATING EXPENSE RATIOS -- ARMADA. The following tables set forth the ratios of
operating expenses to average net assets of the Armada Funds for the fiscal year
ended May 31, 1999 (a) after fee waivers and expense reimbursements, and (b)
absent fee waivers and expense reimbursements:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31, 1999
------------------------------
RATIO OF OPERATING RATIO OF OPERATING
EXPENSES TO AVERAGE EXPENSES TO AVERAGE
NET ASSETS AFTER NET ASSETS ABSENT
FEE WAIVERS AND FEE WAIVERS AND
EXPENSE EXPENSE
REIMBURSEMENTS REIMBURSEMENTS
-------------- --------------
ARMADA FUNDS
<S> <C> <C>
Armada Money Market Fund
A Shares 0.56% 0.66%
B Shares 1.27% 1.37%
I Shares 0.42% 0.52%
Armada Government Money Market Fund
A Shares 0.57% 0.67%
I Shares 0.42% 0.52%
Armada Tax Exempt Money Market Fund
A Shares 0.44% 0.64%
B Shares N/A* N/A*
I Shares 0.30% 0.50%
Armada Bond Fund
A Shares 0.96% 0.96%
B Shares 1.66% 1.66%
I Shares 0.70% 0.70%
Armada Limited Maturity
Bond Fund
A Shares 0.53% 0.75%
B Shares N/A* N/A*
I Shares 0.43% 0.65%
Armada Intermediate Bond Fund
A Shares 0.86% 1.00%
B Shares 1.57% 1.71%
I Shares 0.61% 0.75%
Armada Equity Income Fund
A Shares 1.18% 1.18%
B Shares 1.89% 1.89%
I Shares 0.93% 0.93%
Armada Small Cap Growth Fund
A Shares 1.51% 1.51%
B Shares 2.23% 2.23%
I Shares 1.27% 1.27%
</TABLE>
* B Shares did not commence as of 5/31/99.
-13-
<PAGE> 29
<TABLE>
<S> <C> <C>
Armada International Equity Fund
A Shares 1.68% 1.68%
B Shares 2.43% 2.43%
I Shares 1.43% 1.43%
Armada Balanced Allocation Fund
A Shares 1.31% 1.31%
B Shares 2.02% 2.02%
I Shares 1.06% 1.06%
Armada National Tax Exempt Bond Fund
A Shares 0.46% 0.97%
B Shares 1.17% 1.68%
I Shares 0.36% 0.87%
Large Cap Ultra Fund
A Shares N/A(1) N/A(1)
B Shares N/A(1) N/A(1)
I Shares N/A(1) N/A(1)
Armada U.S. Government
Income Fund
A Shares N/A(1) N/A(1)
B Shares N/A(1) N/A(1)
I Shares N/A(1) N/A(1)
Armada Mid Cap Growth Fund
A Shares N/A(1) N/A(1)
B Shares N/A(1) N/A(1)
I Shares N/A(1) N/A(1)
Armada Michigan Municipal Bond Fund
A Shares N/A(1) N/A(1)
B Shares N/A(1) N/A(1)
I Shares N/A(1) N/A(1)
Armada Treasury Plus Money
Market Fund
A Shares N/A(1) N/A(1)
I Shares N/A(1) N/A(1)
<FN>
- ------------------------------
1 The Armada Large Cap Ultra Fund, U.S. Government Income Fund, Mid Cap
Growth Fund, Michigan Municipal Bond Fund and Treasury Plus Money Market
Fund will not commence investment operations until the Reorganization is
effective.
</TABLE>
VOTING INFORMATION. This Combined Prospectus/Proxy Statement is being furnished
in connection with the solicitation of proxies by Parkstone's Board of Trustees
in connection with a Special Meeting of Shareholders to be held at SEI
Investments Co., One Freedom Valley Drive, Oaks, Pennsylvania, 19456, on May 10,
2000 at 3:00 p.m. (Eastern time) (such meeting and any adjournments thereof
hereinafter referred to as the "Meeting"). Only Shareholders of record at the
close of business on February 28, 2000 will be entitled to notice of and to vote
at the Meeting. Every Shareholder is entitled to one vote for every dollar of
value invested, and to have a proportionate fractional vote for any fraction of
one dollar invested. All shares will vote
-14-
<PAGE> 30
separately by each Fund. Shares represented by a properly executed proxy will be
voted in accordance with the instructions thereon, or if no specification is
made, the persons named as proxies will vote in favor of each proposal set forth
in the Notice of Meeting. Proxies may be revoked at any time before they are
exercised by submitting to Parkstone a written notice of revocation or a
subsequently executed proxy or by attending the Meeting and voting in person.
For additional information, including a description of the Shareholder vote
required for approval of the Reorganization Agreement and related transactions
contemplated thereby, see "Information Relating to Voting Matters."
RISK FACTORS
Because of the similarities of the investment objectives and policies
of the Reorganizing Funds and the corresponding Existing Armada Funds,
management believes that an investment in an Existing Armada Fund involves risks
that are similar to those of the corresponding Reorganizing Fund. There are,
however, differences between the Reorganizing Funds and the Existing Armada
Funds as noted above in "Summary - Overview of the Parkstone Funds and Armada
Funds" and below under "Comparison of Investment Policies and Risk Factors."
These differences can present different risks.
The following discussion highlights the principal risk factors
associated with an investment in the Reorganizing Funds, the Continuing Funds
and the Existing Armada Funds and is qualified in its entirety by the more
extensive discussion of risk factors in "Comparison of Investment Policies and
Risk Factors."
MARKET RISK - (Armada International Equity, Small Cap Growth, Equity
Income, Balanced Allocation, Limited Maturity Bond, Mid Cap Growth and Large Cap
Ultra Funds. Parkstone International Discovery, Small Capitalization, Mid
Capitalization, Large Capitalization, Equity Income, and Balanced Allocation
Funds) Market risk is the risk that the value of a Fund's investments will
fluctuate as the stock or bond markets fluctuate and that prices overall will
decline over short or longer-term periods.
INTEREST RATE RISK - (Armada Balanced Allocation, Bond, Intermediate
Bond, Limited Maturity Bond, National Tax Exempt Bond, Tax Exempt Money Market,
Money Market, Government Money Market, U.S. Government Income, Michigan
Municipal Bond and Treasury Plus Money Market Funds. Parkstone Equity Income,
Balanced Allocation, Bond, Intermediate Government Obligations, U.S. Government
Income, Limited Maturity Bond, Michigan Municipal Bond, National Tax Exempt
Bond, Tax-Free, Prime Obligations, U.S. Government Obligations and Treasury
Funds) Interest rate risk is the risk that changes in interest rates will affect
the value of a Fund's investments in income-producing, fixed-income or debt
securities. Increases in interest rates may cause the value of a Fund's
investments to decline.
CREDIT RISK - (Armada Balanced Allocation, Bond, Intermediate Bond,
Limited Maturity Bond, National Tax Exempt Bond, Tax Exempt Money Market, Money
Market, Mid Cap Growth and Michigan Municipal Bond Funds. Parkstone Equity
Income, Balanced Allocation, Bond, Intermediate Government Obligations, U.S.
Government Income, Limited Maturity Bond, Michigan Municipal Bond, National Tax
Exempt Bond, Tax-Free, Prime Obligations, and U.S. Government Obligations
Funds.) Credit risk is the risk that the issuer of a security will be unable or
unwilling to make timely payments of interest or principal, or to otherwise
honor its obligations.
-15-
<PAGE> 31
FOREIGN RISK - (Armada International Equity, Small Cap Growth, Equity
Income, Balanced Allocation, Intermediate Bond, Limited Maturity Bond and Mid
Cap Growth Funds. Parkstone International Discovery, Small Capitalization, Mid
Capitalization, Large Capitalization, Equity Income and Balanced Allocation
Funds.) Foreign risk is the risk of investments in issuers located in foreign
countries, which may have greater price volatility and less liquidity.
Investments in foreign securities are also subject to political, regulatory, and
diplomatic risks. Foreign risk includes currency risk, which may occur due to
fluctuations in the exchange rates between the U.S. dollar and foreign
currencies. This risk could negatively affect the value of a Fund's investments.
MUNICIPAL ISSUER RISK - (Armada National Tax Exempt Bond, Tax Exempt
Money Market, Money Market and Michigan Municipal Bond Funds. Parkstone Michigan
Municipal Bond, National Tax Exempt Bond and Tax-Free Funds.) A Fund's
investments in municipal securities may also have exposure to special factors
that may adversely affect the value of municipal securities, and have a
significant effect on the value of the Fund's investments. These factors include
political or legislative changes, uncertainties related to the tax status of
municipal securities or the rights of investors in these securities.
MORTGAGE/ASSET BACKED SECURITIES RISK - (Armada Bond, Intermediate
Bond, Limited Maturity Bond and U.S. Government Income Funds. Parkstone Bond,
Intermediate Government Obligations, U.S. Government Income and Limited Maturity
Bond Funds.) Funds that invest in mortgage or asset-backed securities are
subject to the risk that mortgages or other assets may be prepaid when interest
rates decline, forcing the Fund to invest in securities with lower interest
rates. For this and other reasons, mortgage and asset-backed securities may have
significantly greater price and yield volatility than traditional debt
securities.
There is no assurance that any portfolio will achieve its investment
objective.
INFORMATION RELATING TO THE PROPOSED REORGANIZATION
Parkstone has entered into an agreement whereby its investment
portfolios are to be acquired by portfolios of Armada. Significant provisions of
this Reorganization Agreement are summarized below; however, this summary is
qualified in its entirety by reference to the Reorganization Agreement, a copy
of which is attached as Appendix A to this Combined Prospectus/Proxy Statement.
DESCRIPTION OF THE REORGANIZATION AGREEMENT. There are sixteen separate
Parkstone investment portfolios that are intended to participate in the
reorganization. Initially, the assets of eleven of them will be acquired by
eleven similar investment portfolios currently offered by Armada. Subsequently,
five portfolios will be acquired by five new Armada portfolios which have been
organized to continue the operations of these Parkstone Funds.
The Reorganization Agreement provides, first, that substantially all of
the assets and liabilities of the Reorganizing Funds will be transferred to the
Existing Armada Funds identified in the table below. Thereafter, substantially
all of the assets and liabilities of the Continuing Funds will be transferred to
the New Armada Funds identified in the table below. The holders of
-16-
<PAGE> 32
each class of shares of a Parkstone Fund will receive the class of shares of the
corresponding Armada Fund identified in the table.
In the tables, (a) opposite the name of each Parkstone Fund is the name
of the Armada Fund which will issue shares to such Parkstone Fund, and (b)
opposite the name of each class of shares of the Parkstone Fund is the name of
the class of shares of the Armada Fund to be distributed to the holders of such
Parkstone class. With respect to the Reorganizing Funds, the number of each
class of shares to be issued by the Armada Funds will have an aggregate net
asset value equal to the aggregate net asset value of the corresponding class or
classes of shares of the particular Parkstone Fund as of the regular close of
the New York Stock Exchange, currently 4:00 p.m. New York time, on the business
day immediately preceding the transfer relating to the Reorganizing Funds. With
respect to the Continuing Funds, the number of each class of shares to be issued
by the Armada Funds will have an aggregate net asset value equal to the
aggregate net asset value of the corresponding class or classes of shares of the
particular Parkstone Fund as of the regular close of the New York Stock
Exchange, currently 4:00 p.m. New York time, on the business day immediately
preceding the transfer relating to the Continuing Funds, or another date not
less than seven days after the transfer relating to the Reorganizing Funds.
The four Armada money market funds (Money Market Fund, Treasury Plus
Money Market Fund, Government Money Market Fund and Tax Exempt Money Market
Fund) may have minute differences in market-based net asset values per share
from their Parkstone counterparts; however, it is a condition of the
Reorganization that the per-share amortized cost values of these portfolios be
identical with those of their corresponding Parkstone money market funds.
<TABLE>
<CAPTION>
REORGANIZING EXISTING ARMADA FUNDS
FUNDS AND CLASSES AND CLASSES
- ----------------- -----------
<S> <C>
Prime Obligations Fund Money Market Fund*
Investor A Shares A Shares
Investor B Shares B Shares
Institutional Shares I Shares
U.S. Government Obligations Fund Government Money Market Fund*
Investor A Shares A Shares
Institutional Shares I Shares
Tax-Free Fund Tax Exempt Money Market Fund*
Investor A Shares A Shares
B Shares
Institutional Shares I Shares
Bond Fund* Bond Fund
Investor A Shares A Shares
Investor B Shares B Shares
Institutional Shares I Shares
Limited Maturity Bond Fund Limited Maturity Bond Fund*
Investor A Shares A Shares
Investor B Shares B Shares
Institutional Shares I Shares
</TABLE>
-17-
<PAGE> 33
<TABLE>
<CAPTION>
REORGANIZING EXISTING ARMADA FUNDS
FUNDS AND CLASSES AND CLASSES
- ----------------- -----------
<S> <C>
Intermediate Government Intermediate Bond Fund*
Obligations Fund
Investor A Shares A Shares
Investor B Shares B Shares
Institutional Shares I Shares
Equity Income Fund Equity Income Fund*
Investor A Shares A Shares
Investor B Shares B Shares
Institutional Shares I Shares
Small Capitalization Fund Small Cap Growth Fund*
Investor A Shares A Shares
Investor B Shares B Shares
Institutional Shares I Shares
International Discovery Fund International Equity Fund*
Investor A Shares A Shares
Investor B Shares B Shares
Institutional Shares I Shares
Balanced Allocation Fund Balanced Allocation Fund*
Investor A Shares A Shares
Investor B Shares B Shares
Institutional Shares I Shares
National Tax Exempt Bond Fund National Tax Exempt Bond Fund*
Investor A Shares A Shares
Investor B Shares B Shares
Institutional Shares I Shares
</TABLE>
-18-
<PAGE> 34
<TABLE>
<CAPTION>
CONTINUING FUNDS AND CLASSES NEW ARMADA FUNDS AND CLASSES
- ---------------------------- ----------------------------
<S> <C>
Large Capitalization Fund* Large Cap Ultra Fund
Investor A Shares A Shares
Investor B Shares B Shares
Institutional Shares I Shares
U.S. Government Income Fund* U.S. Government Income Fund
Investor A Shares A Shares
Investor B Shares B Shares
Institutional Shares I Shares
Mid Capitalization Fund* Mid Cap Growth Fund
Investor A Shares A Shares
Investor B Shares B Shares
Institutional Shares I Shares
Michigan Municipal Bond Fund* Michigan Municipal Bond Fund
Investor A Shares A Shares
Investor B Shares B Shares
Institutional Shares I Shares
Treasury Fund* Treasury Plus Money Market Fund
Investor A Shares A Shares
Institutional Shares I Shares
<FN>
- --------------------
* Denotes the surviving or continuing portfolio for purposes of
maintaining the financial statements and performance history in the
post-reorganization funds.
</TABLE>
-19-
<PAGE> 35
Parkstone may liquidate a limited number of holdings of certain of the
Reorganizing Funds in light of the investment policies of Armada and the
strategies of its investment adviser. The transaction costs that will result
from such sales are expected to be minimal.
The Reorganization Agreement provides that Parkstone will declare a
dividend or dividends prior to the Reorganizing Funds Transaction which,
together with all previous dividends, will have the effect of distributing to
the Shareholders of each of the Reorganizing Funds all undistributed ordinary
income earned and net capital gains realized up to and including the Effective
Time of the Reorganization.
Following the transfers of assets and liabilities from the Parkstone
Funds to the Armada Funds, and the issuances of shares by the Armada Funds to
the Parkstone Funds, each of the Parkstone Funds will distribute the class of
shares of the Armada Funds PRO RATA to the holders of classes of shares of the
Parkstone Funds as described above in liquidation of the Parkstone Funds. Each
holder of a class of shares of a Parkstone Fund will receive an amount of the
corresponding class of shares of the corresponding Armada Fund of equal value,
plus the right to receive any declared and unpaid dividends or distributions.
Following the Reorganization, the registration of Parkstone as an investment
company under the 1940 Act will be terminated, and Parkstone will be terminated
under state law.
The stock transfer books of Parkstone will be permanently closed after
the Reorganization.
The Reorganization is subject to a number of conditions, including
approval of the Reorganization Agreement and the transactions contemplated
thereby described in this Combined Prospectus/Proxy Statement by the
Shareholders of Parkstone; the receipt of certain legal opinions described in
the Reorganization Agreement; the receipt of certain certificates from the
parties concerning the continuing accuracy of the representations and warranties
in the Reorganization Agreement and other matters; and the parties' performance
in all material respects of their agreements and undertakings in the
Reorganization Agreement. Assuming satisfaction of the conditions in the
Reorganization Agreement, the Reorganizing Funds and Continuing Funds
Transactions are expected to occur on or after June 9, 2000 and the Treasury
Fund Transaction is expected to occur on or after June 10, 2000.
The expenses of Armada and of Parkstone incurred in connection with the
Reorganization will be borne equally by Armada and National City Bank except
that Armada shall bear any registration fees payable under the Securities Act of
1933 and state "blue sky" laws.
The Reorganization may be abandoned prior to its consummation by the
mutual consent of the parties to the Reorganization Agreement. The
Reorganization Agreement provides further that at any time prior to or (to the
fullest extent permitted by law) after approval of the Reorganization Agreement
by the Shareholders of Parkstone (a) the parties thereto may, by written
agreement approved by their respective Boards of Trustees or authorized
officers, and with or without the approval of their Shareholders, amend any of
the provisions of the Reorganization Agreement; and (b) either party may waive
any breach by the other party or the failure to satisfy any of the conditions to
its obligations with or without the approval of such party's shareholders.
-20-
<PAGE> 36
In its consideration and approval of the Reorganization at meetings on
November 19, 1998, May 11, 1999, July 20-21, 1999 and November 17, 1999, the
Board of Trustees of Parkstone considered, primarily, the March 1998 merger
between First of America Bank Corporation, the parent company of First of
America, and National City Corporation, the parent corporation of National City.
IMC and National City have recommended that each of the Parkstone Funds be
reorganized as described in this Combined Prospectus/Proxy Statement. This
Reorganization presents the opportunity to combine the separate Parkstone and
Armada mutual fund families into a single, larger consolidated group, offering
shareholders a full spectrum of funds. The Board of Trustees of Parkstone
considered the effect of the recent merger of the bank holding companies on
Parkstone; the recommendation of IMC and National City with respect to the
proposed consolidation of Parkstone and Armada; the investment capabilities of
IMC; the compatibility of the investment objectives and policies of the
Parkstone Funds and their corresponding Armada Funds; the improvement of
operational efficiencies and possible achievement of economies of scale through
the consolidation of investment portfolios that are substantially similar; the
fee structures of the Armada Funds; the historical and projected expense ratios
of the Armada Funds as compared to those of the Parkstone Funds; the comparative
investment performance of the Parkstone Funds and their corresponding Armada
Funds; the fact that the Reorganization would constitute a tax-free
reorganization; and that the interests of Shareholders would not be diluted as a
result of the Reorganization.
After consideration of all of the foregoing factors, together with
certain other factors and information considered to be relevant, Parkstone's
Trustees unanimously approved the Reorganization Agreement and directed that it
be submitted to Shareholders for approval.
PARKSTONE'S BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL
OF THE REORGANIZATION AGREEMENT.
The Parkstone Board of Trustees has not determined what action it will
take in the event the Shareholders of any Parkstone Fund fail to approve the
Reorganization Agreement or for any reason the Reorganization is not
consummated. In either such event, the Trustees may choose to continue
operations of the Parkstone Funds in their present form, or to consider
alternative dispositions of Parkstone's assets, including the sales of assets
to, or merger with, another investment company, or the possible liquidation of
any of its Funds.
At the meetings referenced above, the Armada Board of Trustees
considered the proposed Reorganization. Based upon their evaluation of the
relevant information provided to them, and in light of their fiduciary duties
under federal and state law, the Board of Trustees unanimously determined that
the proposed Reorganization was in the best interests of Armada and its
shareholders and that the interests of existing shareholders of Armada would not
be diluted as a result of effecting the transaction.
-21-
<PAGE> 37
CAPITALIZATION. Because the Reorganizing Funds will be combined in the
Reorganization with the Existing Armada Funds, the total capitalization of each
of the Existing Armada Funds after the Reorganization is expected to be greater
than the current capitalization of the corresponding Reorganizing Funds. In
addition, because the Continuing Funds will be combined in the Reorganization
with the newly organized New Armada Funds, which have only nominal assets and
liabilities, information on the capitalization of the Continuing Funds and New
Armada Funds is not included. The following table sets forth, as of September
30, 1999 (unaudited):
(i) the capitalization of each of the Reorganizing Funds and each
of the Existing Armada Funds; and
(ii) the pro forma capitalization of each of the Existing Armada
Funds as adjusted to give effect to the Reorganization. If
consummated, the capitalization of each Fund is likely to be
different at the Effective Time of the Reorganization as a
result of daily share purchase and redemption activity in the
Funds.
-22-
<PAGE> 38
<TABLE>
<CAPTION>
PARKSTONE PRIME ARMADA
OBLIGATIONS MONEY MARKET PRO FORMA
FUND FUND COMBINED
---- ---- --------
<S> <C> <C> <C>
Total Net Assets 579,310,613 3,643,501,879 4,222,812,492
Investor A/A Shares 18,179,381 1,520,372,403 1,538,551,784
Investor B/B Shares 715,463 784,832 1,500,294
Institutional/I Shares 560,415,769 2,122,344,644 2,682,760,413
Shares Outstanding
Investor A/A Shares 18,173,637 1,520,216,250 1,538,389,887
Investor B/B Shares 715,031 784,786 1,499,817
Institutional/I Shares 560,414,815 2,122,550,222 2,682,965,037
------------- ------------- -------------
Net Asset Value Per Share
Investor A/A Shares 1.00 1.00 1.00
Investor B/B Shares 1.00 1.00 1.00
Institutional/I Shares 1.00 1.00 1.00
<CAPTION>
PARKSTONE
U.S.
GOVERNMENT ARMADA
OBLIGATIONS GOVERNMENT PRO FORMA
FUND MONEY MARKET FUND COMBINED
---- ----------------- --------
<S> <C> <C> <C>
Total Net Assets 118,534,510 1,727,638,006 1,846,172,516
Investor A/A Shares 700,600 581,699,898 582,400,498
Institutional/I Shares 117,833,910 1,145,938,108 1,263,772,018
Shares Outstanding
Investor A/A Shares 697,932 581,700,729 582,398,661
Institutional/I Shares 117,802,773 1,145,937,148 1,263,739,921
----------- ------------- -------------
Net Asset Value Per Share
Investor A/A Shares 1.00 1.00 1.00
Institutional/I Shares 1.00 1.00 1.00
<CAPTION>
PARKSTONE ARMADA
TAX-FREE TAX EXEMPT PRO FORMA
FUND MONEY MARKET FUND COMBINED
---- ----------------- --------
<S> <C> <C> <C>
Total Net Assets 85,639,359 574,549,532 660,188,891
Investor A/A Shares 979,991 183,749,891 184,729,882
Institutional/I Shares 84,659,368 390,799,641 475,459,009
Shares Outstanding
Investor A/A Shares 978,312 183,832,722 184,811,034
Institutional/I Shares 84,653,628 390,959,055 475,612,683
---------- ----------- -----------
Net Asset Value Per Share
Investor A/A Shares 1.00 1.00 1.00
Institutional/I Shares 1.00 1.00 1.00
<CAPTION>
PARKSTONE ARMADA
BOND BOND PRO FORMA
FUND FUND COMBINED
---- ---- --------
<S> <C> <C> <C>
Total Net Assets 356,225,032 722,854,546 1,079,079,578
Investor A/A Shares 8,989,401 3,460,578 12,449,979
Investor B/B Shares 3,572,317 718,242 4,260,559
Institutional/I Shares 343,663,314 718,675,726 1,062,339,040
Shares Outstanding
Investor A/A Shares 945,361 353,404 1,271,727
Investor B/B Shares 375,067 73,467 438,563
Institutional/I Shares 35,948,285 73,568,996 108,744,595
---------- ---------- -----------
Net Asset Value Per Share
Investor A/A Shares 9.51 9.79 9.79
Investor B/B Shares 9.52 9.78 9.78
Institutional/I Shares 9.56 9.77 9.77
</TABLE>
-23-
<PAGE> 39
<TABLE>
<CAPTION>
PARKSTONE ARMADA
LIMITED LIMITED
MATURITY MATURITY PRO FORMA
BOND FUND BOND FUND COMBINED
--------- --------- --------
<S> <C> <C> <C>
Total Net Assets 133,722,757 81,232,988 213,955,745
Investor A/A Shares 17,748,784 510,466 18,259,250
Investor B/B Shares 850,242 79,049 929,291
Institutional/I Shares 114,123,731 80,643,473 194,767,204
Shares Outstanding
Investor A/A Shares 1,892,958 51,379 1,837,691
Investor B/B Shares 90,672 7,956 93,520
Institutional/I Shares 12,170,986 8,142,565 19,674,267
---------- --------- ----------
Net Asset Value Per Share
Investor A/A Shares 9.38 9.94 9.94
Investor B/B Shares 9.38 9.94 9.94
Institutional/I Shares 9.38 9.90 9.90
<CAPTION>
PARKSTONE ARMADA
INTERMEDIATE INTERMEDIATE
GOVERNMENT BOND PRO FORMA
OBLIGATIONS FUND FUND COMBINED
---------------- ---- --------
<S> <C> <C> <C>
Total Net Assets 129,968,397 308,975,753 438,944,150
Investor A/A Shares 8,463,328 5,526,548 13,989,876
Investor B/B Shares 1,129,756 540,870 1,670,626
Institutional/I Shares 120,375,313 302,908,335 423,283,648
Shares Outstanding
Investor A/A Shares 874,925 536,303 1,357,713
Investor B/B Shares 117,097 52,479 162,080
Institutional/I Shares 12,445,252 29,448,822 41,144,214
---------- ---------- ----------
Net Asset Value Per Share
Investor A/A Shares 9.67 10.30 10.30
Investor B/B Shares 9.65 10.31 10.31
Institutional/I Shares 9.67 10.29 10.29
<CAPTION>
PARKSTONE EQUITY ARMADA EQUITY PRO FORMA
INCOME FUND INCOME FUND COMBINED
----------- ----------- --------
<S> <C> <C> <C>
Total Net Assets 274,880,264 525,437,793 800,318,057
Investor A/A Shares 66,716,057 11,871,245 78,587,302
Investor B/B Shares 18,910,777 1,132,261 20,043,038
Institutional/I Shares 189,253,430 512,434,287 701,687,717
Shares Outstanding
Investor A/A Shares 4,009,100 685,500 4,537,199
Investor B/B Shares 1,146,313 65,727 1,163,473
Institutional/I Shares 11,434,396 29,562,555 40,482,304
---------- ---------- ----------
Net Asset Value Per Share
Investor A/A Shares 16.64 17.32 17.32
Investor B/B Shares 16.50 17.23 17.23
Institutional/I Shares 16.55 17.33 17.33
<CAPTION>
PARKSTONE ARMADA
SMALL SMALL CAP
CAPITALIZATION GROWTH PRO FORMA
FUND FUND COMBINED
---- ---- --------
<S> <C> <C> <C>
Total Net Assets 280,735,617 96,282,646 377,018,263
Investor A/A Shares 49,732,433 1,519,948 51,252,381
Investor B/B Shares 17,485,687 185,352 17,671,039
Institutional/I Shares 213,517,497 94,577,346 308,094,843
Shares Outstanding
Investor A/A Shares 2,391,541 134,523 4,536,652
Investor B/B Shares 876,822 16,599 1,581,848
Institutional/I Shares 10,045,790 8,332,227 27,140,474
---------- --------- ----------
Net Asset Value Per Share
Investor A/A Shares 20.80 11.30 11.30
Investor B/B Shares 19.94 11.17 11.17
Institutional/I Shares 21.25 11.35 11.35
</TABLE>
-24-
<PAGE> 40
<TABLE>
<CAPTION>
ARMADA
PARKSTONE INTERNATIONAL
INTERNATIONAL EQUITY PRO FORMA
DISCOVERY FUND FUND COMBINED
-------------- ---- --------
<S> <C> <C> <C>
Total Net Assets 306,562,812 250,837,223 557,400,035
Investor A/A Shares 22,918,730 1,612,394 24,531,124
Investor B/B Shares 7,430,526 80,268 7,510,794
Institutional/I Shares 276,213,556 249,144,561 525,358,117
Shares Outstanding
Investor A/A Shares 1,385,834 132,644 2,017,652
Investor B/B Shares 470,080 6,640 621,360
Institutional/I Shares 16,452,287 20,397,876 43,021,455
---------- ---------- ----------
Net Asset Value Per Share
Investor A/A Shares 16.54 12.16 12.16
Investor B/B Shares 15.81 12.09 12.09
Institutional/I Shares 16.79 12.21 12.21
<CAPTION>
PARKSTONE ARMADA
BALANCED BALANCED PRO FORMA
ALLOCATION FUND ALLOCATION FUND COMBINED
--------------- --------------- --------
<S> <C> <C> <C>
Total Net Assets 172,243,993 73,067,480 245,311,473
Investor A/A Shares 14,228,164 2,535,254 16,763,418
Investor B/B Shares 5,297,951 401,222 5,699,173
Institutional/I Shares 152,717,878 70,131,004 222,848,882
Shares Outstanding
Investor A/A Shares 1,023,366 246,542 1,630,276
Investor B/B Shares 381,072 38,953 553,215
Institutional/I Shares 10,996,718 6,817,089 21,661,055
---------- --------- ----------
Net Asset Value Per Share
Investor A/A Shares 13.90 10.28 10.28
Investor B/B Shares 13.90 10.30 10.30
Institutional/I Shares 13.89 10.29 10.29
<CAPTION>
PARKSTONE ARMADA
NATIONAL TAX EXEMPT NATIONAL PRO FORMA
BOND FUND TAX EXEMPT BOND FUND COMBINED
--------- -------------------- --------
<S> <C> <C> <C>
Total Net Assets 93,745,094 100,524,710 194,269,804
Investor A/A Shares 5,640,226 4,573,311 10,213,537
Investor B/B Shares 478,887 295,415 774,303
Institutional/I Shares 87,625,981 95,655,984 183,281,965
Shares Outstanding
Investor A/A Shares 556,041 470,887 1,051,552
Investor B/B Shares 47,340 30,445 79,835
Institutional/I Shares 8,637,291 9,856,471 18,894,461
--------- --------- ----------
Net Asset Value Per Share
Investor A/A Shares 10.14 9.71 9.71
Investor B/B Shares 10.12 9.70 9.70
Institutional/I Shares 10.15 9.70 9.70
</TABLE>
-25-
<PAGE> 41
FEDERAL INCOME TAX CONSEQUENCES. Consummation of the Reorganization is subject
to the condition that Armada receive an opinion from Drinker Biddle & Reath LLP
addressed to both Armada and Parkstone in form reasonably satisfactory to them
to the effect that for federal income tax purposes:
(i) the transfer of all of the assets and liabilities of each of
the Reorganizing Funds (except in each case for a cash reserve
in an amount necessary for the discharge of all known and
reasonably anticipated liabilities of each of the Reorganizing
Funds) and each of the Continuing Funds to the corresponding
Armada Fund in exchange for shares of the corresponding Armada
Fund and liquidating distributions to Shareholders of the
Parkstone Funds of the shares of the Armada Fund so received,
as described in the Reorganization Agreement, will constitute
reorganizations within the meaning of Sections 368(a)(1)(C),
368(a)(1)(D) or 368(a)(1)(F) of the Internal Revenue Code of
1986, as amended, (the "Code") and with respect to the
Reorganization, each Parkstone Fund and Armada Fund will be
considered "a party to a reorganization" within the meaning of
Section 368(b) of the Code;
(ii) no gain or loss will be recognized by the Parkstone Funds as a
result of such transactions;
(iii) no gain or loss will be recognized by the Armada Funds as a
result of such transactions;
(iv) no gain or loss will be recognized by the Shareholders of any
Parkstone Fund on the distribution to them by Parkstone of
shares of any class of the corresponding Armada Fund in
exchange for their shares of any class of the Parkstone Fund;
(v) the aggregate basis of the Armada Fund shares received by a
Shareholder of a Parkstone Fund will be the same as the
aggregate basis of the Shareholder's Parkstone Fund shares
immediately prior to the Reorganization;
(vi) the basis of each Armada Fund in the assets of the
corresponding Parkstone Fund received pursuant to the
Reorganization will be the same as the basis of the assets in
the hands of the Parkstone Fund immediately before the
Reorganization;
(vii) a shareholder's holding period for Armada Fund shares will be
determined by including the period for which the shareholder
held the Parkstone Fund shares exchanged therefor, provided
that the shareholder held such Parkstone Fund shares as a
capital asset; and
(viii) each Armada Fund's holding period with respect to the assets
received in the Reorganization will include the period for
which such assets were held by the corresponding Parkstone
Fund.
Armada and Parkstone have not sought a tax ruling from the Internal
Revenue Service ("IRS"), but are acting in reliance upon the opinion of counsel
discussed in the previous
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paragraph. That opinion is not binding on the IRS and does not preclude the IRS
from adopting a contrary position. Shareholders should consult their own
advisers concerning the potential tax consequences to them, including state and
local income taxes.
COMPARISON OF INVESTMENT POLICIES AND RISK FACTORS
The investment objectives and policies of the Reorganizing Funds are,
in many respects, similar to those of the corresponding Existing Armada Funds.
There are, however, certain differences. The investment objective of each of the
Existing Armada Funds and the Reorganizing Funds, with the exception of the
Parkstone U.S. Government Obligations and Treasury Funds, is non-fundamental,
meaning that it may be changed without a vote of the holders of a majority of
the Fund's outstanding shares, as defined by the 1940 Act. The investment
objectives of the Parkstone U.S. Government Obligations and Treasury Funds are
fundamental. Additionally, the investment policies of the Reorganizing Funds and
the Existing Armada Funds are, with the exception of the Armada Tax Exempt Money
Market Fund, not fundamental and may be changed by the respective Boards of
Trustees.
The following discussion summarizes some of the more significant
similarities and differences in the investment policies and risk factors of the
Reorganizing Funds and corresponding Existing Armada Funds and is qualified in
its entirety by the discussion elsewhere herein, and in the Prospectuses and
Statements of Additional Information of the Reorganizing Funds and the Existing
Armada Funds incorporated herein by reference.
PARKSTONE PRIME OBLIGATIONS FUND AND ARMADA MONEY MARKET FUND.
Each Fund is a money market fund that seeks to maintain a net asset
value of $1.00 per share, although there is no assurance either will be able to
do so. Both the Parkstone Prime Obligations Fund and Armada Money Market Fund
may invest in a broad range of U.S. dollar-denominated, high quality, short-term
instruments, including government obligations, commercial paper, bank
obligations, guaranteed investment contracts ("GICs"), repurchase agreements and
reverse repurchase agreements.
Both Funds will only purchase "eligible securities" that present
minimal credit risks as determined by its adviser pursuant to guidelines
established by their Boards of Trustees. Eligible securities generally include
U.S. government obligations and other high-quality money market instruments,
including municipal securities and other instruments deemed to be of comparable
high quality as determined by the Boards of Trustees. These securities will have
short-term debt ratings in the two highest rating categories of at least two
nationally recognized statistical rating organizations, or will be unrated
securities of comparable quality. In addition, the Parkstone Prime Obligations
Fund diversifies its investments so that, except for United States government
securities and certain other exceptions, not more than 5% of its total assets is
invested in securities of all issuers, not more than 5% of its total assets is
invested in the securities of any one issuer, not more than 5% of its total
assets is invested in securities of all issuers rated by a Rating Agency at the
time of investment in the second highest rating category for short-term debt
obligations or deemed to be of comparable quality to securities rated in the
second highest rating category for short-term debt obligations ("Second Tier
Securities") and not more than the greater of 1% of total assets or $1 million
is invested in the Second Tier Securities of one issuer. Each
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Fund's assets have remaining maturities of 397 calendar days or less (except for
certain variable and floating rate instruments and securities underlying certain
repurchase agreements) as defined by the SEC and each Fund's dollar-weighted
average portfolio maturity may not exceed 90 days.
Both Funds may invest in U.S. dollar denominated bank obligations of
foreign and domestic banks such as certificates of deposit, time deposits,
bankers' acceptances, Eurodollar Certificates of Deposit ("ECDs"), Eurodollar
Time Deposits ("ETDs"), Canadian Time Deposits ("CTDs") and Yankee Certificates
of Deposit ("Yankee CDs"). Both Funds may invest in Canadian Commercial Paper
("CCP") and Europaper, which is U.S. dollar denominated commercial paper of a
foreign issuer. With respect to the Armada Money Market Fund, investments in
bank obligations are limited to the obligations of financial institutions having
more than $1 billion in total assets at the time of purchase.
There are some differences between the Funds. The Armada Money Market
Fund may invest in zero coupon securities. These securities may exhibit greater
price volatility than ordinary debt securities because of the manner in which
their principal and interest are returned to investors. Subject to 1940 Act
limitations and pursuant to applicable SEC requirements, Armada Money Market
Fund may also 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 (a
"money market mutual fund").
PARKSTONE U.S. GOVERNMENT OBLIGATIONS FUND AND ARMADA GOVERNMENT MONEY MARKET
FUND.
Each Fund is a money market fund that seeks to maintain a net asset
value of $1.00 per share, although there is no assurance either will be able to
do so. Both Funds invest in obligations issued or guaranteed as to payment of
principal and interest by the U.S. Government, its agencies or
instrumentalities, and repurchase agreements issued by financial institutions
such as banks and broker-dealers.
The Parkstone U.S. Government Obligations Fund diversifies its
investments so that, except for United States government securities and certain
other exceptions, not more than 5% of its total assets is invested in Second
Tier Securities and not more than 1% of total assets or $1 million is invested
in the Second Tier Securities of one issuer.
A difference between the Funds is that Parkstone U.S. Government
Obligations Fund is permitted to invest up to 35% of the value of its total
assets in high quality money market instruments, including Municipal Securities,
bankers' acceptances, certificates of deposit, time deposits, and other
instruments deemed to be of comparable high quality as determined by Parkstone's
Board of Trustees although it has not been the practice of the Adviser to do so.
Armada Government Money Market is not expressly permitted to invest in these
securities.
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PARKSTONE TAX-FREE FUND AND ARMADA TAX EXEMPT MONEY MARKET FUND.
Each Fund is a money market fund that seeks to maintain a net asset
value of $1.00 per share, although there is no assurance they will be able to do
so. Both Funds invest at least 80% of their assets in Municipal Securities rated
in the two highest short-term rating categories by a Rating Agency, or, if
unrated, are determined to be of comparable quality. This 80% requirement is a
fundamental policy of the Armada Tax Exempt Money Market Fund.
Both Funds may invest in the same types of Municipal Securities. Both
may invest in securities issued or guaranteed by the U.S. government, its
agencies and instrumentalities. Both may purchase securities on a when-issued or
delayed delivery basis.
There are some differences between the Funds. Parkstone Tax-Free Fund
is permitted to invest up to 20% of its total assets in taxable obligations for
temporary defensive purposes or when sufficient tax-exempt securities are not
available, may enter into repurchase agreements and reverse repurchase
agreements, and may lend its portfolio securities. Parkstone Tax-Free Fund is
also permitted to invest up to 20% of its assets the interest on which is
treated as a preference item for purposes of the federal alternative minimum
tax. Armada Tax Exempt Money Market Fund may enter into repurchase agreements
and reverse repurchase agreements, but is not expressly permitted to lend its
portfolio securities.
Armada Tax Exempt Money Market Fund may, unlike Parkstone Tax-Free
Fund, invest in municipal lease obligations and participation interests.
Municipal lease obligations are issued by a state or local government or
authority to acquire land and a wide variety of equipment and facilities. They
may take the form of a lease, an installment purchase contract, a conditional
sales contract, or a participation certificate in any of the above. Municipal
lease obligations typically are not backed by the municipality's credit, and
their interest may become taxable if the lease is assigned. Under guidelines
established by Armada's Board of Trustees, the credit quality of municipal
leases will be determined on an ongoing basis, including an assessment of the
likelihood that a lease will be canceled. Participation interests are interests
in Municipal Securities from financial institutions such as commercial and
investment banks, savings and loan associations and insurance companies. A
participation interest may be in the form of "certificates of participation"
which represents undivided proportional interests in lease payments by a
governmental or nonprofit entity. The municipal leases underlying the
certificates of participation in which the Armada Tax Exempt Money Market Fund
invests will be rated in the two highest rating categories by a Rating Agency.
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PARKSTONE BOND FUND AND ARMADA BOND FUND.
The investment policies of these Funds are similar. Both Funds invest
at least 80% of the value of their total assets in bonds, debentures and certain
other debt securities. Both Funds invest only in investment grade fixed income
securities (i.e., securities rated in the four highest rating categories by a
Rating Agency), or if unrated, are determined by each Fund's adviser to be of
comparable quality. Parkstone Bond Fund may invest up to 25% of its net assets
in foreign securities, either directly or through the purchase of American
Depository Receipts ("ADRs"). Armada Bond Fund is not expressly permitted to
invest in foreign securities.
Both Funds invest in the same types of debt securities, including debt
securities of corporations, securities issued or guaranteed by the U.S.
government, its agencies and instrumentalities, mortgage-backed securities and
asset-backed securities. Both Funds may invest a portion of their assets in the
same types of short-term obligations. Each may engage in interest rate and bond
index futures contracts and options on futures contracts.
PARKSTONE LIMITED MATURITY BOND FUND AND ARMADA LIMITED MATURITY BOND FUND.
It is expected that the Armada Enhanced Income Fund will change its
name to Armada Limited Maturity Bond Fund on or about the time of the
Reorganization.
The investment policies of these Funds are similar. Both Funds invest
at least 80% of their total assets in investment grade debt securities of all
types, including debt securities of corporations, obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities,
asset-backed securities, mortgage-backed securities and Municipal Securities. In
addition, each may invest up to 20% of total assets in other securities,
including preferred stocks. Both Funds may invest a portion of their assets in
the same types of short-term obligations. Both Funds may invest in foreign
securities either directly or through the purchase of ADRs. Parkstone Limited
Maturity Bond Fund may only invest 25% of its net assets in foreign securities,
CCP and Europaper. Armada Limited Maturity Bond Fund has no limitation on
investing in foreign securities. Both Funds may invest in interest rate and bond
index futures and options on futures contracts, and may engage in forward
currency exchange contracts. Both Funds intend to maintain a dollar-weighted
average maturity of 1 to 5 years.
There are some differences. Parkstone Limited Maturity Bond Fund is
permitted to invest in bank obligations, including bankers' acceptances,
certificates of deposit and time deposits. Armada Limited Maturity Bond Fund is
not expressly permitted to invest in these securities. In order to protect its
value from interest rate fluctuations, the Armada Limited Maturity Bond Fund may
enter into interest rate swaps. The Armada Limited Maturity Bond Fund expects to
enter into these hedging transactions primarily to preserve a return or spread
of a particular investment or portion of its holdings and to protect against an
increase in the price of securities the Fund anticipates purchasing at a later
date. Interest rate swaps involve the exchange by the Armada Limited Maturity
Bond Fund with another party of their respective commitments to pay or receive
interest (i.e., an exchange of floating rate payments for fixed 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
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<PAGE> 46
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.
Armada Limited Maturity Bond 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 in the highest category by a Rating Agency. Parkstone
Limited Maturity may not invest in interest rate swaps.
PARKSTONE INTERMEDIATE GOVERNMENT OBLIGATIONS FUND AND ARMADA INTERMEDIATE BOND
FUND.
These Funds have similar, but not identical, investment policies. The
principal difference is that Parkstone Intermediate Government Obligations Fund
invests 80% of its total assets in obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities. Armada Intermediate Bond Fund is
permitted to invest 80% of its total assets in debt securities of all types, not
just obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities, and 20% of the value of its total assets may be invested in
preferred stocks and other investments. These debt securities include: equipment
lease and trust certificates; corporate issues; collateralized mortgage
obligations; state, municipal and private activity bonds; obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities; securities
of supranational organizations such as the World Bank; participation
certificates in pools of mortgages, including mortgages issued or guaranteed by
the U.S. government, its agencies or instrumentalities; asset-backed securities
such as mortgage backed securities, Certificates of Automobile Receivables
("CARS") and Certificates of Amortizing Revolving Debts ("CARDS"); private
placements; and income participation loans.
Under normal market conditions, both Funds expect to maintain a
dollar-weighted average portfolio maturity of three to ten years. Both Funds may
invest in mortgage-related securities. Parkstone Intermediate Government
Obligations Fund may purchase mortgage-backed securities rated in the three
highest rating categories by a Rating Agency, whereas Armada Intermediate Bond
Fund may purchase corporate debt securities, mortgage-backed securities and
commercial paper in the four highest rating categories. Both Funds may invest a
portion of their assets in the same types of short-term obligations, except that
Armada Intermediate Bond Fund may also invest in GICs. The Armada Intermediate
Bond Fund may invest in foreign securities whereas Parkstone Intermediate
Government Obligations Fund may not. The Armada Intermediate Bond Fund may
invest in variable and floating rate instruments, which are unsecured
instruments that permit the indebtedness thereunder to vary and provide for
periodic adjustments in the interest rates, whereas the Parkstone Intermediate
Government Obligations Fund may not. Both Funds are permitted to invest in
repurchase agreements, however, the Parkstone Intermediate Government
Obligations Fund is also permitted to invest in reverse repurchase agreements,
while the Armada Intermediate Bond Fund may not.
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PARKSTONE EQUITY INCOME FUND AND ARMADA EQUITY INCOME FUND.
The investment policies of the Funds are similar. Both Funds invest at
least 80% of their total assets in income producing common stocks and securities
convertible into common stock. Both Funds invest portions of their assets in the
same types of short-term obligations except that Armada Equity Income Fund may
also invest in GICs. Both Funds may invest in stock index futures contracts and
options on futures contracts. Both may purchase put and call options and write
covered call options for hedging purposes. With respect to the Armada Equity
Income Fund, such options must be listed on a national securities exchange or
board of trade. Parkstone Equity Income Fund is not subject to such a
limitation. The aggregate value of securities subject to options can not exceed
50% of Parkstone Equity Income Fund's net assets or 25% of Armada Equity Income
Fund's net assets. Both Funds may invest in foreign securities, including ADRs,
EDRs and SPDRs. Armada Equity Income Fund may invest up to 20% of its total
assets in foreign securities, whereas Parkstone Equity Income Fund may invest up
to 25% of its net assets in such securities. Both Funds may engage in foreign
currency transactions. The Parkstone Equity Income Fund may invest in bank
obligations and commercial paper, while the Armada Equity Income Fund may not.
PARKSTONE SMALL CAPITALIZATION FUND AND ARMADA SMALL CAP GROWTH FUND.
The investment policies of both Funds are similar. Both Funds intend to
invest at least 80% of their total assets in equity securities of companies with
small stock market capitalization. Both Funds consider a "small capitalization"
company to be one that has the same market capitalization as the companies in
the Russell 2000 Growth Index.
Both Funds may invest portions of their assets in the same types of
short-term obligations, including commercial paper (including variable amount
master demand notes), bankers' acceptances, certificates of deposit, repurchase
agreements, obligations issued or guaranteed by the U.S. government or its
agencies or instrumentalities, and demand and time deposits of domestic and
foreign banks and savings and loan associations, except that Armada Small Cap
Growth Fund may also invest in GICs. Both Funds may invest in stock index
futures contracts and options on futures contracts. Both Funds may purchase put
and call options and write covered call options for hedging purposes. With
respect to Armada Small Cap Growth Fund, such options must be listed on a
national securities exchange or board of trade. Parkstone Small Capitalization
Fund is not subject to such a limitation. The aggregate value of securities
subject to options will not exceed 50% of Parkstone Small Capitalization Fund's
net assets or 25% of Armada Small Cap Growth Fund's net assets. Both Funds may
invest in securities of foreign issuers, including ADRs and EDRs. Armada Small
Cap Growth may also invest in SPDRs. Armada Small Cap Growth Fund may invest up
to 20% of its total assets in the securities of foreign issuers, whereas
Parkstone Small Capitalization Fund may invest up to 25% of its net assets in
such securities. Parkstone Small Capitalization Fund is permitted to enter into
foreign currency futures contracts. Armada Small Cap Growth Fund is not
permitted to engage in foreign currency futures contracts. The Parkstone Small
Capitalization Fund may invest in bank obligations and commercial paper, while
the Armada Small Cap Growth Fund may not.
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PARKSTONE INTERNATIONAL DISCOVERY FUND AND ARMADA INTERNATIONAL EQUITY FUND.
The investment policies of both Funds are very similar. Parkstone
International Discovery Fund and the Armada International Equity Fund each seek
to achieve their investment objective by investing, under normal market
conditions, at least 80% of their total assets in equity securities of foreign
issuers. Both Funds' assets normally will be invested in the securities of
issuers located in at least three foreign countries. It is not anticipated that
the Parkstone International Discovery Fund or the Armada International Equity
Fund will invest in the common stock of U.S. companies.
Both Funds will invest primarily in equity securities, including common
and preferred stocks, rights, warrants, securities convertible into common
stocks, ADRs and EDRs. Foreign investments by both Funds may include debt
obligations issued or guaranteed by foreign governments or their agencies,
authorities, instrumentalities, or political sub-divisions, including a foreign
state, province or municipality. Both Funds focus their investments in equity
securities of companies that are included in the Morgan Stanley Capital
International Europe, Australasia, Far East ("EAFE") Index, a broadly
diversified international index consisting of more than 1,000 equity securities
of companies located in the above-referenced countries.
More than 25% of each Fund's total assets may be invested in the
securities of issuers located in the same country. Investment in a particular
country of 25% or more of the Fund's total assets will make the Fund's
performance more dependent upon the political and economic circumstances of that
country than a mutual fund more widely diversified among issuers in different
countries.
Both Funds may invest in stock index futures contracts and options on
futures. Both Funds may also invest in foreign currency futures contracts. Both
Funds may purchase put and call options and write covered calls for hedging
purposes. Such options may relate to particular securities, stock or bond
indices, financial instruments or foreign currencies. With respect to the Armada
International Equity Fund, such options must be listed on a national securities
exchange or board of trade. The Parkstone International Discovery Fund is not
subject to such a limitation. The aggregate value of the securities subject to
options will not exceed 50% of Parkstone International Discovery Fund's net
assets or 25% of Armada International Equity Fund's net assets.
The Armada International Equity Fund may also purchase shares of
investment companies investing primarily in foreign securities, including
"country funds" which have portfolios consisting exclusively of securities of
issuers located in one foreign country. Such "country funds" may be either
open-end or closed-end investment companies. Parkstone International Discovery
Fund may only invest in other investment companies which are money market mutual
funds.
The Armada International Equity Fund may also purchase World Equity
Benchmark Shares issued by The Foreign Fund, Inc. ("WEBS") and similar
securities of other issuers. WEBS are shares of an investment company that
invests substantially all of its assets in securities included in the Morgan
Stanley Capital International indices for specific countries.
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Because the expense associated with an investment in WEBS can be substantially
lower than the expense of small investments directly in the securities
comprising the indices it seeks to track, the adviser believes that investment
in WEBS of countries that are included in the EAFE Index can provide a
cost-effective means of diversifying the Fund's assets across a broader range of
equity securities.
WEBS are listed on the American Stock Exchange ("AMEX"), and were
initially offered to the public in 1996. The market prices of WEBS are expected
to fluctuate in accordance with both changes in the net assets value of their
underlying indices and supply and demand of WEBS under AMEX. To date, WEBS have
traded at relatively modest discounts and premiums to their net asset value.
However, WEBS have limited operating history, and information is lacking
regarding the actual performance and trading liquidity of WEBS for extended
periods or over complete market periods. In addition, there is no assurance that
the requirements of AMEX necessary to maintain the listing of WEBS will continue
to be met or will remain unchanged.
In the event substantial market or other disruptions effecting WEBS
would occur in the future, the liquidity and value of the Armada International
Equity Fund's shares could also be substantially and adversely affected, and the
Fund's ability to provide investment results approximating the performance of
securities in the EAFE could be impaired. If such disruptions were to occur, the
Fund could be required to reconsider the use of WEBS or other "Country Funds" as
part of its investment strategy. The Parkstone International Discovery Fund may
not invest in WEBS.
PARKSTONE BALANCED ALLOCATION FUND AND ARMADA BALANCED ALLOCATION FUND.
The investment policies of these two Funds are substantially the same.
Each may invest in any type or class of security. Both intend to invest 50% to
70% of their net assets in common stocks and securities convertible to common
stocks, 25% to 55% of their net assets in fixed income securities and up to 30%
of their net assets in cash and cash equivalents. Both Funds may invest a
portion of their assets in the same types of short-term obligations. Each may
invest up to 20% of its net assets in foreign securities, including ADRs, EDRs
and GDRs. Both may engage in foreign currency exchange contracts. Both may
invest in futures contracts and options on futures contracts. Both may purchase
put and call options and write covered calls for hedging purposes. Armada
Balanced Allocation Fund is limited to options listed on a national securities
exchange or board of trade. Parkstone Balanced Allocation Fund is not subject to
such a limitation. The aggregate value of the securities subject to options will
not exceed 50% of Parkstone Balanced Allocation Fund's net assets or 25% of
Armada Balanced Allocation Fund's net assets.
In order to protect its value from interest rate fluctuations, the
Armada Balanced Allocation Fund may enter into interest rate and total return
swaps. The Armada Balanced Allocation Fund expects to enter into these hedging
transactions primarily to preserve a return or spread of a particular investment
or portion of its holdings and to protect against an increase in the price of
securities the Fund anticipates purchasing at a later date. Swaps involve the
exchange by the Fund with another party of their respective commitments to pay
or receive interest (i.e., an exchange of floating rate payments for fixed rate
payments). The net amount of
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the excess, if any, of the Fund's obligations over its 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. The
Armada Balanced Allocation Fund will not enter into any swap unless the
unsecured commercial paper, senior debt, or claims paying ability of the other
party is rated in the two highest rating categories by a Rating Agency, or the
claims paying ability of the other party is deemed creditworthy and any such
obligation the Armada Balanced Allocation Fund may have under such an
arrangement will be covered by setting aside liquid high grade securities in a
segregated account.
The Armada Balanced Allocation Fund may engage in short sales of its
securities. Selling securities short involves selling securities the seller does
not own (but has borrowed) in anticipation of a decline in the market price of
such securities. To deliver the securities to the buyer, the seller must arrange
through a broker to borrow the securities and, in so doing, the seller becomes
obligated to replace the securities borrowed at their market price at the time
of replacement. In a short sale, the proceeds the seller receives from the sale
are retained by a broker until the seller replaces the borrowed securities. The
seller may have to pay a premium to borrow the securities and must pay any
dividends or interest payable on the securities until they are replaced.
PARKSTONE NATIONAL TAX EXEMPT BOND FUND AND ARMADA NATIONAL TAX EXEMPT BOND
FUND.
The investment policies of these two Funds are similar. Each invests,
under normal market conditions, at least 80% of its total assets in Municipal
Securities. This 80% requirement is a fundamental policy of the Armada National
Tax Exempt Bond Fund. Both Funds may invest in the same types of Municipal
Securities. Both are permitted to invest in taxable obligations for temporary
defensive purposes or if suitable tax exempt securities are not available. Both
Funds expect to maintain a dollar-weighted average portfolio maturity of three
to ten years.
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INVESTMENT POLICIES AND RISKS -- GENERAL
The investment objective of each of the Reorganizing Funds and each
Existing Armada Fund are non-fundamental, with the exception of the Parkstone
U.S. Government Obligations and Treasury Funds. A non-fundamental investment
objective may be changed without a vote of the majority of the Fund's
outstanding voting securities, as defined by the 1940 Act. The investment
objectives of the U.S. Government Obligations and Treasury Funds are
fundamental. Additionally, the investment policies of the Reorganizing Funds and
the Existing Armada Funds are not fundamental and may be changed by the
respective Boards of Trustees.
This section describes certain policies and risks that are common to a
number of Reorganizing Funds and Existing Armada Funds.
Each Reorganizing Fund and each Existing Armada Fund is permitted to
(i) enter into repurchase agreements; and (ii) purchase obligations of the U.S.
Government, its agencies and instrumentalities.
There are similarities between the Funds with respect to the types of
money market instruments they are permitted to purchase. Each Reorganizing Fund
and each Existing Armada Fund may invest in a broad array of money market
instruments, with debt securities rated in one of the top two rating categories
by a Rating Agency.
Each Fund may lend its portfolio securities. The aggregate amount of
all outstanding securities loans of each of the Reorganizing Funds and each of
the Existing Armada Funds may not exceed one-third of the Fund's total assets.
Such loans involve risks of delay in receiving additional collateral or in
recovering the securities loaned or even loss of rights in the collateral,
should the borrower of the securities fail financially. Any portfolio securities
purchased with cash collateral would also be subject to possible depreciation.
Parkstone Limited Maturity Bond Fund and Armada Bond Fund, Limited
Maturity Bond Fund, Intermediate Bond Fund and Balanced Allocation Fund may
invest in asset-backed securities. These securities may be backed by either
credit card receivables or motor vehicle installment purchase obligations.
Asset-backed securities entail certain risks, including the risk that 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
give such debtors the right to set off certain amounts owned on the credit
cards, thereby reducing the balance due. Most issuers of asset-backed securities
backed by motor vehicle installment purchase obligations permit the servicer of
such receivable to retain possession of the underlying obligations. If the
servicer sells 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 asset-backed securities. Further, if a vehicle is registered in one
state and is then re-registered because the owner and obligor move to another
state, such re-registration could defeat the original security interest in the
vehicle in certain cases. 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 asset-backed securities backed by automobile
receivables may not have a proper security interest in all of the obligations
backing such receivables. Therefore, there is the possibility that recoveries on
repossessed collateral may not, in some cases, be available to support payments
on these securities.
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Parkstone Bond Fund, Limited Maturity Bond Fund, U.S. Government Income
Fund, Intermediate Government Obligations Fund and Balanced Allocation Fund, and
Armada Bond Fund, Limited Maturity Bond Fund, U.S. Government Income Fund,
Intermediate Bond Fund and Balanced Allocation Fund may invest in
mortgage-backed securities. To the extent that a Fund purchases mortgage-backed
securities at a premium, mortgage foreclosures and prepayments of principal by
mortgagors (which may be made at any time without penalty) may result in some
loss of the Fund's principal investment to the extent of the premium paid. The
yield of a Fund that invests in mortgage-backed securities may be affected by
reinvestment of prepayments at higher or lower rates than the original
investment. Mortgage-backed securities have either fixed or adjustable interest
rates. The rate of return on mortgage-backed securities may be affected by
prepayments on principal on the underlying loans, which generally increase as
interest rates decline. As a result, when interest rates decline, holders of
these securities normally do not benefit from appreciation in market value to
the same extent as holders of other non-callable debt securities. In addition,
the value of mortgage-backed securities will fluctuate in response to market
interest rates.
The Parkstone Prime Obligations Fund, U.S. Government Obligations Fund,
Tax-Free Fund, Bond Fund, Limited Maturity Bond Fund, U.S. Government Income
Fund, Large Capitalization Fund, Equity Income Fund, Mid Capitalization Fund,
Small Capitalization Fund, International Discovery Fund and Balanced Allocation
Fund and the Armada U.S. Government Income Fund, Limited Maturity Bond Fund,
Intermediate Bond Fund, Equity Income Fund, Mid Cap Growth Fund, Small Cap
Growth Fund, International Equity Fund and Balanced Allocation Fund may invest
in foreign securities. 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 a Fund may be subject to greater
fluctuation in price than securities of domestic companies.
Subject to 1940 Act limitations, each Reorganizing Fund, except for the
Parkstone Prime Obligations Fund, U.S. Government Obligations Fund, Tax-Free
Fund and Treasury Fund may invest in the securities of any one money market
mutual fund. Each existing Armada Fund may invest in securities issued by other
investment companies (including other investment companies advised by their
advisers) 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. Additionally, Armada International Equity Fund may invest
in the securities of other investment companies investing in foreign securities.
As a shareholder of another investment company, a Fund would bear, along with
other shareholders, its pro rata portion of that company's expenses, including
advisory fees. These expenses would be in addition to the advisory and other
expenses that a Fund bears directly in connection with its own operations.
Investment companies in which
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<PAGE> 53
a Fund may invest may also impose a sales or distribution charge in connection
with the purchase or redemption of their shares and other types of commissions
or charges. Such charges will be payable by the Fund and, therefore, will be
borne indirectly by its shareholders.
Each Reorganizing Fund and the Armada Money Market Fund, Bond Fund,
Limited Maturity Bond Fund, Intermediate Bond Fund, Balanced Allocation Fund,
U.S. Government Income Fund, Mid Cap Growth Fund and Michigan Municipal Bond
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).
Each Reorganizing Fund, except for the Parkstone Prime Obligations
Fund, U.S. Government Obligations Fund, Tax-Free Fund and Treasury Fund and the
Armada Money Market Fund, Bond Fund, Limited Maturity Bond Fund, Intermediate
Bond Fund, Balanced Allocation Fund, U.S. Government Income Fund, Mid Cap Growth
Fund and Michigan Municipal Bond Fund may invest in "Treasury Investment Growth
Receipts" ("TIGR's") and "Certificates of Accrual on Treasury Securities"
("CATS"). TIGR's and CATS are interests in private proprietary accounts.
Securities denominated as TIGR's 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 regular debt obligations.
INVESTMENT LIMITATIONS
Neither the Reorganizing Funds nor the Existing Armada Funds may change
their fundamental investment limitations without the affirmative vote of the
holders of a majority of the outstanding shares (as defined in the 1940 Act) of
the particular Reorganizing Fund or Existing Armada Fund. The investment
limitations of the Reorganizing Funds and the Existing Armada Funds are very
similar, but not identical.
The investment limitations listed below are fundamental with respect to
the Reorganizing Funds and the Existing Armada Funds except as noted.
The Parkstone Bond Fund, Limited Maturity Bond Fund, National Tax
Exempt Bond Fund, Intermediate Government Obligations Fund, U.S. Government
Income Fund, Large Capitalization Fund, Equity Income Fund, Mid Capitalization
Fund, Small Capitalization Fund, International Discovery Fund and Balanced
Allocation Fund and the Armada Bond Fund, Limited Maturity Bond Fund,
Intermediate Bond Fund, Equity Income Fund, Small Cap Growth Fund, International
Equity Fund, Balanced Allocation Fund, U.S. Government and Income Fund, Large
Cap Ultra Fund, Mid Cap Growth Fund and National Tax Exempt Bond Fund may not:
Purchase securities of any one issuer, other than securities issued or
guaranteed by the U.S. government or its agencies or instrumentalities,
if, immediately after such purchase, more than 5% of the value of the
Fund's total assets would be invested in such issuer or
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<PAGE> 54
the Fund would hold more than 10% of any class of securities of the
issuer or more than 10% of the outstanding voting securities of the
issuer, except that up to 25% of the value of the Fund's total assets
may be invested without regard to such limitations.
The following investment restrictions apply to all Funds except the
Parkstone U.S. Government Obligations Fund and Treasury Fund:
No Fund may:
1. Purchase any securities which would cause 25% or more of
the value of its total assets at the time of purchase to be invested in the
securities of one or more issuers conducting their principal business activities
in the same industry, provided that:
(a) there is no limitation with respect to
obligations issued or guaranteed by the U.S. government, any state,
territory or possession of the United States, the District of Columbia
or any of their authorities, agencies, instrumentalities or political
subdivisions, and repurchase agreements secured by such instruments, or
in the case of the Parkstone Prime Obligations Fund and Tax-Free Fund,
domestic bank obligations and repurchase agreements secured by such
obligations;
(b) wholly-owned finance companies will be considered
to be in the industries of their parents if their activities are
primarily related to financing the activities of the parents;
(c) utilities will be divided according to their
services, for example, gas, gas transmission, electric and gas,
electric, and telephone will each be considered a separate industry;
and
(d) personal credit and business credit businesses
will be considered separate industries.
2. Make loans, except that the Fund may purchase and hold debt
instruments and enter into repurchase agreements in accordance with its
investment objective and policies and may lend portfolio securities in an amount
not exceeding one-third of its total assets.
3. Borrow money, issue senior securities or mortgage, pledge or
hypothecate its assets except to the extent permitted under the 1940 Act.
The Parkstone U.S. Government Obligations Fund and Treasury Fund will
not:
Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. government or its agencies or instrumentalities,
if, immediately after such purchase, more than 5% of the value of the
Fund's total assets would be invested in such issuer or the Fund would
hold more than 10% of the outstanding voting securities of the issuer,
except that up to 25% of the value of the Fund's total assets may be
invested without regard to such limitations. There is no limit to the
percentage of assets that may be
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<PAGE> 55
invested in U.S. Treasury bills, notes, or other obligations issued or
guaranteed by the U.S. government or its agencies or instrumentalities.
Irrespective of the investment restriction above, and pursuant to Rule
2a-7 under the 1940 Act, the U.S. Government Obligations Fund and the Treasury
Fund each will, with respect to 100% of their total assets, limit their
investments in the securities of any one issuer in the manner provided by such
Rule.
Additionally, neither the U.S. Government Obligations Fund, nor the
Treasury Fund, will:
1. Purchase any securities which would cause more than 25% of the value
of the Fund's total assets at the time of purchase to be invested in 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 or its agencies or
instrumentalities and repurchase agreements secured by obligations of
the U.S. government or its agencies or instrumentalities;
(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 their parents; and
(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.
2. (a) Borrow money (not including reverse repurchase agreements or
dollar roll agreements), except that each Fund may borrow from banks for
temporary or emergency purposes and then only in amounts up to 10% of its total
assets at the time of borrowing (and provided that such bank borrowings, reverse
repurchase agreements and dollar roll agreements do not exceed in the aggregate
one-third of the Fund's total assets less liabilities other than the obligations
represented by the bank borrowings, reverse repurchase agreements and dollar
roll agreements), or mortgage, pledge or hypothecate any assets except in
connection with a bank borrowing, in amounts not to exceed 30% of the Fund's net
assets at the time of borrowing;
(b) enter into reverse repurchase agreements, dollar roll
agreements and other permitted borrowings in amounts exceeding in the
aggregate one-third of the Fund's total assets less liabilities other
than the obligations represented by such reverse repurchase and dollar
roll agreements; and
(c) issue senior securities except as permitted by the 1940
Act or any rule, order or interpretation thereunder.
3. Make loans, except that a Fund may Purchase or hold debt instruments
and lend portfolio securities in accordance with its investment objective and
policies, make time deposits with financial institutions and enter into
repurchase agreements.
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<PAGE> 56
For purposes of investment limitation number 1 above only, such
limitation shall not apply to Municipal Securities or governmental guarantees of
Municipal Securities, and industrial development bonds or private activity bonds
that are backed only by the assets and revenues of a non-governmental user shall
not be deemed to be Municipal Securities.
The following investment restrictions apply to all Funds
except the Parkstone U.S. Government Obligations and Treasury Funds:
No Fund may:
1. Purchase or sell real estate, except that the fund may
purchase securities of issuers which deal in real estate and
may purchase securities which are secured by interests in real
estate.
2. Invest in commodities, except that, as is consistent with its
investment objective and policies, a Fund may: (a) purchase
and sell options, forward contracts and futures contracts,
including without limitation those relating to indices; (b)
purchase and sell options on futures contracts or indices; and
(c) purchase publicly traded securities of companies engaging
in whole or in part in such activities. For purposes of this
investment limitation, "commodities" includes commodity
contracts.
3. Act as an underwriter of securities within the meaning of the
Securities Act of 1933, except insofar as the Fund might be
deemed to be an underwriter upon the disposition of portfolio
securities acquired within the limitation on purchases of
illiquid securities and except to the extent that the purchase
of obligations directly from the issuer thereof in accordance
with its investment objective, policies and limitations may be
deemed to be underwriting.
In addition, each of the Funds is subject to the following
non-fundamental limitations, which may be changed without a vote of the
shareholders:
No Fund may:
1. Acquire any other investment company or investment company
security except in connection with a merger, consolidation,
reorganization or acquisition of assets or where otherwise
permitted under the 1940 Act.
2. Write or sell put options, call options, straddles, spreads,
or any combination thereof, except as consistent with the
Fund's investment objective and policies for transactions in
options on securities or indices of securities, futures
contracts and options on futures contracts and in similar
investments.
3. Purchase securities on margin, make short sales of securities
or maintain a short position, except that, as consistent with
a Fund's investment objective and policies, (a) this
investment limitation shall not apply to the Fund's
transactions in
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<PAGE> 57
futures contracts and related options, options on securities
or indices of securities and similar instruments, and (b) it
may obtain short-term credit as may be necessary for the
clearance of purchases and sales of portfolio securities.
4. Purchase securities of companies for the purpose of exercising
control.
5. Invest more than 15% (10% in the case of a Money Market Fund)
of its net assets in illiquid securities.
For the purpose of the above investment limitations, the Funds treat
all supranational organizations as a single industry and each foreign government
(and all of its agencies) as a separate industry. In addition, a security is
considered to be issued by the government entity (or entities) whose assets and
revenues back the security.
Generally if a percentage limitation is satisfied at the time of
investment, a later increase or decrease in such percentage resulting from a
change in the value of a Fund's portfolio securities will not constitute a
violation of such limitation for purposes of the 1940 Act.
See "Investment Restrictions" in the Reorganizing Funds' Statement of
Additional Information, which is incorporated by reference herein, for
additional non-fundamental investment limitations of the Reorganizing Funds.
See "Investment Limitations" in the Existing Armada Funds' Statement of
Additional Information, which is incorporated by reference herein, for
additional non-fundamental investment limitations of the Existing Armada Funds.
PURCHASE AND REDEMPTION INFORMATION, EXCHANGE PRIVILEGES, DISTRIBUTION AND
PRICING. The purchase, redemption, exchange privileges and distribution policies
of the Parkstone Funds and the Armada Funds are discussed below in Appendix D to
this Combined Prospectus/Proxy Statement.
OTHER INFORMATION. Parkstone and Armada are registered as open-end management
investment companies under the 1940 Act. Currently, Parkstone offers sixteen
investment portfolios. All Parkstone Funds except the Michigan Municipal Bond
Fund are diversified portfolios. Armada offers twenty-three investment
portfolios. All Armada Funds except the Ohio Tax Exempt Bond and the
Pennsylvania Municipal Bond Funds are diversified portfolios.
Both Parkstone and Armada were organized as Massachusetts business
trusts in 1987 and 1986, respectively, and are subject to the provisions of
their respective Declarations of Trust and Codes of Regulations. Shares of
Parkstone are entitled to one vote for each dollar of value invested, and have a
proportionate fractional vote for any fraction of one dollar invested. Shares of
Armada are entitled to one vote for each full share held and a proportionate
fractional vote for each fractional share held. Shares of both Parkstone and
Armada:
(i) will vote in the aggregate and not by class except as
otherwise expressly required by law or when class voting is
permitted by the respective Board of Trustees; and
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<PAGE> 58
(ii) are entitled to participate equally in the dividends and
distributions that are declared with respect to a particular
investment portfolio and in the net distributable assets of
such portfolio on liquidation.
Shares of both the Parkstone Funds and the Armada Funds have no par
value. In addition, shares of the Parkstone Funds and Armada Funds have no
preemptive rights and only such conversion and exchange rights as the respective
Boards of Trustees may grant in their discretion. When issued for payment as
described in their Prospectuses, Parkstone Fund shares and Armada Fund shares
are fully paid and non-assessable by such entities except as required under
Massachusetts law. Armada is not required under Massachusetts law to hold annual
shareholder meetings and intends to do so only if required by the 1940 Act.
Shareholders have the right to remove Trustees. To the extent required by law,
Armada will assist in shareholder communications in such matters.
The foregoing is only a summary. Shareholders may obtain copies of the
Declarations of Trust and Codes of Regulations of Parkstone and Armada upon
written request at the addresses shown on the cover page of this Combined
Prospectus/Proxy Statement.
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<PAGE> 59
INFORMATION RELATING TO VOTING MATTERS
GENERAL INFORMATION. This Combined Prospectus/Proxy Statement is being furnished
in connection with the solicitation of proxies by Parkstone's Board of Trustees
in connection with the Meeting. It is expected that the solicitation of proxies
will be primarily by mail. Officers and service contractors of Parkstone may
also solicit proxies by telephone, telegraph, facsimile or personal interview.
Shareholders may vote by touch-tone telephone or on the Internet by following
the instructions on the insert contained in the proxy solicitation material. Any
shareholder giving a proxy may revoke it at any time before it is exercised by
submitting to Parkstone a written notice of revocation or a subsequently
executed proxy or by attending the Meeting and voting in person.
Only shareholders of record at the close of business on February 28,
2000 will be entitled to vote at the Meeting. On that date there were
outstanding and entitled to be voted __________ shares of the Parkstone Prime
Obligations Fund, __________ shares of the Parkstone U.S. Government Obligations
Fund, __________ shares of the Parkstone Tax-Free Fund, __________ shares of the
Parkstone Bond Fund, __________ shares of the Parkstone U.S. Government Income
Fund, __________ shares of the Parkstone Limited Maturity Bond Fund, _________
shares of the Parkstone Intermediate Government Obligations Fund, _________
shares of the Parkstone Large Capitalization Fund, _________ shares of the
Parkstone Equity Income Fund, ________ shares of the Parkstone Small
Capitalization Fund, ________ shares of the Parkstone International Discovery
Fund, ________ shares of the Parkstone Balanced Allocation Fund, _______ shares
of the Parkstone National Tax Exempt Bond Fund, _________ shares of the
Parkstone Mid Capitalization Fund, _______ shares of the Parkstone Michigan
Municipal Bond Fund and _______ shares of the Parkstone Treasury Fund. Every
shareholder of record shall have the right to one vote for each dollar of value
invested, and to have a proportionate fractional vote for any fraction of one
dollar invested. Shareholders will vote separately by Fund.
IMC has advised Parkstone and Armada that IMC and its affiliates will
vote the shares of each Parkstone Fund for which it is record owner as follows:
(i) for each account as to which there is an individual designated
both to vote proxies and to receive annual and semi-annual
reports and other disclosure documents, such individual shall
be entitled to vote the shares beneficially owned by such
account; and
(ii) for each account as to which IMC or any of its affiliates is
responsible to vote proxies, an independent third party,
unrelated to IMC, its affiliates or the account shall vote
such shares.
If the accompanying proxy is executed and returned in time for the
Meeting, the shares covered thereby will be voted in accordance with the proxy
on all matters that may properly come before the Meeting or any adjournment
thereof. For information on adjournment of the meeting, see "Quorum" below.
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<PAGE> 60
SHAREHOLDER AND BOARD APPROVALS. The Reorganization Agreement is being submitted
for approval at the Meeting by the holders of a majority of the outstanding
shares of the Parkstone Prime Obligations Fund, U.S. Government Obligations
Fund, Tax-Free Fund, Bond Fund, U.S. Government Income Fund, Limited Maturity
Bond Fund, Intermediate Government Obligations Fund, Large Capitalization Fund,
Equity Income Fund, Small Capitalization Fund, International Discovery Fund,
Balanced Allocation Fund, National Tax Exempt Bond Fund, Mid Capitalization
Fund, Michigan Municipal Bond Fund and Treasury Fund in accordance with the
provisions of Parkstone's Declaration of Trust and the requirements of the 1940
Act.
The term "majority of the outstanding shares" of a Parkstone Fund as
used herein means the lesser of (a) 67% of the shares of the particular
Parkstone Fund present at the Meeting if the holders of more than 50% of the
outstanding shares of the Parkstone Fund are present in person or by proxy, or
(b) more than 50% of the outstanding shares of such Parkstone Fund.
In tallying shareholder votes, abstentions and broker non-votes (i.e.,
proxies sent in by brokers and other nominees that cannot be voted on a proposal
because instructions have not been received from the beneficial owners) will be
counted for purposes of determining whether or not a quorum is present for
purposes of convening the meeting. On the Reorganization, abstentions and broker
non-votes will be considered to be a vote against such proposals.
The approval by the shareholders of the corresponding Existing Armada
Funds of the Reorganization is not being solicited because their approval or
consent is not necessary for the Reorganization to be consummated.
At February 28, 2000, the name, address and share ownership of the
persons who owned of record 5% or more of any class of shares of the
Reorganizing Funds, and the percentage of the respective share classes of the
corresponding Existing Armada Funds that would be owned by those persons upon
the consummation of the Reorganizing Funds Transaction based upon their holdings
on that date are as follows:
<TABLE>
<CAPTION>
PERCENTAGE
PERCENTAGE OF CLASS OF
PERCENTAGE OF REORGANIZING EXISTING
CLASS OF OF CLASS FUND'S SHARES ARMADA FUND
REORGANIZING SHARES OWNED ON OWNED ON OWNED ON
FUND NAME AND ADDRESS OWNED RECORD DATE RECORD DATE CONSUMMATION
- ---- ---------------- ----- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
</TABLE>
At February 28, 2000, the name, address and percentage of ownership of
the persons who owned of record 5% or more of any class of shares of the
Existing Armada Funds, and the percentage of the respective share classes that
would be owned by those persons upon consummation of the Reorganizing Funds
Transaction based upon their holdings on February 28, 2000, are as follows:
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<PAGE> 61
<TABLE>
<CAPTION>
PERCENTAGE
OF EXISTING
PERCENTAGE ARMADA PERCENTAGE
CLASS OF OF CLASS FUND SHARES OF CLASS
SHARES OWNED ON OWNED ON OWNED ON
EXISTING ARMADA FUND NAME AND ADDRESS OWNED RECORD DATE RECORD DATE CONSUMMATION
- -------------------- ---------------- -------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C>
</TABLE>
The name, address and percentage of ownership of each person who owns
of record 5% or more of any class of shares of the Continuing Funds is listed
below. Prior to the Continuing Funds Transaction, the New Armada Funds will have
only nominal assets. Accordingly, the persons who own of record 5% or more of
any class of shares of the Continuing Funds will not materially change upon
consummation of the Continuing Funds Transaction.
<TABLE>
<CAPTION>
PERCENTAGE
PERCENTAGE OF CLASS
PERCENTAGE OF CONTINUING OF NEW
CLASS OF OF CLASS FUND SHARES ARMADA FUND
CONTINUING SHARES OWNED ON OWNED ON OWNED ON
FUND NAME AND ADDRESS OWNED RECORD DATE RECORD DATE CONSUMMATION
- ---- ---------------- ----- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
</TABLE>
At February 28, 2000, the trustees and officers of Parkstone, as a
group, owned less than 1% of the outstanding shares of each of the Parkstone
Funds. At February 28, 2000, the trustees and officers of Armada owned less than
1% of the outstanding shares of each of the Armada Funds.
APPRAISAL RIGHTS. Shareholders are not entitled to any rights of share appraisal
under Parkstone's Declaration of Trust or under the laws of the Commonwealth of
Massachusetts in connection with the Reorganization. Shareholders have, however,
the right to redeem from Parkstone their Parkstone Fund shares at net asset
value until the Effective Time of the Reorganization, and thereafter
shareholders may redeem from Armada the Armada shares acquired by them in the
Reorganization at net asset value.
QUORUM. In the event that a quorum is not present at the Meeting, or in the
event that a quorum is present at the Meeting but sufficient votes to approve
the Reorganization Agreement and the transactions contemplated thereby are not
received, the persons named as proxies may propose one or more adjournments of
the Meeting to permit further solicitation of proxies. Any such adjournment will
require the affirmative vote of a majority of those shares affected by the
adjournment that are represented at the Meeting in person or by proxy. If a
quorum is present, the persons named as proxies will vote those proxies which
they are entitled to vote FOR such
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<PAGE> 62
proposals in favor of such adjournments, and will vote those proxies required to
be voted AGAINST such proposals against any adjournment. A shareholder vote may
be taken with respect to one or more Parkstone Funds prior to any such
adjournment if sufficient votes have been received for approval with respect to
any such Parkstone Fund. A quorum is constituted with respect to a Parkstone
Fund by the presence in person or by proxy of the holders of more than 50% of
the outstanding shares of the Fund entitled to vote at the Meeting. Parkstone
proxies properly executed and marked with a negative vote or an abstention will
be considered to be present at the Meeting for the purposes of determining the
existence of a quorum for the transaction of business.
ANNUAL MEETINGS. Armada does not presently intend to hold annual meetings of
shareholders for the election of trustees and other business unless and until
such time as less than a majority of the trustees holding office have been
elected by the shareholders, at which time the trustees then in office will call
a shareholders' meeting for the election of trustees. Shareholders have the
right to call a meeting of shareholders to consider the removal of one or more
trustees or for other matters and such meetings will be called when requested in
writing by the holders of record of 20% or more of Armada's outstanding shares
of common stock. To the extent required by law, Armada will assist in
shareholder communications on such matters.
ADDITIONAL INFORMATION ABOUT ARMADA
Information about the Existing Armada Funds is included in the
Prospectus accompanying this Combined Prospectus/Proxy Statement, which is
incorporated by reference herein. Additional information about these Funds is
included in their Statement of Additional Information dated December 10, 1999,
which has been filed with the SEC. A copy of the Statement of Additional
Information may be obtained without charge by writing to Armada, One Freedom
Valley Drive, Oaks, Pennsylvania 19456, or by calling Armada at 1-800-622-FUND
(3863).
Armada is subject to the informational requirements of the Securities
Exchange Act of 1934 and the 1940 Act, as applicable, and, in accordance with
such requirements, files proxy materials, reports and other information with the
SEC. These materials can be inspected and copied at the Public Reference
Facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549, and at the offices of listed above and at the SEC's Regional Offices at 7
World Trade Center, Suite 1300, New York, New York 10048 and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can also be
obtained from the Public Reference Branch, Office of Consumer Affairs and
Information Services, Securities and Exchange Commission, Washington, D.C.
20549, at prescribed rates.
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<PAGE> 63
ADDITIONAL INFORMATION ABOUT PARKSTONE
Information about Parkstone is incorporated herein by reference from
its Prospectuses dated September 17, 1999, and Statement of Additional
Information, dated September 17, 1999, copies of which may be obtained without
charge by writing or calling Parkstone at the address and telephone number shown
on the cover page of this Combined Prospectus/Proxy Statement. Reports and other
information filed by Parkstone can be inspected and copied at the Public
Reference Facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and copies of such material can be obtained from the
Public Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, Washington, D.C. 20549, at prescribed rates.
LITIGATION
Neither Parkstone nor Armada is involved in any litigation that would
have any material adverse financial effect upon either the Parkstone Funds or
the Armada Funds.
FINANCIAL HIGHLIGHTS
PARKSTONE FINANCIAL HIGHLIGHTS. The tables set forth below
present unaudited financial information for the various share classes of the
Reorganizing Funds for the six-month period ended November 30, 1999. The
financial highlights for the Reorganizing Funds for prior periods are contained
in Parkstone's Prospectuses dated September 17, 1999, and the financial
statements and related notes for the Reorganizing Funds for prior periods are
contained in Parkstone's Annual Report and are incorporated by reference into
Parkstone's Statement of Additional Information dated September 17, 1999, which
Prospectuses and Statement of Additional Information are incorporated herein by
reference.
The financial highlights tables are intended to help you
understand the Fund's financial performance for the six-month period ended
November 30, 1999. Certain information reflects financial results for a single
Fund share. The total returns in the table represent the rate that an investor
would have earned (or lost) on an investment in the Fund (assuming reinvestment
of all dividends and distributions). This information has not been audited.
Financial statements for prior periods have been audited by
PricewaterhouseCoopers LLP, whose report, along with the Fund's financial
statements, are included for the fiscal periods ending May 31, 1999 in the
annual report, which is available upon request.
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<PAGE> 64
<TABLE>
<CAPTION>
PARKSTONE PRIME OBLIGATIONS FUND
SIX MONTHS ENDED
NOVEMBER 30, 1999 (UNAUDITED)
-----------------------------
INVESTOR A INVESTOR B INSTITUTIONAL
---------- ---------- -------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.......... $1.000 $1.000 $1.000
------ ------ ------
Investment Activities:
Net investment income ...................... 0.023 0.018 0.023
Distributions:
Net investment income....................... (0.023) (0.018) (0.023)
NET ASSET VALUE, END OF PERIOD................ $1.000 $1.000 $1.000
====== ====== ======
Total Return.................................. 2.31%(1) 1.85%(1) 2.36%(1)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)............. $ 16,782 $ 589 $ 589,718
Ratio of expenses to average net assets....... 0.76%(2) 1.66%(2) 0.66%(2)
Ratio of net investment income to average net 4.55%(2) 3.66%(2) 4.65%(2)
assets........................................ 0.91%(2) 1.66%(2) 0.66%(2)
Ratio of expenses to average net assets before
fee waivers......................
<FN>
- -------------
1 Not annualized.
2 Annualized.
</TABLE>
-49-
<PAGE> 65
<TABLE>
<CAPTION>
PARKSTONE U.S. GOVERNMENT OBLIGATIONS FUND
SIX MONTHS ENDED
NOVEMBER 30, 1999 (UNAUDITED)
-----------------------------
INVESTOR A INSTITUTIONAL
---------- -------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................................... $1.000 $1.000
------ ------
Investment Activities:
Net investment income........................................................ 0.022 0.023
Distributions:
Net investment income........................................................ (0.022) (0.023)
NET ASSET VALUE, END OF PERIOD................................................. $1.000 $1.000
====== ======
Total Return................................................................... 2.22%(1) 2.27%(1)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000).............................................. $ 975 $ 99,202
Ratio of expenses to average net assets........................................ 0.84%(2) 0.73%(2)
Ratio of net income to average net assets...................................... 4.32%(2) 4.48%(2)
Ratio of expenses to average net assets before fee waivers..................... 0.99%(2) 0.73%(2)
<FN>
- ---------------
1 Not annualized.
2 Annualized.
</TABLE>
-50-
<PAGE> 66
<TABLE>
<CAPTION>
PARKSTONE TAX-FREE FUND
SIX MONTHS ENDED
NOVEMBER 30, 1999 (UNAUDITED)
-----------------------------
INVESTOR A INSTITUTIONAL
---------- -------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............................................ $1.000 $1.000
------ ------
Investment Activities:
Net investment income ........................................................ 0.013 0.013
Distributions:
Net investment income......................................................... (0.013) (0.013)
NET ASSET VALUE, END OF PERIOD.................................................. $1.000 $1.000
====== ======
Total Return.................................................................... 1.28%(1) 1.33%(1)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)............................................... $ 685 $ 88,305
Ratio of expenses to average net assets......................................... 0.81%(2) 0.72%(2)
Ratio of net income to average net assets....................................... 2.49%(2) 2.62%(2)
Ratio of expense to average net assets before fee waivers....................... 0.96%(2) 0.72%(2)
- ---------------
<FN>
1 Not annualized.
2 Annualized.
</TABLE>
-51-
<PAGE> 67
<TABLE>
<CAPTION>
PARKSTONE SMALL CAPITALIZATION FUND
SIX MONTHS ENDED
NOVEMBER 30, 1999 (UNAUDITED)
-----------------------------
INVESTOR A INVESTOR B INSTITUTIONAL
---------- ---------- -------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD........................................... $ 18.49 $17.78 $18.89
------- ------ ------
Investment Activities:
Net investment income (loss)..................... (0.14) (0.20) (0.10)
Net realized and unrealized
gains (losses) from investments................ 5.97 5.70 6.07
Total from Investment Activities................. 5.83 5.50 5.97
Distributions:
Net Realized Gains............................... (0.00) (0.00) (0.00)
Total Distributions.............................. (0.00) (0.00) (0.00)
NET ASSET VALUE, END OF PERIOD..................... $ 24.32 $ 23.28 $ 24.86
======== ======== ========
Total Return (excludes sales and
redemption charges).............................. 31.53%(1) 30.93%(1) 31.60%(1)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000).................. $ 48,547 $ 19,243 $ 222,630
Ratio of expenses to average net
assets........................................... 1.70%(2) 2.45%(2) 1.45%(2)
Ratio of net investment income (loss) to average net
assets............................................. (1.12)%(2) (1.71)%(2) (0.77)%(2)
Portfolio turnover(3).............................. 65% 65% 65%
<FN>
- ---------------
1 Not annualized.
2 Annualized.
3 Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
</TABLE>
-52-
<PAGE> 68
<TABLE>
<CAPTION>
PARKSTONE INTERNATIONAL DISCOVERY FUND
SIX MONTHS ENDED
NOVEMBER 30, 1999 (UNAUDITED)
-----------------------------
INVESTOR A INVESTOR B INSTITUTIONAL
---------- ---------- -------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD........................................... $ 14.81 $ 14.20 $ 15.03
------- ------- -------
Investment Activities:
Net investment income (loss)..................... (0.19) (0.29) (0.06)
Net realized and unrealized
gains (losses) from investments and
foreign currencies............................. 5.14 4.90 5.04
Total from Investment Activities................. 4.95 4.61 4.98
Distributions:
Net realized gains............................... (0.00) (0.00) (0.00)
Total Distributions.............................. (0.00) (0.00) (0.00)
NET ASSET VALUE, END OF PERIOD..................... $ 19.76 $ 18.81 $ 20.01
======== ======== ========
Total Return (excludes sales and
redemption charges).............................. 33.60%(1) 32.65%(1) 33.31%(1)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000).................. $ 24,305 $ 8,406 $ 310,654
Ratio of expenses to average net
assets........................................... 1.83%(2) 2.58%(2) 1.58%(2)
Ratio of net investment income (loss)
to average net assets............................ (0.66)%(2) (1.42)%(2) (0.43)%(2)
Portfolio turnover(3).............................. 76% 76% 76%
<FN>
- ---------------
1 Not annualized.
2 Annualized.
3 Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
</TABLE>
-53-
<PAGE> 69
<TABLE>
<CAPTION>
PARKSTONE BOND FUND
SIX MONTHS ENDED
NOVEMBER 30, 1999 (UNAUDITED)
-----------------------------
INVESTOR A INVESTOR B INSTITUTIONAL
---------- ---------- -------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD........................................... $ 9.68 $ 9.69 $ 9.73
------ ------ ------
Investment Activities:
Net investment income (loss)..................... 0.27 0.23 0.28
Net realized and unrealized gains (losses)
from investments............................. (0.24) (0.23) (0.24)
Total from Investment Activities................. 0.03 0.00 0.04
Distributions:
Net investment income......................... (0.27) (0.23) (0.28)
Total Distributions.............................. (0.27) (0.23) (0.28)
NET ASSET VALUE, END OF PERIOD..................... $ 9.44 $ 9.46 $ 9.49
======= ======= =======
Total Return (excludes sales and
redemption charges).............................. 0.32%(1) 0.06%(1) 0.47%(1)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000).................. $ 8,191 $ 3,272 $ 336,473
Ratio of expenses to average net
assets........................................... 1.19%(2) 1.94%(2) 0.94%(2)
Ratio of net investment income (loss) to average net
assets............................................. 5.65%(2) 4.90%(2) 5.92%(2)
Ratio of expenses to average net assets before fee
waivers............................................ 1.24%(2) 1.99%(2) 0.99%(2)
Portfolio turnover(3).............................. 54% 54% 54%
<FN>
- ---------------
1 Not annualized.
2 Annualized.
3 Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
</TABLE>
-54-
<PAGE> 70
<TABLE>
<CAPTION>
PARKSTONE LIMITED MATURITY BOND FUND
SIX MONTHS ENDED
NOVEMBER 30, 1999 (UNAUDITED)
-----------------------------
INVESTOR A INVESTOR B INSTITUTIONAL
---------- ---------- -------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD........................................... $ 9.42 $ 9.42 $ 9.42
------ ------ ------
Investment Activities:
Net investment income (loss)..................... 0.25 0.22 0.27
Net realized and unrealized gains (losses)
from investments............................. (0.08) (0.08) (0.08)
Total from Investment Activities................. 0.17 0.14 0.19
Distributions:
Net investment income......................... (0.25) (0.22) (0.27)
Total Distributions.............................. (0.25) (0.22) (0.27)
NET ASSET VALUE, END OF PERIOD..................... $ 9.34 $ 9.34 $ 9.34
======= ======= =======
Total Return (excludes sales and
redemption charges).............................. 1.84%(1) 1.48%(1) 1.99%(1)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000).................. $ 13,317 $ 839 $ 111,266
Ratio of expenses to average net
assets........................................... 1.11%(2) 1.86%(2) 0.86%(2)
Ratio of net investment income (loss) to average net
assets............................................. 5.36%(2) 4.65%(2) 5.64%(2)
Ratio of expenses to average net assets before fee
waivers............................................ 1.26%(2) 2.00%(2) 1.01%(2)
Portfolio turnover(3).............................. 48% 48% 48%
<FN>
- ---------------
1 Not annualized.
2 Annualized.
3 Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
</TABLE>
-55-
<PAGE> 71
<TABLE>
<CAPTION>
PARKSTONE INTERMEDIATE GOVERNMENT OBLIGATIONS FUND
SIX MONTHS ENDED
NOVEMBER 30, 1999 (UNAUDITED)
-----------------------------
INVESTOR A INVESTOR B INSTITUTIONAL
---------- ---------- -------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD........................................... $ 9.77 $ 9.74 $ 9.76
------ ------ ------
Investment Activities:
Net investment income (loss)..................... 0.25 0.21 0.26
Net realized and unrealized
gains (losses) from investments................ (0.15) (0.15) (0.14)
Total from Investment Operations................. 0.10 0.06 0.12
Distributions:
Net investment income............................ (0.25) (0.21) (0.26)
Total Distributions.............................. (0.25) (0.21) (0.26)
NET ASSET VALUE, END OF PERIOD..................... $ 9.62 $ 9.59 $ 9.62
======= ======= =======
Total Return (excludes sales and
redemption charges).............................. 0.99%(1) 0.61%(1) 1.23%(1)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000).................. $ 7,680 $ 796 $ 102,725
Ratio of expenses to average net
assets........................................... 1.26%(2) 2.01%(2) 1.01%(2)
Ratio of net investment income (loss) to average net
assets............................................. 5.06%(2) 4.29%(2) 5.30%(2)
Ratio of expense to average net assets before fee
waivers............................................ 1.31%(2) 2.06%(2) 1.06%(2)
Portfolio turnover(3).............................. 29% 29% 29%
<FN>
1 Not annualized.
2 Annualized.
3 Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
</TABLE>
-56-
<PAGE> 72
<TABLE>
<CAPTION>
PARKSTONE EQUITY INCOME FUND
SIX MONTHS ENDED
NOVEMBER 30, 1999 (UNAUDITED)
-----------------------------
INVESTOR A INVESTOR B INSTITUTIONAL
---------- ---------- -------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD........................................... $ 18.30 $ 18.15 $ 18.20
------- ------- -------
Investment Activities:
Net investment income (loss)..................... 0.10 0.03 0.12
Net realized and unrealized gains (losses)
from investments............................. (1.66) (1.64) (1.66)
Total from Investment Activities................. (1.56) (1.61) (1.54)
Distributions:
Net investment income......................... (0.09) (0.04) (0.11)
Total Distributions.............................. (0.09) (0.04) (0.11)
NET ASSET VALUE, END OF PERIOD..................... $ 16.65 $ 16.50 $ 16.55
======== ======== ========
Total Return (excludes sales and
redemption charges).............................. (8.55)%(1) (8.91)%(1) (8.48)%(1)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000).................. $ 59,675 $17,749 $ 177,506
Ratio of expenses to average net
assets........................................... 1.56%(2) 2.31%(2) 1.31%(2)
Ratio of net investment income (loss) to average net
assets............................................. 1.09%(2) 0.36%(2) 1.36%(2)
Portfolio turnover(3).............................. 22% 22% 22%
- ---------------
<FN>
1 Not annualized.
2 Annualized.
3 Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
</TABLE>
-57-
<PAGE> 73
<TABLE>
<CAPTION>
PARKSTONE NATIONAL TAX EXEMPT BOND FUND
SIX MONTHS ENDED
NOVEMBER 30, 1999 (UNAUDITED)
-----------------------------
INVESTOR A INVESTOR B INSTITUTIONAL
---------- ---------- -------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD........................................... $ 10.38 $ 10.36 $ 10.39
------- ------- --------
Investment Activities:
Net investment income (loss)..................... 0.18 0.15 0.20
Net realized and unrealized
gains (losses) from investments................ (0.28) (0.29) (0.29)
Total from Investment Activities................. (0.10) (0.14) (0.09)
Distributions:
Net investment income............................ (0.18) (0.15) (0.20)
Net realized gains............................... (0.00) (0.00) (0.00)
Total Distributions.............................. (0.18) (0.15) (0.20)
NET ASSET VALUE, END OF PERIOD..................... $ 10.10 $ 10.07 $ 10.10
======== ======== =========
Total Return (excludes sales and
redemption charges).............................. (0.92)%(1) (1.38)%(1) (0.88)%(1)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000).................. $ 4,060 $ 441 $ 81,719
Ratio of expenses to average net
assets........................................... 1.12%(2) 1.87%(2) 0.87%(2)
Ratio of net investment income to (loss) average net
assets............................................. 3.63%(2) 2.89%(2) 3.89%(2)
Ratio of expenses to average net assets before fee
waivers............................................ 1.31%(2) 2.06%(2) 1.06%(2)
Portfolio turnover(3).............................. 15% 15% 15%
<FN>
- ---------------
1 Not annualized.
2 Annualized.
3 Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
</TABLE>
-58-
<PAGE> 74
<TABLE>
<CAPTION>
PARKSTONE BALANCED ALLOCATION FUND
SIX MONTHS ENDED
NOVEMBER 30, 1999 (UNAUDITED)
-----------------------------
INVESTOR A INVESTOR B INSTITUTIONAL
---------- ---------- -------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD........................................... $ 13.52 $ 13.52 $ 13.50
------- ------- --------
Investment Activities
Net investment income (loss)..................... 0.37 0.26 0.50
Net realized and unrealized
gains (losses) from investments
and foreign currencies......................... 1.30 1.36 1.19
Total from Investment Activities................. 1.67 1.62 1.69
Distributions:
Net investment income........................... (0.13) (0.08) (0.15)
Net realized gains.............................. (0.00) (0.00) (0.00)
Total Distributions.............................. (0.13) (0.08) (0.15)
NET ASSET VALUE, END OF PERIOD..................... $ 15.06 $ 15.06 $ 15.04
======== ======== ========
Total Return (excludes sales and
redemption charges).............................. 12.42%(1) 12.00%(1) 12.58%(1)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000).................. $ 14,370 $ 5,248 $ 149,013
Ratio of expenses to average net
assets........................................... 1.39%(2) 2.14%(2) 1.14%(2)
Ratio of net investment income (loss) to average net
assets............................................. 1.70%(2) 0.95%(2) 1.95%(2)
Ratio of expenses to average net assets before fee
waivers............................................ 1.56%(2) 2.31%(2) 1.31%(2)
Portfolio turnover(3).............................. 70% 70% 70%
<FN>
- ---------------
1 Not annualized.
2 Annualized.
3 Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
</TABLE>
-59-
<PAGE> 75
ARMADA FINANCIAL HIGHLIGHTS. The tables set forth below
present unaudited financial information for the various share classes of the
Existing Armada Funds for the six-month period ended November 30, 1999. The
financial highlights for the Existing Armada Funds for prior periods are
contained in Armada's Prospectus relating to the Class I shares of the Existing
Armada Funds dated September 28, 1999, and the Prospectus relating to the Class
A, B and C shares of the Existing Armada Funds dated December 10, 1999, and the
financial statements and related notes for the Existing Armada Funds for prior
periods are contained in Armada's Annual Reports and are incorporated by
reference into Armada's Statement of Additional Information dated December 10,
1999, which Prospectuses and Statement of Additional Information are
incorporated herein by reference.
The financial highlights table is intended to help you
understand the Fund's financial performance for the six-month period ended
November 30, 1999. Certain information reflects financial results for a single
Fund share. The total returns in the table represent the rate that an investor
would have earned (or lost) on an investment in the Fund (assuming reinvestment
of all dividends and distributions). This information has not been audited.
Financial statements for prior periods ending May 31, 1999 have been audited by
Ernst & Young LLP, whose report, along with the Fund's financial statements, are
included in the annual report, which is available upon request.
-60-
<PAGE> 76
<TABLE>
<CAPTION>
ARMADA MONEY MARKET FUND
FOR THE SIX MONTHS
ENDED NOVEMBER 30, 1999
(UNAUDITED)
-----------
Class I Class A Class B
------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00
---------- ---------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.02 0.02 0.02
LESS DISTRIBUTIONS
Dividends from net investment
income (0.02) (0.02) (0.02)
------ -------- --------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00
========== ========== =======
TOTAL RETURN 2.47%(1) 2.39%(1) 2.03%(1)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's) $2,220,015 $1,598,198 $ 230
Ratio of expenses to average
net assets 0.40%(2) 0.55%(2) 1.30%(2)
Ratio of net investment income
to average net assets 4.91%(2) 4.76%(2) 4.01%(2)
<FN>
1 Returns are for the period indicated and have not been annualized.
2 Annualized.
</TABLE>
-61-
<PAGE> 77
<TABLE>
<CAPTION>
ARMADA GOVERNMENT MONEY MARKET FUND
FOR THE
SIX MONTHS ENDED
NOVEMBER 30, 1999
(UNAUDITED)
-----------
Class I Class A
<S> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00
---------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.02 0.02
LESS DISTRIBUTIONS
Dividends from net
investment income (0.02) (0.02)
------- -------
Net asset value, end of period $ 1.00 $ 1.00
========== ========
TOTAL RETURN 2.42%(1) 2.35%(1)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $1,079,858 $582,728
Ratio of expenses to average net assets 0.39%(2) 0.54%(2)
Ratio of net investment income to average
net assets 4.81%(2) 4.66%(2)
<FN>
1 Returns are for the period indicated and have not been annualized.
2 Annualized.
</TABLE>
-62-
<PAGE> 78
<TABLE>
<CAPTION>
ARMADA TAX EXEMPT MONEY MARKET FUND
FOR THE
SIX MONTHS ENDED
NOVEMBER 30, 1999
(UNAUDITED)
-----------
CLASS 1 CLASS A
------- -------
<S> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00
--------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.02 0.01
LESS DISTRIBUTIONS
Dividends from net investment income (0.02) (0.01)
------- --------
Net asset value, end of period $ 1.00 $ 1.00
========== =========
TOTAL RETURN 1.49%(1) 1.41%(1)
Ratios/Supplemental Data
Net assets, end of period (in 000's) $ 349,641 $185,441
Ratio of expenses to average net assets 0.33%(2) 0.47%(2)
Ratio of net investment income to average
net assets 2.98%(2) 2.83%(2)
<FN>
1 Returns are for the period indicated and have not been annualized.
2 Annualized.
</TABLE>
-63-
<PAGE> 79
<TABLE>
<CAPTION>
ARMADA INTERMEDIATE BOND FUND
FOR THE SIX MONTHS
ENDED NOVEMBER 30, 1999
(UNAUDITED)
-----------
CLASS I CLASS A CLASS B
------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning
of period $ 10.39 $ 10.41 $ 10.41
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.30 0.29 0.26
Net gain/(loss) on securities
(realized and unrealized) (0.17) (0.17) (0.18)
------- ------- -------
Total from investment operations 0.13 0.12 0.08
----- ----- -----
LESS DISTRIBUTIONS
Dividends from net investment income (0.30) (0.29) (0.25)
Distributions from net realized
capital gains (0.00) (0.00) (0.00)
Total distributions (0.30) (0.29) (0.25)
------- ------- -------
Net asset value, end of period $ 10.22 $ 10.24 $ 10.24
======== ======= ========
TOTAL RETURN 1.78%(3) 1.66%(1,3) 1.30%(1,3)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $299,921 $ 4,890 $ 620
Ratio of expenses to average net assets 0.58%(2) 0.83%(2) 1.58%(2)
Ratio of net investment income
to average net assets 5.85%(2) 5.60%(2) 4.85%(2)
Portfolio turnover rate 82% 82% 82%
<FN>
1 Total return excludes sales charge.
2 Annualized.
3 Returns are for the period indicated and have not been annualized.
</TABLE>
-64-
<PAGE> 80
<TABLE>
<CAPTION>
ARMADA BOND FUND
FOR THE SIX MONTHS
ENDED NOVEMBER 30, 1999
(UNAUDITED)
-----------
CLASS I CLASS A CLASS B
------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period $ 9.96 $ 9.98 $ 9.97
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.30 0.29 0.25
Net gain/(loss) on securities
(realized and unrealized) (0.27) (0.28) (0.27)
------ ------ ------
Total from investment operations 0.03 0.01 (0.02)
------ ------ ------
LESS DISTRIBUTIONS
Dividends from net investment income (0.30) (0.28) (0.25)
Dividends from net realized capital gains (0.00) (0.00) (0.00)
Total Distributions (0.30) (0.28) (0.25)
------ ------ ------
Net asset value, end of period $ 9.69 $ 9.71 $ 9.70
====== ====== =====
TOTAL RETURN 0.86%(2) 0.74%(2,3) 0.49%(2,3)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $695,625 $3,384 $667
Ratio of expenses to average net assets 0.74%(1) 0.99%(1) 1.70%(1)
Ratio of net investment income to
average net assets 6.04%(1) 5.79%(1) 5.08%(1)
Portfolio turnover rate 62% 62% 62%
<FN>
1 Annualized.
2 Returns are for the period indicated and have not been annualized.
3 Total return excludes sales charge.
</TABLE>
-65-
<PAGE> 81
<TABLE>
<CAPTION>
ARMADA INTERNATIONAL EQUITY FUND
FOR THE SIX MONTHS
ENDED NOVEMBER 30, 1999
(UNAUDITED)
-----------
CLASS I CLASS A CLASS B
------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.91 $ 10.87 $ 10.83
------- ------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss) (0.00) (0.02) (0.06)
Net gain on securities
(realized and unrealized) 3.64 3.62 3.61
------- ------- --------
Total from Investment Operations 3.64 3.60 3.55
------- ------- --------
LESS DISTRIBUTIONS
Dividends from net investment income (0.00) (0.00) (0.00)
------- ------- --------
Total Distributions (0.00) (0.00) (0.00)
------- ------- --------
Net asset value, end of period $ 14.55 $ 14.47 $ 14.38
======= ======= ========
TOTAL RETURN 33.36%(2) 33.12%(1,2) 32.78%(1,2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $312,437 $2,139 $104
Ratio of expenses to average net assets 1.41%(3) 1.65%(3) 2.41%(3)
Ratio of net investment income /(loss) to
average net assets (0.00)%(3) (0.27)%(3) (1.04)%(3)
Portfolio turnover rate 67% 67% 67%
<FN>
1 Total return excludes sales charge.
2 Returns are for the period indicated and have not been annualized.
3 Annualized.
</TABLE>
-66-
<PAGE> 82
<TABLE>
<CAPTION>
ARMADA SMALL CAP GROWTH FUND
FOR THE SIX MONTHS
ENDED NOVEMBER 30, 1999
(UNAUDITED)
-----------
CLASS I CLASS A CLASS B
------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.14 $10.11 $ 10.01
------- ------ -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss) 0.01 (0.00) (0.05)
Net gain/(loss) on securities
(realized and unrealized) 3.09 3.06 3.04
---- ---- ----
Total from Investment Operations 3.10 3.06 2.99
---- ---- ----
LESS DISTRIBUTIONS
Dividends from net investment income (0.00) (0.00) (0.00)
------ ------ ------
Distributions from net realized capital gains (0.00) (0.00) (0.00)
------ ------ ------
Total Distributions (0.00) (0.00) (0.00)
------ ------ ------
Net asset value, end of period $ 13.24 $ 13.17 $ 13.00
======= ====== =======
TOTAL RETURN 30.96%(2) 30.65%(1,2) 30.26%(1,2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $115,852 $1,841 $201
Ratio of expenses to average net assets 1.21%(3) 1.46%(3) 2.17%(3)
Ratio of net investment income /(loss) to
average net assets (0.25)%(3) (0.50)%(3) (1.21)%(3)
Portfolio turnover rate 87% 87% 87%
<FN>
1 Total return excludes sales charge.
2 Returns are for the period indicated and have not been annualized.
3 Annualized.
</TABLE>
-67-
<PAGE> 83
<TABLE>
<CAPTION>
ARMADA LIMITED MATURITY BOND FUND
(FORMERLY, THE ARMADA ENHANCED INCOME FUND)
FOR THE SIX MONTHS
ENDED NOVEMBER 30, 1999
(UNAUDITED)
-----------
CLASS I CLASS A CLASS B(4)
------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period $ 9.96 $ 9.99 $9.92
------ ------ -----
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.28 0.27 0.14
Net gain/(loss) on securities
(realized and unrealized) (0.08) (0.08) (0.01)
------ ------ ------
Total from Investment Operations 0.20 0.19 0.13
---- ---- ----
LESS DISTRIBUTIONS
Dividends from net investment income (0.28) (0.27) (0.14)
Distributions of net realized capital gains (0.00) (0.00) (0.00)
------ ------ ------
Total Distributions (0.28) (0.27) (0.14)
------ ------ ------
Net asset value, end of period $ 9.88 $ 9.91 $ 9.91
====== ===== =====
TOTAL RETURN 2.29%(2) 2.27%(2,3) 1.47%(2,3)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $80,751 $ 526 $139
Ratio of expenses to average net assets 0.48%(1) 0.58%(1) 1.33%(1)
Ratio of net investment income to
average net assets 5.61%(1) 5.51%(1) 4.76%(1)
Portfolio turnover rate 52% 52% 52%
<FN>
1 Annualized.
2 Returns are for the period indicated and have not been annualized.
3 Total returns exclude sales charges.
4 Class B commenced operations on August 11, 1999.
</TABLE>
-68-
<PAGE> 84
<TABLE>
<CAPTION>
ARMADA EQUITY INCOME FUND
FOR THE SIX MONTHS
ENDED NOVEMBER 30, 1999
(UNAUDITED)
-----------
CLASS I CLASS A CLASS B
------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period $18.80 $18.79 $18.69
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.17 0.14 0.09
Net gain/(loss) on securities
(realized and unrealized) (1.47) (1.49) (1.45)
Total from Investment Operations (1.30) (1.35) (1.36)
------ ------ ------
LESS DISTRIBUTIONS
Dividends from net investment income (0.20) (0.17) (0.12)
Distributions from net realized capital gains (0.00) (0.00) (0.00)
------ ------ ------
Total Distributions (0.20) (0.17) (0.12)
------ ------ ------
Net asset value, end of period $ 17.30 $ 17.27 $ 17.21
====== ===== =======
TOTAL RETURN (7.26)%(3) (7.45)%(2,3) (7.62)%(2,3)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $ 504,489 $ 11,865 $ 1,228
Ratio of expenses to average net assets 0.97%(1) 1.22%(1) 1.93%(1)
Ratio of net investment income to
average net assets 1.84%(1) 1.59%(1) 0.89%(1)
Portfolio turnover rate 17% 17% 17%
<FN>
1 Annualized.
2 Total return excludes sales charge.
3 Returns are for the period indicated and have not been annualized.
</TABLE>
-69-
<PAGE> 85
<TABLE>
<CAPTION>
ARMADA BALANCED ALLOCATION FUND
FOR THE SIX MONTHS
ENDED NOVEMBER 30, 1999
(UNAUDITED)
-----------
CLASS I CLASS A CLASS B
------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.31 $10.31 $ 10.33
------- ------ -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.12 0.10 0.07
Net gain/(loss) on securities
(realized and unrealized) 0.79 0.79 0.79
Total from Investment Operations 0.91 0.89 0.86
---- ---- ----
LESS DISTRIBUTIONS
Dividends from net investment income (0.12) (0.11) (0.07)
Distributions from net realized capital gains (0.00) (0.00) (0.00)
------ ------ ------
Total Distributions (0.12) (0.11) (0.07)
------ ------ ------
Net asset value, end of period $ 11.10 $ 11.09 $ 11.12
====== ====== =======
TOTAL RETURN 9.29%(3) 9.09%(2,3) 8.77%(2,3)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $75,370 $ 3,879 $ 485
Ratio of expenses to average net assets 0.90%(1) 1.15%(1) 1.86%(1)
Ratio of net investment income to
average net assets 2.16%(1) 1.91%(1) 1.20%(1)
Portfolio turnover rate 87% 87% 87%
<FN>
1 Annualized.
2 Total return excludes sales charge.
3 Returns are for the period indicated and have not been annualized.
</TABLE>
-70-
<PAGE> 86
<TABLE>
<CAPTION>
ARMADA NATIONAL TAX EXEMPT BOND FUND
FOR THE SIX MONTHS
ENDED NOVEMBER 30, 1999
(UNAUDITED)
-----------
CLASS I CLASS A CLASS B
------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period $ 9.96 $ 9.97 $ 9.96
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.19 0.19 0.16
Net gain/(loss) on securities
(realized and unrealized) (0.28) (0.29) (0.29)
Total from Investment Operations (0.09) (0.10) (0.13)
------ ------ ------
LESS DISTRIBUTIONS
Dividends from net investment income (0.21) (0.20) (0.17)
Distributions from net realized capital gains (0.00) (0.00) (0.00)
------ ------ ------
Total Distributions (0.21) (0.20) (0.17)
------ ------ ------
Net asset value, end of period $ 9.66 $ 9.67 $ 9.66
====== ===== ======
TOTAL RETURN (0.73)%(3) (0.77)%(2,3) (1.13)%(2,3)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $ 91,747 $ 4,278 $ 305
Ratio of expenses to average net assets 0.34%(1) 0.42%(1) 1.14%(1)
Ratio of net investment income to
average net assets 3.93%(1) 3.86%(1) 3.15%(1)
Portfolio turnover rate 11% 11% 11%
<FN>
1 Annualized.
2 Total return excludes sales charge.
3 Returns are for the period indicated and have not been annualized.
</TABLE>
-71-
<PAGE> 87
FINANCIAL STATEMENTS
The financial highlights and financial statements for the Reorganizing
Funds for the fiscal periods ended May 31, 1999 are contained in Parkstone's
Annual Report to Shareholders and in Parkstone's Prospectuses dated September
17, 1999, and its Statement of Additional Information dated September 17, 1999,
each of which is incorporated by reference into this Combined Prospectus/Proxy
Statement. The financial highlights and the financial statements for the
Existing Armada Funds for the fiscal years ended May 31, 1999 are contained in
Armada's Annual Report to Shareholders dated May 31, 1999 and in Armada's
Prospectus relating to the Class I shares of the Existing Armada Funds dated
September 28, 1999, and Armada's Prospectus relating to the Class A, B and C
shares of the Existing Armada Funds dated December 10, 1999, and the Statement
of Additional Information dated December 10, 1999, each of which is incorporated
by reference in this Combined Prospectus/Proxy Statement.
The audited financial statements of the Reorganizing Funds for the
fiscal period ended May 31, 1999, contained in Parkstone's Annual Report and
incorporated by reference in this Combined Prospectus/Proxy Statement, have been
incorporated herein in reliance on the report of PricewaterhouseCoopers LLP,
independent auditors, given upon the authority of such firm as experts in
accounting and auditing.
The financial statements of the existing Armada Funds for the fiscal
periods ending May 31, 1999, contained in the Annual Report, audited by Ernst &
Young, LLP, have been included in reliance on their report, given on their
authority as experts in accounting and auditing.
OTHER BUSINESS
Parkstone's Board knows of no other business to be brought before the
Meeting. However, if any other matters come before the Meeting, it is the
intention that proxies which do not contain specific restrictions to the
contrary will be voted on such matters in accordance with the judgment of the
persons named in the enclosed form of proxy.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to Parkstone in writing at the
address on the cover page of this Combined Prospectus/Proxy Statement or by
telephoning 1-800-451-8377.
* * *
-72-
<PAGE> 88
APPENDIX A
AGREEMENT AND PLAN OF
REORGANIZATION
BY AND BETWEEN
ARMADA FUNDS
AND
THE PARKSTONE GROUP OF FUNDS
DATED NOVEMBER 17, 1999
A - 1
<PAGE> 89
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
I. Transfer of Assets of Parkstone.............................................. A-5
II. Liquidating Distributions and Termination of Parkstone....................... A-8
III. Valuation Times...............................................................A-9
IV. Certain Representations, Warranties and Agreements of Parkstone...............A-9
V. Certain Representations, Warranties and Agreements of Armada.................A-12
VI. Shareholder Action on Behalf of the Acquired Funds...........................A-14
VII. N-14 Registration Statement and Proxy Solicitation Materials.................A-14
VIII. Effective Times of the Reorganization........................................A-15
IX. Armada Conditions............................................................A-15
X. Parkstone Conditions.........................................................A-18
XI. Tax Documents................................................................A-20
XII. Finder's Fees................................................................A-20
XIII. Announcements................................................................A-21
XIV. Further Assurances...........................................................A-21
XV. Termination of Representations and Warranties................................A-21
XVI. Termination of Agreement.....................................................A-21
XVII. Amendment and Waiver.........................................................A-22
XVIII. Governing Law................................................................A-22
XIX. Successors and Assigns.......................................................A-22
XX. Beneficiaries................................................................A-22
XXI. Parkstone Liability..........................................................A-22
</TABLE>
A - 2
<PAGE> 90
<TABLE>
<S> <C>
XXII. Armada Liability.............................................................A-23
XXIII. Indemnification and Insurance................................................A-23
XXIV. Notices......................................................................A-25
XXV. Expenses.....................................................................A-26
XXVI. Entire Agreement.............................................................A-27
XXVII. Counterparts.................................................................A-27
</TABLE>
A - 3
<PAGE> 91
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION made as of November 17, 1999
between ARMADA FUNDS, a Massachusetts business trust ("Armada"), and THE
PARKSTONE GROUP of FUNDS, a Massachusetts business trust ("Parkstone").
WHEREAS, the parties desire that substantially all of the known assets
and liabilities of Parkstone's portfolios be transferred to, and be acquired and
assumed by, certain Armada portfolios in exchange for A Shares, B Shares or I
Shares, as applicable, of the Armada portfolios which shall thereafter be
distributed by Parkstone to the holders of Investor A Shares, Investor B Shares
or Institutional Shares, as applicable, of its portfolios, all as described in
this Agreement (the "Reorganization");
WHEREAS, the parties intend that the Armada Large Cap Ultra, U.S.
Government Income Fund, Mid Cap Growth Fund, Michigan Municipal Bond Fund and
Treasury Plus Money Market Fund will each have nominal assets and liabilities
before the Reorganization and will continue the investment operations of the
Parkstone Large Capitalization Fund, U.S. Government Income Fund, Mid
Capitalization Fund, Michigan Municipal Bond Fund and Treasury Fund (the
"Continuing Funds"), respectively, after the Reorganization;
WHEREAS, the Reorganization with respect to Parkstone's Prime
Obligations Fund, U.S. Government Obligations Fund, Tax-Free Fund, Bond Fund,
Limited Maturity Bond Fund, Intermediate Government Obligations Fund, Equity
Income Fund, Small Capitalization Fund, International Discovery Fund, Balanced
Allocation Fund and National Tax Exempt Bond Fund (the "Reorganizing Funds")
shall occur on a date that is the same or prior to the Reorganization with
respect to the Continuing Funds;
WHEREAS, the parties intend that the transfers of assets, assumptions
of liabilities, and distributions of A Shares, B Shares or I Shares, as the case
may be, be treated as tax-free reorganizations under Section 368(a)(1)(C),
368(a)(1)(D), or 368(a)(1)(F) of the Internal Revenue Code of 1986, as amended
(the "Code"); and
WHEREAS, the parties intend that in connection with the Reorganization
each of the Parkstone portfolios shall be terminated and Parkstone shall be
terminated under state law and deregistered as described in this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and agreements hereinafter set forth and subject to the terms
and conditions hereof, and intending to be legally bound hereby, Armada and
Parkstone agree as follows:
A - 4
<PAGE> 92
I. TRANSFER OF ASSETS OF PARKSTONE.
1.01 (a) At the Effective Time of the Reorganization (as
defined in Article VIII) with respect to each of the
Parkstone portfolios (each, an "Acquired Fund"), all
property of every description, and all interests,
rights, privileges and powers of each Acquired Fund
other than cash in an amount necessary to pay any
unpaid dividends and distributions as provided in
Article IV(g) (such assets, the "Acquired Fund
Assets") shall be transferred and conveyed by such
Acquired Fund to Armada on behalf of one of its
portfolios as set forth in Section 1.02 (each, an
"Acquiring Fund"), and shall be accepted by Armada on
behalf of such Acquiring Fund, and Armada, on behalf
of such Acquiring Fund, shall assume all known
liabilities whether accrued, absolute, contingent or
otherwise, of such Acquired Fund reflected in the
calculation of such Acquired Fund's net asset value
(the "Acquired Fund Liabilities"), so that at and
after the Effective Time of the Reorganization with
respect to such Acquired Fund: (i) all Acquired Fund
Assets shall become and be the assets of its
Acquiring Fund; and (ii) all Acquired Fund
Liabilities shall attach to its Acquiring Fund and
may thereafter be enforced against such Acquiring
Fund as if the same had been incurred by it. Without
limiting the generality of the foregoing, the
Acquired Fund Assets shall include all property and
assets of any nature whatsoever, including, without
limitation, all cash, cash equivalents, securities,
claims and receivables (including dividend and
interest receivables) owned by an Acquired Fund, and
(subject to Section 1.01(b)) any deferred or prepaid
expenses shown as an asset on an Acquired Fund's
books, at the Effective Time of the Reorganization of
such Acquired Fund, and all good will, all other
intangible property and all books and records
belonging to an Acquired Fund. Recourse by any person
for the Acquired Fund Liabilities assumed by an
Acquiring Fund shall, at and after the Effective Time
of the Reorganization of such Acquired Fund, be
limited to such Acquiring Fund. All ownership
interest in and rights to use of the name "Parkstone"
shall become the property of Armada at the Effective
Time of the Reorganization of the Continuing Funds.
At that time, Parkstone shall adopt a new name that
does not include the name "Parkstone" or any name
similar to it.
(b) Notwithstanding Section 1.01(a), unamortized
organizational expenses of the Reorganizing Funds
shall not be transferred or assumed hereunder. The
parties have been advised that such expenses will be
paid to such Reorganizing Funds by one or more third
parties and will be eliminated from the balance
sheets of such Reorganizing Funds prior to the
applicable Effective Time of the Reorganization of
the Reorganizing Funds.
1.02 The assets of each Acquired Fund shall be acquired by the
Acquiring Fund identified below opposite its name, and the holders of each class
of shares of such Acquired Fund
A - 5
<PAGE> 93
shall receive the class of shares of beneficial interest of the Acquiring Fund
identified below opposite the name of such class:
PARKSTONE FUNDS AND CLASSES ARMADA FUNDS AND CLASS
- --------------------------- ----------------------
Prime Obligations Fund Money Market Fund
Investor A Shares A Shares
Investor B Shares B Shares
Institutional Shares I Shares
U.S. Government Obligations Fund Government Money Market Fund
Investor A Shares A Shares
Institutional Shares I Shares
Tax-Free Fund Tax Exempt Money Market Fund
Investor A Shares A Shares
Institutional Shares I Shares
Bond Fund Bond Fund
Investor A Shares A Shares
Investor B Shares B Shares
Institutional Shares I Shares
Limited Maturity Bond Fund Enhanced Income Fund
Investor A Shares A Shares
Investor B Shares B Shares
Institutional Shares I Shares
Intermediate Government Intermediate Bond Fund
Obligations Fund
Investor A Shares A Shares
Investor B Shares B Shares
Institutional Shares I Shares
Equity Income Fund Equity Income Fund
Investor A Shares A Shares
Investor B Shares B Shares
Institutional Shares I Shares
Small Capitalization Fund Small Cap Growth Fund
Investor A Shares A Shares
Investor B Shares B Shares
Institutional Shares I Shares
International Discovery Fund International Equity Fund
Investor A Shares A Shares
Investor B Shares B Shares
Institutional Shares I Shares
Balanced Allocation Fund Balanced Allocation Fund
Investor A Shares A Shares
Investor B Shares B Shares
Institutional Shares I Shares
Large Capitalization Fund Large Cap Ultra Fund
Investor A Shares A Shares
Investor B Shares B Shares
Institutional Shares I Shares
National Tax Exempt Bond Fund National Tax Exempt Bond Fund
Investor A Shares A Shares
Investor B Shares B Shares
A - 6
<PAGE> 94
PARKSTONE FUNDS AND CLASSES ARMADA FUNDS AND CLASS
- --------------------------- ----------------------
Institutional Shares I Shares
U.S. Government Income Fund U.S. Government Income Fund
Investor A Shares A Shares
Investor B Shares B Shares
Institutional Shares I Shares
Mid Capitalization Fund Mid Cap Growth Fund
Investor A Shares A Shares
Investor B Shares B Shares
Institutional Shares I Shares
Michigan Municipal Bond Fund Michigan Municipal Bond Fund
Investor A Shares A Shares
Investor B Shares B Shares
Institutional Shares I Shares
Treasury Fund Treasury Plus Money Market Fund
Investor A Shares A Shares
Institutional Shares I Shares
In connection with the Reorganization, the Board of Trustees of Armada
has adopted resolutions authorizing the change of name of the Enhanced Income
Fund to the Limited Maturity Bond Fund. This change will be effected prior to,
on or about the Effective Time of the Reorganization with respect to such
Acquired Fund.
1.03 In exchange for the transfer of the Acquired Fund Assets and the
assumption of the Acquired Fund Liabilities, Armada shall simultaneously issue
at the applicable Effective Time of the Reorganization to each Acquired Fund a
number of full and fractional shares to the third decimal place, of the
Acquiring Fund specified in Section 1.02 and of the class or classes identified
in Section 1.02, all determined and adjusted as provided in this Agreement. For
each class of shares, the shares of the Acquiring Funds so issued will have an
aggregate net asset value equal to the value of the Acquired Fund Assets, net of
the Acquired Fund Liabilities, that are represented by the class of shares of
the Acquired Fund, the holders of which shall receive such class of shares of
the Acquiring Fund, as specified in Section 1.02, all determined and adjusted as
provided in this Agreement.
1.04 The net asset value of each class of shares of the Acquiring Funds
and the net asset value of each class of shares of the Acquired Funds shall be
determined as of the applicable Valuation Time with respect to each Acquired
Fund specified in Article III.
1.05 The net asset value of each class of shares of each Acquiring Fund
shall be computed in the manner set forth in such Acquiring Fund's then current
prospectuses under the Securities Act of 1933, as amended (the "1933 Act"). The
net value of the Acquired Fund Assets to be transferred by the Parkstone
portfolios shall be computed by Parkstone and shall be subject to adjustment by
an amount, if any, agreed to by Armada and Parkstone. In determining the value
of the securities transferred by the Acquired Funds to the Acquiring Funds, each
security
A - 7
<PAGE> 95
shall be priced in accordance with the policies and procedures of Armada
described in its then current prospectuses and statements of additional
information and adopted by Armada's Board of Trustees, which are and shall be
consistent with the policies now in effect for Parkstone. For such purposes,
price quotations and the security characteristics relating to establishing such
quotations shall be determined by Armada, provided that such determination shall
be subject to the approval of Parkstone.
The value of the Acquired Fund Assets of the Parkstone Prime
Obligations Fund, Treasury Fund, U.S. Government Obligations Fund and Tax-Free
Fund (each, a "Parkstone Money Market Fund") and the value of the shares of the
corresponding Acquiring Funds for purposes of sales and redemptions shall be
based on the amortized cost valuation procedures that have been adopted by the
Board of Trustees of Parkstone and the Board of Trustees of Armada,
respectively. Any provision in this Agreement to the contrary notwithstanding,
if the difference between the per share net asset values of a Parkstone Money
Market Fund and its corresponding Acquiring Fund equals or exceeds $.0025 at the
applicable Valuation Time, as computed by using such market values in accordance
with the policies and procedures established by Armada (or as otherwise mutually
determined by the Board of Trustees of Parkstone and the Board of Trustees of
Armada), either the Board of Trustees of Parkstone or the Board of Trustees of
Armada shall have the right to postpone the applicable Valuation Time and the
applicable Effective Time of the Reorganization with respect to such Parkstone
Money Market Fund until such time as the per share difference is less than
$.0025.
II. LIQUIDATING DISTRIBUTIONS AND TERMINATION OF PARKSTONE. Immediately
after the Effective Time of the Reorganization with respect to each Acquired
Fund, such Acquired Fund shall distribute in complete liquidation pro rata to
the record holders of each class of its shares at the applicable Effective Time
of the Reorganization the shares of the class of the Acquiring Fund identified
in Section 1.02 to be received by the record holders of such class of such
Acquired Fund. In addition, each shareholder of record of an Acquired Fund shall
have the right to receive any unpaid dividends or other distributions which were
declared before the applicable Effective Time of the Reorganization with respect
to the shares of an Acquired Fund that are held by the shareholder at the
applicable Effective Time of the Reorganization. In accordance with instructions
it receives from Parkstone, Armada shall record on its books the ownership of
each class of shares of each Acquiring Fund by the record holders of the class
of shares of the Acquired Fund identified in Section 1.02. All of the issued and
outstanding shares of each class of each Acquired Fund shall be redeemed and
canceled on the books of Parkstone at the Effective Time of the Reorganization
of such Acquired Fund and shall thereafter represent only the right to receive
the class of shares of the Acquiring Fund identified in Section 1.02, and any
dividends and distributions declared pursuant to Article IV(g), and the Acquired
Fund's transfer books shall be closed permanently. As soon as practicable after
the Effective Time of the Reorganization with respect to the Continuing Funds,
Parkstone shall make all filings and take all other steps as shall be necessary
and proper to effect its complete dissolution, and shall file an application
pursuant to Section 8(f) of the 1940 Act for an order declaring that it has
ceased to be an investment company and any and all documents that may be
necessary to terminate its existence under state law. After the Effective Time
of the Reorganization with respect to the Continuing Funds, Parkstone shall not
conduct any business except in connection with its liquidation, dissolution, and
deregistration.
A - 8
<PAGE> 96
III. VALUATION TIMES. Subject to Section 1.05 hereof, (a) the Valuation
Time for the Reorganization with respect to the Reorganizing Funds shall be 4:00
P.M., Eastern Time, on the business day preceding the Effective Time of the
Reorganization, or such other time and on such date as may be agreed in writing
by the duly authorized officers of both parties hereto, (b) the Valuation Time
for the Reorganization with respect to each of the Continuing Funds, other than
the Treasury Fund, shall be 4:00 p.m., Eastern Time, on the business day
preceding the Effective Time of the Reorganization, or such other time and on
such date as may be agreed in writing by the duly authorized officers of both
parties hereto, and (c) the Valuation Time for the Reorganization with respect
to the Treasury Fund shall be 4:00 p.m., Eastern Time, on the business day
preceding the Effective Time of the Treasury Fund Transaction, or such other
time and on such date as may be agreed in writing by the duly authorized
officers of both parties hereto, which date shall be not less than seven
calendar days following the Valuation Time for the Reorganization with respect
to the Reorganizing and Continuing Funds.
IV. CERTAIN REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF PARKSTONE.
Parkstone, on behalf of itself and each Acquired Fund, represents and warrants
to, and agrees with, Armada as follows:
(a) It is a Massachusetts business trust duly created
pursuant to its Declaration of Trust for the purpose
of acting as a management investment company under
the 1940 Act and is validly existing under the laws
of, and duly authorized to transact business in, the
Commonwealth of Massachusetts. It is registered with
the Securities and Exchange Commission (the "SEC") as
an open-end management investment company under the
1940 Act and such registration is in full force and
effect.
(b) It has power to own all of its properties and assets
and, subject to the approvals of shareholders
referred to herein, to carry out and consummate the
transactions contemplated hereby, and has all
necessary federal, state and local authorizations to
carry on its business as now being conducted and to
consummate the transactions contemplated by this
Agreement.
(c) This Agreement has been duly authorized, executed and
delivered by Parkstone, and represents Parkstone's
valid and binding contract, enforceable in accordance
with its terms, subject as to enforcement to
bankruptcy, insolvency, reorganization, arrangement,
moratorium, and other similar laws of general
applicability relating to or affecting creditors'
rights and to general principles of equity. The
execution and delivery of this Agreement does not and
will not, and the consummation of the transactions
contemplated by this Agreement will not, violate
Parkstone's Declaration of Trust or Code of
Regulations or any agreement or arrangement to which
it is a party or by which it is bound.
A - 9
<PAGE> 97
(d) Each Acquired Fund has elected to qualify and has
qualified as a regulated investment company under
Part I of Subchapter M of the Code, as of and since
its first taxable year; has been a regulated
investment company under such Part of the Code at all
times since the end of its first taxable year when it
so qualified; and qualifies and shall continue to
qualify as a regulated investment company until the
Effective Time of the Reorganization with respect to
such Acquired Fund.
(e) All federal, state, local and foreign income,
profits, franchise, sales, withholding, customs,
transfer and other taxes, including interest,
additions to tax and penalties (collectively,
"Taxes") relating to the Acquired Fund Assets due or
properly shown to be due on any return filed by any
Acquired Fund with respect to taxable periods ending
on or prior to, and the portion of any interim period
up to, the date hereof have been fully and timely
paid or provided for; and there are no levies, liens,
or other encumbrances relating to Taxes existing,
threatened or pending with respect to the Acquired
Fund Assets.
(f) The financial statements of each Parkstone Portfolio
listed in Section 1.02 for the fiscal year ended May
31, 1999, examined by PricewaterhouseCoopers LLP, and
for the six month period ended November 30, 1999,
copies of which have been previously furnished to
Armada, present fairly the financial position of each
Acquired Fund as of the dates indicated and the
results of its operations for the year and period
then ended as of such dates, in conformity with
generally accepted accounting principles.
(g) Prior to the Valuation Time applicable to the
Reorganizing Funds, each of the Reorganizing Funds
shall have declared a dividend or dividends, with a
record date and ex-dividend date prior to such
Valuation Time, which, together with all previous
dividends, shall have the effect of distributing to
its shareholders all of its net investment company
income, if any, for the taxable periods or years
ended on or before May 31, 1999 and for the period
from said date to and including the Effective Time of
the Reorganization applicable to the Reorganizing
Funds (computed without regard to any deduction for
dividends paid), and all of its net capital gain, if
any, realized in taxable periods or years ended on or
before May 31, 1999 and in the period from said date
to and including the Effective Time of the
Reorganization applicable to the Reorganizing Funds.
(h) At both the Valuation Time and the Effective Time of
the Reorganization with respect to each Acquired
Fund, there shall be no known liabilities of such
Acquired Fund, whether accrued, absolute, contingent
or otherwise,
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not reflected in the net asset values per share of
its outstanding classes of shares.
(i) There are no legal, administrative or other
proceedings pending or, to Parkstone's knowledge
threatened, against Parkstone or an Acquired Fund
which could result in liability on the part of
Parkstone or an Acquired Fund.
(j) Subject to the approvals of shareholders referred to
herein, at both the Valuation Time and the Effective
Time of the Reorganization with respect to each
Acquired Fund, it shall have full right, power and
authority to sell, assign, transfer and deliver the
Acquired Fund Assets of such Acquired Fund and, upon
delivery and payment for the Acquired Fund Assets as
contemplated herein, an Acquiring Fund shall acquire
good and marketable title thereto, free and clear of
all liens and encumbrances, and subject to no
restrictions on the ownership or transfer thereof
(except as imposed by federal or state securities
laws).
(k) No consent, approval, authorization or order of any
court or governmental authority is required for the
consummation by Parkstone of the transactions
contemplated by this Agreement, except such as may be
required under the 1933 Act, the Securities Exchange
Act of 1934, as amended ("1934 Act"), the 1940 Act,
the rules and regulations under those Acts, and state
securities laws.
(l) With respect to materials and information provided by
Parkstone, the registration statement filed by Armada
on Form N-14 relating to the shares of certain
Acquiring Funds that will be registered with the SEC
pursuant to this Agreement, which, without
limitation, shall include a proxy statement of
Parkstone and the prospectuses of Armada with respect
to the transactions contemplated by this Agreement,
and any supplement or amendment thereto or to the
documents contained or incorporated therein by
reference (the "N-14 Registration Statement"), on the
effective date of the N-14 Registration Statement, at
the time of any shareholders' meeting referred to
herein and at each Effective Time of the
Reorganization: (i) shall comply in all material
respects with the provisions of the 1933 Act, the
1934 Act and the 1940 Act, the rules and regulations
thereunder, and state securities laws, and (ii) shall
not contain any untrue statement of a material fact
or omit to state a material fact required to be
stated therein or necessary to make the statements
therein not misleading.
(m) All of the issued and outstanding shares of each
class of each Acquired Fund have been duly and
validly issued, are fully paid and non-assessable,
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and were offered for sale and sold in conformity with
all applicable federal and state securities laws, and
no shareholder of an Acquired Fund has any preemptive
right of subscription or purchase in respect of such
shares.
(n) Parkstone shall not sell or otherwise dispose of any
shares of an Acquiring Fund to be received in the
transactions contemplated herein, except in
distribution to its shareholders as contemplated
herein.
V. CERTAIN REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF ARMADA.
Armada, on behalf of itself and each Acquiring Fund, represents and warrants to,
and agrees with, Parkstone as follows:
(a) It is a Massachusetts business trust duly created
pursuant to its Declaration of Trust for the purpose
of acting as a management investment company under
the 1940 Act and is validly existing under the laws
of, and duly authorized to transact business in, the
Commonwealth of Massachusetts. It is registered with
the SEC as an open-end management investment company
under the 1940 Act and such registration is in full
force and effect.
(b) It has power to own all of its properties and assets
and to carry out and consummate the transactions
contemplated herein, and has all necessary federal,
state and local authorizations to carry on its
business as now being conducted and to consummate the
transactions contemplated by this Agreement.
(c) This Agreement has been duly authorized, executed and
delivered by Armada, and represents Armada's valid
and binding contract, enforceable in accordance with
its terms, subject as to enforcement to bankruptcy,
insolvency, reorganization, arrangement, moratorium,
and other similar laws of general applicability
relating to or affecting creditors' rights and to
general principles of equity. The execution and
delivery of this Agreement did not, and the
consummation of the transactions contemplated by this
Agreement will not, violate Armada's Declaration of
Trust or Code of Regulations or any agreement or
arrangement to which it is a party or by which it is
bound.
(d) Each Acquiring Fund has elected or will elect to
qualify, and each of the first eleven Acquiring Funds
listed in Section 1.02 has qualified, as a regulated
investment company under Part I of Subchapter M of
the Code, as of and since its first taxable year;
each of the first eleven Acquiring Funds listed in
Section 1.02 has been a regulated investment company
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under such Part of the Code at all times since the
end of its first taxable year when it so qualified
and intends to continue to qualify as a regulated
investment company.
(e) The financial statements of each of the first eleven
Acquiring Funds listed in Section 1.02 for its fiscal
periods ended May 31, 1999, audited by Ernst & Young
LLP, and for the six-month period ended November 30,
1999, copies of which have been previously furnished
to Parkstone, present fairly the financial position
of each such Acquiring Fund as of the dates indicated
and the results of its operations for the year and
period ended as of such dates, in conformity with
generally accepted accounting principles.
(f) At both the Valuation Time and the Effective Time of
the Reorganization with respect to each Acquiring
Fund, there shall be no known liabilities of such
Acquiring Fund, whether accrued, absolute, contingent
or otherwise, not reflected in the net asset values
per share of its outstanding classes to be issued
pursuant to this Agreement.
(g) There are no legal, administrative or other
proceedings pending or, to its knowledge, threatened
against Armada or an Acquiring Fund which could
result in liability on the part of Armada or an
Acquiring Fund.
(h) No consent, approval, authorization or order of any
court or governmental authority is required for the
consummation by Armada of the transactions
contemplated by this Agreement, except such as may be
required under the 1933 Act, the 1934 Act, the 1940
Act, the rules and regulations under those Acts, and
state securities laws.
(i) The N-14 Registration Statement on its effective
date, at the time of any shareholders' meetings
referred to herein and at each Effective Time of the
Reorganization, except with respect to information
and materials provided by Parkstone: (i) shall comply
in all material respects with the provisions of the
1933 Act, the 1934 Act and the 1940 Act, the rules
and regulations thereunder, and state securities
laws, and (ii) shall not contain any untrue statement
of a material fact or omit to state a material fact
required to be stated therein or necessary to make
the statements therein not misleading.
(j) The shares of each class of each Acquiring Fund to be
issued and delivered to an Acquired Fund for the
account of record holders of shares of an Acquired
Fund, pursuant to the terms hereof, shall have been
duly authorized as of the Effective Time of the
Reorganization applicable to such Acquiring Fund and,
when so issued and delivered, shall be registered
under the 1933 Act and under applicable state
securities laws,
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duly and validly issued, fully paid and
non-assessable, and no shareholder of Armada shall
have any preemptive right of subscription or purchase
in respect thereto.
VI. SHAREHOLDER ACTION ON BEHALF OF THE ACQUIRED FUNDS.
6.01 As soon as practicable after the effective date of the N-14
Registration Statement, but in any event prior to the Effective Time of the
Reorganization applicable to the Reorganizing Funds and as a condition to the
Reorganization, the Board of Trustees of Parkstone shall call, and Parkstone
shall hold, a meeting of the shareholders of the Acquired Funds for the purpose
of considering and voting upon:
(a) Approval of this Agreement and the transactions
contemplated hereby, including, without limitation:
(i) The transfer of the Acquired Fund Assets
belonging to each Acquired Fund to an
Acquiring Fund, and the assumption by such
Acquiring Fund of the Acquired Fund
Liabilities of such Acquired Fund, in
exchange for a class or classes of shares
of an Acquiring Fund, as set forth in
Section 1.02.
(ii) The liquidation of each Acquired Fund
through the distribution to its record
holders of shares of the class or classes
of shares of an Acquiring Fund as
described in this Agreement.
(b) Such other matters as may be determined by the Boards
of Trustees or authorized officers of the parties.
6.02 Approval of this Reorganization Agreement by the shareholders of
the Acquired Funds shall constitute the waiver of the application of any
fundamental policy of such Acquired Funds that might be deemed to prevent them
from taking the actions necessary to effectuate the Reorganization as described,
and such policies, if any, shall be deemed to have been amended accordingly.
VII. N-14 REGISTRATION STATEMENT AND PROXY SOLICITATION MATERIALS.
Armada shall prepare and file the N-14 Registration Statement under the 1933
Act, and Parkstone shall file the combined prospectus/proxy statement contained
therein under the 1934 Act and 1940 Act proxy rules, with the SEC as promptly as
practicable. Each of Armada and Parkstone has cooperated and shall continue to
cooperate with the other, and has furnished and shall continue to furnish the
other with the information relating to itself that is required by the 1933 Act,
the 1934 Act, the
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1940 Act, the rules and regulations under each of those Acts and state
securities laws, to be included in the N-14 Registration Statement.
VIII. EFFECTIVE TIMES OF THE REORGANIZATION. Delivery of the Acquired
Fund Assets of each Acquired Fund and the shares of the classes of its Acquiring
Fund to be issued pursuant to Article I and the liquidation of each Acquired
Fund pursuant to Article II shall occur at the opening of business on the next
business day following the Valuation Time applicable to such Acquired Fund, or
on such other date, and at such place and time and date, as may be determined by
the President or any Vice President of each party hereto. The respective date
and time at which such actions are taken with respect to an Acquired Fund are
referred to herein as the "Effective Time of the Reorganization." To the extent
any Acquired Fund Assets are, for any reason, not transferred at the applicable
Effective Time of the Reorganization, Parkstone shall cause such Acquired Fund
Assets to be transferred in accordance with this Agreement at the earliest
practicable date thereafter.
IX. ARMADA CONDITIONS. The obligations of Armada hereunder with respect
to each Acquired Fund shall be subject to the following conditions precedent:
(a) This Agreement and the transactions contemplated by
this Agreement shall have been approved by the
shareholders of each Acquired Fund, in the manner
required by law.
(b) With respect to each Acquired Fund, the Parkstone
Board of Trustees, including a majority of Trustees
who are not "interested persons" as defined under the
1940 Act, has determined that the transactions
contemplated by this Agreement are in the best
interests of each Acquired Fund and that the
interests of the existing shareholders of each
Acquired Fund would not be diluted as a result of
such transactions.
(c) Parkstone shall have duly executed and delivered to
Armada such bills of sale, assignments, certificates
and other instruments of transfer ("Transfer
Documents") as may be necessary or desirable to
transfer all right, title and interest of Parkstone
and such Acquired Fund in and to the Acquired Fund
Assets of such Acquired Fund. The Acquired Fund
Assets shall be accompanied by all necessary state
stock transfer stamps or cash for the appropriate
purchase price therefor.
(d) All representations and warranties of Parkstone made
in this Agreement shall be true and correct in all
material respects as if made at and as of each
Valuation Time and each Effective Time of the
Reorganization. As of the Valuation Time and the
Effective Time of the Reorganization applicable to
each Acquired Fund, there shall have been no material
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<PAGE> 103
adverse change in the financial position of such
Acquired Fund since November 30, 1999 other than
those changes incurred in the ordinary course of
business as an investment company. No action, suit or
other proceeding shall be threatened or pending
before any court or governmental agency in which it
is sought to restrain or prohibit, or obtain damages
or other relief in connection with, this Agreement or
the transactions contemplated herein.
(e) Armada shall have received an opinion of Drinker,
Biddle & Reath, LLP addressed to Armada in form
reasonably satisfactory to it and dated the Effective
Time of the Reorganization applicable to each
Acquired Fund, substantially to the effect that: (i)
Parkstone is a Massachusetts business trust duly
organized and validly existing under the laws of the
Commonwealth of Massachusetts; (ii) the shares of
such Acquired Fund outstanding at such time are duly
authorized, validly issued, fully paid and
non-assessable by such Acquired Fund, and to such
counsel's knowledge, no shareholder of such Acquired
Fund has any option, warrant or pre-emptive right to
subscription or purchase in respect thereof; (iii)
this Agreement and the Transfer Documents have been
duly authorized, executed and delivered by Parkstone
and represent legal, valid and binding contracts,
enforceable in accordance with their terms, subject
to the effect of bankruptcy, insolvency, moratorium,
fraudulent conveyance and similar laws relating to or
affecting creditors' rights generally and court
decisions with respect thereto, but such counsel
shall not be required to express an opinion with
respect to the application of equitable principles in
any proceeding, whether at law or in equity, or with
respect to the provisions of this Agreement intended
to limit liability for particular matters to an
Acquired Fund and its assets; (iv) the execution and
delivery of this Agreement did not, and the
consummation of the transactions contemplated by this
Agreement will not, violate the Declaration of Trust
or Code of Regulations of Parkstone or any material
agreement known to such counsel to which Parkstone is
a party or by which Parkstone is bound; and (v) to
such counsel's knowledge, no consent, approval,
authorization or order of any court or governmental
authority is required for the consummation by
Parkstone of the transactions contemplated by this
Agreement, except such as have been obtained under
the 1933 Act, the 1934 Act, the 1940 Act, the rules
and regulations under those Acts and such as may be
required under the state securities laws. Such
opinion may rely on the opinion of other counsel to
the extent set forth in such opinion, provided such
other counsel is reasonably acceptable to Armada.
(f) Armada shall have received an opinion of Drinker
Biddle & Reath LLP, addressed to Armada and Parkstone
in form reasonably satisfactory to them and dated the
Effective Time of the Reorganization applicable to
each Acquired Fund, substantially to the effect that
for federal income tax purposes (i) the transfers of
all of the Acquired Fund Assets hereunder,
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<PAGE> 104
and the assumption by its Acquiring Fund of Acquired
Fund Liabilities, in exchange for shares of each
class of such Acquiring Fund, and the distribution of
said shares to the shareholders of such Acquired
Fund, as provided in this Agreement, will each
constitute a reorganization within the meaning of
Section 368(a)(1)(C), 368(a)(1)(D) or 368(a)(1)(F) of
the Code and with respect to each reorganization, the
Acquired Fund and the Acquiring Fund will each be
considered "a party to a reorganization" within the
meaning of Section 368(b) of the Code; (ii) in
accordance with Sections 361(a), 361(c)(1) and 357(a)
of the Code, no gain or loss will be recognized by
such Acquired Fund as a result of such transactions;
(iii) in accordance with Section 1032 of the Code, no
gain or loss will be recognized by an Acquiring Fund
as a result of such transactions; (iv) in accordance
with Section 354(a)(1) of the Code, no gain or loss
will be recognized by the shareholders of such
Acquired Fund on the distribution to them by such
Acquired Fund of shares of any class of an Acquiring
Fund in exchange for their shares of the
corresponding class of the Acquired Fund; (v) in
accordance with Section 358(a)(1) of the Code, the
aggregate basis of Acquiring Fund shares received by
each shareholder of any class of an Acquired Fund
will be the same as the aggregate basis of the
shareholder's Acquired Fund shares immediately prior
to the transactions; (vi) in accordance with Section
362(b) of the Code, the basis of the Acquired Fund
Assets to any Acquiring Fund will be the same as the
basis of such Acquired Fund Assets in the hands of
the corresponding Acquired Fund immediately prior to
the exchange; (vii) in accordance with Section 1223
of the Code, a shareholder's holding period for
Acquiring Fund shares will be determined by including
the period for which the shareholder held the shares
of an Acquired Fund exchanged therefor, provided that
the shareholder held such shares of an Acquired Fund
as a capital asset; and (viii) in accordance with
Section 1223 of the Code, the holding period of an
Acquiring Fund with respect to the Acquired Fund
Assets will include the period for which such
Acquired Fund Assets were held by an Acquired Fund.
(g) The SEC shall not have issued any unfavorable
advisory report under Section 25(b) of the 1940 Act
or instituted any proceeding seeking to enjoin
consummation of the transactions contemplated by this
Agreement under Section 25(c) of the 1940 Act.
(h) The N-14 Registration Statement shall have become
effective under the 1933 Act and no stop order
suspending such effectiveness shall have been
instituted or, to the knowledge of Parkstone or
Armada, contemplated by the SEC and the parties shall
have received all permits and other authorizations
necessary under state securities laws to consummate
the transactions contemplated by this Agreement.
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<PAGE> 105
(i) The President of Parkstone shall have certified that
Parkstone has performed and complied in all material
respects with each of its agreements and covenants
required by this Agreement to be performed or
complied with by it prior to or at each Valuation
Time and each Effective Time of the Reorganization.
(j) Parkstone shall have delivered or caused to be
delivered to Armada each account, book, record or
other document of Parkstone applicable to such
Acquired Fund which is required to be maintained by
Section 31(a) of the 1940 Act and Rules 31a-1 to
31a-3 thereunder (regardless of what person possesses
the same). Parkstone has instructed its service
contractors to provide Armada upon request with
access to and copies of all documents belonging to
Parkstone.
(k) With respect to the Reorganization of the Continuing
Funds, the Reorganization of all of the Reorganizing
Funds shall have been consummated.
X. PARKSTONE CONDITIONS. The obligations of Parkstone hereunder with
respect to each Acquired Fund shall be subject to the following conditions
precedent:
(a) This Agreement and the transactions contemplated by
this Agreement shall have been approved by the
shareholders of each Acquired Fund, in the manner
required by law.
(b) With respect to each Acquiring Fund, the Armada Board
of Trustees, including a majority of Trustees who are
not "interested persons" as defined under the 1940
Act, has determined that the transactions
contemplated by this Agreement are in the best
interests of each Acquiring Fund and that the
interests of the existing shareholders of each
Acquiring Fund would not be diluted as a result of
such transactions.
(c) All consents, orders, permits, and exemptions of
federal, state and local regulatory authorities
(including those of the SEC and of state securities
authorities) deemed necessary by Parkstone to permit
consummation, in all material respects, of the
transactions contemplated hereby shall have been
obtained, except where failure to obtain any such
consent, order, or permit would not involve a risk of
a materially adverse effect on the assets or
properties of Parkstone.
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<PAGE> 106
(d) All representations and warranties of Armada made in
this Agreement shall be true and correct in all
material respects as if made at and as of each
Valuation Time and each Effective Time of the
Reorganization. As of the Valuation Time and the
Effective Time of the Reorganization applicable to
each Acquired Fund, there shall have been no material
adverse change in the financial condition of its
Acquiring Fund since November 30, 1999 other than
those changes incurred in the ordinary course of
business as an investment company. No action, suit or
other proceeding shall be threatened or pending
before any court or governmental agency in which it
is sought to restrain or prohibit, or obtain damages
or other relief in connection with, this Agreement or
the transactions contemplated herein.
(e) Parkstone shall have received an opinion of Drinker
Biddle & Reath LLP, addressed to Parkstone in form
reasonably satisfactory to it and dated the Effective
Time of the Reorganization applicable to each
Acquired Fund, substantially to the effect that: (i)
Armada is a Massachusetts business trust duly
organized and validly existing under the laws of the
Commonwealth of Massachusetts and is qualified to do
business and in good standing in each state in which
such qualification is required; (ii) the shares of
each class of each Acquiring Fund to be delivered at
such time to an Acquired Fund as provided for by this
Agreement are duly authorized and upon delivery will
be validly issued, fully paid and non-assessable by
such Acquiring Fund and to such counsel's knowledge,
no shareholder of an Acquiring Fund has any option,
warrant or pre-emptive right to subscription or
purchase in respect thereof; (iii) this Agreement has
been duly authorized, executed and delivered by
Armada and represents a legal, valid and binding
contract, enforceable in accordance with its terms,
subject to the effect of bankruptcy, insolvency,
moratorium, fraudulent conveyance and similar laws
relating to or affecting creditors' rights generally
and court decisions with respect thereto, but such
counsel shall not be required to express an opinion
with respect to the application of equitable
principles in any proceeding, whether at law or in
equity, or with respect to the provisions of this
Agreement intended to limit liability for particular
matters to an Acquiring Fund and its assets; (iv) the
execution and delivery of this Agreement did not, and
the consummation of the transactions contemplated by
this Agreement will not, violate the Declaration of
Trust or Code of Regulations of Armada, or any
material agreement known to such counsel to which
Armada is a party or by which Armada is bound; and
(v) to such counsel's knowledge no consent, approval,
authorization or order of any court or governmental
authority is required for the consummation by Armada
of the transactions contemplated by this Agreement,
except such as have been obtained under the 1933 Act,
the 1934 Act, the 1940 Act, the rules and regulations
under those Acts and such as may be required under
the state securities laws. Such opinion may rely on
the opinion of other counsel to the extent set
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forth in such opinion, provided such other counsel is
reasonably acceptable to Parkstone.
(f) Parkstone shall have received an opinion of Drinker
Biddle & Reath LLP, addressed to Armada and Parkstone
in the form reasonably satisfactory to them and dated
the Effective Time of the Reorganization applicable
to each Acquired Fund, with respect to the matters
specified in Section IX(f).
(g) The N-14 Registration Statement shall have become
effective under the 1933 Act and no stop order
suspending such effectiveness shall have been
instituted, or to the knowledge of Parkstone or
Armada, contemplated by the SEC and the parties shall
have received all permits and other authorizations
necessary under state securities laws to consummate
the transactions contemplated by this Agreement.
(h) The SEC shall not have issued any unfavorable
advisory report under Section 25(b) of the 1940 Act
or instituted any proceeding seeking to enjoin
consummation of the transactions contemplated by this
Agreement under Section 25(c) of the 1940 Act.
(i) The President of Armada shall have certified that
Armada has performed and complied in all material
respects with each of its agreements and covenants
required by this Agreement to be performed or
complied with by it prior to or at each Valuation
Time and each Effective Time of the Reorganization.
(j) With respect to the Reorganization of the Continuing
Funds, the Reorganization of all of the Reorganizing
Funds shall have been consummated.
XI. TAX DOCUMENTS. Parkstone shall deliver to Armada at each Effective
Time of the Reorganization confirmations or other adequate evidence as to the
adjusted tax basis of the Acquired Fund Assets then delivered to an Acquiring
Fund in accordance with the terms of this Agreement.
XII. FINDER'S FEES. Each party represents and warrants to each of the
other parties hereto that there is no person who is entitled to any finder's or
other similar fee or commission arising out of the transactions contemplated by
this Agreement.
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XIII. ANNOUNCEMENTS. Any announcements or similar publicity with
respect to this Agreement or the transactions contemplated herein shall be at
such time and in such manner as the parties shall agree; provided, -------- that
nothing herein shall prevent any party upon notice to the other parties from
making such public announcements as such party's counsel may consider advisable
in order to satisfy the party's legal and contractual obligations in such
regard.
XIV. FURTHER ASSURANCES. Subject to the terms and conditions herein
provided, and any applicable laws, rules or regulations, each of the parties
hereto shall use its best efforts to take, or cause to be taken, such action, to
execute and deliver, or cause to be executed and delivered, such additional
documents and instruments, and to do, or cause to be done, all things necessary,
proper or advisable under the provisions of this Agreement and under applicable
law to consummate and make effective the transactions contemplated by this
Agreement.
XV. TERMINATION OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the parties set forth in this Agreement shall terminate at the
Effective Time of the Reorganization of the Continuing Funds.
XVI. TERMINATION OF AGREEMENT.
16.01 This Agreement may be terminated by a party at any time at or
prior to (i) the Effective Time of the Reorganization of the Reorganizing Funds,
or (ii) with respect to the Continuing Funds and the corresponding Acquiring
Funds at any time at or prior to the Effective Time of the Reorganization of the
Continuing Funds, by the Board of Trustees of Armada or the Board of Trustees of
Parkstone, as provided below:
(a) By Armada if the conditions set forth in Article IX
are not satisfied as specified in said Article;
(b) By Parkstone if the conditions set forth in Article X
are not satisfied as specified in said Article;
(c) By the mutual consent of the parties.
16.02 If a party terminates this Agreement as to any investment
portfolio for any reason specified in Section 16.01 hereof, this Agreement will
become null and void without any liability of either party or any of their
investment portfolios to the other; provided, however, that if such termination
is by Armada pursuant to Section 16.01(a) as a result of a breach by Parkstone
of any of its representations, warranties or covenants in this Agreement, or
such termination is by Parkstone pursuant to Section 16.01(b) as a result of a
breach by Armada of any of its representations, warranties or covenants in this
Agreement, nothing herein shall affect the non-breaching party's right to
damages on account of such other party's breach.
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XVII. AMENDMENT AND WAIVER. At any time prior to or (to the fullest
extent permitted by law) after approval of this Agreement by the shareholders of
Parkstone, (a) the parties hereto may, by written agreement authorized by their
respective Boards of Trustees, or their respective Presidents, and with or
without the approval of their shareholders, amend any of the provisions of this
Agreement, and (b) either party may waive any breach by the other party or the
failure to satisfy any of the conditions to its obligations (such waiver to be
in writing and authorized by the President or Vice President of the waiving
party with or without the approval of such party's shareholders).
XVIII. GOVERNING LAW. This Agreement and the transactions contemplated
hereby shall be governed, construed and enforced in accordance with the laws of
the Commonwealth of Massachusetts, without giving effect to the conflicts of law
principles otherwise applicable therein.
XIX. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
respective successors and permitted assigns of the parties hereto. This
Agreement and the rights, obligations and liabilities hereunder may not be
assigned by either party without the consent of the other party.
XX. BENEFICIARIES. Nothing contained in this Agreement shall be deemed
to create rights in persons not parties hereto, other than the successors and
permitted assigns of the parties.
XXI. PARKSTONE LIABILITY.
21.01 The names "The Parkstone Group of Funds" and "Trustees of The
Parkstone Group of Funds" refer respectively to the trust created and the
trustees, as trustees but not individually or personally, acting from time to
time under a Declaration of Trust dated March 25, 1987, which is hereby referred
to and a copy of which is on file at the office of the State Secretary of the
Commonwealth of Massachusetts and at the principal office of Parkstone. The
obligations of Parkstone entered into in the name or on behalf thereof by any of
the trustees, representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the trustees, shareholders or
representatives of Parkstone personally, but bind only the trust property, and
all persons dealing with any portfolio of Parkstone must look solely to the
trust property belonging to such portfolio for the enforcement of any claims
against Parkstone.
21.02 Both parties specifically acknowledge and agree that any
liability of Parkstone under this Agreement with respect to an Acquired Fund, or
in connection with the transactions contemplated herein with respect to an
Acquired Fund, shall be discharged only out of the assets of that Acquired Fund
and that no other portfolio of Parkstone shall be liable with respect thereto.
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XXII. ARMADA LIABILITY.
22.01 The names "Armada Funds" and "Board of Trustees of Armada Funds"
refer respectively to the trust created and the trustees, as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust dated January 28, 1986, which is hereby referred to and a copy of which is
on file at the office of the State Secretary of the Commonwealth of
Massachusetts and at the principal office of Armada. The obligations of Armada
entered into in the name or on behalf thereof by any of the trustees,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the trustees, shareholders or representatives of
Armada personally, but bind only the trust property, and all persons dealing
with any series of shares of Armada must look solely to the trust property
belonging to such series for the enforcement of any claims against Armada.
22.02 Both parties specifically acknowledge and agree that any
liability of Armada under this Agreement with respect to an Acquiring Fund, or
in connection with the transactions contemplated herein with respect to an
Acquiring Fund, shall be discharged only out of the assets of that Acquiring
Fund and that no other fund of Armada shall be liable with respect thereto.
XXIII. INDEMNIFICATION AND INSURANCE.
23.01 (a) Each Acquired Fund will indemnify and hold harmless,
out of its own assets and no others, the
corresponding Acquiring Fund and Armada's Trustees
and officers (for purposes of the Section, the
"Indemnified Parties") against any and all expenses,
losses, claims, damages and liabilities at any time
imposed upon or reasonably incurred by any one or
more of the Indemnified Parties in connection with,
arising out of, or resulting from any claim, action,
suit or proceeding in which any one or more of the
Indemnified Parties may be involved or with which any
one or more of the Indemnified Parties may be
threatened by reason of any untrue statement or
alleged untrue statement of a material fact relating
to Parkstone or any Acquired Fund contained in the
Form N-14 Registration Statement, any Acquired Fund
Prospectus or related Statement of Additional
Information, or any amendment or supplement to any of
the foregoing, or arising out of or based upon the
omission or alleged omission to state in any of the
foregoing a material fact relating to Parkstone or
any Acquired Fund required to be stated therein or
necessary to make the statements relating to
Parkstone or any Acquired Fund therein not
misleading, including, without limitation, any
amounts paid by any one or more of the Indemnified
Parties in a reasonable compromise or settlement of
any such claim, action, suit or proceeding, or
threatened claim, action, suit or proceeding made
with the prior consent of Parkstone.
(b) The Indemnified Parties will notify Parkstone in
writing within ten days after the receipt by any one
or more of the Indemnified Parties of any notice of
legal process or any suit brought against or claim
made against
A - 23
<PAGE> 111
such Indemnified Party as to any matters covered by
this Section 23. Parkstone shall be entitled to
participate at its own expense in the defense of any
claim, action, suit or proceeding covered by this
Section 23, or, if it so elects, to assume at its
expense by counsel satisfactory to the Indemnified
Parties the defense of any such claim, action, suit
or proceeding, and if Parkstone elects to assume such
defense, the Indemnified Parties shall be entitled to
participate in the defense of any such claim, action,
suit or proceeding at their own expense. The
obligation of each of the Acquired Funds under this
Section 23 to indemnify and hold harmless the
Indemnified Parties shall constitute a guarantee of
any expenses, losses, claims, damages and liabilities
required to be paid by it under Section 23 without
the necessity of the Indemnified Parties' first
paying the same.
23.02 (a) Each Acquiring Fund will indemnify and hold harmless,
out of its own assets and no others, the
corresponding Acquired Fund and Parkstone's Trustees
and officers (for purposes of this Section, the
"Indemnified Parties") against any and all expenses,
losses, claims, damages and liabilities at any time
imposed upon or reasonably incurred by any one or
more of the Indemnified Parties in connection with,
arising out of, or resulting from any claim, action,
suit or proceeding in which any one or more of the
Indemnified Parties may be involved or with which any
one or more of the Indemnified Parties may be
threatened by reason of any untrue statement or
alleged untrue statement of a material fact relating
to Armada or any Acquiring Fund contained in the Form
N-14 Registration Statement, any Acquiring Fund
Prospectus or related Statement of Additional
Information, or any amendment or supplement to any of
the foregoing, or arising out of or based upon the
omission or alleged omission to state in any of the
foregoing a material fact relating to Armada or any
Acquiring Fund required to be stated therein or
necessary to make the statement relating to Armada or
any Acquiring Fund therein not misleading, including,
without limitation, any amounts paid by any one or
more of the Indemnified Parties in a reasonable
compromise or settlement of any such claim, action,
suit or proceeding, or threatened claim, action, suit
or proceeding made with the prior consent of Armada.
(b) The Indemnified Parties will notify Armada in writing
within ten days after the receipt by any one or more
of the Indemnified Parties of any notice of legal
process or any suit brought against or claim made
against such Indemnified Party as to any matters
covered by this Section 23. Armada shall be entitled
to participate at its own expense in the defense of
any claim, action, suit or proceeding covered by this
Section 23, or, if it so elects, the assume at its
expense by counsel satisfactory to the Indemnified
Parties the defense of any such claim, action, suit
or proceeding, and, if Armada elects to assume such
defense, the Indemnified Parties shall be entitled to
participate in the defense of any such claim, action,
suit or
A - 24
<PAGE> 112
proceeding at their own expense. The obligation of
each of the Acquiring Funds under this Section 23 to
indemnify and hold harmless the Indemnified Parties
shall constitute a guarantee of payment so that the
Acquiring Funds will pay in the first instance any
expenses, losses, claims, damages and liabilities
required to be paid by it under this Section 23
without the necessity of the Indemnified Parties'
first paying the same.
23.03. (a) From and after the Effective Time of the
Reorganization, Armada will assume and honor any
obligation as provided for or permitted by applicable
federal and state law in effect immediately prior to
the Effective Time of the Reorganization with respect
to the indemnification of each person who is now, or
has been at any time prior to the date hereof or who
becomes prior to the Effective Time of the
Reorganization, a Trustee or officer of Parkstone
(for the purposes of this Section, the "Indemnified
Parties") to the maximum extent available and
permitted by applicable law or regulation against any
and all losses in connection with or arising out of
any claim which is based upon, arises out of or in
any way relates to any actual or alleged act or
omission occurring at or prior to the Effective Time
of the Reorganization, including any actions taken to
approve and implement this Agreement and the
transactions contemplated hereby, in the Indemnified
Parties' capacities as director or officer (whether
elected or appointed), of Parkstone. This Section
23.03(a) will be construed as an agreement as to
which the Indemnified Parties are intended to be
third-party beneficiaries.
XXIV. NOTICES. All notices required or permitted herein shall be in
writing and shall be deemed to be properly given when delivered personally or by
telecopier with confirmation, to the party entitled to receive the notice or
when sent by certified or registered mail, postage prepaid, or delivered to a
nationally recognized overnight courier service, in each case properly addressed
to the party entitled to receive such notice at the address or telecopier number
stated below or to such other address or telecopier number as may hereafter be
furnished in writing by notice similarly given by one party to the other party
hereto:
A - 25
<PAGE> 113
If to Armada:
Anne Rapacz-Kimmins
National City Bank
Armada Funds Department, 22nd Floor
1900 East Ninth Street
Cleveland, OH 44114
Telecopier Number: (216) 771-8490
With a copy to:
Audrey C. Talley, Esq.
Drinker Biddle & Reath LLP
One Logan Square
18th and Cherry Streets
Philadelphia, PA 19103-6996
Telecopier Number: (215) 988-2757
If to Parkstone:
Anne Rapacz-Kimmins
National City Bank
Armada Funds Department, 22nd Floor
1900 East Ninth Street
Cleveland, OH 44114
Telecopier Number: (216) 771-8490
With a copy to:
Audrey C. Talley, Esq.
Drinker Biddle & Reath LLP
One Logan Square
18th and Cherry Streets
Philadelphia, PA 19103-6996
Telecopier Number: (215) 988-2757
XXV. EXPENSES. Each party represents to the other that its expenses
incurred in connection with the Reorganization will be borne equally by National
City Bank of Michigan/Illinois ("National City") and Armada, PROVIDED, HOWEVER,
that (a) Armada shall bear any filing fees under the 1933 Act and state
securities laws in connection with its A Shares, B Shares and I Shares to be
distributed to shareholders of the Acquired Funds, and (b) National City shall
bear any contractual termination fees incurred by Parkstone as a result of
effecting the transactions contemplated by this Agreement.
A - 26
<PAGE> 114
XXVI. ENTIRE AGREEMENT. This Agreement embodies the entire agreement
and understanding of the parties hereto and supersedes any and all prior
agreements, arrangements and understandings relating to matters provided for
herein.
XXVII. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which, when executed and delivered shall be deemed to be
an original, but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their duly authorized officers designated below as of the date
first written above.
ATTEST: ARMADA FUNDS
- --------------------------- -------------------------------
Name: Name:
Title: Title:
ATTEST: THE PARKSTONE GROUP OF FUNDS
- --------------------------- -------------------------------
Name: Name:
Title: Title:
A - 27
<PAGE> 115
APPENDIX B
PERFORMANCE INFORMATION ABOUT THE FUNDS
ARMADA INTERNATIONAL EQUITY FUND
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows the performance of the Fund's Class I Shares. The returns
for Class A Shares and Class B Shares will differ from the Class I Shares shown
in the bar chart because of differences in the expenses of each class.
CALENDAR YEAR TOTAL RETURN (I SHARES)
1998 19.98%
1999 50.13%
BEST QUARTER WORST QUARTER
36.24% -15.57%
(12/31/99) (9/30/98)
This table compares average annual total returns for each share class for the
periods ended December 31, 1999 to those of the Morgan Stanley World EAFE Index.
<TABLE>
<CAPTION>
SHARES 1 YEAR SINCE INCEPTION
- --------------------------------------------- --------------------------- -----------------
<S> <C> <C>
A SHARES (WITH SALES CHARGE) 41.52% 20.55%(1)
B SHARES (WITH CONTINGENT DEFERRED SALES
CHARGE) 43.70% 31.39%(2)
I SHARES 50.13% 23.77%(1)
MORGAN STANLEY WORLD EAFE INDEX(3) 26.96% 18.39%(4)
</TABLE>
(1) Since August 1, 1997.
(2) Since January 6, 1998.
(3) The Morgan Stanley Capital International Europe, Australasia and Far East
(World EAFE) Index is an unmanaged index which represents the performance of
more than 1,000 equity securities of companies located in those regions.
(4)Since August 31, 1997.
B - 1
<PAGE> 116
PARKSTONE INTERNATIONAL DISCOVERY FUND
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31/99 FOR INSTITUTIONAL SHARES(1)
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C>
Percentage 33.88% -6.68% 8.01% 16.56% 1.80% 12.66% 47.18%
</TABLE>
The returns for Investor A Shares and Investor B Shares will differ from the
Institutional Shares shown in the bar chart because of differences in the
expenses of each class.
During the period shown in the bar chart, the Fund's:
- --------------------------------------------------------------------------------
Best quarter was 36.05% 4th quarter 1999
Worst quarter was -15.56% 3rd quarter 1998
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1)
(for the periods ended December 31, 1999)
<TABLE>
<CAPTION>
FUND OR CLASS
INCEPTION PAST YEAR PAST 5 YEARS PAST 10 YEARS SINCE INCEPTION
<S> <C> <C> <C> <C> <C>
Investor A Shares (with 5.50%
sales charge) 12/29/92 39.36% 14.82% N/A 13.82%
Investor B Shares (with
applicable Contingent Deferred
Sales Charge) 2/4/94 40.97% 15.72% N/A 10.09%
Institutional Shares 12/29/92 47.18% 16.27% N/A 14.96%
MORGAN STANLEY CAPITAL
INTERNATIONAL EAFE INDEX 12/29/92 26.96%% 12.83% N/A 12.97%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
1. Both the chart and the table assume reinvestment of dividends and
distributions.
B - 2
<PAGE> 117
ARMADA SMALL CAP GROWTH FUND
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows the performance of the Fund's Class I Shares. The returns
for Class A Shares and Class B Shares will differ from the Class I Shares shown
in the bar chart because of differences in the expenses of each class.
CALENDAR YEAR TOTAL RETURN (I SHARES)
1998 7.56%
1999 36.06%
BEST QUARTER WORST QUARTER
36.30% -21.14%
(12/31/99) (9/30/98)
This table compares the average annual total returns for each share class for
the periods ended December 31, 1999 to those of the Russell 2000 Growth Index.
<TABLE>
<CAPTION>
SHARES 1 YEAR SINCE INCEPTION
- ----------------------------------------- ----------------------- ----------------------
<S> <C> <C>
A SHARES (WITH SALES CHARGE) 28.17% 17.40%(1)
B SHARES (WITH CONTINGENT DEFERRED
SALES CHARGE) 29.81% 18.13%(2)
I SHARES 36.06% 20.49%(1)
RUSSELL 2000 GROWTH INDEX(3) 43.10% 16.77%(4)
</TABLE>
(1) Since August 1, 1997.
(2) Since January 6, 1998.
(3) The Russell 2000 Growth Index is comprised of securities in the Russell 2000
Stock Index with a greater than average growth orientation.
(4) Since August 31, 1997.
B - 3
<PAGE> 118
PARKSTONE SMALL CAPITALIZATION FUND
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31/99 FOR INSTITUTIONAL SHARES(1)
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Percentage 32.39% -1.37% 43.94% 19.15% 21.93% 5.17% 35.86% 27.70% -5.97% -5.31% 32.13%
</TABLE>
The returns for Investor A Shares and Investor B Shares will differ from the
Institutional Shares shown in the bar chart because of differences in the
expenses of each class.
During the period shown in the bar chart, the Fund's:
- --------------------------------------------------------------------------------
Best quarter was 36.36% 4th quarter 1999
Worst quarter was -26.90% 3rd quarter 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS(1)
(for the periods ended December 31, 1999)
FUND OR CLASS
INCEPTION PAST YEAR PAST 5 YEARS PAST 10 YEARS SINCE INCEPTION
<S> <C> <C> <C> <C> <C>
Investor A Shares (with 5.50%
sales charge) 10/31/88 24.65% 13.83% 15.21% 16.41%
Investor B Shares (with
applicable Contingent Deferred
Sales Charge) 2/4/94 25.79% 14.07% N/A 13.60%
Institutional Shares 10/31/88 32.13% 15.34% 16.04% 17.16%
RUSSELL 2000 GROWTH
INDEX 10/31/88 43.10% 18.99% 13.51% 13.95%
</TABLE>
1. Both the chart and the table assume reinvestment of dividends and
distributions.
B - 4
<PAGE> 119
ARMADA EQUITY INCOME FUND
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year. The returns for Class A Shares and Class B Shares will differ
from the Class I Shares shown in the bar chart because of differences in the
expenses of each class.
CALENDAR YEAR TOTAL RETURN (I SHARES)
1995 27.70%
1996 18.08%
1997 29.21%
1998 10.23%
1999 -0.13%
BEST QUARTER WORST QUARTER
12.63% -9.19%
(6/30/97) (9/30/99)
This table compares the average annual total returns for each share class for
the periods ended December 31, 1999 to those of the S&P 500/BarraValue Index.
<TABLE>
<CAPTION>
SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- ----------------------------------------- --------------- -------------- -----------------
<S> <C> <C> <C>
A SHARES (WITH SALES CHARGE) -5.73% 14.89% 13.40%(1)
B SHARES (WITH CONTINGENT DEFERRED
SALES CHARGE) -5.56% N/A 2.24%(2)
I SHARES -0.13% 16.49% 15.02%(3)
S&P 500/BARRAVALUE INDEX(4) 12.72% 22.94% 20.65%(5)
</TABLE>
(1) Since August 22, 1994.
(2) Since January 6, 1998.
(3) Since July 1, 1994.
(4) The S&P 500/BarraValue Index is comprised of securities in the S&P 500
Composite Index that have a lower than average price-to-book ratio. The S&P 500
Composite Index is a widely recognized, unmanaged index of 500 common stocks
which are generally representative of the U.S. stock market as a whole.
(5) Since July 31, 1994.
B - 5
<PAGE> 120
PARKSTONE EQUITY INCOME FUND
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR INVESTOR A SHARES(1)
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Percentage 28.13% 0.13% 24.96% 9.40% 12.65% -8.26% 27.71% 17.17% 25.48% 10.95% -0.26%
</TABLE>
The returns for Investor A Shares and Investor B Shares will differ from the
Institutional Shares shown in the bar chart because of differences in the
expenses of each class.
During the period shown in the bar chart, the Fund's:
- --------------------------------------------------------------------------------
Best quarter was 13.54% 2nd quarter 1997
Worst quarter was -10.73% 3rd quarter 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS(1)
(for the periods ended December 31, 1999)
FUND OR CLASS
INCEPTION PAST YEAR PAST 5 YEARS PAST 10 YEARS SINCE INCEPTION
<S> <C> <C> <C> <C> <C>
Investor A Shares (with 5.50%
sales charge) 10/31/88 -6.04% 14.24% 10.64% 12.16%
Investor B Shares (with
applicable Contingent Deferred
Sales Charge) 2/4/94 -4.28% 14.50% N/A 10.29%
Institutional Shares 10/31/88 -0.26% 15.75% 11.39% 12.84%
S&P BARRA VALUE INDEX 10/31/88 12.72% 22.94% 15.37% 16.06%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Both the chart and the table assume reinvestment of dividends and
distributions.
B - 6
<PAGE> 121
ARMADA BALANCED ALLOCATION FUND
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year. The returns for Class A Shares and Class B Shares will differ
from the Class I Shares shown in the bar chart because of differences in the
expenses of each class.
CALENDAR YEAR TOTAL RETURN (I SHARES)
1999 15.27%
BEST QUARTER WORST QUARTER
16.09% -3.21%
(12/31/99) (9/30/99)
This table compares the average annual total returns for each share class for
the periods ended December 31, 1999 to those of the S&P 500 Composite Index, the
Lehman Aggregate Bond Index and a Balanced Hybrid Benchmark.
<TABLE>
<CAPTION>
SHARES 1 YEAR SINCE INCEPTION
- ----------------------------------------------- --------------- -----------------
<S> <C> <C>
A SHARES (WITH SALES CHARGE) 9.55% 12.91%(1)
B SHARES (WITH CONTINGENT DEFERRED
SALES CHARGE) 9.28% 15.79%(2)
I SHARES 15.27% 14.31%(3)
S&P 500 COMPOSITE INDEX(4) 21.04% 22.73%(5)
LEHMAN AGGREGATE BOND INDEX(6) -0.83% 2.45%(7)
BALANCED ALLOCATION HYBRID BENCHMARK(8) 12.00% 14.77%(9)
</TABLE>
(1) Since July 31, 1998.
(2) Since November 11, 1998.
(3) Since July 10, 1998.
(4) The S&P 500 Composite Index is a widely recognized, unmanaged index of 500
common stocks which are generally representative of the U.S. stock market as a
whole.
(5) Since July 31, 1998.
(6) 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.
(7) Since July 31, 1998.
(8) The Balanced Allocation Hybrid Benchmark is an unmanaged composite of the
S&P 500 Composite Index and the Lehman Aggregate Bond Index. These two indices
are combined in the same ratio as the stock/bond ration of the Balanced
Allocation Fund to arrive at the Hybrid Benchmark.
(9) Since July 31, 1998.
B - 7
<PAGE> 122
PARKSTONE BALANCED ALLOCATION FUND
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31/99 FOR INSTITUTIONAL SHARES(1)
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C>
Percentage 11.42% -2.77% 22.96% 13.10% 11.67% 13.04% 17.35%
</TABLE>
The returns for Investor A Shares and Investor B Shares will differ from the
Institutional Shares shown in the bar chart because of differences in the
expenses of each class.
During the period shown in the bar chart, the Fund's:
- --------------------------------------------------------------------------------
Best quarter was 16.39% 4th quarter 1999
Worst quarter was -6.87% 3rd quarter 1998
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1)
(for the periods ended December 31, 1999)
<TABLE>
<CAPTION>
FUND OR CLASS
INCEPTION PAST YEAR PAST 5 YEARS SINCE INCEPTION
<S> <C> <C> <C> <C>
Investor A Shares (with 4.75%
sales charge) 1/31/92 11.48% 14.16% 11.26%
Investor B Shares (with
applicable Contingent Deferred
Sales Charge) 2/4/94 11.20% 14.20% 11.46%
Institutional Shares 1/31/92 17.35% 15.55% 12.15%
S&P STOCK INDEX 1/31/92 21.04% 28.55% 20.19%
LEHMAN BROTHERS AGGREGATE BOND
INDEX 1/31/92 -0.83% 7.73% 6.80%
- -----------------------------------------------------------------------------------------------------
</TABLE>
1. Both the chart and the table assume reinvestment of dividends and
distributions.
B - 8
<PAGE> 123
ARMADA BOND FUND
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year. The returns for Class A Shares and Class B Shares will differ
from the Class I Shares shown in the bar chart because of differences in the
expenses of each class.
CALENDAR YEAR TOTAL RETURN (I SHARES)
1995 14.46%
1996 3.48%
1997 7.97%
1998 8.44%
1999 -1.89%
BEST QUARTER WORST QUARTER
4.75% -1.12%
(9/30/98) (3/31/99)
This table compares the average annual total returns for each share class for
the periods ended December 31, 1999 to those of the Lehman Aggregate Bond Index.
<TABLE>
<CAPTION>
SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- ------------------------------------------------------- ------------ ---------------- -----------------
<S> <C> <C> <C>
A SHARES (WITH SALES CHARGE) -6.62% N/A 3.62%(1)
B SHARES (WITH CONTINGENT DEFERRED SALES CHARGE) -7.35% N/A 1.84%(2)
I SHARES -1.89% 6.35% 5.75%(3)
LEHMAN AGGREGATE BOND INDEX(4) -0.83% 7.73% 7.01%(5)
(1) Since September 11, 1996.
(2) Since January 6, 1998.
(3) Since August 10, 1994.
(4) 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.
(5) August 31, 1994.
</TABLE>
B - 9
<PAGE> 124
PARKSTONE BOND FUND
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31/99 FOR INSTITUTIONAL SHARES(1)
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Percentage 11.91% 8.12% 15.04% 6.23% 9.83% -3.50% 18.05% 3.41% 9.28% 7.50% -1.75%
</TABLE>
The returns for Investor A Shares and Investor B Shares will differ from the
Institutional Shares shown in the bar chart because of differences in the
expenses of each class.
During the period shown in the bar chart, the Funds:
- --------------------------------------------------------------------------------
Best quarter was 6.16% 2nd quarter 1995
Worst quarter was -2.67% 1st quarter 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS(1)
(FOR THE PERIODS ENDED DECEMBER 31, 1999)
Fund or Class Past Year Past 5 Years Past 10 Years Since Inception
Inception
----------------- ------------- -------------- --------------- ------------------
<S> <C> <C> <C> <C> <C>
Investor A Shares
(with 4.75% sales charge) 10/31/88 -6.67% 5.68% 6.31% 6.60%
Investor B Shares
(with applicable Contingent
Deferred Sales Charge) 2/4/94 -7.38% 5.71% N/A 4.19%
Institutional Shares 10/31/88 -1.75% 7.10% 7.03% 7.25%
Lehman Brothers Aggregate
Bond Index 10/31/88 -0.83% 7.73% 7.70% 8.06%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
B - 10
<PAGE> 125
ARMADA INTERMEDIATE BOND FUND
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year. The returns for Class A Shares and Class B Shares will differ
from the Class I Shares shown in the bar chart because of differences in the
expenses of each class.
CALENDAR YEAR TOTAL RETURN (I SHARES)
1990 8.28%
1991 15.69%
1992 7.51%
1993 10.32%
1994 -4.52%
1995 15.74%
1996 3.12%
1997 6.94%
1998 7.91%
1999 -0.04%
BEST QUARTER WORST QUARTER
5.46% -3.22%
(12/31/90) (3/31/94)
This table compares the average annual total returns for each share class for
the periods ended December 31, 1999 to those of the Lehman Intermediate
Government/Corporate Bond Index.
<TABLE>
<CAPTION>
SHARES 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
- --------------------------------------------------- --------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
A SHARES (WITH SALES CHARGES) -5.13% 5.21% N/A 5.64%(1)
B SHARES (WITH CONTINGENT DEFERRED -5.70% N/A N/A -0.09%(2)
SALES CHARGES)
I SHARES -0.04% 6.60% 6.92% 6.91%(3)
LEHMAN INTERMEDIATE
GOVERNMENT/CORPORATE BOND INDEX(4) 0.39% 7.09% 7.26% 7.26%(5)
</TABLE>
(1) Since April 15, 1991.
(2) Since January 6, 1998.
(3) Since December 20, 1989.
(4) The Lehman Intermediate Government/Corporate Bond Index is an unmanaged
index which is representative of intermediate-term bonds.
(5) Since December 31, 1989.
B - 11
<PAGE> 126
PARKSTONE INTERMEDIATE GOVERNMENT OBLIGATIONS FUND
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31/99 FOR INSTITUTIONAL SHARES(1)
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Percentage 10.05% 8.81% 13.77% 5.33% 7.44% -2.33% 13.49% 3.17% 6.88% 7.62% -0.07%
</TABLE>
The returns for Investor A Shares and Investor B Shares will differ from the
Institutional Shares shown in the bar chart because of differences in the
expenses of each class.
During the period shown in the bar chart, the Funds:
- --------------------------------------------------------------------------------
Best quarter was 4.89% 4th quarter 1991
Worst quarter was -1.91% 1st quarter 1994
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1)
(FOR THE PERIODS ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
Fund or Class Past Year Past 5 Years Past 10 Years Since Inception
Inception
----------------- ------------- -------------- --------------- ------------------
<S> <C> <C> <C> <C> <C>
Investor A Shares
(with 4.75% sales charge) 10/31/88 -5.05% 4.81% 5.62% 5.82%
Investor B Shares
(with applicable Contingent
Deferred Sales Charge) 2/4/94 -5.75% 4.74% N/A 3.65%
---------------------------------------------------------------------------------
Institutional Shares 10/31/88 -0.07% 6.12% 6.30% 6.43%
Lehman Brothers Intermediate
Government Index 10/31/88 0.50% 6.93% 7.10% 7.41%
- ------------------------------------ ---------------------------------------------------------------------------------
</TABLE>
- ----------
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
B - 12
<PAGE> 127
ARMADA LIMITED MATURITY BOND FUND (FORMERLY THE ENHANCED INCOME FUND)
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
There is no performance information for Class B Shares because they have not yet
completed a full calendar year of operations.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year. The returns for Class A Shares and Class B Shares will differ
from the Class I Shares shown in the bar chart because of differences in the
expenses of each class.
CALENDAR YEAR TOTAL RETURN (I SHARES)
1995 7.69%
1996 5.29%
1997 6.43%
1998 6.58%
1999 3.20%
BEST QUARTER WORST QUARTER
2.95% 0.28%
(9/30/98) (6/30/99)
This table compares the average annual total returns for each share class for
the periods ended December 31, 1999 to those of the Merrill Lynch 1-3 Year
Government/Corporate Index.
<TABLE>
<CAPTION>
SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- ------------------------------------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C>
A SHARES (WITH SALES CHARGE) 0.27% 5.18% 5.08%(1)
I SHARES 3.20% 5.83% 5.67%(2)
MERRILL LYNCH 1-3 YEAR
GOVERNMENT/CORPORATE INDEX(3) 3.25% 6.50% 6.01%(4)
</TABLE>
(1) Since September 9, 1994.
(2) Since July 7, 1994.
(3) This is a market capitalization weighted index including U.S. Treasury and
Agency bonds and U.S. fixed coupon investment grade corporate bonds (U.S.
domestic and Yankee/global bonds). U.S. Treasury bonds must have at least $1
billion face value outstanding and agency and corporate bonds must have at least
$150 million face value outstanding to be included in the index. Both total
return and price returns are calculated daily. Prices are taken as of
approximately 3 p.m. ET. Quality range is BBB3-AAA based on composite Moody and
S&P ratings. Maturities for all bonds are greater than or equal to one year and
less than three years. Floaters, Equipment Trust Certificates, and Title 11
securities are excluded.
(4) Since July 31, 1994.
B - 13
<PAGE> 128
PARKSTONE LIMITED MATURITY BOND FUND
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31/99 FOR INSTITUTIONAL SHARES(1)
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Percentage 9.54% 7.83% 12.24% 5.76% 6.85% -0.72% 11.27% 4.16% 5.80% 6.51% 3.13%
</TABLE>
The returns for Investor A Shares and Investor B Shares will differ from the
Institutional Shares shown in the bar chart because of differences in the
expenses of each class.
During the period shown in the bar chart, the Fund's:
- --------------------------------------------------------------------------------
Best quarter was 4.17% 4th quarter 1991
Worst quarter was -1.08% 1st quarter 1994
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1)
(for the periods ended December 31, 1999)
<TABLE>
<CAPTION>
FUND OR
CLASS
INCEPTION PAST YEAR PAST 5 YEARS PAST 10 YEARS SINCE INCEPTION
<S> <C> <C> <C> <C> <C>
Investor A Shares (with 2.75%
sales charge) 10/31/88 0.01% 5.27% 5.76% 6.02%
Investor B Shares (with applicable
Contingent Deferred Sales Charge) 2/4/94 -2.77% 4.74% N/A 3.93%
Institutional Shares 10/31/88 3.13% 6.14% 6.22% 6.43%
Merrill Lynch 1-3 Year
Government/Corporate Index 10/31/88 3.25% 6.59% 6.68% 6.95%
</TABLE>
- ----------
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
B - 14
<PAGE> 129
ARMADA NATIONAL TAX EXEMPT BOND FUND
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year. The returns for Class A Shares and Class B Shares will differ
from the Class I Shares shown in the bar chart because of differences in the
expenses of each class.
CALENDAR YEAR TOTAL RETURN (I Shares)
1989 9.79%
1990 4.65%
1991 8.45%
1992 9.74%
1993 11.76%
1994 -4.58%
1995 14.05%
1996 -1.07%
1997 6.57%
1998 5.95%
1999 -1.12
BEST QUARTER WORST QUARTER
5.44% -4.13%
(3/31/95) (3/31/94)
This table compares the average annual total returns for each share class for
the periods ended December 31, 1999 to those of the Lehman 10 Year Municipal
Bond Index.
<TABLE>
<CAPTION>
SHARES 1 YEAR 5 YEARS 10 YEARS
- ----------------------------------------------- -------------- --------------- ---------------
<S> <C> <C> <C>
A SHARES (WITH SALES CHARGE) -5.58% 3.73% 4.78%
B SHARES (WITH CONTINGENT DEFERRED -6.53% 4.24% 5.20%
SALES CHARGE)
I SHARES -1.12% 4.73% 5.28%
LEHMAN 10 YEAR MUNICIPAL BOND INDEX(1) -1.24% 7.12% 7.10%
</TABLE>
(1) The Lehman 10 Year Municipal Bond Index is a broad based total return index.
The bonds are all investment grade, fixed rate with maturities of 9-12 years and
are selected from issues larger than $50 million dated since January 1984.
The performance of the National Tax Exempt Bond Fund for the period prior to
June 22, 1998 is represented by the performance of a common trust fund ("common
trust fund") which operated prior to the effectiveness of the registration
statement of the National Tax Exempt Bond Fund. The common trust fund was
advised by National City Bank, an affiliate of the Adviser. At the time of the
National Tax Exempt Bond Fund's inception, the common trust fund was operated
using materially equivalent investment objectives, policies, guidelines and
restrictions as the Fund. In connection with the National Tax Exempt Bond Fund's
commencement of operations, on June 22, 1998, the common trust fund transferred
its assets to the Fund. At the time of the transfer, the Adviser did not manage
any other
B - 15
<PAGE> 130
collective investment or common trust funds using materially equivalent
investment objectives, policies, guidelines and restrictions to those of the
National Tax Exempt Bond Fund.
The common trust fund was not open to the public generally, nor registered under
the Investment Company Act of 1940 (the "1940 Act") or subject to certain
restrictions that are imposed by the 1940 Act and the Internal Revenue Code. If
the common trust fund had been registered under the 1940 Act, performance may
have been adversely affected. Performance quotations of the common trust fund
represent past performance of the Adviser managed common trust fund, which are
separate and distinct from the National Tax Exempt Bond Fund; do not represent
past performance of the Fund; and should not be considered as representative of
future results of the Fund.
B - 16
<PAGE> 131
PARKSTONE NATIONAL TAX EXEMPT BOND FUND
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31/99 FOR INSTITUTIONAL SHARES(1)
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Percentage 7.57% 6.01% 9.16% 7.46% 9.18% -3.25% 13.57% 2.92% 6.52% 4.98% -1.45%
</TABLE>
The returns for Investor A Shares and Investor B Shares will differ from the
Institutional Shares shown in the bar chart because of differences in the
expenses of each class.
During the period shown in the bar chart, the Fund's:
- --------------------------------------------------------------------------------
Best quarter was 5.69% 1st quarter 1995
Worst quarter was -3.27% 1st quarter 1994
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1)
(for the periods ended December 31, 1999)
<TABLE>
<CAPTION>
FUND OR
CLASS
INCEPTION PAST YEAR PAST 5 YEARS PAST 10 YEARS SINCE INCEPTION
<S> <C> <C> <C> <C> <C>
Investor A Shares (with 4.75%
sales charge) 10/31/88 -6.41% 3.90% 4.73% 4.95%
Investor B Shares (with applicable
Contingent Deferred Sales Charge) 2/4/94 -7.18% 3.73% N/A 2.66%
Institutional Shares 10/31/88 -1.45% 5.19% 5.40% 5.55%
Lehman Brothers Municipal Bond Index 10/31/88 -2.07% 6.91% 6.90% 7.13%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
B - 17
<PAGE> 132
ARMADA TAX EXEMPT MONEY MARKET FUND
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year. The returns for Class A Shares and Class B Shares will differ
from the Class I Shares shown in the bar chart because of differences in the
expenses of each class.
CALENDAR YEAR TOTAL RETURN (I Shares)
1989 6.20%
1990 5.83%
1991 4.26%
1992 2.52%
1993 2.02%
1994 2.51%
1995 3.57%
1996 3.21%
1997 3.37%
1998 3.23%
1999 2.95%
BEST QUARTER WORST QUARTER
1.47% 0.47%
(12/31/90) (3/31/94)
This table shows the average annual total returns for each share class for the
periods ended December 31, 1999.
<TABLE>
<CAPTION>
SHARES 1 YEAR 5 YEARS 10 YEARS SINCE
INCEPTION
- ----------------------------------------------------- -------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
A SHARES 2.80% 3.14% N/A 2.89%(1)
I SHARES 2.95% 3.27% 3.34% 3.68%(2)
(1) Since April 1, 1991.
(2) Since July 20, 1988.
</TABLE>
B - 18
<PAGE> 133
PARKSTONE TAX-FREE FUND
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31/99 FOR INSTITUTIONAL SHARES(1)
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Percentage 6.08% 5.46% 3.96% 2.53% 1.88% 2.34% 3.26% 2.79% 3.08% 2.86% 2.63%
</TABLE>
The returns for Investor A Shares will differ from the Institutional Shares
shown in the bar chart because of differences in the expenses of each class.
During the period shown in the bar chart, the Fund's:
- --------------------------------------------------------------------------------
Best quarter was 1.37% 2nd quarter 1990
Worst quarter was 0.43% 1st quarter 1994
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1)
(for the periods ended December 31, 1999)
<TABLE>
<CAPTION>
INCEPTION
DATE PAST YEAR PAST 5 YEARS PAST 10 YEARS SINCE INCEPTION
<S> <C> <C> <C> <C> <C>
Investor A Shares 7/30/87 2.53% 2.82% 3.01% 3.44%
Institutional Shares 7/30/87 2.63% 2.92% 3.07% 3.50%
</TABLE>
For current yield information on the Fund, call 1-800-451-8377. The Tax-Free
Fund's yield appears in the Wall Street Journal each Thursday.
- ----------
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
B - 19
<PAGE> 134
ARMADA MONEY MARKET FUND
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year. The returns for Class A Shares and Class B Shares will differ
from the Class I Shares shown in the bar chart because of differences in the
expenses of each class.
CALENDAR YEAR TOTAL RETURN (I SHARES)
1989 9.20%
1990 8.16%
1991 5.67%
1992 3.33%
1993 2.76%
1994 3.98%
1995 5.72%
1996 5.19%
1997 5.32%
1998 5.25%
1999 4.92%
BEST QUARTER WORST QUARTER
2.01% 0.67%
(6/30/90) (6/30/93)
This table shows the Fund's average annual total returns for the periods ended
December 31, 1999.
<TABLE>
<CAPTION>
SHARES 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
- ----------------------------------------- --------------- -------------- ----------------- ------------------
<S> <C> <C> <C> <C>
A SHARES (WITH SALES CHARGE) 4.76% 5.16% N/A 4.52%(1)
B SHARES (WITH CONTINGENT DEFERRED -0.92% N/A N/A 2.38%(2)
SALES CHARGE)
I SHARES 4.92% 5.28% 5.02% 5.62%(3)
</TABLE>
(1) Since April 1, 1991.
(2) Since January 5, 1998.
(3) Since September 3, 1986.
B - 20
<PAGE> 135
PARKSTONE PRIME OBLIGATIONS FUND
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31/99 FOR INSTITUTIONAL SHARES(1)
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Percentage 8.98% 7.90% 5.96% 3.56% 2.68% 3.72% 5.42% 4.99% 5.11% 5.04% 4.68%
</TABLE>
The returns for Investor A Shares and Investor B Shares will differ from the
Institutional Shares shown in the bar chart because of differences in the
expenses of each class.
During the period shown in the bar chart, the Fund's:
- --------------------------------------------------------------------------------
Best quarter was 1.93% 2nd quarter 1990
Worst quarter was 0.65% 4th quarter 1993
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1)
(for the periods ended December 31, 1999)
<TABLE>
<CAPTION>
CLASS
INCEPTION PAST YEAR PAST 5 YEARS PAST 10 YEARS SINCE INCEPTION
<S> <C> <C> <C> <C> <C>
Investor A Shares 8/24/87 4.58% 4.86% 4.79% 5.38%
Investor B Shares*
(with applicable Contingent
Deferred Sales Charge) 9/26/97 3.65% N/A N/A 3.86%
Institutional Shares 8/24/87 4.68% 5.05% 4.90% 5.47%
</TABLE>
For current yield information on the Fund, call 1-800-451-8377. The Prime
Obligations Fund's yield appears in the Wall Street Journal each Thursday.
* The table above reflects the impact of any contingent deferred sales charges
that apply to Investor B Shares of the Prime Obligations Fund.
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
B - 21
<PAGE> 136
ARMADA GOVERNMENT MONEY MARKET FUND
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year. The returns for Class A Shares will differ from the Class I
Shares shown in the bar chart because of differences in the expenses of each
class.
CALENDAR YEAR TOTAL RETURN (I SHARES)
1989 9.01%
1990 7.94%
1991 5.65%
1992 3.36%
1993 2.75%
1994 3.91%
1995 5.63%
1996 5.14%
1997 5.25%
1998 5.15%
1999 4.82%
BEST QUARTER WORST QUARTER
1.95% 0.67%
(6/30/90) (6/30/93)
This table shows the average annual total returns for each share class for the
periods ended December 31, 1999.
<TABLE>
<CAPTION>
SHARES 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
- -------------------------------------------------- ------------------ ----------- --------------- ----------------
<S> <C> <C> <C> <C>
A SHARES 4.66% 5.07% N/A 4.43%(1)
I SHARES 4.82% 5.20% 4.95% 5.51%(2)
</TABLE>
(1) Since April 1, 1991.
(2) Since March 3, 1987.
B - 22
<PAGE> 137
PARKSTONE U.S. GOVERNMENT OBLIGATIONS FUND
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31/99 FOR INSTITUTIONAL SHARES(1)
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Percentage 8.66% 7.69% 5.62% 3.72% 2.62% 3.66% 5.39% 4.86% 4.98% 4.94% 4.52%
</TABLE>
The returns for Investor A Shares will differ from the Institutional Shares
shown in the bar chart because of differences in the expenses of each class.
During the period shown in the bar chart, the Fund's:
- --------------------------------------------------------------------------------
Best quarter was 1.90% 2nd quarter 1990
Worst quarter was 0.64% 2nd quarter 1993
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1)
(for the periods ended December 31, 1999)
<TABLE>
<CAPTION>
CLASS
INCEPTION PAST YEAR PAST 5 YEARS PAST 10 YEARS SINCE INCEPTION
<S> <C> <C> <C> <C> <C>
Investor A Shares 8/24/87 4.42% 4.83% 4.72% 5.28%
Institutional Shares 8/24/87 4.52% 4.94% 4.79% 5.33%
</TABLE>
For current yield information on the Fund, call 1-800-451-8377. The U.S.
Government Obligations Fund's yield appears in The Wall Street Journal each
Thursday.
- ----------
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
B - 23
<PAGE> 138
ARMADA LARGE CAP ULTRA FUND
There is no bar chart or performance table for the Class A, Class B or Class I
Shares of this Fund because it has not yet completed a full calendar year of
operations.
The performance of Class A, Class B and Class I Shares will differ due to
differences in expenses.
B - 24
<PAGE> 139
PARKSTONE LARGE CAPITALIZATION FUND
PERFORMANCE BAR CHART AND TABLE
-------------------------------
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31/99 FOR INSTITUTIONAL SHARES(1)
<TABLE>
<CAPTION>
1996 1997 1998 1999
<S> <C> <C> <C> <C>
Percentage 23.23% 29.08% 42.62% 29.04%
</TABLE>
The returns for Investor A Shares and Investor B Shares will differ from the
Institutional Shares shown in the bar chart because of differences in the
expenses of each class.
During the period shown in the bar chart, the Fund's:
- --------------------------------------------------------------------------------
Best quarter was 25.53% 4th quarter 1998
Worst quarter was -9.12% 3rd quarter 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS(1)
(for the periods ended December 31, 1999)
FUND OR CLASS
INCEPTION PAST YEAR SINCE INCEPTION
<S> <C> <C> <C>
Investor A Shares (with 5.50%
sales charge) 2/1/96 21.45% 28.30%
Investor B Shares (with
applicable Contingent Deferred
Sales Charge) 2/1/96 22.53% 28.87%
Institutional Shares 12/28/95 29.04% 30.80%
S&P BARRA GROWTH
INDEX 12/28/95 28.26% 32.43%
- --------------------------------------------------------------------------------
</TABLE>
1. Both the chart and the table assume reinvestment of dividends and
distributions.
B - 25
<PAGE> 140
ARMADA U.S. GOVERNMENT INCOME FUND
There is no bar chart or performance table for the Class A, Class B or Class I
Shares of this Fund because it has not yet completed a full calendar year of
operations.
The performance of Class A, Class B and Class I Shares will differ due to
differences in expenses.
B - 26
<PAGE> 141
PARKSTONE U.S. GOVERNMENT INCOME FUND
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31/99 FOR INSTITUTIONAL SHARES(1)
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C>
Percentage 7.48% -0.55% 13.78% 4.70% 8.10% 7.08% 1.23%
</TABLE>
The returns for Investor A Shares and Investor B Shares will differ from the
Institutional Shares shown in the bar chart because of differences in the
expenses of each class.
During the period shown in the bar chart, the Fund's:
- --------------------------------------------------------------------------------
Best quarter was 3.94% 2nd quarter 1995
Worst quarter was -1.06% 1st quarter 1994
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1)
(FOR THE PERIODS ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
Fund or Class Past Year Past 5 Years Since Inception
Inception
----------------- ------------- -------------- ------------------
<S> <C> <C> <C> <C>
Investor A Shares
(with 4.75% sales charge) 11/12/92 -3.80% 5.62% 4.90%
Investor B Shares
(with applicable Contingent
Deferred Sales Charge) 2/4/94 -4.57% 5.57% 4.61%
Institutional Shares 11/12/92 1.23% 6.90% 5.83%
- ------------------------------------ ----------------- ------------- -------------- ------------------
Lehman Brothers Mortgage-Backed
Securities Index 11/12/92 1.85% 7.98% 6.50%
- ------------------------------------ ----------------- ------------- -------------- ------------------
- ----------
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
</TABLE>
B - 27
<PAGE> 142
ARMADA MID CAP GROWTH FUND
There is no bar chart or performance table for the Class A, Class B or Class I
Shares of this Fund because it has not yet completed a full calendar year of
operations.
The performance of Class A, Class B and Class I Shares will differ due to
differences in expenses.
B - 28
<PAGE> 143
PARKSTONE MID CAPITALIZATION FUND
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31/99 FOR INSTITUTIONAL SHARES(1)
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Percentage 35.54% -3.30% 27.60% 15.22% 12.97% -5.30% 29.86% 18.32% 11.70% 11.31% 45.85%
</TABLE>
The returns for Investor A Shares and Investor B Shares will differ from the
Institutional Shares shown in the bar chart because of differences in the
expenses of each class.
During the period shown in the bar chart, the Fund's:
- --------------------------------------------------------------------------------
Best quarter was 35.09% 4th quarter 1999
Worst quarter was -19.22% 3rd quarter 1998
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1)
(for the periods ended December 31, 1999)
<TABLE>
<CAPTION>
FUND OR CLASS
INCEPTION PAST YEAR PAST 5 YEARS PAST 10 YEARS SINCE INCEPTION
<S> <C> <C> <C> <C> <C>
Investor A Shares (with 5.50%
sales charge) 10/31/88 37.44% 21.21% 14.79% 16.26%
Investor B Shares (with
applicable Contingent Deferred
Sales Charge) 2/4/94 39.47% 21.52% N/A 17.11%
Institutional Shares 10/31/88 45.85% 22.75% 15.53% 16.94%
RUSSELL MIDCAP GROWTH INDEX 10/31/88 51.30% 28.02% 18.95% 19.84%
- -------------------------------------------------------------------------------------------------------------------
1. Both the chart and the table assume reinvestment of dividends and
distributions.
</TABLE>
B - 29
<PAGE> 144
ARMADA MICHIGAN MUNICIPAL BOND FUND
There is no bar chart or performance table for the Class A, Class B or Class I
Shares of this Fund because it has not yet completed a full calendar year of
operations.
The performance of Class A, Class B and Class I Shares will differ due to
differences in expenses.
B - 30
<PAGE> 145
PARKSTONE MICHIGAN MUNICIPAL BOND FUND
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31/99 FOR INSTITUTIONAL SHARES(1)
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Percentage 9.78% 6.98% 9.74% -2.86% 13.63% 3.03% 7.18% 5.00% -1.34%
</TABLE>
The returns for Investor A Shares and Investor B Shares will differ from the
Institutional Shares shown in the bar chart because of differences in the
expenses of each class.
During the period shown in the bar chart, the Fund's:
- --------------------------------------------------------------------------------
Best quarter was 5.25% 1st quarter 1995
Worst quarter was -3.28% 1st quarter 1994
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1)
(for the periods ended December 31, 1999)
<TABLE>
<CAPTION>
FUND OR
CLASS
INCEPTION PAST YEAR PAST 5 YEARS SINCE INCEPTION
<S> <C> <C> <C> <C>
Investor A Shares (with 4.75%
sales charge) 7/02/90 -6.25% 4.10% 4.90%
Investor B Shares (with applicable
Contingent Deferred Sales Charge) 2/04/94 -7.05% 4.04% 2.90%
Institutional Shares 7/02/90 -1.34% 5.39% 5.61%
LEHMAN SEVEN YEAR MUNICIPAL BOND
INDEX 6/30/90 -0.41% 6.36% 6.56%
- -----------------------------------------------------------------------------------------------
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
</TABLE>
B - 31
<PAGE> 146
ARMADA TREASURY PLUS MONEY MARKET FUND
There is no bar chart or performance table for the Class A or Class I Shares of
this Fund because it has not yet completed a full calendar year of operations.
The performance of Class A and Class I Shares will differ due to differences in
expenses.
B - 32
<PAGE> 147
PARKSTONE TREASURY FUND
PERFORMANCE BAR CHART AND TABLE
-------------------------------
<TABLE>
<CAPTION>
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR INVESTOR A SHARES(1)
1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C>
Percentage 3.71% 5.42% 4.89% 5.06% 4.96% 4.44%
</TABLE>
The returns for Investor A Shares will differ from the Institutional Shares
shown in the bar chart because of differences in the expenses of each class.
During the period shown in the bar chart, the Fund's:
- --------------------------------------------------------------------------------
Best quarter was 1.36% 2nd quarter 1995
Worst quarter was 0.65% 1st quarter 1994
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1)
(for the periods ended December 31, 1999)
<TABLE>
<CAPTION>
CLASS
INCEPTION PAST YEAR PAST 5 YEARS PAST 10 YEARS SINCE INCEPTION
<S> <C> <C> <C> <C> <C>
Investor A Shares 12/1/93 4.34% 4.85% N/A 4.61%
Institutional Shares 12/1/93 4.44% 4.96% N/A 4.72%
</TABLE>
For current yield information on the Fund, call 1-800-451-8377. The Treasury
Fund's yield appears in The Wall Street Journal each Thursday.
- ----------
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
B - 33
<PAGE> 148
APPENDIX C
FEE AND EXPENSE TABLES
(Unaudited)
as of 11/30/99
<TABLE>
<CAPTION>
Parkstone
Prime
Obligations Armada Pro Forma
Fund Money Market Fund Combined
------------- ----------------- ---------
Investor Investor Institutional A I A I
A Shares B Shares Shares Shares B Shares Shares Shares B Shares Shares
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed
on Purchases None None None None None None None None None
Maximum Sales Load Imposed on
Reinvested Dividends None None None None None None None None None
Contingent Deferred Sales
Charge None 5.00%(3) None None 5.00%(5) None None 5.00%(5) None
Redemption Fee None(1) None None None None None None None None
Exchange Fee None(2) None None None None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Management Fees .35% .35% .35% .35% .35% .35% .35% .35% .35%
12b-1 Fees .25% 1.00% .00% .10% .75% .10% .10% .75% .10%
Other Expenses .28% .27% .27% .25% .25% .10% .25% .25% .10%
Total Operating Expenses .88%(6) 1.62%(6) .62%(4,6) .70%(7) 1.35%(7) .55%(7) .70% 1.35% .55%
</TABLE>
- --------------------------
(1) Although no such fee is currently in place, the Transfer Agent has reserved
the right in the future to charge a fee for wire transfers of redemption
proceeds.
(2) Exchanges into a Non-Money Market Fund from a Money Market Fund will be
normally subject to a sales charge.
(3) The contingent deferred sales load declines over five years starting with
year one and ending in year six from: 5.00%; 5.00%; 4.00%; 3.00%; 2.00%.
Investor B Shares which were purchased prior to January 1, 1997, are subject
to a CDSC which declines over four years ending in year five from: 4.00%;
4.00%; 3.00%; 2.00%.
(4) Certain purchases of the Funds through financial institutions may be subject
to fees for additional services provided to investors.
(5) 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.
C-1
<PAGE> 149
(6) The Administrator and Distributor are each currently waiving a portion of
their fees for the current year. With these fee waivers the Fund's actual
total operating expenses are expected to be 0.71% for Investor A Shares,
1.61% for Investor B Shares and 0.60% for Institutional Shares.
(7) The Fund's Adviser and Distributor are each waiving a portion of the fees in
order to keep operating expenses at a specified level. The Adviser and
Distributor may discontinue all or part of these waivers at any time. With
these waivers, the Funds actual total operating expenses are 0.54% for Class
A Shares, 1.25% for Class B Shares and 0.39% for Class I Shares.
C-2
<PAGE> 150
EXAMPLE: This Example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Funds for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that each Fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Parkstone Prime Obligations Fund
Investor A Shares $ 90 $ 281 $ 488 $1,084
Investor B Shares
Assuming Redemption $ 665 $ 911 $1,081 $1,631
Assuming no Redemption $ 165 $ 511 $ 881 $1,631
Institutional Shares $ 63 $ 199 $ 346 $ 774
Armada Money Market Fund
A Shares $ 72 $ 224 $ 390 $ 871
B Shares
Assuming Redemption $ 637 $ 828 $ 939 $1,444
Assuming no Redemption $ 137 $ 428 $ 739 $1,444
I Shares $ 56 $ 176 $ 307 $ 689
Pro Forma Combined
A Shares $ 72 $ 224 $ 390 $ 871
B Shares
Assuming Redemption $ 637 $ 828 $ 939 $1,444
Assuming no Redemption $ 137 $ 428 $ 739 $1,444
I Shares $ 56 $ 176 $ 307 $ 689
- ----------------------
C-3
<PAGE> 151
<TABLE>
<CAPTION>
Parkstone
U.S. Government Obligations Armada Pro Forma
Fund Government Money Market Fund Combined
---- ---------------------------- --------
Investor Institutional A I A I
A Shares Shares Shares Shares Shares Shares
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed
on Purchases None None None None None None
Maximum Sales Load Imposed on
Reinvested Dividends None None None None None None
Contingent Deferred Sales
Charge None None None None None None
Redemption Fee None(1) None(1) None None None None
Exchange Fee None(2) None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Management Fees .35% .35% .35% .35% .35% .35%
12b-1 Fees .25% .00% .10% .10% .10% .10%
Other Expenses .36% .36% .25% .10% .25% .10%
Total Operating Expenses 0.96%(4) .71%(3,4) .70%(5) .55%(5) .70% .55%
- --------------------------
</TABLE>
(1) Although no such fee is currently in place, the Transfer Agent has reserved
the right in the future to charge a fee for wire transfers of redemption
proceeds.
(2) Exchanges into a Non-Money Market Fund from a Money Market Fund will be
normally subject to a sales charge.
(3) Certain purchases of the Funds through financial institutions may be subject
to fees for additional services provided to investors.
(4) The Administrator and Distributor are each currently waiving a portion of
their fees for the current year. With these fee waivers the Fund's actual
total operating expenses are expected to be 0.79% for Investor A Shares and
0.69% for Institutional Shares.
(5) The Fund's Adviser and Distributor are each waiving a portion of the fees in
order to keep operating expenses at a specified level. The Adviser and
Distributor may discontinue all or part of these waivers at any time. With
these waivers, the Funds actual total operating expenses are 0.54% for Class
A Shares and 0.39% for Class I Shares.
C-4
<PAGE> 152
EXAMPLE: This Example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Funds for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that each Fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Parkstone U.S. Government Obligations Fund
Investor A Shares $ 98 $ 306 $ 531 $1,178
Institutional Shares $ 73 $ 227 $ 395 $ 883
Armada Government Money Market Fund
A Shares $ 72 $ 224 $ 390 $ 871
I Shares $ 56 $ 176 $ 307 $ 689
Pro Forma Combined
A Shares $ 72 $ 224 $ 390 $ 871
I Shares $ 56 $ 176 $ 307 $ 689
</TABLE>
C-5
<PAGE> 153
<TABLE>
<CAPTION>
Parkstone
Tax-Free Armada Pro Forma
Fund Tax Exempt Money Market Fund Tax Exempt Money Market
------------ ---------------------------- ------------------------
Investor Institutional A I A I
A Shares Shares Shares B Shares(4) Shares Shares B Shares Shares
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed
on Purchases None None None None None None None None
Maximum Sales Load Imposed on
Reinvested Dividends None None None None None None None None
Contingent Deferred Sales
Charge None None None 5.00%(5) None None 5.00%(5) None
Redemption Fee None(1) None(1) None(1) None(1) None(1) None(1) None(1) None(1)
Exchange Fee None(2) None None None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Management Fees .35% .35% .35% .35% .35% .35% .35% .35%
12b-1 Fees .25% .00% .10% .75% .10% .10% .75% .10%
Other Expenses .29% .30% .27% .27% .12% .26% .26% .11%
Total Operating Expenses .89%(6) .65%(3,6) .72%(7) 1.37%(7) .57%(7) .71% 1.36% .56%
</TABLE>
- ----------------------------
(1) Although no such fee is currently in place, the Transfer Agent has reserved
the right in the future to charge a fee for wire transfers of redemption
proceeds.
(2) Exchanges into a Non-Money Market Fund from a Money Market Fund will be
normally subject to a sales charge.
(3) Certain purchases of the Funds through financial institutions may be subject
to fees for additional services provided to investors.
(4) As of the date of this Prospectus, the Armada Tax Exempt Money Market Fund's
B share class has not commenced operations, and therefore, "Other Expenses"
for such class are estimates only.
(5) 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.
(6) The Administrator and Distributor are each currently waiving a portion of
their fees for the current year. With these fee waivers the Fund's actual
total operating expenses are expected to be 0.72% for Investor A Shares and
0.63% for Institutional Shares.
(7) The Fund's Adviser and Distributor are each waiving a portion of the fees in
order to keep operating expenses at a specified level. The Adviser and
Distributor may discontinue all or part of these waivers at any time. With
these waivers, the Funds actual total operating expenses are 0.46% for Class
A Shares, 1.17% for Class B Shares and 0.31% for Class I Shares.
C-6
<PAGE> 154
EXAMPLE: This Example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Funds for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that each Fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Parkstone Tax Free Fund
Investor A Shares $ 91 $ 284 $ 493 $1,096
Institutional Shares $ 66 $ 208 $ 362 $ 810
Armada Tax Exempt Money Market Fund
A Shares $ 74 $ 230 $ 401 $ 894
B Shares
Assuming Redemption $ 639 $ 834 $ 950 $1,467
Assuming no Redemption $ 139 $ 434 $ 750 $1,467
I Shares $ 58 $ 183 $ 318 $ 714
Pro Forma Combined
A Shares $ 74 $ 230 $ 401 $ 894
B Shares
Assuming Redemption $ 639 $ 834 $ 950 $1,467
Assuming no Redemption $ 139 $ 434 $ 750 $1,467
I Shares $ 58 $ 183 $ 318 $ 714
C-7
<PAGE> 155
<TABLE>
<CAPTION>
Parkstone Armada Pro Forma
Bond Fund Bond Fund Combined
----------- --------- ---------
Investor Investor Institutional A I A I
A Shares B Shares Shares Shares B Shares Shares Shares B Shares Shares
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed
on Purchases 4.75%(1) None None 4.75%(8) None None 4.75%(8) None None
Maximum Sales Load Imposed on
Reinvested Dividends None None None None None None None None None
Contingent Deferred Sales
Charge None 5.00%(5) None None 5.00%(9) None None 5.00%(9) None
Redemption Fee None(2) None(6) None(6) None None None None None None
Exchange Fee None(3) None None None None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Management Fees .55% .55% .55% .55% .55% .55% .55% .55% .55%
12b-1 Fees .25%(4) 1.00% .00% .10% .75% .10% .10% .75% .10%
Other Expenses .29% .29% .29% .39% .39% .14% .39% .39% .14%
Total Operating Expenses 1.09%(10) 1.84%(10) 0.84%(7,10) 1.04%(11) 1.69% .79%(11) 1.04% 1.69% .79%
</TABLE>
- ------------------------
(1) The sales charge may be reduced or eliminated under certain circumstances.
(2) Investors who invest $1,000,000 or more in Investor A Shares of the Funds
will be subject to a redemption fee of 1.00% for redemptions of such shares
made within one year of the date of purchase. In addition, with respect to
all Funds, although no such fee is currently in place, the Transfer Agent
has reserved the right in the future to charge a fee for wire transfers of
redemption proceeds.
(3) Exchanges into a Non-Money Market Fund from a Money Market Fund will be
normally subject to a sales charge.
(4) Shareholders should be aware that due to the distribution fees, a long-term
shareholder in a Fund may pay over time more than the economic equivalent
of the maximum front-end sales charge permitted under the rules of the
National Association of Securities Dealers, Inc.
(5) The CDSC on Investor B Shares declines over five years starting with year
one and ending in year six from: 5.00%; 5.00%; 4.00%; 3.00%; 2.00%.
Investor B Shares which were purchased prior to January 1, 1997, are
subject to a CDSC which declines over four years ending in year five from:
4.00%; 4.00%; 3.00%; 2.00%.
(6) Although no such fee is currently in place, the Transfer Agent has reserved
the right in the future to charge a fee for wire transfers of redemption
proceeds.
(7) Certain purchases of the Funds through financial institutions may be
subject to fees for additional services provided to investors.
(8) This sales charge varies depending upon how much a shareholder invests.
C-8
<PAGE> 156
(9) 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.
(10) The Administrator is currently waiving a portion of its fees for the
current year. With these fee waivers the Fund's actual total operating
expenses are expected to be 1.04% for Investor A Shares, 1.79% for Investor
B Shares and 0.79% for Institutional Shares.
(11) The Fund's Distributor is waiving a portion of the fees in order to keep
operating expenses at a specified level. The Distributor may discontinue
all or part of these waivers at any time. With these waivers, the Funds
actual total operating expenses are 0.98% for Class A Shares and 0.73% for
Class I Shares.
C-9
<PAGE> 157
EXAMPLE: This Example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Funds for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that each Fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Parkstone Bond Fund
Investor A Shares $ 581 $ 805 $1,047 $1,741
Investor B Shares
Assuming Redemption $ 687 $ 979 $1,195 $1,870
Assuming no Redemption $ 187 $ 579 $ 995 $1,870
Institutional Shares $ 86 $ 268 $ 466 $1,037
Armada Bond Fund
A Shares $ 576 $ 790 $1,022 $1,686
B Shares
Assuming Redemption $ 672 $ 933 $1,118 $1,823
Assuming no Redemption $ 172 $ 533 $ 918 $1,823
I Shares $ 81 $ 252 $ 439 $ 978
Pro Forma Combined
A Shares $ 576 $ 790 $1,022 $1,686
B Shares
Assuming Redemption $ 672 $ 933 $1,118 $1,823
Assuming no Redemption $ 172 $ 533 $ 918 $1,823
I Shares $ 81 $ 252 $ 439 $ 978
C-10
<PAGE> 158
<TABLE>
<CAPTION>
Parkstone
U.S. Government
Income Armada Pro Forma
Fund U.S. Government Income Fund(12) Combined
------------- --------------------------- ---------
Investor Investor Institutional A I A I
A Shares B Shares Shares Shares B Shares Shares Shares B Shares Shares
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed
on Purchases 4.75%(1) None None 4.75%(8) None None 4.75% None None
Maximum Sales Load Imposed on
Reinvested Dividends None None None None None None None None None
Contingent Deferred Sales
Charge None 5.00%(5) None None 5.00%(9) None None 5.00% None
Redemption Fee None(2) None(6) None(6) None None None None None None
Exchange Fee None(3) None None None None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Management Fees .55% .55% .55% .55% .55% .55% .55% .55% .55%
12b-1 Fees .25%(4) 1.00% .00% .10% .75% .10% .10% .75% .10%
Other Expenses .35% .35% .35% .43%(10) .43%(10) .18% .43%(10) .43%(10) .18%
Total Operating Expenses 1.15%(13) 1.90%(13) 0.90%(7,13) 1.08%(11) 1.73%(11) .83%(11) 1.08%(11) 1.73%(11) .83%(11)
</TABLE>
- -------------------------
(1) The sales charge may be reduced or eliminated under certain circumstances.
(2) Investors who invest $1,000,000 or more in Investor A Shares of the Funds
will be subject to a redemption fee of 1.00%, for redemptions of such
shares made within one year of the date of purchase. In addition, with
respect to all Funds, although no such fee is currently in place, the
Transfer Agent has reserved the right in the future to charge a fee for
wire transfers of redemption proceeds.
(3) Exchanges into a Non-Money Market Fund from a Money Market Fund will be
normally subject to a sales charge.
(4) Shareholders should be aware that due to the distribution fees, a long-term
shareholder in a Fund may pay over time more than the economic equivalent
of the maximum front-end sales charge permitted under the rules of the
National Association of Securities Dealers, Inc.
(5) The CDSC on Investor B Shares declines over five years starting with year
one and ending in year six from: 5.00%; 5.00%; 4.00%; 3.00%; 2.00%.
Investor B Shares which were purchased prior to January 1, 1997, are
subject to a CDSC which declines over four years ending in year five from:
4.00%; 4.00%; 3.00%; 2.00%.
(6) Although no such fee is currently in place, the Transfer Agent has reserved
the right in the future to charge a fee for wire transfers of redemption
proceeds.
(7) Certain purchases of the Funds through financial institutions may be
subject to fees for additional services provided to investors.
(8) This sales charge varies depending upon how much you invest.
C-11
<PAGE> 159
(9) 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.
(10) "Other Expenses" are based on estimated amounts for the current fiscal
year.
(11) The Distributor plans to waive a portion of its fees for the current fiscal
year. The Distributor may revise or cancel this expense limitation at any
time and will notify you of any material change.
(12) The Fund has not yet commenced operations.
(13) The Administrator is currently waiving a portion of its fees for the
current year. With these fee waivers the Fund's actual total operating
expenses are expected to be 1.10% for Investor A Shares, 1.85% for Investor
B Shares and 0.85% for Institutional Shares.
C-12
<PAGE> 160
EXAMPLE: This Example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Funds for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that each Fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Parkstone U.S. Government Income Fund
Investor A Shares $587 $823 $1,078 $1,806
Investor B Shares
Assuming Redemption $693 $997 $1,226 $1,935
Assuming no Redemption $193 $597 $1,026 $1,935
Institutional Shares $ 92 $287 $ 498 $1,108
Armada U.S. Government Income Fund
A Shares $580 $802 N/A N/A
B Shares
Assuming Redemption $676 $945 N/A N/A
Assuming no Redemption $176 $545 N/A N/A
I Shares $ 85 $265 N/A N/A
Pro Forma Combined
A Shares $580 $802 N/A N/A
B Shares
Assuming Redemption $676 $945 N/A N/A
Assuming no Redemption $176 $545 N/A N/A
I Shares $ 85 $265 N/A N/A
C-13
<PAGE> 161
<TABLE>
<CAPTION>
Parkstone
Limited
Maturity Bond Armada Pro Forma
Fund Limited Maturity Bond Fund Combined
---- -------------------------- --------
Investor Investor Institutional
A Shares B Shares Shares A Shares B Shares I Shares A Shares B Shares I Shares
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed
on Purchases 2.75%(1) None None 2.75%(8) None None 2.75%(8) None None
Maximum Sales Load Imposed on
Reinvested Dividends None None None None None None None None None
Contingent Deferred Sales
Charge None 5.00%(5) None None 5.00%(9) None None 5.00%(9) None
Redemption Fee None(2) None(6) None(6) None None None None None None
Exchange Fee None(3) None None None None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Management Fees .45% .45% .45% .45% .45% .45% .45% .45% .45%
12b-1 Fees .25%(4) 1.00% .00% .10% .75% .10% .10% .75% .10%
Other Expenses .33% .33% .33% .28% .28% .18% .25% .25% .15%
Total Operating Expenses 1.03%(10) 1.78%(10) .78%(7,10) .83%(11) 1.48%(11) .73%(11) .80% 1.45% .70%
</TABLE>
- --------------------------
(1) The sales charge may be reduced or eliminated under certain circumstances.
(2) Investors who invest $1,000,000 or more in Investor A Shares of the Funds
will be subject to a redemption fee of .25% for redemptions of such shares
made within one year of the date of purchase. In addition, with respect to
all Funds, although no such fee is currently in place, the Transfer Agent
has reserved the right in the future to charge a fee for wire transfers of
redemptions proceeds.
(3) Exchanges into a Non-Money Market Fund from a Money Market Fund will be
normally subject to a sales charge.
(4) Shareholders should be aware that due to the distribution fees, a long-term
shareholder in a Fund may pay over time more than the economic equivalent
of the maximum front-end sales charge permitted under the rules of the
National Association of Securities Dealers, Inc.
(5) The CDSC on Investor B Shares declines over five years starting with year
one and ending in year six from: 5.00%; 5.00%; 4.00%; 3.00%; 2.00%.
Investor B Shares which were purchased prior to January 1, 1997, are
subject to a CDSC which declines over four years ending in year five from:
4.00%; 4.00%; 3.00%; 2.00%.
(6) Although no such fee is currently in place, the Transfer Agent has reserved
the right in the future to charge a fee for wire transfers of redemption
proceeds.
(7) Certain purchases of the Funds through financial institutions may be
subject to fees for additional services provided to investors.
(8) This sales charge varies depending upon how much you invest.
C-14
<PAGE> 162
(9) 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
charges is charged after the fifth year.
(10) The Administrator is currently waiving a portion of its fees for the
current year. With these fee waivers the Fund's actual total operating
expenses are expected to be 0.98% for Investor A Shares, 1.73% for Investor
B Shares and 0.73% for Institutional Shares.
(11) The Fund's Adviser and Distributor are each waiving a portion of the fees
in order to keep operating expenses at a specified level. The Adviser and
Distributor may discontinue all or part of these waivers at any time. With
these waivers, the Funds actual total operating expenses are 0.63% for
Class A Shares, 1.38% for Class B Shares and 0.53% for Class I Shares.
C-15
<PAGE> 163
EXAMPLE: This Example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Funds for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that each Fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Parkstone Limited Maturity Bond Fund
Investor A Shares $ 377 $ 594 $ 828 $1,500
Investor B Shares
Assuming Redemption $ 681 $ 960 $1,164 $1,804
Assuming no Redemption $ 181 $ 560 $ 964 $1,804
Institutional Shares $ 80 $ 249 $ 433 $ 966
Armada Limited Maturity Bond Fund
A Shares $ 357 $ 533 $ 723 $1,272
B Shares
Assuming Redemption $ 651 $ 868 $1,008 $1,591
Assuming no Redemption $ 151 $ 468 $ 808 $1,591
I Shares $ 75 $ 233 $ 406 $ 906
Pro Forma Combined
A Shares $ 354 $ 523 $ 707 $1,238
B Shares
Assuming Redemption $ 648 $ 859 $ 992 $1,557
Assuming no Redemption $ 148 $ 459 $ 792 $1,557
I Shares $ 72 $ 224 $ 390 $ 871
</TABLE>
C-16
<PAGE> 164
<TABLE>
<CAPTION>
Parkstone
Intermediate
Government Obligations Armada Pro Forma
Fund Intermediate Bond Fund Combined
---- ---------------------- --------
Investor Investor Institutional
A Shares B Shares Shares A Shares B Shares I Shares A Shares B Shares I Shares
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed
on Purchases 4.75%(1) None None 4.75%(8) None None 4.75%(8) None None
Maximum Sales Load Imposed on
Reinvested Dividends None None None None None None None None None
Contingent Deferred Sales
Charge None 5.00%(5) None None 5.00%(9) None None 5.00%(9) None
Redemption Fee None(2) None(6) None(6) None None None None None None
Exchange Fee None(3) None None None None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Management Fees .55% .55% .55% .55% .55% .55% .55% .55% .55%
12b-1 Fees .25%(4) 1.00% .00% .10% .75% .10% .10% .75% .10%
Other Expenses .34% .34% .34% .40% .40% .15% .38% .38% .13%
Total Operating Expenses 1.14%(10) 1.89%(10) 0.89%(7,10) 1.05%(11) 1.70%(11) .80%(11) 1.03% 1.68% .78%
</TABLE>
- ---------------------
(1) The sales charge may be reduced or eliminated under certain circumstances.
(2) Investors who invest $1,000,000 or more in Investor A Shares of the Funds
will be subject to a redemption fee of 1.00% for redemptions of such shares
made within one year of the date of purchase. In addition, with respect to
all Funds, although no such fee is currently in place, the Transfer Agent
has reserved the right in the future to charge a fee for wire transfers of
redemptions proceeds.
(3) Exchanges into a Non-Money Market Fund from a Money Market Fund will be
normally subject to a sales charge.
(4) Shareholders should be aware that due to the distribution fees, a long-term
shareholder in a fund may pay over time more than the economic equivalent
of the maximum front-end sales charge permitted under the rules of the
National Association of Securities Dealers, Inc.
(5) The CDSC on Investor B Shares declines over five years starting with year
one and ending in year six from: 5.00%; 5.00%; 4.00%; 3.00%; 2.00%.
investor B Shares which were purchased prior to January 1, 1997, are
subject to a CDSC which declines over four years ending in year five from:
4.00%; 4.00%; 3.00%; 2.00%.
(6) Although no such fee is currently in place, the Transfer Agent has reserved
the right in the future to charge a fee for wire transfers of redemption
proceeds.
(7) Certain purchases of the Funds through financial institutions may be
subject to fees for additional services provided to investors.
(8) This sales charge varies depending upon how much you invest.
C-17
<PAGE> 165
(9) 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
(10) The Administrator is currently waiving a portion of its fees for the
current year. With these fee waivers the Fund's actual total operating
expenses are expected to be 1.09% for Investor A Shares, 1.84% for Investor
B Shares and 0.84% for Institutional Shares.
(11) The Fund's Adviser and Distributor are each waiving a portion of the fees
in order to keep operating expenses at a specified level. The Adviser and
Distributor may discontinue all or part of these waivers at any time. With
these waivers, the Funds actual total operating expenses are 0.84% for
Class A Shares, 1.55% for Class B Shares and 0.59% for Class I Shares.
C-18
<PAGE> 166
EXAMPLE: This Example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Funds for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that each Fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Parkstone Intermediate Government
Obligations Fund
Investor A Shares $ 586 $ 820 $1,073 $1,795
Investor B Shares
Assuming Redemption $ 692 $ 994 $1,221 $1,924
Assuming no redemption $ 192 $ 594 $1,021 $1,924
Institutional Shares $ 91 $ 284 $ 493 $1,096
Armada Intermediate Bond Fund
A Shares $ 577 $ 793 $1,027 $1,697
B Shares
Assuming Redemption $ 673 $ 936 $1,123 $1,834
Assuming no Redemption $ 173 $ 536 $ 923 $1,834
I Shares $ 82 $ 255 $ 444 $ 990
Pro Forma Combined
A Shares $ 575 $ 787 $1,017 $1,675
B Shares
Assuming Redemption $ 671 $ 930 $1,113 $1,813
Assuming no Redemption $ 171 $ 530 $ 913 $1,813
I Shares $ 80 $ 249 $ 433 $ 966
C-19
<PAGE> 167
<TABLE>
<CAPTION>
Parkstone
Equity
Income Armada Pro Forma
Fund Equity Income Fund Combined
---- ------------------ --------
Investor Investor Institutional
A Shares B Shares Shares A Shares B Shares I Shares A Shares B Shares I Shares
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed
on Purchases 5.50%(1) None None 5.50%(8) None None 5.50%(8) None None
Maximum Sales Load Imposed on
Reinvested Dividends None None None None None None None None None
Contingent Deferred Sales
Charge None 5.00%(5) None None 5.00%(9) None None 5.00%(9) None
Redemption Fee None(2) None(6) None(6) None None None None None None
Exchange Fee None(3) None None None None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Management Fees 0.75% 0.75% 0.75% .75% .75% .75% .78% .75% .75%
12b-1 Fees .25%(5) 1.00% .00% .10% .75% .10% .18% .75% .10%
Other Expenses .34% .34% .34% .39% .39% .14% .38% .38% .13%
Total Operating Expenses 1.34% 2.09% 1.09%(7) 1.24%(10) 1.89% .99%(10) 1.23% 1.88% .98%
</TABLE>
- --------------------------
(1) The sales charge may be reduced or eliminated under certain circumstances.
(2) Investors who invest $1,000,000 or more in Investor A Shares of the Funds
will be subject to a redemption fee of 1.00% for redemptions of such shares
made within one year of the date of purchase. In addition, with respect to
all Funds, although no such fee is currently in place, the Transfer Agent
has reserved the right in the future to charge a fee for wire transfers of
redemptions proceeds.
(3) Exchanges into a Non-Money Market Fund from a Money Market Fund will be
normally subject to a sales charge.
(4) Shareholders should be aware that due to the distribution fees, a long term
shareholder in a Fund may pay over time more than the economic equivalent
of the maximum front-end sales charge permitted under the rules of the
National Association of Securities Dealers, Inc.
(5) The CDSC on Investor B Shares declines over five years starting with year
one and ending in year six from: 5.00%; 5.00%; 4.00%; 3.00%; 2.00%.
Investor B Shares which were purchased prior to January 1, 1997, are
subject to a CDSC which declines over four years ending in year five from:
4.00%; 4.00%; 3.00%; 2.00%.
(6) Although no such fee is currently in place, the Transfer Agent has reserved
the right in the future to charge a fee for wire transfers of redemption
proceeds.
(7) Certain purchases of the Funds through financial institutions may be
subject to fees for additional services provided to investors.
(8) This sales charge varies depending upon how much you invest.
C-20
<PAGE> 168
(9) 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.
(10) The Fund's Distributor is waiving a portion of the fees in order to keep
operating expenses at a specified level. The Adviser and Distributor may
discontinue all or part of these waivers at any time. With these waivers,
the Funds actual total operating expenses are 1.18% for Class A Shares and
0.93% for Class I Shares.
C-21
<PAGE> 169
EXAMPLE: This Example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Funds for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that each Fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Parkstone Equity Income Fund
Investor A Shares $ 679 $ 951 $1,244 $2,074
Investor B Shares
Assuming Redemption $ 712 $1,055 $1,324 $2,139
Assuming no Redemption $ 212 $ 655 $1,124 $2,139
Institutional Shares $ 111 $ 347 $ 601 $1,329
Armada Equity Income Fund
A Shares $ 669 $ 922 $1,194 $1,967
B Shares
Assuming Redemption $ 692 $ 994 $1,221 $2,040
Assuming no Redemption $ 192 $ 594 $1,021 $2,040
I Shares $ 101 $ 315 $ 547 $1,213
Pro Forma Combined
A Shares $ 668 $ 919 $1,188 $1,957
B Shares
Assuming Redemption $ 691 $ 991 $1,216 $2,030
Assuming no Redemption $ 191 $ 591 $1,016 $2,030
I Shares $ 100 $ 312 $ 542 $1,201
C-22
<PAGE> 170
<TABLE>
<CAPTION>
Parkstone
Small Capitalization Armada Pro Forma
Fund Small Cap Growth Fund Combined
---- --------------------- --------
Investor Investor Institutional
A Shares B Shares Shares A Shares B Shares I Shares A Shares B Shares I Shares
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed
on Purchases 5.50%(1) None None 5.50%(8) None None 5.50%(8) None None
Maximum Sales Load Imposed on
Reinvested Dividends None None None None None None None None None
Contingent Deferred Sales
Charge None 5.00%(5) None None 5.00%(9) None None 5.00%(9) None
Redemption Fee None(2) None(6) None(6) None None None None None None
Exchange Fee None(3) None None None None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Management Fees 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
12b-1 Fees .25%(4) 1.00% .00% .10% .75% .10% .10% .75% .10%
Other Expenses .45% .45% .45% .42% .42% .17% .38% .38% .13%
Total Operating Expenses 1.70% 2.45% 1.45%(7) 1.52%(10) 2.17% 1.27%(10) 1.48% 2.13% 1.23%
</TABLE>
(1) The sales charge may be reduced or eliminated under certain circumstances.
(2) Investors who invest $1,000,000 or more in Investor A Shares of the Funds
will be subject to a redemption fee of 1.00% for redemptions of such shares
made within one year of the date of purchase. In addition, with respect to
all Funds, although no such fee is currently in place, the Transfer Agent
has reserved the right in the future to charge a fee for wire transfers of
redemptions proceeds.
(3) Exchanges into a Non-Money Market Fund from a Money Market Fund will be
normally subject to a sales charge.
(4) Shareholders should be aware that due to the distribution fees, a long-term
shareholder in a Fund may pay over time more than the economic equivalent
of the maximum front-end sales charge permitted under the rules of the
National Association of Securities Dealers, Inc.
(5) The CDSC on Investor B Shares declines over five years starting with year
one and ending in year six from: 5.00%; 5.00%; 4.00%; 3.00%; 2.00%.
Investor B Shares which were purchased prior to January 1, 1997, are
subject to a CDSC which declines over four years ending in year five from:
4.00%; 4.00%; 3.00%; 2.00%.
(6) Although no such fee is currently in place, the Transfer Agent has reserved
the right in the future to charge a fee for wire transfers of redemption
proceeds.
(7) Certain purchases of the Funds through financial institutions may be
subject to fees for additional services provided to investors.
(8) This sales charge varies depending upon how much you invest.
C-23
<PAGE> 171
(9) 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.
(10) The Fund's Distributor is waiving a portion of the fees in order to keep
operating expenses at a specified level. The Distributor may discontinue
all or part of these waivers at any time. With these waivers, the Funds
actual total operating expenses are 1.46% for Class A Shares and 1.21% for
Class I Shares.
C-24
<PAGE> 172
EXAMPLE: This Example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Funds for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that each Fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Parkstone Small Capitalization Fund
Investor A Shares $ 713 $1,056 $1,422 $2,448
Investor B Shares
Assuming Redemption $ 748 $1,164 $1,506 $2,514
Assuming no Redemption $ 248 $ 764 $1,306 $2,514
Institutional Shares $ 148 $ 459 $ 792 $1,735
Armada Small Cap Growth Fund
A Shares $ 696 $1,004 $1,333 $2,263
B Shares
Assuming Redemption $ 720 $1,079 $1,364 $2,336
Assuming no Redemption $ 220 $ 679 $1,164 $2,336
I Shares $ 129 $ 403 $ 697 $1,534
Pro Forma Combined
A Shares $ 692 $ 992 $1,313 $2,231
B Shares
Assuming Redemption $ 716 $1,067 $1,344 $2,294
Assuming no Redemption $ 216 $ 667 $1,144 $2,294
I Shares $ 125 $ 390 $ 676 $1,489
C-25
<PAGE> 173
<TABLE>
<CAPTION>
Parkstone
International
Discovery Armada Pro Forma
Fund International Equity Fund Combined
---- ------------------------- --------
Investor Investor Institutional
A Shares B Shares Shares A Shares B Shares I Shares A Shares B Shares I Shares
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed
on Purchases 5.50%(1) None None 5.50%(8) None None 5.50%(8) None None
Maximum Sales Load Imposed on
Reinvested Dividends None None None None None None None None None
Contingent Deferred Sales
Charge None 5.00%(5) None None 5.00%(9) None None 5.00%(9) None
Redemption Fee None(2) None(6) None(6) None None None None None None
Exchange Fee None(3) None None None None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Management Fees 1.15% 1.15% 1.15% 1.15% 1.15% 1.15% 1.15% 1.15% 1.15%
12b-1 Fees .25%(4) 1.00% .00% .10% .75% .10% .10% .75% .10%
Other Expenses .41% .41% .41% .48% .48% .23% .48% .48% .23%
Total Operating Expenses 1.81% 2.56% 1.56%(7) 1.73%(10) 2.38% 1.48%(10) 1.73% 2.38% 1.48%
</TABLE>
- -------------------------
(1) The sales charge may be reduced or eliminated under certain circumstances.
(2) Investors who invest $1,000,000 or more in Investor A Shares of the Funds
will be subject to a redemption fee of 1.00% for redemptions of such shares
made within one year of the date of purchase. In addition, with respect to
all Funds, although no such fee is currently in place, the Transfer Agent
has reserved the right in the future to charge a fee for wire transfers of
redemptions proceeds.
(3) Exchanges into a Non-Money Market Fund from a Money Market Fund will be
normally subject to a sales charge.
(4) Shareholders should be aware that due to the distribution fees, a long-term
shareholder in a Fund may pay over time more than the economic equivalent
of the maximum front-end sales charge permitted under the rules of the
National Association of Securities Dealers, Inc.
(5) The CDSC on Investor B Shares declines over five years starting with year
one and ending in year six from: 5.00%; 5.00%; 4.00%; 3.00%; 2.00%.
Investor B Shares which were purchased prior to January 1, 1997, are
subject to a CDSC which declines over four years ending in year five from:
4.00%; 4.00%; 3.00%; 2.00%.
(6) Although no such fee is currently in place, the Transfer Agent has reserved
the right in the future to charge a fee for wire transfers of redemption
proceeds.
(7) Certain purchases of the Funds through financial institutions may be
subject to fees for additional services provided to investors.
(8) This sales charge varies depending upon how much you invest.
C-26
<PAGE> 174
(9) 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.
(10) The Fund's Distributor is waiving a portion of the fees in order to keep
operating expenses at a specified level. The Distributor may discontinue
all or part of these waivers at any time. With these waivers, the Funds
actual total operating expenses are 1.67% for Class A Shares and 1.42% for
Class I Shares.
C-27
<PAGE> 175
EXAMPLE: This Example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Funds for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that each Fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Parkstone International Discovery Fund
Investor A Shares $ 724 $1,088 $1,476 $2,560
Investor B Shares
Assuming Redemption $ 759 $1,196 $1,560 $2,626
Assuming no Redemption $ 259 $ 796 $1,360 $2,626
Institutional Shares $ 159 $ 493 $ 850 $1,856
Armada International Equity Fund
A Shares $ 716 $1,065 $1,437 $2,479
B Shares
Assuming Redemption $ 741 $1,142 $1,470 $2,552
Assuming no Redemption $ 241 $ 742 $1,270 $2,552
I Shares $ 151 $ 468 $ 808 $1,768
Pro Forma Combined
A Shares $ 714 $1,059 $1,427 $2,458
B Shares
Assuming Redemption $ 739 $1,136 $1,460 $2,532
Assuming no Redemption $ 739 $ 736 $1,260 $2,532
I Shares $ 149 $ 462 $ 797 $1,746
C-28
<PAGE> 176
<TABLE>
<CAPTION>
Parkstone
Balanced
Allocation Armada Pro Forma
Fund Balanced Allocation Fund Combined
---- ------------------------ --------
Investor Investor Institutional
A Shares B Shares Shares A Shares B Shares I Shares A Shares B Shares I Shares
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed
on Purchases 4.75%(1) None None 4.75%(8) None None 4.75%(8) None None
Maximum Sales Load Imposed on
Reinvested Dividends None None None None None None None None None
Contingent Deferred Sales
Charge None 5.00%(5) None None 5.00%(9) None None 5.00%(9) None
Redemption Fee None(2) None(6) None(6) None None None None None None
Exchange Fee None(3) None None None None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Management Fees 0.75% 0.75% 0.75% .75% .75% .75% .75% .75% .75%
12b-1 Fees .25%(4) 1.00% .00% .10% .75% .10% .10% .75% .10%
Other Expenses .36% .36% .36% .46% .46% .21% .46% .46% .21%
Total Operating Expenses 1.36% 2.11% 1.11%(7) 1.31%(10) 1.96% 1.06%(10) 1.31% 1.96% 1.06%
</TABLE>
- --------------------------
(1) The sales charge may be reduced or eliminated under certain circumstances.
(2) Investors who invest $1,000,000 or more in Investor A Shares of the Funds
will be subject to a redemption fee of 1.00% for redemptions of such shares
made within one year of the date of purchase. In addition, with respect to
all Funds, although no such fee is currently in place, the Transfer Agent
has reserved the right in the future to charge a fee for wire transfers of
redemptions proceeds.
(3) Exchanges into a Non-Money Market Fund from a Money Market Fund will be
normally subject to a sales charge.
(4) Shareholders should be aware that due to the distribution fees, a long-term
shareholder in a Fund may pay over time more than the economic equivalent
of the maximum front-end sales charge permitted under the rules of the
National Association of Securities Dealers, Inc.
(5) The CDSC on Investor B Shares declines over four years starting with year
one and ending in year six from: 5.00%; 5.00% 4.00%; 3.00%; 2.00%. Investor
B Shares which were purchased prior to January 1, 1997, are subject to a
CDSC which declines over four years ending in year five from: 4.00%; 4.00%;
3.00%; 2.00%.
(6) Although no such fee is currently in place, the Transfer Agent has reserved
the right in the future to charge a fee for wire transfers of redemption
proceeds.
(7) Certain purchases of the Funds through financial institutions may be
subject to fees for additional services provided to investors.
(8) This sales charge varies depending upon how much you invest.
C-29
<PAGE> 177
(9) 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, fourth and fifth years, respectively. No deferred sales
charge is charged after the fifth year.
(10) The Fund's Distributor is waiving a portion of the fees in order to keep
operating expenses at a specified level. The Distributor may discontinue
all or part of these waivers at any time. With these waivers, the Funds
actual total operating expenses are 1.25% for Class A Shares and 1.00% for
Class I Shares.
C-30
<PAGE> 178
EXAMPLE: This Example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Funds for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that each Fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Parkstone Balanced Allocation Fund
Investor A Shares $ 607 $ 885 $1,184 $2,032
Investor B Shares
Assuming Redemption $ 714 $1,061 $1,334 $2,160
Assuming no redemption $ 214 $ 661 $1,134 $2,160
Institutional Shares $ 113 $ 353 $ 612 $1,352
Armada Balanced Allocation Fund
A Shares $ 602 $ 870 $1,159 $1,979
B Shares
Assuming Redemption $ 699 $1,015 $1,257 $2,115
Assuming no Redemption $ 199 $ 615 $1,057 $2,115
I Shares $ 108 $ 337 $ 585 $1,294
Pro Forma Combined
A Shares $ 594 $ 847 $1,119 $1,893
B Shares
Assuming Redemption $ 681 $ 991 $1,216 $2,030
Assuming no Redemption $ 191 $ 591 $1,016 $2,030
I Shares $ 100 $ 312 $ 542 $1,201
C-31
<PAGE> 179
<TABLE>
<CAPTION>
Parkstone
National Tax Exempt
Bond Armada Pro Forma
Fund National Tax Exempt Bond Fund Combined
---- ----------------------------- --------
Investor Investor Institutional
A Shares B Shares Shares A Shares B Shares I Shares A Shares B Shares I Shares
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed
on Purchases 4.75%(1) None None 4.75%(8) None None 4.75%(8) None None
Maximum Sales Load Imposed on
Reinvested Dividends None None None None None None None None None
Contingent Deferred Sales
Charge None 5.00%(5) None None 5.00%(9) None None 5.00%(9) None
Redemption Fee None(2) None(6) None(6) None None None None None None
Exchange Fee None(3) None None None None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Management Fees .55% .55% .55% .55% .55% .55% .55% .55% .55%
12b-1 Fees .25%(4) 1.00% .00% .10% .75% .10% .10% .75% .10%
Other Expenses .41% .40% .41% .25% .25% .15% .25% .25% .15%
Total Operating Expenses 1.21%(10) 1.95%(10) 0.96%(7,10) .90%(11) 1.55%(11) .80%(11) .90% 1.55% .80%
</TABLE>
- -----------------------
(1) The sales charge may be reduced or eliminated under certain circumstances.
(2) Investors who invest $1,000,000 or more in Investor A Shares of the Funds
will be subject to a redemption fee of 1.00% for redemptions of such shares
made within one year of the date of purchase. In addition, with respect to
all Funds, although no such fee is currently in place, the Transfer Agent
has reserved the right in the future to charge a fee for wire transfers of
redemptions proceeds.
(3) Exchanges into a Non-Money Market Fund from a Money Market Fund will be
normally subject to a sales charge.
(4) Shareholders should be aware that due to the distribution fees, a long-term
shareholder in a Fund may pay over time more than the economic equivalent
of the maximum front-end sales charge permitted under the rules of the
National Association of Securities Dealers, Inc.
(5) The CDSC on Investor B Shares declines over five years starting with year
one and ending in year six from: 5.00%; 5.00%; 4.00%; 3.00%; 2.00%.
Investor B Shares which were purchased prior to January 1, 1997, are
subject to a CDSC which declines over four years ending in year five from:
4.00%; 4.00%; 3.00%; 2.00%.
(6) Although no such fee is currently in place, the Transfer Agent has reserved
the right in the future to charge a fee for wire transfers of redemption
proceeds.
(7) Certain purchases of the Funds through financial institutions may be
subject to fees for additional services provided to investors.
(8) This sales charge varies depending upon how much you invest.
C-32
<PAGE> 180
(9) 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.
(10) The Administrator is currently waiving a portion of its fees for the
current year. With these fee waivers the Fund's actual total operating
expenses are expected to be 1.11% for Investor A Shares, 1.85% for Investor
B Shares and 0.86% for Institutional Shares.
(11) The Fund's Adviser and Distributor are each waiving a portion of the fees
in order to keep operating expenses at a specified level. The Adviser and
Distributor may discontinue all or part of these waivers at any time. With
these waivers, the Funds actual total operating expenses are 0.69% for
Class A Shares, 1.40% for Class B Shares and 0.59% for Class I Shares.
C-33
<PAGE> 181
EXAMPLE: This Example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Funds for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that each Fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Parkstone National Tax Exempt Bond Fund
Investor A Shares $ 592 $ 841 $1,108 $1,871
Investor B Shares
Assuming Redemption $ 698 $1,012 $1,252 $1,993
Assuming no Redemption $ 198 $ 612 $1,052 $1,993
Institutional Shares $ 98 $ 306 $ 531 $1,178
Armada National Tax Exempt Bond Fund
A Shares $ 562 $ 748 $ 950 $1,530
B Shares
Assuming Redemption $ 658 $ 890 $1,045 $1,669
Assuming no Redemption $ 158 $ 490 $ 845 $1,669
I Shares $ 82 $ 255 $ 444 $ 990
Pro Forma Combined
A Shares $ 562 $ 745 $ 945 $1,519
B Shares
Assuming Redemption $ 657 $ 886 $1,039 $1,658
Assuming no Redemption $ 157 $ 486 $ 839 $1,658
I Shares $ 81 $ 252 $ 439 $ 978
</TABLE>
C-34
<PAGE> 182
<TABLE>
<CAPTION>
Parkstone
Large Capitalization Armada Pro Forma
Fund Large Cap Ultra Fund(12) Combined
---- ------------------------ --------
Investor Investor Institutional
A Shares B Shares Shares A Shares B Shares I Shares A Shares B Shares I Shares
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed
on Purchases 5.50%(1) None None 5.50%(8) None None 5.50%(8) None None
Maximum Sales Load Imposed on
Reinvested Dividends None None None None None None None None None
Contingent Deferred Sales
Charge None 5.00%(5) None None 5.00%(11) None None 5.00%(11) None
Redemption Fee None(2) None(6) None(6) None None None None None None
Exchange Fee None(3) None None None None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Management Fees .75% .75% .75% .75% .75% .75% .75% .75% .75%
12b-1 Fees .25%(4) 1.00% .00% .10% .75% .10% .10% .75% .10%
Other Expenses .31% .31% .30% .43%(9) .43%(9) .18%(9) .43%(9) .43%(9) .18%(9)
Total Operating Expenses 1.31% 2.06% 1.05%(7) 1.28%(10) 1.93%(10) 1.03% 1.28%(10) 1.93%(10) 1.03%
</TABLE>
- ----------------------------
(1) The sales charge may be reduced or eliminated under certain circumstances.
(2) Investors who invest $1,000,000 or more in Investor A Shares of the Funds
will be subject to a redemption fee of 1.00% for redemptions of such shares
made within one year of the date of purchase. In addition, with respect to
all Funds, although no such fee is currently in place, the Transfer Agent
has reserved the right in the future to charge a fee for wire transfers of
redemptions proceeds.
(3) Exchanges into a Non-Money Market Fund from a Money Market Fund will be
normally subject to a sales charge.
(4) Shareholders should be aware that due to the distribution fees, a long-term
shareholder in a Fund may pay over time more than the economic equivalent
of the maximum front-end sales charge permitted under the rules of the
National Association of Securities Dealers, Inc.
(5) The CDSC on Investor B Shares declines over five years starting with year
one and ending in year six from: 5.00%; 5.00%; 4.00%; 3.00%; 2.00%.
Investor B Shares which were purchased prior to January 1, 1997, are
subject to a CDSC which declines over four years ending in year five from:
4.00%; 4.00%; 3.00%; 2.00%.
(6) Although no such fee is currently in place, the Transfer Agent has reserved
the right in the future to charge a fee for wire transfers of redemption
proceeds.
(7) Certain purchases of the Funds through financial institutions may be
subject to fees for additional services provided to investors.
(8) This sales charge varies depending upon how much you invest.
C-35
<PAGE> 183
(9) "Other Expenses" are based on estimated amounts for the current fiscal
year.
(10) The Distributor plans to waive a portion of its fees for the current fiscal
year. The Distributor may revise or cancel this expense limitation at any
time and will notify you of any material change.
(11) 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.
(12) This Fund has not yet commenced operations.
C-36
<PAGE> 184
EXAMPLE: This Example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Funds for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that each Fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Parkstone Large Capitalization Fund
Investor A Shares $ 676 $ 942 $1,229 $2,042
Investor B Shares
Assuming Redemption $ 709 $1,046 $1,308 $2,104
Assuming no Redemption $ 209 $ 646 $1,108 $2,104
Institutional Shares $ 107 $ 334 $ 579 $1,283
Armada Large Cap Ultra Fund
A Shares $ 673 $ 934 N/A N/A
B Shares
Assuming Redemption $ 696 $1,006 N/A N/A
Assuming no Redemption $ 196 $ 606 N/A N/A
I Shares $ 105 $ 328 N/A N/A
Pro Forma Combined
A Shares $ 673 $ 934 N/A N/A
B Shares
Assuming Redemption $ 696 $1,006 N/A N/A
Assuming no Redemption $ 196 $ 606 N/A N/A
I Shares $ 105 $ 328 N/A N/A
</TABLE>
C-37
<PAGE> 185
<TABLE>
<CAPTION>
Parkstone
Mid Capitalization Armada Pro Forma
Fund Mid Cap Growth Fund(12) Combined
---- ----------------------- --------
Investor Investor Institutional
A Shares B Shares Shares A Shares B Shares I Shares A Shares B Shares I Shares
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed
on Purchases 5.50%(1) None None 5.50%(8) None None 5.50%(8) None None
Maximum Sales Load Imposed on
Reinvested Dividends None None None None None None None None None
Contingent Deferred Sales
Charge None 5.00%(5) None None 5.00%(11) None None 5.00%(11) None
Redemption Fee None(2) None(6) None(6) None None None None None None
Exchange Fee None(3) None None None None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Management Fees 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
12b-1 Fees .25%4 1.00% .00% .10% .75% .10% .10% .75% .10%
Other Expenses .32% .32% .32% .47%(9) .47%(9) .22%(9) .47%(9) .47%(9) .22%(9)
Total Operating Expenses 1.57% 2.32% 1.32%(7) 1.57%(10) 2.22%(10) 1.32% 1.57%(10) 2.22%(10) 1.32%
</TABLE>
- --------------------------
(1) The sales charge may be reduced or eliminated under certain circumstances.
(2) Investors who invest $1,000,000 or more in Investor A Shares of the Funds
will be subject to a redemption fee of 1.00% for redemptions of such shares
made within one year of the date of purchase. In addition, with respect to
all Funds, although no such fee is currently in place, the Transfer Agent
has reserved the right in the future to charge a fee for wire transfers of
redemptions proceeds.
(3) Exchanges into a Non-Money Market Fund from a Money Market Fund will be
normally subject to a sales charge.
(4) Shareholders should be aware that due to the distribution fees, a long-term
shareholder in a Fund may pay over time more than the economic equivalent
of the maximum front-end sales charge permitted under the rules of the
National Association of Securities Dealers, Inc.
(5) The CDSC on Investor B Shares declines over five years starting with year
one and ending in year six from: 5.00%; 5.00%; 4.00%; 3.00%; 2.00%.
Investor B Shares which were purchased prior to January 1, 1997, are
subject to a CDSC which declines over four years ending in year five from:
4.00%; 4.00%; 3.00%; 2.00%.
(6) Although no such fee is currently in place, the Transfer Agent has reserved
the right in the future to charge a fee for wire transfers of redemption
proceeds.
(7) Certain purchases of the Funds through financial institutions may be
subject to fees for additional services provided to investors.
(8) This sales charge varies depending upon how much you invest.
(9) "Other Expenses" are based on estimated amounts for the current fiscal
year.
C-38
<PAGE> 186
(10) The Distributor plans to waive a portion of its fees for the current fiscal
year. The Distributor may revise or cancel this expense limitation at any
time and will notify you of any material change.
(11) 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.
(12) This Fund has not yet commenced operations.
C-39
<PAGE> 187
EXAMPLE: This Example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Funds for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that each Fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Parkstone Mid Capitalization Fund
Investor A Shares $ 701 $1,018 $1,358 $2,315
Investor B Shares
Assuming Redemption $ 735 $1,124 $1,440 $2,381
Assuming no Redemption $ 235 $ 724 $1,240 $2,381
Institutional Shares $ 134 $ 418 $ 723 $1,590
Armada Mid Cap Growth Fund
A Shares $ 701 $1,018 N/A N/A
B Shares
Assuming Redemption $ 725 $1,094 N/A N/A
Assuming no Redemption $ 225 $ 694 N/A N/A
I Shares $ 134 $ 418 N/A N/A
Pro Forma Combined
A Shares $ 701 $1,018 N/A N/A
B Shares
Assuming Redemption $ 725 $1,094 N/A N/A
Assuming no Redemption $ 225 $ 694 N/A N/A
I Shares $ 134 $ 418 N/A N/A
C-40
<PAGE> 188
<TABLE>
<CAPTION>
Parkstone
Michigan Municipal
Bond Armada Pro Forma
Fund Michigan Municipal Bond Fund(8) Combined
---- ----------------------------- --------
Investor Investor Institutional
A Shares B Shares Shares A Shares B Shares I Shares A Shares B Shares I Shares
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed
on Purchases 4.75%(1) None None 4.75%(9) None None 4.75%(10) None None
Maximum Sales Load Imposed on
Reinvested Dividends None None None None None None None None None
Contingent Deferred Sales
Charge None 5.00%(5) None None 5.00%(12) None None 5.00%(13) None
Redemption Fee None(2) None(6) None(6) None None None None None None
Exchange Fee None(3) None None None None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Management Fees .55% .55% .55% .55% .55% .55% .55% .55% .55%
12b-1 Fees .25%(4) 1.00% .00% .10% .75% .10% .10% .75% .10%
Other Expenses .31% .31% .31% .43%(10) .43%(10) .18%(10) .43%(10) .43%(10) .18%(10)
Total Operating Expenses 1.11%(13) 1.86%(13) 0.86%(7,13) 1.08%(11) 1.73%(11) .83% 1.08%(11) 1.73%(11) .83%
</TABLE>
- --------------------------
(1) The sales charge may be reduced or eliminated under certain circumstances.
(2) Investors who invest $1,000,000 or more in Investor A Shares of the Funds
will be subject to a redemption fee of 1.00% for redemptions of such shares
made within one year of the date of purchase. In addition, with respect to
all Funds, although no such fee is currently in place, the Transfer Agent
has reserved the right in the future to charge a fee for wire transfers of
redemptions proceeds.
(3) Exchanges into a Non-Money Market Fund from a Money Market Fund will be
normally subject to a sales charge.
(4) Shareholders should be aware that due to the distribution fees, a long-term
shareholder in a Fund may pay over time more than the economic equivalent
of the maximum front end sales charge permitted under the rules of the
National Association of Securities Dealers, Inc.
(5) The CDSC on Investor B Shares declines over five years starting with year
one and ending in year six from: 5.00%; 5.00%; 4.00%; 3.00%; 2.00%.
Investor B Shares which were purchased prior to January 1, 1997, are
subject to a CDSC which declines over four years ending in year five from:
4.00%; 4.00%; 3.00%; 2.00%.
(6) Although no such fee is currently in place, the Transfer Agent has reserved
the right in the future to charge a fee for wire transfers of redemption
proceeds.
(7) Certain purchases of the Funds through financial institutions may be
subject to fees for additional services provided to investors.
(8) This Fund has not yet commenced operation.
C-41
<PAGE> 189
(9) This sales charge varies depending upon how much you invest.
(10) "Other Expenses" are based on estimated amounts for the current fiscal
year.
(11) The Distributor plans to waive a portion of its fees for the current fiscal
year. The Distributor may revise or cancel this expense limitation at any
time and will notify you of any material change.
(12) 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.
(13) The Administrator is currently waiving a portion of its fees for the
current year. With these fee waivers the Fund's actual total operating
expenses are expected to be 1.01% for Investor A Shares, 1.76% for Investor
B Shares and 0.76% for Institutional Shares.
C-42
<PAGE> 190
EXAMPLE: This Example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Funds for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that each Fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Parkstone Michigan Municipal Bond Fund
Investor A Shares $583 $811 $1,058 $1,762
Investor B Shares
Assuming Redemption $689 $985 $1,206 $1,892
Assuming no Redemption $189 $585 $1,006 $1,892
Institutional Shares $ 88 $274 $ 477 $1,061
Armada Michigan Municipal Bond Fund
A Shares $580 $802 N/A N/A
B Shares
Assuming Redemption $676 $945 N/A N/A
Assuming no Redemption $176 $545 N/A N/A
I Shares $ 85 $265 N/A N/A
Pro Forma Combined
A Shares $580 $802 N/A N/A
B Shares
Assuming Redemption $676 $945 N/A N/A
Assuming no Redemption $176 $545 N/A N/A
I Shares $ 85 $265 N/A N/A
C-43
<PAGE> 191
<TABLE>
<CAPTION>
Parkstone
Treasury Armada Pro Forma
Fund Treasury Plus Money Market Fund(5) Combined
---- ---------------------------------- --------
Investor Institutional
A Shares Shares A Shares I Shares A Shares I Shares
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed
on Purchases None None None None None None
Maximum Sales Load Imposed on
Reinvested Dividends None None None None None None
Contingent Deferred Sales
Charge None None None None None None
Redemption Fee None(3) None(3) None None None None
Exchange Fee None(1) None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Management Fees .30% .30% .30% .40% .30% .30%
12b-1 Fees .25%(2) .00% .10% .10% .10% .10%
Other Expenses .26% .28% .31%(6) .16%(6) .31%(6) .16%(6)
Total Operating Expenses .81%(8) .58%(4,8) .71%(7) .66% .71%(7) .56%
</TABLE>
- --------------------------
(1) Exchanges into a Non-Money Market Fund from a Money Market Fund will be
normally subject to a sales charge.
(2) Shareholders should be aware that due to the distribution fees, a long-term
shareholder in a Fund may pay over time more than the economic equivalent of
the maximum front-end sales charge permitted under the rules of the National
Association of Securities Dealers, Inc.
(3) Although no such fee is currently in place, the Transfer Agent has reserved
the right in the future to charge a fee for wire transfers of redemption
proceeds.
(4) Certain purchases of the Funds through financial institutions may be subject
to fees for additional services provided to investors.
(5) This Fund has not yet commenced operations.
(6) "Other Expenses" are based on estimated amounts for the current fiscal year.
(7) The Distributor plans to waive a portion of its fees for the current fiscal
year. The Distributor may revise or cancel this expense limitation at any
time and will notify you of any material change.
(8) The Administrator and Distributor are each currently waiving a portion of
their fees for the current year. With these fee waivers the Fund's actual
total operating expenses are expected to be 0.57% for Investor A Shares and
0.48% for Institutional Shares.
C-44
<PAGE> 192
EXAMPLE: This Example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Funds for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that each Fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Parkstone Treasury Fund
Investor A Shares $ 83 $259 $450 $1,002
Institutional Shares $ 59 $186 $324 $ 726
Armada Treasury Plus Money Market Fund
A Shares $ 73 $227 N/A N/A
I Shares $ 57 $199 N/A N/A
Pro Forma Combined
A Shares $ 73 $227 N/A N/A
I Shares $ 57 $199 N/A N/A
C-45
<PAGE> 193
APPENDIX D
SHAREHOLDER TRANSACTIONS AND SERVICES
This Appendix compares the shareholder transactions and
services that are available in connection with: (1) Class A Shares, Class B
Shares and Class I Shares of Armada, and (2) Investor A Shares, Investor B
Shares and Institutional Shares of Parkstone.
The following is qualified in its entirety by the more
detailed information included in the applicable Prospectuses which are
incorporated by reference in this Combined Proxy/Prospectus Statement. Unless
otherwise indicated, terms used herein and not otherwise defined have the same
meaning as are given to them in such Prospectuses.
D-1
<PAGE> 194
ACCOUNT POLICIES FOR ARMADA FUNDS(1) AND THE CORRESPONDING
PARKSTONE FUNDS(2)
A. SALES CHARGES AND EXEMPTIONS
ARMADA CLASS A SHARES/PARKSTONE INVESTOR A SHARES:
- -------------------------------------------------
(a) ARMADA CLASS A SHARES - Class A Shares are sold at their public
offering price. This price includes the initial sales charge. Therefore, part of
the money you invest will be used to pay the sales charge. The remainder is
invested in Fund Shares. The sales charge decreases with larger purchases. There
is no sales charge on reinvested dividends and distributions.
The current sales charge rates are as follows:
For the Armada National Tax Exempt Bond; Balanced Allocation;
Intermediate Bond; Bond; U.S. Government Income; and Michigan Municipal Bond
Funds:
<TABLE>
<CAPTION>
DEALERS' REALLOWANCE
AS A % OF OFFERING AS A % OF NET AS A % OF OFFERING
AMOUNT OF TRANSACTION PRICE PER SHARE ASSET 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>
- ----------------------------
1. Includes Class A Shares, Class B Shares and Class I Shares, as applicable,
of: Armada Money Market Fund, Government Money Market Fund, Tax Exempt Money
Market Fund and Treasury Plus Money Market Fund (collectively, the "Money
Market Series"); Armada Bond Fund, U.S. Government Income Fund, Limited
Maturity Bond Fund and Intermediate Bond Fund, (collectively, the "Income
Series"); Armada Large Cap Ultra Fund, Equity Income Fund, Small Cap Growth
Fund, International Equity Fund and Mid Cap Growth Fund (collectively, the
"Equity Series"); Armada Balanced Allocation Fund; and Armada National Tax
Exempt Bond Fund and Michigan Municipal Bond Fund (collectively, the "Tax
Exempt Series").
2. Includes Investor A Shares, Investor B Shares and Institutional Shares, as
applicable, of: Parkstone Prime Obligations Fund, U.S. Government Obligations
Fund, Treasury Fund and Tax-Free Fund (collectively "Parkstone Money Market
Funds"); Parkstone Bond Fund, Limited Maturity Bond Fund, Intermediate
Government Obligations Fund and U.S. Government Income Fund (collectively,
the "Parkstone Income Funds"); Parkstone Small Capitalization Fund, Mid
Capitalization Fund, Large Capitalization Fund and International Discovery
Fund (collectively, the "Parkstone Growth Funds"); Parkstone Balanced
Allocation Fund and Equity Income Fund (collectively, the "Parkstone Growth
and Income Funds"); Parkstone National Tax Exempt Bond Fund and Michigan
Municipal Bond Fund (collectively, the "Parkstone Tax-Free Income Funds").
D-2
<PAGE> 195
For the Armada International Equity; Equity Income; Small Cap Growth;
Mid Cap Growth; and Large Cap Ultra Funds:
<TABLE>
<CAPTION>
DEALERS' REALLOWANCE
AS A % OF OFFERING AS A % OF NET ASSET AS A % OF OFFERING
AMOUNT OF TRANSACTION PRICE PER SHARE VALUE PER SHARE PRICE PER SHARE
--------------------- --------------- --------------- ---------------
<S> <C> <C> <C>
Less than $25,000 ................. 5.50% 5.80% 5.25%
$25,000 but less than $50,000 ..... 5.25% 5.50% 5.00%
$50,000 but less than $100,000 ... 4.75% 5.00% 4.50%
$100,000 but less than $250,000 ... 3.75% 3.90% 3.50%
$250,000 but less than $500,000 ... 3.00% 3.10% 2.75%
$500,000 but less than $1,000,000.. 2.00% 2.00% 1.75%
$1,000,000 or more ................ 0.00% 0.00% 0.00%
</TABLE>
For the Armada Limited Maturity Bond Fund:
<TABLE>
<CAPTION>
DEALERS' REALLOWANCE
AS A % OF OFFERING AS A % OF NET ASSET AS A % OF OFFERING
AMOUNT OF TRANSACTION PRICE PER SHARE VALUE PER SHARE PRICE PER SHARE
--------------------- --------------- --------------- ---------------
<S> <C> <C> <C>
Less than $100,000 ................ 2.75% 2.83% 2.50%
$100,000 but less than $250,000 ... 1.75% 1.78% 1.50%
$250,000 but less than $500,000 ... 1.00% 1.01% 0.75%
$500,000 but less than $1,000,000.. 0.50% 0.50% 0.25%
$1,000,000 or more ................ 0.00% 0.00% 0.00%
</TABLE>
A 1% sales charge, or 0.25% in the case of the Limited Maturity Bond
Fund, 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. 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%, or 0.25% in the case of the Limited Maturity Bond Fund, of
the amount invested to the financial institution placing the purchase order.
(b) PARKSTONE INVESTOR A SHARES - Investor A Shares are sold at their
public offering price. This price includes the initial sales charge. Therefore,
part of the money you invest will be used to pay the sales charge. The remainder
is invested in Fund Shares. The sales charge decreases with larger purchases.
There is no sales charge on reinvested dividends and distributions.
The current sales charge rates are as follows:
D-3
<PAGE> 196
For the Parkstone International Discovery, Small Capitalization, Mid
Capitalization, Large Capitalization and Equity Income Funds:
<TABLE>
<CAPTION>
DEALERS' REALLOWANCE
AS A % OF OFFERING AS A % OF NET AS A % OF OFFERING
AMOUNT OF TRANSACTION PRICE PER SHARE AMOUNT INVESTED PRICE PER SHARE
--------------------- --------------- --------------- ---------------
<S> <C> <C> <C>
Less than $25,000 ................. 5.50% 5.80% 5.25%
$25,000 but less than $50,000 ..... 5.25% 5.50% 5.00%
$50,000 but less than $100,000 ... 4.75% 5.00% 4.50%
$100,000 but less than $250,000 ... 3.75% 3.90% 3.50%
$250,000 but less than $500,000 ... 3.00% 3.10% 2.75%
$500,000 but less than $1,000,000.. 2.00% 2.00% 1.75%
$1,000,000 or more ................ 0.00% 0.00% 0.00%
</TABLE>
For the Balanced Allocation, Bond, Intermediate Government Obligations,
U.S. Government Income, Michigan Municipal Bond and National Tax Exempt Bond
Funds:
<TABLE>
<CAPTION>
DEALERS' REALLOWANCE
AS A % OF OFFERING AS A % OF NET AS A % OF OFFERING
AMOUNT OF TRANSACTION PRICE PER SHARE AMOUNT INVESTED 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>
For the Limited Maturity Bond Fund
<TABLE>
<CAPTION>
DEALERS' REALLOWANCE
AS A % OF OFFERING AS A % OF NET AS A % OF OFFERING
AMOUNT OF TRANSACTION PRICE PER SHARE AMOUNT INVESTED PRICE PER SHARE
--------------------- --------------- --------------- ---------------
<S> <C> <C> <C>
Less than $100,000 ................ 2.75% 2.83% 2.50%
$100,000 but less than $250,000 ... 1.75% 1.78% 1.50%
$250,000 but less than $500,000 ... 1.00% 1.01% 0.75%
$500,000 but less than $1,000,000.. 0.50% 0.50% 0.25%
$1,000,000 or more ................ 0.00% 0.00% 0.00%
</TABLE>
With respect to each of the above-mentioned Parkstone Funds, a
1.00% redemption fee, or 0.25% in the case of the Limited Maturity Bond Fund,
will be assessed against a shareholder's fund account if it's 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. With respect to
purchases of $1,000,000 or more of a fund, the Adviser may pay from its own
funds a fee of 1.00%, or .25% in the case of the Limited Maturity Bond Fund, of
the amount invested to the financial institution placing the purchase order.
D-4
<PAGE> 197
(c) Reduced Sales Charges - Armada Class A Shares/Parkstone Investor A
Shares
1. Rights of Accumulation
a. Armada Class A Shares: In calculating the appropriate sales
charge rate, this right allows investors to add the value of the Class
A Shares they already own to the amount that they are currently
purchasing. The Fund will combine the value of the investor's current
purchases with the current value of any Class A Shares purchased
previously for (i) the investor's account, (ii) the investor's spouse's
account, (iii) a joint account with the investor's spouse, or (iv) the
investor's 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, the investor must ask for the reduction at the
time of purchase. The investor must provide the Fund with the
applicable account number(s) and, if applicable, the account numbers of
the spouse and/or children (and provide the children's ages). The Fund
may amend or terminate this right of accumulation at any time.
b. Parkstone Investor A Shares: In calculating the appropriate
sales charge rate, this right allows investors to add the value of the
Investor A Shares they already own to the amount they are currently
purchasing. The Fund will combine the value of the investor's current
purchases with the current value of any Investor A Shares purchased
previously for the investor's account. 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, the investor must ask for the reduction at the
time of purchase. The investor must provide the Fund with the
applicable account number(s).
2. Letter of Intent
Investors may purchase Armada Class A Shares or Parkstone
Investor A Shares at the sales charge rate applicable to the total
amount of the purchases they intend to make over a 13-month period. In
other words, a Letter of Intent allows investors to purchase Class A or
Investor A Shares, as applicable, of a Fund over a 13-month period and
receive the same sales charge as if all of the shares had been
purchased at the same time. The Fund will only consider the value of
Class A or Investor A Shares sold subject to a sales charge. As a
result, shares of Class A or Investor 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 an investor intends
to purchase over the 13-month period, the investor must send the
appropriate Fund a Letter of Intent. In calculating the total amount of
purchases investors may include in their letter purchases made up to 90
days
D-5
<PAGE> 198
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 the investor does not purchase the amount of shares
indicated in the Letter, the Letter authorizes the Fund to hold in
escrow 4% of the total amount the investor intends to purchase. If the
investor does not complete the total intended purchase at the end of
the 13-month period or redeems 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 the investor
intended to purchase) and the sales charge that would normally apply
(based on the actual amount purchased).
3. Combined Purchase/Quantity Discount Privilege
When calculating the appropriate sales charge rate, the Fund
will combine same day purchases of Armada Class A Shares/Parkstone
Investor A Shares (that are subject to a sales charge) made by an
investor, the investor's spouse and minor children (under age 21). This
combination also applies to Armada Class A Shares/Parkstone Investor A
Shares purchased with a Letter of Intent. The investor must notify the
Fund of the purchases that qualify for this discount.
(d) Neither Armada nor Parkstone apply a sales charge on any purchases
made through reinvested dividends.
(e) No sales charge will be assessed on purchases of Armada Class A
Shares or Parkstone Investor A Shares made by:
ARMADA PARKSTONE
(1) trustees, retired trustees (1) trustees, retired trustees
and officers of the Trust and and officers of the Trust and
their immediate family members their immediate family members
(spouse, parents, siblings, (spouse, parents, siblings,
children and grandchildren); children and grandchildren);
(2) directors, retired (2) directors, retired
directors, employees, retired directors, employees and
employees and participants in retired employees of the
employee benefit/retirement Adviser and its affiliates and
plans (annuitants) of National their immediate family
City Corporation or any of its members;
affiliates and their immediate
family members;
D-6
<PAGE> 199
(3) a direct transfer or a (3) reinvestment of
rollover from a qualified plan distributions from a deferred
distribution where affiliates compensation plan, agency,
of National City Corporation trust, or custody account that
are serving as a trustee or was maintained by the Adviser
agent, or certain institutions or its affiliates or invested
having relationship with in any Parkstone Fund;
affiliates of National City
Corporation;
(4) investors purchasing Fund (4) investors purchasing Fund
shares through a payroll shares through payroll
deduction plan; deduction plans;
(5) investors investing in the (5) purchases by certain
Armada Plus account through qualified employee benefit
National City's Retirement plans;
Plan Services;
(6) investors purchasing Fund (6) investors purchasing Fund
shares through "one-stop" shares through "one-stop"
mutual fund networks; mutual fund networks;
(7) qualified broker-dealers, (7) qualified broker-dealers,
investment advisers or investment advisers or
financial planners who charge financial planners who charge
a management fee for their a management fee for their
services and place trades for services and place trades for
their own account or accounts their own account or accounts
of clients; of clients;
(8) proceeds from redemptions (8) proceeds from redemptions
from a Parkstone or Armada from a Parkstone or Armada
fund within 180 days after fund within 180 days after
redemption, if a sales load or redemption, if a sales load or
commission was paid for those commission was paid for those
shares (notification must be shares (notification must be
given to the transfer agent given to the transfer agent
regarding such repurchases); regarding such repurchases);
and
(9) exchanges from Parkstone B (9) certain orders placed by
Shares to the Trust's Class A investment representatives
Shares or by exchanges from through fee-based investment
Parkstone Investor A Shares to products or accounts; and
the Trust's Class A Shares (if
sales charges for the new
shares would be greater than
that sales charges paid on the
previous shares, the
shareholder is responsible for
paying the difference).
(10) shares purchased for
trust or other advisory
accounts established with the
Adviser or its affiliates.
ARMADA B SHARES/PARKSTONE INVESTOR B SHARES:
- --------------------------------------------
Except as described below for Parkstone Investor B Shares
purchased prior to January 1, 1997, the contingent deferred sales charges
applicable to Armada B Shares and Parkstone Investor B Shares are substantially
similar. Investors do not pay a sales charge when purchasing Class B Shares. The
offering price of Class B Shares is simply the next calculated NAV. If, however,
the investor sells the shares within five years after purchase, the investor
D-7
<PAGE> 200
pays a contingent deferred sales charge as described in the table below for
either (1) the NAV of the shares at the time of purchase, or (2) the NAV of the
shares next calculated after the Fund receives the sale request in good order,
whichever is less. The sales charge does not apply to shares purchased through
reinvestment of dividends or distributions. There is never any deferred sales
charge on any increase in an investment above the initial offering price.
Additionally, this sales charge does not apply to exchanges of Class B Shares of
one Fund for Class B Shares of another Fund. After eight years, Class B Shares
are converted into Class A Shares.
YEAR OF CONTINGENT DEFERRED
REDEMPTION SALES CHARGE
---------- ------------
First 5.00%
Second 5.00%
Third 4.00%
Fourth 3.00%
Fifth 2.00%
No deferred sales charge is charged after the fifth year.
Contingent deferred sales charges for Armada Class B Shares and Parkstone
Investor B Shares are waived for the following reasons:
ARMADA PARKSTONE
(1) Distributions from (1) Distributions from
retirement plans if the retirement plans if the
distributions are made distributions are made
following the death or following the death or
disability of the shareholders disability of the shareholders
or plan participants; or plan participants;
(2) Redemptions representing a (2) Certain minimum required
minimum required distribution distributions from retirement
from an IRA or a custodial accounts or retirement plans
account to a shareholder who where such redemptions are
has reached 70 1/2 years of necessary to make
age; distributions to plan
participants;
(3) Redemptions by (3) Redemptions by
participants in a qualified participants in a qualified
plan for retirement loans, plan for retirement loans,
financial hardship, certain financial hardship,
participant expenses and termination and certain
redemptions due to termination participant expenses;
of employment with plan
sponsor;
(4) Redemptions from accounts (4) Redemptions from accounts
other than retirement accounts other than retirement accounts
following the death or following the death or
disability of the shareholder disability of the shareholder
and/or joint shareholders; and/or joint shareholders;
(5) Exchanges of Class B (5) Exchanges of Investor B
Shares between funds of the Shares between funds of the
Trust; Trust;
D-8
<PAGE> 201
(6) Return of excess (6) Returns of excess
contributions to retirement contributions to retirement
plans; plans;
(7) Distributions of less than (7) Distributions of less than
10% of the annual account 10% of the annual account
value under a Systematic value under a Systematic
Withdrawal Plan; Withdrawal Plan;
(8) Redemptions by a settlor (8) Shares issued in a plan of
of a living trust; and reorganization sponsored by
the Adviser, or shares
redeemed involuntarily in a
similar situation; and
(9) Redemptions effected (9) Purchases by certain
pursuant to a Fund's right to qualified employee benefit
liquidate a shareholder's plans.
account if the value of the
shares held in the account is
less than the minimum account
size.
Investor B Shares of Parkstone which were purchased prior to January 1,
1997 and redeemed prior to four years from the date of purchase will be subject
to a contingent deferred sales charge equal to a percentage of the lesser of net
asset value at the time of purchase of the Investor B Shares being redeemed or
net asset value of such shares at the time of redemption, as set forth in the
chart below:
YEAR OF CONTINGENT DEFERRED
REDEMPTION SALES CHARGE
---------- ------------
First 4.00%
Second 4.00%
Third 3.00%
Fourth 2.00%
ARMADA I SHARES/PARKSTONE INSTITUTIONAL SHARES:
- ----------------------------------------------
All I and Institutional Shares are sold with no sales charge.
D-9
<PAGE> 202
B. PURCHASE POLICIES
<TABLE>
<CAPTION>
ARMADA PARKSTONE
<S> <C> <C>
MINIMUM INITIAL INVESTMENT: $500 for initial purchase of Class A $500 for initial purchase of
Shares or Class B Shares (but see Investor A Shares and Investor B
discussion below regarding Shares (but see discussion below
investments in the Planned regarding investments in the Auto
Investment Program (PIP)). No Investment Plan). No minimum
minimum initial investment for initial investment for
investment in I Shares. Institutional Shares.
AUTOMATIC INVESTMENT PLAN: Class A Shares and Class B Shares Investor A Shares and Investor B
may be purchased on a semi-monthly, Shares may be purchased on a
monthly or quarterly basis through monthly, bi-monthly or quarterly
automatic deductions from a basis through automatic
shareholder's bank account. The deductions from a shareholder's
required minimum initial investment bank account. The required
when opening an account using the minimum initial investment when
Planned Investment Program is $50; opening an account using the Auto
the minimum amount for subsequent Invest Plan is $50; the minimum
investments in a Fund is $50. amount for subsequent investments
in a Fund is $50.
Not available for Class I Shares. Not available for Institutional
Shares.
</TABLE>
D-10
<PAGE> 203
<TABLE>
<CAPTION>
ARMADA PARKSTONE
<S> <C> <C>
PURCHASE METHODS: Investors may purchase Class A Investors may purchase Investor A
Shares and Class B Shares directly Shares and Investor B Shares
by mail, telephone, internet, wire directly by mail, telephone, wire or
or Automated Clearing House (ACH). Automated Clearing House (ACH).
Investors may also purchase Class A Investors may also purchase Investor
Shares and Class B Shares through A Shares and Investor B Shares
accounts with brokers and other through accounts with brokers and
institutions that are authorized to other institutions that are
place trades in Fund shares for authorized to place trades in Fund
their customers. Investors that shares for their customers.
invest through an authorized Investors that invest through an
institution will have to follow that authorized institution will have to
institution's procedures. Such follow that institution's
institutions may charge a fee for procedures. Such institutions may
their services in addition to fees charge a fee for their services in
charged by the Trust. Additionally, addition to fees charged by the
such institutions may charge Trust. Additionally, such
additional fees and may require institutions may charge additional
higher minimum investments or impose fees and may require higher minimum
other limitations on buying and investments or impose other
selling shares. limitations on buying and selling
shares.
Class I Shares may be purchased Institutional Shares may be
through accounts with brokers and purchased through procedures
other institutions that are established by the distributor in
authorized to place trades in Fund connection with the requirement
shares for their customers. of customer accounts maintained
Investors that invest through an by or on behalf of certain
authorized institution will have to financial institutions acting as
follow that institution's fiduciary or agent for their
procedures. Such institutions may customers. These procedures may
charge a fee for their services in include instructions under which
addition to fees charged by the a customer account is "swept"
Trust. automatically at least weekly and
amounts in excess of a minimum
amount agreed upon by the
financial institution and the
customer are invested by the
Distributor in Institutional
Shares of the Money Market Funds,
depending upon the type of
customer account and/or the
instructions of the customer.
</TABLE>
D-11
<PAGE> 204
<TABLE>
<CAPTION>
ARMADA PARKSTONE
<S> <C> <C>
PAYMENT METHODS: Payment for Class A Shares and Class B Payment for Investor A Shares and
Shares may be made by wire, ACH or check Investor B Shares may be made by wire,
in U.S. dollars. The Trust cannot accept ACH, check, bank draft or money order in
third-party checks, credit cards, credit U.S. dollars. The Trust cannot accept
card checks or cash. third-party checks, credit cards, credit
card checks or cash.
Class I Shares -
- A fee will be charged for any Institutional Shares -
checks that do not clear. - A fee will be charged for any
- Third-party checks are not checks that do not clear.
accepted. - Third-party checks are not
- Purchases may be made by wire, ACH accepted.
or check in U.S. Dollars. - Purchases may be made by wire, ACH
or check in U.S. Dollars.
</TABLE>
Depending upon the terms of a particular Customer Account, a
financial institution may charge a Customer Account fees for automatic
investment and other cash management services provided in connection with
investment in Armada I Shares or Parkstone Institutional Shares. Information
concerning these services and any charges may be obtained from the financial
institution.
Both Armada and Parkstone reserve the right to reject purchase
orders.
D-12
<PAGE> 205
C. REDEMPTION POLICIES
<TABLE>
<CAPTION>
ARMADA PARKSTONE
<S> <C> <C>
REDEMPTION METHODS: Class A Shares and Class B Shares Investor A Shares and Investor B Shares -
-Investors that own shares directly may Redemptions may be requested by mail or
redeem shares on any business day by by telephone. Redemptions received in
contacting a Fund directly by mail, good order are effected at a Fund's net
Internet or telephone. Redemptions asset value per share next determined
received in good order are effected at a after receipt of the order by the Fund.
Fund's net asset value per share next Good order means that the request
determined after receipt of the order by includes complete information on the
the Fund. Good order means that the purchase, exchange or redemption and that
request includes complete information on the Fund has received the appropriate
the purchase, exchange or redemption and assets. Normally, investors will receive
that the Fund has received the the proceeds within a week after the
appropriate assets. request is received.
Investors that own shares through an Redemptions from Individual Retirement
account with a broker or other Accounts must be requested in writing.
institution should contact that broker or Additionally, requests for the following
institution to sell shares. The minimum redemptions must be made in writing and
amount for telephone or Internet must include a signature guarantee by an
redemptions is $100. A signature eligible guarantor institution, which for
guarantee by a bank or other financial the purpose of this policy, includes
institution is required for all banks, brokers, dealers, credit unions,
redemption requests of $100,000 or more, securities exchanges and associations,
or for requests to change the commercial clearing agencies and savings
bank or account designated to receive associations: (1) the account
redemption proceeds. registration or the name(s) in the
account has changed within the last 15
Class I Shares - Holders of Class I days; (2) the check is not being mailed
Shares may sell shares by following to the address on the account; (3) the
procedures established when they opened check is not being made payable to the
their account or accounts. Holders of owner of the account; (4) the redemption
shares owned through an account with a proceeds are being transferred to another
broker or other institution should fund account with a different
contact that broker or institution to registration; or (5) the redemption is in
sell the shares. the amount of $10,000 or more.
Institutional Shares - Holders of
Institutional Shares may sell shares by
following procedures established when they
opened their account or accounts. Holders
of shares owned through an account with a
broker or other institution should contact
that broker or institution to sell the
shares.
</TABLE>
D-13
<PAGE> 206
<TABLE>
<CAPTION>
ARMADA PARKSTONE
<S> <C> <C>
PAYMENT METHOD Class A Shares and Class B Shares - Investor A and Investor B Shares -
Armada will normally send sale proceeds Parkstone will normally send sale
within seven days after receiving the proceeds within seven days after
redemption request. Proceeds can be receiving the redemption request.
wired to the investor's bank account or Proceeds can be wired to the investor's
sent to the investor by check. Armada bank account or sent to the investor by
does not charge a fee to wire funds, check. Both the Fund and the investor's
however, the investor's institution may financial institution may charge a wire
charge a fee. transfer fee.
Class I Shares - Armada will normally Institutional Shares - May be redeemed in
send sale proceeds within seven days accordance with instructions and
after receiving the redemption request. limitations pertaining to his or her
Proceeds can be wired to the investor's Customer Account with a financial
bank account. Armada does not charge a institution.
fee to wire funds, however, the
investor's institution may charge a fee.
All Shares - When purchases are made by
check, redemption proceeds will not be
All Shares - When purchases are made by released until the investment being
check, redemption proceeds may not be redeemed has been in the account 15 days.
released until the investment being
redeemed has been in the account 15 days.
Redemption proceeds are generally paid in
cash. However, under unusual conditions
Redemption proceeds are generally paid in that make the payment of cash unwise (and
cash. However, under unusual conditions for the protection of the Fund's
that make the payment of cash unwise (and remaining shareholders) Parkstone might
for the protection of the Fund's pay all or part of redemption proceeds in
remaining shareholders) Armada might pay liquid securities with a market value
all or part of redemption proceeds in equal to the redemption price (redemption
liquid securities with a market value in kind).
equal to the redemption price (redemption
in kind).
CHECK WRITING PRIVILEGES: Yes, for the shareholders of the Class A Yes, for the shareholders of the Investor
Shares of the Money Market Funds ($100 A Shares of the Money Market Funds ($100
minimum). Investors may not close a minimum). Investors may not close a
Money Market Fund account by writing a Money Market Fund account by writing a
check. check.
AUTOMATIC WITHDRAWAL PLAN: Yes for shareholders of Class A Shares Yes for Investor A Shares and Investor B
and Class B Shares of any Fund held on Shares ($500 minimum balance/$100 minimum
the transfer agent's system ($1,000 withdrawal).
minimum balance/$100 minimum withdrawal).
</TABLE>
D-14
<PAGE> 207
Armada and Parkstone both reserve the right to redeem, at net asset
value, any account maintained by a Class A or Class B shares shareholder, or an
Investor A or Investor B Shares Shareholder, respectively, that has a value of
less than $500 due to redemptions where the shareholder does not increase the
amount in the account to at least $500 upon 60 days notice.
D. SHARE EXCHANGES
<TABLE>
<CAPTION>
ARMADA PARKSTONE
<S> <C> <C>
BY MAIL: Yes Yes
BY TELEPHONE: Yes Yes
BY INTERNET: Yes No
MINIMUM: $500 $500
LIMITATIONS: No more than one exchange every two No more than one exchange every two
months during a twelve month period months during a twelve month period
beginning upon the date of the first beginning upon the date of the first
exchange transaction. exchange transaction.
</TABLE>
1. ARMADA CLASS A SHARES AND CLASS B SHARES
----------------------------------------
(a) Class A Shares - Investors may exchange Class A Shares of any Fund
for Class A Shares of any other Fund. If an investor exchanges shares that the
investor 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 an investor exchanges shares into a Fund
with the same, lower or no sales charge there is no incremental sales charge for
the exchange.
(b) Class B Shares - Investors may exchange Class B Shares of any Fund
for Class B Shares of any other Fund. No contingent deferred sales charge is
imposed on redemptions of shares acquired in an exchange, provided those shares
are held for at least five years from the initial purchase.
2. ARMADA SYSTEMATIC EXCHANGE PROGRAM
----------------------------------
The Systematic Exchange Program allows investors to exchange their
existing shares of an Armada money market fund for shares of any other Armada
Fund of the same class automatically, at monthly or quarterly intervals.
Exchanging in this manner will reduce the average cost per share of a non-money
market fund. Because purchases of Class A Shares of non-money market funds may
be subject to an initial sales charge, it may be beneficial for investors to
execute a Letter of Intent indicating an intent to purchase Class A Shares in
connection with this program. If an investor would like to enter a systematic
exchange program concerning Class B Shares he/she must exchange them within six
or twelve months from the date
D-15
<PAGE> 208
of purchase. Investors may apply for participation in this program by telephone
or completing an account application.
3. PARKSTONE INVESTOR A SHARES:
---------------------------
Investors who own Investor A Shares may acquire in an exchange Investor
A Shares that are offered by another Fund of the Trust or fund of Armada with a
different investment objective. The exchange must occur on the same business
day.
(a) Exchanging a Money Market Fund for another Money Market Fund -
Investors that own Investor A Shares of any of the Trust's Money Market Funds or
a money market fund of Armada may exchange those shares at net asset value
without any sales charge for Investor A Shares offered by any of the Trust's
other Money Market Funds or an Armada Money Market Fund. The amount to be
exchanged must meet the applicable minimum investment requirements and the
exchange must be made in states where it is legally authorized.
(b) Exchanging a Non-Money Market Fund for another Non-Money Market
Fund - Investors who own Investor A Shares of any of the Trust's non-Money
Market Funds or any fund of Armada which is not an Armada Money Market Fund may
exchange those Investor A Shares at net asset value without any sales charge for
Investor A Shares offered by any Fund of the Trust and any fund of Armada. If
you paid a sales charge on the Investor A Shares that you are to exchange that
is less than the sales charge applicable to the Investor A Shares you would like
to acquire, you must pay a sales charge on the exchange equal to the difference
between the two sales charges.
(c) Exchanging a Money Market Fund for a Non-Money Market Fund -
Investors who own Investor A Shares of a Parkstone or Armada Money Market Fund
may exchange those shares for Investor A Shares of a Parkstone or Armada
non-Money Market Fund, but a sales load will be charged on the exchange.
4. PARKSTONE INVESTOR B SHARES:
----------------------------
Investors who own Investor B Shares may acquire in an exchange Investor
B Shares that are offered by another Fund of the Trust or A Shares of a Fund of
Armada Funds. The exchange must occur on the same business day.
Investors who own Investor B Shares of one Fund of the Trust may
exchange those Investor B Shares for Class A Shares of a Fund of Armada at net
asset value. These exchanges will be executed only if they meet the applicable
minimum investment requirements within states where the exchanges are
authorized.
5. PARKSTONE SYSTEMATIC EXCHANGE PROGRAM:
--------------------------------------
The Systematic Exchange Program enables investors to purchase Investor
A Shares or Investor B Shares through automatic monthly or quarterly deductions
from any account
D-16
<PAGE> 209
invested in one of the Parkstone Money Market Funds. If investors invest
directly in Investor B Shares of the Prime Obligations Fund, as opposed to
obtaining shares through an exchange, they will be asked to participate in the
Systematic Exchange Program and to establish the time and amount of the
systematic exchanges so that all of the shares of the Prime Obligations Fund
purchased initially will be exchanged for shares of Investor B Shares of other
non-Money Market Funds within two years of purchase. Under the program, the
investor will enter into an agreement to purchase shares of one or more
specified Funds over a specified period of time. The program requires investors
to:
- Initially purchase shares of one of the Money Market Funds in an
amount equal to the total amount of the investment.
- Specify an amount to be deducted on a monthly or quarterly basis
from the Money Market Fund and exchanged for shares of chosen specified funds.
E. RESPONSIBILITY FOR TELEPHONE AND INTERNET INSTRUCTIONS
Purchasing, selling and exchanging Fund shares over the telephone or
via the Internet is extremely convenient, but not without risk. Although Armada,
Parkstone, their administrators, distributors and transfer agents have certain
safeguards and procedures to confirm the authenticity of instructions, they are
not responsible for any losses or costs incurred by following telephone or
on-line instructions reasonably believed to be genuine. Investors or financial
institutions transacting with Armada, Parkstone, their administrators,
distributors and transfer agents over the telephone or via the Internet will
generally bear the risk of any loss.
F. PRICING
The price per share (the offering price) will be the net asset value
per share ("NAV") next determined after a Fund receives your purchase order
plus, in the case of Armada Class A Shares and Parkstone Investor A Shares, the
applicable front-end sales charge. The NAV for one Fund share is the value of
that share's portion of all of the assets in the Fund less liabilities and class
expenses.
For processing purchase and redemption orders, the NAVs per share of
the Armada Money Market and Government Money Market Funds and the Parkstone
Prime Obligations and U.S. Government Obligations Funds are calculated on each
business day first at 3:00 p.m. Eastern time, then as of the close of trading of
the New York Stock Exchange (the "Exchange"). The net asset values per share of
the Armada Tax Exempt Money Market and Treasury Plus Money Market Funds and the
Parkstone Tax-Free and Treasury Funds are calculated on each business day first
at 1:00 p.m. Eastern time then as of the close of trading of the Exchange,
generally 4:00 p.m. Eastern time.
D-17
<PAGE> 210
Each other Armada and Parkstone fund calculates its NAV once each
Business Day at the regularly-scheduled close of normal trading on the Exchange
(normally 4:00 p.m. Eastern Time).
NAV is determined on any day that the Exchange is open for business
("Business Day"). The NAV is calculated by adding the total value of a Fund's
investments and other assets, subtracting its liabilities and then dividing that
figure by the number of outstanding shares of the Fund. The NAV is calculated
separately for each class of shares.
An investor's order for the purchase of shares is priced at the next
NAV calculated after the order is received by the Distributor. An investor's
order for redemption of shares is priced at the next NAV calculated after the
shares are properly tendered for redemption.
The Fund's securities are generally valued at current market prices. If
market quotations are not available, prices will be based on fair value as
determined by a method which the Fund's Trustees believe accurately reflects
fair value.
Foreign securities are valued based on quotations from the primary
market in which they are traded and are translated from the local currency into
U.S. dollars using current exchange rates.
Some of the Funds have portfolio securities that are primarily listed
on foreign exchanges that trade on weekends or other days when these Funds do
not price their shares. As a result, the NAV of a Fund's shares may change on
days when shareholders will not be able to purchase or redeem the Fund's shares.
The NAV will fluctuate as the value of the investment portfolio of a
Fund changes. However, the Money Market Funds value their securities at their
amortized cost. The amortized cost method involves valuing a portfolio security
initially at its cost on the date of purchase and thereafter assuming a constant
amortization to maturity of the difference between the principal amount due at
maturity and initial cost.
D-18
<PAGE> 211
II. DIVIDENDS AND DISTRIBUTIONS
Each Armada Fund and each Parkstone Fund distributes its net income to
shareholders as follows:
<TABLE>
<CAPTION>
CURRENT CURRENT
DIVIDEND DIVIDEND
PARKSTONE FUNDS DECLARED/PAID ARMADA FUNDS DECLARED/PAID
<S> <C> <C> <C>
Prime Obligations Fund D/M Money Market Fund D/M
U.S. Government Obligations Fund D/M Government
Money Market Fund D/M
Tax-Free Fund D/M Tax Exempt Money
Market Fund D/M
Bond Fund D/M Bond Fund D/M
Limited Maturity Limited Maturity
Bond Fund D/M Bond Fund D/M
Intermediate Intermediate Bond
Government Obligations Fund D/M Fund D/M
Equity Income Fund M/M Equity Income Fund Q/Q
Small Capitalization Fund M/M Small Cap Growth
Fund A/A
International International Equity Fund A/A
Discovery Fund M/M
Balanced Allocation Balanced Allocation
Fund M/M Fund Q/Q
National Tax Exempt Bond Fund D/M National Tax Exempt Bond Fund D/M
U.S. Government U.S. Government
Income Fund D/M Income Fund D/M
Large Capitalization Large Cap Ultra Fund Q/Q
Fund M/M
Mid Capitalization Mid Cap Growth Fund Q/Q
Fund M/M
Michigan Municipal Michigan Municipal
Bond Fund D/M Bond Fund D/M
Treasury Fund D/M Treasury Plus Money
Market Fund D/M
</TABLE>
* D/M = Daily/Monthly
M/M = Monthly/Monthly
Q/Q = Quarterly/Quarterly
A/A = Annually/Annually
Each Armada Fund and each Parkstone Fund distributes its net
capital gains to shareholders at least annually.
D-19
<PAGE> 212
APPENDIX E
[Insert Management's Discussion of Fund Performance]
LINE GRAPH
E-1
<PAGE> 213
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE ARMADA
BOND FUND, CLASS I, SYNTHETIC CLASS A, OR SYNTHETIC CLASS B,
VERSUS THE LEHMAN AGGREGATE BOND INDEX
<TABLE>
<CAPTION>
- ----------------------------------------------------------
One Year Annualized Annualized Annualized Cumulative
Return 3 Year 5 Year Inception Inception
Return Return to Date to Date
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
-1.89% 4.73% 6.35% 5.75% 35.19% Class I
- ----------------------------------------------------------
-1.93% 4.55% 6.23% 5.64% 34.41% Synthetic Class A
- ----------------------------------------------------------
-6.62% 2.87% 5.21% 4.68% 28.01% With Load
- ----------------------------------------------------------
-2.72% 4.19% 6.02% 5.44% 33.05% Synthetic Class B
- ----------------------------------------------------------
-7.35% 3.00% 5.70% 5.44% 33.05% With Load
- ----------------------------------------------------------
5.17% 18.11% Class A (Actual)
-----------------------
3.62% 12.47% With Load
-----------------------
1.84% 3.68% Class B (Actual)
-----------------------
-0.48% -0.96% With Load
-----------------------
</TABLE>
Bond Fund
Past performance is not predictive of future performance.
1 Class I Shares are sold primarily to banks and trust companies which are
affiliated with National City Corporation and clients of National Asset
Management Corporation ("NAM"). Certain account level charges may apply.
2 Activity for the period presented includes that of a predecessor fund through
September 6, 1996. The Armada Bond Fund's date of inception for performance was
August 10, 1994 for Class I Shares, September 11, 1996 for Class A Shares and
January 6, 1998 for Class B Shares. The annualized 3-year return of the Class A
and Class B Shares includes information from the commencement of operations of
the Class I Shares, rather than the date Class A Shares or Class B Shares were
introduced. The performance of the Class A Shares or Class B Shares prior to
their introduction date does not reflect shareholder servicing fees, which, if
reflected, would reduce the performance quoted for such periods.
3 The return and principal value of an investment will fluctuate. When redeemed,
shares may be worth more or less than their original cost.
4 Performance calculated based on the maximum front-end sales charge in effect
at DECEMBER 31, 1999 of 4.75%.
5 Performance calculated based on the maximum deferred sales charge in effect at
DECEMBER 31, 1999 of 5.00%. This charge declines from 5.00% in the first year to
0.00% after five years, as outlined in the prospectus.
6 The performance chart for the Class A and Class B Shares includes performance
of the Class I Shares from date of inception.
ARMADA BOND FUND
In the face of a strong economy and hawkish Federal Reserve, we continue to
maintain a neutral duration stance as well as an overweight strategy in the
spread (non-US Treasury) sectors of the Armada Bond Fund. In spite of our
optimistic view on the economy, the potentially negative impact of likely merger
and acquisition activity in the corporate sector has driven us to slightly
decrease our overweight in corporate securities to 24% in favor of less
credit-sensitive asset-backed and mortgage-backed securities to 13% and 46%
respectively. This compares to the fund's benchmark, the Lehman Aggregate Bond
Index whose weightings are 22% corporates, 0% asset-backed securities and
34.1% in mortgage-backed securities as of December 31, 1999.
For the year ended December 31, 1999, the Armada Bond Fund produced a total
return of -1.93 percent (before sales charges) for Class A investors, -2.72
percent (before sales charges) for Class B investors, and -1.89 percent for
Class I investors. During the same period, the Index returned -0.83 percent. As
of December 31, 1999, the weighted average life of the portfolio's holdings was
9.46 years, with an average credit quality of AAA.
GOING FORWARD:
We believe strong growth and relatively low inflation will continue to be
dominant themes in the domestic economy, but we are also mindful of the
relatively hawkish mood at the Federal Reserve. Continued global expansion
should be good for growth, but strong real growth, and cyclical inflation fears
will likely keep interest rates relatively high in the short run. While we
recognize that higher interest rates are not a positive for the fixed income
markets, we do not believe that substantial changes in interest rates early in
2000 will be the beginning of a secular negative trend. Accordingly, we are
concerned with the fixed income market's near-term prospects, but we are
confident that any substantial move in interest rates will create a good long
term opportunity for fixed income investors.
<PAGE> 214
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE ARMADA
ENHANCED INCOME FUND, CLASS I, CLASS A, OR SYNTHETIC CLASS B, VERSUS
THE MERRILL 1-3 YEAR U.S. CORPORATE/GOVERNMENT INDEX, AND
THE MERRILL 1-3 YEAR U.S. TREASURY BILL INDEX
<TABLE>
<CAPTION>
- ----------------------------------------------------------
One Year Annualized Annualized Annualized Cumulative
Return 3 Year 5 Year Inception Inception
Return Return to Date to Date
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
3.20% 5.39% 5.83% 5.67% 35.36% Class I
- ----------------------------------------------------------
3.15% 5.34% 5.76% 5.64% 33.85% Class A
- ----------------------------------------------------------
0.27% 4.38% 5.18% 5.08% 30.12% With Load
- ----------------------------------------------------------
2.78% 5.22% 5.68% 5.57% 33.38% Synthetic Class B
- ----------------------------------------------------------
-2.10% 4.02% 5.36% 5.57% 33.38% With Load
- ----------------------------------------------------------
1.59% Class B (Actual)
-------------
-3.40% With Load
-------------
</TABLE>
Enhanced Income
Past performance is not predictive of future performance.
1 Class I Shares are sold primarily to banks and trust companies which are
affiliated with National City Corporation and clients of National Asset
Management Corporation ("NAM"). Certain account level charges may apply.
2 The Armada Enhanced Income Fund's date of inception was July 7, 1994 for Class
I Shares, and September 9, 1994 for Class A Shares, AND AUGUST 11, 1999 FOR
CLASS B SHARES.
3 The return and principal value of an investment will fluctuate. When redeemed,
Shares may be worth more or less than their original cost.
4 Performance calculated based on the maximum front-end sales charge in effect
at DECEMBER 31, 1999 of 2.75%.
5 PERFORMANCE CALCULATED BASED ON THE MAXIMUM DEFERRED SALES CHARGE IN EFFECT AT
DECEMBER 31, 1999 OF 5.00%. THIS CHARGE DECLINES FROM 5.00% IN THE FIRST YEAR TO
0.00% AFTER FIVE YEARS, AS OUTLINED IN THE PROSPECTUS.
ARMADA ENHANCED INCOME FUND
Our overall strategy for the Enhanced Income Fund is to remain duration neutral
versus our benchmark, the Merrill Lynch 1-3 Year Govt/Corp. Index (the "Index"),
while continuing our overweight in select spread sectors (non-government
securities) versus the Index. During the quarter ended December 31, 1999 we
maintained our significant overweight in corporate bonds and asset-backed
securities. As of December 31, 1999, 32 percent of the Fund's net assets were
invested in corporate bonds and 36 percent in asset-backed securities. Spreads
tightened significantly during the quarter, but we continue to believe that
excess spread available in short corporate and asset-backed securities is
attractive on a risk reward basis. Further, we continue to believe that positive
fundamentals and technicals will drive spreads tighter in the long run.
Therefore, we remain overweighted in short-term asset backed and corporate
securities.
GOING FORWARD:
We believe strong growth and relatively low inflation will continue to be
dominant themes in the domestic economy, but we are also mindful of the
relatively hawkish mood at the Federal Reserve. Continued global expansion
should be good for growth, but strong real growth, and cyclical inflation fears
will likely keep interest rates relatively high in the short run. While we
recognize that higher interest rates are not a positive for the fixed income
markets, we do not believe that substantial changes in interest rates early in
2000 will be the beginning of a secular negative trend. Accordingly, we are
concerned with the fixed income market's near term prospects, but we are
confident that any substantial move in interest rates will create a good
long-term opportunity for fixed income investors. Spread sectors (non-US
Treasury securities) remain attractive on a fundamental basis, but their
tightening potential has been diminished by tightening interest rate spreads in
recent months. We believe spreads will tighten further now that Y2K fears have
been subdued and liquidity has returned to more normal levels.
For the year ended December 31, 1999, the Armada Enhanced Income Fund produced a
total return of 3.15 percent (before sales charges) for Class A investors and
3.20 percent for Class I investors. During the same period, the Merrill Lynch
1-3 Year Govt/Corp Index returned 3.25 percent. As of December 31, 1999, the
average maturity of the portfolio's holdings was 1.70 years.
<PAGE> 215
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE ARMADA
INTERMEDIATE BOND FUND, CLASS I, SYNTHETIC CLASS A, OR SYNTHETIC CLASS B,
VERSUS THE LEHMAN INTERMEDIATE GOVERNMENT/CORPORATE INDEX
<TABLE>
<CAPTION>
One Year Annualized Annualized Annualized Annualized Cumulative
Return 3 Year 5 Year 10 Year Inception Inception
Return Return Return to Date to Date
- --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
-0.04% 4.87% 6.60% 6.92% 6.91% 95.49% Class I
- --------------------------------------------------------------------
-0.37% 4.52% 6.25% 6.63% 6.61% 90.16% Synthetic Class A
- --------------------------------------------------------------------
-5.13% 2.85% 5.21% 6.11% 6.10% 81.11% With Load
- --------------------------------------------------------------------
-0.98% 4.03% 5.95% 6.53% 6.52% 88.45% Synthetic Class B
- --------------------------------------------------------------------
-5.70% 2.83% 5.63% 6.53% 6.52% 88.45% With Load
- --------------------------------------------------------------------
6.24% 69.27% Class A (Actual)
------------------------
5.64% 61.16% With Load
------------------------
2.27% 4.56% Class B (Actual)
------------------------
-0.09% -0.18% With Load
------------------------
</TABLE>
Intermediate Bond Fund
Past performance is not predictive of future performance.
1 Class I Shares are sold primarily to banks and trust companies which are
affiliated with National City Corporation and clients of National Asset
Management Corporation ("NAM"). Certain account level charges may apply.
2 The Armada Intermediate Bond Fund's date of inception was December 20, 1989
for Class I Shares, April 15, 1991 for Class A Shares and January 6, 1998 for
Class B Shares. The 3-year and 5-year returns of the Class B Shares include
information from the commencement of operations of the Class I Shares, rather
than the date Class B Shares were introduced. The performance of the Class B
Shares prior to their introduction date does not reflect shareholder servicing
fees, which, if reflected, would reduce the performance quoted for such periods.
3 The return and principal value of an investment will fluctuate. When redeemed,
shares may be worth more or less than their original cost.
4 Performance calculated based on the maximum front-end sales charge in effect
at DECEMBER 31, 1999 of 4.75%.
5 Performance calculated based on the maximum deferred sales charge in effect at
DECEMBER 31, 1999 of 5.00%. This charge declines from 5.00% in the first year to
0.00% after five years, as outlined in the prospectus.
6 The performance chart for the Class A and Class B Shares includes performance
of the Class I Shares from date of inception.
ARMADA INTERMEDIATE BOND FUND
In the face of a strong economy and unfriendly Federal Reserve, we continue to
maintain a neutral duration stance as well as an overweight strategy in the
spread (non-US Treasury) sectors. As of December 31, 1999, 25 percent of the
Armada Intermediate Bond Fund's net assets were invested in U.S. Treasury and
Agency securities, 17 percent in mortgage-backed securities, 36 percent in
corporate bonds, and 22 percent in asset-backed securities.
In spite of our optimistic view on the economy, the potentially negative impact
of likely merger and acquisition activity in the corporate sector has driven us
to slightly decrease our overweight in corporate securities in favor of less
credit-sensitive, asset-backed and mortgage-backed securities. We continue to
believe that strong fundamentals justify tighter spreads, but we also realize
that recent rallies in the spread markets may have lessened the attractiveness
of certain sectors and securities. This considered, we are carefully evaluating
our current spread product exposure.
GOING FORWARD:
We believe strong growth and relatively low inflation will continue to be
dominant themes in the domestic economy, but we are also mindful of the
relatively hawkish mood at the Federal Reserve. Continued global expansion
should be good for growth, but strong real growth, and cyclical inflation fears
will likely keep interest rates relatively high in the short run. While we
recognize that higher interest rates are not a positive for the fixed income
markets, we do not believe that substantial changes in interest rates early in
2000 will be the beginning of a secular negative trend. Accordingly, we are
concerned with the fixed income market's near term prospects, but we are
confident that any substantial move in interest rates will create a good long
term opportunity for fixed income investors. Spread sectors (non-US Treasury
securities) remain attractive on a fundamental basis, but their tightening
potential has been diminished by tightening interest rate spreads in recent
months. We believe spreads will tighten further now that Y2K fears have been
subdued and liquidity has returned to more normal levels.
For the year ended December 31, 1999, the Armada Intermediate Bond Fund produced
a total return of -0.37 percent (before sales charges) for Class A investors,
- -0.98 percent (before sales charges) for Class B investors, and -0.04 percent
for Class I investors. During the same period, the Lehman Intermediate
Government/Corporate Bond Index returned 0.39 percent. As of December 31, 1999,
the weighted average life of the portfolio's holdings was 5.0 years, with an
average credit quality of AA+.
<PAGE> 216
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE
ARMADA EQUITY INCOME FUND, CLASS I, CLASS A, OR SYNTHETIC CLASS B,
VERSUS THE S&P 500 COMPOSITE INDEX, AND THE S&P 500/BARRA VALUE INDEX
<TABLE>
<CAPTION>
- -----------------------------------------------------------
One Year Annualized Annualized Annualized Cumulative
Return 3 Year 5 Year Inception Inception
Return Return to Date to Date
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
-0.13% 12.46% 16.49% 15.02% 116.03% Class I
- -----------------------------------------------------------
-0.25% 12.16% 16.20% 14.61% 107.78% Class A
- -----------------------------------------------------------
-5.73% 10.08% 14.89% 13.40% 96.30% With Load
- -----------------------------------------------------------
-0.92% 11.72% 15.93% 14.36% 105.32% Synthetic Class B
- -----------------------------------------------------------
-5.56% 10.64% 15.71% 14.36% 105.32% With Load
- -----------------------------------------------------------
4.67% 9.48% Class B (Actual)
------------------------
2.24% 4.49% With Load
------------------------
</TABLE>
Equity Income
Past performance is not predictive of future performance.
1 Class I Shares are sold primarily to banks and trust companies which are
affiliated with National City Corporation and clients of National Asset
Management Corporation ("NAM"). Certain account level charges may apply.
2 The Armada Equity Income Fund's date of inception was July 1, 1994 for Class I
Shares, August 22, 1994 for Class A Shares and January 6, 1998 for Class B
Shares. The annualized 3-year AND 5-YEAR RETURNS of the Class B Shares INCLUDES
information from commencement of operations of the Class A Shares, rather than
the date Class B Shares were introduced.
3 The return and principal value of an investment will fluctuate. When redeemed,
shares may be worth more or less than their original cost.
4 Performance calculated based on the maximum front-end sales charge in effect
at DECEMBER 31, 1999 of 5.50%.
5 Performance calculated based on the maximum deferred sales charge in effect at
DECEMBER 31, 1999 of 5.00%. This charge declines from 5.00% in the first year to
0.00% after five years, as outlined in the prospectus.
6 The performance chart for Class B Shares includes performance of the Class A
Shares from date of inception.
ARMADA EQUITY INCOME FUND
The Fund's sector weights as of December 31, 1999 reflect both the large
capitalization value style and our strategy of investing in stocks with "good
value and good news". Our style naturally lends itself to large positions in
energy, financials, and utility stocks, relative to the general market, given
the historically high yield, low multiple nature of these sectors. At year-end,
the Fund's weightings in these sectors were 13.1%, 24.4% and 6.0%, respectively,
versus 5.6%, 13.2% and 2.1% for the S&P 500 Index.
Our strategy currently leads us to over-weighted positions, relative to the
style-specific benchmark, the Standard & Poor's/BARRA Value Index, in basic
materials, industrials, utilities, and consumer cyclicals. It is in these
sectors that we find the preponderance of stocks offering both good value and
good news - meaning that we have identified cheap stocks deserving higher
valuations and poised to outperform. Relative to both the market and our
benchmark, the portfolio has a higher dividend yield, lower 1999 and 2000
price/earnings ratios, and a smaller average market capitalization. One of the
most significant differences between our portfolio and that of the benchmark is
volatility (measured by beta) -- our style typically leads to a much lower risk
profile.
GOING FORWARD:
After an excruciatingly bad stretch of relative performance for contrarian
value-oriented strategies and an incredibly rewarding period of returns for
momentum growth-oriented strategies, we are increasingly convinced that there
will be a reversion to the mean in terms of the performance of value versus
growth. We are sticking to the philosophy that has served our investors well in
the past and continue to invest in stocks offering both "good value and good
news". We feel that this would be a particularly inopportune time to change our
stripes and begin to move away from our discipline. It is typically at the point
of greatest discomfort that deserting a style will result in the greatest
punishment. The benefits of investing across equity styles accrue to those who
are diversified when the rotations occur -- the most recent example being in the
second quarter of 1999 when the cyclical stocks raged back into favor after a
long period of dormancy.
For the year ended December 31, 1999, the Armada Equity Income Fund produced a
total return of -0.25 percent (before sales charges) for Class A investors,
- -0.92 percent (before sales charges) for Class B investors, and -0.13 percent
for Class I investors. Over the same period, the Fund's benchmark, Standard &
Poor's/BARRA Value Index, produced a total return of 12.72 percent.
<PAGE> 217
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE ARMADA
SMALL CAP GROWTH FUND, CLASS I, CLASS A, OR SYNTHETIC CLASS B, VERSUS
THE RUSSELL 2000 INDEX, AND THE RUSSELL 2000 GROWTH INDEX
<TABLE>
<CAPTION>
- ------------------------------------
One Year Annualized Cumulative
Return Inception Inception
to Date to Date
- ------------------------------------
<S> <C> <C>
36.06% 20.49% 56.91% Class I
- ------------------------------------
35.63% 20.17% 55.90% Class A
- ------------------------------------
28.17% 17.40% 47.36% With Load
- ------------------------------------
34.81% 19.53% 53.89% Synthetic Class B
- ------------------------------------
29.81% 18.23% 49.89% With Load
- ------------------------------------
20.25% 44.16% Class B (Actual)
-------------------------
18.13% 39.16% With Load
-------------------------
</TABLE>
Small Cap Growth
Past performance is not predictive of future performance.
1 Class I Shares are sold primarily to banks and trust companies which are
affiliated with National City Corporation and clients of National Asset
Management Corporation ("NAM"). Certain account level charges may apply.
2 The Armada Small Cap Growth Fund's date of inception was August 1, 1997 for
both Class I Shares and Class A Shares and January 6, 1998 for Class B Shares.
3 The return and principal value of an investment will fluctuate. When redeemed,
shares may be worth more or less than their original cost.
4 Performance calculated based on the maximum front-end sales charge in effect
at DECEMBER 31, 1999, of 5.50%.
5 Performance calculated based on the maximum deferred sales charge in effect at
DECEMBER 31, 1999, of 5.00%. This charge declines from 5.00% in the first year
to 0.00% after five years, as outlined in the prospectus.
6 The performance chart for the Class B Shares includes performance of the Class
A Shares from date of inception.
ARMADA SMALL CAP GROWTH FUND
Small capitalization stocks finally managed to outperform large capitalization
stocks, albeit modestly in 1999. Small capitalization technology stocks had
eye-popping, triple-digit returns during 1999, though a disproportionate amount
of the gains were booked from mid-October on. Semiconductor related stocks were
important contributors to the Armada Small Cap Growth Fund during the second
half of the year. Software stocks became big contributors during the latter
stages of the year as well, especially in the areas of business intelligence and
telecom service provider network monitoring. The technology sector is the
largest single sector for the Fund and it maintains an overweighted position in
technology issues relative to the Russell 2000 Growth comparison benchmark. As
of December 31, 1999, the Fund's allocation in the technology sector is 48.3%
versus the Index at 40.8%. We believe the fundamental outlook for these
companies is still strong.
For the year ended December 31, 1999, the Armada Small Cap Growth Fund produced
a total return of 35.63 percent (before sales charges) for Class A investors,
34.81 percent (before sales charges) for Class B investors, and 36.06 percent
for Class I investors. Over the same period, the Fund's benchmark produced a
total return of 43.10% percent.
GOING FORWARD
After the unprecedented returns in 1999, one could reasonably become concerned
with how extended some of the markets favorite stocks became during the last ten
weeks of 1999. The continued upward pressure on interest rates is also a
concern. Our inclination is to reduce our overweight to technology and reduce
exposure to those stocks that have been driven up to levels that cannot be
justified by the fundamentals. However, markets tend to defy conventional wisdom
at times. This bull market more than any other has defied conventional wisdom
from the beginning of its advance. In recognition of this, we will refrain from
stepping out of our small cap growth discipline.
We believe the fundamentals for many technology groups remain strong. Biotech
has gotten increased attention lately and the Fund has benefited from the
increased exposure to the group. Semiconductor capital equipment companies are
just entering the capacity expansion phase of the industry's upturn, which
historically has led to rapid revenue growth, margin expansion, and earnings
revisions - all catalysts for stock performance. Software stocks which help
businesses improve their decision making processes (business intelligence)
should also see superior growth. Derivative plays on the growth of the internet
should continue to be fertile ground for small cap growth investors, whether in
the form of broadband wireless infrastructure equipment, web development
software, business to business enablers, or information technology services
companies who are increasingly helping customers develop e-commerce
capabilities. Our goal is to discover the emerging companies that have the best
growth prospects within these areas.
<PAGE> 218
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE
ARMADA INTERNATIONAL EQUITY FUND, CLASS I, CLASS A, OR
SYNTHETIC CLASS B, VERSUS THE MORGAN STANLEY MSCI EAFE INDEX
<TABLE>
<CAPTION>
- ------------------------------------
One Year Annualized Cumulative
Return Inception Inception
to Date to Date
- ------------------------------------
<S> <C> <C>
50.13% 23.77% 67.41% Class I
- ------------------------------------
49.71% 23.39% 66.19% Class A
- ------------------------------------
41.52% 20.55% 57.08% With Load
- ------------------------------------
48.70% 22.91% 64.61% Synthetic Class B
- ------------------------------------
43.70% 21.66% 60.61% With Load
- ------------------------------------
33.30% 76.86% Class B (Actual)
-------------------------
31.39% 71.86% With Load
-------------------------
</TABLE>
International Equity
Past performance is not predictive of future performance.
1 Class I Shares are sold primarily to banks and trust companies which are
affiliated with National City Corporation and clients of National Asset
Management Corporation ("NAM"). Certain account level charges may apply.
2 The Armada International Equity Fund's date of inception was August 1, 1997
for both Class I Shares and Class A Shares and January 6, 1998 for Class B
Shares.
3 The return and principal value of an investment will fluctuate. When redeemed,
shares may be worth more or less than their original cost.
4 Performance calculated based on the maximum front-end sales charge in effect
at DECEMBER 31, 1999, of 5.50%.
5 Performance calculated based on the maximum deferred sales charge in effect at
DECEMBER 31, 1999, of 5.00%. This charge declines from 5.00% in the first year
to 0.00% after five years, as outlined in the prospectus.
6 The performance chart for the Class B Shares includes performance of the Class
A Shares from date of inception.
ARMADA INTERNATIONAL EQUITY FUND
For the year, the performance of Pacific Rim stocks outdistanced European stock
by a wide margin, 57.6% vs. 15.9% respectively, even as the heavily technology
and communication oriented Nordic regions posted a spectacular 87.0% advance.
During the quarter, both European and Far Eastern stocks moved in relative sync,
generating returns of 17.4% and 16.8% respectively. During the month of
December, however, European stock outperformed the Pacific Rim issues,
generating returns of 10.3% and 6.6% respectively, as new German tax reform,
stronger industrial production, and increased consumer confidence fueled strong
stock European performance.
Currently, the Fund maintains its most significant overweighting in the Pacific
Rim at 39.0%, while being underweight to Europe (58.8%). The largest country
allocations are to Japan, United Kingdom, and France which are 26.5%, 16.1% and
11.7%, respectively. The Funds most significant overweighted positions relative
to the Morgan Stanley EAFE Index are to Hong Kong, Singapore, and France. The
most significant underweighted positions relative to the MSCI EAFE benchmark are
to the United Kingdom, Netherlands, and Germany.
GOING FORWARD
We continue to be constructive on the outlook for international stocks relative
to the United States. Markets outside the United States offer better value with
more accommodative monetary policy, and excellent scope for earnings growth amid
accelerating economic growth and corporate restructuring. Recently, the
movements of bonds, currencies, and equity markets suggest that global investors
are looking increasingly outside the US.
The differences between Europe and Asia have greatly lessened over the past
year, as Europe's growth has been accelerating since mid-1999 while Japan faces
continuing struggles to maintain the pace of growth amid a high level of
structural change. Non-Japan Asia continues to offer the best combination of
relative value, improving conditions, and improving investor sentiment. Emerging
markets are also relatively attractive despite a strong recovery in 1999.
Within global sectors, we see a few structural shifts. Improving pricing in a
number industries suggest that basic materials, energy, and insurance should
perform better in the year to come. Moreover, the high degree of negative news
and lack of earnings growth in the pharmaceutical industry have been well
telegraphed to markets, leading to attractive entry points for select stocks.
Telecommunications and technology remain highly attractive for their growth
prospects, but the degree of our emphasis in these sectors has been trimmed.
Interest sensitive sectors, outside of insurance, remain under intense
competitive pressure, affecting margin expansion.
For the year ended December 31, 1999, the Armada International Equity Fund
produced a total return of 49.71 percent (before sales charges) for Class A
investors, 48.70 percent (before sales charges) for Class B investors, and 50.13
percent for Class I investors. Over the same period, the Fund's benchmark
produced a total return of 26.96 percent.
<PAGE> 219
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE
ARMADA BALANCED ALLOCATION FUND, CLASS I, CLASS A, OR CLASS B,
VERSUS THE S&P 500 COMPOSITE INDEX, THE LEHMAN AGGREGATE
BOND INDEX, AND A 60% S&P 500 / 40% LEHMAN AGGREGATE BLEND
<TABLE>
<CAPTION>
- -------------------------------------
One Year Annualized Cumulative
Return Inception Inception
to Date to Date
- -------------------------------------
<S> <C> <C>
15.27% 14.31% 21.83% Class I
- -------------------------------------
14.97% 16.89% 24.79% Class A
- -------------------------------------
9.55% 12.91% 18.81% With Load
- -------------------------------------
14.28% 20.09% 23.14% Class B
- -------------------------------------
9.28% 15.79% 18.14% With Load
- -------------------------------------
</TABLE>
Balanced Allocation
Past performance is not predictive of future performance.
1 Class I Shares are sold primarily to banks and trust companies which are
affiliated with National City Corporation and clients of National Asset
Management Corporation ("NAM"). Certain account level charges may apply.
2 The Armada Balanced Allocation Fund's date of inception was July 10, 1998 for
Class I Shares, July 31, 1998 for Class A Shares and November 11, 1998 for Class
B Shares.
3 The return and principal value of an investment will fluctuate. When redeemed,
shares may be worth more or less than their original cost.
4 Performance calculated based on the maximum front-end sales charge in effect
at DECEMBER 31, 1999 of 4.75%.
5 Performance calculated based on the maximum deferred sales charge in effect at
DECEMBER 31, 1999 of 5.00%. This charge declines from 5.00% in the first year to
0.00% after five years, as outlined in the prospectus.
6 The performance chart for Class B Shares includes performance of the Class A
Shares from date of inception.
ARMADA BALANCED ALLOCATION FUND
The Armada Balanced Allocation Fund's traditional emphasis on equity holdings
was greatly rewarded during both the fourth quarter 1999 and the entire year. In
addition, the Fund's growth style of investing was particularly advantageous.
This was especially true of its increased investment in small cap and
international growth stocks. In terms of fixed income, interest rates rose less
in the fourth quarter than in the year's first half. Accordingly, while absolute
fixed income returns were again negative in the fourth quarter, they were only
marginally so. At year-end, approximately 62% of the Fund was invested in large
cap stocks.
The Fund's equity exposure was maintained at its normal level throughout the
third quarter, as the positive and negatives for the market were carefully
analyzed. On the positive side were our forecasts of strong corporate earnings
growth, our beliefs that inflation will remain relatively well behaved, that the
Federal Reserve will not embark on an additional series of interest rate
increases, and that the worst of the rise in long-term interest rates had
already been seen. Negatives factors include the increasing pace of economic
growth throughout the entire world, the corresponding fears of cyclical
pressures on inflation and resulting pressures on world central banks to raise
interest rates. Additional negative factors include our long-held concerns about
the extreme narrowness of the overall equity market, as well as the
unprecedented levels of valuation and expectations which are embedded in the
growth sectors in particular. Within the Fund, the recent excellent returns in
both the small capitalization and international equity components has narrowed
their previous advantage in terms of relative valuation. Accordingly, their
relative weightings remained constant in the fourth quarter. In regards to fixed
income, the Fund maintained its neutral position in terms of both its overall
weight, as well as its interest rate sensitivity. Our relatively sanguine view
of economic conditions, coupled with historically wide credit spreads between
sectors of the fixed income markets, has led to a substantial emphasis on the
non-government or spread sectors of the fixed income markets.
GOING FORWARD:
We expect the US economy to remain "stronger for longer", assisted by the first
synchronous global upswing in over a decade. In terms of inflation, while
cyclical pressures are readily apparent, we believe the combination of
technology-induced advancements in productivity coupled with an
intensely-competitive global environment, will translate into higher but still
secularly-low levels of inflation. As for monetary policy, we expect global
central banks, including the Federal Reserve, to continue their recent
tightening moves in the early part of 2000. However, if correct on our inflation
views, we think short rate hikes will be of limited magnitude and that long
rates will likely decline in the year's latter half. As for the equity market,
our continued confidence in solid growth, healthy profits and a positive
supply/demand relationship means the overall backdrop remains solid. However,
central bank tightening, coupled with the historic highs in growth stock
valuation and exuberant expectations almost ensures that volatility/risks will
remain elevated throughout the financial markets.
Specific to the Armada Balanced Allocation Fund, equity exposure will likely
remain near the normal level, as the countervailing forces of positive economic
growth, strong corporate earnings growth and a positive supply/demand situation,
counterbalance the negatives of higher interest rates, coupled with elevated
stock valuations. In terms of allocation within the equity market, the
overweighting of small capitalization stocks will likely be marginally reduced,
as their recent returns have been dramatic. The relative reduction in small cap
will be transferred to an overweight in the international arena, as expected
structural reforms combine with attractive relative valuations in a number of
foreign markets. As for fixed income, we will again wait for interest rates to
attain new highs before either adding to our exposure, or much more likely,
extending portfolio duration. While bond valuation appears increasingly
attractive, higher economic growth and an inflation concerned Federal Reserve
are potent obstacles to a sustained rally. While waiting for such an
opportunity, which we believe will eventually surface, we will continue to
overweight non-government securities, where yields are more attractive than
those available with government securities.
For the year ended December 31, 1999, the Armada Balanced Allocation Fund
produced a total return of 14.97 percent (before sales charges) for Class A
investors, 14.28 percent (before sales charges) for Class B investors, and 15.27
percent for Class I investors. By comparison, the S&P 500 Composite Index
returned 21.04 percent, the Lehman Aggregate Bond Index returned -0.83 percent
the Balanced Allocation Hybrid Benchmark returned 12.00 percent for the year.
This benchmark reflects a blending of the S&P 500 Composite Index and the Lehman
Aggregate Bond Index.
<PAGE> 220
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE
ARMADA NATIONAL TAX EXEMPT FUND, CLASS I, CLASS A, OR CLASS B,
VERSUS THE LEHMAN 10 YEAR MUNICIPAL INDEX
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
One Year Annualized Annualized Annualized Annualized Cumulative
Return 3 Year 5 Year 10 Year Inception Inception
Return Return Return to Date to Date
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
-1.12% 3.74% 4.73% 5.28% 6.68% 171.18% Class I
- ---------------------------------------------------------------------
-0.91% 3.78% 4.75% 5.29% 6.69% 171.52% Class A
- ---------------------------------------------------------------------
-5.58% 2.11% 3.73% 4.78% 6.35% 158.68% With Load
- ---------------------------------------------------------------------
-1.81% 3.47% 4.56% 5.20% 6.63% 169.06% Class B
- ---------------------------------------------------------------------
-6.53% 2.26% 4.24% 5.20% 6.63% 169.06% With Load
- ---------------------------------------------------------------------
</TABLE>
National Tax Exempt
Past performance is not predictive of future performance.
1 Class I Shares are sold primarily to banks and trust companies which are
affiliated with National City Corporation and clients of National Asset
Management Corporation ("NAM"). Certain account level charges may apply.
2 The Armada National Tax Exempt Fund's date of inception was April 9, 1998 for
Class I Shares, June 22, 1998 for Class A Shares, and January 28, 1999 for Class
B Shares. The performance of the Class I Shares, Class A Shares, and Class B
Shares includes performance of a predecessor common trust fund which commenced
operations on July 31, 1984.
3 The return and principal value of an investment will fluctuate. When redeemed,
Shares may be worth more or less than their original cost.
4 Performance calculated based on the maximum front-end sales charge in effect
at DECEMBER 31, 1999 of 4.75%.
5 Performance calculated based on the maximum deferred sales charge in effect at
DECEMBER 31, 1999 of 5.00%. This charge declines from 5.00% in the first year to
0.00% after five years, as outlined in the prospectus.
6 The performance chart for all Classes includes performance of a predecessor
common trust fund.
7 This fund is not managed for total return. Its investment objective is to
provide as high a level of current interest income exempt from federal income
tax, as is consistent with conservation of capital.
ARMADA NATIONAL TAX EXEMPT BOND FUND
The Armada National Tax Exempt Bond Fund's gross total return for the fourth
quarter of 1999 was competitive with its benchmark index, and in excess of the
average for its peer group, as measured by the Lipper Intermediate Municipal
Fund universe. For the year ended December 31, 1999, the Armada National Tax
Exempt Bond Fund produced a total return of -0.91 percent (before sales charges)
for Class A investors, -1.81 percent (before sales charges) for Class B
investors, and -1.12 percent for Class I investors. Over the same period, the
Fund's benchmark, the Lehman 10-Year Municipal Bond Index produced a total
return of -1.24 percent
The Fund's average maturity and duration are slightly longer than its benchmark,
but the Fund contains significantly more higher coupon bonds, which is
consistent with the Fund's primary investment objective of income generation and
relative stability. Credit quality remains extremely high with more than 95% of
the Fund's holdings rated double A or higher.
GOING FORWARD:
We expect the municipal market to remain volatile over the next few months, and
anticipate that the Federal Reserve will have to raise interest rates at least
once during the first quarter of 2000. Consequently, we will continue our
strategy of purchasing higher-coupon bonds and executing swaps that could
increase the Fund's income distribution yield. New purchases will continue to
focus on higher-rated securities until spreads between credit grades widen.
<PAGE> 221
THE PARKSTONE GROUP OF FUNDS
ONE FREEDOM VALLEY DRIVE
OAKS, PENNSYLVANIA 19456
ARMADA FUNDS
ONE FREEDOM VALLEY DRIVE
OAKS, PENNSYLVANIA 19456
STATEMENT OF ADDITIONAL INFORMATION
(2000 SPECIAL MEETING OF SHAREHOLDERS OF THE
PARKSTONE GROUP OF FUNDS)
This Statement of Additional Information is not a prospectus but should
be read in conjunction with the Combined Prospectus/Proxy Statement dated March
13, 2000 for the Special Meeting of The Shareholders of Parkstone Group of
Funds, to be held on May 10, 2000. Copies of the Combined Prospectus/Proxy
Statement may be obtained at no charge by calling The Parkstone Group of Funds
at 1-800-451-8377.
Unless otherwise indicated, capitalized terms used herein and not
otherwise defined have the same meanings as are given to them in the Combined
Prospectus/Proxy Statement.
Further information about the Class A Shares, Class B Shares and Class
I Shares of the Existing Armada Funds is contained in, and incorporated by
reference to, Armada's Statement of Additional Information dated December 10,
1999.
Further information about Investor A Shares, Investor B Shares and
Institutional Shares of the Reorganizing Funds is contained in, and incorporated
by reference to, Parkstone's Statement of Additional Information dated September
17, 1999.
The date of this Statement of Additional Information is March 13, 2000.
1
<PAGE> 222
TABLE OF CONTENTS
Page
----
General Information........................................... 3
Pro Forma Financial Statements................................ PFS-1
2
<PAGE> 223
GENERAL INFORMATION
The Shareholders of The Parkstone Group of Funds ("Parkstone") are
being asked to approve or disapprove an Agreement and Plan of Reorganization
(the "Reorganization Agreement") dated as of November 17, 2000 between Parkstone
and Armada Funds ("Armada"), and the transactions contemplated thereby. The
Reorganization Agreement contemplates the transfer of substantially all of the
assets and liabilities of Parkstone's Prime Obligations Fund, U.S. Government
Obligations Fund, Tax-Free Fund, Bond Fund, U.S. Government Income Fund, Limited
Maturity Bond Fund, Intermediate Government Obligations Fund, Large
Capitalization Fund, Equity Income Fund, Small Capitalization Fund,
International Discovery Fund, Balanced Allocation Fund, National Tax Exempt Bond
Fund, Mid Capitalization Fund, Michigan Municipal Bond Fund and Treasury Fund to
corresponding Armada Funds in exchange for full and fractional shares
representing interests in such corresponding Armada Funds. The shares issued by
Armada will have an aggregate net asset value equal to the aggregate net asset
value of the shares of the respective Parkstone Funds that are outstanding
immediately before the Effective Time of the Reorganization.
Following the exchange, the Parkstone Funds will make a liquidating
distribution of corresponding Armada Funds shares to their shareholders. Each
shareholder owning shares of a particular Parkstone Fund at the Effective Time
of the Reorganization will receive shares of the corresponding Armada Fund of
equal value, plus the right to receive any unpaid dividends and distributions
that were declared before the Effective Time of the Reorganization on Parkstone
Fund shares. Upon completion of the Reorganization, Parkstone will be terminated
under state law and deregistered under the Investment Company Act of 1940.
The Special Meeting of Shareholders of Parkstone to consider the
Reorganization Agreement and the related transactions will be held at 3:00 p.m.
(Eastern time) on May 10, 2000 at SEI Investments Co., One Freedom Valley Drive,
Oaks, Pennsylvania 19456. For further information about the transaction, see the
Combined Prospectus/Proxy Statement.
3
<PAGE> 224
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1999
(Amounts in Thousands)
<TABLE>
<CAPTION>
Parkstone
Prime Armada
Obligations Money Market Pro Forma
Fund Fund Combined
<S> <C> <C> <C>
TOTAL INVESTMENTS: 613,419 3,885,836 4,499,255
------- --------- ---------
ASSETS
Cash 52 (29,398) (29,346)
Accrued Income 1,790 6,495 8,285
Investment Securities Sold 0 0 0
Cap Shares Sold 24 11 350
Other Assets 14 0 14
TOTAL ASSETS: 615,299 3,862,944 4,478,243
------- --------- ---------
LIABILITIES
Income Payable 2,492 16,531 19,023
Capital Gain Payable 0 0 0
Investment Securities Purchased 4,926 24,628 29,554
Capital Shares Redeemed Payable 418 0 418
Accrued Expense Payable 374 3,342 3,716
Other Payables 0 0 0
TOTAL LIABILITIES: 8,210 44,501 52,711
------- --------- ---------
TOTAL NET ASSETS: 607,089 3,818,443 4,425,532
</TABLE>
4
<PAGE> 225
STATEMENT OF OPERATIONS
SIX MONTH PERIOD ENDING NOVEMBER 30, 1999
(Amounts in Thousands)
<TABLE>
<CAPTION>
Parkstone Prime Armada
Obligations Money Market Pro Forma
Fund Fund Combined
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest 16,325 97,549 113,874
------ ------ -------
TOTAL INCOME: 16,325 97,549 113,874
------ ------ -------
EXPENSES:
Administrator Fees 674 1,434 2,108
Investment Advisory Fees 1,176 6,422 7,598
Waiver of Investment Advisory Fees (13) (1,835) (1,848)
Transfer Agent Fees 61 22 83
Custodian Fees 37 367 404
Professional Fees (Audit + Legal) 24 115 139
Trustee (Directors) Fees 5 28 33
Registration Fees 17 5 22
12b-1 Fees 25 736 761
Shareholder Servicing Fees 0 1,095 1,095
Printing Expenses 32 75 107
Miscellaneous Expenses 8 15 23
TOTAL EXPENSES: (2,046) (8,479) (10,525)
------ ------ -------
NET INVESTMENT INCOME: 14,279 89,070 103,349
------ ------ -------
Net Realized Gains (Losses) on Investments 0 0 0
Net Unrealized Appreciation (Depreciation)
of Investment Securities 0 0 0
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS: 0 0 0
------ ------ -------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS: 14,279 89,070 103,349
------ ------ -------
</TABLE>
5
<PAGE> 226
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTH PERIOD ENDING NOVEMBER 30, 1999
(Amounts in Thousands)
<TABLE>
<CAPTION>
Parkstone Prime Armada
Obligations Money Market Pro Forma
Fund Fund Combined
<S> <C> <C> <C>
INVESTMENT ACTIVITIES:
Net Investment Income 14,279 89,070 103,349
Net Realized Gain (Loss) on Securities Sold - - -
Net Increase (Decrease) in Unrealized
Appreciation of Assets - - -
------- --------- ---------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS: 14,279 89,070 103,349
------- --------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional/Class I Shares (13,864) (54,173) (68,037)
Investor A/Class A Shares (403) (34,777) (35,180)
Investor B/Class B Shares (12) (9) (21)
Realized Capital Gains
Institutional/Class I Shares - - -
Investor A/Class A Shares - - -
Investor B/Class B Shares - - -
TOTAL DISTRIBUTIONS: (14,279) (88,959) (103,238)
------- --------- ---------
PAID-IN-CAPITAL:
Institutional/Class I Shares
Shares Issued 337,382 2,925,982 3,263,364
Shares Issued in Lieu of Cash Distributions - 538 538
Shares Redeemed (376,217) (2,840,334) (3,216,551)
Net Institutional/Class I Share Transactions (38,835) 86,186 47,351
------- --------- ---------
Investor A/Class A Shares
Shares Issued 67,740 2,430,586 2,498,326
Shares Issued in Lieu of Cash Distributions 170 20,184 20,354
Shares Redeemed (66,052) (2,213,338) (2,279,390)
Net Investor A/Class A Share Transactions 1,858 237,432 239,290
------- --------- ---------
Investor B/Class B Shares
Shares Issued 475 1,605 2,080
Shares Issued in Lieu of Cash Distributions 11 6 17
Shares Redeemed (661) (1,407) (2,068)
Net Investor B/Class B Share Transactions (175) 204 29
------- --------- ---------
INCREASE (DECREASE) IN NET ASSETS
FROM SHARE TRANSACTIONS: (37,152) 323,822 286,670
------- --------- ---------
BEGINNING OF PERIOD: 644,241 3,494,510 4,138,751
------- --------- ---------
END OF PERIOD: 607,089 3,818,443 4,425,532
------- --------- ---------
</TABLE>
6
<PAGE> 227
PROFORMA COMBINED SCHEDULE OF INVESTMENTS
ARMADA MONEY MARKET/
PARKSTONE PRIME OBLIGATIONS
AS OF 11/30/99
<TABLE>
<CAPTION>
Proforma Proforma
Armada Parkstone Combined Armada Parkstone Combined
Shares/Par Shares/Par Shares/Par Security Description Market Value Market Value Market Value
---------- ---------- ---------- -------------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
0.00 5,000,000.00 5,000,000.00 ALLSTATE FRN 0.00 5,000,000.00 5,000,000.00
15,000,000.00 10,000,000.00 25,000,000.00 ABBEY NAT'L BANK (5.13%) 14,995,706.18 9,997,137.45 24,992,843.63
10,000,000.00 0.00 10,000,000.00 ABBEY NATIONAL 9,910,000.00 0.00 9,910,000.00
15,000,000.00 0.00 15,000,000.00 ABBEY NATIONAL 14,784,916.66 0.00 14,784,916.66
15,000,000.00 0.00 15,000,000.00 ABBEY NAT'L CP (4.97%) 15,000,000.00 0.00 15,000,000.00
15,000,000.00 5,000,000.00 20,000,000.00 ABBEY NAT'L CP (5.355%) 14,995,537.50 4,998,513.89 19,994,051.39
15,000,000.00 5,000,000.00 20,000,000.00 ABBEY NATIONAL CP 14,979,975.00 4,993,325.00 19,973,300.00
18,750,000.00 0.00 18,750,000.00 AKZO NOBEL 18,472,083.34 0.00 18,472,083.34
0.00 5,000,000.00 5,000,000.00 AKZO NOBEL 0.00 4,921,861.11 4,921,861.11
25,000,000.00 5,000,000.00 30,000,000.00 AKZO NOBEL 24,598,500.00 4,919,700.00 29,518,200.00
10,000,000.00 0.00 10,000,000.00 AKZO NOBEL 9,834,055.55 0.00 9,834,055.55
15,000,000.00 5,000,000.00 20,000,000.00 AKZO NOBEL 14,729,437.50 4,909,812.50 19,639,250.00
15,000,000.00 0.00 15,000,000.00 ALLSTATE CORP CP (5.75%) 14,849,062.50 0.00 14,849,062.50
15,000,000.00 0.00 15,000,000.00 ALLSTATE CORPORATION CP 14,753,658.34 0.00 14,753,658.34
15,000,000.00 0.00 15,000,000.00 ALCOA CP 15,000,000.00 0.00 15,000,000.00
15,000,000.00 0.00 15,000,000.00 ALCOA CP 14,984,541.67 0.00 14,984,541.67
15,000,000.00 5,000,000.00 20,000,000.00 AMERICAN EXPRESS CO 14,878,520.83 4,963,386.11 19,841,906.94
15,000,000.00 5,000,000.00 20,000,000.00 AMERICAN EXPRESS CO 14,860,466.66 4,953,488.89 19,813,955.55
10,000,000.00 0.00 10,000,000.00 AMERICAN EXPRESS 9,908,008.34 0.00 9,908,008.34
30,000,000.00 5,000,000.00 35,000,000.00 AMERICAN EXPRESS CO 29,700,337.50 4,950,691.66 34,651,029.16
15,000,000.00 15,000,000.00 AMERICAN EXPRESS 14,845,775.00 0.00 14,845,775.00
15,000,000.00 5,000,000.00 20,000,000.00 AMERICAN EXPRESS CO 14,845,125.00 4,948,375.00 19,793,500.00
15,000,000.00 0.00 15,000,000.00 AMERICAN GENERAL CORP 14,817,812.50 0.00 14,817,812.50
15,000,000.00 0.00 15,000,000.00 AMERICAN GENERAL CORP 14,780,083.34 0.00 14,780,083.34
25,000,000.00 5,000,000.00 30,000,000.00 AMERICAN GENERAL CORP 24,576,354.17 4,915,270.83 29,491,625.00
15,000,000.00 5,000,000.00 20,000,000.00 AM HOME PROD CP (5.42%) 14,875,791.67 4,958,597.22 19,834,388.89
15,000,000.00 0.00 15,000,000.00 AMERICAN HOME PRODUCTS 14,843,025.00 0.00 14,843,025.00
15,000,000.00 5,000,000.00 20,000,000.00 AMERICAN HOME CP (5.72%) 14,816,483.33 4,938,827.78 19,755,311.11
5,836,000.00 0.00 5,836,000.00 AMERICAN HOME PROD 5,757,959.71 0.00 5,757,959.71
15,000,000.00 5,000,000.00 20,000,000.00 AMERICAN HOME PPRODUCTS 14,772,000.00 4,924,000.00 19,696,000.00
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<S> <C> <C> <C> <C> <C> <C>
15,000,000.00 0.00 15,000,000.00 AMERICAN HOME PRODUCTS 14,719,687.50 0.00 14,719,687.50
25,000,000.00 0.00 25,000,000.00 AT & T CORP 24,996,333.33 0.00 24,996,333.33
15,000,000.00 5,000,000.00 20,000,000.00 AT&T FLOATER (Q13) 14,996,311.48 4,998,770.49 19,995,081.97
15,000,000.00 0.00 15,000,000.00 TRAVELERS FDG (Q/29) 15,000,000.00 0.00 15,000,000.00
15,000,000.00 0.00 15,000,000.00 ARCHER DANIELS 14,698,650.00 0.00 14,698,650.00
15,000,000.00 0.00 15,000,000.00 ASSOC FIRST CP (5.70%) 14,814,750.00 0.00 14,814,750.00
15,000,000.00 0.00 15,000,000.00 ASSOC FIRST CP (5.71%) 14,783,495.83 0.00 14,783,495.83
15,000,000.00 0.00 15,000,000.00 ASSOC FIRST CP (5.32%) 14,988,916.67 0.00 14,988,916.67
5,000,000.00 0.00 5,000,000.00 ASSOC FIRST CAP (5.31%) 4,994,837.50 0.00 4,994,837.50
15,000,000.00 5,000,000.00 20,000,000.00 ATLANTIC RICHFLD (5.30%) 14,997,791.67 4,999,263.89 19,997,055.56
15,000,000.00 5,000,000.00 20,000,000.00 BP AMOCO (4.86%) 14,890,650.00 4,963,550.00 19,854,200.00
38,325,000.00 0.00 38,325,000.00 BAKER HUGHES 38,325,000.00 0.00 38,325,000.00
15,000,000.00 10,000,000.00 25,000,000.00 BANK OF MONTREAL (5.16%) 14,997,562.19 9,998,374.80 24,995,936.99
9,000,000.00 4,915,000.00 13,915,000.00 BASS FINANCIAL 8,895,807.50 4,858,099.32 13,753,906.82
0.00 5,000,000.00 5,000,000.00 BASS FINANCIAL 0.00 4,932,331.94 4,932,331.94
14,190,000.00 5,000,000.00 19,190,000.00 BASS FINANCIAL 13,995,313.20 4,931,400.00 18,926,713.20
15,000,000.00 5,000,000.00 20,000,000.00 BASS FINANCE LTD 14,988,937.50 4,996,312.50 19,985,250.00
15,610,000.00 0.00 15,610,000.00 BASS FINANCIAL 15,610,000.00 0.00 15,610,000.00
20,000,000.00 5,000,000.00 25,000,000.00 BAYERISCHE LANDISBANK 20,000,000.00 5,000,000.00 25,000,000.00
20,000,000.00 5,000,000.00 25,000,000.00 BAYERISCHE LANDISBANK 20,000,000.00 5,000,000.00 25,000,000.00
21,800,000.00 0.00 21,800,000.00 BELL ATLANTIC FIN SVCS 21,647,932.89 0.00 21,647,932.89
15,000,000.00 0.00 15,000,000.00 BELL SOUTH CAPL FDG 14,867,083.34 0.00 14,867,083.34
10,000,000.00 0.00 10,000,000.00 ALLSTATE FUNDING (Q1) 10,000,000.00 0.00 10,000,000.00
10,000,000.00 0.00 10,000,000.00 ALLSTATE FUNDING (M1) 10,000,000.00 0.00 10,000,000.00
7,650,000.00 0.00 7,650,000.00 BROWN FOREMAN 7,595,302.50 0.00 7,595,302.50
10,000,000.00 0.00 10,000,000.00 BROWN FOREMAN CORP 9,906,583.33 0.00 9,906,583.33
13,715,000.00 0.00 13,715,000.00 BROWN FOREMAN 13,715,000.00 0.00 13,715,000.00
10,000,000.00 0.00 10,000,000.00 CORP ASSET FUNDING CP 9,921,055.56 0.00 9,921,055.56
0.00 5,000,000.00 5,000,000.00 CAMPBELL SOUP 0.00 5,000,000.00 5,000,000.00
15,000,000.00 0.00 15,000,000.00 CAMPBELL SOUP 15,000,000.00 0.00 15,000,000.00
15,000,000.00 5,000,000.00 20,000,000.00 CARGILL INC CP (5.42%) 14,889,341.67 4,963,113.89 19,852,455.56
15,000,000.00 0.00 15,000,000.00 CARGILL INC CP (5.70%) 14,897,875.00 0.00 14,897,875.00
12,475,000.00 0.00 12,475,000.00 CARGILL INC CP (5.72%) 12,387,785.89 0.00 12,387,785.89
15,000,000.00 0.00 15,000,000.00 CARGILL INC CP (5.40%) 14,887,500.00 0.00 14,887,500.00
15,000,000.00 0.00 15,000,000.00 CARGILL INC CP (5.42%) 14,884,825.00 0.00 14,884,825.00
15,000,000.00 5,000,000.00 20,000,000.00 CATERPILLAR FINANCIAL 14,785,658.33 4,928,552.78 19,714,211.11
17,200,000.00 5,000,000.00 22,200,000.00 CATERPILLAR FINANCIAL 16,906,262.23 4,914,611.11 21,820,873.34
10,000,000.00 0.00 10,000,000.00 ALLSTATE FND (Q30/Q1) 10,000,000.00 0.00 10,000,000.00
15,000,000.00 5,000,000.00 20,000,000.00 CIESCO 14,864,666.67 4,954,888.89 19,819,555.56
15,000,000.00 0.00 15,000,000.00 CIESCO LP 14,876,666.67 0.00 14,876,666.67
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<S> <C> <C> <C> <C> <C> <C>
15,000,000.00 0.00 15,000,000.00 CIESCO L.P. 14,827,916.66 0.00 14,827,916.66
15,000,000.00 0.00 15,000,000.00 CIESCO 14,984,541.67 0.00 14,984,541.67
15,000,000.00 5,000,000.00 20,000,000.00 CIESCO L.P. 14,973,250.00 4,991,083.33 19,964,333.33
25,000,000.00 5,000,000.00 30,000,000.00 CIESCO L.P. 25,000,000.00 5,000,000.00 30,000,000.00
205,000,000.00 0.00 205,000,000.00 REPO (5.75 %) BOSTON 205,000,000.00 0.00 205,000,000.00
64,202,000.00 0.00 64,202,000.00 REPO (5.69 %) LEHM 64,202,000.00 0.00 64,202,000.00
25,000,000.00 0.00 25,000,000.00 REPO (5.72 %) PRUD 25,000,000.00 0.00 25,000,000.00
8,500,000.00 0.00 8,500,000.00 COLGATE PALMOLIVE 8,431,527.77 0.00 8,431,527.77
15,000,000.00 5,000,000.00 20,000,000.00 COMERICA BANK FRN (M31/M) 14,994,435.18 4,998,145.06 19,992,580.24
15,000,000.00 0.00 15,000,000.00 TRAVELERS FDG (M17) 15,000,000.00 0.00 15,000,000.00
0.00 5,000,000.00 5,000,000.00 CORPORATE ASSET FUNDING 0.00 4,957,986.11 4,957,986.11
28,664,000.00 5,000,000.00 33,664,000.00 CORPORATE ASSET FUNDING 28,394,281.48 4,953,100.00 33,347,381.48
10,000,000.00 0.00 10,000,000.00 CORP ASSET CP (5.91 %) 9,904,783.33 0.00 9,904,783.33
15,000,000.00 5,000,000.00 20,000,000.00 CORPORATE ASSET FUNDING 14,822,500.00 4,940,833.34 19,763,333.34
10,000,000.00 0.00 10,000,000.00 CORPORATE ASET FDG 9,998,513.89 0.00 9,998,513.89
15,000,000.00 5,000,000.00 20,000,000.00 CORPORATE ASSET FDG 14,973,500.00 4,991,166.67 19,964,666.67
10,000,000.00 0.00 10,000,000.00 CORPORATE ASSET FDG 9,977,083.33 0.00 9,977,083.33
15,000,000.00 5,000,000.00 20,000,000.00 DAIMLER CHRYSLER MONTHLY 14,989,235.80 4,996,411.93 19,985,647.73
15,000,000.00 0.00 15,000,000.00 DAIMLER CHRYSLER 14,742,312.50 0.00 14,742,312.50
15,000,000.00 5,000,000.00 20,000,000.00 DAIMLER CHRYSLER (5.31%) 14,984,512.50 4,994,837.50 19,979,350.00
25,000,000.00 5,000,000.00 30,000,000.00 DAIMLER CHRYSLER (5.31%) 24,948,316.67 4,989,675.00 29,937,991.67
15,000,000.00 0.00 15,000,000.00 DAIMLER CHRYSLER (5.55%) 14,854,312.50 0.00 14,854,312.50
15,000,000.00 0.00 15,000,000.00 DAIMLER CHRYSLER (5.59%) 14,836,958.33 0.00 14,836,958.33
15,000,000.00 0.00 15,000,000.00 DAIMLER CHRYSLER (5.70%) 14,783,875.00 0.00 14,783,875.00
15,000,000.00 0.00 15,000,000.00 JOHN DEERE 14,898,150.00 0.00 14,898,150.00
20,000,000.00 0.00 20,000,000.00 JOHN DEERE CAP 19,754,027.77 0.00 19,754,027.77
15,000,000.00 0.00 15,000,000.00 DELAWARE FUNDING 14,893,395.83 0.00 14,893,395.83
10,000,000.00 5,000,000.00 15,000,000.00 DELAWARE FDG 9,922,000.00 4,961,000.00 14,883,000.00
10,000,000.00 0.00 10,000,000.00 DELAWARE FUNDING 9,915,277.78 0.00 9,915,277.78
0.00 5,000,000.00 5,000,000.00 DELAWARE FUNDING 0.00 4,958,704.17 4,958,704.17
35,000,000.00 0.00 35,000,000.00 DELAWARE FUNDING CP 34,690,250.00 0.00 34,690,250.00
15,000,000.00 0.00 15,000,000.00 DELAWARE FDG CP (5.80%) 14,798,725.00 0.00 14,798,725.00
0.00 5,000,000.00 5,000,000.00 DELAWARE FUNDING CP 0.00 4,932,908.33 4,932,908.33
15,000,000.00 0.00 15,000,000.00 DEN DANSKE 14,861,812.50 0.00 14,861,812.50
20,000,000.00 5,000,000.00 25,000,000.00 DEN DANSKE CP (5.34%) 19,961,415.28 4,990,358.33 24,951,773.61
15,000,000.00 0.00 15,000,000.00 DEN DANSKE CP 14,953,362.50 0.00 14,953,362.50
20,000,000.00 0.00 20,000,000.00 DEN DANSKE 19,860,466.67 0.00 19,860,466.67
15,000,000.00 0.00 15,000,000.00 DEN DANSKE 14,858,833.33 0.00 14,858,833.33
0.00 5,000,000.00 5,000,000.00 DEN DANSKE 0.00 4,870,958.34 4,870,958.34
15,000,000.00 0.00 15,000,000.00 DEN DANSKE 14,783,804.16 0.00 14,783,804.16
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<S> <C> <C> <C> <C> <C> <C>
15,000,000.00 0.00 15,000,000.00 DEUTCHE BANK 14,916,983.33 0.00 14,916,983.33
15,000,000.00 5,000,000.00 20,000,000.00 DEUTCHE BANK FIN (5.74%) 14,882,808.33 4,960,936.11 19,843,744.44
15,000,000.00 5,000,000.00 20,000,000.00 DEUTCHE BANK CP (5.34%) 14,968,850.00 4,989,616.67 19,958,466.67
25,000,000.00 0.00 25,000,000.00 DEUTCHE BANK NY 24,996,753.20 0.00 24,996,753.20
15,000,000.00 0.00 15,000,000.00 DEUTSCHE BANK (5.05%) 14,998,288.04 0.00 14,998,288.04
10,000,000.00 5,000,000.00 15,000,000.00 DIAGEO CP (5.55%) 9,935,250.00 4,967,625.00 14,902,875.00
45,000,000.00 5,000,000.00 50,000,000.00 DIAGEO PLC 44,643,000.00 4,960,333.33 49,603,333.33
15,000,000.00 5,000,000.00 20,000,000.00 DIAGEO CP (5.50%) 14,839,583.33 4,946,527.78 19,786,111.11
15,000,000.00 5,000,000.00 20,000,000.00 DIAGEO PLC 14,697,916.67 4,899,305.56 19,597,222.23
15,000,000.00 0.00 15,000,000.00 DIAGEO PLC 14,695,729.16 0.00 14,695,729.16
25,000,000.00 5,000,000.00 30,000,000.00 DRESDNER BANK 5.81% 24,838,611.11 4,967,722.22 29,806,333.33
15,000,000.00 0.00 15,000,000.00 DRESDNER CP (5.40%) 14,874,000.00 0.00 14,874,000.00
30,000,000.00 5,000,000.00 35,000,000.00 DRESDNER CP (5.35%) 29,937,583.33 4,989,597.22 34,927,180.55
15,000,000.00 5,000,000.00 20,000,000.00 EASTMAN KODAK 14,879,745.83 4,959,915.28 19,839,661.11
15,000,000.00 0.00 15,000,000.00 EATON CORP CP (4.95%) 14,874,187.50 0.00 14,874,187.50
10,000,000.00 5,000,000.00 15,000,000.00 EATON CORP CP (5.47%) 9,925,547.22 4,962,365.28 14,887,912.50
25,000,000.00 10,000,000.00 35,000,000.00 FHLB FLOATER (Q24/TUE) 25,000,000.00 10,000,000.00 35,000,000.00
50,000,000.00 5,000,000.00 55,000,000.00 FNMA DISC NOTE (5.265) 49,963,402.78 4,996,340.28 54,959,743.06
15,000,000.00 5,000,000.00 20,000,000.00 FORD MOTOR CREDIT CO 14,917,691.67 4,972,563.89 19,890,255.56
15,000,000.00 0.00 15,000,000.00 FMCC 14,911,350.00 0.00 14,911,350.00
15,000,000.00 0.00 15,000,000.00 FORD MOTOR CREDIT CORP CP 14,904,833.33 0.00 14,904,833.33
15,000,000.00 0.00 15,000,000.00 FMCC CP (5.56%) 14,858,683.33 0.00 14,858,683.33
15,000,000.00 0.00 15,000,000.00 FMCC 14,676,920.83 0.00 14,676,920.83
15,000,000.00 5,000,000.00 20,000,000.00 FMCC 14,659,916.66 4,886,638.89 19,546,555.55
10,000,000.00 0.00 10,000,000.00 FORD MOTOR CR CP (5.28%) 9,979,466.67 0.00 9,979,466.67
15,000,000.00 0.00 15,000,000.00 FORTUNE BRANDS CP (5.40%) 14,822,250.00 0.00 14,822,250.00
5,000,000.00 5,000,000.00 10,000,000.00 GE CAPITAL CP (5.73%) 4,933,150.00 4,933,150.00 9,866,300.00
15,000,000.00 0.00 15,000,000.00 GE CAPITAL INT'L (5.73%) 14,732,600.00 0.00 14,732,600.00
10,000,000.00 0.00 10,000,000.00 GE CAPITAL CP (5.33%) 9,977,791.67 0.00 9,977,791.67
20,000,000.00 0.00 20,000,000.00 GANNETT 19,838,027.78 0.00 19,838,027.78
15,000,000.00 0.00 15,000,000.00 GENERAL ELECTRIC CAP CORP 14,875,204.17 0.00 14,875,204.17
10,000,000.00 5,000,000.00 15,000,000.00 GE CAPITAL (4.95%) 9,912,000.00 4,956,000.00 14,868,000.00
15,000,000.00 5,000,000.00 20,000,000.00 GE CAPITAL CP (5.08%) 14,837,016.67 4,938,400.00 19,775,416.67
0.00 5,000,000.00 5,000,000.00 GENERAL ELECTRIC 0.00 4,897,975.00 4,897,975.00
15,000,000.00 0.00 15,000,000.00 GE CAP CP (5.72%) 14,816,483.33 0.00 14,816,483.33
15,000,000.00 0.00 15,000,000.00 GE CAPITAL CP (5.72%) 14,783,116.67 0.00 14,783,116.67
15,000,000.00 10,000,000.00 25,000,000.00 GMAC CP (5.42%) 14,873,533.33 9,911,255.55 24,784,788.88
15,000,000.00 0.00 15,000,000.00 GMAC 14,827,916.66 0.00 14,827,916.66
10,000,000.00 0.00 10,000,000.00 GMAC CP 9,867,000.00 0.00 9,867,000.00
15,000,000.00 0.00 15,000,000.00 GMAC 14,798,479.17 0.00 14,798,479.17
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<S> <C> <C> <C> <C> <C> <C>
15,000,000.00 5,000,000.00 20,000,000.00 GMAC CP (5.38%) 14,748,933.33 4,916,311.11 19,665,244.44
15,000,000.00 0.00 15,000,000.00 GMAC 14,860,233.33 0.00 14,860,233.33
15,000,000.00 0.00 15,000,000.00 GILLETTE CO 14,997,800.00 0.00 14,997,800.00
10,000,000.00 0.00 10,000,000.00 GLAXO WELLCOME 9,887,611.11 0.00 9,887,611.11
25,000,000.00 0.00 25,000,000.00 GLAXO WELLCOME 24,654,666.67 0.00 24,654,666.67
0.00 5,000,000.00 5,000,000.00 GLAXO WELLCOME 0.00 4,935,866.66 4,935,866.66
25,000,000.00 5,000,000.00 30,000,000.00 GLAXO WELLCOME 24,593,750.00 4,918,750.00 29,512,500.00
9,000,000.00 0.00 9,000,000.00 GOLDEN PEANUT 8,834,800.00 0.00 8,834,800.00
11,416,384.57 0.00 11,416,384.57 FSQ PREMIUM MM #483 11,416,384.57 0.00 11,416,384.57
25,000,000.00 5,000,000.00 30,000,000.00 GREAT LAKES CHEM CORP 24,798,215.28 4,959,643.06 29,757,858.34
15,000,000.00 0.00 15,000,000.00 GREAT LAKES CHEMICAL 14,861,633.34 0.00 14,861,633.34
10,000,000.00 0.00 10,000,000.00 GREAT LAKES CHEMICAL 9,900,875.00 0.00 9,900,875.00
15,000,000.00 0.00 15,000,000.00 CIESCO L.P. (M17/M) 14,996,803.28 0.00 14,996,803.28
11,600,000.00 0.00 11,600,000.00 GUARDIAN INDUSTRIES 11,516,866.67 0.00 11,516,866.67
0.00 5,000,000.00 5,000,000.00 GUARDIAN INDUSTRIES 0.00 4,963,150.00 4,963,150.00
5,000,000.00 5,000,000.00 10,000,000.00 GUARDIAN INDUSTRIES 4,952,472.22 4,952,472.22 9,904,944.44
12,012,000.00 0.00 12,012,000.00 JOHN HANCOCK CAP CORP 11,923,912.00 0.00 11,923,912.00
10,000,000.00 0.00 10,000,000.00 HASBRO INC CP (5.38%) 9,940,222.22 0.00 9,940,222.22
15,000,000.00 0.00 15,000,000.00 HASBRO INC CP (5.03%) 14,897,304.17 0.00 14,897,304.17
15,000,000.00 0.00 15,000,000.00 GMAC CP (5.69%) 14,834,041.67 0.00 14,834,041.67
14,380,000.00 0.00 14,380,000.00 HASBRO INC 14,363,031.60 0.00 14,363,031.60
10,859,000.00 0.00 10,859,000.00 HASBRO INC 10,836,618.39 0.00 10,836,618.39
0.00 5,000,000.00 5,000,000.00 HENKEL 0.00 4,964,166.67 4,964,166.67
12,000,000.00 0.00 12,000,000.00 HENKEL 11,888,280.00 0.00 11,888,280.00
12,000,000.00 0.00 12,000,000.00 HENKEL 11,874,000.00 0.00 11,874,000.00
17,000,000.00 0.00 17,000,000.00 HENKEL 16,803,140.00 0.00 16,803,140.00
15,000,000.00 0.00 15,000,000.00 HENKEL CP (5.32%) 14,966,812.50 0.00 14,966,812.50
10,000,000.00 0.00 10,000,000.00 HOUSEHOLD FINANCE CORP 9,895,700.00 0.00 9,895,700.00
30,000,000.00 5,000,000.00 35,000,000.00 HOUSEHOLD FIN CP (5.70%) 29,799,625.00 4,966,750.00 34,766,375.00
15,000,000.00 0.00 15,000,000.00 HOUSEHOLD FINANCE 14,881,200.00 0.00 14,881,200.00
15,000,000.00 0.00 15,000,000.00 HOUSEHOLD FIN CP (5.71%) 14,864,387.50 0.00 14,864,387.50
0.00 5,000,000.00 5,000,000.00 HOUSEHOLD 0.00 4,947,850.00 4,947,850.00
15,000,000.00 0.00 15,000,000.00 HOUSEHOLD FIN CP (5.65%) 14,849,333.33 0.00 14,849,333.33
15,000,000.00 5,000,000.00 20,000,000.00 HOUSEHOLD FIN CP (5.30%) 14,997,791.67 4,999,263.89 19,997,055.56
10,000,000.00 0.00 10,000,000.00 KEY BANK NA (Q20) 9,993,448.13 0.00 9,993,448.13
15,000,000.00 0.00 15,000,000.00 LUCENT TECH CP (4.98%) 14,883,800.00 0.00 14,883,800.00
10,000,000.00 0.00 10,000,000.00 LUCENT TECH INC (4.91%) 9,914,075.00 0.00 9,914,075.00
10,000,000.00 0.00 10,000,000.00 LUCENT TECH (5.10%) 9,882,416.67 0.00 9,882,416.67
10,000,000.00 0.00 10,000,000.00 MONSANTO CP (5.40%) 9,926,500.00 0.00 9,926,500.00
10,000,000.00 5,000,000.00 15,000,000.00 MONSANTO 9,820,488.89 4,910,244.44 14,730,733.33
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<TABLE>
<S> <C> <C> <C> <C> <C> <C>
5,000,000.00 4,500,000.00 9,500,000.00 MONSANTO CP (5.40%) 4,964,000.00 4,467,600.00 9,431,600.00
13,980,000.00 0.00 13,980,000.00 MONSANTO 13,724,562.10 0.00 13,724,562.10
14,000,000.00 0.00 14,000,000.00 MONSANTO COMPANY 13,735,221.11 0.00 13,735,221.11
7,821,000.00 0.00 7,821,000.00 MOTOROLA CREDIT 7,694,995.00 0.00 7,694,995.00
11,000,000.00 0.00 11,000,000.00 NATIONAL RURAL UTIL 10,851,133.34 0.00 10,851,133.34
15,000,000.00 0.00 15,000,000.00 NY LIFE CP (5.30%) 14,997,791.67 0.00 14,997,791.67
15,000,000.00 5,000,000.00 20,000,000.00 NY LIFE CP (5.30%) 14,984,541.67 4,994,847.22 19,979,388.89
10,000,000.00 0.00 10,000,000.00 PACCAR 9,905,750.00 0.00 9,905,750.00
10,000,000.00 5,000,000.00 15,000,000.00 PEMEX (LOC) 9,992,611.11 4,996,305.56 14,988,916.67
10,000,000.00 0.00 10,000,000.00 POTOMAC ELECTRIC POWER CO 9,885,958.33 0.00 9,885,958.33
0.00 4,490,000.00 4,490,000.00 PREFERRED RECEIVABLES 0.00 4,461,713.00 4,461,713.00
15,000,000.00 5,735,000.00 20,735,000.00 PREFERRED RECEIVABLES 14,878,600.00 5,688,584.73 20,567,184.73
10,000,000.00 0.00 10,000,000.00 PREFERRED RECEIVABLES FDG 9,894,825.00 0.00 9,894,825.00
15,000,000.00 0.00 15,000,000.00 PREF RECEIVABLES (5.85%) 14,834,250.00 0.00 14,834,250.00
0.00 5,000,000.00 5,000,000.00 PREF RECEIVABLES 0.00 4,964,166.67 4,964,166.67
15,000,000.00 0.00 15,000,000.00 PREF RECEIVABLES 14,892,500.00 0.00 14,892,500.00
15,000,000.00 0.00 15,000,000.00 PREFERRED RECEIVABLES 14,997,766.67 0.00 14,997,766.67
15,000,000.00 0.00 15,000,000.00 PREFERRED RECEIVABLES 14,957,725.00 0.00 14,957,725.00
25,000,000.00 0.00 25,000,000.00 PRUDENTIAL FUNDING CP 24,836,611.11 0.00 24,836,611.11
10,000,000.00 0.00 10,000,000.00 PRUDENTIAL FUNDING 9,932,805.56 0.00 9,932,805.56
15,000,000.00 5,000,000.00 20,000,000.00 PRUDENTIAL FDG CP (5.75%) 14,899,375.00 4,966,458.33 19,865,833.33
10,000,000.00 5,000,000.00 15,000,000.00 PRUDENTIAL FDG CP (5.75%) 9,921,736.11 4,960,868.05 14,882,604.16
40,000,000.00 5,000,000.00 45,000,000.00 PRUDENTIAL FUNDING 39,629,933.34 4,954,422.22 44,584,355.56
0.00 5,000,000.00 5,000,000.00 PRUDENTIAL FUNDING 0.00 4,899,025.00 4,899,025.00
0.00 10,000,000.00 10,000,000.00 RABOBANK, NY 0.00 9,998,018.18 9,998,018.18
25,000,000.00 0.00 25,000,000.00 RABOBANK, NY CD (5.13%) 24,995,045.45 0.00 24,995,045.45
15,000,000.00 5,000,000.00 20,000,000.00 ROYAL BANK, CANADA 14,938,166.67 4,979,388.89 19,917,555.56
15,000,000.00 0.00 15,000,000.00 SBC 14,881,583.33 0.00 14,881,583.33
15,000,000.00 5,000,000.00 20,000,000.00 ST. PAUL COS CP (5.63%) 14,835,791.67 4,945,263.89 19,781,055.56
15,000,000.00 0.00 15,000,000.00 ST. PAUL COS. 14,828,416.67 0.00 14,828,416.67
30,000,000.00 5,000,000.00 35,000,000.00 ST. PAUL COS CP (5.70%) 29,593,300.00 4,933,500.00 34,526,800.00
15,000,000.00 5,000,000.00 20,000,000.00 SONOCO PRODUCTS (5.75%) 14,750,833.33 4,916,944.45 19,667,777.78
10,000,000.00 0.00 10,000,000.00 SOUTHERN CAL ED 9,979,311.11 0.00 9,979,311.11
10,000,000.00 0.00 10,000,000.00 HENKEL CP (5.31%) 9,980,825.00 0.00 9,980,825.00
25,000,000.00 0.00 25,000,000.00 SOUTHERN CO. 24,713,194.44 0.00 24,713,194.44
22,000,000.00 5,000,000.00 27,000,000.00 THE SOUTHERN CO 21,746,175.00 4,942,312.50 26,688,487.50
9,100,000.00 0.00 9,100,000.00 SOUTHERN CO CP (5.65%) 8,992,885.42 0.00 8,992,885.42
15,000,000.00 5,000,000.00 20,000,000.00 SOUTHERN CO 14,800,500.00 4,933,500.00 19,734,000.00
9,650,000.00 5,000,000.00 14,650,000.00 STANLEY WORKS CP (5.65%) 9,543,984.03 4,945,069.44 14,489,053.47
15,000,000.00 5,000,000.00 20,000,000.00 STANLEY WORKS CP 14,783,116.67 4,927,705.55 19,710,822.22
</TABLE>
12
<PAGE> 233
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
10,000,000.00 0.00 10,000,000.00 STANLEY WORKS 9,827,333.33 0.00 9,827,333.33
15,000,000.00 0.00 15,000,000.00 STANLEY WORKS 14,731,666.67 0.00 14,731,666.67
6,000,000.00 0.00 6,000,000.00 STANLEY WORKS 5,999,116.67 0.00 5,999,116.67
25,000,000.00 10,000,000.00 35,000,000.00 SLMA (Q10/TUES) 24,994,815.57 9,997,926.23 34,992,741.80
30,000,000.00 0.00 30,000,000.00 SLMA (Q27/TUES) 29,975,581.97 0.00 29,975,581.97
50,000,000.00 10,000,000.00 60,000,000.00 SLMA (3MO T-BILL+70BPS) 49,976,571.04 9,995,314.21 59,971,885.25
24,000,000.00 0.00 24,000,000.00 SLMA CALLABLE NOTE 5.05% 24,000,000.00 0.00 24,000,000.00
25,000,000.00 5,000,000.00 30,000,000.00 SVENSKA 24,628,416.67 4,925,683.33 29,554,100.00
15,000,000.00 5,000,000.00 20,000,000.00 SVENSKA CP (5.33%) 14,955,583.33 4,985,194.44 19,940,777.77
25,000,000.00 5,000,000.00 30,000,000.00 SVENSKA 5.34% 24,896,166.67 4,979,233.33 29,875,400.00
20,000,000.00 0.00 20,000,000.00 SYSCO 19,861,166.67 0.00 19,861,166.67
15,000,000.00 10,000,000.00 25,000,000.00 TRANSAMERICA FINANCE 14,860,000.00 9,906,900.00 24,766,900.00
10,000,000.00 0.00 10,000,000.00 TRANSAMERICA CP (5.58%) 9,902,350.00 0.00 9,902,350.00
15,000,000.00 0.00 15,000,000.00 TRANSAMERICA FINL 14,784,175.00 0.00 14,784,175.00
5,000,000.00 0.00 5,000,000.00 TRANSAMERICA FINANCIAL 4,920,244.44 0.00 4,920,244.44
5,000,000.00 0.00 5,000,000.00 TRANSAMERICA FIN (5.70%) 4,922,416.67 0.00 4,922,416.67
15,000,000.00 5,000,000.00 20,000,000.00 TRANSAMERICA FIN 14,675,812.50 4,891,937.50 19,567,750.00
10,000,000.00 0.00 10,000,000.00 TRANSAMERICA FINL 9,745,777.78 0.00 9,745,777.78
10,000,000.00 0.00 10,000,000.00 TRANSAMERICA MTN (Q5/Q6) 10,007,337.25 0.00 10,007,337.25
10,000,000.00 5,000,000.00 15,000,000.00 UBS AG STAMFORD (5.60%) 9,998,197.69 4,999,098.85 14,997,296.54
35,000,000.00 0.00 35,000,000.00 WAL-MART 35,000,000.00 0.00 35,000,000.00
0.00 33,072,000.00 33,072,000.00 JP MORGAN 0.00 33,072,000.00 33,072,000.00
0.00 5,000,000.00 5,000,000.00 ALLSTATE 0.00 5,000,000.00 5,000,000.00
0.00 10,000,000.00 10,000,000.00 TRAVELERS 0.00 10,000,000.00 10,000,000.00
0.00 10,000,000.00 10,000,000.00 TRAVELERS 0.00 10,000,000.00 10,000,000.00
0.00 10,000,000.00 10,000,000.00 ALLSTATE 0.00 10,000,000.00 10,000,000.00
3,913,735,384.57 617,712,000.00 4,531,447,384.57 3,885,835,574.31 613,419,142.84 4,499,254,717.15
</TABLE>
13
<PAGE> 234
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1999
(Amounts in Thousands)
Parkstone U.S. Armada
Government Government
Obligations Money Market Pro Forma
Fund Fund Combined
TOTAL INVESTMENTS: 100,515 1,669,311 1,769,826
------- --------- ---------
ASSETS
Cash 1 1 2
Accrued Income 152 1,976 2,128
Investment Securities Sold 0 0 0
Cap Shares Sold 0 0 0
Other Assets 3 68 71
TOTAL ASSETS: 100,671 1,671,356 1,772,027
------- --------- ---------
LIABILITIES
Income Payable 404 7,075 7,479
Capital Gain Payable 0 0 0
Investment Securities Purchased 0 0 0
Capital Shares Redeemed Payable 0 0 0
Accrued Expense Payable 90 1,695 1,785
Other Payables 0 0 0
TOTAL LIABILITIES: 494 8,770 9,264
------- --------- ---------
TOTAL NET ASSETS: 100,177 1,662,586 1,762,763
14
<PAGE> 235
STATEMENT OF OPERATIONS
SIX MONTH PERIOD ENDING NOVEMBER 30, 1999
(Amounts in Thousands)
<TABLE>
<CAPTION>
Parkstone U.S. Armada
Government Government
Obligations Money Market Pro Forma
Fund Fund Combined
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest 2,981 42,974 45,955
----- ------ ------
TOTAL INCOME: 2,981 42,974 45,955
----- ------ ------
EXPENSES:
Administrator Fees 129 578 707
Investment Advisory Fees 220 2,890 3,110
Waiver of Investment Advisory Fees (2) (826) (828)
Transfer Agent Fees 34 24 58
Custodian Fees 11 91 102
Professional Fees (Audit + Legal) 7 60 67
Trustee (Directors) Fees 1 10 13
Registration Fees 8 5 13
12b-1 Fees 3 330 333
Shareholder Servicing Fees 0 435 435
Printing Expenses 8 53 61
Miscellaneous Expenses 2 26 26
TOTAL EXPENSES: (421) (3,676) (4,097)
----- ------ ------
NET INVESTMENT INCOME: 2,560 39,298 41,858
----- ------ ------
Net Realized Gains (Losses) on Investments (1) 0 (1)
Net Unrealized Appreciation (Depreciation)
of Investment Securities 0 0 0
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS: (1) 0 (1)
----- ------ ------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS: 2,559 39,298 41,857
----- ------ ------
</TABLE>
15
<PAGE> 236
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTH PERIOD ENDING NOVEMBER 30, 1999
(Amounts in Thousands)
<TABLE>
<CAPTION>
Parkstone U.S. Armada
Government Government
Obligations Money Market Pro Forma
Fund Fund Combined
<S> <C> <C> <C>
INVESTMENT ACTIVITIES:
Net Investment Income 2,560 39,298 41,858
Net Realized Gain (Loss) on Securities Sold (1) - (1)
Net Increase (Decrease) in Unrealized
Appreciation of Assets - - -
-------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS: 2,559 39,298 41,857
-------- ---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional/Class I Shares (2,506) (25,780) (28,286)
Investor A/Class A Shares (54) (13,533) (13,587)
Investor B/Class B Shares - - -
Realized Capital Gains
Institutional/Class I Shares - - -
Investor A/Class A Shares - - -
Investor B/Class B Shares - - -
TOTAL DISTRIBUTIONS: (2,560) (39,313) (41,873)
-------- ---------- ----------
PAID-IN-CAPITAL:
Institutional/Class I Shares
Shares Issued 60,898 2,365,346 2,426,244
Shares Issued in Lieu of Cash Distributions - 631 631
Shares Redeemed (83,171) (2,381,087) (2,464,258)
Net Institutional/Class I Share Transactions (22,273) (15,110) (37,383)
-------- ---------- ----------
Investor A/Class A Shares
Shares Issued 16,938 556,936 573,874
Shares Issued in Lieu of Cash Distributions 12 2,108 2,120
Shares Redeemed (18,006) (541,407) (559,413)
Net Investor A/Class A Share Transactions (1,056) 17,637 16,581
-------- ---------- ----------
Investor B/Class B Shares
Shares Issued - - -
Shares Issued in Lieu of Cash Distributions - - -
Shares Redeemed - - -
Net Investor B/Class B Share Transactions - - -
INCREASE (DECREASE) IN NET ASSETS
FROM SHARE TRANSACTIONS: (23,329) 2,527 (20,802)
-------- ---------- ----------
BEGINNING OF PERIOD: 123,507 1,660,074 1,783,581
-------- ---------- ----------
END OF PERIOD: 100,177 1,662,586 1,762,763
-------- ---------- ----------
</TABLE>
16
<PAGE> 237
PROFORMA COMBINED SCHEDULE OF INVESTMENTS
ARMADA GOVERNMENT MONEY MARKET/
PARKSTONE US GOVERNMENT OBLIGATIONS
AS OF 11/30/99
<TABLE>
<CAPTION>
Proforma Proforma
Armada Parkstone Combined Armada Parkstone Combined
Shares/Par Shares/Par Shares/Par Security Description Market Value Market Value Market Value
---------- ---------- ---------- -------------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
230,000,000.00 0.00 230,000,000.00 REPO (5.75 %) BOSTON 230,000,000.00 0.00 230,000,000.00
38,887,000.00 0.00 38,887,000.00 REPO (5.69 %) LEHM 38,887,000.00 0.00 38,887,000.00
75,000,000.00 0.00 75,000,000.00 REPO (5.72 %) PRUD 75,000,000.00 0.00 75,000,000.00
4,203,000.00 0.00 4,203,000.00 FFCB DISC NOTE (5.25%) 4,195,031.81 0.00 4,195,031.81
10,000,000.00 0.00 10,000,000.00 FFCB DISC NOTE (5.09%) 9,980,205.56 0.00 9,980,205.56
10,550,000.00 1,000,000.00 11,550,000.00 FFCB DISC NOTE (5.33%) 10,506,264.39 995,854.44 11,502,118.83
25,000,000.00 1,000,000.00 26,000,000.00 FFCB DISC NOTE (5.61%) 24,792,100.00 991,675.00 25,783,775.00
10,000,000.00 0.00 10,000,000.00 FFCB (5.45%) 9,916,736.11 0.00 9,916,736.11
8,502,000.00 0.00 8,502,000.00 FFCB DISC NOTE (5.54%) 8,428,731.65 0.00 8,428,731.65
10,000,000.00 1,000,000.00 11,000,000.00 FFCB DISC NOTE (5.55%) 9,882,833.34 988,283.34 10,871,116.68
10,000,000.00 0.00 10,000,000.00 FFCB DISC NOTE (5.52%) 9,868,133.33 0.00 9,868,133.33
7,140,000.00 0.00 7,140,000.00 FFCB DISC NOTE (5.45%) 7,009,209.08 0.00 7,009,209.08
15,000,000.00 0.00 15,000,000.00 FFCB DEBENTURE 4.75% 15,000,000.00 0.00 15,000,000.00
10,000,000.00 0.00 10,000,000.00 FHLB DISC NOTE (5.531) 9,901,671.11 0.00 9,901,671.11
10,000,000.00 0.00 10,000,000.00 FHLB DISC. NOTE 5.22% 10,000,000.00 0.00 10,000,000.00
10,000,000.00 0.00 10,000,000.00 FHLMC DISC NOTE (5.26%) 9,997,077.78 0.00 9,997,077.78
10,000,000.00 1,000,000.00 11,000,000.00 FHLB (01/12/00) 9,935,483.34 993,548.34 10,929,031.68
20,000,000.00 1,000,000.00 21,000,000.00 FHLB DISC NOTE (5.565%) 19,864,027.78 993,204.45 20,857,232.23
20,000,000.00 0.00 20,000,000.00 FHLB DISC. NOTE 5.39% 19,860,350.00 0.00 19,860,350.00
10,000,000.00 0.00 10,000,000.00 FHLB DISC NOTE (5.21%) 9,926,191.67 0.00 9,926,191.67
30,000,000.00 2,000,000.00 32,000,000.00 FHLB DISC NOTE 29,745,822.23 1,982,857.79 31,728,680.02
10,000,000.00 0.00 10,000,000.00 FHLB DISC NOTE (5.53%) 9,910,905.55 0.00 9,910,905.55
20,000,000.00 1,000,000.00 21,000,000.00 FHLB DISCOUNT NOTE 19,818,863.88 991,239.72 20,810,103.60
10,000,000.00 1,000,000.00 11,000,000.00 FHLB AGY DISCOUNT NOTE 9,904,933.33 990,493.33 10,895,426.66
20,000,000.00 1,000,000.00 21,000,000.00 FHLB DISC. NOTE 5.39% 19,809,775.00 990,410.00 20,800,185.00
0.00 1,000,000.00 1,000,000.00 FHLB DISC. NOTE 0.00 990,167.11 990,167.11
10,000,000.00 1,000,000.00 11,000,000.00 FHLB DISC NOTE (5.53%) 9,889,400.00 988,940.00 10,878,340.00
10,000,000.00 1,000,000.00 11,000,000.00 FHLB DISC. NOTE 5.51% 9,882,147.23 988,214.73 10,870,361.96
10,000,000.00 1,000,000.00 11,000,000.00 FHLB (5.52%) 9,872,733.33 987,273.33 10,860,006.66
</TABLE>
17
<PAGE> 238
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
20,000,000.00 2,000,000.00 22,000,000.00 FHLB DISC NOTE 5.0006% 19,741,466.67 1,974,146.67 21,715,613.34
10,000,000.00 1,000,000.00 11,000,000.00 FHLB DISC NOTE (5.57%) 9,857,655.56 985,765.56 10,843,421.12
20,000,000.00 1,000,000.00 21,000,000.00 FHLB 5.510% 19,700,827.79 985,000.56 20,685,828.35
0.00 1,000,000.00 1,000,000.00 FHLB DN 0.00 979,421.95 979,421.95
8,653,000.00 0.00 8,653,000.00 FHLB 5.51% 8,470,234.22 0.00 8,470,234.22
10,000,000.00 1,000,000.00 11,000,000.00 FHLB AGY DISCOUNT NOTE 9,783,000.00 978,300.00 10,761,300.00
10,000,000.00 1,000,000.00 11,000,000.00 FHLB DISCOUNT NOTE 9,771,741.66 977,174.16 10,748,915.82
10,000,000.00 2,000,000.00 12,000,000.00 FHLB DISC. NOTE 9,754,475.00 1,950,716.12 11,705,191.12
10,000,000.00 0.00 10,000,000.00 FHLB DISC. NOTE 9,738,666.67 0.00 9,738,666.67
10,000,000.00 1,000,000.00 11,000,000.00 FHLB DISC NOTE 9,730,208.34 973,020.84 10,703,229.18
0.00 1,075,000.00 1,075,000.00 FHLMC DN 0.00 1,075,000.00 1,075,000.00
10,000,000.00 1,000,000.00 11,000,000.00 FHLMC DISC NOTE (5.26%) 9,998,538.89 999,856.94 10,998,395.83
10,000,000.00 1,000,000.00 11,000,000.00 FHLMC DISC NOTE (5.11%) 9,988,644.44 998,864.44 10,987,508.88
10,000,000.00 1,000,000.00 11,000,000.00 FHLMC DISC NOTE (5.14%) 9,987,150.00 998,715.00 10,985,865.00
0.00 1,000,000.00 1,000,000.00 FHLMC DN 0.00 998,151.11 998,151.11
10,000,000.00 0.00 10,000,000.00 FHLMC DISC NOTE (5.24%) 9,979,622.22 0.00 9,979,622.22
10,000,000.00 1,000,000.00 11,000,000.00 FHLMC DISC NOTE (5.35 %) 9,976,222.22 997,666.67 10,973,888.89
10,000,000.00 1,000,000.00 11,000,000.00 FHLMC DISC NOTE (5.48%) 9,969,550.00 996,955.00 10,966,505.00
10,000,000.00 0.00 10,000,000.00 FHLMC DISC NOTE (5.54%) 9,938,444.45 0.00 9,938,444.45
20,666,000.00 2,073,000.00 22,739,000.00 FHLMC DISC NOTE (5.54%) 20,539,515.04 2,060,215.68 22,599,730.72
10,000,000.00 1,000,000.00 11,000,000.00 FHLMC DISC NOTE (5.47%) 9,936,183.34 993,618.34 10,929,801.68
30,000,000.00 1,000,000.00 31,000,000.00 FHLMC DISC NOTE (5.61%) 29,801,961.11 993,382.78 30,795,343.89
10,000,000.00 0.00 10,000,000.00 FHLMC DISC NOTE (5.20%) 9,930,666.67 0.00 9,930,666.67
10,000,000.00 1,000,000.00 11,000,000.00 FHLMC DISC NOTE (5.251%) 9,926,191.67 992,165.83 10,918,357.50
8,000,000.00 0.00 8,000,000.00 FHLMC DISC NOTE (5.20%) 7,936,444.45 0.00 7,936,444.45
17,725,000.00 2,000,000.00 19,725,000.00 FHLMC DISC NOTE (5.361%) 17,575,956.08 1,983,468.42 19,559,424.50
0.00 1,000,000.00 1,000,000.00 FHLMC DN 0.00 991,090.56 991,090.56
10,000,000.00 1,000,000.00 11,000,000.00 FHLMC DISC NOTE (5.40%) 9,904,000.00 990,400.00 10,894,400.00
20,992,000.00 1,000,000.00 21,992,000.00 FHLMC DISC NOTE (5.47%) 20,784,476.23 990,123.61 21,774,599.84
10,000,000.00 1,000,000.00 11,000,000.00 FHLMC DISC NOTE (5.47%) 9,896,677.78 989,667.78 10,886,345.56
20,000,000.00 1,000,000.00 21,000,000.00 FHLMC DISC NOTE (5.52 %) 19,786,208.33 989,354.16 20,775,562.49
20,000,000.00 0.00 20,000,000.00 FHLMC DISC NOTE (5.474) 19,784,751.67 0.00 19,784,751.67
10,000,000.00 1,000,000.00 11,000,000.00 FHLMC DISC NOTE (5.53%) 9,883,255.55 988,325.55 10,871,581.10
0.00 1,000,000.00 1,000,000.00 FHLMC DN 0.00 988,148.34 988,148.34
10,000,000.00 1,000,000.00 11,000,000.00 FHLMC DISC NOTE (5.52%) 9,871,200.00 987,120.00 10,858,320.00
20,567,000.00 0.00 20,567,000.00 FHLMC DISC NOTE (5.54%) 20,300,217.70 0.00 20,300,217.70
10,000,000.00 0.00 10,000,000.00 FHLMC DISC NOTE (5.580%) 9,862,050.00 0.00 9,862,050.00
0.00 1,000,000.00 1,000,000.00 FHLMC DN 0.00 985,996.11 985,996.11
10,000,000.00 1,000,000.00 11,000,000.00 FHLMC DISC NOTE (5.64%) 9,848,200.00 984,820.00 10,833,020.00
</TABLE>
18
<PAGE> 239
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
20,000,000.00 1,000,000.00 21,000,000.00 FHLMC DISC NOTE (5.5400 19,674,226.67 983,734.89 20,657,961.56
10,000,000.00 1,000,000.00 11,000,000.00 FHLMC DISC NOTE (5.76%) 9,828,302.78 982,830.28 10,811,133.06
10,000,000.00 0.00 10,000,000.00 FHLMC DISCOUNT NOTE 9,816,333.33 0.00 9,816,333.33
10,000,000.00 1,000,000.00 11,000,000.00 FHLMC DISC NOTE (5.587%) 9,792,039.45 979,203.95 10,771,243.40
15,000,000.00 3,000,000.00 18,000,000.00 FHLB FLOATER (Q24/TUE) 15,000,000.00 3,000,000.00 18,000,000.00
15,000,000.00 0.00 15,000,000.00 FHLB (FED FUNDS +4.5BPS) 14,997,233.61 0.00 14,997,233.61
10,000,000.00 2,000,000.00 12,000,000.00 FHLB FLOATER (Q9/WED) 10,000,000.00 2,000,000.00 12,000,000.00
10,000,000.00 0.00 10,000,000.00 FHLB (3MO TBILL+45BP) 10,000,000.00 0.00 10,000,000.00
10,000,000.00 0.00 10,000,000.00 FHLB FLOATER (Q06/D) 9,994,918.03 0.00 9,994,918.03
10,000,000.00 0.00 10,000,000.00 FNMA DISC NOTE (5.51%) 9,869,902.78 0.00 9,869,902.78
10,000,000.00 1,000,000.00 11,000,000.00 FNMA DISC NOTE (5.27%) 9,998,536.11 999,853.61 10,998,389.72
20,000,000.00 2,000,000.00 22,000,000.00 FNMA DISC NOTE (5.265) 19,985,368.06 1,998,536.81 21,983,904.87
10,000,000.00 1,000,000.00 11,000,000.00 FNMA DISC NOTE (5.203%) 9,991,233.33 999,123.33 10,990,356.66
10,000,000.00 1,000,000.00 11,000,000.00 FNMA DISC NOTE (5.74%) 9,989,772.22 998,977.22 10,988,749.44
20,000,000.00 1,000,000.00 21,000,000.00 FNMA DISC NOTE (5.10%) 19,974,125.00 998,687.50 20,972,812.50
20,000,000.00 0.00 20,000,000.00 FNMA DISC NOTE (5.23%) 19,965,100.00 0.00 19,965,100.00
15,000,000.00 1,000,000.00 16,000,000.00 FNMA DISC NOTE (5.24%) 14,969,433.33 997,962.22 15,967,395.55
10,000,000.00 2,100,000.00 12,100,000.00 FNMA DISC NOTE (5.53%) 9,926,266.67 2,085,000.00 12,011,266.67
40,000,000.00 3,000,000.00 43,000,000.00 FNMA DISC NOTE (5.57%) 39,708,722.22 2,978,097.22 42,686,819.44
10,000,000.00 1,000,000.00 11,000,000.00 FNMA DISC NOTE (5.52%) 9,917,200.00 991,720.00 10,908,920.00
0.00 1,000,000.00 1,000,000.00 FNMA DN 0.00 991,848.89 991,848.89
20,000,000.00 3,100,000.00 23,100,000.00 FNMA DISC NOTE 02/02/00 19,806,975.00 3,070,374.25 22,877,349.25
17,985,000.00 2,000,000.00 19,985,000.00 FNMA DISC NOTE (5.61%) 17,795,293.70 1,978,897.50 19,774,191.20
10,000,000.00 0.00 10,000,000.00 FNMA DISC NOTE (5.52%) 9,891,133.33 0.00 9,891,133.33
20,000,000.00 1,000,000.00 21,000,000.00 FNMA DISC NOTE (5.59%) 19,759,066.67 988,018.33 20,747,085.00
10,000,000.00 1,000,000.00 11,000,000.00 FNMA DISC NOTE (5.525) 9,838,854.17 984,745.84 10,823,600.01
10,000,000.00 1,000,000.00 11,000,000.00 FNMA DISC NOTE (5.76%) 9,838,055.55 983,805.55 10,821,861.10
10,000,000.00 0.00 10,000,000.00 FNMA DISC NOTE (5.53%) 9,820,275.00 0.00 9,820,275.00
10,000,000.00 0.00 10,000,000.00 FNMA DISC NOTE (5.60%) 9,802,444.44 0.00 9,802,444.44
20,000,000.00 1,000,000.00 21,000,000.00 FNMA DISC NOTE (5.27%) 19,592,444.44 979,622.22 20,572,066.66
10,000,000.00 0.00 10,000,000.00 FNMA DISC NOTE (5.58%) 9,786,100.00 0.00 9,786,100.00
10,187,000.00 0.00 10,187,000.00 FNMA DISC NOTE (5.48%) 9,962,150.27 0.00 9,962,150.27
10,000,000.00 1,000,000.00 11,000,000.00 FNMA DISC NOTE (5.48%) 9,777,755.55 977,775.55 10,755,531.10
10,000,000.00 0.00 10,000,000.00 FNMA DISC NOTE (5.59%) 9,759,319.45 0.00 9,759,319.45
20,000,000.00 1,000,000.00 21,000,000.00 FNMA DISC NOTE (5.54 ) 19,481,263.89 974,133.61 20,455,397.50
10,000,000.00 0.00 10,000,000.00 FNMA FLOATING RATE 9,995,481.56 0.00 9,995,481.56
10,293,867.01 0.00 10,293,867.01 FSQ GOVERNMENT MM #465 10,293,867.01 0.00 10,293,867.01
0.00 1,300,000.00 1,300,000.00 SLMA DN 0.00 1,289,337.83 1,289,337.83
10,000,000.00 0.00 10,000,000.00 SLMA (Q10/TUES) 9,997,926.23 0.00 9,997,926.23
</TABLE>
19
<PAGE> 240
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
20,000,000.00 0.00 20,000,000.00 SLMA (Q27/TUES) 19,983,721.31 0.00 19,983,721.31
12,000,000.00 0.00 12,000,000.00 SLMA FLOATER(Q13/T) 11,997,749.19 0.00 11,997,749.19
15,000,000.00 0.00 15,000,000.00 SLMA (3MO T-BILL+70BPS) 14,992,971.31 0.00 14,992,971.31
15,000,000.00 0.00 15,000,000.00 SLMA (Q/RATE) 14,999,814.05 0.00 14,999,814.05
15,000,000.00 5,000,000.00 20,000,000.00 SLMA FLOATER (Q12/T) 14,999,309.59 4,999,769.86 19,999,079.45
0.00 4,500,000.00 4,500,000.00 SLMA VRN 0.00 4,501,251.64 4,501,251.64
10,000,000.00 0.00 10,000,000.00 SLMA CALLABLE NOTE 5.05% 10,000,000.00 0.00 10,000,000.00
0 9153000 9,153,000.00 JP MORGAN 5.72% 12/01/99 0.00 9,153,000.00 9,153,000.00
1,681,350,867.01 101,301,000.00 1,782,651,867.01 1,669,310,716.55 100,515,121.86 1,769,825,838.41
</TABLE>
20
<PAGE> 241
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1999
(Amounts in Thousands)
Armada
Parkstone Tax-Exempt
Tax-Free Money Market Pro Forma
Fund Fund Combined
TOTAL INVESTMENTS: 88,795 531,783 620,578
------ ------- -------
ASSETS
Cash 0 0 0
Accrued Income 479 3,652 4,131
Investment Securities Sold 0 5,000 5,000
Cap Shares Sold 0 0 0
Other Assets 5 1078 112
TOTAL ASSETS: 89,279 540,542 629,821
------ ------- -------
LIABILITIES
Income Payable 216 1,445 1,661
Capital Gain Payable 0 0 0
Investment Securities Purchased 0 3,508 3,508
Capital Shares Redeemed Payable 2 0 2
Accrued Expense Payable 71 507 578
Other Payables 0 0 0
TOTAL LIABILITIES: 289 5,460 5,749
------ ------- -------
TOTAL NET ASSETS: 88,990 535,082 624,072
21
<PAGE> 242
STATEMENT OF OPERATIONS
SIX MONTH PERIOD ENDING NOVEMBER 30, 1999
(Amounts in Thousands)
<TABLE>
<CAPTION>
Armada
Parkstone Tax-Exempt
Tax-Free Money Market Pro Forma
Fund Fund Combined
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest 1,589 9,795 11,384
----- ------- -------
TOTAL INCOME: 1,589 9,795 11,384
----- ------- -------
EXPENSES:
Administrator Fees 109 207 316
Investment Advisory Fees 182 1,036 1,218
Waiver of Investment Advisory Fees (1) (592) (593)
Transfer Agent Fees 19 15 34
Custodian Fees 10 54 64
Professional Fees (Audit + Legal) 7 23 30
Trustee (Directors) Fees 1 4 8
Registration Fees 7 26 33
12b-1 Fees 1 118 119
Shareholder Servicing Fees 0 148 148
Printing Expenses 7 16 23
Miscellaneous Expenses 1 55 53
TOTAL EXPENSES: (343) (1,110) (1,453)
----- ------- -------
NET INVESTMENT INCOME: 1,246 8,685 9,931
----- ------- -------
Net Realized Gains (Losses) on Investments 0 0 0
Net Unrealized Appreciation (Depreciation)
of Investment Securities 0 0 0
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS: 0 0 0
----- ------- -------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS: 1,246 8,685 9,931
----- ------- -------
</TABLE>
22
<PAGE> 243
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTH PERIOD ENDING NOVEMBER 30, 1999
(Amounts in Thousands)
<TABLE>
<CAPTION>
Armada
Parkstone Tax-Exempt
Tax-Free Money Market Pro Forma
Fund Fund Combined
<S> <C> <C> <C>
INVESTMENT ACTIVITIES:
Net Investment Income 1,246 8,685 9,931
Net Realized Gain (Loss) on Securities Sold - - -
Net Increase (Decrease) in Unrealized
Appreciation of Assets - - -
------- ------- -------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS: 1,246 8,685 9,931
------- ------- -------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional/Class I Shares (1,234) (5,759) (6,993)
Investor A/Class A Shares (12) (2,843) (2,885)
Investor B/Class B Shares - - -
Realized Capital Gains
Institutional/Class I Shares - - -
Investor A/Class A Shares - - -
Investor B/Class B Shares - - -
TOTAL DISTRIBUTIONS: (1,246) (8,602) (9,848)
------- ------- -------
PAID-IN-CAPITAL:
Institutional/Class I Shares
Shares Issued 80,947 381,535 462,482
Shares Issued in Lieu of Cash Distributions - 140 140
Shares Redeemed (102,778) (466,343) (569,121)
Net Institutional/Class I Share Transactions (21,831) (84,668) (106,499)
------- ------- -------
Investor A/Class A Shares
Shares Issued 1,134 252,307 253,441
Shares Issued in Lieu of Cash Distributions 11 2,417 2,428
Shares Redeemed (1,081) (259,704) (206,785)
Net Investor A/Class A Share Transactions 64 (4,980) (4,916)
------- ------- -------
Investor B/Class B Shares
Shares Issued - - -
Shares Issued in Lieu of Cash Distributions - - -
Shares Redeemed - - -
Net Investor B/Class B Share Transactions - - -
INCREASE (DECREASE) IN NET ASSETS
FROM SHARE TRANSACTIONS: (21,767) (89,648) (111,415)
------- ------- -------
BEGINNING OF PERIOD: 110,757 624,647 735,404
------- ------- -------
END OF PERIOD: 88,990 535,082 624,072
------- ------- -------
</TABLE>
23
<PAGE> 244
PROFORMA COMBINED SCHEDULE OF INVESTMENTS
ARMADA TAX EXEMPT MONEY MARKET/
PARKSTONE TAX FREE
AS OF 11/30/99
<TABLE>
<CAPTION>
Proforma Proforma
Armada Parkstone Combined Armada Parkstone Combined
Shares Shares Shares Security Description Market Value Market Value Market Value
------ ------ ------ -------------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
3,000,000.00 0.00 3,000,000.00 ABN AMRO MUNITOPS (M1\W) 3,000,000.00 0.00 3,000,000.00
6,000,000.00 0.00 6,000,000.00 ALLEGHENY CNTY (MB/D) 6,000,000.00 0.00 6,000,000.00
5,000,000.00 0.00 5,000,000.00 ALLEGHENY CNTY PA IDA 5,000,000.00 0.00 5,000,000.00
4,755,000.00 0.00 4,755,000.00 ALLEGHENY CNTY,PA MTG REV 4,755,000.00 0.00 4,755,000.00
0.00 1,270,000.00 1,270,000.00 BATH CNTY, KY 0.00 1,270,000.00 1,270,000.00
4,200,000.00 0.00 4,200,000.00 BECKER, MN PCR TECP 4,200,000.00 0.00 4,200,000.00
4,000,000.00 0.00 4,000,000.00 BECKER, MN. TECP 4,000,000.00 0.00 4,000,000.00
2,000,000.00 0.00 2,000,000.00 BELLEVUE, MI CMNY SCH GO 2,009,038.25 0.00 2,009,038.25
2,000,000.00 0.00 2,000,000.00 CARLTON WISC PCR (MB/D) 2,000,000.00 0.00 2,000,000.00
4,260,000.00 0.00 4,260,000.00 CHELAN CNTY, WA (MB/W) 4,260,000.00 0.00 4,260,000.00
1,545,000.00 0.00 1,545,000.00 CLARK CNTY, NV (MB/W) 1,545,000.00 0.00 1,545,000.00
4,300,000.00 0.00 4,300,000.00 COLORADO STATE (M1-TH) 4,300,000.00 0.00 4,300,000.00
7,700,000.00 0.00 7,700,000.00 COLORADO STATE (M1-WED) 7,700,000.00 0.00 7,700,000.00
2,000,000.00 0.00 2,000,000.00 COLUMBUS, OHIO (M1TH/TH) 2,000,000.00 0.00 2,000,000.00
10,575,000.00 3,000,000.00 13,575,000.00 COLUMBUS, OH. (MT\W) 10,575,000.00 3,000,000.00 13,575,000.00
2,200,000.00 0.00 2,200,000.00 COLUMBUS OHIO 2,200,000.00 0.00 2,200,000.00
0.00 1,300,000.00 1,300,000.00 CONSHOCTON 0.00 1,300,000.00 1,300,000.00
1,425,000.00 0.00 1,425,000.00 CUYAHOGA HOSP.(M1/TH) 1,425,000.00 0.00 1,425,000.00
2,625,000.00 0.00 2,625,000.00 DEL CNTY INDL AUTH RB 2,625,000.00 0.00 2,625,000.00
0.00 1,000,000.00 1,000,000.00 DELAWARE PA 0.00 1,000,000.00 1,000,000.00
2,000,000.00 0.00 2,000,000.00 DELAWARE CNTY,PA IDA TECP 2,000,000.00 0.00 2,000,000.00
2,000,000.00 0.00 2,000,000.00 DETROIT MICH RB (S1/W) 2,000,000.00 0.00 2,000,000.00
155,000.00 0.00 155,000.00 DUBLIN, OH CTY SCH DST GO 155,000.00 0.00 155,000.00
1,500,000.00 0.00 1,500,000.00 EASTERN, OH WSTWATER AUTH 1,500,012.86 0.00 1,500,012.86
3,500,000.00 0.00 3,500,000.00 EASTERN OH BD ANTIC NTE 3,508,050.00 0.00 3,508,050.00
2,700,000.00 0.00 2,700,000.00 EMERY COUNTY, UT (M1B/W) 2,700,000.00 0.00 2,700,000.00
</TABLE>
24
<PAGE> 245
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
8,000,000.00 0.00 8,000,000.00 FOREST, MS (M1-WED) 8,000,000.00 0.00 8,000,000.00
2,700,000.00 0.00 2,700,000.00 FORT WORTH TX. TECP 2,700,000.00 0.00 2,700,000.00
0.00 2,000,000.00 2,000,000.00 FORT WORTH TX. 0.00 2,000,000.00 2,000,000.00
0.00 1,500,000.00 1,500,000.00 FORT WORTH TX. 0.00 1,500,000.00 1,500,000.00
2,975,000.00 0.00 2,975,000.00 FOX VALLEY PARK, IL G.O. 2,975,304.79 0.00 2,975,304.79
0.00 1,850,000.00 1,850,000.00 FRANKLIN, IND 0.00 1,850,000.00 1,850,000.00
6,000,000.00 0.00 6,000,000.00 GEORGIA GO TR REC (S1/TH) 6,000,000.00 0.00 6,000,000.00
2,539,341.28 1,178,912.65 3,718,253.93 FSQ TAX EXEMPT MM #477 2,539,341.28 1,178,912.65 3,718,253.93
0.00 1,470,000.00 1,470,000.00 GOSHEN IND 0.00 1,470,000.00 1,470,000.00
0.00 2,405,000.00 2,405,000.00 GRANT CNTY 0.00 2,405,000.00 2,405,000.00
100,000.00 0.00 100,000.00 GREATER CLEVELAND, OH GO 100,000.00 0.00 100,000.00
3,500,000.00 0.00 3,500,000.00 HAMILTON OH BD ANTIC NTE 3,501,377.62 0.00 3,501,377.62
0.00 2,300,000.00 2,300,000.00 HAMPTON, VA 0.00 2,300,000.00 2,300,000.00
0.00 2,235,000.00 2,235,000.00 HARFORD MD 0.00 2,235,000.00 2,235,000.00
3,000,000.00 0.00 3,000,000.00 HARRIS CNTY, TX ANT NTE 3,003,774.49 0.00 3,003,774.49
2,000,000.00 0.00 2,000,000.00 HENNEPIN CNTY, MN (M1-WE) 2,000,000.00 0.00 2,000,000.00
4,000,000.00 0.00 4,000,000.00 HENNEPIN CNTY, MN (M1-WE) 4,000,000.00 0.00 4,000,000.00
1,600,000.00 0.00 1,600,000.00 HOUSTON, TX SCH DIST GO 1,604,817.18 0.00 1,604,817.18
5,000,000.00 0.00 5,000,000.00 HOUSTON TX GO TECP 5,000,000.00 0.00 5,000,000.00
4,000,000.00 0.00 4,000,000.00 HOUSTON TX CP NOTES 4,000,000.00 0.00 4,000,000.00
0.00 2,000,000.00 2,000,000.00 IL DEV AUTH 0.00 2,000,000.00 2,000,000.00
3,900,000.00 0.00 3,900,000.00 ILLINOIS DEV AUTH (MB/TH) 3,900,000.00 0.00 3,900,000.00
8,736,000.00 0.00 8,736,000.00 ILLINOIS ST (M1-WED) 8,736,000.00 0.00 8,736,000.00
3,000,000.00 0.00 3,000,000.00 ILLINOIS EDL FACS (M1/T) 3,000,000.00 0.00 3,000,000.00
0.00 1,000,000.00 1,000,000.00 ILL HEALTH 0.00 1,000,000.00 1,000,000.00
1,200,000.00 0.00 1,200,000.00 ILLINOIS ST (MB/D) 1,200,000.00 0.00 1,200,000.00
4,820,000.00 1,845,000.00 6,665,000.00 ILLINOIS STATE (MW/W) 4,820,000.00 1,845,000.00 6,665,000.00
2,000,000.00 0.00 2,000,000.00 ILLINOIS HEALTH FACS TECP 2,000,000.00 0.00 2,000,000.00
0.00 2,000,000.00 2,000,000.00 ILL HEALTH 0.00 2,000,000.00 2,000,000.00
5,000,000.00 0.00 5,000,000.00 ILLINOIS ST (S1/TH) 144A 5,000,000.00 0.00 5,000,000.00
2,550,000.00 0.00 2,550,000.00 INDIANA BANK, PRG NTS 2,551,767.76 0.00 2,551,767.76
4,300,000.00 900,000.00 5,200,000.00 INDIANA HEALTH (MW) 4,300,000.00 900,000.00 5,200,000.00
1,000,000.00 0.00 1,000,000.00 INDIANA HEALTH FAC 1,000,000.00 0.00 1,000,000.00
1,450,000.00 0.00 1,450,000.00 INDIANA HELTH FAC (MW/W) 1,450,000.00 0.00 1,450,000.00
4,250,000.00 0.00 4,250,000.00 INDIANA HEALTH (M1W/W) 4,250,000.00 0.00 4,250,000.00
</TABLE>
25
<PAGE> 246
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
5,000,000.00 0.00 5,000,000.00 INDIANA HLTH FACS TECP 5,000,000.00 0.00 5,000,000.00
10,000,000.00 0.00 10,000,000.00 INDIANA ST (M1W-WED) 10,000,000.00 0.00 10,000,000.00
0.00 1,050,000.00 1,050,000.00 INDIANA DEV 0.00 1,050,000.00 1,050,000.00
0.00 1,000,000.00 1,000,000.00 INDIANA DEV 0.00 1,000,000.00 1,000,000.00
0.00 1,100,000.00 1,100,000.00 INDIANA DEV 0.00 1,100,000.00 1,100,000.00
3,300,000.00 0.00 3,300,000.00 INTERMNT PWR, TECP 3,300,000.00 0.00 3,300,000.00
2,000,000.00 0.00 2,000,000.00 INTERMN POWR, UT TECP 2,000,000.00 0.00 2,000,000.00
4,000,000.00 0.00 4,000,000.00 INTERMOUNTAIN POWER, TECP 4,000,000.00 0.00 4,000,000.00
5,000,000.00 0.00 5,000,000.00 INTERMNT POWER, UT TECP 5,000,000.00 0.00 5,000,000.00
0.00 1,500,000.00 1,500,000.00 INTERMNT POWER, UT TECP 0.00 1,500,000.00 1,500,000.00
0.00 2,000,000.00 2,000,000.00 JACKSON CNTY, MS 0.00 2,000,000.00 2,000,000.00
4,400,000.00 0.00 4,400,000.00 JACKSON CNTY, MS TECP 4,400,000.00 0.00 4,400,000.00
5,750,000.00 0.00 5,750,000.00 JACKSONVILLE CP NOTES 5,750,000.00 0.00 5,750,000.00
3,000,000.00 0.00 3,000,000.00 JACKSONVILLE FL PCR TECP 3,000,000.00 0.00 3,000,000.00
5,810,000.00 0.00 5,810,000.00 JACKSONVILLE, FL PCR TECP 5,810,000.00 0.00 5,810,000.00
4,000,000.00 0.00 4,000,000.00 JEFFERSON, KY. PCR TECP 4,000,000.00 0.00 4,000,000.00
0.00 2,000,000.00 2,000,000.00 JEFFERSON, KY. PCR 0.00 2,000,000.00 2,000,000.00
5,000,000.00 0.00 5,000,000.00 KENTCKY LCL SCH ANTIC NTE 5,012,500.28 0.00 5,012,500.28
2,000,000.00 0.00 2,000,000.00 KENTUCKY TRNPIKE AUTH RB 2,063,864.17 0.00 2,063,864.17
0.00 2,000,000.00 2,000,000.00 KING CNTY, WA 0.00 2,000,000.00 2,000,000.00
0.00 1,035,000.00 1,035,000.00 LEWIS CNTY, KY 0.00 1,035,000.00 1,035,000.00
1,550,000.00 0.00 1,550,000.00 LEXINGTON-FAYETTE KY. RB 1,551,876.70 0.00 1,551,876.70
2,000,000.00 0.00 2,000,000.00 LINCOLN CNTY, WY PCR TECP 2,000,000.00 0.00 2,000,000.00
600,000.00 0.00 600,000.00 LUCAS CNTY, OH GO 600,000.00 0.00 600,000.00
100,000.00 0.00 100,000.00 LUCAS CNTY, OH GO 100,000.00 0.00 100,000.00
6,600,000.00 0.00 6,600,000.00 MAHONING CNTY, OH (MB/T) 6,600,000.00 0.00 6,600,000.00
2,300,000.00 0.00 2,300,000.00 MAINE HEALTH & HIGHER ED 2,300,000.00 0.00 2,300,000.00
2,000,000.00 0.00 2,000,000.00 MARICOPA CNTY, AZ TECP 2,000,000.00 0.00 2,000,000.00
0.00 1,000,000.00 1,000,000.00 MARICOPA CNTY, AZ 0.00 1,000,000.00 1,000,000.00
0.00 2,600,000.00 2,600,000.00 MARICOPA CNTY, AZ 0.00 2,600,000.00 2,600,000.00
2,000,000.00 0.00 2,000,000.00 MARICOPA CNTY, AZ (MB/D) 2,000,000.00 0.00 2,000,000.00
750,000.00 0.00 750,000.00 MASON, OH GO 750,668.57 0.00 750,668.57
725,000.00 0.00 725,000.00 MASSACHUSETTS ST G.O. 746,710.72 0.00 746,710.72
1,800,000.00 0.00 1,800,000.00 MASSILLON OH BD ANT NTE 1,801,007.41 0.00 1,801,007.41
4,500,000.00 0.00 4,500,000.00 MAYFIELD VILLAGE, OH BAN 4,505,329.18 0.00 4,505,329.18
</TABLE>
26
<PAGE> 247
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
2,000,000.00 0.00 2,000,000.00 MICHIGAN MUNICIPAL RB 2,000,000.00 0.00 2,000,000.00
0.00 1,450,000.00 1,450,000.00 MICH BLDG 01/12/00 0.00 1,450,000.00 1,450,000.00
5,000,000.00 0.00 5,000,000.00 MICHIGAN ST. (S1/THUR) 5,000,000.00 0.00 5,000,000.00
3,900,000.00 0.00 3,900,000.00 MICHIGAN HDA (MW/W) 3,900,000.00 0.00 3,900,000.00
2,500,000.00 4,300,000.00 6,800,000.00 MICHIGAN STATE (MB-D) 2,500,000.00 4,300,000.00 6,800,000.00
5,800,000.00 0.00 5,800,000.00 MICHIGAN STRATEGIC (M1/D) 5,800,000.00 0.00 5,800,000.00
0.00 1,000,000.00 1,000,000.00 BOC MICHIGAN 0.00 1,000,000.00 1,000,000.00
1,160,000.00 0.00 1,160,000.00 MILFORD CITY OHIO 1,160,697.92 0.00 1,160,697.92
3,235,000.00 2,000,000.00 5,235,000.00 MINNEAPOLIS, MN RB (Q1) 3,235,000.00 2,000,000.00 5,235,000.00
1,600,000.00 0.00 1,600,000.00 MINNEAPOLIS, MN (M1-THR) 1,600,000.00 0.00 1,600,000.00
4,000,000.00 0.00 4,000,000.00 MINNEAPOLIS MN (Q1-TH) 4,000,000.00 0.00 4,000,000.00
1,830,000.00 0.00 1,830,000.00 MINNEAPOLIS, MN (QB/TH) 1,830,000.00 0.00 1,830,000.00
6,350,000.00 0.00 6,350,000.00 MINNEAPOLIS, MN (MB/T) 6,350,000.00 0.00 6,350,000.00
2,000,000.00 0.00 2,000,000.00 MINNESOTA SCH DISTS COP 2,000,000.00 0.00 2,000,000.00
2,000,000.00 0.00 2,000,000.00 MINNESOTA SCH DIS ANTC NT 2,000,000.00 0.00 2,000,000.00
3,400,000.00 0.00 3,400,000.00 MINNESOTA TX & AID AN NTE 3,400,000.00 0.00 3,400,000.00
0.00 2,700,000.00 2,700,000.00 MISSOURI EDU 0.00 2,700,000.00 2,700,000.00
2,100,000.00 0.00 2,100,000.00 MISSOURI STATE (M1-TH) 2,100,000.00 0.00 2,100,000.00
1,000,000.00 0.00 1,000,000.00 MISSOURI ST (M1-TH) 1,000,000.00 0.00 1,000,000.00
4,100,000.00 0.00 4,100,000.00 FEDERATED TAX-FREE MM #15 4,100,000.00 0.00 4,100,000.00
4,100,000.00 0.00 4,100,000.00 MONROE, MICH (M1B-D) 4,100,000.00 0.00 4,100,000.00
3,500,000.00 0.00 3,500,000.00 MONTGOMERY, CNTY. MD TECP 3,500,000.00 0.00 3,500,000.00
2,500,000.00 0.00 2,500,000.00 MT. MORRIS MI ST AID NTS 2,504,487.15 0.00 2,504,487.15
5,435,000.00 0.00 5,435,000.00 MUNCPL ELEC AUTH GA TECP 5,435,000.00 0.00 5,435,000.00
2,657,000.00 0.00 2,657,000.00 MUNI ELEC AUTH GA TECP 2,657,000.00 0.00 2,657,000.00
0.00 1,403,397.31 1,403,397.31 MUNI CASH MUTUAL FUND 0.00 1,403,397.31 1,403,397.31
2,650,000.00 0.00 2,650,000.00 MUSKINGUM CNTY, OH BAN 2,653,836.97 0.00 2,653,836.97
1,980,000.00 0.00 1,980,000.00 MUSKINGUM CNTY, OH BD ANT 1,983,838.15 0.00 1,983,838.15
1,000,000.00 0.00 1,000,000.00 NEW HAMPSHIRE MB1/W 1,000,000.00 0.00 1,000,000.00
1,000,000.00 0.00 1,000,000.00 NEW HAMPSHIRE ST GO 1,003,058.13 0.00 1,003,058.13
5,000,000.00 0.00 5,000,000.00 NORFOLK, VA IDA TECP 5,000,000.00 0.00 5,000,000.00
10,600,000.00 0.00 10,600,000.00 N.CAROLINA ST (M1-TH) 10,600,000.00 0.00 10,600,000.00
2,000,000.00 0.00 2,000,000.00 NORTH CAROLINA (M1W/W) 2,000,000.00 0.00 2,000,000.00
2,000,000.00 0.00 2,000,000.00 NORTHAMPTON, PA (MB/TH) 2,000,000.00 0.00 2,000,000.00
700,000.00 0.00 700,000.00 NSIDE TEXAS SCH DIST GO 712,609.56 0.00 712,609.56
</TABLE>
27
<PAGE> 248
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
100,000.00 0.00 100,000.00 NORTHWST OHIO SCH DIST GO 100,000.00 0.00 100,000.00
3,100,000.00 0.00 3,100,000.00 OAK CREEK, WI (M1B/WED) 3,100,000.00 0.00 3,100,000.00
0.00 250,000.00 250,000.00 OAKLAND CA 0.00 250,266.76 250,266.76
1,505,000.00 0.00 1,505,000.00 OCONEE CNTY, SC GO 1,515,791.55 0.00 1,515,791.55
3,000,000.00 0.00 3,000,000.00 OHIO STATE 3,000,000.00 0.00 3,000,000.00
1,050,000.00 0.00 1,050,000.00 OHIO STATE (M1/D) 1,050,000.00 0.00 1,050,000.00
4,780,000.00 0.00 4,780,000.00 OHIO STATE (MB/TH) 4,780,000.00 0.00 4,780,000.00
1,685,000.00 0.00 1,685,000.00 OHIO ST INFRASTRCTRE RB 1,685,802.58 0.00 1,685,802.58
1,250,000.00 0.00 1,250,000.00 OHIO STATE UNIV (QB/TH) 1,250,000.00 0.00 1,250,000.00
2,710,000.00 0.00 2,710,000.00 OHIO STATE (Q1B-TH) 2,710,000.00 0.00 2,710,000.00
3,310,000.00 2,140,000.00 5,450,000.00 OLMSTED CNTY, MN (M1B/TH) 3,310,000.00 2,140,000.00 5,450,000.00
0.00 670,000.00 670,000.00 ORANGE CNTY, OH 0.00 670,000.00 670,000.00
200,000.00 0.00 200,000.00 ORRVILLE, OH RB 200,000.00 0.00 200,000.00
4,765,000.00 0.00 4,765,000.00 OWENSBORO DAVIES KY, BAN 4,782,264.29 0.00 4,782,264.29
100,000.00 0.00 100,000.00 PA HIGHER EDUCATION MB/W 100,000.00 0.00 100,000.00
1,000,000.00 0.00 1,000,000.00 PENN ST. (MB/D) 1,000,000.00 0.00 1,000,000.00
1,000,000.00 3,000,000.00 4,000,000.00 PENNSYLVANIA STATE (MB/W) 1,000,000.00 3,000,000.00 4,000,000.00
2,000,000.00 0.00 2,000,000.00 PA ST IND DEV AUTH RB 2,003,236.82 0.00 2,003,236.82
1,150,000.00 0.00 1,150,000.00 PENNSYLVANIA STATE 1,150,000.00 0.00 1,150,000.00
1,850,000.00 0.00 1,850,000.00 PIKE DELTA YORK SCH 1,851,711.35 0.00 1,851,711.35
0.00 845,000.00 845,000.00 ANGELES WA 0.00 845,000.00 845,000.00
0.00 2,000,000.00 2,000,000.00 PORTLAND OR 0.00 2,000,000.00 2,000,000.00
0.00 2,000,000.00 2,000,000.00 PORTLAND OR 0.00 2,000,040.58 2,000,040.58
930,000.00 0.00 930,000.00 PURDUE UNIV (QB/WED) 930,000.00 0.00 930,000.00
5,850,000.00 1,000,000.00 6,850,000.00 PURDUE UNIV, IN (Q1-WED) 5,850,000.00 1,000,000.00 6,850,000.00
4,000,000.00 0.00 4,000,000.00 QUAKERTOWN, PA (MB/TU) 4,000,000.00 0.00 4,000,000.00
2,745,000.00 0.00 2,745,000.00 QUAKERTOWN, PA (M1/TUE) 2,745,000.00 0.00 2,745,000.00
3,400,000.00 0.00 3,400,000.00 RICHLAND CNTY, SC GO 3,407,592.16 0.00 3,407,592.16
1,500,000.00 0.00 1,500,000.00 ROCHESTER MN. TECP 1,500,000.00 0.00 1,500,000.00
0.00 2,200,000.00 2,200,000.00 ROSHES MINN 0.00 2,200,000.00 2,200,000.00
0.00 1,145,000.00 1,145,000.00 RUTHERFORD 0.00 1,147,768.68 1,147,768.68
2,000,000.00 0.00 2,000,000.00 PARRISH OF ST. JAMES TECP 2,000,000.00 0.00 2,000,000.00
1,570,000.00 0.00 1,570,000.00 ST MARYS, OH BD ANTIC NTE 1,572,422.29 0.00 1,572,422.29
5,000,000.00 0.00 5,000,000.00 SALT RIVER PRJ. TECP 5,000,000.00 0.00 5,000,000.00
4,000,000.00 0.00 4,000,000.00 SALT RIVER PRJ, AZ TECP 4,000,000.00 0.00 4,000,000.00
</TABLE>
28
<PAGE> 249
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
6,000,000.00 0.00 6,000,000.00 SALT RIVER PRJ. AZ TECP 6,000,000.00 0.00 6,000,000.00
0.00 1,000,000.00 1,000,000.00 SALT RIVER PRJ. AZ TECP 0.00 1,000,000.00 1,000,000.00
0.00 1,000,000.00 1,000,000.00 SALT RIVER PRJ. AZ TECP 0.00 1,000,000.00 1,000,000.00
0.00 1,500,000.00 1,500,000.00 SAN ANTONIO TX 0.00 1,500,000.00 1,500,000.00
2,000,000.00 0.00 2,000,000.00 SAVANNAH, GA (M1-WE) 2,000,000.00 0.00 2,000,000.00
2,000,000.00 0.00 2,000,000.00 SAYRE PA HLTH CARE (M1/W) 2,000,000.00 0.00 2,000,000.00
0.00 2,700,000.00 2,700,000.00 SOMERVILLE, MA 0.00 2,700,000.00 2,700,000.00
4,000,000.00 0.00 4,000,000.00 SOUTH CAROLINA TECP 4,000,000.00 0.00 4,000,000.00
3,000,000.00 0.00 3,000,000.00 S. CAROLINA TECP 3,000,000.00 0.00 3,000,000.00
3,400,000.00 0.00 3,400,000.00 SULLIVAN, IN. TECP 3,400,000.00 0.00 3,400,000.00
8,000,000.00 0.00 8,000,000.00 SUMMIT CNTY, OH BAN GO 8,023,247.03 0.00 8,023,247.03
2,000,000.00 0.00 2,000,000.00 TENNESSEE STATE (TH) 2,000,000.00 0.00 2,000,000.00
5,800,000.00 0.00 5,800,000.00 TENNESSEE ST. TECP 5,800,000.00 0.00 5,800,000.00
0.00 1,300,000.00 1,300,000.00 TENN STATE 0.00 1,300,000.00 1,300,000.00
8,000,000.00 0.00 8,000,000.00 TEXAS TAX & REVENUE 8,046,302.24 0.00 8,046,302.24
0.00 520,000.00 520,000.00 TEXAS PUBLIC 0.00 522,495.32 522,495.32
4,220,000.00 0.00 4,220,000.00 TOLEDO (M1/TH) 4,220,000.00 0.00 4,220,000.00
200,000.00 0.00 200,000.00 TWINSBURG, OHIO GO 200,000.00 0.00 200,000.00
1,375,000.00 0.00 1,375,000.00 U. OF CINCINNATI ANTIC NT 1,375,167.72 0.00 1,375,167.72
1,350,000.00 0.00 1,350,000.00 U. OF MICHIGAN (M1/D) 1,350,000.00 0.00 1,350,000.00
0.00 2,300,000.00 2,300,000.00 NC CHA HILL 0.00 2,300,000.00 2,300,000.00
4,000,000.00 0.00 4,000,000.00 UNIVERSITY TEXAS TECP 4,000,000.00 0.00 4,000,000.00
3,850,000.00 0.00 3,850,000.00 UNIVERSITY OF UTAH (MW/W) 3,850,000.00 0.00 3,850,000.00
0.00 3,000,000.00 3,000,000.00 UTAH CITY 0.00 3,000,000.00 3,000,000.00
6,000,000.00 0.00 6,000,000.00 VALDEZ, AK (MB-WED) 6,000,000.00 0.00 6,000,000.00
3,300,000.00 0.00 3,300,000.00 VALDEZ AK MARINE TRM TECP 3,300,000.00 0.00 3,300,000.00
1,300,000.00 0.00 1,300,000.00 VERMONT ST GO 1,307,846.46 0.00 1,307,846.46
1,215,000.00 0.00 1,215,000.00 VERMONT STATE GO 1,216,748.49 0.00 1,216,748.49
7,000,000.00 0.00 7,000,000.00 VIRGINIA ST AUTH (THURS) 7,000,000.00 0.00 7,000,000.00
115,000.00 0.00 115,000.00 WARREN CNTY, OHIO GO 115,000.00 0.00 115,000.00
3,730,000.00 0.00 3,730,000.00 WASHINGTON CO., PA (MB/W) 3,730,000.00 0.00 3,730,000.00
7,200,000.00 2,500,000.00 9,700,000.00 WASHINGTON ST HEALTH (M1) 7,200,000.00 2,500,000.00 9,700,000.00
3,000,000.00 0.00 3,000,000.00 W. DEPTFORD NJ ANT NTE 3,002,509.22 0.00 3,002,509.22
100,000.00 0.00 100,000.00 WHITEHALL OHIO GO 100,000.00 0.00 100,000.00
8,300,000.00 0.00 8,300,000.00 WINSTON, NC (MB/TH) 8,300,000.00 0.00 8,300,000.00
</TABLE>
29
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<TABLE>
<S> <C> <C> <C> <C> <C> <C>
0.00 325,000.00 325,000.00 WISCONSIN GO 0.00 327,236.61 327,236.61
4,085,000.00 0.00 4,085,000.00 WISCONSIN GO CP NOTES 4,085,000.00 0.00 4,085,000.00
6,350,000.00 0.00 6,350,000.00 WISC.ST GO CP NOTES 6,350,000.00 0.00 6,350,000.00
6,010,000.00 0.00 6,010,000.00 WISCONSIN GO CP NOTES 6,010,000.00 0.00 6,010,000.00
700,000.00 0.00 700,000.00 WOOSTER OHIO IDR (MW/W) 700,000.00 0.00 700,000.00
531,492,341.28 88,787,309.96 620,279,651.24 531,782,611.34 88,795,117.91 620,577,729.25
</TABLE>
30
<PAGE> 251
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1999
(Amounts in Thousands)
Parkstone Armada Pro Forma
Bond Fund Bond Fund Combined
TOTAL INVESTMENTS: 374,186 696,414 1,070,600
------- ------- ---------
ASSETS
Cash 0 517 517
Accrued Income 3,348 6,760 10,108
Investment Securities Sold 0 3 3
Cap Shares Sold 1 1 2
Other Assets 11 116 127
TOTAL ASSETS: 377,546 703,811 1,081,357
------- ------- ---------
LIABILITIES
Income Payable 1,804 3,560 5,364
Capital Gain Payable 0 0 0
Investment Securities Purchased 0 0 0
Capital Shares Redeemed Payable 10 0 10
Accrued Expense Payable 311 575 886
Other Payables 27,485 0 27,485
TOTAL LIABILITIES: 29,610 4,135 33,745
------- ------- ---------
TOTAL NET ASSETS: 347,936 699,676 1,047,612
31
<PAGE> 252
STATEMENT OF OPERATIONS
SIX MONTH PERIOD ENDING NOVEMBER 30, 1999
(Amounts in Thousands)
<TABLE>
<CAPTION>
Parkstone Armada Pro Forma
Bond Fund Bond Fund Combined
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest 12,448 24,810 37,258
------ ------ ------
TOTAL INCOME: 12,448 24,810 37,258
------ ------ ------
EXPENSES:
Administrator Fees 418 256 674
Investment Advisory Fees 1,228 2,013 3,241
Waiver of Investment Advisory Fees (85) 0 (85)
Transfer Agent Fees 60 35 95
Custodian Fees 23 73 96
Professional Fees (Audit + Legal) 16 23 39
Trustee (Directors) Fees 3 9 12
Registration Fees 15 113 128
12b-1 Fees 31 149 180
Shareholder Servicing Fees 0 5 5
Printing Expenses 20 23 43
Miscellaneous Expenses 6 1 9
Amortization of Deferred Organization Cost -- 2 --
TOTAL EXPENSES: (1,735) (2,702) (4,437)
------ ------ ------
NET INVESTMENT INCOME: 10,713 22,108 32,821
------ ------ ------
Net Realized Gains (Losses) on Investments (5,522) (12,128) (17,650)
Net Unrealized Appreciation (Depreciation)
of Investment Securities (3,690) (8,054) (11,744)
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS: (9,212) (20,182) (29,394)
------ ------ ------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS: 1,501 1,926 3,427
------ ------ ------
</TABLE>
32
<PAGE> 253
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTH PERIOD ENDING NOVEMBER 30, 1999
(Amounts in Thousands)
<TABLE>
<CAPTION>
Parkstone Armada Pro Forma
Bond Fund Bond Fund Combined
<S> <C> <C> <C>
INVESTMENT ACTIVITIES:
Net Investment Income 10,713 22,108 32,821
Net Realized Gain (Loss) on Securities Sold (5,522) (12,128) (17,650)
Net Increase (Decrease) in Unrealized
Appreciation of Assets (3,690) (8,054) (11,744)
------- ------- ---------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS: 1,501 1,926 3,427
------- ------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional/Class I Shares (10,343) (21,939) (32,282)
Investor A/Class A Shares (276) (93) (369)
Investor B/Class B Shares (94) (18) (112)
Realized Capital Gains
Institutional/Class I Shares - - -
Investor A/Class A Shares - - -
Investor B/Class B Shares - - -
TOTAL DISTRIBUTIONS: (10,713) (22,050) (32,763)
------- ------- ---------
PAID-IN-CAPITAL:
Institutional/Class I Shares
Shares Issued 18,913 28,363 47,276
Shares Issued in Lieu of Cash Distributions 6,370 2,800 9,170
Shares Redeemed (46,195) (74,231) (120,426)
Net Institutional/Class I Share Transactions (20,912) (43,068) (63,980)
------- ------- ---------
Investor A/Class A Shares
Shares Issued 416 2,130 2,546
Shares Issued in Lieu of Cash Distributions 231 51 282
Shares Redeemed (4,109) (1,517) (5,626)
Net Investor A/Class A Share Transactions (3,462) 664 (2,798)
------- ------- ---------
Investor B/Class B Shares
Shares Issued 46 155 201
Shares Issued in Lieu of Cash Distributions 79 17 96
Shares Redeemed (1,297) (210) (1,507)
Net Investor B/Class B Share Transactions (1,172) (38) (1,210)
------- ------- ---------
INCREASE (DECREASE) IN NET ASSETS
FROM SHARE TRANSACTIONS: (25,546) (42,442) (67,988)
------- ------- ---------
BEGINNING OF PERIOD: 382,694 762,242 1,144,936
------- ------- ---------
END OF PERIOD: 347,936 699,676 1,047,612
------- ------- ---------
</TABLE>
33
<PAGE> 254
PROFORMA COMBINED SCHEDULE OF INVESTMENTS
ARMADA BOND /
PARKSTONE BOND
AS OF 11/30/99
<TABLE>
<CAPTION>
Proforma Proforma
Armada Parkstone Combined Armada Parkstone Combined
Shares/Par Shares/Par Shares/Par Security Description Market Value Market Value Market Value
---------- ----------- ----------- -------------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
10,465,000.00 6,700,000.00 17,165,000.00 AMERICAN GREETINGS 9,549,312.50 6,113,750.00 15,663,062.50
8,489,608.12 4,577,729.87 13,067,337.99 AMRES 99 1 NIM 8,298,591.94 4,474,730.95 12,773,322.89
6,900,000.00 5,000,000.00 11,900,000.00 ARCHER DANIELS 6,770,625.00 4,906,250.00 11,676,875.00
6,700,000.00 3,000,000.00 9,700,000.00 ARROW ELECTRONIC 6,035,808.90 2,655,000.00 8,690,808.90
3,100,000.00 2,145,000.00 5,245,000.00 BRADLEY OPER LTD PRTNSHP 2,948,794.40 2,040,375.48 4,989,169.88
8,170,000.00 4,950,000.00 13,120,000.00 BRUNSWICK CORP 6.75% 7,741,075.00 4,690,125.00 12,431,200.00
3,000,000.00 0.00 3,000,000.00 CIGNA CORPORATION 5/15/07 2,951,250.00 0.00 2,951,250.00
2,000,000.00 0.00 2,000,000.00 CSX TRANSPORT MTN 7.54% 2,020,220.00 0.00 2,020,220.00
3,900,000.00 1,965,000.00 5,865,000.00 CHAMP 6.71% SER 1997-2 A5 3,799,243.50 1,914,234.23 5,713,477.73
8,000,000.00 5,610,000.00 13,610,000.00 CITICORP 7,480,000.00 5,245,350.00 12,725,350.00
5,500,000.00 3,000,000.00 8,500,000.00 COMMERCIAL NET 5,396,875.00 2,943,750.00 8,340,625.00
12,250,000.00 6,500,000.00 18,750,000.00 COMPUTER ASSOCIATES INTL 11,821,250.00 6,272,500.00 18,093,750.00
7,500,000.00 9,000,000.00 16,500,000.00 FIRST BOSTON MTG SECS 7,374,600.00 8,849,520.00 16,224,120.00
4,800,000.00 2,000,000.00 6,800,000.00 CUMMINS ENGINE, (6.45%) 4,536,000.00 1,890,000.00 6,426,000.00
2,220,000.00 1,325,000.00 3,545,000.00 DAIMLER CHRYSLER 2,217,225.00 1,323,343.75 3,540,568.75
0.00 2,664,254.75 2,664,254.75 EQCC 93-4A 5.725% 12/15/08 0.00 2,596,236.33 2,596,236.33
0.00 6,000,000.00 6,000,000.00 EQVA 97-4 7.045% 12/25/28 0.00 5,892,702.00 5,892,702.00
0.00 5,845,000.00 5,845,000.00 EXCEL RTY 6.875% 10/15/04 0.00 5,720,793.75 5,720,793.75
2,257,526.70 0.00 2,257,526.70 EXPORT FUNDING TRUST 2,377,311.07 0.00 2,377,311.07
25,734.54 0.00 25,734.54 FHLMC POOL #E60894 26,120.56 0.00 26,120.56
110,250.88 0.00 110,250.88 FHLMC POOL #E61277 111,835.18 0.00 111,835.18
3,590,276.18 0.00 3,590,276.18 FHLMC POOL # E61976 3,584,639.05 0.00 3,584,639.05
293,080.59 0.00 293,080.59 FHLMC POOL #E64179 297,476.80 0.00 297,476.80
159,994.87 0.00 159,994.87 FHLMC POOL #E64198 162,394.80 0.00 162,394.80
9,102.63 0.00 9,102.63 FHLMC POOL #E64229 9,233.44 0.00 9,233.44
620,376.42 0.00 620,376.42 FHLMC POOL #E64248 629,682.07 0.00 629,682.07
7,183,722.32 0.00 7,183,722.32 FNMA POOL #C00690 6,672,520.16 0.00 6,672,520.16
1,961,521.54 0.00 1,961,521.54 FNMA POOL #C18901 1,821,937.35 0.00 1,821,937.35
7,816,635.58 3,318,473.32 11,135,108.90 FHLMC POOL #C18271 7,660,302.87 3,247,955.76 10,908,258.63
</TABLE>
34
<PAGE> 255
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
301,843.54 0.00 301,843.54 FHLMC POOL # E00164 296,464.69 0.00 296,464.69
0.00 1,563,817.23 1,563,817.23 FHLMC A00873 9.50% 10/01/20 0.00 1,675,083.39 1,675,083.39
0.00 715,305.47 715,305.47 FHLMC GOLD 9.00% 05/01/20 0.00 754,548.57 754,548.57
2,127,541.77 0.00 2,127,541.77 FHLMC POOL #80322 2,173,411.57 0.00 2,173,411.57
505,745.03 0.00 505,745.03 FHLMC POOL#E20204 496,732.65 0.00 496,732.65
137,689.65 0.00 137,689.65 FHLMC POOL #E20206 139,755.00 0.00 139,755.00
18,502.20 0.00 18,502.20 FHLMC GTMTG 78C 9.4% 19,007.13 0.00 19,007.13
419,833.85 0.00 419,833.85 FHLMC POOL#141138 427,835.88 0.00 427,835.88
60,531.09 0.00 60,531.09 FHLMC POOL # 252804 63,670.83 0.00 63,670.83
46,047.28 0.00 46,047.28 FHLMC POOL# 219329 47,989.55 0.00 47,989.55
14,498.67 0.00 14,498.67 FHLMC POOL #294315 15,246.22 0.00 15,246.22
168,799.49 0.00 168,799.49 FHLMC POOL #450074 177,502.79 0.00 177,502.79
6,639.98 0.00 6,639.98 FHLMC POOL #280417 6,957.44 0.00 6,957.44
62,084.34 0.00 62,084.34 FHLMC POOL # E31059 64,276.53 0.00 64,276.53
751,935.98 0.00 751,935.98 FHLMC POOL #E50893 741,596.86 0.00 741,596.86
3,140,000.00 0.00 3,140,000.00 FANNIE MAE (6.375%) 3,047,307.20 0.00 3,047,307.20
37,078.81 0.00 37,078.81 FNMA POOL # 1125 39,094.78 0.00 39,094.78
92,982.68 0.00 92,982.68 FNMA POOL# 31592 93,737.69 0.00 93,737.69
69,668.34 0.00 69,668.34 FNMA POOL # 35366 72,432.78 0.00 72,432.78
109,931.83 0.00 109,931.83 FNMA POOL# 77831 110,824.47 0.00 110,824.47
0.00 1,251,967.85 1,251,967.85 FNMA 084251 9.00% 08/01/09 0.00 1,310,259.47 1,310,259.47
899,743.00 0.00 899,743.00 FNMA POOL # 190506 887,929.37 0.00 887,929.37
116,917.53 0.00 116,917.53 FNMA POOL# 210452 124,589.66 0.00 124,589.66
0.00 1,559,513.38 1,559,513.38 FNMA 250273 8.50% 07/01/25 0.00 1,608,248.17 1,608,248.17
4,136,679.78 0.00 4,136,679.78 FNMA POOL #250060 4,158,645.55 0.00 4,158,645.55
4,253,444.94 0.00 4,253,444.94 FNMA POOL # 250433 4,261,398.88 0.00 4,261,398.88
9,321,191.58 0.00 9,321,191.58 FNMA POOL #252162 8,895,221.89 0.00 8,895,221.89
3,480,679.65 0.00 3,480,679.65 FNMA POOL # 252212 3,320,777.23 0.00 3,320,777.23
0.00 1,789,247.22 1,789,247.22 FNMA 280518 9.00 11/01/24 0.00 1,872,554.57 1,872,554.57
10,000,000.00 4,050,000.00 14,050,000.00 FEDERAL RLTY INVS TRST 9,888,700.00 4,004,923.50 13,893,623.50
1,001,146.23 0.00 1,001,146.23 FNMA POOL # 316357 999,894.80 0.00 999,894.80
2,296,486.27 0.00 2,296,486.27 FNMA POOL #322344 2,300,780.70 0.00 2,300,780.70
2,358,999.42 0.00 2,358,999.42 FNMA POOL #346316 2,365,628.21 0.00 2,365,628.21
1,027,804.21 0.00 1,027,804.21 FNMA POOL #407603 1,028,441.45 0.00 1,028,441.45
0.00 688,510.72 688,510.72 FNMA 394035 6.50 10/01/27 0.00 656,880.54 656,880.54
0.00 103,145.99 103,145.99 FNMA 394026 6.50 09/01/27 0.00 98,407.46 98,407.46
0.00 681,638.69 681,638.69 FNMA 397372 6.50 08/01/27 0.00 650,324.21 650,324.21
0.00 104,209.67 104,209.67 FNMA 398938 6.50 10/01/27 0.00 99,422.28 99,422.28
0.00 732,215.08 732,215.08 FNMA 402609 6.50 12/01/27 0.00 698,577.12 698,577.12
</TABLE>
35
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<TABLE>
<S> <C> <C> <C> <C> <C> <C>
0.00 721,239.90 721,239.90 FNMA 403480 6.50 12/01/27 0.00 688,106.14 688,106.14
0.00 121,558.90 121,558.90 FNMA 404323 6.50 12/01/27 0.00 115,974.48 115,974.48
0.00 26,856.83 26,856.83 FNMA 406501 6.50 12/01/27 0.00 25,623.03 25,623.03
5,295,001.46 0.00 5,295,001.46 FNMA POOL #413863 5,293,307.06 0.00 5,293,307.06
1,221,910.96 0.00 1,221,910.96 FNMA POOL #417392 1,168,452.36 0.00 1,168,452.36
3,964,259.76 0.00 3,964,259.76 FNMA POOL #420621 3,960,533.36 0.00 3,960,533.36
0.00 9,429.99 9,429.99 FNMA 435081 6.0% 07/01/28 0.00 8,749.24 8,749.24
1,224,081.18 0.00 1,224,081.18 FNMA POOL #435082 1,135,714.76 0.00 1,135,714.76
996,408.11 0.00 996,408.11 FNMA POOL #440148 950,873.20 0.00 950,873.20
2,014,546.95 0.00 2,014,546.95 FNMA POOL #441542 2,012,028.77 0.00 2,012,028.77
1,037,523.92 0.00 1,037,523.92 FNMA POOL #446109 1,035,412.56 0.00 1,035,412.56
4,786,430.11 0.00 4,786,430.11 FNMA POOL #448509 4,485,627.44 0.00 4,485,627.44
0.00 9,991,179.86 9,991,179.86 FNMA 6.5% 11 01 28 0.00 9,534,592.33 9,534,592.33
0.00 5,639,579.83 5,639,579.83 FNMA 448727 6.0% 12/01/28 0.00 5,232,458.56 5,232,458.56
0.00 0.00 0.00 FNMA POOL #452026 0.01 0.00 0.01
13,000,797.07 569,465.14 13,570,262.21 FNMA POOL #484693 12,063,237.44 528,355.45 12,591,592.89
17,585,685.43 11,747,757.56 29,333,442.99 FNMA POOL # 484699 16,316,174.80 10,899,686.94 27,215,861.74
488,885.72 6,275,415.18 6,764,300.90 FNMA POOL #484731 453,593.06 5,822,392.96 6,275,986.02
10,858,004.75 4,451,782.00 15,309,786.75 FNMA POOL #492335 10,070,565.52 4,130,407.86 14,200,973.38
4,600,893.10 0.00 4,600,893.10 FNMA POOL #494724 4,388,448.79 0.00 4,388,448.79
4,174.24 2,145,361.21 2,149,535.45 FNMA POOL #513370 3,983.77 2,046,803.32 2,050,787.09
7,000,000.00 3,370,000.00 10,370,000.00 FIRST CHICAGO CORP 6,982,500.00 3,361,575.00 10,344,075.00
5,000,000.00 2,000,000.00 7,000,000.00 FIRST MD BANCORP 7.20% 4,925,000.00 1,970,000.00 6,895,000.00
9,970,000.00 5,260,000.00 15,230,000.00 FIRST 99 - A A4 9,768,855.25 5,153,879.50 14,922,734.75
7,970,000.00 3,945,000.00 11,915,000.00 FIRST UNION CORP 7,920,187.50 3,920,343.75 11,840,531.25
8,440,000.00 4,375,000.00 12,815,000.00 FIRST UNION CAP 7.95% 8,218,450.00 4,260,156.25 12,478,606.25
3,250,000.00 1,600,000.00 4,850,000.00 FLAGSHIP 99-2 A3 3,242,892.25 1,596,500.80 4,839,393.05
2,750,000.00 2,500,000.00 5,250,000.00 FORD MOTOR CREDIT 2,719,062.50 2,471,875.00 5,190,937.50
7,300,000.00 3,650,000.00 10,950,000.00 FORD MOTOR CREDIT 7,351,676.70 3,672,812.50 11,024,489.20
9,760,000.00 6,090,000.00 15,850,000.00 GEHEL 99-1 A4 6.185% 9,488,135.20 5,920,363.05 15,408,498.25
6,940,350.06 3,589,153.30 10,529,503.36 GECMS99 -1 A1 (6.50%) 6,380,784.34 3,283,691.97 9,664,476.31
17,754,322.18 63,460,682.74 81,215,004.92 GMAC 1997-C1 IO 1,403,834.25 5,017,836.18 6,421,670.43
125,187.52 0.00 125,187.52 GNMA POOL# 0001136 131,798.67 0.00 131,798.67
46,746.64 0.00 46,746.64 GNMA POOL# 0009244 48,090.60 0.00 48,090.60
104,291.81 0.00 104,291.81 GNMA POOL# 0009279 107,290.20 0.00 107,290.20
230,991.48 0.00 230,991.48 GNMA POOL#348665 232,723.91 0.00 232,723.91
0.00 4,286,233.42 4,286,233.42 GNMA 354563 7.50 04/15/23 0.00 4,295,389.93 4,295,389.93
0.00 2,798,530.33 2,798,530.33 GNMA 354563 7.50 04/15/23 0.00 2,688,936.33 2,688,936.33
177,131.24 0.00 177,131.24 GNMA POOL# 371437 174,474.27 0.00 174,474.27
</TABLE>
36
<PAGE> 257
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
80,744.10 0.00 80,744.10 GNMA POOL# 22374 83,014.63 0.00 83,014.63
1,856,989.62 0.00 1,856,989.62 GNMA POOL# 480525 1,816,934.35 0.00 1,816,934.35
3,710,000.00 1,825,000.00 5,535,000.00 GNMA POOL# 481632 3,706,512.60 1,823,284.50 5,529,797.10
0.00 5,600,163.13 5,600,163.13 GNMA I POOL 6.5% 11 15 28 0.00 5,327,746.27 5,327,746.27
8,487,628.31 5,658,418.90 14,146,047.21 GNMA POOL #482829 8,081,749.92 5,383,168.22 13,464,918.14
5,641,258.07 0.00 5,641,258.07 GNMA 483453 5,371,493.11 0.00 5,371,493.11
5,827,433.86 0.00 5,827,433.86 GNMA #483463 5,548,765.97 0.00 5,548,765.97
8,625,877.39 0.00 8,625,877.39 GNMA POOL # 486516 8,213,387.93 0.00 8,213,387.93
0.00 8,539,225.27 8,539,225.27 GNMA 498651 6.5% 04/15/29 0.00 8,130,879.52 8,130,879.52
2,416,694.99 0.00 2,416,694.99 GNMA POOL# 498652 2,301,128.64 0.00 2,301,128.64
2,951,333.67 0.00 2,951,333.67 GNMA POOL#502768 2,948,559.42 0.00 2,948,559.42
2,995,185.19 0.00 2,995,185.19 GNMA POOL# 505842 2,992,369.72 0.00 2,992,369.72
5,027,352.56 0.00 5,027,352.56 GNMA POOL#507382 5,022,626.85 0.00 5,022,626.85
10,064,583.06 0.00 10,064,583.06 GNMA POOL#510422 10,055,122.35 0.00 10,055,122.35
64,004.85 0.00 64,004.85 GNMA POOL# 164775 69,084.91 0.00 69,084.91
11,751.28 0.00 11,751.28 GNMA POOL#303442 12,258.00 0.00 12,258.00
684,404.30 0.00 684,404.30 GNMA POOL# 304732 689,961.67 0.00 689,961.67
99,570.94 0.00 99,570.94 GNMA POOL#306473 103,864.44 0.00 103,864.44
79,997.19 0.00 79,997.19 GNMA POOL# 308571 83,446.67 0.00 83,446.67
18,754.11 0.00 18,754.11 GNMA POOL#310780 19,562.78 0.00 19,562.78
166,156.48 0.00 166,156.48 GNMA POOL#314586 173,321.15 0.00 173,321.15
191,607.90 0.00 191,607.90 GNMA POOL#315728 199,870.03 0.00 199,870.03
101,605.56 0.00 101,605.56 GNMA POOL#319999 105,986.79 0.00 105,986.79
32,435.20 0.00 32,435.20 GNMA POOL#321563 33,833.81 0.00 33,833.81
105,602.00 0.00 105,602.00 GNMA POOL#321786 110,155.56 0.00 110,155.56
9,038.51 0.00 9,038.51 GNMA POOL#325399 9,114.70 0.00 9,114.70
247,670.97 0.00 247,670.97 GNMA POOL# 331869 249,372.47 0.00 249,372.47
140,576.84 0.00 140,576.84 GNMA POOL#332285 146,638.51 0.00 146,638.51
357,421.01 0.00 357,421.01 GNMA POOL# 337049 360,101.67 0.00 360,101.67
233,613.61 0.00 233,613.61 GNMA POOL#337062 235,290.96 0.00 235,290.96
0.00 9,707,967.79 9,707,967.79 GNMA 780213 7.50% 08/15/25 0.00 9,704,861.23 9,704,861.23
4,665,000.00 3,650,000.00 8,315,000.00 GABLES REALTY 4,406,577.66 3,447,804.60 7,854,382.26
2,407,700.58 1,620,400.85 4,028,101.43 FSQ GOVERNMENT MM #465 2,407,700.58 1,620,400.85 4,028,101.43
296,561.22 0.00 296,561.22 TURKEY TRUST 303,612.85 0.00 303,612.85
711,934.04 0.00 711,934.04 TRUST CERTIFICATE 730,622.31 0.00 730,622.31
0.00 1,153,638.65 1,153,638.65 GREEN TREE 7.85% 07/15/09 0.00 1,135,076.60 1,135,076.60
6,880,000.00 3,245,000.00 10,125,000.00 GREENPOINT MAN HOUSING 6,485,260.00 3,058,818.13 9,544,078.13
5,750,000.00 1,850,000.00 7,600,000.00 HSBC HOLDING PLC 5,764,375.00 1,858,249.15 7,622,624.15
2,000,000.00 1,095,000.00 3,095,000.00 HALLIBURTON CO 1,797,500.00 984,131.25 2,781,631.25
</TABLE>
37
<PAGE> 258
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
4,205,051.47 5,153,271.01 9,358,322.48 HOUSING SECURITIES INC 4,239,217.51 5,196,192.21 9,435,409.72
12,810,000.00 7,790,000.00 20,600,000.00 IMCHE 1997-7 A5 12,663,645.75 7,700,999.25 20,364,645.00
1,036,000.00 0.00 1,036,000.00 KNIGHT-RIDDER (8 1/2) 1,047,774.14 0.00 1,047,774.14
1,313,000.00 0.00 1,313,000.00 KRAFT INC 1,354,031.25 0.00 1,354,031.25
7,360,000.00 4,810,000.00 12,170,000.00 LUBRIZOL 6,587,200.00 4,304,950.00 10,892,150.00
2,123,121.35 0.00 2,123,121.35 THE MONEY STORE (M15/M15) 2,121,709.48 0.00 2,121,709.48
0.00 2,800,000.00 2,800,000.00 MONSANTO 5.375% 12/01/01 0.00 2,733,500.00 2,733,500.00
13,000,000.00 6,000,000.00 19,000,000.00 MSC 99-FNV1 A2 (6.53%) 12,323,545.00 5,687,790.00 18,011,335.00
8,395,000.00 4,090,000.00 12,485,000.00 MOTOROLA INC. (7.50%) 8,332,037.50 4,059,325.00 12,391,362.50
9,000,000.00 4,550,000.00 13,550,000.00 NEW CENTURY HOME EQUITY 8,891,325.00 4,495,058.75 13,386,383.75
7,028,847.71 3,469,431.23 10,498,278.94 NEW CENTURY EQUITY TRUST 6,885,424.07 3,398,637.49 10,284,061.56
7,525,000.00 3,645,000.00 11,170,000.00 NEW CENTY HOME EQUITY LN 7,499,136.58 3,632,472.14 11,131,608.72
2,997,106.01 6,418,327.59 9,415,433.60 PNC 98-7 A5 2,803,268.18 6,003,222.24 8,806,490.42
7,292,343.34 4,466,560.41 11,758,903.75 PALS 99 - 1 A1 (6.30%) 7,071,297.83 4,331,170.03 11,402,467.86
6,680,000.00 2,665,000.00 9,345,000.00 PENTAIR INC SR NT 6,604,850.00 2,635,018.75 9,239,868.75
10,000,000.00 0.00 10,000,000.00 PRIME PROPERTY FNDG 144A 9,864,960.00 0.00 9,864,960.00
1,500,000.00 0.00 1,500,000.00 PRUDENTIAL HOME MTG (CMO) 1,440,525.00 0.00 1,440,525.00
10,090,000.00 4,960,000.00 15,050,000.00 PSSF 1998-C1 A1A3 9,562,847.95 4,700,864.80 14,263,712.75
7,460,000.00 3,640,000.00 11,100,000.00 PSSF 1999-NRF1 A2 7,063,016.10 3,446,297.40 10,509,313.50
2,110,637.12 0.00 2,110,637.12 RESIDENT'L FUND (M25/M25) 2,114,837.28 0.00 2,114,837.28
6,170,000.00 3,750,000.00 9,920,000.00 RESIDENTIAL FDG MTG 5,669,824.63 3,446,003.63 9,115,828.26
16,797,275.30 10,308,797.15 27,106,072.45 RALI SER 1999 - QS3 CL A8 15,466,511.17 9,492,082.70 24,958,593.87
13,684,000.00 0.00 13,684,000.00 RESIDENTIAL ACCREDIT LOAN 12,838,397.22 0.00 12,838,397.22
5,240,000.00 2,300,000.00 7,540,000.00 RESIDENTIAL ASSET SEC 5,229,085.08 2,295,209.10 7,524,294.18
16,730,000.00 8,010,000.00 24,740,000.00 SAXON ASSET SEC TRUST 16,750,912.50 8,020,012.50 24,770,925.00
7,303,000.00 3,460,000.00 10,763,000.00 SAXON ASSET SEC TRUST 7,264,206.46 3,441,620.48 10,705,826.94
21,331,181.00 0.00 21,331,181.00 SECURITIZED ASSET (CMO) 20,452,869.63 0.00 20,452,869.63
500,000.00 0.00 500,000.00 SALLIE MAE MTN 517,070.00 0.00 517,070.00
7,000,000.00 4,000,000.00 11,000,000.00 SUSA PARTNERSHIP 6,352,500.00 3,630,000.00 9,982,500.00
8,650,000.00 4,225,000.00 12,875,000.00 VENDE 99 - 3 1D 8,095,699.35 3,954,257.78 12,049,957.13
36,570,000.00 13,140,000.00 49,710,000.00 U.S. TREASURY BOND 35,381,840.70 12,713,081.40 48,094,922.10
19,698,630.00 9,340,110.00 29,038,740.00 U.S. TREASURY NOTE (TIPS) 18,038,232.48 8,552,832.13 26,591,064.61
9,630,000.00 955,000.00 10,585,000.00 U.S. TREASURY NOTE 9,538,707.60 945,946.60 10,484,654.20
15,201,150.00 5,118,420.00 20,319,570.00 U.S. TREASURY TIP 14,892,566.66 5,014,516.07 19,907,082.73
2,880,000.00 0.00 2,880,000.00 U.S. TREASURY NOTE 2,919,340.80 0.00 2,919,340.80
6,755,000.00 0.00 6,755,000.00 U.S. TREASURY NOTE 6,787,086.25 0.00 6,787,086.25
6,610,000.00 3,135,000.00 9,745,000.00 VANDERBILT MTG FIN 6,605,181.31 3,132,714.59 9,737,895.90
13,910,000.00 6,600,000.00 20,510,000.00 WORTHINGTON INDUSTRIES 13,510,087.50 6,410,250.00 19,920,337.50
0.00 10,729,000.00 10,729,000.00 FEDERAL SIGNAL CORP. 5.88% 0.00 10,729,000.00 10,729,000.00
0.00 10,000,000.00 10,000,000.00 MERRILL CO. 6.02% 0.00 10,000,000.00 10,000,000.00
0.00 6,756,000.00 6,756,000.00 LEHMAN TRIPARTY 5.83% 0.00 6,756,000.00 6,756,000.00
</TABLE>
38
<PAGE> 259
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
737,611,731.88 445,673,987.90 1,183,105,719.28 696,413,830.90 374,185,802.46 1,070,588,633.36
</TABLE>
39
<PAGE> 260
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1999
(Amounts in Thousands)
<TABLE>
<CAPTION>
Parkstone Armada
Limited Limited
Maturity Bond Maturity Bond Pro Forma
Fund Fund Combined
<S> <C> <C> <C>
TOTAL INVESTMENTS: 127,265 80,844 208,109
------- ------ -------
ASSETS
Cash 0 194 194
Accrued Income 1,679 835 2,514
Investment Securities Sold 0 0 0
Cap Shares Sold 1 0 1
Other Assets 8 37 45
TOTAL ASSETS: 128,953 81,910 210,863
------- ------ -------
LIABILITIES
Income Payable 612 391 1,003
Capital Gain Payable 0 0 0
Investment Securities Purchased 0 0 0
Capital Shares Redeemed Payable 232 103 335
Accrued Expense Payable 115 0 115
Other Payables 2,572 0 2,572
TOTAL LIABILITIES: 3,531 494 4,025
------- ------ -------
TOTAL NET ASSETS: 125,422 81,416 206,838
</TABLE>
40
<PAGE> 261
STATEMENT OF OPERATIONS
SIX MONTH PERIOD ENDING NOVEMBER 30, 1999
(Amounts in Thousands)
<TABLE>
<CAPTION>
Parkstone Armada
Limited Limited
Maturity Bond Maturity Bond Pro Forma
Fund Fund Combined
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest 4,423 2,425 6,848
----- ----- -----
TOTAL INCOME: 4,423 2,425 6,848
----- ----- -----
EXPENSES:
Administrator Fees 164 28 192
Investment Advisory Fees 440 179 619
Waiver of Investment Advisory Fees (99) (40) (139)
Transfer Agent Fees 37 18 55
Custodian Fees 12 8 20
Professional Fees (Audit + Legal) 8 4 12
Trustee (Directors) Fees 1 1 2
Registration Fees 12 3 15
12b-1 Fees 28 0 28
Shareholder Servicing Fees 0 2 2
Printing Expenses 9 2 11
Miscellaneous Expenses 2 1 3
TOTAL EXPENSES: (614) (206) (820)
----- ----- -----
NET INVESTMENT INCOME: 3,809 2,219 6,028
----- ----- -----
Net Realized Gains (Losses) on Investments (693) (352) (1,045)
Net Unrealized Appreciation (Depreciation)
of Investment Securities (533) (310) (843)
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS: (1,226) (662) (1,888)
----- ----- -----
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS: 2,583 1,557 4,140
----- ----- -----
</TABLE>
41
<PAGE> 262
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTH PERIOD ENDING NOVEMBER 30, 1999
(Amounts in Thousands)
<TABLE>
<CAPTION>
Parkstone Armada
Limited Limited
Maturity Bond Maturity Bond Pro Forma
Fund Fund Combined
<S> <C> <C> <C>
INVESTMENT ACTIVITIES:
Net Investment Income 3,809 2,219 6,028
Net Realized Gain (Loss) on Securities Sold (693) (352) (1,045)
Net Increase (Decrease) in Unrealized
Appreciation of Assets (533) (310) (843)
------- ------ -------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS: 2,583 1,557 4,140
------- ------ -------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional/Class I Shares (3,284) (2,197) (5,481)
Investor A/Class A Shares (506) (15) (521)
Investor B/Class B Shares (20) - (20)
Realized Capital Gains
Institutional/Class I Shares - - -
Investor A/Class A Shares - - -
Investor B/Class B Shares - - -
TOTAL DISTRIBUTIONS: (3,810) (2,212) (6,022)
------- ------ -------
PAID-IN-CAPITAL:
Institutional/Class I Shares
Shares Issued 7,939 39,968 47,907
Shares Issued in Lieu of Cash Distributions 1,012 1,106 2,118
Shares Redeemed (19,778) (31,967) (51,745)
Net Institutional/Class I Share Transactions (10,827) 9,107 (1,720)
------- ------ -------
Investor A/Class A Shares
Shares Issued 468 236 704
Shares Issued in Lieu of Cash Distributions 510 14 524
Shares Redeemed (11,731) (267) (11,998)
Net Investor A/Class A Share Transactions (10,753) (17) (10,770)
------- ------ -------
Investor B/Class B Shares
Shares Issued 71 140 211
Shares Issued in Lieu of Cash Distributions 15 1 16
Shares Redeemed (66) (1) (67)
Net Investor B/Class B Share Transactions 20 140 160
------- ------ -------
INCREASE (DECREASE) IN NET ASSETS
FROM SHARE TRANSACTIONS: (21,560) 9,230 (12,330)
------- ------ -------
BEGINNING OF PERIOD: 148,209 72,841 221,050
------- ------ -------
END OF PERIOD: 125,422 81,416 206,838
------- ------ -------
</TABLE>
42
<PAGE> 263
PROFORMA COMBINED SCHEDULE OF INVESTMENTS
ARMADA ENHANCED INCOME/
PARKSTONE LIMITED MATURITY BOND
AS OF 11/30/99
<TABLE>
<CAPTION>
Proforma Proforma
Armada Parkstone Combined Armada Parkstone Combined
Shares/Par Shares/Par Shares/Par Security Description Market Value Market Value Market Value
---------- ---------- ---------- -------------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
915,000.00 0.00 915,000.00 AESOP FUNDING 1997-1-A1 906,124.50 0.00 906,124.50
0.00 4,554,429.27 4,554,429.27 AMRESCO SN 7.545 09/26/27 0.00 4,520,981.54 4,520,981.54
1,410,000.00 0.00 1,410,000.00 WOLS 1998-1-A3 1,398,543.75 0.00 1,398,543.75
1,335,000.00 2,100,000.00 3,435,000.00 BOMBARDIER CAP MTG SEC 1,336,635.38 2,102,572.50 3,439,207.88
1,700,000.00 3,300,000.00 5,000,000.00 BROWNING FERRIS (6.08%) 1,695,750.00 3,289,044.00 4,984,794.00
1,100,000.00 0.00 1,100,000.00 CSC ENTERPRISES 6.5% 144A 1,095,747.40 0.00 1,095,747.40
588,862.15 1,307,816.74 1,896,678.89 RAST 97-A1-A1 586,742.24 1,305,037.63 1,891,779.87
2,910,000.00 0.00 2,910,000.00 COUNTRYWIDE HOME LOANS 2,902,783.20 0.00 2,902,783.20
2,855,000.00 0.00 2,855,000.00 CAPITA EQUIP. RECEIVABLES 2,836,057.08 0.00 2,836,057.08
1,000,000.00 4,000,000.00 5,000,000.00 CASE CREDIT 6.12% 988,750.00 3,955,000.00 4,943,750.00
6,000,000.00 15,000,000.00 21,000,000.00 CHAMPION HOME EQUITY IO 786,408.00 1,966,020.00 2,752,428.00
1,500,000.00 1,500,000.00 3,000,000.00 CHAMPION INTL 1,550,625.00 1,550,625.00 3,101,250.00
1,260,000.00 0.00 1,260,000.00 CITIBANK CREDIT TR 96-1 A 1,166,300.10 0.00 1,166,300.10
1,235,000.00 2,600,000.00 3,835,000.00 COMDISCO INC 1,194,862.50 2,515,403.80 3,710,266.30
1,025,000.00 2,975,000.00 4,000,000.00 COMPUTER ASSOCIATES INTL 989,125.00 2,870,875.00 3,860,000.00
2,490,000.00 5,000,000.00 7,490,000.00 COPEL 1997-A A4 2,466,394.80 4,952,600.00 7,418,994.80
1,800,000.00 1,500,000.00 3,300,000.00 DIAL CORP DEL NOTE 6.625% 1,761,750.00 1,468,125.00 3,229,875.00
0.00 2,000,000.00 2,000,000.00 DILLARDS 9.50% 10/15/01 0.00 2,070,000.00 2,070,000.00
1,060,000.00 0.00 1,060,000.00 DISCOVER MASTER TR 98-4A 1,029,578.00 0.00 1,029,578.00
1,500,000.00 2,500,000.00 4,000,000.00 EMPIRE FUNDING 99-1 A3 1,463,203.50 2,438,672.50 3,901,876.00
1,395,000.00 0.00 1,395,000.00 EVANS WITHYCOMBE 144A 1,434,659.85 0.00 1,434,659.85
3,000,000.00 0.00 3,000,000.00 FHLMC MORT 2,987,280.00 0.00 2,987,280.00
1,007,969.41 3,359,897.97 4,367,867.38 FNMA SERIES 1997-26 CL E 997,274.85 3,324,249.45 4,321,524.30
1,394,289.14 0.00 1,394,289.14 FNMA #426798 1,413,908.24 0.00 1,413,908.24
680,471.06 0.00 680,471.06 FIDELITY DOMESTIC MM #690 680,471.06 0.00 680,471.06
900,000.00 3,600,000.00 4,500,000.00 FIRST CHICAGO 10.25% 940,500.00 3,766,500.00 4,707,000.00
1,400,000.00 0.00 1,400,000.00 FIRST UNION CORPORATION 1,439,832.80 0.00 1,439,832.80
</TABLE>
43
<PAGE> 264
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
3,000,000.00 6,000,000.00 9,000,000.00 FLAGSHIP 99-2 A3 2,993,439.00 5,986,878.00 8,980,317.00
1,000,000.00 0.00 1,000,000.00 FORD MOTOR CDT GLOBAL 991,250.00 0.00 991,250.00
1,810,000.00 5,000,000.00 6,810,000.00 FRANCHISE FIN CORP 1,800,298.40 4,974,100.00 6,774,398.40
1,400,000.00 2,600,000.00 4,000,000.00 GENERAL AMERICAN TRANS 1,487,500.00 2,756,816.40 4,244,316.40
0.00 597,693.33 597,693.33 GREEN TREE 7.85 07/15/09 0.00 588,076.44 588,076.44
50,000,000.00 0.00 50,000,000.00 GREEN TREE 99-D A7 IO 4,192,700.00 0.00 4,192,700.00
0.00 2,000,649.18 2,000,649.18 GREEN TREE 6.55 07/15/28 0.00 2,008,731.80 2,008,731.80
1,250,000.00 0.00 1,250,000.00 HARTI 1998-1 A3 1,239,712.50 0.00 1,239,712.50
1,750,000.00 2,250,000.00 4,000,000.00 JB HUNT TRANSPORT 1,730,312.50 2,224,687.50 3,955,000.00
0.00 4,700,000.00 4,700,000.00 INGERSOLL 6.34 12/03/01 0.00 4,653,000.00 4,653,000.00
0.00 5,000,000.00 5,000,000.00 BELGIUM RAIL 8.25 02/02/0 0.00 5,014,500.00 5,014,500.00
0.00 3,000,000.00 3,000,000.00 US WEST 6.125 11/21/00 0.00 2,985,000.00 2,985,000.00
0.00 5,000,000.00 5,000,000.00 NATL POWER 7.125 07/11/01 0.00 4,984,825.00 4,984,825.00
0.00 5,000,000.00 5,000,000.00 LEHMAN HLDS 6.89 10/10/00 0.00 5,022,300.00 5,022,300.00
1,121,567.03 2,091,029.61 3,212,596.64 MERRILL 1996-C1 A1 1,120,226.76 2,083,480.99 3,203,707.75
20,534.21 0.00 20,534.21 GOLDEN NATIONAL MTGE 20,490.78 0.00 20,490.78
910,000.00 0.00 910,000.00 METLIFE CAP 97-A-A 6.85% 907,725.00 0.00 907,725.00
600,000.00 0.00 600,000.00 MONSANTO 7.09 12/15/00 601,425.00 0.00 601,425.00
1,500,000.00 3,000,000.00 4,500,000.00 NEW CENTURY HOME EQUITY 1,481,887.50 2,963,775.00 4,445,662.50
2,000,000.00 4,989,000.00 6,989,000.00 OAKWOOD MTG INVESTORS 1,992,080.00 4,969,243.56 6,961,323.56
915,000.00 0.00 915,000.00 PNC STUDENT LOAN TRUST I 913,915.73 0.00 913,915.73
1,378,054.39 2,734,628.83 4,112,683.22 PALS 99 - 1 A1 (6.30%) 1,336,282.81 2,651,736.76 3,988,019.57
1,000,000.00 125,000.00 1,125,000.00 PRIME PROPERTY FNDG 144A 986,496.00 120,312.50 1,106,808.50
840,000.00 920,000.00 1,760,000.00 PRIME PROP II (144A) 821,264.64 899,480.32 1,720,744.96
1,100,000.00 0.00 1,100,000.00 RAYTHEON (5.95%) 1,083,500.00 0.00 1,083,500.00
0.00 4,150,000.00 4,150,000.00 SAXON 7.375 11/25/23 0.00 4,153,921.75 4,153,921.75
790,000.00 0.00 790,000.00 SEARS MASTER TRUST 1996-4 785,410.10 0.00 785,410.10
258,370.62 0.00 258,370.62 SBA POOL #503115 (M1/M1) 273,568.67 0.00 273,568.67
1,300,000.00 2,700,000.00 4,000,000.00 LIMITED INC. (Q23/Q23) 1,296,750.00 2,693,250.00 3,990,000.00
1,500,000.00 3,100,000.00 4,600,000.00 VENDEE 99-2 IJ 1,463,842.50 3,025,274.50 4,489,117.00
4,000,000.00 9,000,000.00 13,000,000.00 U.S. TREASURY NOTE 3,951,120.00 8,895,870.00 12,846,990.00
5,200,000.00 2,500,000.00 7,700,000.00 U.S. TREASURY NOTE 5,222,828.00 2,511,875.00 7,734,703.00
2,750,000.00 6,000,000.00 8,750,000.00 WFS 1999-A A4 2,686,502.50 5,857,500.00 8,544,002.50
1,000,000.00 0.00 1,000,000.00 WEINGARTEN REALTY 6.00% 988,750.00 0.00 988,750.00
588,948.34 0.00 588,948.34 WORLD OMNI AUTO LEASE 97A 594,313.66 0.00 594,313.66
0.00 572,698.03 572,698.03 GOLDMAN SACHS PREM SQ 0.00 572,698.03 572,698.03
</TABLE>
44
<PAGE> 265
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1,850,000.00 0.00 1,850,000.00 HYDRO-QUEBEC FRN(S28/M28) 1,831,500.00 0.00 1,831,500.00
0.00 2,572,000.00 2,572,000.00 BEAR STEARNS 0.00 2,572,000.00 2,572,000.00
132,294,066.35 140,899,842.96 273,193,709.31 80,844,399.30 127,265,039.97 208,109,439.27
</TABLE>
45
<PAGE> 266
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1999
(Amounts in Thousands)
Parkstone
Intermediate
Government Armada
Obligations Intermediate Pro Forma
Fund Bond Fund Combined
TOTAL INVESTMENTS: 146,990 302,593 449,583
------- ------- -------
ASSETS
Cash 0 1,081 1,081
Accrued Income 1,504 3,339 4,843
Investment Securities Sold 15 140 155
Cap Shares Sold 0 0 0
Other Assets 10 27 37
TOTAL ASSETS: 148,519 307,180 455,699
------- ------- -------
LIABILITIES
Income Payable 529 1,517 2,046
Capital Gain Payable 0 0 0
Investment Securities Purchased 0 0 0
Capital Shares Redeemed Payable 13 0 13
Accrued Expense Payable 120 232 352
Other Payables 36,656 0 36,656
TOTAL LIABILITIES: 37,318 1,749 39,067
------- ------- -------
TOTAL NET ASSETS: 111,201 305,431 416,632
46
<PAGE> 267
STATEMENT OF OPERATIONS
SIX MONTH PERIOD ENDING NOVEMBER 30, 1999
(Amounts in Thousands)
<TABLE>
<CAPTION>
Parkstone
Intermediate
Government Armada
Obligations Intermediate Pro Forma
Fund Bond Fund Combined
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest 4,108 10,055 14,163
----- ----- -----
TOTAL INCOME: 4,108 10,055 14,163
----- ----- -----
EXPENSES:
Administrator Fees 161 109 270
Investment Advisory Fees 443 860 1,303
Waiver of Investment Advisory Fees (29) (234) (263)
Transfer Agent Fees 40 43 83
Custodian Fees 12 31 43
Professional Fees (Audit + Legal) 9 12 21
Trustee (Directors) Fees 1 4 5
Registration Fees 12 5 17
12b-1 Fees 16 65 81
Shareholder Servicing Fees 0 7 7
Printing Expenses 9 11 20
Miscellaneous Expenses 1 5 6
TOTAL EXPENSES: (675) (918) (1,593)
----- ----- -----
NET INVESTMENT INCOME: 3,433 9,137 12,570
----- ----- -----
Net Realized Gains (Losses) on Investments (1,049) (4,903) (5,952)
Net Unrealized Appreciation (Depreciation)
of Investment Securities (1,011) (348) (1,359)
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS: (2,060) (5,251) (7,311)
----- ----- -----
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS: 1,373 3,886 5,259
----- ----- -----
</TABLE>
47
<PAGE> 268
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTH PERIOD ENDING NOVEMBER 30, 1999
(Amounts in Thousands)
<TABLE>
<CAPTION>
Parkstone
Intermediate
Government Armada
Obligations Intermediate Pro Forma
Fund Bond Fund Combined
<S> <C> <C> <C>
INVESTMENT ACTIVITIES:
Net Investment Income 3,433 9,137 12,570
Net Realized Gain (Loss) on Securities Sold (1,049) (4,903) (5,952)
Net Increase (Decrease) in Unrealized
Appreciation of Assets (1,011) (348) (1,359)
------- ------- -------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS: 1,373 3,886 5,259
------- ------- -------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional/Class I Shares (3,186) (9,022) (12,208)
Investor A/Class A Shares (223) (152) (375)
Investor B/Class B Shares (24) (15) (39)
Realized Capital Gains
Institutional/Class I Shares - - -
Investor A/Class A Shares - - -
Investor B/Class B Shares - - -
TOTAL DISTRIBUTIONS: (3,433) (9,189) (12,622)
------- ------- -------
PAID-IN-CAPITAL:
Institutional/Class I Shares
Shares Issued 1,929 43,852 45,781
Shares Issued in Lieu of Cash Distributions 837 2,658 3,495
Shares Redeemed (31,820) (54,753) (86,573)
Net Institutional/Class I Share Transactions (29,054) (8,243) (37,297)
------- ------- -------
Investor A/Class A Shares
Shares Issued 291 1,486 1,777
Shares Issued in Lieu of Cash Distributions 156 111 267
Shares Redeemed (2,868) (1,749) (4,617)
Net Investor A/Class A Share Transactions (2,421) (152) (2,573)
------- ------- -------
Investor B/Class B Shares
Shares Issued 19 143 162
Shares Issued in Lieu of Cash Distributions 23 13 36
Shares Redeemed (483) (233) (716)
Net Investor B/Class B Share Transactions (441) (77) (518)
------- ------- -------
INCREASE (DECREASE) IN NET ASSETS
FROM SHARE TRANSACTIONS: (31,916) (8,472) (40,388)
------- ------- -------
BEGINNING OF PERIOD: 145,177 319,206 464,383
------- ------- -------
END OF PERIOD: 111,201 305,431 416,632
------- ------- -------
</TABLE>
48
<PAGE> 269
PROFORMA COMBINED SCHEDULE OF INVESTMENTS
ARMADA INTERMEDIATE BOND/
PARKSTONE INTERMEDIATE GOVERNMENT OBLIGATIONS
AS OF 11/30/99
<TABLE>
<CAPTION>
Proforma Proforma
Armada Parkstone Combined Armada Parkstone Combined
Shares/Par Shares/Par Shares/Par Security Description Market Value Market Value Market Value
---------- ---------- ---------- -------------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
4,085,000.00 0.00 4,085,000.00 AT&T CORP 3,901,175.00 0.00 3,901,175.00
500,000.00 0.00 500,000.00 AMGEN MTN 473,125.00 0.00 473,125.00
3,578,952.44 0.00 3,578,952.44 AMRES 99 1 NIM 3,498,426.01 0.00 3,498,426.01
4,965,000.00 0.00 4,965,000.00 ARMSTRONG WORLD 6.35% 4,816,050.00 0.00 4,816,050.00
4,000,000.00 0.00 4,000,000.00 BOMBARDIER CAP MTG SEC 4,004,900.00 0.00 4,004,900.00
1,200,000.00 0.00 1,200,000.00 BRADLEY OPER LTD PRTNSHP 1,141,468.80 0.00 1,141,468.80
3,150,000.00 0.00 3,150,000.00 BRUNSWICK CORP 6.75% 2,984,625.00 0.00 2,984,625.00
7,950,000.00 0.00 7,950,000.00 CELT 1998-C A4 7,750,494.75 0.00 7,750,494.75
3,200,000.00 0.00 3,200,000.00 COMDISCO INC 3,108,000.00 0.00 3,108,000.00
2,000,000.00 0.00 2,000,000.00 COMMERCIAL NET 1,962,500.00 0.00 1,962,500.00
5,970,000.00 0.00 5,970,000.00 COMPUTER ASSOCIATES INTL 5,761,050.00 0.00 5,761,050.00
3,575,000.00 0.00 3,575,000.00 CONTIMORTGAGE 1998-2 A6 3,455,469.88 0.00 3,455,469.88
4,550,000.00 0.00 4,550,000.00 CONHE 1993-3 CLA5 4,488,870.75 0.00 4,488,870.75
3,000,000.00 0.00 3,000,000.00 FIRST BOSTON MTG SECS 2,949,840.00 0.00 2,949,840.00
2,100,000.00 0.00 2,100,000.00 CUMMINS ENGINE, (6.45%) 1,984,500.00 0.00 1,984,500.00
3,190,000.00 0.00 3,190,000.00 EOP OPERATING LP 3,014,550.00 0.00 3,014,550.00
3,670,000.00 0.00 3,670,000.00 EXCEL REALTY TR INC 3,592,012.50 0.00 3,592,012.50
0.00 631,806.59 631,806.59 FHLMC 555138 8.75 4/01/17 0.00 661,817.40 661,817.40
500,000.00 0.00 500,000.00 FHLB SERIES EG03 (6.565) 497,535.00 0.00 497,535.00
0.00 5,000,000.00 5,000,000.00 FHLB 5.53 01/15/03 0.00 4,871,550.00 4,871,550.00
1,000,000.00 0.00 1,000,000.00 FHLB 979,810.00 0.00 979,810.00
0.00 10,000,000.00 10,000,000.00 FHLB 5.625 03/19/01 0.00 9,930,600.00 9,930,600.00
95,000.00 0.00 95,000.00 FHLB SERIES BS01 (5.86) 94,055.70 0.00 94,055.70
2,970,000.00 0.00 2,970,000.00 FSPC T-8 A5 2,956,694.40 0.00 2,956,694.40
17,324.93 0.00 17,324.93 FHLMC POOL 16-0015 (8.25) 18,104.55 0.00 18,104.55
0.00 384,444.23 384,444.23 FHLMC 141183 8.0 05/01/17 0.00 394,293.69 394,293.69
0.00 5,000,000.00 5,000,000.00 FHLMC 7.44 09/20/06 0.00 4,991,250.00 4,991,250.00
</TABLE>
49
<PAGE> 270
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
0.00 7,000,000.00 7,000,000.00 FNMA 94-93PH 7.5 08/25/22 0.00 7,115,080.00 7,115,080.00
0.00 10,000,000.00 10,000,000.00 FNMA 5.625 03/15/01 0.00 9,932,400.00 9,932,400.00
4,460,000.00 0.00 4,460,000.00 FANNIE MAE 4,296,050.40 0.00 4,296,050.40
0.00 14,219,000.00 14,219,000.00 FNMA CORP 6.375 06/15/09 0.00 13,799,255.12 13,799,255.12
2,000,000.00 0.00 2,000,000.00 FNMA 6.25% 11/15/02 1,991,940.00 0.00 1,991,940.00
0.00 5,000,000.00 5,000,000.00 FNMA 6.25 11/15/02 0.00 4,979,850.00 4,979,850.00
0.00 473,289.92 473,289.92 FNMA 20252 8.75 08/01/09 0.00 491,629.90 491,629.90
0.00 1,017,039.04 1,017,039.04 FNMA 62226 9.00 01/01/10 0.00 1,064,392.38 1,064,392.38
0.00 834,645.17 834,645.17 FNMA 084251 9.00 08/01/09 0.00 873,506.25 873,506.25
0.00 1,772,720.12 1,772,720.12 FNMA 100044 13.0 08/15/15 0.00 2,007,605.54 2,007,605.54
1,000,000.00 0.00 1,000,000.00 FANNIE MAE MTN 996,930.00 0.00 996,930.00
0.00 821,960.52 821,960.52 FNMA 124439 8.25 07/01/17 0.00 840,709.44 840,709.44
0.00 898,145.10 898,145.10 FNMA 303545 8.50 02/01/25 0.00 926,212.13 926,212.13
0.00 627,651.25 627,651.25 FNMA 313025 11.5 05/01/10 0.00 676,093.37 676,093.37
2,552,950.56 0.00 2,552,950.56 FNMA POOL #412232 2,442,050.39 0.00 2,442,050.39
0.00 946,167.74 946,167.74 FNMA 417392 6.5% 02/01/28 0.00 902,700.79 902,700.79
0.00 1,472,933.51 1,472,933.51 FNMA 485269 6.0% 02/01/29 0.00 1,366,602.44 1,366,602.44
6,860,590.47 0.00 6,860,590.47 FNMA POOL #493767 6,713,176.48 0.00 6,713,176.48
1,550,000.00 0.00 1,550,000.00 FEDERAL RLTY INVS TR 1,418,730.50 0.00 1,418,730.50
2,394,989.30 0.00 2,394,989.30 FIDELITY DOMESTIC MM #690 2,394,989.30 0.00 2,394,989.30
2,500,000.00 0.00 2,500,000.00 FIRST MD BANCORP 7.20% 2,462,500.00 0.00 2,462,500.00
3,375,000.00 0.00 3,375,000.00 FIRST UNION CORP 3,353,906.25 0.00 3,353,906.25
2,550,000.00 0.00 2,550,000.00 FORD MOTOR CREDIT 2,521,312.50 0.00 2,521,312.50
3,033,924.46 0.00 3,033,924.46 GECMS99 -1 A1 (6.50%) 2,789,314.30 0.00 2,789,314.30
0.00 32,690.16 32,690.16 GNMA2 1002 9.5 06/20/18 0.00 34,488.12 34,488.12
0.00 58,024.61 58,024.61 GNMA2 1399 9.5 05/20/20 0.00 61,215.96 61,215.96
0.00 26,763.42 26,763.42 GNMA2 21561 9.5 02/20/21 0.00 28,235.41 28,235.41
0.00 1,988,159.81 1,988,159.81 GNMA2 2780 6.00 07/20/29 0.00 1,825,369.28 1,825,369.28
0.00 1,432,149.37 1,432,149.37 GNMA 446666 7.0% 08/15/28 0.00 1,400,369.98 1,400,369.98
0.00 5,969,860.92 5,969,860.92 GNMA 6.5 470238 04/15/29 0.00 5,684,382.17 5,684,382.17
5,941,074.30 0.00 5,941,074.30 GNMA POOL#472969 5,656,972.13 0.00 5,656,972.13
31,742.97 0.00 31,742.97 GNMA POOL#154047 33,706.91 0.00 33,706.91
5,025,000.00 0.00 5,025,000.00 GABLES REALTY 4,746,635.10 0.00 4,746,635.10
0.00 37,392.71 37,392.71 GNMA 4029 9.00 09/15/04 0.00 39,343.86 39,343.86
0.00 29,872.24 29,872.24 GNMA 4265 9.00 10/15/04 0.00 31,430.97 31,430.97
0.00 25,105.63 25,105.63 GNMA 4309 9.00 12/15/04 0.00 26,415.64 26,415.64
0.00 5,451.98 5,451.98 GNMA 4610 9.00 01/15/05 0.00 5,736.46 5,736.46
</TABLE>
50
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<TABLE>
<S> <C> <C> <C> <C> <C> <C>
0.00 34,218.12 34,218.12 GNMA 4790 9.00 12/15/04 0.00 36,003.62 36,003.62
0.00 17,626.33 17,626.33 GNMA 4820 9.00 01/15/05 0.00 18,546.07 18,546.07
0.00 10,795.11 10,795.11 GNMA 4921 9.00 01/15/05 0.00 11,358.40 11,358.40
0.00 4,221.69 4,221.69 GNMA 4961 9.00 01/15/05 0.00 4,441.98 4,441.98
0.00 32,881.09 32,881.09 GNMA 4991 9.00 12/15/04 0.00 34,596.83 34,596.83
0.00 29,194.99 29,194.99 GNMA 8328 9.00 04/15/05 0.00 30,718.38 30,718.38
0.00 97,283.70 97,283.70 GNMA 23554 9.00 10/15/08 0.00 102,359.96 102,359.96
0.00 43,576.06 43,576.06 GNMA 24863 9.00 09/15/08 0.00 45,849.86 45,849.86
0.00 82,967.71 82,967.71 GNMA 25395 9.00 09/15/08 0.00 87,296.97 87,296.97
0.00 13,438.15 13,438.15 GNMA 25407 9.00 09/15/08 0.00 14,139.35 14,139.35
0.00 15,970.79 15,970.79 GNMA 26836 9.00 10/15/08 0.00 16,804.15 16,804.15
0.00 76,831.55 76,831.55 GNMA 27002 9.00 11/15/08 0.00 80,840.62 80,840.62
0.00 62,316.59 62,316.59 GNMA 27022 9.00 04/15/09 0.00 65,568.27 65,568.27
0.00 47,704.34 47,704.34 GNMA 27253 9.00 02/15/09 0.00 50,193.55 50,193.55
0.00 9,010.13 9,010.13 GNMA 27716 9.00 10/15/08 0.00 9,480.28 9,480.28
0.00 77,734.64 77,734.64 GNMA 28156 9.00 12/15/08 0.00 81,790.83 81,790.83
0.00 69,371.91 69,371.91 GNMA 29022 9.00 12/15/08 0.00 72,991.74 72,991.74
0.00 81,005.65 81,005.65 GNMA 29381 9.00 02/15/09 0.00 85,232.52 85,232.52
0.00 14,116.65 14,116.65 GNMA 29414 9.00 05/15/09 0.00 14,853.26 14,853.26
0.00 11,234.97 11,234.97 GNMA 29539 9.00 05/15/09 0.00 11,821.21 11,821.21
0.00 9,217.46 9,217.46 GNMA 29644 9.00 03/15/09 0.00 9,698.43 9,698.43
0.00 44,066.33 44,066.33 GNMA 30185 9.00 05/15/09 0.00 46,365.71 46,365.71
0.00 29,557.02 29,557.02 GNMA 31183 9.00 04/15/09 0.00 31,099.31 31,099.31
0.00 52,013.14 52,013.14 GNMA 31362 9.00 04/15/09 0.00 54,727.19 54,727.19
0.00 106,532.65 106,532.65 GNMA 32386 9.00 04/15/09 0.00 112,091.52 112,091.52
0.00 154,877.28 154,877.28 GNMA 32989 9.00 05/15/09 0.00 162,958.78 162,958.78
0.00 35,627.65 35,627.65 GNMA 33963 9.00 07/15/09 0.00 37,486.70 37,486.70
0.00 131,397.51 131,397.51 GNMA 34103 9.00 05/15/09 0.00 138,253.83 138,253.83
0.00 20,226.06 20,226.06 GNMA 38055 9.00 05/15/09 0.00 21,281.46 21,281.46
0.00 40,552.69 40,552.69 GNMA 45022 9.00 04/15/09 0.00 42,668.73 42,668.73
0.00 13,075.10 13,075.10 GNMA2 73 9.5 08/20/22 0.00 13,794.23 13,794.23
0.00 9,861.40 9,861.40 GNMA2 245600 9.5 12 20 15 0.00 10,403.78 10,403.78
0.00 80,189.55 80,189.55 GNMA2 2590 9.5 07/20/16 0.00 84,599.98 84,599.98
0.00 44,500.67 44,500.67 GNMA2 002626 9.5 09/20/16 0.00 46,948.21 46,948.21
0.00 43,575.84 43,575.84 GNMA2 2661 9.5 11/20/16 0.00 45,972.51 45,972.51
0.00 29,140.31 29,140.31 GNMA2 2732 9.5 03/20/17 0.00 30,743.03 30,743.03
0.00 283,420.25 283,420.25 GNMA2 836 9.5 09/20/17 0.00 299,008.36 299,008.36
</TABLE>
51
<PAGE> 272
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
0.00 90,292.89 90,292.89 GNMA2 988 9.5 12/20/22 0.00 95,259.00 95,259.00
0.00 8,762.33 8,762.33 GNMA2 001038 9.5 08/20/18 0.00 9,244.26 9,244.26
0.00 35,262.74 35,262.74 GNMA2 1236 9.5 08/20/19 0.00 37,202.19 37,202.19
0.00 50,493.57 50,493.57 GNMA2 1273 9.5 10/20/19 0.00 53,270.72 53,270.72
0.00 139,639.62 139,639.62 GNMA2 001309 9.5 12/20/19 0.00 147,319.80 147,319.80
0.00 21,794.47 21,794.47 GNMA2 1327 9.5 01/20/20 0.00 22,993.17 22,993.17
0.00 25,336.01 25,336.01 GNMA2 1471 9.5 09/20/20 0.00 26,729.49 26,729.49
0.00 56,437.06 56,437.06 GNMA2 21507 9.5 11/20/20 0.00 59,541.10 59,541.10
0.00 33,178.25 33,178.25 GNMA2 1525 9.5 12/20/20 0.00 35,003.05 35,003.05
0.00 34,693.70 34,693.70 GNMA2 1651 9.5 07/20/21 0.00 36,601.85 36,601.85
0.00 38,945.02 38,945.02 GNMA2 1669 9.5 08/20/21 0.00 41,087.00 41,087.00
0.00 49,261.86 49,261.86 GNMA2 21705 9.5 10/20/21 0.00 51,971.26 51,971.26
0.00 124,452.59 124,452.59 GNMA2 119221 9.5 12/20/13 0.00 131,297.48 131,297.48
0.00 49,981.11 49,981.11 GNMA2 121161 9.5 10/20/14 0.00 52,730.07 52,730.07
0.00 170,564.17 170,564.17 GNMA2 149718 9.5 04/20/16 0.00 179,945.20 179,945.20
0.00 114,803.06 114,803.06 GNMA2 149729 9.5 03/20/16 0.00 121,117.23 121,117.23
0.00 57,045.23 57,045.23 GNMA2 150634 9.5 02/20/16 0.00 60,182.72 60,182.72
0.00 42,596.16 42,596.16 GNMA2 152042 9.5 04/20/16 0.00 44,938.95 44,938.95
0.00 78,310.91 78,310.91 GNMA2 158468 9.5 05/20/16 0.00 82,618.01 82,618.01
0.00 8,302.21 8,302.21 GNMA2 160304 9.5 05/20/16 0.00 8,758.83 8,758.83
0.00 102,894.46 102,894.46 GNMA2 166048 9.5 06/20/16 0.00 108,553.66 108,553.66
0.00 67,629.30 67,629.30 GNMA2 170929 9.5 09/20/16 0.00 71,348.91 71,348.91
0.00 87,386.79 87,386.79 GNMA2 217671 9.5 02/20/18 0.00 92,193.06 92,193.06
0.00 27,578.66 27,578.66 GNMA2 246100 9.5 06/20/18 0.00 29,095.49 29,095.49
0.00 38,138.88 38,138.88 GNMA2 250860 9.5 06/20/18 0.00 40,236.52 40,236.52
0.00 133,404.71 133,404.71 GNMA2 52784 9.5 06/20/18 0.00 140,741.97 140,741.97
0.00 63,094.55 63,094.55 GNMA2 255345 9.5 07/20/19 0.00 66,564.75 66,564.75
0.00 35,314.38 35,314.38 GNMA2 263506 9.5 12/20/18 0.00 37,256.67 37,256.67
0.00 210,920.94 210,920.94 GNMA2 281785 9.5 12/20/19 0.00 222,521.59 222,521.59
5,000,000.00 0.00 5,000,000.00 GMAC 5,025,000.00 0.00 5,025,000.00
5,120,000.00 0.00 5,120,000.00 GOLDMAN SACHS GROUP 4,825,600.00 0.00 4,825,600.00
1,580,000.00 0.00 1,580,000.00 HSBC HOLDING PLC 1,583,950.00 0.00 1,583,950.00
1,000,000.00 0.00 1,000,000.00 HERTZ CORP 1,003,750.00 0.00 1,003,750.00
3,168,164.17 0.00 3,168,164.17 HOUSING SECURITIES (CMO) 3,197,017.91 0.00 3,197,017.91
3,200,000.00 0.00 3,200,000.00 JB HUNT TRANSPORT 3,164,000.00 0.00 3,164,000.00
500,000.00 0.00 500,000.00 HUNTINGTON NAT'L BANK 506,250.00 0.00 506,250.00
4,220,000.00 0.00 4,220,000.00 IMCHE 1997-7 A5 4,171,786.50 0.00 4,171,786.50
</TABLE>
52
<PAGE> 273
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
5,000,000.00 0.00 5,000,000.00 IKON CAPITAL INC. 4,912,500.00 0.00 4,912,500.00
4,000,000.00 0.00 4,000,000.00 LUBRIZOL 3,580,000.00 0.00 3,580,000.00
5,150,000.00 0.00 5,150,000.00 MACK-CALI REALTY 4,989,062.50 0.00 4,989,062.50
3,293,371.65 0.00 3,293,371.65 MERRILL 1996-C1 A1 3,289,436.07 0.00 3,289,436.07
1,175,000.00 0.00 1,175,000.00 MONSANTO CO (144A) 1,145,881.15 0.00 1,145,881.15
1,500,000.00 0.00 1,500,000.00 NORTHERN ILL GAS CO 1,496,250.00 0.00 1,496,250.00
500,000.00 0.00 500,000.00 NORTHERN TRUST CO 499,375.00 0.00 499,375.00
6,380,000.00 0.00 6,380,000.00 NSCOR 1998-18 A4 5,756,573.20 0.00 5,756,573.20
5,000,000.00 0.00 5,000,000.00 OAK 1997-D A3 4,948,225.00 0.00 4,948,225.00
4,750,000.00 0.00 4,750,000.00 PA POWER & LIGHT 4,794,816.25 0.00 4,794,816.25
2,370,011.59 0.00 2,370,011.59 PALS 99 - 1 A1 (6.30%) 2,298,171.80 0.00 2,298,171.80
5,000,000.00 0.00 5,000,000.00 PRIME PROPERTY FNDG 144A 4,932,480.00 0.00 4,932,480.00
4,800,000.00 0.00 4,800,000.00 PNBMT 1999-2 A 4,793,736.00 0.00 4,793,736.00
2,500,000.00 0.00 2,500,000.00 PRUDENTIAL HOME MTG (CMO) 2,400,875.00 0.00 2,400,875.00
6,650,000.00 0.00 6,650,000.00 PSSF 1999-NRF1 A2 6,296,120.25 0.00 6,296,120.25
0.00 1,370,000.00 1,370,000.00 RES. MTG. 6.75% 06/25/28 0.00 1,258,939.99 1,258,939.99
7,800,000.00 0.00 7,800,000.00 RESID FDG MTG SECS 6.31% 7,676,799.00 0.00 7,676,799.00
3,250,000.00 0.00 3,250,000.00 RFMS2 99-HI6 A3 7.34% 3,242,720.00 0.00 3,242,720.00
6,420,000.00 0.00 6,420,000.00 RASC 1999-KS3 AI5 6,419,332.32 0.00 6,419,332.32
3,210,000.00 0.00 3,210,000.00 RFMSI1999-S12 A11 3,065,437.65 0.00 3,065,437.65
4,000,000.00 0.00 4,000,000.00 RYDER SYSTEM 3,780,000.00 0.00 3,780,000.00
0.00 1,399,525.91 1,399,525.91 RYL 17D CMO 9.00 07/01/16 0.00 1,466,003.39 1,466,003.39
300,000.00 0.00 300,000.00 ST PAUL COMPANIES 298,125.00 0.00 298,125.00
3,600,000.00 0.00 3,600,000.00 SCHOLASTIC CORP 3,537,000.00 0.00 3,537,000.00
5,245,000.00 0.00 5,245,000.00 SERVICE CORP INTL NT 5,107,318.75 0.00 5,107,318.75
5,490,000.00 0.00 5,490,000.00 SUNOCO INC 7.125% 5,393,925.00 0.00 5,393,925.00
3,325,000.00 0.00 3,325,000.00 SUN MICROSYSTEMS 3,329,156.25 0.00 3,329,156.25
3,305,963.71 0.00 3,305,963.71 THE MONEY STORE 1993-C A3 3,191,345.95 0.00 3,191,345.95
2,818,352.85 0.00 2,818,352.85 UCFCM 1997-3 A2 2,821,199.38 0.00 2,821,199.38
1,600,000.00 0.00 1,600,000.00 UNITED DOMINION RLTY 1,546,840.00 0.00 1,546,840.00
4,220,000.00 0.00 4,220,000.00 VENDE 99-2 ID 3,949,223.70 0.00 3,949,223.70
0.00 1,420,000.00 1,420,000.00 VENDE 6.50% 06/15/25 0.00 1,329,004.98 1,329,004.98
300,000.00 0.00 300,000.00 U.S. LEASING INTL INC. 297,000.00 0.00 297,000.00
1,036,770.00 0.00 1,036,770.00 U.S. TREASURY NOTE (TIPS) 949,380.66 0.00 949,380.66
0.00 3,300,000.00 3,300,000.00 US T-NOTES 6.125 12/31/01 0.00 3,307,755.00 3,307,755.00
0.00 6,015,000.00 6,015,000.00 US T-NOTES 6.625 03/31/02 0.00 6,092,352.90 6,092,352.90
</TABLE>
53
<PAGE> 274
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
19,655,000.00 0.00 19,655,000.00 U.S. TREASURY NOTE 19,468,670.60 0.00 19,468,670.60
0.00 1,580,000.00 1,580,000.00 US T-NOTES 6.125 08/15/07 0.00 1,565,021.60 1,565,021.60
0.00 4,000,000.00 4,000,000.00 US T-NOTES 5.75 11/15/00 0.00 3,996,920.00 3,996,920.00
5,185,650.00 0.00 5,185,650.00 U.S. TREASURY NOTE TIPS 4,999,329.60 0.00 4,999,329.60
0.00 5,195,500.00 5,195,500.00 TIP 3.625% 01/15/08 0.00 5,008,825.69 5,008,825.69
6,080,460.00 0.00 6,080,460.00 U.S. TREASURY TIP 5,957,026.66 0.00 5,957,026.66
0.00 3,070,740.00 3,070,740.00 US TIPS 3.875% 01/15/09 0.00 3,008,403.98 3,008,403.98
3,000,000.00 0.00 3,000,000.00 U.S. TREASURY NOTE 3,014,310.00 0.00 3,014,310.00
0.00 3,500,000.00 3,500,000.00 US T-NOTES 5.75% 08/15/03 0.00 3,459,505.00 3,459,505.00
14,965,000.00 0.00 14,965,000.00 U.S. TREASURY NOTE 15,169,421.90 0.00 15,169,421.90
8,045,000.00 0.00 8,045,000.00 U.S. TREASURY NOTE 8,083,213.75 0.00 8,083,213.75
200,000.00 0.00 200,000.00 WESTVIEW SCH CORP IND 191,637.40 0.00 191,637.40
820,000.00 0.00 820,000.00 WILLIAMS COMPANIES INC 798,475.00 0.00 798,475.00
5,605,000.00 0.00 5,605,000.00 WORTHINGTON INDUSTRIES 5,443,856.25 0.00 5,443,856.25
0.00 709,615.56 709,615.56 GOLDMAN SACHS SQ GOVT. 0.00 709,615.56 709,615.56
0.00 36,656,000.00 36,656,000.00 PAINEWEBER TRI PARTY 5.70% 0.00 36,656,000.00 36,656,000.00
309,875,293.39 147,877,502.22 457,752,295.61 302,593,073.05 146,990,198.00 449,583,271.05
</TABLE>
54
<PAGE> 275
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1999
(Amounts in Thousands)
Parkstone Armada
Equity Income Equity Income Pro Forma
Fund Fund Combined
TOTAL INVESTMENTS: 283,926 516,528 800,454
------- ------- -------
ASSETS
Cash 0 101 101
Accrued Income 720 1,510 2,230
Investment Securities Sold 3,229 60 3,289
Cap Shares Sold 1 0 1
Other Assets 7 66 73
TOTAL ASSETS: 287,883 518,265 806,148
------- ------- -------
LIABILITIES
Income Payable 0 0 0
Capital Gain Payable 0 0 0
Investment Securities Purchased 0 0 0
Capital Shares Redeemed Payable 480 0 480
Accrued Expense Payable 364 683 1,047
Other Payables 32,109 0 32,109
TOTAL LIABILITIES: 32,953 683 33,636
------- ------- -------
TOTAL NET ASSETS: 254,930 517,582 772,512
55
<PAGE> 276
STATEMENT OF OPERATIONS
SIX MONTH PERIOD ENDING NOVEMBER 30, 1999
(Amounts in Thousands)
<TABLE>
<CAPTION>
Parkstone Armada
Equity Income Equity Income Pro Forma
Fund Fund Combined
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends 7,344
Interest 3,944 400 11,654
------- ------- -------
Foreign Tax Withheld (34)
TOTAL INCOME: 3,944 7,710 11,654
------- ------- -------
EXPENSES:
Administrator Fees 339 193 532
Investment Advisory Fees 1,365 2,066 3,431
Transfer Agent Fees 157 49 206
Custodian Fees 21 55 76
Professional Fees (Audit + Legal) 14 30 44
Trustee (Directors) Fees 2 5 7
Registration Fees 15 48 63
12b-1 Fees 194 114 308
Shareholder Servicing Fees 0 16 16
Printing Expenses 17 112 129
Miscellaneous Expenses 6 1 7
TOTAL EXPENSES: (2,130) (2,689) (4,819)
------- ------- -------
NET INVESTMENT INCOME: 1,814 5,021 6,835
------- ------- -------
Net Realized Gains (Losses) on Investments 35,998 22,814 58,812
Net Unrealized Appreciation (Depreciation)
of Investment Securities (63,483) (67,632) (131,115)
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS: (27,485) (44,818) (72,303)
------- ------- -------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS: (25,671) (39,797) (65,468)
------- ------- -------
</TABLE>
56
<PAGE> 277
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTH PERIOD ENDING NOVEMBER 30, 1999
(Amounts in Thousands)
<TABLE>
<CAPTION>
Parkstone Armada
Equity Income Equity Income Pro Forma
Fund Fund Combined
<S> <C> <C> <C>
INVESTMENT ACTIVITIES:
Net Investment Income 1,814 5,021 6,835
Net Realized Gain (Loss) on Securities Sold 35,998 22,814 58,812
Net Increase (Decrease) in Unrealized
Appreciation of Assets (63,483) (67,632) (131,115)
------- ------- -------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS: (25,671) (39,797) (65,468)
------- ------- -------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional/Class I Shares (1,320) (5,755) (7,075)
Investor A/Class A Shares (383) (114) (497)
Investor B/Class B Shares (43) (7) (50)
Realized Capital Gains
Institutional/Class I Shares - - -
Investor A/Class A Shares - - -
Investor B/Class B Shares - - -
TOTAL DISTRIBUTIONS: (1,746) (5,876) (7,622)
------- ------- -------
PAID-IN-CAPITAL:
Institutional/Class I Shares
Shares Issued 6,268 42,481 48,749
Shares Issued in Lieu of Cash Distributions 278 2,117 2,395
Shares Redeemed (31,690) (43,870) (75,560)
Net Institutional/Class I Share Transactions (25,144) 728 (24,416)
------- ------- -------
Investor A/Class A Shares
Shares Issued 1,874 4,330 6,204
Shares Issued in Lieu of Cash Distributions 355 82 437
Shares Redeemed (18,528) (2,636) (21,164)
Net Investor A/Class A Share Transactions 16,299 1,776 (14,523)
------- ------- -------
Investor B/Class B Shares
Shares Issued 263 509 772
Shares Issued in Lieu of Cash Distributions 41 7 48
Shares Redeemed (3,102) (198) (3,300)
Net Investor B/Class B Share Transactions (2,798) 318 (2,480)
------- ------- -------
INCREASE (DECREASE) IN NET ASSETS
FROM SHARE TRANSACTIONS: (44,241) 2,822 (41,419)
------- ------- -------
BEGINNING OF PERIOD: 326,588 560,433 887,021
------- ------- -------
END OF PERIOD: 254,930 517,582 772,512
------- ------- -------
</TABLE>
57
<PAGE> 278
SCHEDULE OF INVESTMENTS
ARMADA EQUITY INCOME/
PARKSTONE EQUITY INCOME
AS OF 11/30/99
<TABLE>
<CAPTION>
Proforma Proforma
Parkstone Armada Combined Parkstone Armada Combined
Shares Shares Shares Description Market Value Market Value Market Value
------ ------ ------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
148,550.00 292,750.00 441,300.00 AT&T CORP. 8,300,231.25 16,357,406.25 24,657,637.50
120,800.00 227,300.00 348,100.00 ALCOA INC. 7,912,400.00 14,888,150.00 22,800,550.00
40,966.00 56,500.00 97,466.00 ALLSTATE FINANCIAL 1,072,797.13 1,479,593.75 2,552,390.88
41,000.00 80,195.00 121,195.00 AM GEN DEL CONV 3,731,000.00 7,297,745.00 11,028,745.00
15,600.00 10,800.00 26,400.00 AMERICAN HOME PRODUCTS 811,200.00 561,600.00 1,372,800.00
58,600.00 118,500.00 177,100.00 AMERICAN WATER WORK, INC. 1,497,962.50 3,029,156.25 4,527,118.75
115,500.00 205,200.00 320,700.00 ARDEN REALTY, INC. 2,223,375.00 3,950,100.00 6,173,475.00
42,400.00 97,200.00 139,600.00 ARMSTRONG WORLD INDS INC 1,420,400.00 3,256,200.00 4,676,600.00
65,500.00 124,500.00 190,000.00 ATLANTIC RICHFIELD CO. 6,312,562.50 11,998,687.50 18,311,250.00
88,679.00 177,139.00 265,818.00 BANK OF AMERICA CORP. 5,187,721.50 10,362,631.50 15,550,353.00
11,200.00 62,400.00 73,600.00 BAXTER INTERNATIONAL 756,700.00 4,215,900.00 4,972,600.00
43,600.00 82,540.00 126,140.00 BELL ATLANTIC CORP. 2,760,425.00 5,225,813.75 7,986,238.75
77,700.00 146,200.00 223,900.00 H & R BLOCK 3,341,100.00 6,286,600.00 9,627,700.00
35,500.00 70,400.00 105,900.00 CIGNA CORP. 2,919,875.00 5,790,400.00 8,710,275.00
13,200.00 35,200.00 48,400.00 CATERPILLAR INC 612,150.00 1,632,400.00 2,244,550.00
29,600.00 77,300.00 106,900.00 CHASE MANHATTAN CORP. 2,286,600.00 5,971,425.00 8,258,025.00
65,800.00 130,100.00 195,900.00 CHEVRON CORPORATION 5,827,412.50 11,521,981.25 17,349,393.75
47,900.00 78,661.00 126,561.00 CHUBB CORPORATION 2,565,643.75 4,213,279.81 6,778,923.56
53,700.00 169,400.00 223,100.00 COMERICA INC. 2,846,100.00 8,978,200.00 11,824,300.00
17,200.00 86,200.00 103,400.00 CON EDISON INC. 593,400.00 2,973,900.00 3,567,300.00
78,100.00 154,725.00 232,825.00 CONSOLIDATED NAT. GAS 5,008,162.50 9,921,740.63 14,929,903.13
38,500.00 82,700.00 121,200.00 COOPER INDUSTRIES INC. 1,653,093.75 3,550,931.25 5,204,025.00
18,400.00 41,100.00 59,500.00 DEERE & COMPANY 790,050.00 1,764,731.25 2,554,781.25
49,100.00 184,700.00 233,800.00 DEVELOPERS DIVERS REALTY 684,331.25 2,574,256.25 3,258,587.50
30,600.00 62,984.00 93,584.00 DOW CHEMICAL COMPANY 3,584,025.00 7,377,001.00 10,961,026.00
39,000.00 75,700.00 114,700.00 DU PONT E I DE NEMOURS 2,318,062.50 4,499,418.75 6,817,481.25
</TABLE>
58
<PAGE> 279
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
32,100.00 63,400.00 95,500.00 DUKE ENERGY CORP. 1,627,068.75 3,213,587.50 4,840,656.25
161,800.00 324,800.00 486,600.00 DUKE REALTY INVESTMENTS 2,993,300.00 6,008,800.00 9,002,100.00
85,900.00 166,900.00 252,800.00 DUN & BRADSTREET 2,319,300.00 4,506,300.00 6,825,600.00
55,800.00 111,200.00 167,000.00 EMERSON ELECTRIC 3,180,600.00 6,338,400.00 9,519,000.00
130,100.00 258,600.00 388,700.00 ENRON CORP 4,951,931.25 9,842,962.50 14,794,893.75
49,500.00 75,700.00 125,200.00 FPL GROUP, INC. 2,165,625.00 3,311,875.00 5,477,500.00
55,700.00 104,800.00 160,500.00 FED HOME LOAN MORTGAGE 2,750,187.50 5,174,500.00 7,924,687.50
68,400.00 136,700.00 205,100.00 FANNIE MAE 4,557,150.00 9,107,637.50 13,664,787.50
76,700.00 145,100.00 221,800.00 FIRST TENNESSEE NAT CORP. 2,521,512.50 4,770,162.50 7,291,675.00
74,000.00 129,600.00 203,600.00 FLEETBOSTON FINANCIAL 2,798,125.00 4,900,500.00 7,698,625.00
112,500.00 224,100.00 336,600.00 FLOWERS INDUSTRIES 1,842,187.50 3,669,637.50 5,511,825.00
48,800.00 120,500.00 169,300.00 FORD MOTOR CO. 2,464,400.00 6,085,250.00 8,549,650.00
75,600.00 222,300.00 297,900.00 FORTUNE BRANDS INC. 2,584,575.00 7,599,881.25 10,184,456.25
26,600.00 52,400.00 79,000.00 GENERAL PUB UTIL CORP. 851,200.00 1,676,800.00 2,528,000.00
87,100.00 170,800.00 257,900.00 GTE CORP. 6,358,300.00 12,468,400.00 18,826,700.00
31,300.00 127,100.00 158,400.00 GENERAL DYNAMICS CORP. 1,613,906.25 6,553,593.75 8,167,500.00
102,800.00 238,200.00 341,000.00 GENERAL MILLS INC. 3,874,275.00 8,977,162.50 12,851,437.50
35,800.00 92,100.00 127,900.00 GENERAL MOTORS CORP. 2,577,600.00 6,631,200.00 9,208,800.00
53,200.00 175,600.00 228,800.00 GENUINE PARTS CO. 1,369,900.00 4,521,700.00 5,891,600.00
39,200.00 95,700.00 134,900.00 HUBBELL, INC., CLASS B 1,092,700.00 2,667,637.50 3,760,337.50
38,500.00 82,600.00 121,100.00 I B M 3,967,906.25 8,512,962.50 12,480,868.75
15,000.00 70,386.00 85,386.00 INTL PAPER 5.25% PFD 774,375.00 3,616,080.75 4,390,455.75
51,790.00 103,295.00 155,085.00 INTIMATE BRANDS 2,220,496.25 4,428,773.13 6,649,269.38
36,800.00 64,000.00 100,800.00 KIMBERLY CLARK CORP. 2,350,600.00 4,088,000.00 6,438,600.00
41,100.00 65,000.00 106,100.00 KIMCO REALTY 1,366,575.00 2,161,250.00 3,527,825.00
36,500.00 145,400.00 181,900.00 LG&E ENERGY CORPORATION 730,000.00 2,908,000.00 3,638,000.00
43,600.00 70,400.00 114,000.00 MACK CALI REALTY CORP. 1,076,375.00 1,738,000.00 2,814,375.00
66,500.00 120,250.00 186,750.00 MARSH & MCLENNAN 5,228,562.50 9,454,656.25 14,683,218.75
121,800.00 243,100.00 364,900.00 MASCO CORP. 3,075,450.00 6,138,275.00 9,213,725.00
64,200.00 112,600.00 176,800.00 MATTEL 918,862.50 1,611,587.50 2,530,450.00
123,150.00 205,800.00 328,950.00 MAY DEPARTMENT STORES 4,140,918.75 6,920,025.00 11,060,943.75
35,400.00 62,600.00 98,000.00 MAYTAG 1,688,137.50 2,985,237.50 4,673,375.00
8,600.00 65,900.00 74,500.00 MINN. MINING & MFG CO. 821,837.50 6,297,568.75 7,119,406.25
101,000.00 198,600.00 299,600.00 MOBIL CORP. 10,535,562.50 20,716,462.50 31,252,025.00
32,800.00 65,300.00 98,100.00 J.P. MORGAN 4,313,200.00 8,586,950.00 12,900,150.00
</TABLE>
59
<PAGE> 280
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
27,200.00 64,800.00 92,000.00 NEW YORK TIMES CO. 1,045,500.00 2,490,750.00 3,536,250.00
53,200.00 95,453.00 148,653.00 NORTHROP GRUMMAN CORP 2,989,175.00 5,363,265.44 8,352,440.44
85,400.00 170,000.00 255,400.00 PNC BANK CORP. 4,761,050.00 9,477,500.00 14,238,550.00
72,400.00 106,000.00 178,400.00 J.C. PENNEY 1,615,425.00 2,365,125.00 3,980,550.00
74,700.00 149,300.00 224,000.00 PITNEY BOWES, INC. 3,580,931.25 7,157,068.75 10,738,000.00
237,500.00 470,550.00 708,050.00 RPM INC OHIO 2,790,625.00 5,528,962.50 8,319,587.50
94,100.00 177,300.00 271,400.00 ROYAL DUTCH PETRO.-NY 5,457,800.00 10,283,400.00 15,741,200.00
119,061.00 236,485.00 355,546.20 SBC COMM INC 6,183,730.69 12,282,450.08 18,466,180.77
156,900.00 308,600.00 465,500.00 SARA LEE 3,804,825.00 7,483,550.00 11,288,375.00
66,850.00 108,700.00 175,550.00 SEARS ROEBUCK 2,285,434.38 3,716,181.25 6,001,615.63
61,600.00 123,000.00 184,600.00 SNAP ON TOOLS, INC. 1,863,400.00 3,720,750.00 5,584,150.00
84,100.00 280,200.00 364,300.00 SOUTHTRUST CORP 3,264,131.25 10,875,262.50 14,139,393.75
10,700.00 21,000.00 31,700.00 TEMPLE-INLAND INC 612,575.00 1,202,250.00 1,814,825.00
96,500.00 202,600.00 299,100.00 TEXACO, INC. 5,880,468.75 12,345,937.50 18,226,406.25
18,600.00 40,700.00 59,300.00 TEXTRON INC COMMON 1,321,762.50 2,892,243.75 4,214,006.25
53,400.00 104,000.00 157,400.00 THOMAS & BETTS CORP. 2,189,400.00 4,264,000.00 6,453,400.00
96,800.00 211,900.00 308,700.00 UST INCORPORATED 2,577,300.00 5,641,837.50 8,219,137.50
74,500.00 133,400.00 207,900.00 USX-U.S. STEEL GROUP INC. 1,885,781.25 3,376,687.50 5,262,468.75
120,800.00 230,300.00 351,100.00 ULTRAMAR DIAMOND SHAMROCK 3,057,750.00 5,829,468.75 8,887,218.75
102,600.00 275,800.00 378,400.00 UNIONBANCAL CORP 4,520,812.50 12,152,437.50 16,673,250.00
41,400.00 70,200.00 111,600.00 UNITED TECHNOLOGIES CORP. 2,339,100.00 3,966,300.00 6,305,400.00
73,000.00 156,800.00 229,800.00 WASHINGTON MUTUAL, INC. 2,117,000.00 4,547,200.00 6,664,200.00
50,500.00 82,800.00 133,300.00 WEYERHAEUSER CO. 3,093,125.00 5,071,500.00 8,164,625.00
47,800.00 95,000.00 142,800.00 XEROX CORP. 1,293,587.50 2,570,937.50 3,864,525.00
6,566,756.00 0.00 6,566,756.00 GOLDMAN SACHS SQ PREMIUM 6,566,756.00 0 6,566,756.00
0 4,053,952.06 4,053,952.06 FIDELITY DOMESTIC MM #690 0.00 4,053,952.06 4,053,952.06
5,000,000.00 0 5,000,000.00 OGE ENERGY CORP. 5.81% 5,000,000.00 0 5,000,000.00
27,109,000.00 0 27,109,000.00 BEAR STEARNS & CO. TRIPARTY 5 27,109,000.00 0 27,109,000.00
------------------- ----------------
44,201,702.00 15,610,065.26 59,811,767.26 283,925,929.70 516,528,083.15 800,454,012.85
</TABLE>
60
<PAGE> 281
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1999
(Amounts in Thousands)
<TABLE>
<CAPTION>
Parkstone Armada
Small Small Cap
Capitalization Growth Pro Forma
Fund Fund Combined
<S> <C> <C> <C>
TOTAL INVESTMENTS: 318,842 113,563 432,405
------- ------- -------
ASSETS
Cash 149 230 379
Accrued Income 96 42 138
Investment Securities Sold 12,465 4,554 17,019
Cap Shares Sold 109 2 111
Other Assets 29 242 271
TOTAL ASSETS: 331,690 118,633 450,323
------- ------- -------
LIABILITIES
Income Payable 0 0 0
Capital Gain Payable 0 0 0
Investment Securities Purchased 1,519 556 2,075
Capital Shares Redeemed Payable 165 0 165
Accrued Expense Payable 575 132 707
Other Payables 39,011 51 39,062
TOTAL LIABILITIES: 41,270 739 42,009
------- ------- -------
TOTAL NET ASSETS: 290,420 117,894 408,314
</TABLE>
61
<PAGE> 282
STATEMENT OF OPERATIONS
SIX MONTH PERIOD ENDING NOVEMBER 30, 1999
(Amounts in Thousands)
<TABLE>
<CAPTION>
Parkstone Armada
Small Small Cap
Capitalization Growth Pro Forma
Fund Fund Combined
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends 54
Interest 963 400 1,417
------ ------ -------
TOTAL INCOME: 963 454 1,417
------ ------ -------
EXPENSES:
Administrator Fees 333 33 366
Investment Advisory Fees 1,445 476 1,921
Transfer Agent Fees 254 29 283
Custodian Fees 20 8 28
Professional Fees (Audit + Legal) 13 1 14
Trustee (Directors) Fees 2 1 3
Registration Fees 15 8 23
12b-1 Fees 158 20 178
Shareholder Servicing Fees 0 2 2
Printing Expenses 17 3 20
Miscellaneous Expenses 4 1 5
TOTAL EXPENSES: (2,261) (582) (2,843)
------ ------ -------
NET INVESTMENT INCOME: (1,298) (128) (1,426)
------ ------ -------
Net Realized Gains (Losses) on Investments 43,051 7,111 50,162
Net Unrealized Appreciation (Depreciation)
of Investment Securities 36,589 18,990 55,579
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS: 79,640 26,101 105,741
------ ------ -------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS: 78,342 25,973 104,315
------ ------ -------
</TABLE>
62
<PAGE> 283
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTH PERIOD ENDING NOVEMBER 30, 1999
(Amounts in Thousands)
<TABLE>
<CAPTION>
Parkstone Armada
Small Small Cap
Capitalization Growth Pro Forma
Fund Fund Combined
<S> <C> <C> <C>
INVESTMENT ACTIVITIES:
Net Investment Income (1,298) (128) (1,426)
Net Realized Gain (Loss) on Securities Sold 43,051 7,111 50,162
Net Increase (Decrease) in Unrealized
Appreciation of Assets 36,589 18,990 55,579
------- ------- --------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS: 78,342 25,973 104,315
------- ------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional/Class I Shares - - -
Investor A/Class A Shares - - -
Investor B/Class B Shares - - -
Realized Capital Gains
Institutional/Class I Shares - - -
Investor A/Class A Shares - - -
Investor B/Class B Shares - - -
TOTAL DISTRIBUTIONS: - - -
PAID-IN-CAPITAL:
Institutional/Class I Shares
Shares Issued 2,336 18,021 20,357
Shares Issued in Lieu of Cash Distributions - - -
Shares Redeemed (65,019) (7,800) (72,819)
Net Institutional/Class I Share Transactions (62,683) 10,221 (52,462)
------- ------- --------
Investor A/Class A Shares
Shares Issued 27,215 1,669 28,884
Shares Issued in Lieu of Cash Distributions - - -
Shares Redeemed (50,662) (1,356) (52,018)
Net Investor A/Class A Share Transactions (23,447) 313 (23,134)
------- ------- --------
Investor B/Class B Shares
Shares Issued 256 30 286
Shares Issued in Lieu of Cash Distributions - - -
Shares Redeemed (4,736) (16) (4,752)
Net Investor B/Class B Share Transactions (4,480) 14 (4,466)
------- ------- --------
INCREASE (DECREASE) IN NET ASSETS
FROM SHARE TRANSACTIONS: (90,610) 10,548 (80,062)
------- ------- --------
BEGINNING OF PERIOD: 302,688 81,373 384,061
------- ------- --------
END OF PERIOD: 290,420 117,894 408,314
------- ------- --------
</TABLE>
63
<PAGE> 284
SCHEDULE OF INVESTMENTS
ARMADA SMALL CAP GROWTH/
PARKSTONE SMALL CAPITALIZATION
AS OF 11/30/99
<TABLE>
<CAPTION>
Proforma Proforma
Parkstone Armada Combined Parkstone Armada Combined
Shares Shares Shares Description Market Value Market Value Market Value
------ ------ ------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
107,100.00 41,500.00 148,600.00 ACT MANUFACTURING INC 3,273,243.75 1,268,343.75 4,541,587.50
62,500.00 24,200.00 86,700.00 ADELPHIA BUSINESS SOLUT. 1,953,125.00 756,250.00 2,709,375.00
54,400.00 21,500.00 75,900.00 ADVANCED DIGITAL INFO. 2,444,600.00 966,156.25 3,410,756.25
9,700.00 3,300.00 13,000.00 AFFYMETRIX INC 950,600.00 323,400.00 1,274,000.00
17,000.00 6,500.00 23,500.00 ALLAIRE CORPORATION 2,581,875.00 987,187.50 3,569,062.50
28,300.00 10,600.00 38,900.00 ANCHOR GAMING 1,558,268.75 583,662.50 2,141,931.25
27,800.00 11,100.00 38,900.00 ANCOR COMMUNICATIONS 1,685,375.00 672,937.50 2,358,312.50
59,300.00 22,700.00 82,000.00 ANTEC CORPORATION 3,320,800.00 1,271,200.00 4,592,000.00
20,330.00 7,850.00 28,180.00 ARTHROCARE CORPORATION 1,229,965.00 474,925.00 1,704,890.00
88,600.00 33,300.00 121,900.00 ATLAS AIR INC 2,231,612.50 838,743.75 3,070,356.25
107,900.00 39,800.00 147,700.00 AUDIOVOX CORP. 3,210,025.00 1,184,050.00 4,394,075.00
80,600.00 32,000.00 112,600.00 BJ'S WHOLESALE CLUB INC 3,012,425.00 1,196,000.00 4,208,425.00
71,500.00 24,200.00 95,700.00 BIOMATRIX INC 1,680,250.00 568,700.00 2,248,950.00
50,000.00 17,100.00 67,100.00 BURR-BROWN CORP 2,215,625.00 757,743.75 2,973,368.75
32,300.00 12,800.00 45,100.00 BUSINESS OBJECTS-ADR 2,858,550.00 1,132,800.00 3,991,350.00
39,550.00 15,100.00 54,650.00 C-COR.NET CORPORATION 2,019,521.88 771,043.75 2,790,565.63
87,800.00 33,500.00 121,300.00 CTS CORP. 7,040,462.50 2,686,281.25 9,726,743.75
32,750.00 12,100.00 44,850.00 CAL DIVE INTERNATIONAL 1,191,281.25 440,137.50 1,631,418.75
93,700.00 32,400.00 126,100.00 CHEAP TICKETS INC. 1,563,618.75 540,675.00 2,104,293.75
75,900.00 25,700.00 101,600.00 CHILDREN'S PLACE STORES 1,873,781.25 634,468.75 2,508,250.00
61,600.00 24,400.00 86,000.00 CHIREX CORP 2,140,600.00 847,900.00 2,988,500.00
41,900.00 15,050.00 56,950.00 CHURCH AND DWIGHT INC 1,173,200.00 421,400.00 1,594,600.00
45,400.00 18,000.00 63,400.00 CITADEL COMMUNICATIONS 2,272,837.50 901,125.00 3,173,962.50
43,900.00 17,400.00 61,300.00 CLARIFY INC. 4,091,617.19 1,621,734.38 5,713,351.57
156,600.00 61,200.00 217,800.00 COMMSCOPE INC. 6,596,775.00 2,578,050.00 9,174,825.00
35,885.00 14,700.00 50,585.00 CORPORATE EXECUTIVE BOARD 1,668,652.50 683,550.00 2,352,202.50
40,300.00 15,900.00 56,200.00 CREDENCE SYSTEMS CORP 2,334,881.25 921,206.25 3,256,087.50
75,800.00 29,800.00 105,600.00 CULLEN FROST BANKERS 2,160,300.00 849,300.00 3,009,600.00
101,400.00 40,000.00 141,400.00 CUMULUS MEDIA INC. 4,056,000.00 1,600,000.00 5,656,000.00
</TABLE>
64
<PAGE> 285
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
70,500.00 26,500.00 97,000.00 CYMER INC. 2,820,000.00 1,060,000.00 3,880,000.00
87,400.00 32,300.00 119,700.00 DII GROUP INC 5,517,125.00 2,038,937.50 7,556,062.50
133,600.00 52,300.00 185,900.00 DATASCOPE CORP 4,955,725.00 1,940,003.13 6,895,728.13
37,200.00 16,300.00 53,500.00 DIAMOND TECH 1,953,000.00 855,750.00 2,808,750.00
20,000.00 7,500.00 27,500.00 DIGEX INC 670,000.00 251,250.00 921,250.00
65,200.00 24,500.00 89,700.00 DIGITAL RIVER. 1,988,600.00 747,250.00 2,735,850.00
34,500.00 13,400.00 47,900.00 EGAINS COMMUNICATION 1,449,000.00 562,800.00 2,011,800.00
42,700.00 14,450.00 57,150.00 ENZON INC 1,441,125.00 487,687.50 1,928,812.50
70,500.00 27,400.00 97,900.00 EXAR CORPORATION 3,428,062.50 1,332,325.00 4,760,387.50
85,700.00 34,000.00 119,700.00 EXPEDITORS INTL WASH INC 3,492,275.00 1,385,500.00 4,877,775.00
55,500.00 18,800.00 74,300.00 F.Y.I. INC. 1,776,000.00 601,600.00 2,377,600.00
63,500.00 21,800.00 85,300.00 FAIRCHILD SEMICON INT'L-A 1,778,000.00 610,400.00 2,388,400.00
89,300.00 33,000.00 122,300.00 FOREST OIL CORP 1,021,368.75 377,437.50 1,398,806.25
159,600.00 63,400.00 223,000.00 GENTEX CORP 2,982,525.00 1,184,787.50 4,167,312.50
60,200.00 20,614.00 80,814.00 HELIX TECHNOLOGY CORP. 2,437,159.38 834,544.91 3,271,704.29
179,600.00 66,850.00 246,450.00 HOOPER HOLMES INC 4,243,050.00 1,579,331.25 5,822,381.25
155,000.00 60,100.00 215,100.00 ICG COMMUNICATIONS INC 2,935,312.50 1,138,143.75 4,073,456.25
113,400.00 44,900.00 158,300.00 IMPERIAL BANCORP 2,721,600.00 1,077,600.00 3,799,200.00
62,000.00 21,200.00 83,200.00 INTEGRATED DEVICE TECH 1,460,875.00 499,525.00 1,960,400.00
61,700.00 24,300.00 86,000.00 INTERMEDIA COMMUNICATIONS 1,719,887.50 677,362.50 2,397,250.00
142,000.00 56,400.00 198,400.00 JACK IN THE BOX INC 2,990,875.00 1,187,925.00 4,178,800.00
107,050.00 42,400.00 149,450.00 KING PHARMACEUTICALS INC. 4,937,681.25 1,955,700.00 6,893,381.25
53,800.00 19,850.00 73,650.00 LOUIS DREYFUS NAT. GAS 968,400.00 357,300.00 1,325,700.00
60,000.00 22,800.00 82,800.00 MACROVISION INC 3,832,500.00 1,456,350.00 5,288,850.00
46,400.00 20,300.00 66,700.00 MASTEC INC 1,911,100.00 836,106.25 2,747,206.25
66,600.00 26,300.00 92,900.00 MERCURY COMPUTER SYSTEMS 3,800,362.50 1,500,743.75 5,301,106.25
40,000.00 15,900.00 55,900.00 MERCURY INTERACTIVE 3,325,000.00 1,321,687.50 4,646,687.50
83,000.00 31,400.00 114,400.00 METRIS COMPANIES 2,624,875.00 993,025.00 3,617,900.00
13,500.00 5,100.00 18,600.00 MICROSTRATEGY INC. 1,653,750.00 624,750.00 2,278,500.00
35,400.00 13,600.00 49,000.00 MICROMUSE INC 4,048,875.00 1,555,500.00 5,604,375.00
15,300.00 5,200.00 20,500.00 MILLENNIUM PHARMACEUTICAL 1,489,359.38 506,187.50 1,995,546.88
165,300.00 61,200.00 226,500.00 MONACO COACH CORPORATION 3,553,950.00 1,315,800.00 4,869,750.00
84,600.00 33,600.00 118,200.00 NATL COMPUTER SYSTEMS 3,246,525.00 1,289,400.00 4,535,925.00
91,300.00 36,200.00 127,500.00 NATIONAL INFO CONSORTIUM 2,408,037.50 954,775.00 3,362,812.50
138,500.00 53,900.00 192,400.00 NETOBJECTS INC. 1,878,406.25 731,018.75 2,609,425.00
242,000.00 92,000.00 334,000.00 NETSILICON INC 3,206,500.00 1,219,000.00 4,425,500.00
3,050.00 1,050.00 4,100.00 NEXT LEVEL COMMUNICATIONS 196,915.63 67,790.63 264,706.26
56,000.00 20,900.00 76,900.00 NICOR INC 1,942,500.00 724,968.75 2,667,468.75
</TABLE>
65
<PAGE> 286
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
158,000.00 62,500.00 220,500.00 NOVADIGM, INC. 2,745,250.00 1,085,937.50 3,831,187.50
163,370.00 64,900.00 228,270.00 ONLINE RESOURCES & COMM. 2,001,282.50 795,025.00 2,796,307.50
85,700.00 32,400.00 118,100.00 ONYX SOFTWARE CORP 2,763,825.00 1,044,900.00 3,808,725.00
13,000.00 8,200.00 21,200.00 OPTICAL COATING LABS 2,557,750.00 1,023,100.00 3,580,850.00
106,500.00 42,300.00 148,800.00 OPTIMAL ROBOTICS 3,461,250.00 1,374,750.00 4,836,000.00
40,100.00 13,700.00 53,800.00 PRI AUTOMATION 1,899,737.50 649,037.50 2,548,775.00
145,600.00 57,800.00 203,400.00 POLYMEDICA CORPORATION 2,548,000.00 1,011,500.00 3,559,500.00
56,400.00 20,700.00 77,100.00 PRIORITY HLTHCARE CORP B 1,395,900.00 512,325.00 1,908,225.00
31,500.00 11,200.00 42,700.00 PROXIM CORP 1,764,000.00 627,200.00 2,391,200.00
30,400.00 14,400.00 44,800.00 QRS CORPORATION 1,767,000.00 687,500.00 3,464,500.00
57,600.00 22,000.00 79,600.00 REMEDY CORPORATION 2,008,800.00 767,250.00 2,776,050.00
346,700.00 117,350.00 464,050.00 REPUBLIC SECURITY FINL 2,784,434.38 942,467.19 3,726,901.57
116,900.00 45,450.00 162,350.00 REX STORES CORPORATION 4,361,831.25 1,695,853.13 6,057,684.38
85,500.00 33,100.00 118,600.00 SBS TECHNOLOGIES, INC 2,885,625.00 1,117,125.00 4,002,750.00
264,900.00 114,300.00 379,200.00 SBA COMMUNICATIONS CORP 3,046,350.00 1,314,450.00 4,360,800.00
88,600.00 33,550.00 122,150.00 SAWTEK INC 4,042,375.00 1,530,718.75 5,573,093.75
91,300.00 34,450.00 125,750.00 SILICON STORAGE TECH 2,419,450.00 912,925.00 3,332,375.00
42,450.00 15,870.00 58,320.00 SONIC WALL INC 1,451,259.38 542,555.63 1,993,815.01
63,800.00 23,800.00 87,600.00 SOUTHWEST GAS CORP. 1,495,312.50 557,812.50 2,053,125.00
92,400.00 34,900.00 127,300.00 SPANISH BROADCASTING,CL A 2,933,700.00 1,108,075.00 4,041,775.00
86,600.00 33,000.00 119,600.00 STATION CASINOS INC 2,078,400.00 792,000.00 2,870,400.00
93,000.00 35,200.00 128,200.00 SYMANTEC CORP 4,341,937.50 1,643,400.00 5,985,337.50
50,400.00 20,100.00 70,500.00 T-HQ, INC. 2,709,000.00 1,080,375.00 3,789,375.00
67,300.00 24,850.00 92,150.00 TESORO PETRO. CORP. 807,600.00 298,200.00 1,105,800.00
134,900.00 50,700.00 185,600.00 THERAGENICS CORP 1,289,981.25 484,818.75 1,774,800.00
166,720.00 62,480.00 229,200.00 3DO COMPANY 1,578,630.00 591,607.50 2,170,237.50
100,000.00 37,900.00 137,900.00 TITAN CORP 2,706,250.00 1,025,668.75 3,731,918.75
153,000.00 51,800.00 204,800.00 TITAN PHARMACEUTICALS 2,199,375.00 744,625.00 2,944,000.00
124,750.00 49,400.00 174,150.00 TOO INC 2,307,875.00 913,900.00 3,221,775.00
41,000.00 16,200.00 57,200.00 TRANSWITCH CORP 1,927,000.00 761,400.00 2,688,400.00
104,200.00 41,200.00 145,400.00 TREX COMPANY INC. 2,683,150.00 1,060,900.00 3,744,050.00
59,700.00 23,550.00 83,250.00 VALASSIS COMMUNICATIONS 2,350,687.50 927,281.25 3,277,968.75
75,900.00 28,900.00 104,800.00 VISUAL NETWORKS INC. 4,478,100.00 1,705,100.00 6,183,200.00
89,000.00 33,700.00 122,700.00 ZORAN CORP 3,548,875.00 1,343,787.50 4,892,662.50
91,400.00 36,000.00 127,400.00 ANNUITY & LIFE 2,604,900.00 1,026,000.00 3,630,900.00
189,600.00 73,800.00 263,400.00 SCOTTISH ANNUITY & LIFE 1,611,600.00 491,300.00 2,102,900.00
221,000.00 84,300.00 305,300.00 ASM INTER'L N.V. 3,591,250.00 1,369,875.00 4,961,125.00
100,000.00 55,000.00 155,000.00 SAPIENS INTERNATIONAL 1,387,500.00 555,000.00 1,942,500.00
</TABLE>
66
<PAGE> 287
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
0 4,717,920.44 4,717,920.44 FSQ PREMIUM MM #483 0 4,717,920.44 4,717,920.44
0 6,400,000.00 6,400,000.00 REPO (5.53%) PRUDENTIAL 0 6,400,000.00 6,400,000.00
12,099,107.06 0.00 12,099,107.06 GOLDMAN SACHS SQ PREMIUM 12,099,107.06 0.00 12,099,107.06
15,000,000.00 0.00 15,000,000.00 FEDERAL SIGNAL CORP. 15,000,000.00 0.00 15,000,000.00
24,011,000.00 0.00 24,011,000.00 BEAR STEARNS REPO 24,011,000.00 0.00 24,011,000.00
59,780,025.06 14,524,284.44 74,504,330.50 318,841,523.03 113,562,901.94 432,404,424.97
</TABLE>
67
<PAGE> 288
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1999
(Amounts in Thousands)
<TABLE>
<CAPTION>
Parkstone Armada
International International Pro Forma
Discovery Fund Equity Fund Combined
<S> <C> <C> <C>
TOTAL INVESTMENTS: 365,314 312,534 677,848
------- ------- -------
ASSETS
Cash 610 1,123 1,733
Accrued Income 248 149 397
Investment Securities Sold 1,744 678 2,422
Cap Shares Sold 70 653 723
Other Assets 269 198 467
TOTAL ASSETS: 368,255 316,354 684,609
------- ------- -------
LIABILITIES
Income Payable 0 0 0
Capital Gain Payable 0 0 0
Investment Securities Purchased 1,125 1,028 2,153
Capital Shares Redeemed Payable 101 14 115
Accrued Expense Payable 819 463 1,282
Other Payables 22,845 169 23,014
TOTAL LIABILITIES: 24,890 1,674 26,564
------- ------- -------
TOTAL NET ASSETS: 343,365 314,680 658,045
</TABLE>
68
<PAGE> 289
STATEMENT OF OPERATIONS
SIX MONTH PERIOD ENDING NOVEMBER 30, 1999
(Amounts in Thousands)
<TABLE>
<CAPTION>
Parkstone Armada
International International Pro Forma
Discovery Fund Equity Fund Combined
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends 1,443
Interest 1,823 379 3,550
------ ------ -------
Less Foreign Tax (95)
TOTAL INCOME: 1,823 1,727 3,550
------ ------ -------
EXPENSES:
Administrator Fees 387 86 473
Investment Advisory Fees 1,836 1,412 3,248
Transfer Agent Fees 119 31 150
Custodian Fees 104 132 236
Professional Fees (Audit + Legal) 15 6 21
Trustee (Directors) Fees 2 2 4
Registration Fees 14 6 20
12b-1 Fees 70 49 119
Shareholder Servicing Fees 0 2 2
Printing Expenses 17 3 20
Miscellaneous Expenses 6 2 8
TOTAL EXPENSES: (2,570) (1,731) (4,301)
------ ------ -------
NET INVESTMENT INCOME: (747) (4) (751)
------ ------ -------
Net Realized Gains (Losses) on Investments 36,562 11,700 48,262
Net Unrealized Appreciation (Depreciation)
of Investment Securities 55,195 62,048 117,243
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS: 91,757 73,748 165,505
------ ------ -------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS: 91,010 73,744 164,754
------ ------ -------
</TABLE>
69
<PAGE> 290
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTH PERIOD ENDING NOVEMBER 30, 1999
(Amounts in Thousands)
<TABLE>
<CAPTION>
Parkstone Armada
International International Pro Forma
Discovery Fund Equity Fund Combined
<S> <C> <C> <C>
INVESTMENT ACTIVITIES:
Net Investment Income (747) (4) (751)
Net Realized Gain (Loss) on Securities Sold 36,562 11,700 48,262
Net Increase (Decrease) in Unrealized
Appreciation of Assets 55,195 62,048 117,243
------- ------- -------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS: 91,010 73,744 164,754
------- ------- -------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional/Class I Shares - - -
Investor A/Class A Shares - - -
Investor B/Class B Shares - - -
Realized Capital Gains
Institutional/Class I Shares - - -
Investor A/Class A Shares - - -
Investor B/Class B Shares - - -
TOTAL DISTRIBUTIONS: - - -
------- ------- -------
PAID-IN-CAPITAL:
Institutional/Class I Shares
Shares Issued 2,819 45,059 47,878
Shares Issued in Lieu of Cash Distributions - - -
Shares Redeemed (41,321) (5,071) (46,392)
Net Institutional/Class I Share Transactions (38,502) 39,988 1,486
------- ------- -------
Investor A/Class A Shares
Shares Issued 42,393 882 43,275
Shares Issued in Lieu of Cash Distributions - - -
Shares Redeemed (50,420) (358) (50,778)
Net Investor A/Class A Share Transactions (8,027) 524 (7,503)
------- ------- -------
Investor B/Class B Shares
Shares Issued 38 70 108
Shares Issued in Lieu of Cash Distributions - - -
Shares Redeemed (1,436) (20) (1,456)
Net Investor B/Class B Share Transactions (1,398) 50 (1,348)
------- ------- -------
INCREASE (DECREASE) IN NET ASSETS
FROM SHARE TRANSACTIONS: (47,927) 40,562 (7,365)
------- ------- -------
BEGINNING OF PERIOD: 300,282 200,374 500,656
------- ------- -------
END OF PERIOD: 343,365 314,680 658,045
------- ------- -------
</TABLE>
70
<PAGE> 291
Proforma Combined Schedule Of Investments
Armada International Equity/
Parkstone International Discovery
As of 11/30/99
<TABLE>
<CAPTION>
Proforma Proforma
Armada Parkstone Combined Armada Parkstone Combined
Shares/Par Shares/Par Shares/Par Security Description Market Value Market Value Market Value
---------- ---------- ---------- -------------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
2,174 2,560 4,734 ADECCO 1,393,519.48 1,636,525.12 3,030,044.60
13,260 48,596 61,856 AHOLD 422,837.11 1,546,705.21 1,969,542.32
7,446 8,177 15,623 ALLIANZ 2,183,975.84 2,393,846.23 4,577,822.07
226,290 250,626 476,916 ALLIED ZURICH 2,744,552.73 3,043,689.80 5,788,242.53
9,667 10,861 20,528 ALTRAN TECHNOLOGIES SA 4,607,852.89 5,167,186.73 9,775,039.62
33,862 38,089 71,951 ASSIC GENERALI 976,975.59 1,096,852.26 2,073,827.85
34,219 64,493 98,712 AVENTIS (FRANCE) 2,122,987.82 3,993,652.05 6,116,639.87
29,402 34,619 64,021 AXA-UAP 3,971,572.77 4,667,427.98 8,639,000.75
219,172 241,947 461,119 BANK OF IRELAND 1,807,498.33 1,995,201.09 3,802,699.42
62,533 71,148 133,681 BANK OF TOKYO-MITS 905,155.52 1,027,689.15 1,932,844.67
114,295 127,362 241,657 BASS - NEW 1,291,252.24 1,434,147.11 2,725,399.35
19,482 22,443 41,925 BATM ADVANCED COMM 1,276,385.43 1,465,545.09 2,741,930.52
27,550 31,380 58,930 BAYER VEREINSBK 1,712,014.30 1,946,328.67 3,658,342.97
46,490 25,530 72,020 BCE INC 3,143,886.25 1,726,466.25 4,870,352.50
0 27,252 27,252 BCE INC 0.00 1,836,106.40 1,836,106.40
19,669 23,218 42,887 BENESSE CORPORATION 4,721,948.81 5,562,229.95 10,284,178.76
134,231 166,393 300,624 BOC GROUP 2,773,420.95 3,429,286.31 6,202,707.26
52,505 401,158 453,663 BP AMOCO 535,285.87 4,092,314.56 4,627,600.43
50,714 0 50,714 BP AMOCO ADR 3,090,384.38 0.00 3,090,384.38
0 37,436 37,436 BRITISH AERO LOAN STK 0.00 56,195.93 56,195.93
0 118,529 118,529 BRITISH AEROSPACE 0.00 677,253.31 677,253.31
133,320 151,285 284,605 BRITISH TELECOM 2,681,099.71 3,040,812.50 5,721,912.21
203,815 231,976 435,791 BULGARI SPA (BUG LI) 1,572,905.58 1,786,845.57 3,359,751.15
</TABLE>
71
<PAGE> 292
<TABLE>
<CAPTION>
Proforma Proforma
Armada Parkstone Combined Armada Parkstone Combined
Shares/Par Shares/Par Shares/Par Security Description Market Value Market Value Market Value
---------- ---------- ---------- -------------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
14,462 16,240 30,702 CASTORAMA 3,764,030.53 4,218,793.42 7,982,823.95
923,776 1,066,265 1,990,041 CHINA TELECOM (HONG KONG) 4,960,270.31 5,725,053.54 10,685,323.85
7,017 8,336 15,353 CIE DE ST GOBAIN 1,196,308.68 1,418,492.16 2,614,800.84
46,780 54,525 101,305 COLT TELECOM GROUP 1,769,387.34 2,057,288.28 3,826,675.62
169,884 191,189 361,073 COMPASS GROUP 2,063,148.61 2,318,821.02 4,381,969.63
12,486 14,305 26,791 CREDIT SUISSE, REG 2,341,223.37 2,675,078.87 5,016,302.24
281,783 317,515 599,298 DBS GROUP HOLDINGS LTD. 3,655,381.97 4,120,195.76 7,775,577.73
50,956 54,536 105,492 DEUTSCHE BANK 3,364,418.82 3,593,978.39 6,958,397.21
30,786 34,794 65,580 DEUTSCHE TELEKOM 1,765,585.72 1,991,669.89 3,757,255.61
48,311 56,083 104,394 ENERGIS PLC 1,967,797.04 2,300,079.71 4,267,876.75
32,395 37,047 69,442 EPCOS AG 1,993,484.64 2,275,440.11 4,268,924.75
14,773 16,803 31,576 EQUANT 1,430,688.23 1,624,204.05 3,054,892.28
84,489 88,170 172,659 ERICSSON PHONE 4,071,313.69 4,248,691.88 8,320,005.57
3,114 3,406 6,520 FANCL CORPORATION 1,105,489.85 1,206,607.26 2,312,097.11
58,645 64,805 123,450 FANUC 4,888,521.13 5,390,637.89 10,279,159.02
30,764 34,701 65,465 FRANCE TELECOM 3,572,096.64 4,021,608.99 7,593,705.63
71,631 81,460 153,091 FUJITSU 2,542,946.16 2,885,796.45 5,428,742.61
9,500,000 1,500,000 11,000,000 GE INT'L CP 12/02/99 9,498,556.00 1,499,543.31 10,998,099.31
3,500,000 0 3,500,000 GE INT'L CP 12/16/99 3,491,876.50 0.00 3,491,876.50
247,370 0 247,370 GENERAL ELECTRIC 3,804,628.08 0.00 3,804,628.08
30 0 30 GLAXO WELLCOME 900.29 0.00 900.29
10,711,702 15,696,416 26,408,118 GOLDMAN SACHS 10,711,702.28 15,696,416.07 26,408,118.35
29,457 33,027 62,484 HEINEKEN 1,426,378.64 1,596,220.53 3,022,599.17
97,650 109,917 207,567 HENNES & MAURITZ, CL B 3,100,729.15 3,491,056.09 6,591,785.24
1,942 2,233 4,175 HIKARI TSUSHIN 3,047,170.74 3,496,402.52 6,543,573.26
25,532 26,475 52,007 HONDA MOTOR 1,051,626.95 1,088,173.08 2,139,800.03
175,280 196,156 371,436 HSBC HLDGS - NEW (HKD) 2,324,728.30 2,601,460.08 4,926,188.38
224,003 264,762 488,765 HUTCHISON WHAMPOA 2,754,608.10 3,255,647.44 6,010,255.54
50,987 56,315 107,302 ING GROEP 2,872,683.04 3,166,866.79 6,039,549.83
9,038 10,398 19,436 INTERNET INITIATIVE ADR 863,270.22 993,171.47 1,856,441.69
510,052 599,579 1,109,631 INVENSYS PLC 2,379,916.65 2,769,356.26 5,149,272.91
</TABLE>
72
<PAGE> 293
<TABLE>
<CAPTION>
Proforma Proforma
Armada Parkstone Combined Armada Parkstone Combined
Shares/Par Shares/Par Shares/Par Security Description Market Value Market Value Market Value
---------- ---------- ---------- -------------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
449,007 513,000 962,007 ITOCHU CORP 2,677,221.30 3,052,345.31 5,729,566.61
575,591 678,443 1,254,034 JOHNSON ELECTRIC HLDGS 4,113,481.91 4,848,246.51 8,961,728.42
29,850 0 29,850 KONINKLIJKE AHOLD ADR 955,200.00 0.00 955,200.00
841,069 475,002 1,316,071 LI & FUNG LTD 1,933,180.74 1,091,721.85 3,024,902.59
40,745 47,835 88,580 LINDE 2,038,736.38 2,384,149.62 4,422,886.00
135,099 151,611 286,710 LOGICA 3,270,613.37 3,804,376.92 7,074,990.29
2,070 0 2,070 L'OREAL 1,364,649.16 0 1,364,649.16
27,213 30,591 57,804 MANNESMANN 5,666,190.72 6,357,493.08 12,023,683.80
0 276,425 276,425 MARCONI 0.00 3,528,704.27 3,528,704.27
622,428 713,000 1,335,428 MARUBENI CORP 2,423,300.15 2,770,082.83 5,193,382.98
32,442 36,544 68,986 MAYR-MELNHOF KARTON AG 1,354,918.07 1,523,347.39 2,878,265.46
355,798 398,199 753,997 NATIONAL GRID CO 2,737,563.71 3,063,244.86 5,800,808.57
91,798 198,993 290,791 NATL AUSTRALIA BANK 1,323,645.18 2,871,464.56 4,195,109.74
17,300 0 17,300 NATL AUSTRALIA BANK ADR 1,253,168.75 0.00 1,253,168.75
354,812 407,332 762,144 NATSTEEL ELECTRONICS LTD 1,467,386.73 1,685,116.76 3,152,503.49
113,788 126,851 240,639 NEC 2,661,413.95 2,960,704.05 5,622,118.00
1,100 1,150 2,250 NESTLE SA 1,984,243.04 2,068,851.07 4,053,094.11
60,009 67,545 127,554 NIHON UNISYS 2,301,021.77 2,584,536.57 4,885,558.34
162,807 189,827 352,634 NIKKO SECURITIES 2,027,703.15 2,359,252.50 4,386,955.65
9,443 10,059 19,502 NINTENDO (7974.T) 1,575,222.42 1,674,448.68 3,249,671.10
36,043 41,394 77,437 NOKIA ADR 4,980,692.06 5,720,133.38 10,700,825.44
2,735 3,045 5,780 NOVARTIS, REGISTERED 4,273,329.76 4,744,883.82 9,018,213.58
56 66 122 NTT 1,005,001.47 1,181,973.51 2,186,974.98
235 292 527 NTT MOBILE 8,250,465.82 10,230,069.80 18,480,535.62
891 971 1,862 OPENTV COPRORATION 72,438.30 75,009.75 147,448.05
168,731 189,261 357,992 PEARSON 4,038,974.72 4,515,515.75 8,554,490.47
21,153 23,274 44,427 PHARMACIA UPJOHN 1,156,804.69 1,272,796.88 2,429,601.57
90,394 99,078 189,472 POHANG IRON & STEEL ADR 3,248,534.38 3,560,615.63 6,809,150.01
0 25,023 25,023 POLSKI KONCERN NAFTO -GDR 0 258,237.36 258,237.36
21,399 0 21,399 POLSKI KONCERN NAFTO USD 220,944.68 0.00 220,944.68
181,800 207,000 388,800 QXL PLC 1,263,710.45 1,434,148.16 2,697,858.61
</TABLE>
73
<PAGE> 294
<TABLE>
<CAPTION>
Proforma Proforma
Armada Parkstone Combined Armada Parkstone Combined
Shares/Par Shares/Par Shares/Par Security Description Market Value Market Value Market Value
---------- ---------- ---------- -------------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
302 342 644 ROCHE HOLDINGS - GENUS 3,654,607.34 4,127,519.12 7,782,126.46
41,192 73,579 114,771 ROYAL DUTCH PETRO 2,428,028.83 4,328,847.60 6,756,876.43
24,400 0 24,400 ROYAL DUTCH PETRO-NY SHRS 1,415,200.00 0 1,415,200.00
86,468 101,819 188,287 SANWA BANK 1,051,488.87 1,235,558.27 2,287,047.14
1 0 1 SECURITY LENDING 1 0 1.00
34,595 36,786 71,381 SEVEN ELEVEN 5,631,823.09 5,975,900.72 11,607,723.81
47,901 56,483 104,384 SIEMENS 4,837,085.14 5,692,910.58 10,529,995.72
323,136 362,523 685,659 SINGAPORE AIRLINES 3,268,855.70 3,668,437.72 6,937,293.42
71,930 81,168 153,098 SINGAPORE PRESS HLDGS 1,348,286.22 1,521,920.84 2,870,207.06
13,420 15,231 28,651 SMC 2,371,564.19 2,685,937.63 5,057,501.82
16,600 0 16,600 SMITHKLINE BEECH. (ADR) 1,103,900.00 0 1,103,900.00
15,813 106,270 122,083 SMITHKLINE BEECHAM 211,749.66 1,418,368.63 1,630,118.29
8,090 8,775 16,865 SOFTBANK CORP 5,847,141.32 6,328,886.86 12,176,028.18
67,396 77,018 144,414 SONERA 2,788,232.37 3,180,273.98 5,968,506.35
34,725 38,782 73,507 SONY CORP 6,436,231.24 7,173,064.32 13,609,295.56
30,755 32,783 63,538 ST MICROELECTRONICS 4,188,461.94 4,456,203.26 8,644,665.20
94,755 108,190 202,945 STANDARD CHARTERED BANK 1,288,534.76 1,466,395.43 2,754,930.19
75,658 89,094 164,752 SUMITOMO BANK 1,161,172.60 1,364,506.22 2,525,678.82
13,307 0 13,307 SVENSKA CELL AB B 370,117.08 0.00 370,117.08
33,453 53,143 86,596 SVENSKA CELLULOSA AB-A SH 924,550.75 1,469,068.77 2,393,619.52
280,652 306,357 587,009 SWIRE PACIFIC A 1,611,779.45 1,759,304.49 3,371,083.94
1,279 1,448 2,727 SWISS REINSURANCE, REG 2,615,879.87 2,953,554.72 5,569,434.59
83,836 92,411 176,247 TAIWAN SEMICONDUCTOR ADR 3,002,376.75 3,309,468.94 6,311,845.69
73,817 81,810 155,627 TAKEDA CHEMICAL 4,357,932.14 4,819,651.13 9,177,583.27
9,977 11,196 21,173 TAKEFUJI CORP 1,428,500.54 1,599,662.87 3,028,163.41
0 0 0 TECHNOST 0 0.00 0.00
0 0 0 TECNOST-FLOAT 6/23/04 0.00 0.00 0.00
281,583 318,260 599,843 TELECOM ITALIA MOB 2,215,675.26 2,499,534.82 4,715,210.08
92,786 266,416 359,202 TELECOM ITALIA SPA 1,024,011.53 2,934,675.96 3,958,687.49
19,700 0 19,700 TELECOM ITALIA SPA-SP ADR 2,125,137.50 0 2,125,137.50
60,074 179,738 239,812 TELEFONICA 1,253,262.83 3,742,602.00 4,995,864.83
</TABLE>
74
<PAGE> 295
<TABLE>
<CAPTION>
Proforma Proforma
Armada Parkstone Combined Armada Parkstone Combined
Shares/Par Shares/Par Shares/Par Security Description Market Value Market Value Market Value
---------- ---------- ---------- -------------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
1,184 0 1,184 TELEFONICA - NEW 19,767.64 0.00 19,767.64
30,704 0 30,704 TELEFONICA DE ESPANA 1,907,486.00 0 1,907,486.00
28,541 33,100 61,641 TELEFONOS DE MEXICO ADR 2,641,826.31 3,063,818.75 5,705,645.06
6,482 7,450 13,932 TERRA NETWORKS SA 223,700.61 256,620.81 480,321.42
6,560 7,377 13,937 THOMSON MULTIMEDIA 284,562.30 319,396.95 603,959.25
257,586 291,450 549,036 THUS PLC 1,613,514.09 1,824,278.03 3,437,792.12
28,699 31,655 60,354 TOKYO ELECTRONICS 2,983,322.55 3,283,680.56 6,267,003.11
29,759 38,466 68,225 TOTAL FINA 3,965,758.14 5,116,416.71 9,082,174.85
8,458 0 8,458 TOTAL FINA ADR 559,285.25 0.00 559,285.25
10,765 11,953 22,718 UBS AG - REGISTERED 2,951,452.79 3,268,345.32 6,219,798.11
32,365 36,399 68,764 UPM - KYMMENE 1,083,973.76 1,216,774.40 2,300,748.16
85,455 99,974 185,429 VIAG AG 1,413,794.87 1,650,872.17 3,064,667.04
23,621 26,594 50,215 VIVENDI 1,894,394.75 2,128,792.46 4,023,187.21
66,088 74,412 140,500 WOLTERS KLUWER - CVA 1,996,753.75 2,243,997.32 4,240,751.07
129,815 152,303 282,118 WPP GROUP 1,909,471.20 2,253,505.33 4,162,976.53
11 13 24 YAHOO JAPAN CORPORATION 7,766,990.29 9,159,854.34 16,926,844.63
0 5,000,000 5,000,000 OGE ENERGY CORP 5.81% 0 4,994,000.00 4,994,000.00
0 182,000 182,000 BEAR STEARNS TRIPARTY 5.83% 0 182,000.00 182,000.00
0 17,669,000 17,669,000 LEHMAN TRIPARTY 5.83% 0 17,669,000.00 17,669,000.00
35,534,691.28 53,844,116.00 89,378,807.28 312,533,778.37 365,314,137.48 677,847,915.85
</TABLE>
75
<PAGE> 296
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1999
(Amounts in Thousands)
<TABLE>
<CAPTION>
Parkstone Armada
Balanced Balanced Pro Forma
Allocation Allocation Combined
Fund Fund
<S> <C> <C> <C>
TOTAL INVESTMENTS: 180,126 77,717 257,843
------- ------ --------
ASSETS
Cash 0 66 66
Accrued Income 630 325 955
Investment Securities Sold 2,065 2,359 4,424
Cap Shares Sold 2 0 2
Other Assets 31 39 70
TOTAL ASSETS: 182,854 80,506 263,360
------- ------ -------
LIABILITIES
Income Payable 0 0 0
Capital Gain Payable 0 0 0
Investment Securities Purchased 789 686 1,475
Capital Shares Redeemed Payable 9 0 9
Accrued Expense Payable 238 86 324
Other Payables 13,187 0 13,187
TOTAL LIABILITIES: 14,223 772 14,995
------- ------ -------
TOTAL NET ASSETS: 168,631 79,734 248,365
</TABLE>
76
<PAGE> 297
STATEMENT OF OPERATIONS
SIX MONTH PERIOD ENDING NOVEMBER 30, 1999
(Amounts in Thousands)
<TABLE>
<CAPTION>
Parkstone Armada
Balanced Balanced
Allocation Allocation Pro Forma
Fund Fund Combined
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends 187
Interest 2,788 1,016 3,985
------ ----- ------
Less Foreign Tax (6)
TOTAL INCOME: 2,788 1,197 3,985
------ ----- ------
EXPENSES:
Administrator Fees 224 27 251
Investment Advisory Fees 831 294 1,125
Waiver of Investment Advisory Fees (156) 0 (156)
Transfer Agent Fees 60 6 66
Custodian Fees 30 1 31
Professional Fees (Audit + Legal) 10 1 11
Trustee (Directors) Fees 1 1 2
Registration Fees 13 2 15
12b-1 Fees 46 12 58
Shareholder Servicing Fees 0 3 3
Printing Expenses 11 1 12
Miscellaneous Expenses 4 7 11
TOTAL EXPENSES: (1,074) (355) (1,429)
------ ----- ------
NET INVESTMENT INCOME: 1,714 842 2,556
------ ----- ------
Net Realized Gains (Losses) on Investments 13,133 157 13,290
Net Unrealized Appreciation (Depreciation)
of Investment Securities 6,334 5,742 12,076
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS: 19,467 5,899 25,366
------ ----- ------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS: 21,181 6,741 27,922
------ ----- ------
</TABLE>
77
<PAGE> 298
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTH PERIOD ENDING NOVEMBER 30, 1999
(Amounts in Thousands)
<TABLE>
<CAPTION>
Parkstone Armada
Balanced Balanced
Allocation Allocation Pro Forma
Fund Fund Combined
<S> <C> <C> <C>
INVESTMENT ACTIVITIES:
Net Investment Income 1,714 842 2,556
Net Realized Gain (Loss) on Securities Sold 13,133 157 13,290
Net Increase (Decrease) in Unrealized
Appreciation of Assets 6,334 5,742 12,076
------- ------ -------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS: 21,181 6,741 27,922
------- ------ -------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional/Class I Shares (1,714) (841) (2,555)
Investor A/Class A Shares (138) (21) (159)
Investor B/Class B Shares (30) (2) (32)
Realized Capital Gains
Institutional/Class I Shares - - -
Investor A/Class A Shares - - -
Investor B/Class B Shares - - -
TOTAL DISTRIBUTIONS: (1,882) (864) (2,746)
------- ------ -------
PAID-IN-CAPITAL:
Institutional/Class I Shares
Shares Issued 12,278 8,833 21,111
Shares Issued in Lieu of Cash Distributions 1,562 841 2,403
Shares Redeemed (59,149) (24,949) (84,098)
Net Institutional/Class I Share Transactions (45,309) (15,275) (60,584)
------- ------ -------
Investor A/Class A Shares
Shares Issued 468 2,904 3,372
Shares Issued in Lieu of Cash Distributions 131 21 152
Shares Redeemed (3,582) (739) (4,321)
Net Investor A/Class A Share Transactions (2,983) 2,186 (797)
------- ------ -------
Investor B/Class B Shares
Shares Issued 26 95 121
Shares Issued in Lieu of Cash Distributions 29 2 31
Shares Redeemed (1,117) (29) (1,146)
Net Investor B/Class B Share Transactions (1,062) 68 (994)
------- ------ -------
INCREASE (DECREASE) IN NET ASSETS
FROM SHARE TRANSACTIONS: (49,354) (13,021) (62,375)
------- ------ -------
BEGINNING OF PERIOD: 198,686 86,878 285,564
------- ------ -------
END OF PERIOD: 168,631 79,734 248,365
------- ------ -------
</TABLE>
78
<PAGE> 299
PROFORMA COMBINED SCHEDULE OF INVESTMENTS
ARMADA BALANCED ALLOCATION/
PARKSTONE BALANCED ALLOCATION
AS OF 11/30/99
<TABLE>
<CAPTION>
Proforma Proforma
Armada Parkstone Combined Armada Parkstone Combined
Shares/Par Shares/Par Shares/Par Security Description Market Value Market Value Market Value
---------- ---------- ---------- -------------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
- 2,205.00 2,205.00 BCE INC.-ADR - 149,113.13 149,113.13
5,100.00 10,350.00 15,450.00 ANNUITY & LIFE 145,350.00 294,975.00 440,325.00
31.00 58.00 89.00 OPEN TV CORP CL. A 2,394.75 4,480.50 6,875.25
12,200.00 24,650.00 36,850.00 SCOTTISH ANNUITY & LIFE 103,700.00 209,525.00 313,225.00
12,400.00 25,000.00 37,400.00 ASM INTER'L N.V. 201,500.00 406,250.00 607,750.00
6,000.00 12,100.00 18,100.00 ACT MANUFACTURING INC 183,375.00 369,806.25 553,181.25
3,500.00 7,050.00 10,550.00 ADELPHIA BUSINESS SOLUT. 109,375.00 220,312.50 329,687.50
3,050.00 6,150.00 9,200.00 ADVANCED DIGITAL INFO. 137,059.38 276,365.63 413,425.01
550.00 1,100.00 1,650.00 AFFYMETRIX INC 53,900.00 107,800.00 161,700.00
617.00 1,288.00 1,905.00 BATM ADVANCED COMM 40,423.46 84,107.39 124,530.85
4,839.00 10,045.00 14,884.00 BOC GROUP 99,981.26 207,023.02 307,004.28
3,202.00 7,329.00 10,531.00 SMITHKLINE BEECHAM 42,877.53 97,818.99 140,696.52
4,509.00 10,307.00 14,816.00 BRITISH TELECOM PLC 90,677.17 207,169.61 297,846.78
950.00 1,900.00 2,850.00 ALLAIRE CORPORATION 144,281.25 288,562.50 432,843.75
3,500.00 7,200.00 10,700.00 ALLTEL CORPORATION 302,750.00 622,800.00 925,550.00
6,100.00 12,000.00 18,100.00 ALTERA CORPORATION 328,637.50 646,500.00 975,137.50
1,607.00 3,326.00 4,933.00 ENERGIS PLCCK 65,456.10 136,406.13 201,862.23
12,134.00 26,739.00 38,873.00 NATIONAL GRID CO 93,360.83 205,696.41 299,057.24
3,925.00 9,198.00 13,123.00 BASS 44,342.84 103,573.16 147,916.00
- 8,176.65 8,176.65 BPS BRITISH AEROSPACE PLC - 46,719.88 46,719.88
500,000.00 825,000.00 1,325,000.00 AMERICAN GREETINGS 456,250.00 752,812.50 1,209,062.50
5,968.00 12,125.00 18,093.00 AMERICAN INT'L GROUP 616,196.00 1,251,906.25 1,868,102.25
8,076.00 18,230.00 26,306.00 ALLIED ZURICH 97,949.57 221,391.50 319,341.07
5,610.00 12,613.00 18,223.00 COMPASS GROUP 68,130.39 152,975.80 221,106.19
</TABLE>
79
<PAGE> 300
<TABLE>
<CAPTION>
Proforma Proforma
Armada Parkstone Combined Armada Parkstone Combined
Shares/Par Shares/Par Shares/Par Security Description Market Value Market Value Market Value
---------- ---------- ---------- -------------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
4,400.00 5,900.00 10,300.00 ANALOG DEVICES INC 252,725.00 338,881.25 591,606.25
1,600.00 3,200.00 4,800.00 ANCHOR GAMING 88,100.00 176,200.00 264,300.00
1,550.00 3,150.00 4,700.00 ANCOR COMMUNICATIONS 93,968.75 190,968.75 284,937.50
3,300.00 6,700.00 10,000.00 ANTEC CORPORATION 184,800.00 375,200.00 560,000.00
100,000.00 - 100,000.00 ARCHER DANIELS 98,125.00 - 98,125.00
1,545.00 3,150.00 4,695.00 COLT TELECOM GROUP 58,437.44 118,852.97 177,290.41
225,000.00 450,000.00 675,000.00 ARROW ELECTRONIC 199,125.00 398,250.00 597,375.00
1,150.00 2,300.00 3,450.00 ARTHROCARE CORPORATION 69,575.00 139,150.00 208,725.00
4,950.00 10,000.00 14,950.00 ATLAS AIR INC 124,678.13 251,875.00 376,553.13
6,050.00 12,200.00 18,250.00 AUDIOVOX CORP. 179,987.50 362,950.00 542,937.50
4,604.00 10,267.00 14,871.00 LOGICA 115,909.27 257,629.98 373,539.25
5,500.00 11,100.00 16,600.00 AUTO DATA PROCESS 271,562.50 548,062.50 819,625.00
4,900.00 9,900.00 14,800.00 AVERY DENNISON CORP. 290,937.50 587,812.50 878,750.00
1,552.00 1,099.00 2,651.00 BCE INC. 104,954.00 74,045.24 178,999.24
4,500.00 9,100.00 13,600.00 BJ'S WHOLESALE CLUB INC 168,187.50 340,112.50 508,300.00
5,716.00 12,994.00 18,710.00 PEARSON 136,825.95 310,019.56 446,845.51
8,010.00 17,564.00 25,574.00 BANK OF IRELAND 66,057.99 144,840.45 210,898.44
12,265.00 26,705.00 38,970.00 BRITISH PETROLEUM CO PLC 125,041.07 272,424.49 397,465.56
18,809.00 40,429.00 59,238.00 SIEBE PLC 87,763.31 186,734.87 274,498.18
3,182.00 7,379.00 10,561.00 STANDARD CHARTERED BANK 43,270.73 100,014.16 143,284.89
6,800.00 14,700.00 21,500.00 QXL PLC 47,267.50 101,845.30 149,112.80
8,494.00 17,120.00 25,614.00 THUS PLC 144A 53,206.26 107,159.51 160,365.77
- 2,582.50 2,582.50 BPS BRITISH AERO LOAN STK - 3,876.64 3,876.64
- 19,068.99 19,068.99 BPS MARCONI PLC - 243,425.26 243,425.26
4,000.00 8,100.00 12,100.00 BIOMATRIX INC 94,000.00 190,350.00 284,350.00
4,677.00 8,264.00 12,941.00 WPP GROUP 68,794.81 122,275.78 191,070.59
30,000.00 300,000.00 330,000.00 BRADLEY OPER LTD PRTNSHP 28,536.72 285,367.20 313,903.92
3,100.00 4,000.00 7,100.00 BRISTOL-MYERS SQUIBB CO 226,493.75 292,250.00 518,743.75
300,000.00 785,000.00 1,085,000.00 BRUNSWICK CORP 6.75% 284,250.00 743,787.50 1,028,037.50
2,800.00 5,650.00 8,450.00 BURR-BROWN CORP 124,075.00 250,365.63 374,440.63
4,100.00 7,550.00 11,650.00 BUSINESS OBJECTS-ADR 362,850.00 668,175.00 1,031,025.00
2,200.00 4,450.00 6,650.00 C-COR.NET CORPORATION 112,337.50 227,228.13 339,565.63
5,500.00 11,100.00 16,600.00 CTS CORP. 441,031.25 890,081.25 1,331,112.50
</TABLE>
80
<PAGE> 301
<TABLE>
<CAPTION>
Proforma Proforma
Armada Parkstone Combined Armada Parkstone Combined
Shares/Par Shares/Par Shares/Par Security Description Market Value Market Value Market Value
---------- ---------- ---------- -------------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
1,850.00 3,700.00 5,550.00 CAL DIVE INTERNATIONAL 67,293.75 134,587.50 201,881.25
2,700.00 5,450.00 8,150.00 CALPINE CORPORATION 159,300.00 321,550.00 480,850.00
4,100.00 8,300.00 12,400.00 CARDINAL HEALTH INC 214,481.25 434,193.75 648,675.00
160,000.00 350,000.00 510,000.00 CHAMP 6.71% SER 1997-2 A5 155,866.40 340,957.75 496,824.15
26.00 - 26.00 CHARTERED SEMICONDUCT ADR 1,384.50 - 1,384.50
5,250.00 10,600.00 15,850.00 CHEAP TICKETS INC. 87,609.38 176,887.50 264,496.88
4,200.00 8,500.00 12,700.00 CHEVRON CORPORATION 371,962.50 752,781.25 1,124,743.75
4,250.00 8,600.00 12,850.00 CHILDREN'S PLACE STORES 104,921.88 212,312.50 317,234.38
3,450.00 6,950.00 10,400.00 CHIREX CORP 119,887.50 241,512.50 361,400.00
2,350.00 4,750.00 7,100.00 CHURCH AND DWIGHT INC 65,800.00 133,000.00 198,800.00
12,200.00 44,400.00 56,600.00 CISCO SYSTEMS INC 1,088,087.50 3,959,925.00 5,048,012.50
2,550.00 5,150.00 7,700.00 CITADEL COMMUNICATIONS 127,659.38 257,821.88 385,481.26
300,000.00 765,000.00 1,065,000.00 CITICORP 280,500.00 715,275.00 995,775.00
75,000.00 - 75,000.00 CITICORP 75,000.00 - 75,000.00
2,450.00 4,950.00 7,400.00 CLARIFY INC. 228,347.66 461,355.47 689,703.13
5,100.00 10,500.00 15,600.00 COASTAL CORP 179,775.00 370,125.00 549,900.00
4,600.00 9,300.00 13,900.00 COCA-COLA COMPANY 309,637.50 626,006.25 935,643.75
1,850.00 3,750.00 5,600.00 COLORADO MEDTECH INC 23,471.88 47,578.13 71,050.01
11,600.00 23,900.00 35,500.00 COMCAST SPECIAL A 524,175.00 1,079,981.25 1,604,156.25
2,800.00 6,100.00 8,900.00 COMERICA INC 148,400.00 323,300.00 471,700.00
350,000.00 1,000,000.00 1,350,000.00 COMMERCIAL NET 343,437.50 981,250.00 1,324,687.50
8,750.00 17,700.00 26,450.00 COMMSCOPE INC. 368,593.75 745,612.50 1,114,206.25
470,000.00 1,275,000.00 1,745,000.00 COMPUTER ASSOCIATES INTL 453,550.00 1,230,375.00 1,683,925.00
8,100.00 17,700.00 25,800.00 CONCORD EFS INC 214,650.00 469,050.00 683,700.00
8,000.00 16,300.00 24,300.00 CONOCO INC CLASS B 209,500.00 426,856.25 636,356.25
2,000.00 4,050.00 6,050.00 CORPORATE EXECUTIVE BOARD 93,000.00 188,325.00 281,325.00
3,500.00 7,200.00 10,700.00 COSTCO WHOLESALE CORP 320,906.25 660,150.00 981,056.25
500,000.00 2,065,000.00 2,565,000.00 COUNTRYWIDE HOME 488,750.00 2,018,537.50 2,507,287.50
2,250.00 4,550.00 6,800.00 CREDENCE SYSTEMS CORP 130,359.38 263,615.63 393,975.01
410,000.00 1,200,000.00 1,610,000.00 FIRST BOSTON MTG SECS 403,144.80 1,179,936.00 1,583,080.80
4,250.00 8,550.00 12,800.00 CULLEN FROST BANKERS 121,125.00 243,675.00 364,800.00
200,000.00 650,000.00 850,000.00 CUMMINS ENGINE, (6.45%) 189,000.00 614,250.00 803,250.00
5,650.00 11,450.00 17,100.00 CUMULUS MEDIA INC. 226,000.00 458,000.00 684,000.00
</TABLE>
81
<PAGE> 302
<TABLE>
<CAPTION>
Proforma Proforma
Armada Parkstone Combined Armada Parkstone Combined
Shares/Par Shares/Par Shares/Par Security Description Market Value Market Value Market Value
---------- ---------- ---------- -------------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
3,950.00 7,950.00 11,900.00 CYMER INC. 158,000.00 318,000.00 476,000.00
5,350.00 10,800.00 16,150.00 DII GROUP INC 337,718.75 681,750.00 1,019,468.75
75,000.00 - 75,000.00 DAIMLER CHRYSLER 74,906.25 - 74,906.25
7,500.00 15,100.00 22,600.00 DATASCOPE CORP 278,203.13 560,115.63 838,318.76
5,100.00 10,500.00 15,600.00 DAYTON HUDSON CORP 359,868.75 740,906.25 1,100,775.00
2,100.00 4,200.00 6,300.00 DIAMOND TECH 110,250.00 220,500.00 330,750.00
1,100.00 2,250.00 3,350.00 DIGEX INC 36,850.00 75,375.00 112,225.00
3,650.00 7,350.00 11,000.00 DIGITAL RIVER. 111,325.00 224,175.00 335,500.00
4,400.00 8,900.00 13,300.00 EMC CORPORATION 367,675.00 743,706.25 1,111,381.25
250,000.00 - 250,000.00 EOP OPERATING LTD (6.5%) 237,812.50 - 237,812.50
974.00 - 974.00 EBOOKERS.COM ADR 22,402.00 - 22,402.00
1,950.00 3,900.00 5,850.00 EGAINS COMMUNICATION 81,900.00 163,800.00 245,700.00
4,600.00 9,300.00 13,900.00 EMERSON ELECTRIC CO 262,200.00 530,100.00 792,300.00
2,400.00 4,850.00 7,250.00 ENZON INC 81,000.00 163,687.50 244,687.50
2,814.00 5,990.00 8,804.00 ERICSSON L M ADR 135,599.63 288,643.13 424,242.76
3,950.00 7,950.00 11,900.00 EXAR CORPORATION 192,068.75 386,568.75 578,637.50
440,000.00 1,050,000.00 1,490,000.00 EXCEL REALTY TR INC 430,650.00 1,027,687.50 1,458,337.50
4,800.00 9,700.00 14,500.00 EXPEDITORS INTL WASH INC 195,600.00 395,275.00 590,875.00
7,100.00 14,400.00 21,500.00 EXXON CORP 563,118.75 1,142,100.00 1,705,218.75
3,100.00 6,300.00 9,400.00 F.Y.I. INC. 99,200.00 201,600.00 300,800.00
3,550.00 7,200.00 10,750.00 FAIRCHILD SEMICON INT'L-A 99,400.00 201,600.00 301,000.00
287,729.06 - 287,729.06 FHLMC POOL #C18271 281,974.48 - 281,974.48
7,100.00 14,600.00 21,700.00 FREDDIE MAC 350,562.50 720,875.00 1,071,437.50
7,100.00 13,100.00 20,200.00 FANNIE MAE 473,037.50 872,787.50 1,345,825.00
425,000.00 1,100,000.00 1,525,000.00 FEDERAL RLTY INVS TRST 420,269.75 1,087,757.00 1,508,026.75
780,575.42 2,932,416.30 3,712,991.72 FNMA (POOL #376750) 765,939.63 2,868,255.03 3,634,194.66
816,065.24 - 816,065.24 FNMA POOL # 437810 757,214.25 - 757,214.25
196,890.37 492,225.89 689,116.26 FNMA POOL # 437972 182,691.51 456,692.10 639,383.61
486,549.96 - 486,549.96 FNMA POOL # 437979 451,310.10 - 451,310.10
1,804,653.60 - 1,804,653.60 FNMA POOL #440148 1,722,182.63 - 1,722,182.63
519,180.18 1,656,005.76 2,175,185.94 FNMA POOL # 453931 495,329.04 1,579,928.86 2,075,257.90
1,328,194.98 - 1,328,194.98 FNMA POOL #484693 1,232,312.58 - 1,232,312.58
- 3,823,086.25 3,823,086.25 FNMA 484731 6.0% 03/01/29 - 3,547,097.65 3,547,097.65
</TABLE>
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<TABLE>
<CAPTION>
Proforma Proforma
Armada Parkstone Combined Armada Parkstone Combined
Shares/Par Shares/Par Shares/Par Security Description Market Value Market Value Market Value
---------- ---------- ---------- -------------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
177.46 390.82 568.28 FNMA POOL #513370 169.36 372.87 542.23
310,000.00 600,000.00 910,000.00 FIRST CHICAGO CORP 309,225.00 598,500.00 907,725.00
300,000.00 - 300,000.00 FIRST MD BANCORP 7.20% 295,500.00 - 295,500.00
400,000.00 1,180,000.00 1,580,000.00 FIRST 99 - A A4 391,930.00 1,156,193.50 1,548,123.50
340,000.00 800,000.00 1,140,000.00 FIRST UNION CAP 7.95% 331,075.00 779,000.00 1,110,075.00
325,000.00 705,000.00 1,030,000.00 FIRST UNION CORP 322,968.75 700,593.75 1,023,562.50
135,000.00 290,000.00 425,000.00 FLAGSHIP 99-2 A3 134,704.76 289,365.77 424,070.53
275,000.00 - 275,000.00 FORD MOTOR CREDIT 271,906.25 - 271,906.25
320,000.00 800,000.00 1,120,000.00 FORD MOTOR CREDIT 322,265.28 805,000.00 1,127,265.28
5,000.00 10,100.00 15,100.00 FOREST OIL CORP 57,187.50 115,518.75 172,706.25
290,000.00 840,000.00 1,130,000.00 GEHEL 99-1 A4 6.185% 281,922.05 816,601.80 1,098,523.85
158,778.62 822,927.23 981,705.85 GECMS99 -1 A1 (6.50%) 145,977.10 752,890.53 898,867.63
- 633,712.42 633,712.42 GNMA 345871 6.5% 09/15/23 - 603,408.29 603,408.29
- 692,384.69 692,384.69 GNMA 374650 6.5% 12/15/23 - 659,274.85 659,274.85
1,300,002.69 4,500,002.01 5,800,004.70 GNMA POOL# 7.50 1,295,533.93 4,493,513.01 5,789,046.94
236,282.13 - 236,282.13 GNMA POOL#472939 224,983.12 - 224,983.12
155,000.00 335,000.00 490,000.00 GNMA POOL# 481632 154,756.65 334,685.10 489,441.75
1,186,690.27 - 1,186,690.27 GNMA POOL# 498651 1,129,942.74 - 1,129,942.74
928,577.61 - 928,577.61 GNMA POOL#510422 927,704.75 - 927,704.75
392,005.35 3,436,637.38 3,828,642.73 GNMA POOL# 780213 391,879.91 3,435,537.66 3,827,417.57
6,100.00 12,400.00 18,500.00 GTE CORP 445,300.00 905,200.00 1,350,500.00
300,000.00 485,000.00 785,000.00 GABLES REALTY 283,381.20 458,132.94 741,514.14
6,600.00 12,700.00 19,300.00 GAP INC 267,300.00 514,350.00 781,650.00
6,150.00 12,450.00 18,600.00 GELTEX PHARMACEUTICALS 65,343.75 132,281.25 197,625.00
5,700.00 11,500.00 17,200.00 GENERAL ELECTRIC CO 741,000.00 1,495,000.00 2,236,000.00
8,379.00 - 8,379.00 GENERAL ELECTRIC 128,871.65 - 128,871.65
50,000.00 - 50,000.00 GMAC 52,750.00 - 52,750.00
8,950.00 18,050.00 27,000.00 GENTEX CORP 167,253.13 337,309.38 504,562.51
6,000.00 12,200.00 18,200.00 GILLETTE COMPANY 241,125.00 490,287.50 731,412.50
290,000.00 610,000.00 900,000.00 GREENPOINT MAN HOUSING 273,361.25 575,001.25 848,362.50
348.00 753.00 1,101.00 ALTRAN TECHNOLOGIES SA 165,876.98 358,244.32 524,121.30
1,060.00 2,326.00 3,386.00 AXA-UAP 143,183.02 313,597.66 456,780.68
155,000.00 390,000.00 545,000.00 HSBC HOLDING PLC 155,387.50 391,739.01 547,126.51
</TABLE>
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<TABLE>
<CAPTION>
Proforma Proforma
Armada Parkstone Combined Armada Parkstone Combined
Shares/Par Shares/Par Shares/Par Security Description Market Value Market Value Market Value
---------- ---------- ---------- -------------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
1,176.00 2,598.00 3,774.00 ASSIC GENERALI 33,929.58 74,814.83 108,744.41
175,000.00 - 175,000.00 HALLIBURTON CO 157,281.25 - 157,281.25
4,900.00 10,100.00 15,000.00 HARLEY DAVIDSON INC 298,900.00 616,100.00 915,000.00
501.00 1,110.00 1,611.00 CASTORAMA 130,395.47 288,353.49 418,748.96
3,350.00 6,800.00 10,150.00 HELIX TECHNOLOGY CORP. 135,622.66 275,293.75 410,916.41
452.00 977.00 1,429.00 CREDIT SUISSE, REG 84,753.56 182,702.00 267,455.56
2,500.00 5,100.00 7,600.00 HEWLETT PACKARD CO 237,187.50 483,862.50 721,050.00
976.00 2,156.00 3,132.00 BAYER VEREINSBANK 60,650.67 133,724.81 194,375.48
7,200.00 14,525.00 21,725.00 HOME DEPOT 569,250.00 1,148,382.81 1,717,632.81
11,050.00 22,300.00 33,350.00 HOOPER HOLMES INC 261,056.25 526,837.50 787,893.75
8,700.00 17,550.00 26,250.00 ICG COMMUNICATIONS INC 164,756.25 332,353.13 497,109.38
560,000.00 1,600,000.00 2,160,000.00 IMCHE 1997-7 A5 553,602.00 1,581,720.00 2,135,322.00
6,350.00 12,800.00 19,150.00 IMPERIAL BANCORP 152,400.00 307,200.00 459,600.00
1,131.00 2,496.00 3,627.00 MAYR-MELNHOF KARTON AG 47,235.45 104,046.49 151,281.94
1,350.00 2,700.00 4,050.00 INFOSPACE.COM 137,278.13 274,556.25 411,834.38
3,450.00 7,000.00 10,450.00 INTEGRATED DEVICE TECH 81,290.63 164,937.50 246,228.13
6,600.00 13,400.00 20,000.00 INTEL CORP 506,137.50 1,027,612.50 1,533,750.00
3,450.00 7,000.00 10,450.00 INTERMEDIA COMMUNICATIONS 96,168.75 195,125.00 291,293.75
4,000.00 8,100.00 12,100.00 IBM CORPORATION 412,250.00 834,806.25 1,247,056.25
5,400.00 10,700.00 16,100.00 INTERNATIONAL PAPER CO 281,812.50 558,406.25 840,218.75
358.00 752.00 1,110.00 INTERNET INITI JAPAN ADR 34,194.59 71,827.75 106,022.34
37.00 79.00 116.00 NESTLE SA 66,742.72 142,121.07 208,863.79
7,950.00 16,050.00 24,000.00 JACK IN THE BOX INC 167,446.88 338,053.13 505,500.01
1,979.00 4,371.00 6,350.00 AVENTIS 122,779.53 270,668.96 393,448.49
11.00 20.00 31.00 ROCHE HOLDINGS 133,114.84 241,375.39 374,490.23
266.00 519.00 785.00 CIE DE ST GOBAIN 45,349.60 88,315.43 133,665.03
3,300.00 6,600.00 9,900.00 JOHNSON & JOHNSON 342,375.00 684,750.00 1,027,125.00
45.00 98.00 143.00 SWISS REINSURANCE,REG 92,036.43 199,895.28 291,931.71
1,737.00 1,953.00 3,690.00 SVENSKA CELLULOSA AB-A SH 48,006.00 53,988.13 101,994.13
- 1,692.00 1,692.00 SEK SVENSKA CELLULOSA AB - 47,071.68 47,071.68
14,188.00 21,054.00 35,242.00 TIM 111,640.26 165,352.88 276,993.14
1,200.00 2,588.45 3,788.45 TOTAL FINA 159,914.98 344,290.23 504,205.21
6,000.00 12,100.00 18,100.00 KING PHARMACEUTICALS INC. 276,750.00 558,112.50 834,862.50
</TABLE>
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<TABLE>
<CAPTION>
Proforma Proforma
Armada Parkstone Combined Armada Parkstone Combined
Shares/Par Shares/Par Shares/Par Security Description Market Value Market Value Market Value
---------- ---------- ---------- -------------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
73.00 155.00 228.00 NOVARTIS, REGISTERED 114,059.62 241,529.39 355,589.01
1,121.00 2,476.00 3,597.00 UPM - KYMMENE 37,544.71 82,769.68 120,314.39
1,918.00 4,124.00 6,042.00 ING GROEP 108,062.96 231,912.61 339,975.57
1,107.00 2,378.00 3,485.00 DEUTSCHE TELEKOM 63,486.76 136,120.91 199,607.67
1,074.00 2,328.00 3,402.00 FRANCE TELECOM 124,705.23 269,799.31 394,504.54
2,303.00 5,002.00 7,305.00 ROYAL DUTCH PETRO 135,748.46 294,280.92 430,029.38
278.00 586.00 864.00 ALLIANZ 81,539.79 171,553.61 253,093.40
1,531.00 3,506.00 5,037.00 KONINKLIJKE AHOLD NV 48,820.79 111,588.37 160,409.16
6,385.00 13,827.00 20,212.00 BULGARI SPA (BUG LI) 49,275.09 106,505.47 155,780.56
9,888.00 21,782.00 31,670.00 TELECOM ITALIA SPA 109,126.66 239,937.21 349,063.87
4,600.00 8,700.00 13,300.00 LEXMARK INT'L GROUP INC 381,800.00 722,100.00 1,103,900.00
2,400.00 4,900.00 7,300.00 LILLY (ELI) & CO 172,200.00 351,575.00 523,775.00
1,050.00 2,354.00 3,404.00 HEINEKEN 50,843.52 113,770.65 164,614.17
3,000.00 6,100.00 9,100.00 LOUIS DREYFUS NAT. GAS 54,000.00 109,800.00 163,800.00
406.00 862.00 1,268.00 UBS AG - REGISTERED 111,313.50 235,699.29 347,012.79
250,000.00 - 250,000.00 LUBRIZOL 223,750.00 - 223,750.00
5,400.00 24,300.00 29,700.00 LUCENT TECHNOLOGIES INC 394,537.50 1,775,418.75 2,169,956.25
502.00 1,022.00 1,524.00 EQUANT 48,616.09 98,788.11 147,404.20
8,800.00 24,200.00 33,000.00 MBNA CORP 222,200.00 611,050.00 833,250.00
5,700.00 11,800.00 17,500.00 MCI WORLDCOM INC 471,318.75 975,712.50 1,447,031.25
2,240.00 4,909.00 7,149.00 SONERA 92,670.79 202,705.41 295,376.20
3,750.00 7,600.00 11,350.00 MACROVISION INC 239,531.25 485,450.00 724,981.25
2,283.00 4,990.00 7,273.00 WOLTERS KLUWER - CVA 68,977.56 150,480.39 219,457.95
80.00 177.00 257.00 ADECCO 51,279.47 113,150.37 164,429.84
827.00 1,750.00 2,577.00 VIVENDI 66,325.07 140,083.73 206,408.80
3,572.00 7,516.00 11,088.00 HENNES & MAURITZ, CL B 113,423.50 238,714.46 352,137.96
1,021.00 2,248.00 3,269.00 ST MICROELECTRONICS 139,047.95 305,571.33 444,619.28
1,788.00 3,732.00 5,520.00 SIEMENS 180,553.81 376,147.55 556,701.36
5,416.00 11,870.36 17,286.36 TELEFONICA 112,988.51 247,170.68 360,159.19
1,473.00 3,261.00 4,734.00 LINDE AG 73,703.74 162,531.87 236,235.61
1,688.00 3,676.00 5,364.00 DEUTSCHE BANK 111,451.82 242,252.17 353,703.99
3,207.00 6,158.00 9,365.00 VIAG 53,057.63 101,687.15 154,744.78
2,600.00 5,250.00 7,850.00 MASTEC INC 107,087.50 216,234.38 323,321.88
</TABLE>
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<TABLE>
<CAPTION>
Proforma Proforma
Armada Parkstone Combined Armada Parkstone Combined
Shares/Par Shares/Par Shares/Par Security Description Market Value Market Value Market Value
---------- ---------- ---------- -------------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
974.00 2,100.00 3,074.00 MANNESMANN 202,802.70 436,426.91 639,229.61
1,086.00 2,320.00 3,406.00 EPCOS AG 66,828.96 142,495.24 209,324.20
224.00 457.00 681.00 THOMSON MULTIMEDIA 9,716.76 19,786.42 29,503.18
237.00 431.00 668.00 TERRA NETWORKS SA 8,179.12 14,846.12 23,025.24
114.00 - 114.00 TELEFONICA - NEW 1,903.30 - 1,903.30
7,000.00 14,200.00 21,200.00 MEDTRONIC INC 272,125.00 552,025.00 824,150.00
5,600.00 11,500.00 17,100.00 MERCK & CO 439,600.00 902,750.00 1,342,350.00
3,750.00 7,550.00 11,300.00 MERCURY COMPUTER SYSTEMS 213,984.38 430,821.88 644,806.26
2,250.00 4,500.00 6,750.00 MERCURY INTERACTIVE 187,031.25 374,062.50 561,093.75
4,650.00 9,400.00 14,050.00 METRIS COMPANIES 147,056.25 297,275.00 444,331.25
9,100.00 18,600.00 27,700.00 MICROSOFT CORP 828,526.56 1,693,471.88 2,521,998.44
750.00 1,550.00 2,300.00 MICROSTRATEGY INC. 91,875.00 189,875.00 281,750.00
2,000.00 4,000.00 6,000.00 MICROMUSE INC 228,750.00 457,500.00 686,250.00
850.00 1,750.00 2,600.00 MILLENNIUM PHARMACEUTICAL 82,742.19 170,351.56 253,093.75
1,758.00 4,265.00 6,023.00 BANK OF TOKYO-MITS 25,446.78 61,605.30 87,052.08
35,153.00 64,529.00 99,682.00 CHINA TELECOM (HONG KONG) 188,756.13 346,472.95 535,229.08
15,330.00 30,006.00 45,336.00 NATSTEEL ELECTRONICS LTD 63,399.88 124,133.66 187,533.54
- 1.00 1.00 YEN YAHOO JAPAN CORP. - 704,604.18 704,604.18
9,250.00 18,700.00 27,950.00 MONACO COACH CORPORATION 198,875.00 402,050.00 600,925.00
300,000.00 - 300,000.00 MONSANTO CO (144A) 292,565.40 - 292,565.40
5,900.00 12,000.00 17,900.00 MONSANTO COMPANY 248,906.25 506,250.00 755,156.25
748.00 1,515.00 2,263.00 BENESSE CORPORATION 179,572.82 362,941.61 542,514.43
21,602.00 45,539.00 67,141.00 JOHNSON ELECTRIC HLDGS 154,379.47 325,427.92 479,807.39
10.00 20.00 30.00 NTT MOBILE 351,083.65 700,689.71 1,051,773.36
109.00 199.00 308.00 FANCL CORPORATION 38,695.69 70,497.61 109,193.30
2,392.00 5,810.00 8,202.00 SINGAPORE PRESS HLDGS 44,836.66 108,938.99 153,775.65
6,452.00 13,645.00 20,097.00 HSBC HLDGS - NEW (HKD) 85,572.50 180,962.72 266,535.22
1,900.00 3,800.00 5,700.00 MORGAN J.P. & COMPANY 249,850.00 499,700.00 749,550.00
550,000.00 1,500,000.00 2,050,000.00 MSC 99-FNV1 A2 (6.53%) 521,380.75 1,421,947.50 1,943,328.25
3,105.00 20,861.86 23,966.86 DBS GROUP HOLDINGS LTD 40,279.08 270,711.19 310,990.27
16,960.00 42,099.00 59,059.00 LI & FUNG LTD 38,982.23 96,758.33 135,740.56
320,000.00 645,000.00 965,000.00 MOTOROLA INC. (7.50%) 317,600.00 640,162.50 957,762.50
6,000.00 - 6,000.00 DBS GROUP HOLDINGS LTD. 77,833.98 - 77,833.98
</TABLE>
86
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<TABLE>
<CAPTION>
Proforma Proforma
Armada Parkstone Combined Armada Parkstone Combined
Shares/Par Shares/Par Shares/Par Security Description Market Value Market Value Market Value
---------- ---------- ---------- -------------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
4,750.00 9,550.00 14,300.00 NATL COMPUTER SYSTEMS 182,281.25 366,481.25 548,762.50
2,119.00 4,437.00 6,556.00 FANUC 176,635.28 369,080.48 545,715.76
2,219.00 5,706.00 7,925.00 FUJITSU 78,775.91 202,140.37 280,916.28
5,100.00 10,300.00 15,400.00 NATIONAL INFO CONSORTIUM 134,512.50 271,662.50 406,175.00
7,750.00 15,650.00 23,400.00 NETOBJECTS INC. 105,109.38 212,253.13 317,362.51
13,550.00 27,350.00 40,900.00 NETSILICON INC 179,537.50 362,387.50 541,925.00
69.00 139.00 208.00 HIKARI TSUSHIN 108,267.14 217,644.40 325,911.54
283.00 1,998.00 2,281.00 HONDA MOTOR 11,656.37 82,121.62 93,777.99
380,000.00 1,000,000.00 1,380,000.00 NEW CENTURY HOME EQUITY 375,411.50 987,925.00 1,363,336.50
299,950.83 769,873.79 1,069,824.62 NEW CENTURY EQUITY TRUST 293,830.33 754,164.52 1,047,994.85
285,000.00 670,000.00 955,000.00 NEW CENTURY HOME EQUITY LN 284,020.46 667,697.21 951,717.67
7,776.00 16,299.00 24,075.00 HUTCHISON WHAMPOA 95,622.97 200,420.75 296,043.72
10,995.00 21,998.00 32,993.00 ITOCHU CORP 65,558.11 130,887.90 196,446.01
3,150.00 6,350.00 9,500.00 NICOR INC 109,265.63 220,265.63 329,531.26
1,284.00 2,789.00 4,073.00 NOKIA ADR - CLASS A 177,432.75 385,404.94 562,837.69
15,792.00 31,180.00 46,972.00 MARUBENI CORP 61,483.02 121,137.70 182,620.72
6,449.00 13,573.00 20,022.00 NATL AUSTRALIA BANK 92,988.82 195,858.09 288,846.91
207.00 926.00 1,133.00 NINTENDO (7974.T) 34,530.45 154,144.49 188,674.94
6,023.00 12,265.00 18,288.00 NIKKO SECURITIES 75,014.32 152,434.75 227,449.07
3,352.00 8,959.00 12,311.00 NEC 78,400.71 209,103.18 287,503.89
1.00 3.00 4.00 NTT 17,946.45 53,726.07 71,672.52
2,204.00 4,410.00 6,614.00 NIHON UNISYS 84,511.52 168,743.89 253,255.41
8,850.00 17,850.00 26,700.00 NOVADIGM, INC. 153,768.75 310,143.75 463,912.50
462.00 997.00 1,459.00 SMC 81,644.01 175,817.73 257,461.74
675.00 579.00 1,254.00 SOFTBANK CORP 487,864.08 417,598.35 905,462.43
93.00 - 93.00 SOFTBANK CORP 67,216.83 - 67,216.83
3,086.00 5,214.00 8,300.00 SANWA BANK 37,527.12 63,271.11 100,798.23
392.00 2,241.00 2,633.00 SEVEN ELEVEN 63,814.85 364,051.36 427,866.21
11,511.00 24,174.00 35,685.00 SINGAPORE AIRLINES 116,445.70 244,621.21 361,066.91
3,300.00 6,600.00 9,900.00 OMNICOM GROUP 290,812.50 581,625.00 872,437.50
1,213.00 2,679.00 3,892.00 SONY CORP 224,827.89 495,504.08 720,331.97
9,150.00 18,450.00 27,600.00 ONLINE RESOURCES & COMM. 112,087.50 226,012.50 338,100.00
4,800.00 9,700.00 14,500.00 ONYX SOFTWARE CORP 154,800.00 312,825.00 467,625.00
</TABLE>
87
<PAGE> 308
<TABLE>
<CAPTION>
Proforma Proforma
Armada Parkstone Combined Armada Parkstone Combined
Shares/Par Shares/Par Shares/Par Security Description Market Value Market Value Market Value
---------- ---------- ---------- -------------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
1,350.00 2,700.00 4,050.00 OPTICAL COATING LABS 265,612.50 531,225.00 796,837.50
5,950.00 12,050.00 18,000.00 OPTIMAL ROBOTICS 193,375.00 391,625.00 585,000.00
1,950.00 4,562.00 6,512.00 SUMITOMO BANK 29,927.92 69,868.65 99,796.57
10,204.00 20,699.00 30,903.00 SWIRE PACIFIC A 58,601.39 118,867.35 177,468.74
1,873.00 6,031.00 7,904.00 TAKEDA CHEMICAL 110,576.25 355,302.73 465,878.98
320.00 708.00 1,028.00 TAKEFUJI CORP 45,817.40 101,157.67 146,975.07
1,337.00 3,794.00 5,131.00 TOKYO ELECTRONICS 138,984.01 393,564.49 532,548.50
229,778.13 1,748,311.86 1,978,089.99 PNC 98-7 A5 214,917.23 1,635,239.79 1,850,157.02
2,250.00 4,550.00 6,800.00 PRI AUTOMATION 106,593.75 215,556.25 322,150.00
250,000.00 440,000.00 690,000.00 PENTAIR INC SR NT 246,562.50 435,050.00 681,612.50
725.00 1,610.00 2,335.00 PHARMACIA & UPJOHN 39,648.44 88,046.88 127,695.32
11,800.00 37,700.00 49,500.00 PFIZER INC 427,012.50 1,364,268.75 1,791,281.25
3,127.00 6,616.00 9,743.00 POHANG IRON & STEEL ADR 112,376.56 237,762.50 350,139.06
799.00 1,522.00 2,321.00 POLSKI KONCERN NAFTO ADR 8,245.68 15,707.04 23,952.72
8,150.00 16,450.00 24,600.00 POLYMEDICA CORPORATION 142,625.00 287,875.00 430,500.00
3,150.00 6,400.00 9,550.00 PRIORITY HLTHCARE CORP B 77,962.50 158,400.00 236,362.50
4,800.00 9,800.00 14,600.00 PROCTER & GAMBLE CO 518,400.00 1,058,400.00 1,576,800.00
1,750.00 3,550.00 5,300.00 PROXIM CORP 98,000.00 198,800.00 296,800.00
400,000.00 950,000.00 1,350,000.00 PSSF 1998-C1 A1A3 379,102.00 900,367.25 1,279,469.25
285,000.00 665,000.00 950,000.00 PSSF 1999-NRF1 A2 266,654.55 629,612.03 896,266.58
1,600.00 3,250.00 4,850.00 QRS CORPORATION 93,000.00 188,906.25 281,906.25
1,700.00 3,200.00 4,900.00 QUALCOMM 615,931.25 1,159,400.00 1,775,331.25
3,200.00 6,500.00 9,700.00 REMEDY CORPORATION 111,600.00 226,687.50 338,287.50
19,400.00 39,200.00 58,600.00 REPUBLIC SECURITY FINL 155,806.25 314,825.00 470,631.25
270,000.00 770,000.00 1,040,000.00 RESIDENTIAL FDG MTG 248,112.26 707,579.41 955,691.67
527,277.33 2,654,241.90 3,181,519.23 RALI SER 1999 - QS3 CL A8 485,503.78 2,443,959.59 2,929,463.37
200,000.00 400,000.00 600,000.00 RESIDENTIAL ASSET SEC 199,583.40 399,166.80 598,750.20
6,550.00 13,200.00 19,750.00 REX STORES CORPORATION 244,396.88 492,525.00 736,921.88
9,648.40 19,728.00 29,376.40 SBC COMMUNICATIONS INC. 501,113.78 1,024,623.00 1,525,736.78
4,800.00 9,650.00 14,450.00 SBS TECHNOLOGIES, INC 162,000.00 325,687.50 487,687.50
12,600.00 25,450.00 38,050.00 SBA COMMUNICATIONS CORP 144,900.00 292,675.00 437,575.00
7,700.00 15,700.00 23,400.00 SAFEWAY INC 283,937.50 578,937.50 862,875.00
500,000.00 - 500,000.00 SASKATCHEWAN 520,625.00 - 520,625.00
</TABLE>
88
<PAGE> 309
<TABLE>
<CAPTION>
Proforma Proforma
Armada Parkstone Combined Armada Parkstone Combined
Shares/Par Shares/Par Shares/Par Security Description Market Value Market Value Market Value
---------- ---------- ---------- -------------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
5,550.00 11,200.00 16,750.00 SAWTEK INC 253,218.75 511,000.00 764,218.75
670,000.00 1,560,000.00 2,230,000.00 SAXON ASSET SEC TRUST 670,837.50 1,561,950.00 2,232,787.50
295,000.00 700,000.00 995,000.00 SAXON ASSET SEC TRUST 293,432.96 696,281.60 989,714.56
5,300.00 10,800.00 16,100.00 SCHERING PLOUGH CORP 270,962.50 552,150.00 823,112.50
3,800.00 7,700.00 11,500.00 SCHLUMBERGER LTD 228,237.50 462,481.25 690,718.75
5,100.00 10,300.00 15,400.00 SILICON STORAGE TECH 135,150.00 272,950.00 408,100.00
3,550.00 7,200.00 10,750.00 SOUTHWEST GAS CORP. 83,203.13 168,750.00 251,953.13
3,800.00 7,800.00 11,600.00 STATE STREET CORP 279,062.50 572,812.50 851,875.00
4,850.00 9,800.00 14,650.00 STATION CASINOS INC 116,400.00 235,200.00 351,600.00
300,000.00 1,050,000.00 1,350,000.00 SUSA PARTNERSHIP 272,250.00 952,875.00 1,225,125.00
5,200.00 10,500.00 15,700.00 SYMANTEC CORP 242,775.00 490,218.75 732,993.75
2,800.00 5,700.00 8,500.00 T-HQ, INC. 150,500.00 306,375.00 456,875.00
7,300.00 14,900.00 22,200.00 TJX COMPANY 191,168.75 390,193.75 581,362.50
2,885.00 6,354.00 9,239.00 TAIWAN SEMICONDUCTOR 103,319.06 227,552.63 330,871.69
7,100.00 14,600.00 21,700.00 TANDY CORP 544,037.50 1,118,725.00 1,662,762.50
608.00 1,291.00 1,899.00 TELEFONOS DE MEXICO, ADR 56,278.00 119,498.19 175,776.19
3,750.00 7,600.00 11,350.00 TESORO PETRO. CORP. 45,000.00 91,200.00 136,200.00
4,900.00 10,900.00 15,800.00 TEXAS INSTRS INC 470,706.25 1,047,081.25 1,517,787.50
5,000.00 10,400.00 15,400.00 TEXAS UTILITIES 179,062.50 372,450.00 551,512.50
7,550.00 15,250.00 22,800.00 THERAGENICS CORP 72,196.88 145,828.13 218,025.01
9,350.00 18,850.00 28,200.00 3DO COMPANY 88,532.81 178,485.94 267,018.75
7,300.00 14,900.00 22,200.00 TIME WARNER INC 450,318.75 919,143.75 1,369,462.50
5,600.00 11,300.00 16,900.00 TITAN CORP 151,550.00 305,806.25 457,356.25
8,550.00 17,300.00 25,850.00 TITAN PHARMACEUTICALS 122,906.25 248,687.50 371,593.75
7,000.00 14,100.00 21,100.00 TOO INC 129,500.00 260,850.00 390,350.00
2,300.00 4,650.00 6,950.00 TRANSWITCH CORP 108,100.00 218,550.00 326,650.00
5,850.00 11,800.00 17,650.00 TREX COMPANY INC. 150,637.50 303,850.00 454,487.50
13,800.00 28,400.00 42,200.00 TYCO INTERNATIONAL LTD 552,862.50 1,137,775.00 1,690,637.50
350,000.00 760,000.00 1,110,000.00 VENDE 99 - 3 1D 327,571.65 711,298.44 1,038,870.09
110,000.00 2,600,000.00 2,710,000.00 U.S. TREASURY BOND 106,426.10 2,515,526.00 2,621,952.10
1,355,000.00 2,300,000.00 3,655,000.00 U.S. TREASURY NOTE 1,372,655.65 2,331,418.00 3,704,073.65
150,000.00 500,000.00 650,000.00 U.S. TREASURY NOTE 150,658.50 502,375.00 653,033.50
925,000.00 2,040,000.00 2,965,000.00 U.S. TREASURY NOTE 916,231.00 2,020,660.80 2,936,891.80
</TABLE>
89
<PAGE> 310
<TABLE>
<CAPTION>
Proforma Proforma
Armada Parkstone Combined Armada Parkstone Combined
Shares/Par Shares/Par Shares/Par Security Description Market Value Market Value Market Value
---------- ---------- ---------- -------------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
3,600.00 7,500.00 11,100.00 UNITED TECHNOLOGIES 203,400.00 423,750.00 627,150.00
3,900.00 7,850.00 11,750.00 VALASSIS COMMUNICATIONS 153,562.50 309,093.75 462,656.25
300,000.00 600,000.00 900,000.00 VANDERBILT MTG FIN 299,781.30 599,562.60 899,343.90
4,250.00 8,600.00 12,850.00 VISUAL NETWORKS INC. 250,750.00 507,400.00 758,150.00
9,100.00 18,600.00 27,700.00 WAL-MART STORES INC 524,387.50 1,071,825.00 1,596,212.50
9,200.00 18,800.00 28,000.00 WALGREEN CO 267,950.00 547,550.00 815,500.00
4,000.00 8,200.00 12,200.00 WARNER LAMBERT CO 358,750.00 735,437.50 1,094,187.50
430,000.00 1,200,000.00 1,630,000.00 WORTHINGTON INDUSTRIES 416,562.50 1,165,500.00 1,582,062.50
5,000.00 10,050.00 15,050.00 ZORAN CORP 199,375.00 400,743.75 600,118.75
166,560.50 381,606.67 548,167.17 FSQ PREMIUM MM #483 166,560.50 381,606.67 548,167.17
- 13,187,000.00 13,187,000.00 Security Lending Collateral - 13,187,000.00 13,187,000.00
============= ============= ============== ============= ============= ==============
31,004,266.13 81,245,260.78 112,249,526.91 77,717,188.75 180,126,252.35 257,843,441.10
</TABLE>
90
<PAGE> 311
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1999
(Amounts in Thousands)
<TABLE>
<CAPTION>
Parkstone Armada
National Tax- National Tax-
Exempt Bond Exempt Bond Pro Forma
Fund Fund Combined
<S> <C> <C> <C>
TOTAL INVESTMENTS: 84,998 95,114 180,113
------ ------ -------
ASSETS
Cash 0 96 96
Accrued Income 1,591 1,605 3,196
Investment Securities Sold 0 0 0
Cap Shares Sold 0 0 0
Other Assets 11 91 102
TOTAL ASSETS: 86,600 96,907 183,507
------ ------ -------
LIABILITIES
Income Payable 278 334 612
Capital Gain Payable 0 0 0
Investment Securities Purchased 0 0 0
Capital Shares Redeemed Payable 12 68 80
Accrued Expense Payable 90 175 265
Other Payables 0 0 0
TOTAL LIABILITIES: 380 577 957
------ ------ -------
TOTAL NET ASSETS: 86,220 96,330 182,550
</TABLE>
91
<PAGE> 312
STATEMENT OF OPERATIONS
SIX MONTH PERIOD ENDING NOVEMBER 30, 1999
(Amounts in Thousands)
<TABLE>
<CAPTION>
Parkstone Armada
National Tax- National Tax-
Exempt Bond Exempt Bond Pro Forma
Fund Fund Combined
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest 2,296 2,165 4,461
------ ------ ------
TOTAL INCOME: 2,296 2,165 4,461
------ ------ ------
EXPENSES:
Administrator Fees 123 36 159
Investment Advisory Fees 327 279 606
Waiver of Investment Advisory Fees (92) (144) (236)
Transfer Agent Fees 26 24 50
Custodian Fees 10 10 20
Professional Fees (Audit + Legal) 7 2 9
Trustee (Directors) Fees 1 1 2
Registration Fees 11 6 17
12b-1 Fees 10 21 31
Shareholder Servicing Fees 0 2 2
Printing Expenses 7 3 10
Miscellaneous Expenses 1 4 5
TOTAL EXPENSES: (431) (244) (675)
------ ------ ------
NET INVESTMENT INCOME: 1,865 1,921 3,786
------ ------ ------
Net Realized Gains (Losses) on Investments (439) (437) (876)
Net Unrealized Appreciation (Depreciation)
of Investment Securities (2,347) (2,596) (4,943)
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS: (2,786) (3,033) (5,819)
------ ------ ------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS: (921) (1,112) (2,033)
------ ------ ------
</TABLE>
92
<PAGE> 313
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTH PERIOD ENDING NOVEMBER 30, 1999
(Amounts in Thousands)
<TABLE>
<CAPTION>
Parkstone Armada
National Tax- National Tax-
Exempt Bond Exempt Bond Pro Forma
Fund Fund Combined
<S> <C> <C> <C>
INVESTMENT ACTIVITIES:
Net Investment Income 1,865 1,921 3,786
Net Realized Gain (Loss) on Securities Sold (439) (437) (876)
Net Increase (Decrease) in Unrealized
Appreciation of Assets (2,347) (2,596) (4,943)
------- ------- -------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS: (921) (1,112) (2,033)
------- ------- -------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional/Class I Shares (1,753) (2,062) (3,815)
Investor A/Class A Shares (105) (92) (197)
Investor B/Class B Shares (7) (5) (12)
Realized Capital Gains
Institutional/Class I Shares - - -
Investor A/Class A Shares - - -
Investor B/Class B Shares - - -
TOTAL DISTRIBUTIONS: (1,865) (2,159) (4,024)
------- ------- -------
PAID-IN-CAPITAL:
Institutional/Class I Shares
Shares Issued 2,361 5,303 7,664
Shares Issued in Lieu of Cash Distributions 153 21 174
Shares Redeemed (15,147) (11,091) (26,238)
Net Institutional/Class I Share Transactions (12,633) (5,767) (18,400)
------- ------- -------
Investor A/Class A Shares
Shares Issued 43 925 968
Shares Issued in Lieu of Cash Distributions 82 82 164
Shares Redeemed (2,773) (797) (3,570)
Net Investor A/Class A Share Transactions (2,648) 210 (2,438)
------- ------- -------
Investor B/Class B Shares
Shares Issued - 35 35
Shares Issued in Lieu of Cash Distributions 3 5 8
Shares Redeemed (39) - (39)
Net Investor B/Class B Share Transactions (36) 40 4
------- ------- -------
INCREASE (DECREASE) IN NET ASSETS
FROM SHARE TRANSACTIONS: (15,317) (5,517) (20,834)
------- ------- -------
BEGINNING OF PERIOD: 104,323 105,118 209,441
------- ------- -------
END OF PERIOD: 86,220 96,330 182,550
------- ------- -------
</TABLE>
93
<PAGE> 314
PROFORMA COMBINED SCHEDULE OF INVESTMENTS
ARMADA NATIONAL TAX EXEMPT/
PARKSTONE NATIONAL TAX EXEMPT
AS OF 11/30/99
<TABLE>
<CAPTION>
Proforma Proforma
Armada Parkstone Combined Armada Parkstone Combined
Shares/Par Shares/Par Shares/Par Security Description Market Value Market Value Market Value
---------- ---------- ---------- -------------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
75,000.00 0.00 75,000.00 ALASKA STATE RB 75,750.00 0.00 75,750.00
70,000.00 0.00 70,000.00 ALASKA STATE, RB 70,962.50 0.00 70,962.50
0.00 1,000,000.00 1,000,000.00 ALBERQUERQUE 6.00 07/01/05 0.00 1,062,500.00 1,062,500.00
0.00 1,000,000.00 1,000,000.00 ALBERQUERQUE 6.00 07/01/07 0.00 1,067,500.00 1,067,500.00
1,000,000.00 0.00 1,000,000.00 AMERICAN PUB ENERGY AGY 891,250.00 0.00 891,250.00
1,100,000.00 0.00 1,100,000.00 ANCHORAGE ALASKA 1,031,250.00 0.00 1,031,250.00
200,000.00 0.00 200,000.00 ARKANSAS STATE, RB 200,500.00 0.00 200,500.00
0.00 1,300,000.00 1,300,000.00 BUFFALO NY 6.00 07/01/13 0.00 1,381,250.00 1,381,250.00
0.00 1,355,000.00 1,355,000.00 BURL, VT 6.00 07/01/07 0.00 1,437,993.75 1,437,993.75
1,000,000.00 0.00 1,000,000.00 BUTLER COUNTY, OH RB 1,066,250.00 0.00 1,066,250.00
0.00 1,560,000.00 1,560,000.00 CANYON, CO 8.125 07/30/03 0.00 1,741,350.00 1,741,350.00
1,000,000.00 0.00 1,000,000.00 CHARLESTON CNTY S C 1,071,250.00 0.00 1,071,250.00
0.00 2,095,000.00 2,095,000.00 CHEROKEE SC 5.50 03/01/05 0.00 2,170,943.75 2,170,943.75
0.00 795,000.00 795,000.00 CLEVELAND 8.00 12/01/01 0.00 851,643.75 851,643.75
0.00 820,000.00 820,000.00 CLEVELAND 0.00 12/01/12 0.00 395,650.00 395,650.00
0.00 820,000.00 820,000.00 CLEVELAND 0.00 12/01/15 0.00 319,800.00 319,800.00
0.00 815,000.00 815,000.00 CLEVELAND 0.00 12/01/16 0.00 296,456.25 296,456.25
995,000.00 0.00 995,000.00 CLEVELAND, OH RB 1,064,650.00 0.00 1,064,650.00
1,500,000.00 0.00 1,500,000.00 CLEVELAND, OH RB 1,546,875.00 0.00 1,546,875.00
2,245,000.00 0.00 2,245,000.00 COLUMBIA MO WTR & ELEC 2,334,800.00 0.00 2,334,800.00
2,000,000.00 0.00 2,000,000.00 CONNECTICUT STATE, GO 5.5 2,055,000.00 0.00 2,055,000.00
0.00 2,000,000.00 2,000,000.00 CONN ST 5.375 09/01/08 0.00 2,052,500.00 2,052,500.00
0.00 1,770,000.00 1,770,000.00 CONN WTR 6.375 06/01/05 0.00 1,920,450.00 1,920,450.00
0.00 2,500,000.00 2,500,000.00 CONROE IS. 5.50 02/15/15 0.00 2,468,750.00 2,468,750.00
1,310,000.00 0.00 1,310,000.00 RI CONVENTION CTR RB 1,378,775.00 0.00 1,378,775.00
260,000.00 0.00 260,000.00 COTTAGE GROVE,WI GO 255,775.00 0.00 255,775.00
</TABLE>
94
<PAGE> 315
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
0.00 1,630,000.00 1,630,000.00 DADE CNTY 6.50 02/15/06 0.00 1,774,662.50 1,774,662.50
600,000.00 0.00 600,000.00 DALLAS CTY,TX GO 594,000.00 0.00 594,000.00
0.00 1,000,000.00 1,000,000.00 DALLAS 6.125 02/15/07 0.00 1,047,500.00 1,047,500.00
500,000.00 0.00 500,000.00 DELAWARE STATE 503,535.00 0.00 503,535.00
0.00 1,000,000.00 1,000,000.00 DE TRANS 7.80 07/01/04 0.00 1,086,250.00 1,086,250.00
0.00 1,250,000.00 1,250,000.00 DE STATE 6.00 07/01/06 0.00 1,332,812.50 1,332,812.50
1,750,000.00 0.00 1,750,000.00 EAST CHICAGO, IN RB 1,830,937.50 0.00 1,830,937.50
0.00 1,000,000.00 1,000,000.00 DESC & JEFF 6.00 06/01/03 0.00 1,048,750.00 1,048,750.00
0.00 1,200,000.00 1,200,000.00 FAYETTE GO 6.25 03/01/04 0.00 1,275,000.00 1,275,000.00
0.00 1,000,000.00 1,000,000.00 FL ST DOT 6.00 07/01/07 0.00 1,071,250.00 1,071,250.00
0.00 135,000.00 135,000.00 FL BD EDUC 9.125 06/01/14 0.00 178,200.00 178,200.00
0.00 2,000,000.00 2,000,000.00 FL BD EDUC 6.90 05/01/03 0.00 2,152,500.00 2,152,500.00
1,000,000.00 0.00 1,000,000.00 FOREST HILLS MICH PUB SCH 966,250.00 0.00 966,250.00
500,000.00 0.00 500,000.00 FORT WAYNE INDIANA 484,375.00 0.00 484,375.00
750,000.00 0.00 750,000.00 FORT WAYNE SOUTH SIDE 716,250.00 0.00 716,250.00
500,000.00 0.00 500,000.00 FORT WAYNE SOUTH SIDE 473,125.00 0.00 473,125.00
40,000.00 0.00 40,000.00 FULTON COUNTY GA 40,450.00 0.00 40,450.00
45,000.00 0.00 45,000.00 FULSFH 5.3% 3/1/05 45,675.00 0.00 45,675.00
0.00 2,000,000.00 2,000,000.00 GEORGIA 6.60 04/01/05 0.00 2,180,000.00 2,180,000.00
1,000,000.00 0.00 1,000,000.00 GEORGIA STATE GO 1,082,500.00 0.00 1,082,500.00
1,000,000.00 0.00 1,000,000.00 GEORGIA STATE 1,120,000.00 0.00 1,120,000.00
0.00 2,000,000.00 2,000,000.00 GEORGIA ELEC 6.50 01/01/12 0.00 2,202,500.00 2,202,500.00
175,000.00 0.00 175,000.00 GNV 5.55% 12/01/1999 175,000.00 0.00 175,000.00
2,000,000.00 0.00 2,000,000.00 GRAND RAPIDS, MICH GO 2,112,500.00 0.00 2,112,500.00
0.00 1,505,000.00 1,505,000.00 GUAM HWY 5.90 05/01/02 0.00 1,559,556.25 1,559,556.25
0.00 1,000,000.00 1,000,000.00 GULF BREEZE VRD 12/01/17 0.00 980,000.00 980,000.00
365,000.00 0.00 365,000.00 HMLEDU 4.50% 7/05/2003 365,912.50 0.00 365,912.50
300,000.00 0.00 300,000.00 HMLEDU 4.55% 7/05/2004 298,875.00 0.00 298,875.00
100,000.00 0.00 100,000.00 HMLEDU 4.40% 7/05/2001 100,375.00 0.00 100,375.00
1,250,000.00 0.00 1,250,000.00 HAMMOND, INDIANA RB ETM 1,289,062.50 0.00 1,289,062.50
2,000,000.00 1,540,000.00 3,540,000.00 HARRIS COUNTY 2,100,000.00 1,617,000.00 3,717,000.00
1,000,000.00 0.00 1,000,000.00 HENDERSON, NEV GO 1,092,500.00 0.00 1,092,500.00
1,000,000.00 0.00 1,000,000.00 HUDSON, OHIO GO 562,500.00 0.00 562,500.00
1,200,000.00 0.00 1,200,000.00 IPS SCH BLDG, IND RB 1,293,000.00 0.00 1,293,000.00
400,000.00 0.00 400,000.00 ILSDEV 5.00% 1/01/2004 405,500.00 0.00 405,500.00
200,000.00 0.00 200,000.00 ILL EDL FACS AUTH REV 200,750.00 0.00 200,750.00
</TABLE>
95
<PAGE> 316
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1,000,000.00 0.00 1,000,000.00 ILLINOIS STATE RB 1,043,750.00 0.00 1,043,750.00
2,500,000.00 0.00 2,500,000.00 ILLINOIS HWY AUTH RB 2,512,500.00 0.00 2,512,500.00
400,000.00 0.00 400,000.00 IN ST OFFICE BLDG COMN 388,500.00 0.00 388,500.00
2,000,000.00 0.00 2,000,000.00 INTERMOUNTAIN POWER AGEN 2,165,000.00 0.00 2,165,000.00
0.00 1,000,000.00 1,000,000.00 JEFFERSON 5.25 12/15/05 0.00 1,025,000.00 1,025,000.00
0.00 1,535,000.00 1,535,000.00 KANSAS CITY 6.00 02/01/04 0.00 1,615,587.50 1,615,587.50
0.00 1,000,000.00 1,000,000.00 KS TRANS 7.25 03/01/04 0.00 1,100,000.00 1,100,000.00
0.00 3,000,000.00 3,000,000.00 KENTUCKY 6.50 07/01/07 0.00 3,292,500.00 3,292,500.00
1,000,000.00 0.00 1,000,000.00 KING CNTY WASH (6.10%) 1,001,600.00 0.00 1,001,600.00
300,000.00 0.00 300,000.00 LAGRANGE CNTY IND JAIL 295,875.00 0.00 295,875.00
1,000,000.00 0.00 1,000,000.00 LAKE CNTY,ILL GO 1,022,500.00 0.00 1,022,500.00
0.00 1,435,000.00 1,435,000.00 LANE CNTY OREG 6.00 01/01/04 0.00 1,503,162.50 1,503,162.50
245,000.00 0.00 245,000.00 MSD STEUBEN CNTY 243,775.00 0.00 243,775.00
1,000,000.00 0.00 1,000,000.00 MARICOPA CNTY, AZ RB 1,000,000.00 0.00 1,000,000.00
1,000,000.00 0.00 1,000,000.00 MASS BAY TRANS 1,050,000.00 0.00 1,050,000.00
2,385,000.00 0.00 2,385,000.00 MASS BAY TRANS PREREFUND 2,540,025.00 0.00 2,540,025.00
655,000.00 0.00 655,000.00 MASS BAY TRANS RB 650,087.50 0.00 650,087.50
0.00 1,000,000.00 1,000,000.00 MASS ST 5.75 08/01/08 0.00 1,053,750.00 1,053,750.00
0.00 1,290,000.00 1,290,000.00 MEMPHIS 6.00 11/01/03 0.00 1,359,337.50 1,359,337.50
1,500,000.00 0.00 1,500,000.00 NASHVILLE/DAVIDSON CO. TN 1,616,250.00 0.00 1,616,250.00
0.00 1,435,000.00 1,435,000.00 NASHVILLE GOVT 5.25 05/15/07 0.00 1,465,493.75 1,465,493.75
2,000,000.00 0.00 2,000,000.00 MICHIGAN STATE RB 2,135,000.00 0.00 2,135,000.00
0.00 2,000,000.00 2,000,000.00 MILWAUKEE 6.00 02/01/07 0.00 2,125,000.00 2,125,000.00
1,300,000.00 0.00 1,300,000.00 MINNESOTA PUB FACS RB 1,335,802.00 0.00 1,335,802.00
0.00 1,000,000.00 1,000,000.00 MINNESOTA 6.00 05/01/06 0.00 1,068,750.00 1,068,750.00
200,000.00 0.00 200,000.00 MINNESOTA ST HSG FIN AGY 201,250.00 0.00 201,250.00
0.00 1,000,000.00 1,000,000.00 MISSOURI ST 6.00 04/01/02 0.00 1,037,500.00 1,037,500.00
0.00 1,545,000.00 1,545,000.00 MO ST ENVRN 6.00 01/01/07 0.00 1,641,562.50 1,641,562.50
0.00 495,000.00 495,000.00 MISSOURI ST 7.00 10/01/10 0.00 514,567.35 514,567.35
1,948,393.80 0.00 1,948,393.80 FEDERATED TAX-FREE MM #15 1,948,393.80 0.00 1,948,393.80
0.00 1,000,000.00 1,000,000.00 MONTGOMERY 5.70 07/01/05 0.00 1,051,250.00 1,051,250.00
0.00 1,000,000.00 1,000,000.00 AST CORP NY 6.00 07/01/04 0.00 1,055,000.00 1,055,000.00
0.00 1,090,119.31 1,090,119.31 MUNI CASH MUTUAL FUND VRD 0.00 1,090,119.31 1,090,119.31
1,000,000.00 0.00 1,000,000.00 NEVADA STATE GO 1,053,750.00 0.00 1,053,750.00
1,000,000.00 0.00 1,000,000.00 NEVADA ST. 1,062,500.00 0.00 1,062,500.00
2,000,000.00 0.00 2,000,000.00 NEW JERSEY STATE RBT 2,125,000.00 0.00 2,125,000.00
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C> <C> <C>
0.00 995,000.00 995,000.00 NEW YORK 8.00 04/01/03 0.00 1,101,962.50 1,101,962.50
0.00 1,005,000.00 1,005,000.00 NEW YORK 8.00 04/01/03 0.00 1,106,756.25 1,106,756.25
0.00 1,365,000.00 1,365,000.00 NY TRANS 5.50 08/15/07 0.00 1,411,068.75 1,411,068.75
1,000,000.00 0.00 1,000,000.00 NEW YORK STATE RB 1,151,250.00 0.00 1,151,250.00
0.00 1,000,000.00 1,000,000.00 N ST PAUL 6.875 02/01/15 0.00 1,097,500.00 1,097,500.00
190,000.00 0.00 190,000.00 OHIO HSG FIN AGY MTG REV 192,850.00 0.00 192,850.00
0.00 1,920,000.00 1,920,000.00 OH HSG FIN AGY 0.00 01/15/15 0.00 763,200.00 763,200.00
2,000,000.00 0.00 2,000,000.00 OHIO ST TPK COMMN TPK RB 1,965,000.00 0.00 1,965,000.00
0.00 1,715,000.00 1,715,000.00 OH ST WATER 6.00 06/01/07 0.00 1,835,050.00 1,835,050.00
2,225,000.00 0.00 2,225,000.00 ORANGE COUNTY NY 2,183,281.25 0.00 2,183,281.25
100,000.00 0.00 100,000.00 PENN ST EDL FACS AUTH REV 100,375.00 0.00 100,375.00
1,000,000.00 0.00 1,000,000.00 PLANO, TEXAS 1,062,500.00 0.00 1,062,500.00
1,000,000.00 0.00 1,000,000.00 PLANO, TEXAS GO 1,038,750.00 0.00 1,038,750.00
1,000,000.00 0.00 1,000,000.00 PRINCE GEORGES CNTY, MD 1,067,500.00 0.00 1,067,500.00
1,000,000.00 0.00 1,000,000.00 PRIVATE COLLEGES & UNIVS 1,040,000.00 0.00 1,040,000.00
0.00 4,000,000.00 4,000,000.00 PUERTO RICO 6.50 07/01/06 0.00 4,405,000.00 4,405,000.00
250,000.00 0.00 250,000.00 PULASKI CNTY ARK HLTH REV 249,902.50 0.00 249,902.50
1,315,000.00 0.00 1,315,000.00 REDFORD, MICHIGAN 1,361,025.00 0.00 1,361,025.00
0.00 1,130,000.00 1,130,000.00 RHODE ISLAND 5.00 08/01/06 0.00 1,142,712.50 1,142,712.50
1,000,000.00 0.00 1,000,000.00 RICHMOND, VA GO 1,041,250.00 0.00 1,041,250.00
0.00 575,000.00 575,000.00 ROBINSON TX 5.75 08/15/12 0.00 589,375.00 589,375.00
2,415,000.00 0.00 2,415,000.00 ARIZONA STATE RB 2,393,868.75 0.00 2,393,868.75
1,000,000.00 0.00 1,000,000.00 SAN FRANCISCO, CA GO 997,500.00 0.00 997,500.00
0.00 1,000,000.00 1,000,000.00 SEATTLE WA 5.00 12/01/03 0.00 1,021,250.00 1,021,250.00
0.00 2,000,000.00 2,000,000.00 SHELBY, TN. 5.20 12/01/09 0.00 2,017,500.00 2,017,500.00
4,000,000.00 0.00 4,000,000.00 SOUTH CAROLINA STATE RB 4,010,000.00 0.00 4,010,000.00
0.00 1,000,000.00 1,000,000.00 TAMPA SPORT 0.00 1,063,750.00 1,063,750.00
0.00 2,000,000.00 2,000,000.00 TENN ST 6.00 05/01/05 0.00 2,125,000.00 2,125,000.00
4,100,000.00 0.00 4,100,000.00 TEXAS STATE GO 4,178,556.00 0.00 4,178,556.00
0.00 1,000,000.00 1,000,000.00 UNIV OF PR 6.25 06/01/07 0.00 1,092,500.00 1,092,500.00
0.00 2,000,000.00 2,000,000.00 UTAH ST 5.50 07/01/04 0.00 2,075,000.00 2,075,000.00
2,000,000.00 0.00 2,000,000.00 VERMONT BANK 2,047,500.00 0.00 2,047,500.00
495,000.00 0.00 495,000.00 VINTON-TECUMSEH SCH BLDG 488,812.50 0.00 488,812.50
300,000.00 0.00 300,000.00 VINTON-TECUMSEH SCH BLDG 294,000.00 0.00 294,000.00
0.00 1,220,000.00 1,220,000.00 WASH CNTY 7.80 06/01/04 0.00 1,374,025.00 1,374,025.00
0.00 2,000,000.00 2,000,000.00 WASH CNTY 5.75 10/01/08 0.00 2,105,000.00 2,105,000.00
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1,900,000.00 0.00 1,900,000.00 WASHINGTON STATE GO 1,968,875.00 0.00 1,968,875.00
2,500,000.00 0.00 2,500,000.00 WASHINGTON STATE RB 2,636,725.00 0.00 2,636,725.00
1,000,000.00 0.00 1,000,000.00 WASHINGTON SUBN RB 1,060,000.00 0.00 1,060,000.00
300,000.00 0.00 300,000.00 WEBER CNTY UTAH MUN BLDG 303,375.00 0.00 303,375.00
3,275,000.00 0.00 3,275,000.00 WISCONSIN STATE GO 3,414,187.50 0.00 3,414,187.50
1,000,000.00 0.00 1,000,000.00 WISCONSIN CLEAN WTR RB 1,006,250.00 0.00 1,006,250.00
740,000.00 0.00 740,000.00 WYOMING OH CSD 759,425.00 0.00 759,425.00
800,000.00 0.00 800,000.00 WYOMING OHIO CITY SCH DIS 814,000.00 0.00 814,000.00
92,768,393.80 82,840,119.31 175,608,513.11 95,114,476.80 84,997,999.16 180,112,475.96
</TABLE>
98
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ARMADA/PARKSTONE FUNDS
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS
AS OF NOVEMBER 30, 1999
1. Basis of Combination
The Pro Forma Combining Statement of Assets and Liabilities, including the
Pro Forma Portfolio of Investments, and the related Pro Forma Combining
Statement of Operations ("Pro Forma Statements") reflect the accounts of
the Parkstone Prime Obligations Fund and the Armada Money Market Fund, the
Parkstone U.S. Government Obligations Fund and the Armada Government Money
Market Fund, the Parkstone Tax-Free Fund and the Armada Tax Exempt Money
Market Fund, the Parkstone Bond Fund and the Armada Bond Fund, the
Parkstone Intermediate Government Fund and the Armada Intermediate Bond
Fund, the Parkstone Limited Maturity Bond Fund and the Armada Limited
Maturity Bond Fund, the Parkstone National Tax Exempt Bond Fund and the
Armada National Tax Exempt Bond Fund, the Parkstone Balanced Allocation
Fund and the Armada Balanced Allocation Fund, the Parkstone Equity Income
Fund and the Armada Equity Income Fund, the Parkstone International
Discovery Fund and the Armada International Equity Fund, the Parkstone
Small Capitalization Fund and the Armada Small Cap Growth Fund at November
30, 1999.
The Pro Forma Statements give effect to the proposed Agreement and Plan of
Reorganization (the "Reorganization") to be submitted to shareholders of
Parkstone. The Reorganization provides for the acquisition of all assets
and liabilities of the above Parkstone Funds by the above Armada Funds, in
exchange for Class I, A and B shares of the Armada Funds. Thereafter, there
will be a distribution of Class I, A and B shares of the above Armada Funds
to the respective shareholders in liquidation and subsequent termination
thereof. As a result of the Reorganization, the shareholders of the above
Parkstone Funds, will become the owners of that number of full and
fractional Class I, A and B shares of the corresponding Armada Fund having
an aggregate net asset value equal to the aggregate net asset value of
their shares of the above Parkstone Funds as of the close of business
immediately prior to the date that the above Parkstone Funds assets are
exchanged for Class I, A and B shares of the above Armada Funds.
The Pro Forma Statements reflect the expenses of each Fund in carrying out
its obligations under the Reorganization as though the merger occurred at
the beginning of the period presented.
The information contained herein is based on the experience of each Fund
for the periods ended November 30, 1999 and is designed to permit the
shareholders of the consolidating mutual funds to evaluate the financial
effect of the proposed Reorganization. The expenses of above Parkstone
Funds in connection with the Reorganization (including the cost of any
proxy soliciting agents) will be borne by National City Bank, Cleveland,
Ohio. It is not anticipated that the securities of the combined portfolio
will be sold in significant amounts in order to comply with the policies
and investment practices of Armada Funds.
The Pro Forma Statements should be read in conjunction with the historical
financial statements of each Fund incorporated by reference in the
Statement of Additional Information.
2. Shares of Beneficial Interest
The Pro Forma net asset values per share assume the issuance of Class I, A
and B shares of Armada Funds which would have been issued at November 30,
1999 in connection with the proposed Reorganization. Shareholders of above
Parkstone Funds would receive Class I, A and B shares of the above Armada
Funds based on conversion ratios determined on November 30, 1999. The
conversion ratios are calculated by dividing the net asset value of the
above Parkstone Funds by the net asset value per share of the respective
class of the above Armada Funds.
3. Pro Forma Operations
The Pro Forma Combining Statement of Operations assumes similar rates of
gross investment income for the investments of each Fund. Accordingly, the
combined gross investment income is equal to the sum of each Fund's gross
investment income. Pro Forma operating expenses include the actual expenses
of the Funds adjusted to reflect the expected expenses of the combined
entity. The investment advisory and distribution fees have been charged to
the combined Fund based on the fee schedule in effect for the Armada Funds
at the combined level of average net assets for the periods ended November
30, 1999.
<PAGE> 320
FORM N-14
PART C - OTHER INFORMATION
ITEM 15. INDEMNIFICATION
Indemnification of Registrant's principal underwriter, custodian and
transfer agent against certain losses is provided for, respectively, in Article
6 of the Distribution Agreement, incorporated by reference as Exhibit (6)
hereto, and Sections 12 and 8, respectively, of the Custodian Services and
Transfer Agency Agreements, incorporated by reference as Exhibits (8)(a) and
(9)(h) hereto. In Article 6 of the Distribution Agreement, the Trust agrees to
indemnify and hold harmless the Distributor and each of its directors and
officers and each person, if any, who controls the Distributor within the
meaning of Section 15 of the 1933 Act against any loss, liability, claim,
damages or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damages or expense and reasonable counsel
fees and disbursements incurred in connection therewith), arising by reason of
any person acquiring any Shares, based upon the ground that the registration
statement, prospectus, shareholder reports or other information filed or made
public by the Trust (as from time to time amended) included an untrue statement
of a material fact or omitted to state a material fact required to be stated or
necessary in order to make the statements made not misleading. However, the
Trust does not agree to indemnify the Distributor or hold it harmless to the
extent that the statements or omission was made in reliance upon, and in
conformity with, information furnished to the Trust by or on behalf of the
Distributor.
In addition, Section 9.3 of Registrant's Declaration of Trust dated
January 28, 1986, incorporated by reference as Exhibit (1) hereto, provides as
follows:
9.3 INDEMNIFICATION OF TRUSTEES, REPRESENTATIVES AND EMPLOYEES. The
Trust shall indemnify each of its Trustees against all liabilities and
expenses (including amounts paid in satisfaction of judgments, in
compromise, as fines and penalties, and as counsel fees) reasonably
incurred by him in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, in which
he may be involved or with which he may be threatened, while as a
Trustee or thereafter, by reason of his being or having been such a
Trustee EXCEPT with respect to any matter as to which he shall have
been adjudicated to have acted in bad faith, willful misfeasance,
gross negligence or reckless disregard of his duties, PROVIDED that as
to any matter disposed of by a compromise payment by such person,
pursuant to a consent decree or otherwise, no indemnification either
for said payment or for any other expenses shall be provided unless
the Trust shall have received a written opinion from independent legal
counsel approved by the Trustees to the effect that if either the
matter of willful misfeasance, gross negligence or reckless disregard
of duty, or the matter of bad faith had been adjudicated, it would in
the opinion of such counsel have been adjudicated in favor of such
person. The rights accruing to any person under these provisions shall
not exclude any other right to which he may be lawfully entitled,
PROVIDED that no person may satisfy any right of indemnity or
reimbursement hereunder except out of the property of the Trust. The
Trustees may make advance
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payments in connection with the indemnification under this Section
9.3, PROVIDED that the indemnified person shall have provided a
secured written undertaking to reimburse the Trust in the event it is
subsequently determined that he is not entitled to such
indemnification.
The Trustees shall indemnify representatives and employees of the
Trust to the same extent that Trustees are entitled to indemnification
pursuant to this Section 9.3.
Section 12 of Registrant's Custodian Services Agreement provides as
follows:
12. INDEMNIFICATION. The Trust, on behalf of each of the Funds, agrees
to indemnify and hold harmless the Custodian and its nominees from all
taxes, charges, expenses, assessments, claims and liabilities
(including, without limitation, liabilities arising under the 1933
Act, the 1934 Act, the 1940 Act, the CEA, and any state and foreign
securities and blue sky laws, and amendments thereto), and expenses,
including (without limitation) reasonable attorneys' fees and
disbursements, arising directly or indirectly from any action which
the Custodian takes or does not take (i) at the request or on the
direction of or in reliance on the advice of the Fund or (ii) upon
Oral or Written Instructions. Neither the Custodian, nor any of its
nominees, shall be indemnified against any liability to the Trust or
to its shareholders (or any expenses incident to such liability)
arising out of the Custodian's or its nominees' own willful
misfeasance, bad faith, negligence or reckless disregard of its duties
and obligations under this Agreement.
In the event of any advance of cash for any purpose made by the
Custodian resulting from Oral or Written Instructions of the Trust, or
in the event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or
liabilities in respect of the Trust or any Fund in connection with the
performance of this Agreement, except such as may arise from its or
its nominee's own negligent action, negligent failure to act or
willful misconduct, any Property at any time held for the account of
the relevant Fund or the Trust shall be security therefor.
Section 8 of Registrant's Transfer Agency and Service Agreement
provides as follows:
8 INDEMNIFICATION
8.1 The Transfer Agent shall not be responsible for, and the
Fund shall indemnify and hold the Transfer Agent 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 Transfer Agent or its agents or
subcontractors required to be taken pursuant to
this Agreement, provided that such actions are
taken in good faith and without negligence or
willful misconduct;
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<PAGE> 322
(b) The Fund's lack of good faith, negligence or
willful misconduct;
(c) The reliance upon, and any subsequent use of or
action taken or omitted, by the Transfer Agent, or
its agents or subcontractors on: (i) any
information, records, documents, data, stock
certificates or services, which are received by
the Transfer Agent or its agents or subcontractors
by machine readable input, facsimile, CRT data
entry, electronic instructions or other similar
means authorized by the Fund, and which 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; (ii) any instructions or
requests of the Fund or any of its officers; (iii)
any instructions or opinions of legal counsel with
respect to any matter arising in connection with
the services to be performed by the Transfer Agent
under this Agreement which are provided to the
Transfer Agent after consultation with such legal
counsel; or (iv) any paper or document, reasonably
believed to be genuine, authentic, or signed by
the proper person or persons;
(d) The offer or sale of Shares in violation of
federal or state securities laws or regulations
requiring that such Shares be registered or in
violation of any stop order or other determination
or ruling by any federal agency or any state
agency with respect to the offer or sale of such
Shares;
(e) The negotiations and processing of any checks
including without limitation for deposit into the
Fund's demand deposit account maintained by the
Transfer Agent; or
(f) Upon the Fund's request entering into any
agreements required by the National Securities
Clearing Corporation (the "NSCC") for the
transmission of Fund or Shareholder data through
the NSCC clearing systems.
8.2 In order that the indemnification provisions contained in
this Section 8 shall apply, upon the assertion of a claim
for which the Fund may be required to indemnify the Transfer
Agent, the Transfer Agent 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 Transfer Agent in
the defense of such claim or to defend against said claim in
its own name or in the name of the Transfer Agent. The
Transfer Agent shall in no case confess any claim or make
any compromise in any case in which the Fund may be required
to indemnify the Transfer Agent 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
3
<PAGE> 323
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 16. EXHIBITS
(1) Declaration of Trust dated January 28, 1986 is incorporated
herein by reference to Exhibit 1 to Post-Effective Amendment No. 1 to
Registrant's Registration Statement filed on December 16, 1986 ("PEA
No. 1").
(a) Amendment No. 1 to Declaration of Trust is incorporated
herein by reference to Exhibit 1(a) to Post-Effective Amendment No. 6
to Registrant's Registration Statement filed on August 1, 1989 ("PEA
No. 6").
(b) Amendment No. 2 to Declaration of Trust is incorporated
herein by reference to Exhibit 1(b) to Post-Effective Amendment No. 23
to Registrant's Registration Statement filed on May 11, 1995 ("PEA No.
23").
(c) Certificate of Classification of Shares reflecting the
creation of 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").
(d) 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").
4
<PAGE> 324
(e) Certificate of Classification of Shares reflecting the
creation of Special Series 1 in the Money Market, Government,
Treasury, Tax Exempt, Equity, Bond and Ohio Tax Exempt 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.
(f) Certificate of Classification of Shares reflecting the
creation of Special Series 1 in the Money Market, Government,
Treasury, Tax Exempt, Equity, Bond and Ohio Tax Exempt Funds as filed
with the Office of the Secretary of State of Massachusetts on
September 12, 1990 is incorporated herein by reference to Exhibit 1(e)
to PEA No. 26.
(g) Certificate of Classification of Shares reflecting the
creation of Class L and Class L-Special Series 1 shares, Class M and
Class M-Special Series 1 shares, Class N and Class N-Special Series 1
shares, Class O and Class O-Special Series 1 shares, and Class P and
Class P-Special Series 1 shares representing interests in the National
Tax Exempt Fund, Equity Income Fund, Mid Cap Regional Equity Fund,
Enhanced Income Fund and Total Return Advantage Fund, respectively, as
filed with the Office of Secretary of State of Massachusetts on June
30, 1994 is incorporated herein by reference to Exhibit 1(e) to PEA
No. 26.
(h) 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, Intermediate Government,
GNMA and Pennsylvania Municipal Funds, respectively, as filed with the
Office of the Secretary of State of Massachusetts on September 10,
1996 is incorporated herein by reference to Exhibit 1(g) to
Post-Effective Amendment No. 33 to Registrant's Registration Statement
filed on April 11, 1997 ("PEA No. 33").
(i) 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").
(j) 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.
5
<PAGE> 325
(k) Certificate of Classification of Shares reflecting the
creation of Special Series 2 Shares representing interests in the
Money Market, Government Money Market, Treasury Money Market,
Tax-Exempt Money Market, Equity Growth, Equity Income, Small Cap Value
(formerly, the Mid Cap Regional), Enhanced Income, Total Return
Advantage, Intermediate Bond (formerly, the Fixed Income), Ohio
Tax-Exempt, National Tax-Exempt, Pennsylvania Tax-Exempt, Bond
(formerly, the "Intermediate Government Fund"), GNMA, Pennsylvania
Municipal, International Equity, Equity Index, Core Equity, Small Cap
Growth and Real Return Advantage Funds, as filed with the Office of
the Secretary of State of Massachusetts on December 29, 1997 and with
the City of 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").
(l) 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.
(m) 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").
(2) Code of Regulations as approved and adopted by Registrant's Board
of Trustees on January 28, 1986 is incorporated herein by reference to
Exhibit 2 to Pre-Effective Amendment No. 2 to Registrant's
Registration Statement filed on January 30, 1986 ("Pre-Effective
Amendment No. 2").
(a) Amendment No. 1 to Code of Regulations is incorporated
herein by reference to Exhibit 2(a) to PEA No. 6.
(b) Amendment No. 2 to Code of Regulations as approved and
adopted by Registrant's Board of Trustees on July 17, 1997 is
incorporated herein by reference to Exhibit 2(b) to PEA No. 35.
(3) None.
(4) Plan of Reorganization filed herewith as Appendix A to the
Combined Prospectus/Proxy Statement.
(5) Article V, Section 5.1, and Article V, Section 5.4 of
Registrant's Declaration of Trust is incorporated herein by reference
to Exhibit 1 to Post-Effective Amendment No. 1 to Registrant's
Registration Statement filed on December 16, 1986 ("PEA No. 1").
6
<PAGE> 326
(6) (a) 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 and Pennsylvania Municipal Funds between Registrant and
National City Bank, as dated November 19, 1997 is incorporated herein
by reference to Exhibit 5(a) to PEA No. 44.
(b) Interim Advisory Agreement for the Enhanced Income and
Total Return Advantage Funds between Registrant and National Asset
Management Corporation dated March 6, 1998 is incorporated herein by
reference to Exhibit 5(b) to PEA No. 44.
(c) Interim Advisory Agreement for the Core Equity Fund
between Registrant and National Asset Management Corporation dated
March 6, 1998 is incorporated herein by reference to Exhibit 5(c) to
PEA No. 44.
(d) New Advisory Agreement for the Core Equity, Enhanced
Income and Total Return Advantage Funds between Registrant and
National City Bank dated March 6, 1998 is incorporated herein by
reference to Exhibit 5(d) to PEA No. 44.
(e) Sub-Advisory Agreement for the Core Equity and Total
Return Advantage Funds between Registrant and National Asset
Management Corporation dated March 6, 1998 is incorporated herein by
reference to Exhibit 5(e) to PEA No. 44.
(f) 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) to PEA No. 43.
(7) (a) Distribution Agreement between Registrant and SEI
Investments Distribution Co., dated May 1, 1998 is incorporated herein
by reference to Exhibit 6(a) to PEA No. 44.
(8) None.
(9) (a) Custodian Services Agreement between Registrant and National
City Bank, dated November 7, 1994, is incorporated herein by reference
to Exhibit 8(a) to Post-Effective Amendment No. 22 to Registrant's
Registration Statement filed on December 30, 1994 ("PEA No. 22").
(b) Sub-Custodian Agreement between National City Bank and The
Bank of California, National Association, dated November 7, 1994, is
incorporated herein by reference to Exhibit 8(a) to PEA No. 22.
7
<PAGE> 327
(c) Exhibit A to the Custodian Services Agreement between
Registrant and National City Bank dated July 31, 1997 is incorporated
herein by reference to Exhibit 8(c) to PEA No. 36.
(d) Form of Amended Exhibit A to the Custodian Services
Agreement between Registrant and National City Bank is incorporated
herein by reference to Exhibit (8)(d) to PEA No. 41.
(10) (a) 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.
(b) B shares Distribution and Servicing Plan is incorporated
herein by reference to Exhibit 15(b) to PEA No. 38.
(c) C shares Distribution and Servicing Plan is incorporated
herein by reference to Exhibit m.3. to PEA No. 47.
(11) Opinion of Drinker Biddle & Reath LLP is incorporated herein by
reference to Exhibit 10 to PEA No. 44.
(12) (a) Opinion of Drinker Biddle & Reath LLP as to tax consequences
of Reorganizing Funds Transaction (including consent of the firm).
(b) Opinion of Drinker Biddle & Reath LLP as to tax consequences
of Continuing Funds Transaction (including consent of the firm).
(13) (a) Interim Administration Agreement between Registrant and SEI
Investments Mutual Funds Services, dated April 1, 1998 is incorporated
herein by reference to Exhibit 9(a) to PEA No. 44.
(b) Administration Agreement between Registrant and SEI
Investments Mutual Funds Services, dated May 1, 1998 is incorporated
herein by reference to Exhibit 9(b) to PEA No. 44.
(c) Sub-Administration Agreement between SEI Investments Mutual
Funds Services and National City Bank, dated May 1, 1998 is
incorporated herein by reference to Exhibit 9(c) to PEA No. 44.
(d) 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.
(e) 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.
(f) Revised Shareholder Services Plan and Servicing Agreement
adopted by the Board of Trustees on February 15, 1997, is incorporated
herein by reference to Exhibit 9(e) to PEA No. 33.
8
<PAGE> 328
(g) Blue Sky Services Agreement between the Registrant and SEI
Investments Mutual Funds Services, dated December 2, 1996, is
incorporated herein by reference to Exhibit 9(f) to PEA No. 33.
(h) Assumption Agreement between National City Bank, National
City Investment Management Company, Armada Funds, National Asset
Management Corporation and SEI Investments Mutual Funds Services,
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").
(14) (a) Consent of Ernst & Young LLP.
(b) Consent of PricewaterhouseCoopers LLP.
(c) Consent of Drinker Biddle & Reath LLP.
(15) None.
(16) Powers of Attorney.
(17) (a) Forms of Proxy.
(b) Prospectus dated December 10, 1999 for A, B and C Shares of
the Registrant's Funds.
(c) Prospectus dated September 28, 1999 for I Shares of the
Registrant's Funds.
(d) Prospectus dated September 17, 1999 for Investor A and
Investor B Shares of the Parkstone Funds.
(e) Prospectus dated September 17, 1999 for Institutional Shares
of the Parkstone Funds.
(f) Statement of Additional Information dated December 10, 1999
for A, B, C and I Shares of Registrant's Funds.
(g) Statement of Additional Information dated September 17, 1999
for Investor A, Investor B, and Institutional Shares of the Parkstone
Funds.
(h) Annual Report dated May 31, 1999 for Armada Funds.
(i) Semi-Annual Report dated November 30, 1999 for Armada Funds.
(j) Annual Report dated May 31, 1999 for Parkstone.
9
<PAGE> 329
(k) Semi-Annual Report dated November 30, 1999 for Parkstone.
ITEM 17. UNDERTAKINGS
(1) The undersigned Registrant agrees that prior to any public reoffering
of the securities registered through the use of a prospectus which is a
part of this registration statement by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c) of the
Securities Act of 1933, as amended (the "1933 Act"), the reoffering
prospectus will contain the information called for by the applicable
registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other
items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to
the registration statement and will not be used until the amendment is
effective, and that, in determining any liability under the 1933 Act,
each post-effective amendment shall be deemed to be a new registration
statement for the securities offered therein, and the offering of the
securities at that time shall be deemed to be the initial bona fide
offering of them.
10
<PAGE> 330
SIGNATURES
As required by the Securities Act of 1933, this registration statement
has been signed on behalf of the registrant, in the City of Philadelphia and the
Commonwealth of Pennsylvania, on the 17th day of February, 2000.
ARMADA FUNDS
Registrant
*Robert D. Neary
---------------------------------
Trustee and Chairman of the Board
Robert D. Neary
As required by the Securities Act of 1933, as amended, this registration
statement has been signed below by the following persons in the capacities and
on the dates indicated.
Signature Title Date
- --------- ----- ----
*John Leven Treasurer February 17, 2000
- -----------------------------
John Leven
*Leigh Carter Trustee February 17, 2000
- -----------------------------
Leigh Carter
*John F. Durkott Trustee February 17, 2000
- -----------------------------
John F. Durkott
*Robert J. Farling Trustee February 17, 2000
- -----------------------------
Robert J. Farling
*Richard W. Furst Trustee February 17, 2000
- -----------------------------
Richard W. Furst
*Gerald Gherlein Trustee February 17, 2000
- -----------------------------
Gerald Gherlein
*Herbert Martens President and Trustee February 17, 2000
- -----------------------------
Herbert Martens
*Robert D. Neary Trustee and Chairman February 17, 2000
- ----------------------------- of the Board
Robert D. Neary
*J. William Pullen Trustee February 17, 2000
- -----------------------------
J. William Pullen
*By: /s/ W. Bruce McConnel, III
--------------------------
W. Bruce McConnel, III
Attorney-in-Fact
11
<PAGE> 331
ARMADA FUNDS
CERTIFICATE OF SECRETARY
The following resolution was duly adopted by the Board of Trustees of
Armada Funds on July 21, 1999 and remains in effect on the date hereof:
FURTHER RESOLVED, that the trustees and officers of Armada are required
to execute any amendments to Armada's Registration Statement be, and hereby are,
authorized to execute a power of attorney appointing W. Bruce McConnel, III and
Herbert R. Martens, Jr., and either of them, their true and lawful attorney or
attorneys, to execute in their name, place, and stead, in their capacity as
trustee or officer, or both, of Armada any and all amendments to the
Registration Statement, and all instruments necessary or incidental in
connection therewith, and to file the same with the SEC; and either of said
attorneys shall have the power to act thereunder with or without the other of
said attorneys and shall have full power of substitution and resubstitution; and
to do in the name and on behalf of said trustees and 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 said officers or trustees,
might or could do in person, said acts of said attorneys, or either of them,
being hereby ratified and approved.
ARMADA FUNDS
By: /s/ W. Bruce McConnel, III
--------------------------
W. Bruce McConnel, III
Secretary
Dated: February 11, 2000
<PAGE> 332
ARMADA FUNDS
POWER OF ATTORNEY
-----------------
Know All Men by These Presents, that the undersigned, John H.
Leven, hereby constitutes and appoints Herbert R. Martens, Jr. and W. Bruce
McConnel, III, his true and lawful attorneys, to execute in his name, place, and
stead, in his capacity as Trustee or officer, or both, of Armada Funds, the
Registration Statement and any amendments thereto and all instruments necessary
or incidental in connection therewith, and to file the same with the Securities
and Exchange Commission; and said attorneys shall have full power and authority
to do and perform in his name and on his behalf, in any and all capacities,
every act whatsoever requisite or necessary to be done in the premises, as fully
and to all intents and purposes as he might or could do in person, said acts of
said attorneys being hereby ratified and approved.
DATED: July 14, 1999
/s/ John H. Leven
- --------------------------
John H. Leven
<PAGE> 333
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> 334
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> 335
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> 336
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> 337
ARMADA FUNDS
POWER OF ATTORNEY
-----------------
Know All Men by These Presents, that the undersigned, Gerald
L. Gherlein, hereby constitutes and appoints Herbert R. Martens, Jr. and W.
Bruce McConnel, III, his true and lawful attorneys, to execute in his name,
place, and stead, in his capacity as Trustee or officer, or both, of Armada
Funds, the Registration Statement and any amendments thereto and all instruments
necessary or incidental in connection therewith, and to file the same with the
Securities and Exchange Commission; and said attorneys shall have full power and
authority to do and perform in his name and on his behalf, in any and all
capacities, every act whatsoever requisite or necessary to be done in the
premises, as fully and to all intents and purposes as he might or could do in
person, said acts of said attorneys being hereby ratified and approved.
DATED: September 17, 1997
/s/ Gerald L. Gherlein
- ------------------------------
Gerald L. Gherlein
<PAGE> 338
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> 339
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> 340
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> 341
EXHIBIT INDEX
(12) (a) Opinion of Drinker Biddle & Reath LLP as to tax consequences of
Reorganizing Funds Transaction (including consent of the firm).
(b) Opinion of Drinker Biddle & Reath LLP as to tax consequences
of Continuing Funds Transaction (including consent of the firm).
(14) (a) Consent of Ernst & Young LLP.
(b) Consent of PricewaterhouseCoopers LLP.
(c) Consent of Drinker Biddle & Reath LLP.
(17) (a) Forms of Proxy.
(b) Prospectus dated December 10, 1999 for A, B and C Shares of the
Registrant's Funds.
(c) Prospectus dated September 28, 1999 for I Shares of the Registrant's
Funds.
(d) Prospectus dated September 17, 1999 for Investor A and Investor B
Shares of the Parkstone Funds.
(e) Prospectus dated September 17, 1999 for Institutional Shares of the
Parkstone Funds.
(f) Statement of Additional Information dated December 10, 1999 for A, B,
C and I Shares of Registrant's Funds.
(g) Statement of Additional Information dated September 17, 1999 for
Investor A, Investor B, and Institutional Shares of the Parkstone
Funds.
(h) Annual Report dated May 31, 1999 for Armada Funds.
(i) Semi-Annual Report dated November 30, 1999 for Armada Funds.
(j) Annual Report dated May 31, 1999 for Parkstone.
(k) Semi-Annual Report dated November 30, 1999 for Parkstone.
12
<PAGE> 1
Exhibit (12)(a)
ARMADA FUNDS
One Freedom Valley Drive
Oaks, Pennsylvania 19456
February 11, 2000
Drinker Biddle & Reath LLP
One Logan Square
18th & Cherry Streets
Philadelphia, PA 19103-6996
Re: Agreement and Plan of Reorganization by and between Armada Funds
and The Parkstone Group of Funds, dated November 17, 1999
----------------------------------------------------------------
Dear Ladies and Gentlemen:
The Parkstone Group of Funds ("Parkstone") and we have
requested your opinion as to certain Federal income tax matters in connection
with the proposed reorganization (the "Reorganization") of the Prime Obligations
Fund, U.S. Government Obligations Fund, Tax-Free Fund, Bond Fund, Limited
Maturity Bond Fund, Intermediate Government Obligations Fund, Equity Income
Fund, Small Capitalization Fund, International Discovery Fund, Balanced
Allocation Fund and National Tax Exempt Bond Fund (each a "Transferor Fund" and
collectively the "Transferor Funds") of Parkstone into the Money Market Fund,
Government Money Market Fund, Tax Exempt Money Market Fund, Bond Fund, Limited
Maturity Bond Fund, Intermediate Bond Fund, Equity Income Fund, Small Cap Growth
Fund, International Equity Fund, Balanced Allocation Fund and National Tax
Exempt Bond Fund (each a "Surviving Fund" and collectively the "Surviving
Funds") of Armada Funds ("Armada") pursuant to the above-referenced Agreement
and Plan of Reorganization (the "Reorganization Agreement") by and between
Armada and Parkstone.
At the Effective Time of the Reorganization (as defined in the
Reorganization Agreement), it is contemplated that each Transferor Fund will
transfer all of its assets and liabilities to the corresponding Surviving Fund
in exchange for shares (the "Shares") of the corresponding Surviving Fund. Each
Transferor Fund will then distribute the Shares of the Surviving Fund to the
shareholders of the Transferor Fund in exchange for all outstanding shares of
the Transferor Fund, and the existence of each Transferor Fund will be
terminated. All of the above steps will constitute the "Transactions."
To enable you to render your opinion, we are furnishing the
following representations:
1. Each Surviving Fund qualified as a "regulated investment
company" under Part I of Subchapter M of Subtitle A, Chapter 1, of the Internal
Revenue
<PAGE> 2
Code of 1986, as amended, for its most recently ended taxable year and
will so qualify for its current taxable year.
2. Following the Transactions, each Surviving Fund will
continue the historic business of the corresponding Transferor Fund or will use
a significant portion of the corresponding Transferor Fund's historic business
assets in a business.
3. No Surviving Fund has any plan or intention to reacquire
any of its Shares issued in the Transactions, except in the ordinary course of
business.
4. No Surviving Fund has any plan or intention to sell or
otherwise to dispose of any of the assets of the corresponding Transferor Fund
acquired in the Transactions, except for dispositions made in the ordinary
course of business.
5. There is and will be, no intercorporate indebtedness
between any Surviving Fund and the corresponding Transferor Fund that was
issued, acquired or will be settled at a discount.
6. No Surviving Fund has owned during the past five years or
will own, directly or indirectly, any stock of the corresponding Transferor
Fund.
7. The Transactions will be accomplished for the purposes set
forth in the Combined Proxy Statement/Prospectus, which is part of the
Registration Statement that is being filed this day with the SEC on Form N-14.
We understand that you will, and expressly authorize you to,
rely upon each of the foregoing representations in rendering your opinion of
even date herewith. We undertake to advise you promptly if we become aware of
any facts or circumstances that would cause any representation that we have
given to be incorrect.
Very truly yours,
ARMADA FUNDS
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
-2-
<PAGE> 3
THE PARKSTONE GROUP OF FUNDS
One Freedom Valley Drive
Oaks, Pennsylvania 19456
February 11, 2000
Drinker Biddle & Reath LLP
One Logan Square
18th & Cherry Streets
Philadelphia, PA 19103-6996
Re: Agreement and Plan of Reorganization by and between Armada Funds
and The Parkstone Group of Funds, dated November 17, 1999
----------------------------------------------------------------
Dear Ladies and Gentlemen:
The Armada Funds ("Armada") and we have requested your opinion
as to certain Federal income tax matters in connection with the proposed
reorganization (the "Reorganization") of the Prime Obligations Fund, U.S.
Government Obligations Fund, Tax-Free Fund, Bond Fund, Limited Maturity Bond
Fund, Intermediate Government Obligations Fund, Equity Income Fund, Small
Capitalization Fund, International Discovery Fund, Balanced Allocation Fund and
National Tax Exempt Bond Fund (each a "Transferor Fund" and collectively the
"Transferor Funds") of the Parkstone Group of Funds ("Parkstone") into the Money
Market Fund, Government Money Market Fund, Tax Exempt Money Market Fund, Bond
Fund, Limited Maturity Bond Fund, Intermediate Bond Fund, Equity Income Fund,
Small Cap Growth Fund, International Equity Fund, Balanced Allocation Fund and
National Tax Exempt Bond Fund (each a "Surviving Fund" and collectively the
"Surviving Funds") respectively, of Armada, pursuant to the above-referenced
Agreement and Plan of Reorganization (the "Reorganization Agreement") by and
between Armada and Parkstone.
At the Effective Time of the Reorganization (as defined in the
Reorganization Agreement), it is contemplated that each Transferor Fund will
transfer all of its assets and liabilities to the corresponding Surviving Fund
in exchange for shares (the "Shares") of the corresponding Surviving Fund. Each
Transferor Fund will then distribute the Shares of the Surviving Fund to the
shareholders of the Transferor Fund in exchange for all outstanding shares of
the Transferor Fund, and the existence of each Transferor Fund will be
terminated. All of the above steps will constitute the "Transactions."
To enable you to render your opinion, we are furnishing the
following representations:
1. Each Transferor Fund qualified as a "regulated investment
company" under Part I of Subchapter M of Subtitle A, Chapter 1, of the Internal
Revenue
<PAGE> 4
Code of 1986, as amended, for its most recently ended taxable year and
will so qualify for its current taxable year.
2. Each Transferor Fund will transfer to the corresponding
Surviving Fund assets consisting of at least 90% of the fair market value of the
Transferor Fund's net assets and at least 70% of the fair market value of its
gross assets immediately prior to the Transactions. For purposes of this
assumption, all of the following shall be considered as assets of each
Transferor Fund held immediately prior to the Transactions: (a) amounts used by
each Transferor Fund to pay its expenses in connection with the Transactions and
(b) all amounts used to make redemptions of or distributions on each Transferor
Fund's shares (except for distributions of net investment company taxable income
and net capital gains, other than net capital gains resulting from sales of
assets for the purpose of satisfying investment objectives of each Surviving
Fund, if any, that differ from the existing investment objectives of the
corresponding Transferor Fund).
3. Each Transferor Fund will, as of the Effective Time,
distribute Shares of the corresponding Surviving Fund received in Transactions
to each of the Transferor Fund's shareholders in complete liquidation of the
Transferor Fund and, having made such distributions, will take all necessary
steps to terminate the Transferor Fund's existence.
4. The aggregate adjusted income tax basis and the aggregate
fair market value of the assets to be transferred by each Transferor Fund to the
corresponding Surviving Fund each equals or exceeds the sum of the liabilities
to be assumed by the corresponding Surviving Fund or to which such transferred
assets are subject.
5. There is no plan or intention by the shareholders of any
Transferor Fund who own five percent (5%) or more of such Transferor Fund's
stock and, to the best of the knowledge of the management of each Transferor
Fund, no plan or intention on the part of the remaining shareholders of such
Transferor Fund, to redeem or exchange a corresponding number of Shares of the
Surviving Fund's stock to be received in the Transactions that would reduce the
Transferor Fund shareholders' ownership of the Surviving Fund stock to a number
of shares having a value, as of the time of the Transactions, of less than fifty
percent (50%) of the value of all of the formerly outstanding stock of the
Transferor Fund immediately prior to the Transactions. For purposes of this
assumption, (a) shares of each Transferor Fund surrendered by dissenters will be
treated as outstanding Transferor Fund stock immediately prior to the
Transactions, and (b) shares of each Transferor Fund and the corresponding
Surviving Fund held by Transferor Fund shareholders and otherwise redeemed
(except for redemptions occurring in the ordinary course of each Surviving
Fund's business as an open-end investment company) in anticipation of the
Transactions, or subsequent to the Transactions pursuant to a plan or intention
that existed at the time of the Transactions, also will be taken into account.
-2-
<PAGE> 5
6. No Transferor Fund is, or will be, under the jurisdiction
of a court in a case under Title 11 of the United States Code or a receivership,
foreclosure or similar proceeding in any Federal or State court.
7. The liabilities of each Transferor Fund that will be
assumed by the corresponding Surviving Fund and the liabilities, if any, to
which the transferred assets will be subject were incurred by each Transferor
Fund in the ordinary course of its business.
8. The Transactions have been proposed for the purposes set
forth in the Combined Proxy Statement/Prospectus, which is part of the
Registration Statement that is being filed this day with the SEC on Form N-14.
We understand that you will, and expressly authorize you to,
rely upon each of the foregoing representations in rendering your opinion of
even date herewith. We undertake to advise you promptly if we become aware of
any facts or circumstances that would cause any representation that we have
given to be incorrect.
Very truly yours,
PARKSTONE GROUP OF FUNDS
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
<PAGE> 6
February 11, 2000
Armada Funds
The Parkstone Group of Funds
One Freedom Valley Drive
Oaks, Pennsylvania 19456
Re: Agreement and Plan of Reorganization by and between Armada Funds
and The Parkstone Group of Funds, dated November 17, 1999
----------------------------------------------------------------
Dear Ladies and Gentlemen:
You have asked for our opinion as to certain Federal income
tax consequences of transactions contemplated in the above-referenced Agreement
and Plan of Reorganization (the "Reorganization Agreement").
Background
The Parkstone Group of Funds ("Parkstone") offers multiple
funds including: the Prime Obligations Fund, U.S. Government Obligations Fund,
Tax-Free Fund, Bond Fund, Limited Maturity Bond Fund, Intermediate Government,
Obligations Fund, Equity Income Fund, Small Capitalization Fund, International
Discovery Fund, Balanced Allocation Fund and National Tax Exempt Bond Fund (each
a "Transferor Fund" and collectively the "Transferor Funds"). Armada Funds
offers multiple portfolios including: the Money Market Fund, Government Money
Market Fund, the Money Market Fund, Government Money Market Fund, Tax Exempt
Money Market Fund, Bond Fund, Limited Maturity Bond Fund, Intermediate Bond
Fund, Equity Income Fund, Small Cap Growth Fund, International Equity Fund,
Balanced Allocation Fund and National Tax Exempt Bond Fund, (each a Surviving
Fund and collective the "Surviving Funds"). Armada and Parkstone are open-end
management investment companies registered with the Securities and Exchange
Commission (the "SEC") under the Investment Company Act of 1940, as amended.
At the Effective Time of the Reorganization (as defined in the
Reorganization Agreement), it is contemplated that each Transferor Fund will
transfer all of its assets and liabilities to corresponding Surviving Fund in
exchange for shares (the "Shares") of the corresponding Surviving Fund. Each
Transferor Fund will then distribute the Shares of the corresponding Surviving
Fund to the shareholders of the corresponding Transferor Fund in exchange for
all outstanding shares of each corresponding Transferor Fund, and each existence
of each Transferor Fund will be terminated. All of the above steps will
constitute the "Transactions."
For purposes of this opinion, we have relied on certain
written representations of officers of Parkstone and Armada, copies of which are
attached hereto,
<PAGE> 7
and have assumed such representations to be true. We have also assumed that the
Reorganization Agreement substantially in the form included as Appendix A to
the Combined Proxy Statement/Prospectus (the "Proxy Statement"), which is part
of the Registration Statement (the "Registration Statement") that is being
filed this day with the SEC on Form N-14, has been duly authorized by the
parties and approved by the shareholders of each Transferor Fund, and the
appropriate documents have been filed with the appropriate government agencies.
Conclusions
Based upon the Internal Revenue Code of 1986, as amended (the
"Code"), applicable Treasury Department regulations in effect as of the date
hereof, current published administrative positions of the Internal Revenue
Service contained in revenue rulings and procedures, and judicial decisions, and
upon the assumptions and representations referred to herein and the documents
provided to us by you (including the Proxy Statement and the Reorganization
Agreement), it is our opinion for Federal income tax purposes that:
(i) the acquisition of the assets and assumption of the
liabilities of each Transferor Fund by the corresponding Surviving Fund in
return for Shares of the Surviving Fund followed by the distribution of such
Shares to the shareholders of the Transferor Fund, as provided in the
Reorganization Agreement, will constitute a "reorganization" within the meaning
of section 368(a)(1)(C) or 368(a)(1)(D) of the Code, and each such Fund will be
"a party to the reorganization" within the meaning of section 368(b) of the
Code;
(ii) in accordance with sections 361(a), 361(c)(1) and 357(a)
of the Code, no gain or loss will be recognized by the Transferor Funds as a
result of the Transactions;
(iii) in accordance with section 1032(a) of the Code, no gain
or loss will be recognized by the Surviving Funds as a result of the
Transactions;
(iv) in accordance with section 354(a)(1) of the Code, no gain
or loss will be recognized by the shareholders of each Transferor Fund upon the
receipt of the Shares of each Surviving Fund in exchange for their Transferor
Fund shares;
(v) in accordance with section 358(a)(1) of the Code, the tax
basis of the Shares of each Surviving Fund received by the shareholders of the
Transferor Fund will be the same as the tax basis of the shares of the
Transferor Fund exchanged therefor in the Transactions;
-2-
<PAGE> 8
(vi) in accordance with section 362(b) of the Code, the tax
basis of the assets received by each Surviving Fund in the Transactions will be
the same as the tax basis of such assets in the hands of the corresponding
Transferor Fund immediately before the Transactions;
(vii) in accordance with section 1223(1) of the Code, the
holding period of the Shares of each Surviving Fund received by the shareholders
of the corresponding Transferor Fund will include the holding period of the
shares of the Transferor Fund exchanged therefor, provided that at the time of
the exchange the shares of the Transferor Fund were held as capital assets;
(viii) in accordance with section 1223(2) of the Code, the
holding period of each Surviving Fund with respect to the assets acquired in the
Transactions will include the period during which such assets were held by the
corresponding Transferor Fund; and
(ix) in accordance with section 381(a) of the Code, each
Surviving Fund will succeed to the tax attributes of the corresponding
Transferor Fund described in section 381(c) of the Code.
This opinion represents our best legal judgment, but it has no
binding effect or official status of any kind, and no assurance can be given
that contrary positions may not be taken by the Internal Revenue Service or a
court concerning the issues. We express no opinion relating to any Federal
income tax matter except on the basis of the facts described above.
Additionally, we express no opinion on the tax consequences under foreign, state
or local laws. In issuing our opinion, we have relied solely upon existing
provisions of the Code, existing and proposed regulations thereunder, and
current administrative positions and judicial decisions. Such laws, regulations,
administrative positions and judicial decisions are subject to change at any
time. Any such change could affect the validity of the opinion set forth above.
Also, future changes in Federal income tax laws and the interpretation thereof
can have retroactive effect.
We hereby consent to the filing of this opinion with the SEC
as an exhibit to the Registration Statement. We also consent to the references
to our firm under the caption "INFORMATION RELATING TO THE PROPOSED
REORGANIZATION-- Federal Income Tax Consequences" in the Proxy Statement. In
consenting to such references to our firm, we have not certified any part of the
Registration Statement, and
-3-
<PAGE> 9
such consent does not establish that we come within the categories of persons
whose consent is required under section 7 of the Securities Act of 1933 or under
the rules and regulations of the SEC issued thereunder.
Very truly yours,
DRINKER BIDDLE & REATH LLP
SDDH:FCM
-4-
<PAGE> 1
Exhibit (12)(b)
February 11, 2000
Armada Funds
The Parkstone Group of Funds
One Freedom Valley Drive
Oaks, Pennsylvania 19456
Re: Agreement and Plan of Reorganization by and between
Armada Funds and The Parkstone Group of Funds, dated
November 17, 1999
------------------------------------------------------
Dear Ladies and Gentlemen:
You have asked for our opinion in accordance with the above
Agreement and Plan of Reorganization (the "Agreement") by and between the
Parkstone Group of Funds ("Parkstone"), on behalf of each of the following Five
Funds: the Large Capitalization Fund, U.S. Government Income Fund, Mid
Capitalization Fund, Michigan Municipal Bond Fund, Treasury Fund (each a
"Transferor Fund: and collectively the "Transferor Funds") and Armada Funds
("Armada") on behalf of the following Five Funds: the Large Cap Ultra Fund, U.S.
Government Income Fund, Mid Cap Growth Fund, Michigan Municipal Bond Fund, and
Treasury Plus Money Market Fund (each, a "successor fund" and collectively, the
"Successor Funds"), as to certain Federal income tax consequences of the
transactions contemplated in the Agreement. Both Parkstone and Aramda are
Massachusetts Business Trusts.
Background
At the time of the transactions each Transferor Fund will
transfer all of its assets and liabilities to a corresponding Successor Fund
solely in exchange for the assumption by the corresponding Successor Fund of all
liabilities of each Transferor Fund and the issuance by corresponding Successor
Fund to each Transferor Fund of shares in the corresponding Successor Fund. Each
Transferor Fund will then distribute the corresponding Successor Fund shares to
the holders of Transferor Fund shares in exchange for those Transferor Fund
shares, in liquidation of each Transferor Fund, and the existence of each
Transferor Fund will be terminated. After this date, each Successor Fund will
continue the investment operations of the corresponding Transferor Fund.
For purposes of this opinion, we have relied on certain
written representations of officers of Parkstone and Armada, copies of which are
attached hereto, and have assumed such representations to be true. We have also
assumed that the Agreement included as an exhibit in the proxy materials (the
"Proxy Statement") that is part of the Registration Statement being filed this
day with the Securities and Exchange Commission (the "SEC") in connection with
the transaction has been duly authorized by the parties and approved by the
shareholders of each of the Transferor Funds.
<PAGE> 2
February 11, 2000
Page 2
Conclusions
Based upon the Internal Revenue Code of 1986, as amended (the
"Code"), applicable Treasury Department regulations in effect as of the date
hereof, current published administrative positions of the Internal Revenue
Service contained in revenue rulings and procedures, and judicial decisions, and
upon the assumptions and representations referred to herein and the documents
provided to us by you (including the Proxy Statement and the Agreement), it is
our opinion for Federal income tax purposes that:
(i) the acquisition of all of the assets of each Transferor
Fund by its corresponding Successor Fund solely in exchange for the issuance of
Successor Fund shares to each Transferor Fund and the assumption by the
corresponding Successor Fund of all of the liabilities of each Transferor Fund,
followed by the distribution in liquidation by each Transferor Fund of such
Successor Fund shares to the Transferor Fund shareholders in exchange for their
Transferor Fund shares and the termination of each Transferor Fund, will
constitute a reorganization within the meaning of Section 368(a)(1)(F) of the
Code, and each Transferor Fund and corresponding Successor Fund will each be "a
party to a reorganization" within the meaning of Section 368(b) of the Code;
(ii) no gain or loss will be recognized by any Transferor Fund
upon (a) the transfer of all of its assets to its corresponding Successor Fund
solely in exchange for the issuance of corresponding Successor Fund shares to
the Transferor Fund and the assumption by the Successor Fund of the Transferor
Fund's liabilities and (b) the distribution by the Transferor Fund of such
Successor Fund shares to the Transferor Fund shareholders;
(iii) no gain or loss will be recognized by each Successor
Fund upon its receipt of all of the corresponding Transferor Fund's assets
solely in exchange for the issuance of the Successor Fund shares to the
Transferor Fund and the assumption by the Successor Fund of all of the
liabilities of corresponding Transferor Fund;
(iv) the adjusted basis of the assets acquired by each
Successor Fund from its corresponding Transferor Fund will be, in each instance,
the same as the adjusted basis of those assets in the Transferor Fund's hands
immediately prior to the transfer;
(v) the holding period of the assets of each Transferor Fund
in the hands of its corresponding Successor Fund will, in each instance, include
the Transferor Fund's holding period for those assets;
<PAGE> 3
February 11, 2000
Page 3
(vi) no gain or loss will be recognized by each Transferor
Fund's shareholders upon the exchange of all of their shares of the Transferor
Fund solely for corresponding Successor Fund shares as part of the transaction;
(vii) the adjusted basis of the Successor Fund shares received
by the shareholders of the corresponding Transferor Fund in the transaction will
be, for each shareholder, the same as the adjusted basis of the Transferor Fund
shares surrendered in exchange therefor; and
(viii) the holding period of the Successor Fund shares
received by the shareholders of the corresponding Transferor Fund will include,
for each Transferor Fund shareholder, the tax holding period for the Transferor
Fund shares surrendered in exchange therefor, provided that such Transferor Fund
shares were held as capital assets on the date of the exchange.
This opinion represents our best legal judgment, but it has no
binding effect or official status of any kind, and no assurance can be given
that contrary positions may not be taken by the Internal Revenue Service or a
court concerning the issues. We express no opinion relating to any Federal
income tax matter except on the basis of the facts described above.
Additionally, we express no opinion on the tax consequences under foreign, state
or local laws. In issuing our opinion, we have relied solely upon existing
provisions of the Code, existing and proposed regulations thereunder, and
current administrative positions and judicial decisions. Such laws, regulations,
administrative positions and judicial decisions are subject to change at any
time. Any such change could affect the validity of the opinion set forth above.
Also, future changes in federal income tax laws and the interpretation thereof
can have retroactive effect.
We hereby consent to the filing of this opinion with the SEC
as an exhibit to the Registration Statement. We also consent to the references
to our firm under the caption "INFORMATION RELATING TO THE PROPOSED
REORGANIZATION-- Federal Income Tax Consequences" in the Proxy Statement. In
consenting to such references to our firm, we have not certified any part of the
Registration Statement, and such consent does not establish that we come within
the categories of persons whose consent is required under section 7 of the
Securities Act of 1933 or under the rules and regulations of the SEC issued
thereunder.
Very truly yours,
DRINKER BIDDLE & REATH LLP
SDDH:FCM
<PAGE> 4
ARMADA FUNDS
One Freedom Valley Drive
Oaks, Pennsylvania 19456
February 11, 2000
Drinker Biddle & Reath LLP
One Logan Square
18th and Cherry Streets
Philadelphia, PA 19103
Re: Agreement and Plan of Reorganization by and between
Armada Funds and The Parkstone Group of Funds, dated
November 17, 1999
-------------------------------------------------------
Dear Ladies and Gentlemen:
The Parkstone Group of Funds ("Parkstone") and we have
requested your opinion as to certain Federal income tax matters in connection
with the above-referenced Agreement and Plan of Reorganization (the "Agreement")
by and between Parkstone on behalf of each of the five following Funds: the
Large Capitalization Fund, U.S. Government Income Fund, Mid Capitalization Fund,
Michigan Municipal Bond Fund, and Treasury Fund (each a "Transferor Fund" and
collectively, the "Transferor Funds") and Armada Funds ("Armada") on behalf of
the following five newly formed Funds: the Large Cup Ultra Fund, U.S. Government
Income Fund, Mid Cap Growth Fund, Michigan Municipal Bond Fund, and Treasury
Plus Money Market Fund (each a "Successor Fund" and collectively the "Successor
Funds"). Both Parkstone and Armada are Massachusetts business trusts. At the
time of the Transactions, each Transferor Fund will transfer all of its assets
and liabilities to a corresponding Successor Fund in exchange for shares in a
corresponding Successor Fund. Each Transferor Fund will then distribute the
corresponding Successor Fund shares to the holders of shares in the
corresponding Transferor Fund in exchange for those Transferor Fund shares, in
liquidation of each Transferor Fund, and the existence of the Transferor Funds
will be terminated. All of the above steps constitute the "Transactions." After
the Transactions, each Successor Fund will continue the investment operations of
the corresponding Transferor Fund.
To enable you to render such opinion, we are furnishing the
following representations, which are true, accurate and complete as of the date
hereof:
<PAGE> 5
February 11, 2000
Page 2
(i) Each Successor Fund will be newly formed at the time of
the Transactions and will qualify as a "regulated investment company" under Part
I of Subchapter M of Subtitle A, Chapter 1, of the Internal Revenue Code of
1986, as amended (the "Code") for its current fiscal year.
(ii) The fair market value of the corresponding Successor Fund
shares received by each Transferor Fund shareholder will approximately equal the
fair market value of the Transferor Fund shares surrendered in the exchange.
(iii) Immediately following consummation of the Transactions,
the former holders of Transferor Fund shares will own all of the outstanding
corresponding Successor Fund shares and will own such shares solely by reason of
their ownership of Transferor Fund shares immediately prior to the Transactions.
(iv) Immediately following consummation of the Transactions,
each Successor Fund will possess the same assets and liabilities, except for
assets used to pay expenses incurred in connection with the Transactions, as
those possessed by the corresponding Transferor Fund immediately prior to the
Transactions. Assets used to pay expenses, and all redemptions and distributions
(except for regular, normal dividends) made by each Transferor Fund immediately
preceding the Transactions will, in the aggregate, constitute less than one
percent (1%) of the net assets of such Transferor Fund.
(v) Following the Transactions, each Successor Fund will
continue the historic business of the corresponding Transferor Fund or will use
a significant portion of the Transferor Fund's historic business assets in a
business.
(vi) No Successor Fund has any plan or intention to reacquire
any of its shares issued in the Transactions, except in the ordinary course of
business.
(vii) No Successor Fund has any plan or intention to sell or
otherwise to dispose of any of the assets of the corresponding Transferor Fund
acquired in the Transactions, except for dispositions made in the ordinary
course of business.
(viii) The Transactions will be accomplished for the purposes
set forth in the Combined Proxy Statement/Prospectus that is part of the
Registration Statement being filed this day with the Securities and Exchange
Commission.
<PAGE> 6
February 11, 2000
Page 3
We understand that you will, and expressly authorize you to,
rely upon each of the foregoing representations in rendering your opinion of
even date herewith. We shall undertake to advise you promptly if we become aware
of any facts or circumstances that would cause any representation that we have
given to be incorrect.
Very truly yours,
ARMADA FUNDS
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
<PAGE> 7
THE PARKSTONE GROUP OF FUNDS
One Freedom Valley Drive
Oaks, Pennsylvania 19456
February 11, 2000
Drinker Biddle & Reath LLP
One Logan Square
18th and Cherry Streets
Philadelphia, PA 19103
Re: Agreement and Plan of Reorganization by and between
Armada Funds and The Parkstone Group of Funds, dated
November 17, 1999
-----------------------------------------------------
Dear Ladies and Gentlemen:
Armada Funds ("Armada") and we have requested your opinion as
to certain Federal income tax matters in connection with the above-referenced
Agreement and Plan of Reorganization (the "Agreement") by and between The
Parkstone Group of Funds ("Parkstone"), on behalf of each of the five following
Funds: the Large Capitalization Fund, U.S. Government Income Fund, Mid
Capitalization Fund, Michigan Municipal Bond Fund, and Treasury Fund (each a
"Transferor Fund" and collectively, the "Transferor Funds") and Armada on behalf
of the following five Funds: the Large Cup Ultra Fund, U.S. Government Income
Fund, Mid Cap Growth Fund, Michigan Municipal Bond Fund, and Treasury Plus Money
Market Fund (each, a "Successor Fund" and collectively, the "Successor Funds").
Both Parkstone and Armada are Massachusetts business trusts. At the time of the
Transactions, each Transferor Fund will transfer all of its assets and
liabilities to a corresponding Successor Fund in exchange for shares in the
Successor Fund. Each Transferor Fund will then distribute the corresponding
Successor Fund shares to the holders of shares in the corresponding Transferor
Fund in exchange for those Transferor Fund shares, in liquidation of each
Transferor Fund, and the existence of the Transferor Funds will be terminated.
All of the above steps constitute the "Transactions." After the Transactions,
each Successor Fund will continue the investment operations of the corresponding
Transferor Fund.
To enable you to render such opinion, we are furnishing the
following representations, which are true, accurate and complete as of the date
hereof:
(i) Each Transferor Fund qualified as a "regulated investment
company" under Part I of Subchapter M of Subtitle A, Chapter 1, of the Internal
Revenue Code of 1986, as amended (the "Code") for its most recently ended fiscal
year and will so qualify for its current fiscal year.
<PAGE> 8
February 11, 2000
Page 2
(ii) In connection with the Transactions, there is no plan or
intention by the shareholders of any Transferor Fund who own one percent (1%) or
more of such Transferor Fund's shares, and, to the best of the knowledge of the
management of each Transferor Fund, no plan or intention on the part of the
remaining holders of Transferor Fund shares, to exchange or have redeemed any
corresponding Successor Fund shares received in the Transactions.
(iii) Immediately following consummation of the Transactions,
the former holders of Transferor Fund shares will own all of the outstanding
Successor Fund shares and will own such shares solely by reason of their
ownership of Transferor Fund shares immediately prior to the Transactions.
(iv) No Transferor Fund has outstanding any warrants, options,
convertible securities or other type of right pursuant to which any person could
acquire Transferor Fund shares.
(v) The liabilities of each Transferor Fund that will be
assumed by the corresponding Successor Fund and the liabilities, if any, to
which the transferred assets will be subject were incurred by each Transferor
Fund in the ordinary course of its business.
(vi) No Transferor Fund is under the jurisdiction of a court
in a case under Title 11 of the United States Code or similar case within the
meaning of Code section 368(a)(3)(A).
(vii) The Transactions will be accomplished for the purposes
set forth in the Combined Proxy Statement/Prospectus that is part of the
Registration Statement being filed this day with the Securities and Exchange
Commission.
<PAGE> 9
February 11, 2000
Page 3
We understand that you will, and expressly authorize you to,
rely upon each of the foregoing representations in rendering your opinion of
even date herewith concerning certain of the federal income tax consequences of
the Transactions. We shall undertake to advise you promptly if we become aware
of any facts or circumstances that would cause any representation that we have
given to be incorrect.
Very truly yours,
THE PARKSTONE GROUP OF FUNDS
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
<PAGE> 1
Exhibit (14)(a)
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Financial
Highlights", "Financial Statements", and "Appendix A" in the Combined
Prospectus/Proxy Statement and to the incorporation by reference in the
Registration Statement on Form N-14 of Armada Funds of our report dated July 9,
1999, included in the 1999 Annual Report to shareholders.
/s/ ERNST & YOUNG LLP
Philadelphia, Pennsylvania
February 16, 2000
<PAGE> 1
Exhibit 14(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Combined Prospectus/Proxy
Statement filed with Form N-14 under the Securities Act of 1933 related to the
proposed combination of The Parkstone Group of Funds with the Armada Funds, of
our report dated July 22, 1999 on our audits of the financial statements and
financial highlights of The Parkstone Group of Funds (comprising, respectively
the Prime Obligations Fund, Treasury Fund, U.S. Government Obligations Fund,
Tax-Free Fund, Bond Fund, U.S. Government Income Fund, Limited Maturity Bond
Fund, Intermediate Government Obligations Fund, Large Capitalization Fund,
Equity Income Fund, Small Capitalization Fund, International Discovery Fund,
Balanced Allocation Fund, National Tax Exempt Bond Fund, Mid Capitalization
Fund, and Michigan Municipal Bond Fund) which report is included in the Annual
Report to Shareholders for the year ended May 31, 1999. We also consent to the
reference to our Firm under the captions "Financial Highlights" and Financial
Statements" in the Combined Prospectus/Proxy Statement filed with Form N-14
under the Securities Act of 1933 related to the proposed combination of The
Parkstone Group of Funds with the Armada Funds.
Columbus, Ohio
February 17, 2000
/s/ PricewaterhouseCoopers LLP
<PAGE> 1
Exhibit (14)(c)
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the references to our
Firm included in the Registration Statement on Form N-14 under the Securities
Act of 1933 and the Investment Act of 1940, respectively. However, this action
does not constitute a consent under Section 7 of the Securities Act of 1933,
because we have not certified any part of the Registration Statement and do not
otherwise come within the categories of persons whose consent is required under
Section 7 or under the rules and regulations of the Securities and Exchange
Commission thereunder.
/s/ Drinker Biddle & Reath LLP
------------------------------
DRINKER BIDDLE & REATH LLP
Philadelphia, Pennsylvania
February 11, 2000
<PAGE> 1
Exhibit (17)(a)
PROXY CARD
PLEASE VOTE YOUR PROXY TODAY PROMPT
RESPONSE WILL SAVE THE EXPENSE OF ADDITIONAL SOLICITATIONS.
CHOOSE THE VOTING METHOD THAT IS MOST CONVENIENT FOR YOU.
1. VOTE BY MAIL: Sign and date your proxy card(s) and return them in the
enclosed postage-paid envelope. Note: Your proxy is not valid unless it
is signed.
2. VOTE BY PHONE: Dial 1-888-221-0697, enter the CONTROL NUMBER printed on
the upper portion of your proxy card and follow the simple
instructions. Telephone voting is available 24 hours a day, 7 days a
week. THE CALL IS TOLL-FREE. If you received more than one proxy card,
you can vote each card during the call. Each card has a different
control number.
3. VOTE VIA THE INTERNET: Log on to www.proxyweb.com, enter your CONTROL
NUMBER and follow the instructions on the screen. If you received more
than one proxy card, you may vote them all during the same session.
Each card has a different control number.
IF YOU VOTE BY PHONE OR THE INTERNET,
PLEASE DO NOT RETURN YOUR PROXY CARD(S)
Please fold and detach card at perforation before mailing.
THE PARKSTONE GROUP OF FUNDS
SPECIAL MEETING OF SHAREHOLDERS - MAY 10, 2000
The undersigned hereby appoints John Leven and Vicky M. Cotugno (the
"Proxies") and each of them, Proxies of the undersigned, each with power of
substitution and resubstitution, to attend, vote and act for the undersigned at
the Special Meeting of Shareholders of the PARKSTONE GROUP OF FUNDS (the
"Meeting") to be held at SEI Investments Mutual Funds Services, at 3:00 p.m.
(Eastern Time), on May 10, 2000, and at any adjournment or adjournments thereof.
The Proxies will cast votes according to the number of dollars invested in the
Funds which the undersigned may be entitled to vote with respect to the
proposals set forth below, in accordance with the specification indicated, if
any, and with all the powers which the undersigned would possess if personally
present. The undersigned hereby revokes any prior proxy to vote at such meeting,
and hereby ratifies and confirms all that said attorneys and Proxies, or either
of them, may lawfully do by virtue thereof.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS AND THE COMBINED PROXY STATEMENT/PROSPECTUS, DATED MARCH 20, 2000.
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SHARES ARE HELD BY JOINT
TENANTS, EITHER PARTY MAY SIGN. WHEN SIGNING AS ATTORNEY OR EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED
OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
- -----------------------------------------------------
SIGNATURE DATE
<PAGE> 2
Please fold and detach card at perforation before mailing.
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES OF THE PARKSTONE GROUP OF
FUNDS, WHICH UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF THE PROPOSAL.
THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO BE
TAKEN ON THE FOLLOWING PROPOSAL. PLEASE VOTE BY FILLING IN THE APPROPRIATE BOX
BELOW.
(1) To approve an Agreement and Plan of Reorganization, attached to the
Combined Proxy Statement/Prospectus for the Meeting, which provides
for:
(a) the transfer of substantially all of the assets and
liabilities of each of the PARKSTONE GROUP OF FUNDS into the
corresponding fund of The Armada Funds in exchange for A
Shares, B Shares or I Shares, as applicable of such Armada
Fund of equal value as indicated on pages 16-19 of the
Combined Proxy Statement/Prospectus;
(b) the distribution of the shares of designated classes of the
corresponding Armada Funds to shareholders of the PARKSTONE
GROUP OF FUNDS; and
(c) the dissolution under state law and the deregistration under
the Investment Company Act of 1940, as amended, of the
PARKSTONE GROUP OF FUNDS.
[ ]FOR [ ]AGAINST [ ]ABSTAIN
(2) In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting.
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE. EVERY PROPERLY SIGNED PROXY WILL BE VOTED IN THE MANNER SPECIFIED
HEREON AND, IN THE ABSENCE OF SPECIFICATION, WILL BE TREATED AS GRANTING
AUTHORITY TO VOTE "FOR" THE PROPOSAL.
<PAGE> 1
Exhibit (17)(b)
ARMADA FUNDS PROSPECTUS
A, B AND C SHARES (RETAIL)
[PHOTO]
DECEMBER 10, 1999
[logo etc.]
The Securities and Exchange Commission has not approved
any Fund shares or determined whether this prospectus is accurate
or complete. Any statement to the contrary is a criminal offense.
<PAGE> 2
Investment Adviser
NATIONAL CITY INVESTMENT
MANAGEMENT COMPANY
Investment Sub-Adviser
NATIONAL ASSET MANAGEMENT
CORPORATION
(ARMADA CORE EQUITY FUND AND
ARMADA TOTAL RETURN ADVANTAGE FUND)
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 infor-
mation that you should know about the
Class A, Class B and Class C Shares of the
Funds before investing. Please read this
prospectus and keep it for future reference.
This prospectus has been arranged into different sections so that you can
easily review this important information. The Funds are ordered according to
volatility within their respective asset class at the time of the printing of
this prospectus. On the next page, there is some general information you
should know about the Funds. For more detailed information about each Fund,
please see:
ARMADA INTERNATIONAL EQUITY FUND ........................................ 2
ARMADA SMALL CAP VALUE FUND ............................................. 5
ARMADA SMALL CAP GROWTH FUND ............................................ 8
ARMADA EQUITY GROWTH FUND ............................................... 11
ARMADA TAX MANAGED EQUITY FUND .......................................... 14
ARMADA CORE EQUITY FUND ................................................. 17
ARMADA EQUITY INDEX FUND ................................................ 20
ARMADA EQUITY INCOME FUND................................................ 22
ARMADA BALANCED ALLOCATION FUND.......................................... 25
ARMADA TOTAL RETURN
ADVANTAGE FUND ........................................................ 27
ARMADA BOND FUND ........................................................ 30
ARMADA INTERMEDIATE BOND FUND ........................................... 33
ARMADA GNMA FUND ........................................................ 36
ARMADA ENHANCED INCOME FUND ............................................. 39
ARMADA OHIO TAX EXEMPT BOND FUND ........................................ 42
ARMADA PENNSYLVANIA MUNICIPAL BOND FUND ................................. 45
ARMADA NATIONAL TAX EXEMPT BOND FUND .................................... 48
ARMADA OHIO MUNICIPAL MONEY MARKET FUND ................................. 51
ARMADA PENNSYLVANIA TAX EXEMPT
MONEY MARKET FUND ..................................................... 53
ARMADA TAX EXEMPT MONEY MARKET FUND ..................................... 55
ARMADA MONEY MARKET FUND ................................................ 58
ARMADA GOVERNMENT
MONEY MARKET FUND ..................................................... 61
ARMADA TREASURY MONEY MARKET FUND ....................................... 63
ARMADA MID CAP GROWTH FUND .............................................. 65
ARMADA LARGE CAP ULTRA FUND.............................................. 67
ARMADA U.S. GOVERNMENT INCOME FUND ...................................... 69
ARMADA MICHIGAN MUNICIPAL BOND FUND ..................................... 71
ARMADA TREASURY PLUS MONEY MARKET FUND .................................. 73
MORE INFORMATION ABOUT RISK ............................................. 76
EACH FUND'S OTHER INVESTMENTS ........................................... 80
THE INVESTMENT ADVISER, SUB-ADVISER
AND INVESTMENT TEAM ................................................... 80
PURCHASING, SELLING AND EXCHANGING FUND SHARES .......................... 82
DIVIDENDS AND TAXES ..................................................... 89
FINANCIAL HIGHLIGHTS .................................................... 92
<PAGE> 3
INTRODUCTION
Each 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 and Class C 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
RISK/RETURN SUMMARY
Each Fund has its own investment goal and strategies for reaching that goal. The
investment managers invest Fund assets in a way that they believe will help a
Fund achieve its goal. Still, investing in each Fund involves risk and there is
no guarantee that a Fund will achieve its goal. An investment manager's
judgments about the markets, the economy, or companies may not anticipate actual
market movements, economic conditions or company performance, and these
judgments may affect the return on your investment.
No matter how good a job an investment manager does, you could lose money on
your investment in a Fund, just as you could with other investments.
An investment in a Fund is not a bank deposit and it is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any government
agency.
Although a money market fund seeks to keep a constant price per share of $1.00,
there is no guarantee that a money market fund will achieve this goal and it is
possible that you may lose money by investing in the fund.
The value of your investment in a Fund (other than a money market fund) is based
primarily on the market value of the securities the Fund holds. These prices
change daily due to economic and other events that affect particular companies
and other issuers. These price movements, sometimes called volatility, may be
greater or lesser depending on the types of securities a Fund owns and the
markets in which they trade. The effect on a Fund of a change in the value of a
single security will depend on how widely the Fund diversifies its holdings.
<PAGE> 4
EQUITY FUNDS
ARMADA INTERNATIONAL EQUITY FUND
================================================================================
FUND SUMMARY
INVESTMENT GOAL
Capital appreciation
INVESTMENT FOCUS
Equity securities of foreign issuers
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
High
PRINCIPAL INVESTMENT STRATEGY
Investing in equity securities of issuers
located in at least three foreign
countries
INVESTOR PROFILE
Investors seeking capital appreciation,
who are willing to accept the risks of
foreign investing
PRINCIPAL INVESTMENT STRATEGIES
The Armada International Equity Fund's investment objective is to provide
capital appreciation by investing in a portfolio of equity securities of foreign
issuers. Equity securities of foreign issuers includes common stock, preferred
stock and convertible bonds, of companies headquartered outside the United
States. The investment objective may be changed without a shareholder vote.
The Fund will normally invest at least 80% of its total assets in the equity
securities of foreign issuers. The Fund focuses on issuers included in the
Morgan Stanley Capital International Europe, Australasia, Far East (World EAFE)
Index. The World EAFE Index is an unmanaged index which represents the
performance of more than 1,000 equity securities of companies located in those
regions. The Adviser makes judgements about the attractiveness of countries
based upon a collection of criteria. The relative valuation, growth prospects,
fiscal, monetary and regulatory government policies are considered jointly and
generally in making these judgements. The percentage of the Fund in each country
is determined by its relative attractiveness and weight in the World EAFE Index.
More than 25% of the Fund's assets may be invested in the equity securities of
issuers located in the same country. Within foreign markets, the Adviser buys
and sells securities based on its analysis of competitive position and
valuation. The Adviser sells securities whose competitive position is
deteriorating or whose valuation is unattractive relative to industry peers.
Likewise, companies with strong and durable competitive advantages and
attractive valuation are considered for purchase.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities, and will lower Fund performance.
PRINCIPAL RISKS OF INVESTING
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country.
Companies making up the World EAFE Index are generally issuers of larger cap
securities of multi-national companies who are affected by risks worldwide.
Investment in a particular country of 25% or more of the Fund's total assets
will make the Fund's performance more dependent upon the political and economic
circumstances of that country than a mutual fund more widely diversified among
issuers in different countries.
The Fund is also subject to the risk that its market segment, international
equity securities, may underperform other equity market segments or the equity
market as a whole. For additional information about risks, see "More Information
About Risk."
2 PROSPECTUS
<PAGE> 5
EQUITY FUNDS
ARMADA INTERNATIONAL EQUITY FUND (CONTINUED)
================================================================================
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
There is no performance information for Class B or Class C Shares because
neither has completed a full calendar year of operations.
The performance of Class A, Class B and Class C Shares will differ due to
differences in expenses.
The bar chart does not reflect sales charges. If sales charges had been
reflected, the returns for Class A Shares of the Fund would be less than those
shown below.
<TABLE>
<CAPTION>
1998
<S> <C>
Calendar Year Total Return 19.53%
</TABLE>
Best Quarter 20.04% (12/31/98)
Worst Quarter -15.62% (9/30/98)
The Fund's performance from January 1, 1999 to September 30, 1999 was 10.05%.
This table compares the Fund's average annual total returns for the periods
ended December 31, 1998 to those of the Morgan Stanley World EAFE Index.
- --------------------------------------------------------------------------------
CLASS A SHARES 1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
Armada International
Equity Fund 12.95% 3.45%(1)
- --------------------------------------------------------------------------------
Morgan Stanley
(World EAFE) Index(2) 20.00% 12.35%(3)
- --------------------------------------------------------------------------------
(1) Since August 1, 1997.
(2) The Morgan Stanley Capital International Europe, Australasia
and Far East (World EAFE) Index is an unmanaged index
which represents the performance of more than 1,000 equity
securities of companies located in those regions.
(3) Since August 31, 1997.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price)(1) 5.50% None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as a percentage
of net asset value) None 5.00%(2) 1.00%(3)
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends
and other Distributions (as a
percentage of offering price) None None None
- --------------------------------------------------------------------------------
Redemption Fee (as a percentage
of amount redeemed, if applicable) None None None
- --------------------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
Investment Advisory Fees 1.15% 1.15% 1.15%
- --------------------------------------------------------------------------------
Distribution and Service
(12b-1) Fees 0.10% 0.75% 0.75%
- --------------------------------------------------------------------------------
Other Expenses 0.48% 0.48% 0.48%
- --------------------------------------------------------------------------------
Total Annual Fund
Operating Expenses 1.73%(4) 2.38% 2.38%
- --------------------------------------------------------------------------------
(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 18 months from the date of purchase.
(4)The Fund's total actual annual operating expenses for Class A Shares for the
most recent fiscal year were less than the amounts shown above because the
Distributor waived a portion of the fees in order to keep total operating
expenses for Class A Shares at a specified level. With these fee waivers, the
Fund's actual total operating expenses for Class A Shares were 1.67%. The
Distributor expects to continue these waivers so that total operating expenses
for the current fiscal year will be 1.67%, however, the Distributor may
discontinue all or part of these waivers at any time.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
3 PROSPECTUS
<PAGE> 6
EQUITY FUNDS
ARMADA INTERNATIONAL EQUITY FUND (CONTINUED)
================================================================================
- --------------------------------------------------------------------------------
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:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class A Shares $716 $1,065 $1,437 $2,479
Class B Shares $741 $1,142 $1,470 $2,552
Class C Shares $341 $742 $1,270 $2,716
If you do not sell your shares at the end of the period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class B Shares $241 $742 $1,270 $2,552
Class C Shares $241 $742 $1,270 $2,716
4 PROSPECTUS
<PAGE> 7
EQUITY FUNDS
ARMADA SMALL CAP VALUE FUND
================================================================================
FUND SUMMARY
INVESTMENT GOAL
Capital appreciation
INVESTMENT FOCUS
Small cap equity securities
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
High
PRINCIPAL INVESTMENT STRATEGY
Investing in value-oriented equity
securities of smaller issuers
INVESTOR PROFILE
Investors seeking capital appreciation,
who are willing to accept the risk of
share price volatility that may
accompany small cap investing
PRINCIPAL INVESTMENT STRATEGIES
The Armada Small Cap Value Fund's investment objective is to provide capital
appreciation by investing in a diversified portfolio of publicly traded small
cap equity securities. The investment objective may be changed without a
shareholder vote. The Fund will normally invest at least 80% of its total assets
in the common stocks of small capitalization companies. The Fund may invest up
to 20% of its total assets at the time of purchase in foreign equity securities.
In buying and selling securities for the Fund, the Adviser uses a value-oriented
approach. The Adviser generally seeks to invest in equity securities based upon
price/earnings, price/book and price/cash flow ratios which are lower than the
market averages. The Adviser generally sells securities based upon
price/earnings, price/book and price/cash flow ratios which rise above market
averages or when a company no longer has a small capitalization.
The Fund considers a small capitalization or "small cap" company to be one that
has a comparable market capitalization to the companies in the Russell 2000
Value Index. The Russell 2000 Value Index is an unmanaged index comprised of
securities in the Russell 2000 Index which have less than average growth
orientation. The Russell 2000 Index is an unmanaged index comprised of the 2000
smallest companies of the 3000 largest U.S. companies based on market
capitalization.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may increase transaction costs and capital gains tax liabilities, and will
lower Fund performance.
PRINCIPAL RISKS OF INVESTING
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
Smaller capitalization companies may be more vulnerable to adverse business or
economic events than larger, more established companies. In particular, these
companies may have limited product lines, markets and financial resources, and
may depend upon a relatively small management group. Therefore, small cap stocks
may be more volatile than those of larger companies. These securities may be
traded over-the-counter or listed on an exchange and may or may not pay
dividends.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country.
The Fund is also subject to the risk that its market segment, small cap equity
securities, may underperform other equity market segments or the equity market
as a whole. For additional information about risks, see "More Information About
Risk."
5 PROSPECTUS
<PAGE> 8
EQUITY FUNDS
ARMADA SMALL CAP VALUE FUND (CONTINUED)
================================================================================
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
There is no performance information for Class B or Class C Shares because
neither has completed a full calendar year of operations.
The performance of Class A, Class B and Class C Shares will differ due to
differences in expenses.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The bar chart does not reflect sales charges. If sales charges had been
reflected, the returns for Class A Shares of the Fund would be less than those
shown below.
1995 1996 1997 1998
CALENDAR YEAR TOTAL RETURN 18.41% 22.32% 32.05% -7.64%
Best Quarter 17.65% (12/31/98)
Worst Quarter -17.92% (9/30/98)
The Fund's performance from January 1, 1999 to
September 30, 1999 was 1.25%.
This table compares the Fund's average annual total returns
for the periods ended December 31, 1998 to those of the
Russell 2000 Value Index.
- --------------------------------------------------------------------------------
CLASS A SHARES 1 YEAR SINCE INCEPTION
Armada Small Cap
Value Fund -12.74% 13.53%(1)
- --------------------------------------------------------------------------------
Russell 2000
Value Index (2) -2.55% 13.71%(3)
- --------------------------------------------------------------------------------
(1) Since August 15, 1994.
(2) The Russell 2000 Value Index is comprised of securities in the
Russell 2000 Index with a less than average growth
orientation. Companies in the Russell 2000 Value Index
generally have low price to book and price-earnings ratios.
(3) Since August 31, 1994.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if
you buy and hold shares of the Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
CLASS A CLASS B CLASS C
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price)(1) 5.50% None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as a percentage
of net asset value) None 5.00%(2) 1.00%(3)
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends
and other Distributions (as a
percentage of offering price) None None None
- --------------------------------------------------------------------------------
Redemption Fee (as a percentage
of amount redeemed, if applicable) None None None
- --------------------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
Investment Advisory Fees 1.00% 1.00% 1.00%
- --------------------------------------------------------------------------------
Distribution and Service
(12b-1) Fees 0.10% 0.75% 0.75%
- --------------------------------------------------------------------------------
Other Expenses 0.40% 0.40% 0.40%
- --------------------------------------------------------------------------------
Total Annual Fund
Operating Expenses 1.50%(4) 2.15% 2.15%
- --------------------------------------------------------------------------------
(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 Shares for the
most recent fiscal year were less than the amounts shown above because the
Distributor waived a portion of the fees in order to keep total operating
expenses for Class A Shares at a specified level. With these fee waivers, the
Fund's actual total operating expenses for Class A Shares were 1.44%. The
Distributor expects to continue these waivers so that total operating expenses
for the current fiscal year will be 1.44%, however, the Distributor may
discontinue all or part of these waivers at any time.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
6 PROSPECTUS
<PAGE> 9
EQUITY FUNDS
ARMADA SMALL CAP VALUE FUND (CONTINUED)
================================================================================
- --------------------------------------------------------------------------------
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:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class A Shares $694 $ 998 $1,323 $2,242
Class B Shares $718 $1,073 $1,354 $2,315
Class C Shares $318 $ 673 $1,154 $2,483
If you do not sell your shares at the end of the period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class B Shares $218 $673 $1,154 $2,315
Class C Shares $218 $673 $1,154 $2,483
7 PROSPECTUS
<PAGE> 10
EQUITY FUNDS
ARMADA SMALL CAP GROWTH FUND
================================================================================
FUND SUMMARY
INVESTMENT GOAL
Capital appreciation
INVESTMENT FOCUS
Small cap equity securities
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
High
PRINCIPAL INVESTMENT STRATEGY
Investing in growth-oriented equity
securities of smaller issuers
INVESTOR PROFILE
Investors seeking capital appreciation,
who are willing to accept the risk of
share price volatility that may
accompany small cap investing
PRINCIPAL INVESTMENT STRATEGIES
The Armada Small Cap Growth Fund's investment objective is to provide capital
appreciation by investing in a diversified portfolio of publicly traded small
cap equity securities. The investment objective may be changed without a
shareholder vote. The Fund normally invests at least 80% of its total assets in
the common stocks of companies with small stock market capitalizations. The Fund
may invest up to 20% of its total assets at the time of purchase in foreign
equity securities. The Adviser seeks to invest in small capitalization companies
with strong growth in revenue, earnings and cash flow. Purchase decisions are
also based on the security's valuation relative to the company's expected growth
rate, earnings quality and competitive position, valuation compared to similar
securities and the security's trading liquidity. Reasons for selling securities
include disappointing fundamentals, negative industry developments, evidence of
management's inability to execute a sound business plan, capitalization
exceeding the Adviser's definition of "small capitalization," desire to reduce
exposure to an industry or sector, and valuation levels which cannot be
justified by the company's fundamental growth prospects.
The Fund considers a small capitalization or "small cap" company to be one that
has a comparable market capitalization to the companies in the Russell 2000
Growth Index. The Russell 2000 Growth Index is an unmanaged index comprised of
securities in the Russell 2000 Index with a greater than average growth
orientation. The Russell 2000 Index is an unmanaged index comprised of the 2000
smallest companies of the 3000 largest U.S. companies based on market
capitalization.
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
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
The smaller capitalization companies the Fund invests in may be more vulnerable
to adverse business or economic events than larger, more established companies.
In particular, these small companies may have limited product lines, markets and
financial resources, and may depend upon a relatively small management group.
Therefore, small cap stocks may be more volatile than those of larger companies
may. These securities may be traded over-the-counter or listed on an exchange
and may or may not pay dividends.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country.
The Fund is also subject to the risk that its market segment, small cap equity
securities, may underperform other equity market segments or the equity market
as a whole. For additional information about risks, see "More Information About
Risk."
8 PROSPECTUS
<PAGE> 11
EQUITY FUNDS
ARMADA SMALL CAP GROWTH FUND (CONTINUED)
================================================================================
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
There is no performance information for Class B or Class C Shares because
neither has completed a full calendar year of operations.
The performance of Class A, Class B and Class C Shares will differ due to
differences in expenses.
The bar chart does not reflect sales charges. If sales charges had been
reflected, the returns for Class A Shares of the Fund would be less than those
shown below.
1998
CALENDAR YEAR TOTAL RETURN 7.28%
Best Quarter 22.67% (12/31/98)
Worst Quarter -21.18% (9/30/98)
The Fund's performance from January 1, 1999 to September 30, 1999 was -0.35%.
This table compares the Fund's average annual total returns for the periods
ended December 31, 1998 to those of the Russell 2000 Growth Index.
- --------------------------------------------------------------------------------
CLASS A SHARES 1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
Armada Small Cap
Growth Fund 1.39% 6.03%(1)
- --------------------------------------------------------------------------------
Russell 2000
Growth Index(2) -2.55% 0.81%(3)
- --------------------------------------------------------------------------------
(1)Since August 1, 1997.
(2)The Russell 2000 Growth Index is comprised of securities in
the Russell 2000 Stock Index with a greater than average
growth orientation.
(3)Since August 31, 1997.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price)(1) 5.50% None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as a percentage
of net asset value) None 5.00%(2) 1.00%(3)
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends
and other Distributions (as a
percentage of offering price) None None None
- --------------------------------------------------------------------------------
Redemption Fee (as a percentage
of amount redeemed, if applicable) None None None
- --------------------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
Investment Advisory Fees 1.00% 1.00% 1.00%
- --------------------------------------------------------------------------------
Distribution and Service
(12b-1) Fees 0.10% 0.75% 0.75%
- --------------------------------------------------------------------------------
Other Expenses 0.42% 0.42% 0.42%
- --------------------------------------------------------------------------------
Total Annual Fund
Operating Expenses 1.52%(4) 2.17% 2.17%
- --------------------------------------------------------------------------------
(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 Shares for the
most recent fiscal year were less than the amounts shown above because the
Distributor waived a portion of the fees in order to keep total operating
expenses for Class A Shares at a specified level. With these fee waivers, the
Fund's actual total operating expenses for Class A Shares were 1.46%. The
Distributor expects to continue these waivers so that total operating expenses
for the current fiscal year will be 1.46%, however, the Distributor may
discontinue all or part of these waivers at any time.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
9 PROSPECTUS
<PAGE> 12
EQUITY FUNDS
ARMADA SMALL CAP GROWTH FUND (CONTINUED)
================================================================================
- --------------------------------------------------------------------------------
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:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class A Shares $696 $1,004 $1,333 $2,263
Class B Shares $720 $1,079 $1,364 $2,336
Class C Shares $320 $679 $1,164 $2,503
If you do not sell your shares at the end of the period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class B Shares $220 $679 $1,164 $2,336
Class C Shares $220 $679 $1,164 $2,503
10 PROSPECTUS
<PAGE> 13
EQUITY FUNDS
ARMADA EQUITY GROWTH FUND
================================================================================
FUND SUMMARY
INVESTMENT GOAL
Capital appreciation
INVESTMENT FOCUS
Large cap equity securities
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
High
PRINCIPAL INVESTMENT STRATEGY
Investing in growth-oriented common
stocks of larger issuers
INVESTOR PROFILE
Investors seeking capital appreciation
and who are willing to accept the risk
of investing in equity securities
PRINCIPAL INVESTMENT STRATEGIES
The Armada Equity Growth Fund's investment objective is to provide capital
appreciation by investing in a diversified portfolio of publicly traded larger
cap equity securities. The investment objective may be changed without
shareholder vote. The Fund will normally invest at least 80% of its total assets
in a diversified portfolio of common stocks and securities convertible into
common stocks of companies with large stock market capitalization. The Fund may
invest up to 20% of its total assets at the time of purchase in foreign equity
securities. In buying and selling securities for the Fund, the Adviser considers
factors such as historical and projected earnings growth, earnings quality and
liquidity. The Fund generally purchases common stocks that are listed on a
national securities exchange or unlisted securities with an established
over-the-counter market.
The Fund considers a large capitalization or "large cap" company to be one that
has a comparable market capitalization to the companies in the S&P500 Composite
Index. The S&P500 Composite Index is a widely recognized, unmanaged index of 500
common stocks which are generally representative of the U.S. stock market as a
whole.
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
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country.
The Fund is also subject to the risk that its market segment, large cap equity
securities, may underperform other equity market segments or the equity market
as a whole. For additional information about risks, see "More Information About
Risk."
11 PROSPECTUS
<PAGE> 14
EQUITY FUNDS
ARMADA EQUITY GROWTH FUND (CONTINUED)
================================================================================
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
There is no performance information for Class B or Class C Shares because
neither has completed a full calendar year of operations.
The performance of Class A, Class B and Class C Shares will differ due to
differences in expenses.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The bar chart does not reflect sales charges. If sales charges had been
reflected, the returns for Class A Shares of the Fund would be less than those
shown below.
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C>
CALENDAR YEAR TOTAL RETURN 6.05% -0.47% -0.94% 28.51% 19.98% 36.34% 28.74%
Best Quarter 22.85% (12/31/98)
Worst Quarter -9.00% (9/30/98)
The Fund's performance from January 1, 1999 to September 30, 1999 was 3.89%.
This table compares the Fund's average annual total returns for the periods
ended December 31, 1998 to those of the S&P 500 Composite Index.
- --------------------------------------------------------------------------------
CLASS A SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- --------------------------------------------------------------------------------
Armada Equity
Growth Fund 21.66% 20.43% 15.61%(1)
- --------------------------------------------------------------------------------
S&P500
Composite Index(2) 28.60% 24.05% 19.64%(3)
- --------------------------------------------------------------------------------
(1)Since April 15, 1991.
(2)The S&P500 Composite Index is a widely recognized,
unmanaged index of 500 common stocks which are generally
representative of the U.S. stock market as a whole.
(3)Since April 30, 1991.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price)(1) 5.50% None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as a percentage
of net asset value) None 5.00%(2) 1.00%(3)
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends
and other Distributions (as a
percentage of offering price) None None None
- --------------------------------------------------------------------------------
Redemption Fee (as a percentage
of amount redeemed, if applicable) None None None
- --------------------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
Investment Advisory Fees 0.75% 0.75% 0.75%
- --------------------------------------------------------------------------------
Distribution and Service
(12b-1) Fees 0.10% 0.75% 0.75%
- --------------------------------------------------------------------------------
Other Expenses 0.38% 0.38% 0.38%
Total Annual Fund
Operating Expenses 1.23%(4) 1.88% 1.88%
- --------------------------------------------------------------------------------
</TABLE>
(1) This sales charge varies depending upon how much you invest. See "Purchasing
Fund Shares."
(2) This amount applies to redemptions during the first and second years. The
deferred sales charge decreases to 4.0%, 3.0% and 2.0% for redemptions made
during the third through fifth years, respectively. No deferred sales charge is
charged after the fifth year. For more information see "Selling Fund Shares."
(3) 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 Shares for the
most recent fiscal year were less than the amounts shown above because the
Distributor waived a portion of the fees in order to keep total operating
expenses for Class A Shares at a specified level. With these fee waivers, the
Fund's actual total operating expenses for Class A Shares were 1.17%. The
Distributor expects to continue these waivers so that total operating expenses
for the current fiscal year will be 1.17%, however, the Distributor may
discontinue all or part of these waivers at any time.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
12 PROSPECTUS
<PAGE> 15
EQUITY FUNDS
ARMADA EQUITY GROWTH FUND (Continued)
================================================================================
- --------------------------------------------------------------------------------
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:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class A Shares $668 $919 $1,188 $1,957
Class B Shares $691 $991 $1,216 $2,030
Class C Shares $291 $591 $1,016 $2,201
If you do not sell your shares at the end of the period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class B Shares $191 $591 $1,016 $2,030
Class C Shares $191 $591 $1,016 $2,201
13 PROSPECTUS
<PAGE> 16
EQUITY FUNDS
ARMADA TAX MANAGED EQUITY FUND
================================================================================
FUND SUMMARY
INVESTMENT GOAL
Capital appreciation, while minimizing
the impact of taxes
INVESTMENT FOCUS
Equity securities
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
High
PRINCIPAL INVESTMENT STRATEGY
Investing in common stock using
strategies designed to minimize the
impact of taxes
INVESTOR PROFILE
Investors who are seeking capital
appreciation while minimizing the
impact of taxes and who are willing to
accept the risk of investing in equity
securities
PRINCIPAL INVESTMENT STRATEGIES
The Armada Tax Managed Equity Fund's investment objective is to provide capital
appreciation while minimizing the impact of taxes on shareholders' returns. The
investment objective may be changed without a shareholder vote. The Fund
normally invests at least 80% of the Fund's total assets in common stocks. The
Fund may invest up to 20% of its total assets at the time of purchase in foreign
equity securities. Equity securities of foreign issuers includes common stock,
preferred stock and convertible bonds, of companies headquartered outside the
United States. The Adviser buys and sells common stocks based on factors such as
historical and projected long-term earnings growth, earnings quality and
liquidity. The Adviser attempts to minimize the realization of taxable gains by
investing in the securities of companies with above average earnings
predictability and stability which the Fund expects to hold for several years.
This generally results in a low level of portfolio turnover. In addition, the
Fund seeks to distribute relatively low levels of taxable investment income by
investing in stocks with low dividend yields. When the Fund sells appreciated
securities, it will attempt to select the share lots with the highest cost basis
in order to hold realized capital gains to a minimum. The Fund may, when
consistent with its overall investment approach, sell depreciated securities to
offset realized capital gains. The Fund may redeem in-kind redemptions
consistent with its investment objective. An in-kind redemption may serve to
minimize any tax impact on the remaining shareholders, because a Fund generally
recognizes no taxable gain (or loss) on the securities used to make an in-kind
redemption. The Fund is not a tax exempt fund, and it expects to distribute
taxable dividends and capital gains from time to time.
PRINCIPAL RISKS OF INVESTING
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country. For
additional information about risks, see "More Information About Risk."
14 PROSPECTUS
<PAGE> 17
EQUITY FUNDS
ARMADA TAX MANAGED EQUITY FUND (CONTINUED)
================================================================================
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate
the volatility of an investment in the Fund. Of course,
the Fund's past performance does not necessarily
indicate how the Fund will perform in the future.
There is no performance information for Class B or
Class C Shares because neither has completed a full
calendar year of operations.
The performance of Class A, Class B and Class C Shares
will differ due to differences in expenses.
This bar chart shows changes in the performance of the
Fund's Class A Shares from year to year.
The bar chart does not reflect sales charges. If sales
charges had been reflected, the returns for Class A Shares
of the Fund would be less than those shown below.
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CALENDAR YEAR TOTAL RETURN 29.63% -1.08% 34.07% 6.89% 1.20% -1.85% 29.51% 20.64% 39.06% 37.25%
</TABLE>
Best Quarter 23.02% (12/31/98)
Worst Quarter -14.38% (9/30/90)
The Fund's performance from January 1, 1999 to
September 30, 1999 was 2.40%.
This table compares the Fund's average annual total returns
for the periods ended December 31, 1998 to those of the S&P
500 Composite Index.
SINCE
CLASS A SHARES 1 YEAR 5 YEARS 10 YEARS INCEPTION
- --------------------------------------------------------------------------------
Armada Tax
Managed
Equity Fund 29.74% 22.57% 17.80% 17.65%(1)
S&P 500
Composite
Index(2) 28.60% 24.05% 19.19% 18.97%(1)
- --------------------------------------------------------------------------------
(1)Since June 30, 1984.
(2)The S&P 500 Composite Index is a widely recognized,
unmanaged index of 500 common stocks which are generally
representative of the U.S. stock market as a whole.
The performance of the Armada Tax Managed Equity Fund for the period prior to
May 11, 1998 is represented by the performance of a common trust fund ("common
trust fund") which operated prior to the effectiveness of the registration
statement of the Tax Managed Equity Fund. The common trust fund was advised by
National City Bank, an affiliate of the Adviser. At the time of the Tax Managed
Equity Fund's inception, the common trust fund was operated using materially
equivalent investment objectives, policies, guidelines and restrictions as the
Fund. In connection with the Tax Managed Equity Fund's commencement of
operations, on May 11, 1998, the common trust fund transferred its assets to the
Fund. At the time of the transfer, the Adviser did not manage any other
collective investment or common trust funds using materially equivalent
investment objectives, policies, guidelines and restrictions to those of the Tax
Managed Equity Fund.
The common trust fund was not open to the public generally, nor registered under
the Investment Company Act of 1940 (the "1940 Act") or subject to certain
restrictions that are imposed by the 1940 Act and the Internal Revenue Code. If
the common trust fund had been registered under the 1940 Act, performance may
have been adversely affected. Performance quotations of the common trust fund
represent past performance of the Adviser managed common trust fund, which are
separate and distinct from the Tax Managed Equity Fund; do not represent past
performance of the Fund; and should not be considered as representative of
future results of the Fund.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price)(1) 5.50% None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as a percentage
of net asset value) None 5.00%(2) 1.00%(3)
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends
and other Distributions (as a
percentage of offering price) None None None
- --------------------------------------------------------------------------------
Redemption Fee (as a percentage
of amount redeemed, if applicable) None None None
- --------------------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------------------
15 PROSPECTUS
<PAGE> 18
EQUITY FUNDS
ARMADA TAX MANAGED EQUITY FUND (CONTINUED)
================================================================================
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Investment Advisory Fees 0.75% 0.75% 0.75%
- --------------------------------------------------------------------------------
Distribution and Service
(12b-1) Fees 0.10% 0.75% 0.75%
- --------------------------------------------------------------------------------
Other Expenses 0.40% 0.40% 0.40%
- --------------------------------------------------------------------------------
Total Annual Fund
Operating Expenses 1.25%(4) 1.90% 1.90%
- --------------------------------------------------------------------------------
</TABLE>
(1) This sales charge varies depending upon how much you invest. See "Purchasing
Fund Shares."
(2) This amount applies to redemptions during the first and second years. The
deferred sales charge decreases to 4.0%, 3.0% and 2.0% for redemptions made
during the third through fifth years, respectively. No deferred sales charge is
charged after the fifth year. For more information see "Selling Fund Shares."
(3) 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 Shares for the
most recent fiscal year were less than the amounts shown above because the
Distributor waived a portion of the fees in order to keep total operating
expenses for Class A Shares at a specified level. With these fee waivers, the
Fund's actual total operating expenses for Class A Shares were 1.19%. The
Distributor expects to continue these waivers so that total operating expenses
for the current fiscal year will be 1.19%, however, the Distributor may
discontinue all or part of these waivers at any time.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return, 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 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares $670 $925 $1,199 $1,978
Class B Shares $693 $997 $1,226 $2,051
Class C Shares $293 $597 $1,026 $2,222
</TABLE>
If you do not sell your shares at the end of the period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class B Shares $193 $597 $1,026 $2,051
Class C Shares $193 $597 $1,026 $2,222
</TABLE>
16 PROSPECTUS
<PAGE> 19
EQUITY FUNDS
ARMADA CORE EQUITY FUND
================================================================================
FUND SUMMARY
INVESTMENT GOAL
Capital appreciation
INVESTMENT FOCUS
Large cap common stocks
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
High
PRINCIPAL INVESTMENT STRATEGY
Investing in large capitalization
common stocks
INVESTOR PROFILE
Investors seeking capital appreciation,
who are willing to accept the risk of
investing in equity securities
PRINCIPAL INVESTMENT STRATEGIES
The Armada Core Equity Fund's investment objective is to provide capital
appreciation by blending value and growth investment styles. The investment
objective may be changed without a shareholder vote. The Fund normally invests
at least 80% of its total assets in a diversified portfolio of common stocks and
securities convertible into common stocks of companies with large stock market
capitalizations. The Sub-Adviser will normally invest between 20% and 50% of its
assets in the following three types of equity securities: (1) common stocks that
meet the Sub-Adviser's criteria for five-year annual earnings-per-share rate
during the last five years; (2) common stocks with price-to-earnings ratios
below the average of the companies included in the S&P 500 Composite Index; and
(3) common stocks that pay dividends at a rate above the average of the
companies included in the S&P 500 Composite Index.
The Sub-Adviser utilizes a systematic, disciplined investment process when
selecting individual securities. This includes: (1) screening a database for
liquidity and the criteria listed above; (2) scoring each issue emphasizing
fundamental, valuation and technical indicators; and (3) security analysis that
further evaluates the company and the stock, which includes an analysis of
company fundamentals such as earnings, profitability and management, valuation
such as price/earnings, price/book and yield, and technical analysis emphasizing
individual stock price trends.
The sell discipline involves the monitoring of each company's fundamental,
valuation, and technical measures. If one of these measures is unfavorable, an
immediate review of that company is performed. If two of these three measures
are unfavorable, that stock is sold. The Fund may invest up to 20% of its total
assets at the time of purchase in foreign equity securities.
The Fund considers a large capitalization or "large cap" company to be one that
has a comparable market capitalization to the companies in the S&P 500 Composite
Index. The S&P 500 Composite Index is a widely recognized, unmanaged index of
500 common stocks which are generally representative of the U.S. stock market as
a whole.
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
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country.
The Fund is also subject to the risk that its market segment, large cap equity
securities, may underperform other equity market segments or the equity market
as a whole. For additional information about risks, see "More Information About
Risk."
17 PROSPECTUS
<PAGE> 20
EQUITY FUNDS
ARMADA CORE EQUITY FUND (CONTINUED)
================================================================================
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
There is no performance information for Class B or Class C Shares because
neither has completed a full calendar year of operations.
The performance of Class A, Class B and Class C Shares will differ due to
differences in expenses.
The bar chart does not reflect sales charges. If sales charges had been
reflected, the returns for Class A Shares of the Fund would be less than those
shown below.
1998
CALENDAR YEAR TOTAL RETURN 31.99%
Best Quarter 25.04% (12/31/98)
Worst Quarter -6.90% (9/30/98)
The Fund's performance from January 1, 1999 to
September 30, 1999 was 6.63%.
This table compares the Fund's average annual total returns for the periods
ended December 31, 1998 to those of the S&P 500 Composite Index.
CLASS A SHARES 1 YEAR SINCE INCEPTION
- -------------------------------------------------------------------------------
Armada Core
Equity Fund 24.68% 19.13%(1)
S&P 500
Composite Index(2) 28.60% 28.38%(3)
- -------------------------------------------------------------------------------
(1)Since August 1, 1997.
(2)The S&P 500 Composite Index is a widely recognized,
unmanaged index of 500 common stocks which are generally
representative of the U.S. stock market as a whole.
(3)Since August 31, 1997.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if
you buy and hold shares of the Fund.
- -------------------------------------------------------------------------------
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
- -------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price)(1) 5.50% None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as a percentage
of net asset value) None 5.00%(2) 1.00%(3)
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends
and other Distributions (as a
percentage of offering price) None None None
- --------------------------------------------------------------------------------
Redemption Fee (as a
percentage of amount
redeemed, if applicable) None None None
- --------------------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- -------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
Investment Advisory Fees 0.75% 0.75% 0.75%
- --------------------------------------------------------------------------------
Distribution and Service
(12b-1) Fees 0.10% 0.75% 0.75%
- --------------------------------------------------------------------------------
Other Expenses 0.37% 0.37% 0.37%
- --------------------------------------------------------------------------------
Total Annual Fund
Operating Expenses 1.22%(4) 1.87% 1.87%
- --------------------------------------------------------------------------------
(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 Shares for the
most recent fiscal year were less than the amounts shown above because the
Distributor waived a portion of the fees in order to keep total operating
expenses for Class A Shares at a specified level. With these fee waivers, the
Fund's actual total operating expenses for Class A Shares were 1.16%. The
Distributor expects to continue these waivers so that total operating expenses
for the current fiscal year will be 1.16%, however, the Distributor may
discontinue all or part of these waivers at any time.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
18 PROSPECTUS
<PAGE> 21
EQUITY FUNDS
ARMADA CORE EQUITY FUND (CONTINUED)
================================================================================
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:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class A Shares $667 $916 $1,183 $1,946
Class B Shares $690 $988 $1,211 $2,019
Class C Shares $290 $588 $1,011 $2,190
If you do not sell your shares at the end of the period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class B Shares $190 $588 $1,011 $2,019
Class C Shares $190 $588 $1,011 $2,190
19 PROSPECTUS
<PAGE> 22
EQUITY FUNDS
ARMADA EQUITY INDEX FUND
================================================================================
FUND SUMMARY
INVESTMENT GOAL
To approximate, before Fund expenses,
the investment results of the S&P500
Composite Index
INVESTMENT FOCUS
Common stocks of larger issuers
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
High
PRINCIPAL INVESTMENT STRATEGY
Investing in stocks that comprise the
S&P 500 Composite Index
INVESTOR PROFILE
Investors seeking returns similar to the
S&P 500 Composite Index, who are
willing to accept the risk of investing
in equity securities
PRINCIPAL INVESTMENT STRATEGIES
The Armada Equity Index Fund's investment objective is to provide investment
results that, before Fund expenses, approximate the aggregate price and dividend
performance of the securities included in the S&P 500 Composite Index by
investing in securities comprising the S&P 500 Composite Index. The investment
objective may be changed without a shareholder vote. The S&P 500 Composite Index
is made up of common stocks of 500 large, publicly traded companies. The Fund
buys and holds all stocks included in the S&P 500 Composite Index in exactly the
same proportion as those stocks are held in the Index. Stocks are eliminated
from the Fund when removed from the S&P 500 Composite Index. The Adviser makes
no attempt to "manage" the Fund in the traditional sense (i.e., by using
economic, financial or market analysis).
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
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
The Fund is also subject to the risk that its market segment, the S&P 500
Composite Index of common stocks, may underperform other equity market segments
or the equity market as a whole.
The Fund's ability to duplicate the performance of the S&P 500 Composite Index
will depend to some extent on the size and timing of cash flows into and out of
the Fund, as well as on the level of the Fund's expenses. For additional
information about risks, see "More Information About Risk."
20 PROSPECTUS
<PAGE> 23
EQUITY FUNDS
ARMADA EQUITY INDEX FUND (CONTINUED)
================================================================================
PERFORMANCE INFORMATION
There is no bar chart or performance information for the Class A, Class B or
Class C Shares because none has completed a full calendar year of operations.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if
you buy and hold shares of the Fund.
- -------------------------------------------------------------------------------
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
- -------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price)(1) 3.75% None None
- -------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as a percentage
of net asset value) None 5.00%(2) 1.00%(3)
- -------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends
and other Distributions (as a
percentage of offering price) None None None
- -------------------------------------------------------------------------------
Redemption Fee (as a percentage
of amount redeemed, if
applicable) None None None
- -------------------------------------------------------------------------------
Exchange Fee None None None
- -------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- -------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
Investment Advisory Fees 0.35% 0.35% 0.35%
- -------------------------------------------------------------------------------
Distribution and Service
(12b-1) Fees 0.10% 0.75% 0.75%
- -------------------------------------------------------------------------------
Other Expenses 0.41% 0.41% 0.41%
- -------------------------------------------------------------------------------
Total Annual Fund
Operating Expenses(4) 0.86% 1.51% 1.51%
- -------------------------------------------------------------------------------
(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 Shares for
the most recent fiscal year were less than the amounts shown above because the
Adviser and Distributor each waived a portion of the fees in order to keep
total operating expenses for Class A Shares at a specified level. With these
fee waivers, the Fund's actual total operating expenses were 0.61% for the
Class A Shares. Based on the foregoing, total operating expenses for Class A,
Class B and Class C Shares are expected to be 0.61%, 1.36% (estimated) and
1.36% (estimated), respectively. The Adviser and Distributor expect to continue
these waivers, however, they may discontinue all or part of these waivers at
any time.
For more information about these fees, see "Investment Adviser,
Sub-Adviser and Investment Team" and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return, 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:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
Class A Shares $459 $639 $834 $1,396
Class B Shares $654 $877 $1,024 $1,624
Class C Shares $254 $477 $824 $1,802
If you do not sell your shares at the end of the period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
Class B Shares $154 $477 $824 $1,624
Class C Shares $154 $477 $824 $1,802
21 PROSPECTUS
<PAGE> 24
EQUITY FUNDS
ARMADA EQUITY INCOME FUND
================================================================================
FUND SUMMARY
INVESTMENT GOAL
Capital appreciation
INVESTMENT FOCUS
Income producing equity securities
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Medium
PRINCIPAL INVESTMENT STRATEGY
Investing in equity securities that
provide a higher yield than the general
market
INVESTOR PROFILE
Investors seeking an income
component as well as capital
appreciation and who are willing to
accept the risk of investing in equity
securities
PRINCIPAL INVESTMENT STRATEGIES
The Armada Equity Income Fund's investment objective is to provide capital
appreciation by investing in a diversified portfolio of publicly traded equity
securities which, in the aggregate, provide a premium current yield. Equity
securities include public and privately issued equity securities, common and
preferred stocks, warrants, rights to subscribe to common stock and convertible
securities, as well as instruments that attempt to track the price movement of
equity indices. The investment objective may be changed without a shareholder
vote.
The Fund normally invests at least 80% of its total assets in common stocks and
securities convertible into common stocks of companies that have the ability to
pay dividends with a yield above the S&P 500 Composite Index. The Fund may
invest up to 20% of its total assets at the time of purchase in foreign equity
securities. In buying and selling securities for the Fund, the Adviser
emphasizes equity securities and convertible securities that provide a higher
yield than the general market. The Fund will generally sell securities when
their yields approach a market yield or they otherwise fail to satisfy
investment criteria.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities, and will lower Fund performance.
PRINCIPAL RISKS OF INVESTING
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country.
The Fund is also subject to the risk that its market segment, income producing
equity securities, may underperform other equity market segments or the equity
market as a whole. For additional information about risks, see "More Information
About Risk."
22 PROSPECTUS
<PAGE> 25
EQUITY FUNDS
ARMADA EQUITY INCOME FUND (CONTINUED)
================================================================================
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
There is no performance information for Class B or Class C Shares because
neither has completed a full calendar year of operations.
The performance of Class A, Class B and Class C Shares will differ due to
differences in expenses.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The bar chart does not reflect sales charges. If sales charges had been
reflected, the returns for Class A Shares of the Fund would be less than those
shown below.
<TABLE>
<CAPTION>
1995 1996 1997 1998
<S> <C> <C> <C> <C>
CALENDAR YEAR TOTAL RETURN 27.37% 17.89% 28.87% 9.77%
</TABLE>
Best Quarter 12.50% (6/30/97)
Worst Quarter -8.97% (9/30/98)
The Fund's performance from January 1, 1999 to September 30, 1999 was 0.49%.
This table compares the Fund's average annual total returns for the periods
ended December 31, 1998 to those of the S&P 500/Barra Value Index.
CLASS A SHARES 1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
Armada Equity
Income Fund 3.72% 16.79%(1)
S&P 500/Barra
Value Index(2) 14.68% 22.21%(3)
- --------------------------------------------------------------------------------
(1)Since August 22, 1994.
(2)The S&P 500/Barra Value Index is comprised of securities in the S&P 500
Composite Index that have a lower than average price-to-book ratio. The S&P 500
Composite Index is a widely recognized, unmanaged index of 500 common stocks
which are generally representative of the U.S. stock market as a whole.
(3)Since August 31, 1994.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price)(1) 5.50% None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as a percentage
of net asset value) None 5.00%(2) 1.00%(3)
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends
and other Distributions (as a
percentage of offering price) None None None
- --------------------------------------------------------------------------------
Redemption Fee (as a percentage
of amount redeemed, if applicable) None None None
- --------------------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
Investment Advisory Fees 0.75% 0.75% 0.75%
- --------------------------------------------------------------------------------
Distribution and Service
(12b-1) Fees 0.10% 0.75% 0.75%
- --------------------------------------------------------------------------------
Other Expenses 0.39% 0.39% 0.39%
- --------------------------------------------------------------------------------
Total Annual Fund
Operating Expenses 1.24%(4) 1.89% 1.89%
- --------------------------------------------------------------------------------
(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 Shares for the
most recent fiscal year were less than the amounts shown above because the
Distributor waived a portion of the fees in order to keep total operating
expenses for Class A Shares at a specified level. With these fee waivers, the
Fund's actual total operating expenses for Class A Shares were 1.18%. The
Distributor expects to continue these waivers so that total operating expenses
for the current fiscal year will be 1.18%, however, the Distributor may
discontinue all or part of these waivers at any time.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
23 PROSPECTUS
<PAGE> 26
EQUITY FUNDS
ARMADA EQUITY INCOME FUND (CONTINUED)
================================================================================
- --------------------------------------------------------------------------------
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:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class A Shares $669 $922 $1,194 $1,967
Class B Shares $692 $994 $1,221 $2,040
Class C Shares $292 $594 $1,021 $2,212
If you do not sell your shares at the end of the period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class B Shares $192 $594 $1,021 $2,040
Class C Shares $192 $594 $1,021 $2,212
24 PROSPECTUS
<PAGE> 27
BALANCED FUND
AMADA BALANCED ALLOCATION FUND
================================================================================
FUND SUMMARY
INVESTMENT GOAL
Long-term capital appreciation and
current income
INVESTMENT FOCUS
A combination of growth-oriented
common stocks, fixed income
securities and cash equivalents
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Medium
PRINCIPAL INVESTMENT STRATEGY
Investing in a diversified portfolio of
growth-oriented common stocks,
investment grade fixed income
securities and cash equivalents with
varying asset allocations depending
on the Adviser's assessment of
market conditions
INVESTOR PROFILE
Investors seeking a broad diversifi-
cation by asset class and style to
manage risk and provide the potential
for above-average total returns (as
gauged by the returns of the S&P500
Composite Index and the Lehman
Brothers Aggregate Bond Index)
PRINCIPAL INVESTMENT STRATEGIES
The Armada Balanced Allocation Fund's investment objective is to provide long-
term capital appreciation and current income. The investment objective may be
changed without a shareholder vote. The Fund intends to invest 50% to 70% of its
net assets in common stocks and convertible securities, 25% to 55% of its net
assets in investment grade fixed income securities such as corporate bonds and
U.S. Government securities and up to 30% of its net assets in cash and cash
equivalent securities. The Fund may invest up to 20% of its total assets at the
time of purchase in foreign securities (which includes common stock, preferred
stock and convertible bonds of companies headquartered outside the United
States). The Fund also invests in the common stock of small capitalization
companies. The Adviser buys and sells equity securities based on their potential
for long-term capital appreciation. The Fund invests the fixed income portion
of its portfolio of investments in a broad range of investment grade debt
securities (which are those rated at the time of investment in one of the four
highest rating categories by a major rating agency) for current income. If a
fixed income security is downgraded, the Adviser will reevaluate the holding
to determine whether it is in the best interests of investors to sell. The
Adviser buys and sells fixed income securities and cash equivalents based on a
number of factors, including yield to maturity, maturity, quality and the
outlook for particular issuers and market sectors. The Fund invests in cash
equivalent, short-term obligations for stability and liquidity.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities, and will lower Fund performance.
PRINCIPAL RISKS OF INVESTING
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa. Also, longer-term securities are generally more
volatile, so the average maturity or duration of these securities affects risk.
The Fund is also subject to the risk that the Adviser's asset allocation
decisions will not anticipate market trends successfully. For example, weighting
common stocks too heavily during a stock market decline may result in a failure
to preserve capital. Conversely, investing too heavily in fixed income
securities during a period of stock market appreciation may result in lower
total return.
The smaller capitalization companies the Fund invests in may be more vulnerable
to adverse business or economic events than larger, more established companies.
In particular, these small companies may have limited product lines, markets and
financial resources, and may depend upon a relatively small management group.
Therefore, small cap stocks may be more volatile than those of larger companies
may. These securities may be traded over-the-counter or listed on an exchange
and may or may not pay dividends.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those
(continued)
25 PROSPECTUS
<PAGE> 28
BALANCED FUND
ARMADA BALANCED ALLOCATION FUND (CONTINUED)
================================================================================
PRINCIPAL RISKS OF INVESTING (continued)
currencies compared to the U.S. dollar may affect (positively or negatively) the
value of a Fund's investments. These currency movements may happen separately
from and in response to events that do not otherwise affect the value of the
security in the issuer's home country.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
Although the Fund's U.S. Government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. Government agencies and
instrumentalities are backed by the U.S. Treasury, while others are backed
solely by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own resources.
The Fund is also subject to the risk that its market segments, investment grade
fixed income and growth-oriented equity securities, may underperform other fixed
income or equity market segments or the fixed income or equity markets as a
whole. For additional information about risks, see "More Information About
Risk."
PERFORMANCE INFORMATION
There is no performance information for the Class A, Class B and Class C Shares
because none has completed a full calendar year of operations.
The performance of Class A, Class B and Class C Shares will differ due to
differences in expenses.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price)(1) 4.75% None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as a percentage
of net asset value) None 5.00%(2) 1.00%(3)
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends
and other Distributions (as a
percentage of offering price) None None None
- --------------------------------------------------------------------------------
Redemption Fee (as a percentage
of amount redeemed, if applicable) None None None
- --------------------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
Investment Advisory Fees 0.75% 0.75% 0.75%
- --------------------------------------------------------------------------------
Distribution and Service
(12b-1) Fees 0.10% 0.75% 0.75%
- --------------------------------------------------------------------------------
Other Expenses 0.46% 0.46% 0.46%
- --------------------------------------------------------------------------------
Total Annual Fund
Operating Expenses 1.31%(4) 1.96% 1.96%
- --------------------------------------------------------------------------------
(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 Shares for the
most recent fiscal year were less than the amounts shown above because the
Distributor waived a portion of the fees in order to keep total operating
expenses for Class A Shares at a specified level. With these fee waivers, the
Fund's actual total operating expenses for Class A Shares were 1.25%. The
Distributor expects to continue these waivers so that total operating expenses
for the current fiscal year will be 1.25%, however, the Distributor may
discontinue all or part of these waivers at any time.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
- --------------------------------------------------------------------------------
EXAMPLE
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return, 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:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class A Shares $602 $870 $1,159 $1,979
Class B Shares $699 $1,015 $1,257 $2,115
Class C Shares $299 $615 $1,057 $2,285
If you do not sell your shares at the end of the period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class B Shares $199 $615 $1,057 $2,115
Class C Shares $199 $615 $1,057 $2,285
26 PROSPECTUS
<PAGE> 29
FIXED INCOME FUNDS
ARMADA TOTAL RETURN ADVANTAGE FUND
================================================================================
FUND SUMMARY
INVESTMENT GOAL
Current income as well as preservation
of capital
INVESTMENT FOCUS
Investment grade fixed income
securities
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Medium
PRINCIPAL INVESTMENT STRATEGY
Investing in investment grade fixed income securities, while maintaining an
average dollar-weighted maturity of between four and twelve years
INVESTOR PROFILE
Investors seeking total return with less price volatility than would be the case
if the Fund were to invest in equity securities, and who are willing to accept
the risks of investing in fixed income securities
PRINCIPAL INVESTMENT STRATEGIES
The Armada Total Return Advantage Fund's investment objective is to provide
current income as well as preservation of capital by investing primarily in a
portfolio of high- and medium-grade fixed income securities. The investment
objective may be changed without a shareholder vote. The Fund normally invests
at least 80% of the value of its total assets in investment grade fixed income
securities of all types, including asset-backed securities and mortgage-backed
securities and obligations of corporate and U.S. Government issuers. Corporate
obligations may include bonds, notes and debentures. U.S. Government securities
may include U.S. Treasury obligations and obligations of certain U.S. Government
agencies or instrumentalities such as Ginnie Maes and Fannie Maes. Fixed income
securities are designed to provide a fixed rate of interest at maturity and
return the principal value at the end of the term. High- and medium-grade fixed
income securities are those rated in one of the four highest rating categories
by a major rating agency, or determined by the Adviser to be of equivalent
quality. If a security is downgraded, the Adviser will re-evaluate whether
continuing to hold the security is in the best interest of shareholders. In
buying and selling securities for the Fund, the Adviser uses a number of
strategies, including duration/maturity management, sector allocation and
individual security selection. The Fund may invest up to 15% of its assets in
fixed income securities that are non-rated or rated below investment grade,
sometimes known as "junk bonds." The Fund does not intend to invest in junk
bonds rated below C.
The Fund generally maintains an average dollar-weighted maturity of between four
and twelve years.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities, and will lower Fund performance.
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 governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa, and the volatility of lower rated securities is even
greater than that of higher rated securities. Also, longer-term securities are
generally more volatile, so the average maturity or duration of these securities
affects risk.
Junk bonds involve greater risks of default or downgrade and are more volatile
than investment grade securities. Junk bonds involve greater risk of default or
price declines than investment grade securities due to actual or perceived
changes in an issuer's creditworthiness. In addition, issuers of junk bonds may
be more susceptible than other issuers to economic downturns. Junk bonds are
subject to the risk that the issuer may not be able to pay interest or dividends
on a timely basis and ultimately to repay principal upon maturity.
Discontinuation of these payments could substantially adversely affect the
market value of the security. (continued)
27 PROSPECTUS
<PAGE> 30
FIXED INCOME FUNDS
ARMADA TOTAL RETURN ADVANTAGE FUND (CONTINUED)
================================================================================
PRINCIPAL RISKS OF INVESTING (continued)
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
The mortgages underlying mortgage-backed securities may be paid off early, which
makes it difficult to determine their actual maturity and therefore calculate
how they will respond to changes in interest rates. The Fund may have to
reinvest prepaid amounts at lower interest rates. This risk of prepayment is an
additional risk of mortgage-backed securities.
Debt extension risk is the risk that an issuer will exercise its right to pay
principal on 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.
Although the Fund's U.S. Government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. Government agencies and
instrumentalities are backed by the full faith and credit of the United States,
while others are backed solely by the ability of the agency to borrow from the
U.S. Treasury or by the agency's own resources.
The Fund is also subject to the risk that its market segment, high- and
medium-grade fixed income securities, may underperform other fixed income market
segments or the fixed income market as a whole. For additional information about
risks, see "More Information About Risk."
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
There is no performance information for Class B or Class C Shares because
neither has completed a full calendar year of operations.
The performance of Class A, Class B and Class C Shares will differ due to
differences in expenses.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The bar chart does not reflect sales charges. If sales charges had been
reflected, the returns for Class A Shares of the Fund would be less than those
shown below.
CALENDAR YEAR TOTAL RETURN
1995 1996 1997 1998
18.37% 2.86% 8.54% 8.68%
Best Quarter 6.28% (6/30/95)
Worst Quarter -2.58% (3/31/96)
The Fund's performance from January 1, 1999 to September 30, 1999 was -2.47%.
This table compares the Fund's average annual total returns for the periods
ended December 31, 1998 to those of the Lehman Government/Corporate Bond Index.
- --------------------------------------------------------------------------------
CLASS A SHARES 1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
Armada Total Return
Advantage Fund 3.51% 7.33%(1)
Lehman Government/
Corporate Bond Index(2) 9.47% 9.66%(3)
- --------------------------------------------------------------------------------
(1)Since September 6, 1994.
(2)The Lehman Government/Corporate Bond Index is a widely recognized index of
government and corporate debt securities rated investment grade or better, with
maturities of at least 1 year.
(3)Since September 30, 1994.
28 PROSPECTUS
<PAGE> 31
FIXED INCOME FUNDS
ARMADA TOTAL RETURN ADVANTAGE FUND (CONTINUED)
================================================================================
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price)(1) 4.75% None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as a percentage
of net asset value) None 5.00%(2) 1.00%(3)
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends
and other Distributions (as a
percentage of offering price) None None None
- --------------------------------------------------------------------------------
Redemption Fee (as a percentage
of amount redeemed, if applicable) None None None
- --------------------------------------------------------------------------------
Exchange Fee None None None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
Investment Advisory Fees 0.55% 0.55% 0.55%
- --------------------------------------------------------------------------------
Distribution and Service
(12b-1) Fees 0.10% 0.75% 0.75%
- --------------------------------------------------------------------------------
Other Expenses 0.39% 0.39% 0.39%
- --------------------------------------------------------------------------------
Total Annual Fund
Operating Expenses(4) 1.04% 1.69% 1.69%
- --------------------------------------------------------------------------------
(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 B
Shares for the most recent fiscal year were less than the amounts shown above
because the Adviser and Distributor each waived a portion of the fees in order
to keep total operating expenses at a specified level. With these fee waivers,
the Fund's actual total operating expenses were 0.74% and 1.49%, respectively,
for the Class A and Class B Shares. Based on the foregoing, total operating
expenses for Class A, Class B and Class C Shares are expected to be 0.74%, 1.49%
and 1.49% (estimated), respectively. The Adviser and Distributor expect to
continue these waivers, however, they may discontinue all or part of these
waivers at any time. For more information about these fees, see "Investment
Adviser, Sub-Adviser and Investment Team" and "Distribution of Fund Shares."
- --------------------------------------------------------------------------------
EXAMPLE
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return, 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:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class A Shares $576 $790 $1,022 $1,686
Class B Shares $672 $933 $1,118 $1,823
Class C Shares $272 $533 $918 $1,998
If you do not sell your shares at the end of the period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class B Shares $172 $533 $918 $1,823
Class C Shares $172 $533 $918 $1,998
29 PROSPECTUS
<PAGE> 32
FIXED INCOME FUNDS
ARMADA BOND FUND
================================================================================
FUND SUMMARY
INVESTMENT GOAL
Current income as well as preservation
of capital
INVESTMENT FOCUS
Investment grade fixed income
securities
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Medium
PRINCIPAL INVESTMENT STRATEGY Investing in a diversified portfolio of investment
grade fixed income securities, which maintains a dollar-weighted average
maturity of between four and twelve years
INVESTOR PROFILE
Investors seeking current income, and
who are willing to accept the risks of
investing in fixed income securities
PRINCIPAL INVESTMENT STRATEGIES
The Armada Bond Fund's investment objective is to provide current income as well
as preservation of capital by investing primarily in a portfolio of high- and
medium-grade fixed income securities. The investment objective may be changed
without a shareholder vote. The Fund normally invests at least 80% of the value
of its total assets in high- and medium-grade fixed income securities of all
types, including obligations of corporate and U.S. Government issuers and
mortgage- backed and asset-backed securities. Corporate obligations may include
bonds, notes and debentures. U.S. Government securities may include U.S.
Treasury obligations and obligations of certain U.S. Government agencies or
instrumentalities such as Ginnie Maes and Fannie Maes. High- and medium-grade
fixed income securities are those rated in one of the four highest rating
categories by a major rating agency, or determined by the Adviser to be of
equivalent quality. If a security is downgraded, the Adviser will re-evaluate
the holding to determine whether it is in the best interests of investors to
sell. In buying and selling securities for the Fund, the Adviser considers a
number of factors, including yield to maturity, maturity, quality and the
outlook for particular issuers and market sectors. The Fund generally maintains
a dollar-weighted average maturity of between four and twelve years.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities, and will lower Fund performance.
PRINCIPAL RISKS OF INVESTING
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa. Also, longer-term securities are generally more
volatile, so the average maturity or duration of these securities affects risk.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
The mortgages underlying mortgage-backed securities may be paid off early, which
makes it difficult to determine their actual maturity and therefore calculate
how they will respond to changes in interest rates. The Fund may have to
reinvest prepaid amounts at lower interest rates. This risk of prepayment is an
additional risk of mortgage-backed securities.
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.
Although the Fund's U.S. Government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. Government agencies and
instrumentalities are backed by the U.S. Treasury, while others are backed
solely by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own resources.
The Fund is also subject to the risk that its market segment, investment grade
fixed income securities, may underperform other fixed income market segments or
the fixed income market as a whole. For additional information about risks, see
"More Information About Risk."
30 PROSPECTUS
<PAGE> 33
FIXED INCOME FUNDS
ARMADA BOND FUND (CONTINUED)
================================================================================
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
There is no performance information for Class B or Class C Shares because
neither has completed a full calendar year of operations.
The performance of Class A, Class B and Class C Shares will differ due to
differences in expenses.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The bar chart does not reflect sales charges. If sales charges had been
reflected, the returns for Class A Shares of the Fund would be less than those
shown below.
CALENDAR YEAR TOTAL RETURN
1997 1998
7.71% 8.19%
Best Quarter 4.59% (9/30/98)
Worst Quarter -0.12% (12/31/98)
The Fund's performance from January 1, 1999 to September 30, 1999 was -1.57%.
This table compares the Fund's average annual total returns for the periods
ended December 31, 1998 to those of the Lehman Aggregate Bond Index.
- --------------------------------------------------------------------------------
CLASS A SHARES 1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
Armada Bond Fund 3.05% 6.12%(1)
Lehman Aggregate
Bond Index(2) 8.67% 9.55%(3)
- --------------------------------------------------------------------------------
(1)Since September 11, 1996.
(2)The Lehman Aggregate Bond Index is an unmanaged, fixed income, market
value-weighted index that includes treasury issues, agency issues, corporate
bond issues and mortgage-backed securities.
(3)Since September 30, 1996.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price)(1) 4.75% None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as a percentage
of net asset value) None 5.00%(2) 1.00%(3)
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends
and other Distributions (as a
percentage of offering price) None None None
- --------------------------------------------------------------------------------
Redemption Fee (as a percentage
of amount redeemed, if applicable) None None None
- --------------------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
Investment Advisory Fees 0.55% 0.55% 0.55%
- --------------------------------------------------------------------------------
Distribution and Service
(12b-1) Fees 0.10% 0.75% 0.75%
- --------------------------------------------------------------------------------
Other Expenses 0.39% 0.39% 0.39%
- --------------------------------------------------------------------------------
Total Annual Fund
Operating Expenses 1.04%(4) 1.69% 1.69%
- --------------------------------------------------------------------------------
(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 Shares for the
most recent fiscal year were less than the amounts shown above because the
Distributor waived a portion of the fees in order to keep total operating
expenses for Class A Shares at a specified level. With these fee waivers, the
Fund's actual total operating expenses for Class A Shares were 0.98%. The
Distributor expects to continue these waivers so that total operating expenses
for the current fiscal year will be 0.98%, however, the Distributor may
discontinue all or part of these waivers at any time.
For more information about these fees, see "Investment Adviser, Sub-Adviser
and Investment Team" and "Distribution of Fund Shares."
31 PROSPECTUS
<PAGE> 34
FIXED INCOME FUNDS
ARMADA BOND FUND (CONTINUED)
================================================================================
- --------------------------------------------------------------------------------
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:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class A Shares $576 $790 $1,022 $1,686
Class B Shares $672 $933 $1,118 $1,823
Class C Shares $272 $533 $918 $1,998
If you do not sell your shares at the end of the period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
Class B Shares $172 $533 $918 $1,823
Class C Shares $172 $533 $918 $1,998
32 PROSPECTUS
<PAGE> 35
FIXED INCOME FUNDS
ARMADA INTERMEDIATE BOND FUND
================================================================================
FUND SUMMARY
INVESTMENT GOAL
High current income as well as
preservation of capital
INVESTMENT FOCUS
Investment grade fixed income
securities
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Medium
PRINCIPAL INVESTMENT STRATEGY
Investing in investment grade fixed income securities, while maintaining a
dollar-weighted average maturity of between three and ten years
INVESTOR PROFILE
Investors seeking current income, and
who are willing to accept the risks of
investing in fixed income securities
PRINCIPAL INVESTMENT STRATEGIES
The Armada Intermediate Bond Fund's investment objective is to provide current
income as well as preservation of capital by investing in a portfolio of
high-and medium-grade fixed income securities. The investment objective may be
changed without a shareholder vote. The Fund normally invests at least 80% of
the value of its total assets in domestic and foreign high- and medium-grade
fixed income securities of all types, including obligations of corporate and
governmental issuers and mortgage-backed and asset-backed securities. Corporate
obligations include bonds, notes and debentures. Governmental obligations
include securities issued by U.S. Government, its agencies and
instrumentalities, as well as obligations of foreign governments. High- and
medium-grade fixed income securities are those rated in one of the four highest
rating categories by a major rating agency, or determined by the Adviser to be
of equivalent quality. If a security is downgraded, the Adviser will re-evaluate
the holding to determine whether it is in the best interests of investors to
sell. In buying and selling securities for the Fund, the Adviser considers a
number of factors, including yield to maturity, maturity, quality and the
outlook for particular issuers and market sectors. The Fund generally maintains
an average maturity of between three and ten years.
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 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.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
The mortgages underlying mortgage-backed securities may be paid off early, which
makes it difficult to determine their actual maturity and therefore calculate
how they will respond to changes in interest rates. The Fund may have to
reinvest prepaid amounts at lower interest rates. This risk of prepayment is an
additional risk of mortgage-backed securities.
Debt extension risk is the risk that an issuer will exercise its right to pay
principal on an obligation held by the 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.
Although the Fund's U.S. Government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. Government agencies and
instrumentalities are backed by the U.S. Treasury, while others are backed
solely by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own resources.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country. These
various risks will be even greater for investments in emerging market countries
since political turmoil and rapid changes in economic conditions are more likely
to occur in these countries.
(continued)
33 PROSPECTUS
<PAGE> 36
FIXED INCOME FUNDS
ARMADA INTERMEDIATE BOND FUND (CONTINUED)
================================================================================
PRINCIPAL RISKS OF INVESTING (continued)
The Fund is also subject to the risk that its market segment, investment grade
fixed income securities, may underperform other fixed income market segments or
the fixed income market as a whole. For additional information about risks, see
"More Information About Risk."
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
There is no performance information for Class B or Class C Shares because
neither has completed a full calendar year of operations.
The performance of Class A, Class B and Class C Shares will differ due to
differences in expenses.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The bar chart does not reflect sales charges. If sales charges had been
reflected, the returns for Class A Shares of the Fund would be less than those
shown below.
CALENDAR YEAR TOTAL RETURN
1992 1993 1994 1995 1996 1997 1998
6.91% 10.81% -4.78% 15.39% 2.77% 6.67% 7.44%
Best Quarter 5.33% (6/30/95)
Worst Quarter -3.34% (3/31/94)
The Fund's performance from January 1, 1999 to September 30, 1999 was -0.43%.
This table compares the Fund's average annual total returns for the periods
ended December 31, 1998 to those of the Lehman Intermediate Government/Corporate
Bond Index.
CLASS A SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- --------------------------------------------------------------------------------
Armada Intermediate
Bond Fund 2.32% 4.27% 6.45%(1)
Lehman Intermediate
Government/Corporate
Bond Index(2) 8.42% 6.59% 7.77%(3)
- --------------------------------------------------------------------------------
(1)Since April 15, 1991.
(2)The Lehman Intermediate Government/Corporate Bond Index is an unmanaged index
which is representative of intermediate-term bonds.
(3)Since April 30, 1991.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price)(1) 4.75% None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as a percentage
of net asset value) None 5.00%(2) 1.00%(3)
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends
and other Distributions (as a
percentage of offering price) None None None
- --------------------------------------------------------------------------------
Redemption Fee (as a percentage
of amount redeemed, if applicable) None None None
- --------------------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
Investment Advisory Fees 0.55% 0.55% 0.55%
- --------------------------------------------------------------------------------
Distribution and Service (12b-1) Fees 0.10% 0.75% 0.75%
- --------------------------------------------------------------------------------
Other Expenses 0.40% 0.40% 0.40%
- --------------------------------------------------------------------------------
Total Annual Fund Operating Expenses(4) 1.05% 1.70% 1.70%
- --------------------------------------------------------------------------------
(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 B
Shares for the most recent fiscal year were less than the amounts shown above
because the Adviser and Distributor each waived a portion of the fees in order
to keep total operating expenses at a specified level. With these fee waivers,
the Fund's actual total operating expenses were 0.84% and 1.55%, respectively,
for the Class A and Class B Shares. Based on the foregoing, total operating
expenses for Class A, Class B and Class C Shares are expected to be 0.84%,
1.55%, and 1.55% (estimated), respectively. The Adviser and Distributor expect
to continue these waivers, however, they may discontinue all or part of these
waivers at any time.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
34 PROSPECTUS
<PAGE> 37
FIXED INCOME FUNDS
ARMADA INTERMEDIATE BOND FUND (CONTINUED)
================================================================================
- --------------------------------------------------------------------------------
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:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class A Shares $577 $793 $1,027 $1,697
Class B Shares $673 $936 $1,123 $1,834
Class C Shares $273 $536 $923 $2,009
If you do not sell your shares at the end of the period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class B Shares $173 $536 $923 $1,834
Class C Shares $173 $536 $923 $2,009
35 PROSPECTUS
<PAGE> 38
FIXED INCOME FUNDS
ARMADA GNMA FUND
================================================================================
FUND SUMMARY
INVESTMENT GOAL
Current income as well as preservation
of capital
INVESTMENT FOCUS
Mortgage-backed securities
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Low
PRINCIPAL INVESTMENT STRATEGY
Investing in mortgage-backed
securities guaranteed by the
Government National Mortgage
Association (GNMA)
INVESTOR PROFILE
Investors seeking current income, and
who are willing to accept the risks of
investing in mortgage-backed
securities
PRINCIPAL INVESTMENT STRATEGIES
The Armada GNMA Fund's investment objective is to provide current income as well
as preservation of capital by investing primarily in mortgage-backed securities
guaranteed by GNMA. GNMA securities are backed by the full faith and credit of
the U.S. Government. The investment objective may be changed without a
shareholder vote. The Fund normally invests at least 80% of the value of its
total assets in mortgage-backed securities guaranteed by GNMA, which is an
agency of the U.S. Government established to supervise and finance certain types
of mortgages. In addition to mortgage-backed securities, the Fund invests in
other types of investment grade fixed income securities such as U.S. Treasury
obligations, U.S. Government agency obligations, asset-backed securities and
commercial paper.
In buying and selling securities for the Fund, the Adviser assesses current and
projected market conditions by considering a number of factors including yield
to maturity, maturity, quality and the outlook for particular issuers and market
sectors.
The Fund's dollar-weighted average portfolio maturity will be between three and
ten years. Investment grade fixed income securities are those rated in one of
the four highest rating categories by a major rating agency, or determined by
the Adviser to be of equivalent quality.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities, and will lower Fund performance.
PRINCIPAL RISKS OF INVESTING
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa. Also, longer-term securities are generally more
volatile, so the average maturity or duration of these securities affects risk.
Mortgage-backed securities are fixed income securities representing an interest
in a pool of underlying mortgage loans. They are sensitive to changes in
interest rates, but may respond to these changes differently from other fixed
income securities due to the possibility of prepayment of the underlying
mortgage loans. As a result, it may not be possible to determine in advance the
actual maturity date or average life of a mortgage-backed security. Rising
interest rates tend to discourage refinancings, with the result that the average
life and volatility of the security will increase, exacerbating its decrease in
market price. When interest rates fall, however, mortgage-backed securities may
not gain as much in market value because of the expectation of additional
mortgage prepayments that must be reinvested at lower interest rates. Prepayment
risk may make it difficult to calculate the average maturity of the Fund of
mortgage-backed securities and, therefore, to assess the volatility risk of the
Fund.
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 Fund is also subject to the risk that its market segment, mortgage-backed
securities, may underperform other fixed income market segments or the fixed
income market as a whole.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
Although the Fund's U.S. Government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. Government agencies and
instrumentalities are backed by the U.S. Treasury, while others are backed
solely by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own resources.
For additional information about risks, see "More Information About Risk."
36 PROSPECTUS
<PAGE> 39
FIXED INCOME FUNDS
ARMADA GNMA FUND (CONTINUED)
================================================================================
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
There is no performance information for Class B or Class C Shares because
neither has completed a full calendar year of operations.
The performance of Class A, Class B and Class C Shares will differ due to
differences in expenses.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The bar chart does not reflect sales charges. If sales charges had been
reflected, the returns for Class A Shares of the Fund would be less than those
shown below.
CALENDAR YEAR TOTAL RETURN
1997 1998
9.03% 6.34%
Best Quarter 4.05% (6/30/97)
Worst Quarter -0.07% (3/31/97)
The Fund's performance from January 1, 1999 to September 30, 1999 was 0.53%.
This table compares the Fund's average annual total returns for the periods
ended December 31, 1998 to those of the Lehman GNMA Index.
CLASS A SHARES 1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
Armada GNMA Fund 1.33% 6.22%(1)
Lehman GNMA Index(2) 6.91% 8.66%(3)
- --------------------------------------------------------------------------------
(1)Since September 11, 1996.
(2)The Lehman GNMA Index tracks GNMA issues, including single family, mobile
home, midgets and graduated payments components.
(3)Since September 30, 1996.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price)(1) 4.75% None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as a percentage
of net asset value) None 5.00%(2) 1.00%(3)
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends
and other Distributions (as a
percentage of offering price) None None None
- --------------------------------------------------------------------------------
Redemption Fee (as a percentage
of amount redeemed, if applicable) None None None
- --------------------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
Investment Advisory Fees 0.55% 0.55% 0.55%
- --------------------------------------------------------------------------------
Distribution and Service
(12b-1) Fees 0.10% 0.75% 0.75%
- --------------------------------------------------------------------------------
Other Expenses 0.43% 0.43% 0.43%
- --------------------------------------------------------------------------------
Total Annual Fund
Operating Expenses 1.08%(4) 1.73% 1.73%
- --------------------------------------------------------------------------------
(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 Shares for the
most recent fiscal year were less than the amounts shown above because the
Distributor waived a portion of the fees in order to keep total operating
expenses for Class A Shares at a specified level. With these fee waivers, the
Fund's actual total operating expenses for Class A Shares were 1.02%. The
Distributor expects to continue these waivers so that total operating expenses
for the current fiscal year will be 1.02%, however, the Distributor may
discontinue all or part of these waivers at any time.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
37 PROSPECTUS
<PAGE> 40
FIXED INCOME FUNDS
ARMADA GNMA FUND (CONTINUED)
================================================================================
- --------------------------------------------------------------------------------
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:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class A Shares $580 $802 $1,042 $1,730
Class B Shares $676 $945 $1,139 $1,867
Class C Shares $276 $545 $939 $2,041
If you do not sell your shares at the end of the period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class B Shares $176 $545 $939 $1,867
Class C Shares $176 $545 $939 $2,041
38 PROSPECTUS
<PAGE> 41
FIXED INCOME FUNDS
ARMADA ENHANCED INCOME FUND
================================================================================
FUND SUMMARY
INVESTMENT GOAL
Current income as well as preservation
of capital
INVESTMENT FOCUS
Investment grade debt securities
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Low
PRINCIPAL INVESTMENT STRATEGY
Investing in investment grade fixed income securities, while maintaining a
dollar-weighted average maturity of between one and five years
INVESTOR PROFILE
Investors seeking total return and who
are willing to accept some risks of
price volatility
PRINCIPAL INVESTMENT STRATEGIES
The Armada Enhanced Income Fund's investment objective is to provide current
income as well as preservation of capital by investing in a portfolio of high
and medium-grade fixed income securities. The investment objective may be
changed without a shareholder vote. The Fund normally invests at least 80% of
the value of its total assets in high and medium-grade debt securities of all
types, including obligations of corporate and U.S. Government issuers,
mortgage-backed and asset-backed securities. Corporate obligations may include
bonds, notes and debentures. U.S. Government securities may include U.S.
Treasury obligations and obligations of certain U.S. Government agencies or
instrumentalities such as Ginnie Maes and Fannie Maes. High- and medium-grade
fixed income securities are those rated in one of the four highest rating
categories by a major rating agency, or determined by the Adviser to be of
equivalent quality. If a security is downgraded, the Adviser will re-evaluate
whether continuing to hold the security is in the best interest of shareholders.
In buying and selling securities for the Fund, the Adviser considers a number of
factors including yield to maturity, maturity, quality and the outlook for
particular issuers and market sectors. The Fund generally maintains an average
dollar-weighted portfolio maturity of between one and five years.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities, and will lower Fund performance.
PRINCIPAL RISKS OF INVESTING
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa. Also, longer-term securities are generally more
volatile, so the average maturity or duration of these securities affects risk.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
The mortgages underlying mortgage-backed securities may be paid off early, which
makes it difficult to determine their actual maturity and therefore calculate
how they will respond to changes in interest rates. The Fund may have to
reinvest prepaid amounts at lower interest rates. This risk of prepayment is an
additional risk of mortgage-backed securities.
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.
Although the Fund's U.S. Government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. Government agencies and
instrumentalities are backed by the U.S. Treasury, while others are backed
solely by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own resources.
The Fund is also subject to the risk that its market segment, investment grade
fixed income securities, may underperform other fixed income market segments or
the fixed income market as a whole. For additional information about risks, see
"More Information About Risk."
39 PROSPECTUS
<PAGE> 42
FIXED INCOME FUNDS
ARMADA ENHANCED INCOME FUND (CONTINUED)
================================================================================
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
There is no performance information for Class B or Class C Shares because
neither has completed a full calendar year of operations.
The performance of Class A, Class B and Class C Shares will differ due to
differences in expenses.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The bar chart does not reflect sales charges. If sales charges had been
reflected, the returns for Class A Shares of the Fund would be less than those
shown below.
CALENDAR YEAR TOTAL RETURN
1995 1996 1997 1998
7.60% 5.18% 6.33% 6.58%
Best Quarter 3.12% (9/30/98)
Worst Quarter 0.53% (3/31/97)
The Fund's performance from January 1, 1999 to September 30, 1999 was 2.34%.
This table compares the Fund's average annual total returns for the periods
ended December 31, 1998 to those of the Merrill Lynch 1-3 Year
Government/Corporate Index.
CLASS A SHARES 1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
Armada Enhanced
Income Fund 3.70% 5.53%(1)
Merrill Lynch 1-3 Year
Government/
Corporate Index(2) 7.01% 6.98%(3)
- --------------------------------------------------------------------------------
(1) Since September 9, 1994.
(2) This is a market capitalization weighted index including U.S. Treasury and
Agency bonds and U.S. fixed coupon investment grade corporate bonds (U.S.
domestic and Yankee/global bonds). U.S. Treasury bonds must have at least $1
billion face value outstanding and agency and corporate bonds must have at least
$150 million face value outstanding to be included in the index. Both total
return and price returns are calculated daily. Prices are taken as of
approximately 3 p.m. ET. Quality range is BBB3-AAA based on composite Moody and
S&P ratings. Maturities for all bonds are greater than or equal to one year and
less than three years. Floaters, Equipment Trust Certificates, and Title 11
securities are excluded.
(3) Since September 30, 1994.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price)(1) 2.75% None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as a percentage
of net asset value) None 5.00%(2) 1.00%(3)
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends
and other Distributions (as a
percentage of offering price) None None None
- --------------------------------------------------------------------------------
Redemption Fee (as a percentage
of amount redeemed, if applicable) None None None
- --------------------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
CLASS A CLASS B CLASS C
Investment Advisory Fees 0.45% 0.45% 0.45%
- --------------------------------------------------------------------------------
Distribution and Service
(12b-1) Fees 0.10% 0.75% 0.75%
- --------------------------------------------------------------------------------
Other Expenses 0.28% 0.28% 0.43%
- --------------------------------------------------------------------------------
Total Annual Fund
Operating Expenses(4) 0.83% 1.48% 1.63%
- --------------------------------------------------------------------------------
(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 the Class A and Class B
Shares for the most recent fiscal year were less than the amounts shown above
because the Adviser and Distributor each waived a portion of the fees in order
to keep total operating expenses at a specified level. With these fee waivers,
the Fund's actual total operating expenses were 0.63% and 1.38%, respectively,
for Class A and Class B Shares. Based on the foregoing, total operating expenses
for Class A, Class B and Class C Shares are expected to be 0.63%, 1.38% and
1.53% (estimated), respectively. The Adviser and Distributor expect to continue
these waivers, however, they may discontinue all or part of these waivers at any
time.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
40 PROSPECTUS
<PAGE> 43
FIXED INCOME FUNDS
ARMADA ENHANCED INCOME FUND (CONTINUED)
================================================================================
- --------------------------------------------------------------------------------
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:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
Class A Shares $357 $533 $723 $1,272
Class B Shares $651 $868 $1,008 $1,591
Class C Shares $266 $514 $887 $1,933
If you do not sell your shares at the end of the period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
Class B Shares $151 $468 $808 $1,591
Class C Shares $166 $514 $887 $1,933
41 PROSPECTUS
<PAGE> 44
TAX EXEMPT FUNDS
ARMADA OHIO TAX EXEMPT BOND FUND
================================================================================
FUND SUMMARY
INVESTMENT GOAL
Current income exempt from federal income and, to the extent possible, Ohio
personal income taxes, consistent with conservation of capital
INVESTMENT FOCUS
Ohio municipal securities
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Medium
PRINCIPAL INVESTMENT STRATEGY
Investing in municipal obligations that pay interest that is exempt from federal
income and Ohio personal income taxes
INVESTOR PROFILE
Investors seeking total return and who are willing to accept some risks of price
volatility
PRINCIPAL INVESTMENT STRATEGIES
The Armada Ohio Tax Exempt Bond Fund's investment objective is to provide
current income exempt from federal income tax and, to the extent possible, from
Ohio personal income tax, as is consistent with the conservation of capital. The
investment objective may be changed without a shareholder vote. The Fund
normally invests at least 80% of its total assets in debt securities issued by
the State of Ohio, its political subdivisions and their agencies and
instrumentalities that generate income exempt from federal income and Ohio
personal income taxes (Ohio municipal securities). However, some Fund dividends
will be taxable, such as dividends that are derived from occasional taxable
investments and distributions of short and long-term capital gains. Also, Fund
dividends will generally be subject to state and local income taxes for any
shareholders who are not Ohio residents. The Fund may invest up to 20% of its
total assets in private activity bonds which may be treated as a specific tax
preference item under the federal alternative minimum tax. In selecting
securities for the Fund to buy and sell, the Adviser considers each security's
yield and total return potential relative to other available municipal
securities.
The Fund invests primarily in investment grade securities, which are those rated
in one of the four highest rating categories by a major rating agency, or
determined by the Adviser to be of equivalent quality. If a security is
downgraded, the Adviser will re-evaluate whether continuing to hold the security
is in the best interest of shareholders. The Fund ordinarily will maintain an
average weighted portfolio maturity of between three and ten years.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and capital gains tax liabilities,
and will lower Fund performance.
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 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.
The Fund is also subject to the risk that its market segment, tax exempt
municipal securities, may underperform other fixed income market segments or the
fixed income market as a whole.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Fund's securities.
The Fund's focus of investing in securities of issuers located in Ohio subjects
the Fund to economic and government policies of that state.
The Fund is non-diversified, which means that it may invest in the securities of
relatively few issuers. As a result, the Fund may be more susceptible than a
diversified fund to a single adverse economic or political and regulatory
occurrences affecting one or more of these issuers, and may experience increased
volatility due to its investments in those securities. For additional
information about risks, see "More Information About Risk."
42 PROSPECTUS
<PAGE> 45
TAX EXEMPT FUNDS
ARMADA OHIO TAX EXEMPT BOND FUND (CONTINUED)
================================================================================
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
There is no performance information for Class B or Class C Shares because
neither has completed a full calendar year of operations.
The performance of Class A, Class B and Class C Shares will differ due to
differences in expenses.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The bar chart does not reflect sales charges. If sales charges had been
reflected, returns would be less than those shown below.
CALENDAR YEAR TOTAL RETURN
1992 1993 1994 1995 1996 1997 1998
6.82% 10.14% -4.19% 13.37% 3.92% 7.35% 5.25%
Best Quarter 5.04% (3/31/95)
Worst Quarter -4.89% (3/31/94)
The Fund's performance from January 1, 1999 to September 30, 1999 was -0.90%.
This table compares the Fund's average annual total returns for the periods
ended December 31, 1998 to those of the Lehman 7 Year Municipal Bond Index.
CLASS A SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- --------------------------------------------------------------------------------
Armada Ohio Tax
Exempt Bond Fund 2.13% 4.35% 5.76%(1)
Lehman 7 Year
Municipal Bond
Index(2) 6.23% 5.80% 7.19%(3)
- --------------------------------------------------------------------------------
(1)Since April 15, 1991.
(2)The Lehman 7 Year Municipal Bond Index is a broad based total return index.
The bonds are all investment grade, fixed rate with maturities of 7-8 years and
are selected from issues larger than $50 million dated since January 1984.
(3)Since April 30, 1991.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price)(1) 3.00% None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as a percentage
of net asset value) None 5.00%(2) 1.00%(3)
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends
and other Distributions (as a
percentage of offering price) None None None
- --------------------------------------------------------------------------------
Redemption Fee (as a percentage
of amount redeemed, if applicable) None None None
- --------------------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
CLASS A CLASS B CLASS C
Investment Advisory Fees 0.55% 0.55% 0.55%
- --------------------------------------------------------------------------------
Distribution and Service
(12b-1) Fees 0.10% 0.75% 0.75%
- --------------------------------------------------------------------------------
Other Expenses 0.25% 0.25% 0.40%
- --------------------------------------------------------------------------------
Total Annual Fund
Operating Expenses(4) 0.90% 1.55% 1.70%
- --------------------------------------------------------------------------------
(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 the Class A and Class
B Shares for the most recent fiscal year were less than the amounts shown above
because the Adviser and Distributor each waived a portion of the fees in order
to keep total operating expenses at a specified level. With these fee waivers,
the Fund's actual total operating expenses were 0.69% and 1.40%, respectively,
for Class A and Class B Shares. Based on the foregoing, total operating expenses
for Class A, Class B and Class C Shares are expected to be 0.69%, 1.40% and
1.55% (estimated), respectively. The Adviser and Distributor expect to continue
these waivers, however, they may discontinue all or part of these waivers at any
time.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
43 PROSPECTUS
<PAGE> 46
TAX EXEMPT FUNDS
ARMADA OHIO TAX EXEMPT BOND FUND (CONTINUED)
================================================================================
- --------------------------------------------------------------------------------
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:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
Class A Shares $389 $578 $784 $1,375
Class B Shares $658 $890 $1,045 $1,669
Class C Shares $273 $536 $923 $2,009
If you do not sell your shares at the end of the period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
Class B Shares $158 $490 $845 $1,669
Class C Shares $173 $536 $923 $2,009
44 PROSPECTUS
<PAGE> 47
TAX EXEMPT FUNDS
ARMADA PENNSYLVANIA MUNICIPAL BOND FUND
================================================================================
FUND SUMMARY
INVESTMENT GOAL
Current income exempt from both regular federal income tax and, to the extent
possible, Pennsylvania personal income tax as is consistent with conservation of
capital
INVESTMENT FOCUS
Pennsylvania municipal securities
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Medium
PRINCIPAL INVESTMENT STRATEGY
Investing in municipal obligations that pay interest that is exempt from federal
income and Pennsylvania personal income taxes
INVESTOR PROFILE
Investors seeking tax exempt current income, and who are willing to accept
moderate share price volatility
PRINCIPAL INVESTMENT STRATEGIES
The Armada Pennsylvania Municipal Bond Fund's investment objective is to provide
current income exempt from regular federal income tax and, to the extent
possible, from Pennsylvania personal income tax as is consistent with
conservation of capital. The investment objective may be changed without a
shareholder vote. The Fund normally invests at least 80% of its net assets in
debt securities issued by the Commonwealth of Pennsylvania, its political
subdivisions and their agencies and instrumentalities that generate income
exempt from federal income and Pennsylvania personal income taxes (Pennsylvania
municipal securities). However, some Fund dividends will be taxable, such as
dividends that are derived from occasional taxable investments and distributions
of short and long-term capital gains. Also, Fund dividends will generally be
subject to state and local income taxes for any shareholders who are not
Pennsylvania residents. The Fund may invest up to 100% of its total assets in
private activity bonds which may be treated as a specific tax preference item
under the federal alternative minimum tax. In selecting securities for the Fund
to buy and sell, the Adviser considers each security's yield and total return
potential relative to other available municipal securities.
The Fund primarily invests in investment grade securities, which are those rated
in one of the four highest rating categories by a major rating agency, or
determined by the Adviser to be of equivalent quality. If a security is
downgraded, the Adviser will re-evaluate whether continuing to hold the security
is in the best interest of shareholders. The Fund ordinarily will maintain an
average weighted portfolio maturity of between three and ten years.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and capital gains tax liabilities,
and will lower Fund performance.
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 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.
The Fund is also subject to the risk that its market segment, tax free municipal
securities, may underperform other fixed income market segments or the fixed
income market as a whole.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Fund's securities.
The Fund's focus of investments in securities of issuers located in Pennsylvania
subjects the Fund to economic conditions and government policies within that
state.
The Fund is non-diversified, which means that it may invest in the securities of
relatively few issuers. As a result, the Fund may be more susceptible than a
diversified fund to a single adverse economic or political and regulatory
occurrences affecting one or more of these issuers, and may experience increased
volatility due to its investments in those securities. For additional
information about risks, see "More Information About Risk."
45 PROSPECTUS
<PAGE> 48
TAX EXEMPT FUNDS
ARMADA PENNSYLVANIA MUNICIPAL BOND FUND (CONTINUED)
================================================================================
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
There is no performance information for Class B or Class C Shares because
neither has completed a full calendar year of operations.
The performance of Class A, Class B and Class C Shares will differ due to
differences in expenses.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The bar chart does not reflect sales charges. If sales charges had been
reflected, returns would be less than those shown below.
CALENDAR YEAR TOTAL RETURN
1997 1998
6.83% 5.62%
Best Quarter 2.88% (9/30/98)
Worst Quarter -0.14% (3/31/97)
The Fund's performance from January 1, 1999 to September 30, 1999 was -0.96%.
This table compares the Fund's average annual total returns for the periods
ended December 31, 1998 to those of the Lehman 7 Year Municipal Bond Index.
CLASS A SHARES 1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
Armada Pennsylvania
Municipal Bond Fund 2.49% 5.26%(1)
Lehman 7 Year
Municipal Bond Index(2) 6.23% 7.31%(3)
- --------------------------------------------------------------------------------
(1)Since September 11, 1996.
(2)The Lehman 7 Year Municipal Bond Index is a broad based total return index.
The bonds are all investment grade, fixed rate with maturities of 7-8 years and
are selected from issues larger than $50 million dated since January 1984.
(3)Since September 30, 1996.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price)(1) 3.00% None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as a percentage
of net asset value) None 5.00%(2) 1.00%(3)
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends
and other Distributions (as a
percentage of offering price) None None None
- --------------------------------------------------------------------------------
Redemption Fee (as a percentage
of amount redeemed, if applicable) None None None
- --------------------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
Investment Advisory Fees 0.55% 0.55% 0.55%
- --------------------------------------------------------------------------------
Distribution and Service
(12b-1) Fees 0.10% 0.75% 0.75%
- --------------------------------------------------------------------------------
Other Expenses 0.29% 0.29% 0.44%
- --------------------------------------------------------------------------------
Total Annual Fund
Operating Expenses(4) 0.94% 1.59% 1.74%
- --------------------------------------------------------------------------------
(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 the Class A and Class
B Shares for the most recent fiscal year were less than the amounts shown above
because the Adviser and Distributor each waived a portion of the fees in order
to keep total operating expenses at a specified level. With these fee waivers,
the Fund's actual total operating expenses were 0.69% and 1.44%, respectively,
for Class A and Class B Shares. Based on the foregoing, total operating expenses
for Class A, Class B and Class C Shares are expected to be 0.69%, 1.44% and
1.59% (estimated), respectively. The Adviser and Distributor expect to continue
these waivers, however, they may discontinue all or part of these waivers at any
time.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
46 PROSPECTUS
<PAGE> 49
TAX EXEMPT FUNDS
ARMADA PENNSYLVANIA MUNICIPAL BOND FUND (CONTINUED)
================================================================================
- --------------------------------------------------------------------------------
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:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class A Shares $393 $591 $804 $1,420
Class B Shares $662 $902 $1,066 $1,713
Class C Shares $277 $548 $944 $2,052
If you do not sell your shares at the end of the period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class B Shares $162 $502 $866 $1,713
Class C Shares $177 $548 $944 $2,052
47 PROSPECTUS
<PAGE> 50
TAX EXEMPT FUNDS
ARMADA NATIONAL TAX EXEMPT BOND FUND
================================================================================
FUND SUMMARY
INVESTMENT GOAL
Current income exempt from federal income tax as is consistent with conservation
of capital
INVESTMENT FOCUS
Municipal securities
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Medium
PRINCIPAL INVESTMENT STRATEGY
Investing in municipal obligations that pay interest that is exempt from federal
income tax
INVESTOR PROFILE
Investors seeking tax exempt current income, and who are willing to accept
moderate share price volatility
PRINCIPAL INVESTMENT STRATEGIES
The Armada National Tax Exempt Bond Fund's investment objective is to provide
current income exempt from federal income tax as is consistent with conservation
of capital. The investment objective may be changed without a shareholder vote.
The Fund normally invests at least 80% of its net assets in debt securities that
generate income exempt from federal income tax. However, Fund dividends will
generally be taxable for state and local income tax purposes. Also, some Fund
dividends will be taxable for federal income tax purposes, such as those derived
from occasional taxable investments and distributions of short and long-term
capital gains. The Fund may invest up to 20% of its total assets in private
activity bonds, the income of which may be treated as a specific tax preference
item under the federal alternative minimum tax. The Fund invests in municipal
securities issued by or on behalf of states, territories and possessions of the
United States, the District of Columbia and their political subdivisions,
agencies, instrumentalities and authorities. In selecting securities for the
Fund to buy and sell, the Adviser considers each security's yield and total
return potential relative to other available municipal securities.
The Fund primarily invests only in investment grade securities. Investment grade
municipal securities are those rated in one of the four highest rating
categories as determined by a major rating agency. If a security is downgraded,
the Adviser will re-evaluate whether continuing to hold the security is in the
best interest of shareholders. The Fund ordinarily will maintain a
dollar-weighted average portfolio maturity of between three and ten years.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and capital gains tax liabilities,
and will lower Fund performance.
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 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.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Fund's securities.
The Fund is also subject to the risk that its market segment, tax exempt
securities, may underperform other fixed income market segments or the fixed
income market as a whole. For additional information about risks, see "More
Information About Risk."
48 PROSPECTUS
<PAGE> 51
TAX EXEMPT FUNDS
ARMADA NATIONAL TAX EXEMPT BOND FUND (CONTINUED)
================================================================================
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
There is no performance information for Class B or Class C Shares because
neither has completed a full calendar year of operations.
The performance of Class A, Class B and Class C Shares will differ due to
differences in expenses.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The bar chart does not reflect sales charges. If sales charges had been
reflected, returns would be less than those shown below.
CALENDAR YEAR TOTAL RETURN
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
9.79% 4.65% 8.45% 9.74% 11.76% -4.58% 14.05% -1.07% 6.57% 5.85%
Best Quarter 6.19% (6/30/89)
Worst Quarter -4.13% (3/31/94)
The Fund's performance from January 1, 1999 to September 30, 1999 was -0.96%.
This table compares the Fund's average annual total returns for the periods
ended December 31, 1998 to those of the Lehman 10 Year Municipal Bond Index.
- --------------------------------------------------------------------------------
CLASS A SHARES 1 YEAR 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Armada National
Tax Exempt
Bond Fund 0.83% 2.95% 5.86%
Lehman 10 Year
Municipal Bond
Index(1) 6.76% 6.35% 8.32%
- --------------------------------------------------------------------------------
(1)The Lehman 10 Year Municipal Bond Index is a broad based return index. The
bonds are all investment grade, fixed rate with maturities of 9-12 years and are
selected from issues larger than $50 million dated since January 1984.
The performance of the National Tax Exempt Bond Fund for the period prior to
June 22, 1998 is represented by the performance of a common trust fund ("common
trust fund") which operated prior to the effectiveness of the registration
statement of the National Tax Exempt Bond Fund. The common trust fund was
advised by National City Bank, an affiliate of the Adviser. At the time of the
National Tax Exempt Bond Fund's inception, the common trust fund was operated
using materially equivalent investment objectives, policies, guidelines and
restrictions as the Fund. In connection with the National Tax Exempt Bond Fund's
commencement of operations, on June 22, 1998, the common trust fund transferred
its assets to the Fund. At the time of the transfer, the Adviser did not manage
any other collective investment or common trust funds using materially
equivalent investment objectives, policies, guidelines and restrictions to those
of the National Tax Exempt Bond Fund.
The common trust fund was not open to the public generally, nor registered under
the Investment Company Act of 1940 (the "1940 Act") or subject to certain
restrictions that are imposed by the 1940 Act and the Internal Revenue Code. If
the common trust fund had been registered under the 1940 Act, performance may
have been adversely affected. Performance quotations of the common trust fund
represent past performance of the Adviser managed common trust fund, which are
separate and distinct from the National Tax Exempt Bond Fund; do not represent
past performance of the Fund; and should not be considered as representative of
future results of the Fund.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price)(1) 4.75% None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as a percentage
of net asset value) None 5.00%(2) 1.00%(3)
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends
and other Distributions (as a
percentage of offering price) None None None
- --------------------------------------------------------------------------------
Redemption Fee (as a percentage
of amount redeemed, if applicable) None None None
- --------------------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------------------
49 PROSPECTUS
<PAGE> 52
TAX EXEMPT FUNDS
ARMADA NATIONAL TAX EXEMPT BOND FUND (CONTINUED)
================================================================================
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
Investment Advisory Fees 0.55% 0.55% 0.55%
- --------------------------------------------------------------------------------
Distribution and Service
(12b-1) Fees 0.10% 0.75% 0.75%
- --------------------------------------------------------------------------------
Other Expenses 0.25% 0.25% 0.40%
Total Annual Fund
- --------------------------------------------------------------------------------
Operating Expenses(4) 0.90% 1.55% 1.70%
- --------------------------------------------------------------------------------
(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 the Class A and Class
B Shares for the most recent fiscal year were less than the amounts shown above
because the Adviser and Distributor each waived a portion of the fees in order
to keep total operating expenses at a specified level. With these fee waivers,
the Fund's actual total operating expenses were 0.69% and 1.40%, respectively,
for Class A and Class B Shares. Based on the foregoing, total operating expenses
for Class A, Class B and Class C Shares are expected to be 0.69%, 1.40% and
1.55% (estimated), respectively. The Adviser and Distributor expect to continue
these waivers, however, they may discontinue all or part of these waivers at any
time.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
- --------------------------------------------------------------------------------
EXAMPLE
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return, 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:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class A Shares $562 $748 $950 $1,530
Class B Shares $658 $890 $1,045 $1,669
Class C Shares $273 $536 $923 $2,009
If you do not sell your shares at the end of the period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class B Shares $158 $490 $845 $1,669
Class C Shares $173 $536 $923 $2,009
50 PROSPECTUS
<PAGE> 53
MONEY MARKET FUNDS
ARMADA OHIO MUNICIPAL MONEY MARKET FUND
================================================================================
FUND SUMMARY
INVESTMENT GOAL
Current income exempt from regular federal income tax and Ohio personal income
tax, consistent with stability of principal
INVESTMENT FOCUS
Ohio municipal money market instruments
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Very low
PRINCIPAL INVESTMENT STRATEGY
Investing in a portfolio of high quality short-term debt securities designed to
allow the Fund to maintain a stable net asset value of $1.00 per share
INVESTOR PROFILE
Conservative taxable investors in higher tax brackets seeking current income
exempt from federal and Ohio income taxes
PRINCIPAL INVESTMENT STRATEGIES
The Armada Ohio Municipal Money Market Fund's investment objective is to provide
current income exempt from regular federal income tax and Ohio personal income
tax, consistent with stability of principal. The investment objective may be
changed without a shareholder vote. The Fund invests exclusively in high quality
money market instruments issued by or on behalf of the State of Ohio, political
subdivisions thereof or agencies or instrumentalities of Ohio or its political
subdivisions, the income from which is exempt from regular federal income tax
and Ohio personal income tax (Ohio money market instruments). However, some Fund
dividends may be taxable if the Fund, as it is permitted to do, invests some of
its assets in taxable instruments. Also, Fund dividends will generally be
subject to state and local income taxes for any shareholders who are not Ohio
residents. High quality money market instruments are securities that present
minimal credit risks as determined by the Adviser and generally include
securities that are rated at the time of purchase by a major rating agency in
the two highest rating categories for such securities, and certain securities
that are not so rated but are of comparable quality as determined by the
Adviser.
The Fund may invest 100% of its assets in private activity bonds, the interest
from which is a preference item for the federal alternative minimum tax. Under
normal market conditions, at least 80% of the value of the Fund's total assets
will be invested in Ohio money market instruments. This policy is fundamental
and may not be changed without the affirmative vote of the holders of a majority
of the Fund's outstanding shares.
In managing the Fund, the Adviser assesses current and projected market
conditions, particularly interest rates. Based on this assessment and a separate
credit analysis, the Adviser uses gradual shifts in portfolio maturity to
respond to expected changes and selects securities that it believes offer the
most attractive risk/return trade off.
As a money market fund, the Fund invests only in instruments with remaining
maturities of 397 days or less that the Adviser believes present minimal credit
risk. The Fund maintains an average weighted maturity of 90 days or less.
PRINCIPAL RISKS OF INVESTING
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
The Fund is also subject to the risk that its market segment, Ohio municipal
money market securities, may underperform other fixed income market segments or
the fixed income market as a whole.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Fund's securities.
The Fund's focus of investments in securities of issuers located in Ohio
subjects the Fund to economic and government policies of that state. For
additional information about risks, see "More Information About Risk."
51 PROSPECTUS
<PAGE> 54
MONEY MARKET FUNDS
ARMADA OHIO MUNICIPAL MONEY MARKET FUND (CONTINUED)
================================================================================
PERFORMANCE INFORMATION
There is no bar chart or performance information for the Class A Shares because
it has not completed a full calendar year of operations.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
CLASS A
Investment Advisory Fees 0.35%
- --------------------------------------------------------------------------------
Distribution and Service (12b-1) Fees 0.10%
- --------------------------------------------------------------------------------
Other Expenses 0.32%
- --------------------------------------------------------------------------------
Total Annual Fund
Operating Expenses(1) 0.77%
- --------------------------------------------------------------------------------
(1) The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amounts shown above because the Adviser and Distributor
each waived a portion of the fees in order to keep total operating expenses at a
specified level. With these fee waivers, the Fund's actual total operating
expenses were 0.51%. The Adviser and Distributor expect to continue these
waivers so that total operating expenses for the current fiscal year will be
0.51%, however, they may discontinue all or part of these waivers at any time.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
- --------------------------------------------------------------------------------
EXAMPLE
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return, 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:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class A Shares $79 $246 $428 $954
52 PROSPECTUS
<PAGE> 55
MONEY MARKET FUNDS
ARMADA PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND
================================================================================
FUND SUMMARY
INVESTMENT GOAL
High current income exempt from regular federal income tax and Pennsylvania
personal income tax, consistent with stability of principal
INVESTMENT FOCUS
Pennsylvania municipal money market instruments
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Very low
PRINCIPAL INVESTMENT STRATEGY
Investing in a portfolio of high quality short-term debt securities designed to
allow the Fund to maintain a stable net asset value of $1.00 per share
INVESTOR PROFILE
Conservative taxable investors in higher tax brackets seeking current income
exempt from federal and Pennsylvania income taxes
PRINCIPAL INVESTMENT STRATEGIES
The Armada Pennsylvania Tax Exempt Money Market Fund's investment objective is
to provide current income exempt from regular federal income tax and
Pennsylvania personal income tax, consistent with stability of principal. The
investment objective may be changed without a shareholder vote. The Fund invests
exclusively in high quality money market instruments issued by or on behalf of
the Commonwealth of Pennsylvania and its political subdivisions and financing
authorities, and obligations of the United States, including territories and
possessions of the United States, the income from which is exempt from regular
federal income tax and Pennsylvania income tax (Pennsylvania municipal money
market instruments). However, some Fund dividends may be taxable if the Fund, as
it is permitted to do, invests some of its assets in taxable instruments. Also,
Fund dividends will generally be subject to state and local income taxes for any
shareholders who are not Pennsylvania residents. High quality money market
instruments are securities that present minimal credit risks as determined by
the Adviser and generally include securities that are rated at the time of
purchase by a major rating agency in the two highest rating categories for such
securities, and certain securities that are not so rated but are of comparable
quality as determined by the Adviser. As a matter of fundamental policy, the
Fund invests its assets so that at least 80% of its annual interest income is
not only exempt from regular federal income tax and Pennsylvania personal income
tax, but it is not considered a preference item for purposes of the federal
alternative minimum tax.
In managing the Fund, the Adviser assesses current and projected market
conditions, particularly interest rates. Based on this assessment and a separate
credit analysis, the Adviser uses gradual shifts in portfolio maturity to
respond to expected changes and selects securities that it believes offer the
most attractive risk/return trade off.
As a money market fund, the Fund invests only in instruments with remaining
maturities of 397 days or less that the Adviser believes present minimal credit
risk. The Fund maintains an average weighted maturity of 90 days or less.
PRINCIPAL RISKS OF INVESTING
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
The Fund is also subject to the risk that its market segment, tax exempt money
market securities, may underperform other fixed income market segments or the
fixed income market as a whole.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Fund's securities.
The Fund's focus of investments in securities of issuers located in Pennsylvania
subjects the Fund to economic and government policies of that state. For
additional information about risks, see "More Information About Risk."
53 PROSPECTUS
<PAGE> 56
MONEY MARKET FUNDS
ARMADA PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND (CONTINUED)
================================================================================
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The bar chart does not reflect sales charges. If sales charges had been
reflected, returns would be less than those shown below.
CALENDAR YEAR TOTAL RETURN
1997 1998
3.33% 2.98%
Best Quarter 0.87% (6/30/97)
Worst Quarter 0.68% (9/30/98)
The Fund's performance from January 1, 1999 to September 30, 1999 was 2.01%.
This table shows the Fund's average annual total returns for the periods ended
December 31, 1998.
- --------------------------------------------------------------------------------
CLASS A SHARES 1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
Armada Pennsylvania
Tax Exempt Money
Market Fund 2.98% 3.17%(1)
- --------------------------------------------------------------------------------
(1) Since September 11, 1996.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- --------------------------------------------------------------------------------
CLASS A
Investment Advisory Fees 0.40%
- --------------------------------------------------------------------------------
Distribution and Service (12b-1) Fees 0.10%
- --------------------------------------------------------------------------------
Other Expenses 0.31%
- --------------------------------------------------------------------------------
Total Annual Fund
Operating Expenses(1) 0.81%
- --------------------------------------------------------------------------------
(1) The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Adviser and Distributor
each waived a portion of the fees in order to keep total operating expenses at a
specified level. With these fee waivers, the Fund's actual total operating
expenses were 0.50%. The Adviser and Distributor expect to continue these
waivers so that total operating expenses for the current fiscal year will be
0.50%, however, they may discontinue all or part of these waivers at any time.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
- --------------------------------------------------------------------------------
EXAMPLE
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return, 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:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class A Shares $83 $259 $450 $1,002
54 PROSPECTUS
<PAGE> 57
MONEY MARKET FUNDS
ARMADA TAX EXEMPT MONEY MARKET FUND
================================================================================
FUND SUMMARY
INVESTMENT GOAL
High current interest income exempt from federal income tax consistent with
stability of principal while maintaining liquidity
INVESTMENT FOCUS
Municipal money market instruments
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Very low
PRINCIPAL INVESTMENT STRATEGY
Investing in a portfolio of high quality short-term debt securities designed to
allow the Fund to maintain a stable net asset value of $1.00 per share
INVESTOR PROFILE
Conservative taxable investors in higher tax brackets seeking current income
exempt from federal income taxes
PRINCIPAL INVESTMENT STRATEGIES
The Armada Tax Exempt Money Market Fund's investment objective is to provide as
high a level of current interest income exempt from federal income tax as is
consistent with liquidity and stability of principal. The investment objective
may be changed without a shareholder vote. The Fund invests primarily in high
quality money market instruments issued by or on behalf of states, territories
and possessions of the United States, the District of Columbia and their
political subdivisions, agencies, instrumentalities and authorities that pay
interest exempt from federal taxes (municipal money market instruments).
However, Fund dividends will generally be taxable for state and local income tax
purposes. Also, some Fund dividends may be taxable for federal income tax
purposes if the Fund, as it is permitted to do, invests some of its assets in
taxable instruments. High quality money market instruments are securities that
present minimal credit risks as determined by the Adviser and generally include
securities that are rated at the time of purchase by a major rating agency in
the highest two rating categories for such securities, and certain securities
that are not rated but are of comparable quality as determined by the Adviser.
As a matter of fundamental policy, the Fund invests its assets so that at least
80% of its annual interest income is not only exempt from regular federal income
tax, but is not considered a preference item for purposes of the federal
alternative minimum tax.
In managing the Fund, the Adviser assesses current and projected market
conditions, particularly interest rates. Based on this assessment and a separate
credit analysis, the Adviser uses gradual shifts in portfolio maturity to
respond to expected changes and selects securities that it believes offer the
most attractive risk/return trade off.
As a money market fund, the Fund invests only in money market instruments with
remaining maturities of 397 days or less that the Adviser believes present
minimal credit risk. The Fund maintains an average weighted maturity of 90 days
or less.
PRINCIPAL RISKS OF INVESTING
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Fund's securities.
The Fund is also subject to the risk that its market segment, tax exempt money
market instruments, may underperform other fixed income market segments or the
fixed income market as a whole. For additional information about risks, see
"More Information About Risk."
55 PROSPECTUS
<PAGE> 58
MONEY MARKET FUNDS
ARMADA TAX EXEMPT MONEY MARKET FUND (CONTINUED)
================================================================================
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
There is no performance information for Class B Shares because it has not
completed a full calendar year of operations.
The performance of Class A and Class B Shares will differ due to differences in
expenses.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The bar chart does not reflect sales charges. If sales charges had been
reflected, returns would be less than those shown below.
CALENDAR YEAR TOTAL RETURN
1992 1993 1994 1995 1996 1997 1998
2.41% 1.90% 2.41% 3.46% 3.11% 3.27% 3.08%
Best Quarter 0.91% (6/30/95)
Worst Quarter 0.43% (3/31/93)
The Fund's performance from January 1, 1999 to September 30, 1999 was 2.00%.
This table shows the Fund's average annual total returns for the periods ended
December 31, 1998.
- --------------------------------------------------------------------------------
CLASS A SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- --------------------------------------------------------------------------------
Armada Tax Exempt
Money Market Fund 3.08% 3.06% 2.91%(1)
- --------------------------------------------------------------------------------
(1)Since April 1, 1991.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
- --------------------------------------------------------------------------------
CLASS A CLASS B
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price)(1) None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as a percentage
of net asset value)(2) None 5.00%
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends
and other Distributions (as a
percentage of offering price) None None
- --------------------------------------------------------------------------------
Redemption Fee (as a percentage
of amount redeemed, if applicable) None None
- --------------------------------------------------------------------------------
Exchange Fee None None
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- --------------------------------------------------------------------------------
CLASS A CLASS B
Investment Advisory Fees 0.35% 0.35%
- --------------------------------------------------------------------------------
Distribution and Service (12b-1) Fees 0.10% 0.75%
- --------------------------------------------------------------------------------
Other Expenses 0.27% 0.27%
- --------------------------------------------------------------------------------
Total Annual Fund
Operating Expenses(3) 0.72% 1.37%
- --------------------------------------------------------------------------------
(1)This sales charge varies depending upon how much you invest. See "Purchasing
Fund Shares."
(2)This amount applies to redemptions during the first and second years. The
deferred sales charge decreases to 4.0%, 3.0% and 2.0% for redemptions made
during the third through fifth years, respectively. No deferred sales charge is
charged after the fifth year. For more information see "Selling Fund Shares."
(3)The Fund's total actual annual operating expenses for Class A and Class B
Shares for the most recent fiscal year were less than the amounts shown above
because the Adviser and Distributor each waived a portion of the fees in order
to keep total operating expenses at a specified level. With these fee waivers,
the Fund's actual total operating expenses for the Class A and Class B Shares
were 0.46% and 1.17%, respectively. Based on the foregoing, total operating
expenses for Class A and Class B Shares are expected to be 0.46% and 1.17%,
respectively. The Adviser and Distributor expect to continue these waivers,
however, they may discontinue all or part of these waivers at any time.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
56 PROSPECTUS
<PAGE> 59
MONEY MARKET FUNDS
ARMADA TAX EXEMPT MONEY MARKET FUND (CONTINUED)
================================================================================
- --------------------------------------------------------------------------------
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:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class A Shares $74 $230 $401 $894
Class B Shares $639 $834 $950 $1,467
If you do not sell your shares at the end of the period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class B Shares $139 $434 $750 $1,467
57 PROSPECTUS
<PAGE> 60
MONEY MARKET FUNDS
ARMADA MONEY MARKET
================================================================================
FUND SUMMARY
INVESTMENT GOAL
High current income consistent with stability of principal while maintaining
liquidity
INVESTMENT FOCUS
Money market instruments
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Very low
PRINCIPAL INVESTMENT STRATEGY
Investing in a portfolio of high quality short-term debt securities designed to
allow the Fund to maintain a stable net asset value of $1.00 per share
INVESTOR PROFILE
Conservative investors seeking current income through a liquid investment
PRINCIPAL INVESTMENT STRATEGIES
The Armada Money Market Fund's investment objective is to provide as high a
level of current income as is consistent with liquidity and stability of
principal. The investment objective may be changed without a shareholder vote.
The Fund invests in a variety of high quality money market securities, including
certificates of deposit and other obligations issued by domestic and foreign
banks, as well as commercial paper. Foreign government obligations are U.S.
dollar-denominated obligations (limited to commercial paper and other notes)
issued or guaranteed by a foreign government or other entity located or
organized in a foreign country that maintains a short-term foreign currency
rating in the highest short-term ratings category by the requisite number of
Nationally Recognized Statistical Rating Organizations (NRSROs). The Adviser
also invests in securities issued or guaranteed by the U.S. Government or its
agencies (government obligations) and repurchase agreements collateralized by
government obligations and issued by financial institutions such as banks and
broker-dealers. High quality money market instruments are securities that
present minimal credit risks as determined by the Adviser and generally include
securities that are rated at the time of purchase by a major rating agency in
the highest two rating categories for such securities, and certain securities
that are not rated but are of comparable quality as determined by the Adviser.
In selecting investments for the Fund, the Adviser actively buys throughout the
money market curve, laddering maturities to meet or exceed shareholder liquidity
needs while seeking the highest possible yield consistent with the Fund's risk
profile.
As a money market fund, the Fund invests only in money market instruments with
remaining maturities of 397 days or less that the Adviser believes present
minimal credit risk. The Fund maintains an average weighted maturity of 90 days
or less.
PRINCIPAL RISKS OF INVESTING
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
The Fund is also subject to the risk that its market segment, money market
securities, may underperform other fixed income market segments or the fixed
income market as a whole. For additional information about risks, see "More
Information About Risk."
58 PROSPECTUS
<PAGE> 61
MONEY MARKET FUNDS
ARMADA MONEY MARKET FUND (CONTINUED)
================================================================================
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future. The table measures
performance in terms of total return. However, this Fund is managed for yield
and not total return.
There is no performance information for Class B or Class C Shares because
neither has completed a full calendar year of operations.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The bar chart does not reflect sales charges. If sales charges had been
reflected, returns would be less than those shown below.
CALENDAR YEAR TOTAL RETURN
1992 1993 1994 1995 1996 1997 1998
3.22% 2.64% 3.88% 5.61% 5.09% 5.22% 5.11%
Best Quarter 1.40% (6/30/95)
Worst Quarter 0.64% (6/30/93)
The Fund's performance from January 1, 1999 to September 30, 1999 was 3.42%.
This table shows the Fund's average annual total returns for the periods ended
December 31, 1998.
- --------------------------------------------------------------------------------
CLASS A SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- --------------------------------------------------------------------------------
Armada Money
Market Fund 5.11% 4.98% 4.48%(1)
- --------------------------------------------------------------------------------
(1)Since April 1, 1991.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price)(1) None None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as a percentage
of net asset value) None 5.00%(2) 1.00%(3)
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends
and other Distributions (as a
percentage of offering price) None None None
- --------------------------------------------------------------------------------
Redemption Fee (as a percentage
of amount redeemed, if applicable) None None None
- --------------------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------------------
59 PROSPECTUS
<PAGE> 62
MONEY MARKET FUNDS
ARMADA MONEY MARKET FUND (CONTINUED)
================================================================================
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- --------------------------------------------------------------------------------
CLASS A CLASS B(5) CLASS C(5)
Investment Advisory Fees 0.35% 0.35% 0.35%
- --------------------------------------------------------------------------------
Distribution and Service
(12b-1) Fees 0.10% 0.75% 0.75%
- --------------------------------------------------------------------------------
Other Expenses 0.25% 0.25% 0.35%
- --------------------------------------------------------------------------------
Total Annual Fund
Operating Expenses(4) 0.70% 1.35% 1.45%
- --------------------------------------------------------------------------------
(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 B Shares
for the most recent fiscal year were less than the amounts shown above because
the Adviser and Distributor each waived a portion of the fees in order to keep
total operating expenses at a specified level. With these fee waivers, the
Fund's actual total operating expenses were 0.54% and 1.25%, respectively, for
Class A and Class B Shares. Based on the foregoing, total operating expenses for
Class A, Class B and Class C Shares are expected to be 0.54%, 1.25% and 1.35%
(estimated), respectively. The Adviser and Distributor expect to continue these
waivers, however, they may discontinue all or part of these waivers at any time.
(5) These Shares are available only through exchanges from other Funds within
the respective class. Initial purchases of Class B Shares or Class C Shares of
the Fund are not possible.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
- --------------------------------------------------------------------------------
EXAMPLE
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return, 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:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class A Shares $72 $224 $390 $871
Class B Shares $637 $828 $939 $1,444
Class C Shares $248 $459 $792 $1,735
If you do not sell your shares at the end of the period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class B Shares $137 $428 $739 $1,444
Class C Shares $148 $459 $792 $1,735
60 PROSPECTUS
<PAGE> 63
ARMADA(R)
FUNDS
ARM-M-001-03000
<PAGE> 64
NEW ACCOUNT APPLICATION
A, B, and C Shares
MAIL TO: Armada Funds
P.O. Box 8421, Boston, MA 02266-8421
FOR INFORMATION, CALL:
1-800-622-FUND (3863)
Please Print Clearly
[1] SHAREHOLDER REGISTRATION
________________________________________________________________________________
NAME IN WHICH SHARES WILL BE REGISTERED
(YOUR FULL NAME, OR NAME OF CORPORATION, OR TRUSTEE)
________________________________________________________________________________
ADDRESS
________________________________________________________________________________
CITY STATE ZIP
( ) ( )
________________________________________________________________________________
DAYTIME PHONE EVENING PHONE
________________________________________________________________________________
SOCIAL SECURITY OR TAX I.D. NUMBER EMAIL ADDRESS
[ ] U.S. CITIZEN [ ] OTHER ______________________________________
SPECIFY
[ ] Check if eligible for waiver and indicate investor category
(See current prospectus for eligibility requirements).
If you check this block, only choose A Shares when selecting a fund.
Investor Category: ____________________
[2] TYPE OF ACCOUNT
[ ] INDIVIDUAL [ ] JOINT ___________________________________________________
JOINT ACCOUNT OWNER
________________________________________________________________________________
SOCIAL SECURITY OR TAX I.D. NUMBER
[ ] TRUST_______________________________________________________________________
NAME OF TRUST DATE OF TRUST AGREEMENT
[ ] TRUSTEE NAME ______________________________________________________________
[ ] CORPORATION, PARTNERSHIP OR OTHER ENTITY
Remember, your Social Security/Taxpayer I.D. number must be provided to
avoid back-up withholding.
________________________________________________________________________________
NAME SOCIAL SECURITY OR TAX I.D. NUMBER
[ ] GIFT TO MINOR ______________________________________________________________
CUSTODIAN'S NAME
AS CUSTODIAN FOR__________________________________________________ UNDER THE
NAME OF MINOR
__________________________________________ UNIFORM GIFT/TRANSFER TO MINORS ACT
STATE
MINOR'S SOCIAL SECURITY NO. ___________________________________________________
[3] ARMADA FUNDS SELECTION
CHECK THE FUND(S) AND INDICATE THE AMOUNT OF INVESTMENT FOR EACH FUND. MINIMUM
INVESTMENT: $500 PER FUND OR $50 IF YOU CHOOSE THE PLANNED INVESTMENT PROGRAM
(PIP). ENCLOSE ONE CHECK FOR THE TOTAL AMOUNT OF YOUR INVESTMENT. "CLASS A"
SHARES ARE SOLD SUBJECT TO A FRONT-END SALES CHARGE. "CLASS B" SHARES ARE SOLD
WITH A CONTINGENT DEFERRED SALES CHARGE (CDSC) (BACK-END CHARGE) IMPOSED ON A
SLIDING SCHEDULE WHEN SHARES ARE REDEEMED. "CLASS C" SHARES ARE SOLD WITH A CDSC
OF 1.00% IF REDEEMED WITHIN 18 MONTHS OF PURCHASE.
<TABLE>
<CAPTION>
FUND AMOUNTS
EQUITY SERIES A SHARES B SHARES C SHARES
- ------------- -------- -------- --------
<S> <C> <C> <C>
International Equity Fund $__________(678) $__________(311) $__________(1199)
Small Cap Value Fund $__________(627) $__________(913) $__________(1195)
Small Cap Growth Fund $__________(679) $__________(473) $__________(1200)
Equity Growth Fund $__________(621) $__________(458) $__________(1166)
Tax Managed Equity Fund $__________(360) $__________(446) $__________(1161)
Core Equity Fund $__________(682) $__________(310) $__________(1184)
Equity Index Fund $__________(026) $__________(1232) $__________(1159)
Equity Income Fund $__________(625) $__________(472) $__________(1193)
INCOME SERIES
- -------------
Total Return
Advantage Fund $__________(626) $__________(1178) $__________(1194)
Bond Fund $__________(669) $__________(359) $__________(1197)
Intermediate Bond Fund $__________(622) $__________(357) $__________(1167)
GNMA Fund $__________(672) $__________(1176) $__________(1198)
Enhanced Income Fund $__________(624) $__________(1177) $__________(1169)
TAX EXEMPT SERIES
- -----------------
Ohio Tax Exempt Bond Fund $__________(623) $__________(1168)
Pennsylvania Municipal
Bond Fund $__________(668) $__________(1196)
National Tax Exempt
Bond Fund $__________(388) $__________(356) $__________(1163)
MONEY MARKET SERIES
- -------------------
Ohio Municipal
Money Market Fund $__________(427)
Pennsylvania Tax Exempt $__________(667)
Money Market Fund
Tax Exempt Money
Market Fund $__________(620)
Money Market Fund $__________(618) $__________(286) $__________(1164)
Government Money
Market Fund $__________(619)
Treasury Money
Market Fund $__________(617)
ALLOCATION SERIES
- -----------------
Balanced Allocation Fund $__________(214) $__________(302) $__________(1160)
Other:____________________ $__________(000) $__________(000) $__________(0000)
NAME OF ARMADA FUND
</TABLE>
TOTAL INVESTMENT $__________________________
For initial purchases in the Money Market Fund B or C Shares, you will need to
complete the information for a Systematic Exchange in Section 9B.
METHOD OF PAYMENT:
[ ] Enclosed is my check for the total amount of my investment made payable to
Armada Funds (Fund Name).
[ ] Bank wire sent_____________________________________________________________
CONTROL NUMBER DATE
NOTE: To purchase shares by federal funds or bank wire,
call 1-800-622-FUND (3863).
<PAGE> 65
[4] DIVIDEND INCOME
& CAPITAL GAINS
CHECK YOUR CHOICE OF DIVIDEND/CAPITAL GAIN DISTRIBUTION AND CHOOSE YOUR PAYMENT
METHOD, IF APPLICABLE.
Check one only; if none is checked, all dividend income and
capital gains, if any, will be reinvested automatically.
[ ] Reinvest all dividend income and capital gains.
[ ] Pay dividends in cash and reinvest capital gains.
[ ] Pay capital gains in cash and reinvest dividends.
[ ] Pay all dividend income and capital gains in cash.
METHOD OF PAYMENT: If dividend income or capital gains are to be distributed in
cash, select one of the following:
[ ] Send check to the address of record
[ ] Cash via Automated Transfer (See Section 5)
[ ] Special Dividend Service (See Section 7)
[5] BANK, WIRE AND ELECTRONIC
FUNDS TRANSFER INSTRUCTIONS
If you wish to buy or sell shares via wire or electronic funds transfer, or make
use of the Planned Investment Program or Systematic Withdrawal Plan, you must
attach a voided check for the bank account you wish to use, OR provide full bank
account information as shown below. Any change in these instructions must be
made in writing to Armada Funds.
________________________________________________________________________________
BANK NAME BRANCH OFFICE (IF APPLICABLE)
________________________________________________________________________________
BANK ADDRESS (DO NOT USE P.O. BOX)
________________________________________________________________________________
CITY STATE ZIP
________________________________________________________________________________
NAME(S) ON YOUR BANK ACCOUNT
________________________________________________________________________________
BANK ACCOUNT NUMBER BANK ABA NUMBER
Account Type (check one): [ ] Checking [ ] Savings
[6] WAIVER OF TELEPHONE AND
INTERNET TRANSACTIONS
The Fund(s) currently offer telephone and internet transaction privileges to its
shareholders, whereby a shareholder can make wire transfers or exchanges over
the telephone or via the internet.
Neither the Transfer Agent nor the Fund(s) will be responsible for the
authenticity of redemption instructions received by telephone or internet if it
reasonably believes those instructions to be genuine. The Fund(s) and its
transfer agent will each employ reasonable procedures to confirm that telephone
or internet instructions are genuine, and may be liable for losses resulting
from unauthorized or fraudulent telephone or internet instructions if it does
not employ these procedures. Such procedures may include taping of telephone
conversations.
[ ] I choose to waive the telephone and internet transaction features.
[7] SPECIAL DIVIDEND SERVICE (OPTIONAL)
SPECIAL DIVIDEND SERVICE ALLOWS YOU TO INVEST INCOME AND CAPITAL GAINS FROM ONE
ARMADA FUND INTO ANOTHER ARMADA FUND ACCOUNT.
[ ] Check box if you want this service.
I hereby authorize the Fund Distributor, SEI Investments Distribution Co., to
invest dividends and capital gains as indicated below:
[ ] Invest Both Dividends and Capital Gains.
FROM: (Fund Name and Account Number) TO: (Fund Name and Account Number)
_____________________________________ ________________________________________
_____________________________________ ________________________________________
[ ] Invest Only the Dividends.
FROM: (Fund Name and Account Number) TO: (Fund Name and Account Number)
_____________________________________ ________________________________________
_____________________________________ ________________________________________
[8] CHECK WRITING PRIVILEGE (Optional)
AVAILABLE ON ALL MONEY MARKET FUNDS (A SHARES ONLY).
[ ] Check box if you want this service.
If you elect this service, you must complete the signature card. (See Section
15.) Allow 14 business days for delivery of your checkbook after our receipt of
the signed signature card. Checks may be written against your money market
investment for a minimum of $100 each check.
[9] SYSTEMATIC EXCHANGE PLAN (OPTIONAL)
[A] FOR SYSTEMATIC EXCHANGES FROM ARMADA MONEY MARKET CLASS A FUNDS TO ALL
OTHER CLASS A FUNDS.*
Exchanges will take place on the 20th of each Month
or Quarterly.
Total Investment Amount to be exchanged: $ _________________________________
From: Money Market Account No. (if known) ___________________________________
To: Fund Name and Account Number (if known) Monthly $ Amount ($50 min.)
(Circle One)
___________________ $_________/month/quarter
___________________ $_________/month/quarter
___________________ $_________/month/quarter
*Please note that if you anticipate additional investment over the next 13
months, see Section 12 for Letter of Intent pricing. Each fund initial
investment amount must total at least $500.00 with no minimum subsequent
investments. The systematic exchange each month must equal at least $50.00 per
Fund.
Continued on next page
<PAGE> 66
[B] FOR SYSTEMATIC EXCHANGES FROM THE ARMADA MONEY MARKET FUND CLASS B SHARES
TO ALL OTHER CLASS B SHARES OR FROM THE ARMADA MONEY MARKET FUND CLASS C
SHARES TO ALL OTHER CLASS C SHARES.
Entire investment must be exchanged within:
(MUST choose one)
[ ] Six months from date of purchase
[ ] Twelve months from date of purchase
Exchanges will take place on the 20th of each Month.
**Total Investment Amount: $__________________________________________________
Please indicate share class in which exchanges will occur (B or C):____________
From: Money Market Account No. (if known) _____________________________________
To: Fund Name and Account Number (if known) Amount Total per Fund***
__________________________________________ $_______/month
__________________________________________ $_______/month
__________________________________________ $_______/month
(Must equal initial total investment above) **Total $___________________________
**Each fund investment amount must total at least $500.00. The monthly
investment amount will be calculated automatically by dividing the total amount
per fund by the time period chosen above. The systematic exchange each month
must equal at least $50.00 per fund.
[10] PLANNED INVESTMENT PROGRAM (OPTIONAL)
IF YOU CHOOSE THIS OPTION, YOU MUST ATTACH A VOIDED CHECK OR DEPOSIT SLIP OF THE
BANK ACCOUNT YOU WISH TO USE OR PROVIDE FULL BANK INFORMATION IN SECTION 5.
The minimum initial investment of $500 is waived if the Fund(s) is opened as a
Planned Investment Program (PIP).
[ ] Check box if you want this service.
Attached is an initial check for at least the minimum of $50.
I authorize the Fund Distributor, SEI Investments Distribution Co., to draw on
my bank account on a periodic basis as indicated below, for investments in my
Armada Funds account. I understand that if there are insufficient funds in my
account, finance charges may apply.
[ ] I have attached a voided check OR deposit slip
[ ] Periodic investment amount $________________________________________________
($50 minimum)
Name of Fund ___________________________________________________________________
To specify additional PIP investments, please attach a separate sheet.
PREFERRED INVESTMENT SCHEDULE:
[ ] Semi-monthly, on the 5th and 20th of each month beginning___________________
(MONTH)
[ ] Monthly on the 5th day of each month beginning _____________________________
(MONTH)
[ ] Monthly on the 20th day of each month beginning ____________________________
(MONTH)
[ ] Quarterly on the first 5th of each quarter beginning________________________
(MONTH)
[11] SYSTEMATIC WITHDRAWAL PLAN (OPTIONAL)
IF YOU CHOOSE AUTOMATED PAYMENT, YOU MUST ATTACH A VOIDED CHECK OR PROVIDE FULL
BANK INFORMATION IN SECTION 5. PLEASE NOTE, AMOUNTS EQUALING MORE THAN 10% OF
YOUR BALANCE FOR CLASS B OR CLASS C SHARES WILL BE SUBJECT TO THE CDSC SALES
CHARGE.
[ ] Check box if you want this service.
To establish a Systematic Withdrawal Plan (SWP), an investor must own or
purchase shares of Armada Funds having a current net asset value of at least
$1,000.
Name of Fund ___________________________________________________________________
To specify additional SWP investments, please attach a separate sheet.
AMOUNT AND FREQUENCY OF PAYMENTS:
Beginning in_____________________ __________ please make
(MONTH) (YEAR)
payments of _______________________________________________
($100 MINIMUM)
(Indicate minimum amount or percentage to withdraw in space provided.)
[ ] Monthly [ ] Quarterly [ ] Semi-annually [ ] Annually
[ ] The amount withdrawn is 10% or less of account value and qualifies for
CDSC exemption.
METHOD OF PAYMENT (check one):
[ ] I wish to have payments under the SWP made via Automated Transfer to my bank
account. (Please attach a voided check from the bank account you wish to
use, or complete Section 5)
[ ] I wish to have payments under the SWP made to me by check and sent to the
address of record.
[ ] I wish to have payments under the SWP made directly
to my Armada Funds' money market fund:_____________________________
ACCOUNT NUMBER
[ ] I wish to have payments under the SWP made to me by check at the following
address:
________________________________________________________________________________
ADDRESS
________________________________________________________________________________
CITY STATE ZIP
[12] LETTER OF INTENT (OPTIONAL)
LETTER OF INTENT ALLOWS YOU TO AGGREGATE ANTICIPATED PURCHASES OF A SHARES OVER
A 13-MONTH PERIOD TO OBTAIN A REDUCED SALES CHARGE.
[ ] Check box if you want this service.
Although I am not obligated to do so, I intend to purchase
A Shares of Armada Funds over the next 13-month period which will equal or
exceed:
INTERMEDIATE BOND, TOTAL RETURN ADVANTAGE, GNMA, BOND, BALANCED ALLOCATION
AND NATIONAL TAX EXEMPT BOND FUNDS:
[ ] $50,000 [ ] $250,000 [ ] $1 Million
[ ] $100,000 [ ] $500,000
SMALL CAP VALUE, EQUITY GROWTH, EQUITY INCOME, CORE EQUITY,
INTERNATIONAL EQUITY, SMALL CAP GROWTH AND TAX MANAGED EQUITY:
[ ] $25,000 [ ] $100,000 [ ] $500,000
[ ] $50,000 [ ] $250,000 [ ] $1 Million
EQUITY INDEX, ENHANCED INCOME, OHIO TAX EXEMPT BOND AND
PENNSYLVANIA MUNICIPAL BOND:
[ ] $100,000 [ ] $500,000
[ ] $250,000 [ ] $1 Million
If I do not fulfill this Letter of Intent, or if I redeem this amount within one
year from the time I fulfill my Letter of Intent, I understand that I will be
charged the highest sales charge applicable to the Fund. The Letter of Intent
may include all purchases up to 90 days preceding the date the letter was
signed. Each purchase will be made at the then reduced offering price applicable
to the amount checked above, as described in the prospectus. By completing this
Letter of Intent and signing this Application, I agree to the terms and
conditions of the Letter of Intent. I hereby irrevocably constitute and appoint
SEI Investments Distribution Co., my attorney, with full power of substitution,
to surrender for redemption any or all shares of Armada Funds held as security
as described in the prospectus.
<PAGE> 67
[13] SIGNATURE & CERTIFICATION
I affirm that I have received and read the current prospectus of the Fund(s)
selected on the first page and agree to its terms. I agree that SEI Investments
Distribution Co., the Transfer Agent, Armada Funds or any affiliate or their
officers, directors or employees will not be liable for any loss, expense or
cost for acting upon any instructions or inquiries believed genuine.
I understand that National City Investment Management Co. serves as investment
adviser to the Armada Funds for which it receives compensation for such advisory
services. I understand that these investment products are not FDIC insured, are
not deposits of, obligations of, or guaranteed by any bank, and involve
investment risks, including possible loss of the principal invested.
By signing this application, I hereby certify under penalties of perjury that
the information on this application is complete and correct and that as required
by federal law: (Please check applicable boxes)
[ ] U.S. Citizen/Taxpayer:
[ ] I certify that (1) the number shown above on this form is the
correct Social Security Number or Tax ID Number and (2) I am not
subject to any backup withholding either because (a) I am exempt from
backup withholding, or (b) I have not been notified by the Internal
Revenue Service ("IRS") that I am subject to backup withholding as a
result of a failure to report all interest or dividends, or (c) the
IRS has notified me that I am no longer subject to backup withholding.
[ ] If no Tax ID Number or Social Security Number has been provided
above, I have applied, or intend to apply, to the IRS or the Social
Security Administration for a Tax ID Number or a Social Security
Number, and I understand that if I do not provide either number to the
Transfer Agent within 60 days of the date of this application or if I
fail to furnish my correct Social Security Number or Tax ID Number, I
may be subject to a penalty and a 31% backup withholding on
distributions and redemption proceeds. (Please provide either number
on IRS Form W-9. You may request such form by calling the Transfer
Agent at 1-800-622-FUND(3863)).
[ ] Non-U.S. Citizen/Taxpayer:
Indicate country of residence for tax purposes:
___________________________________________________________________________
Under penalties of perjury, I certify that I am not a U.S. citizen or
resident and I am an exempt foreign person as defined by the Internal
Revenue Service.
The Internal Revenue Service does not require your consent to any provision of
this document other than the certifications required to avoid backup
withholding.
X
- --------------------------------------------------------------------------------
SIGNATURE (INDIVIDUAL OR CUSTODIAN) DATE
X
- --------------------------------------------------------------------------------
SIGNATURE (JOINT REGISTRANT, IF ANY) DATE
X
- -------------------------------------------------------------------------------
SIGNATURE & TITLE (CORPORATE OFFICER, PARTNER, TRUSTEE, ETC.) DATE
[14] PRIVACY PROTECTION (OPTIONAL)
We want to offer you the array of financial-related products and services you
need to accomplish your financial goals. In order to do so, Armada Funds may
provide National City and its affiliates with certain shareholder information.
We believe your privacy should not be compromised. You can expect that we will
protect the privacy and use of your non-public personal and financial
information. We will not sell information about you to any other company or
share your information with any company that offers products that are not
related to your financial needs.
[ ] I prefer not to receive promotional information about financial-related
products and services offered by National City. (Please allow 8 to 10 weeks
for your request to take effect. Once your request has been processed, it
will remain in effect until you request a change).
[15] HOW TO ESTABLISH CHECK WRITING PRIVILEGE (OPTIONAL)
TO ESTABLISH THE CHECK WRITING PRIVILEGE FOR A SINGLE FUND, ALL REGISTERED
OWNERS MUST SIGN BELOW WITH A BLACK BALLPOINT PEN. IF YOU SHOULD HAVE ANY
QUESTIONS, PLEASE CALL ARMADA FUNDS AT 1-800-622-FUND (3863).
METHOD OF PAYMENT:
Corporations, Trusts, Partnerships, and Associations must also complete a
corporate resolution or certification form.
[ ] Check here if more than one signature is required. If this box is not
marked, only one signature will be required on checks. (See notes on
reverse.)
This check writing privilege applies only to the Armada Money Market Series
(A Shares Only).
________________________________________________________________________________
NAME OF MONEY MARKET FUND
________________________________________________________________________________
OWNER'S NAME SOCIAL SECURITY NUMBER
________________________________________________________________________________
OWNER'S SIGNATURE DATE
________________________________________________________________________________
SIGNATURE(S) OF CO-OWNERS (IF ANY) DATE
________________________________________________________________________________
[16] DEALER INFORMATION
DEALER MUST HAVE APPROVED AGREEMENT WITH FUND DISTRIBUTOR,
SEI INVESTMENTS DISTRIBUTION CO.
________________________________________________________________________________
FIRM
________________________________________________________________________________
ADDRESS
________________________________________________________________________________
CITY STATE ZIP
________________________________________________________________________________
PHONE OFFICE NUMBER
________________________________________________________________________________
NAME OF REPRESENTATIVE NUMBER
________________________________________________________________________________
SIGNATURE OF REPRESENTATIVE
________________________________________________________________________________
SIGNATURE OF DEALER/SALES MANAGER
<PAGE> 68
CHECK WRITING SIGNATURE CARD
(NOT AVAILABLE FOR RETIREMENT ACCOUNT)
Please provide information requested on reverse side.
The payment of funds on the conditions set forth below is authorized by the
signature(s) appearing on the reverse side.
CONDITIONS: All checks will require all signatures administered exactly as they
appear on the reverse side unless authority has been given to honor checks
having an abbreviated first name or lacking or adding a middle initial
providing that the signature is otherwise acceptable. Each signatory will
guarantee the signature of those listed on the account.
The Bank is authorized by the person(s) signing this card ("Depositors") to
honor any check for not less than the amount printed on the face of the check
against the checking account and is directed to forward said check to the "Fund"
as authority to reimburse the Bank by redeeming a sufficient number of shares
for which certificates have not been issued in the Depositor's shareholder
account.
Depositors will be subject to the Bank's rules and regulations governing such
checking accounts including the right of the Bank not to honor checks in amounts
exceeding the value of the Depositor's shareholder account with the "Fund" at
the time the check is presented for payment. The undersigned understands that
there may be Bank service charges in connection with the program (i.e. for
insufficient funds or for checks written under $100) which will be deducted from
the undersigned's investor account.
Depositors hereby authorize the "Fund" or its redemption agent to honor
redemption requests presented in the above manner by the Bank. It is further
agreed as follows:
(1) All items must be a minimum amount, if so printed on the face of the check,
or they will be returned to the Depositor marked "Non-Sufficient Funds".
Deposits into the account may be made only by the "Fund".
(2) Cancelled checks will be returned to the Depositor(s) once monthly.
(3) The account may not be used for any purpose other than the presentment,
forwarding and payment of checks relating to a mutual fund share account in
the "Fund".
(4) The Bank reserves the right to change, modify or terminate this agreement
at any time upon notification mailed to the address noted on your check.
<PAGE> 69
MONEY MARKET FUNDS
ARMADA GOVERNMENT MONEY MARKET FUND
================================================================================
FUND SUMMARY
INVESTMENT GOAL
High current income consistent with stability of principal while maintaining
liquidity
INVESTMENT FOCUS
Money market instruments issued or guaranteed by the U.S. Government, its
agencies and instrumentalities and repurchase agreements
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Very Low
PRINCIPAL INVESTMENT STRATEGY
Investing in a portfolio of high quality short-term debt securities issued by
the U.S. Government, its agencies and instrumentalities and repurchase
agreements related to such securities designed to allow the Fund to maintain a
stable net asset value of $1.00 per share
INVESTOR PROFILE
Conservative investors seeking current income through a liquid investment
PRINCIPAL INVESTMENT STRATEGIES
The Armada Government Money Market Fund's investment objective is to provide as
high a level of current income as is consistent with liquidity and stability of
principal. The investment objective may be changed without a shareholder vote.
The Fund invests exclusively in obligations issued or guaranteed as to payment
of principal and interest by the U.S. Government, its agencies and
instrumentalities and repurchase agreements. U.S. Government securities include
direct obligations of the U.S. Treasury, and obligations of certain agencies
such as Ginnie Maes and Fannie Maes.
In managing the Fund, the Adviser actively buys throughout the money market
curve, laddering maturities to meet or exceed shareholder liquidity needs while
seeking the highest possible yield consistent with the Fund's risk profile.
As a money market fund, the Fund invests only in money market instruments with
remaining maturities of 397 days or less and maintains an average weighted
maturity of 90 days or less.
PRINCIPAL RISKS OF INVESTING
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
Although the Fund's U.S. Government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. Government agencies and
instrumentalities are backed by the U.S. Treasury, while others are backed
solely by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own resources.
The Fund is also subject to the risk that its market segment, money market
instruments issued or guaranteed by the U.S. Government, may underperform other
fixed income market segments or the fixed income market as a whole. For
additional information about risks, see "More Information About Risk."
61 PROSPECTUS
<PAGE> 70
MONEY MARKET FUNDS
ARMADA GOVERNMENT MONEY MARKET FUND (CONTINUED)
================================================================================
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The bar chart does not reflect sales charges. If sales charges had been
reflected, returns would be less than those shown below.
CALENDAR YEAR TOTAL RETURN
<TABLE>
<CAPTION>
<S> <C>
1992 3.25%
1993 2.63%
1994 3.81%
1995 5.53%
1996 5.04%
1997 5.14%
1998 4.98%
</TABLE>
Best Quarter 1.39% (6/30/95)
Worst Quarter 0.64% (3/31/93)
The Fund's performance from January 1, 1999 to September 30, 1999 was 3.36%.
This table shows the Fund's average annual total returns for the periods ended
December 31, 1998.
CLASS A SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- --------------------------------------------------------------------------------
Armada Government
Money Market Fund 4.98% 4.90% 4.40%(1)
- --------------------------------------------------------------------------------
(1)Since April 1, 1991.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- --------------------------------------------------------------------------------
CLASS A
Investment Advisory Fees 0.35%
- --------------------------------------------------------------------------------
Distribution and Service (12b-1) Fees 0.10%
- --------------------------------------------------------------------------------
Other Expenses 0.25%
- --------------------------------------------------------------------------------
Total Annual Fund
Operating Expenses(1) 0.70%
- --------------------------------------------------------------------------------
(1) The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amounts shown above because the Adviser and Distributor
each waived a portion of the fees in order to keep total operating expenses at a
specified level. With these fee waivers, the Fund's actual total operating
expenses were 0.54%. The Adviser and Distributor expect to continue these
waivers so that total operating expenses for the fiscal year will be 0.54%,
however, they may discontinue all or part of these waivers at any time.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
- --------------------------------------------------------------------------------
EXAMPLE
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return, 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:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class A Shares $72 $224 $390 $871
62 PROSPECTUS
<PAGE> 71
MONEY MARKET FUNDS
ARMADA TREASURY MONEY MARKET FUND
================================================================================
FUND SUMMARY
INVESTMENT GOAL
High current income consistent with stability of principal while maintaining
liquidity
INVESTMENT FOCUS
U.S. Treasury securities
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Very low
PRINCIPAL INVESTMENT STRATEGY
Investing in a portfolio of high quality short-term obligations of the U.S.
Treasury designed to allow the Fund to maintain a stable net asset value of
$1.00 per share
INVESTOR PROFILE
Conservative investors seeking current income through a liquid investment
PRINCIPAL INVESTMENT STRATEGIES
The Armada Treasury Money Market Fund's investment objective is to provide as
high a level of current income as is consistent with liquidity and stability of
principal. The investment objective may be changed without a shareholder vote.
The Fund invests exclusively in direct obligations of the U.S. Treasury, such as
Treasury bills and notes, and in other money market funds that invest
exclusively in such obligations.
In managing the Fund, the Adviser actively buys throughout the money market
curve, laddering maturities to meet or exceed shareholder liquidity needs while
seeking the highest possible yield consistent with the Fund's risk profile.
As a money market fund, the Fund invests only in money market instruments with
remaining maturities of 397 days or less and maintains an average weighted
maturity of 90 days or less.
PRINCIPAL RISKS OF INVESTING
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
The Fund is also subject to the risk that its market segment, U.S. Treasury
securities, may underperform other fixed income market segments or the fixed
income market as a whole. For additional information about risks, see "More
Information About Risk."
63 PROSPECTUS
<PAGE> 72
MONEY MARKET FUNDS
ARMADA TREASURY MONEY MARKET FUND (CONTINUED)
================================================================================
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The bar chart does not reflect sales charges. If sales charges had been
reflected, returns would be less than those shown below.
CALENDAR YEAR TOTAL RETURN
<TABLE>
<S> <C>
1995 5.27%
1996 4.75%
1997 4.81%
1998 4.54%
</TABLE>
Best Quarter 1.34% (6/30/95)
Worst Quarter 1.00% (12/31/98)
The Fund's performance from January 1, 1999 to September 30, 1999 was 3.05%.
This table shows the Fund's average annual total returns for the periods ended
December 31, 1998.
CLASS A SHARES 1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
Armada Treasury
Money Market Fund 4.54% 4.84%(1)
- --------------------------------------------------------------------------------
(1)Since December 22, 1994.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- --------------------------------------------------------------------------------
CLASS A
Investment Advisory Fees 0.30%
- --------------------------------------------------------------------------------
Distribution and Service (12b-1) Fees 0.10%
- --------------------------------------------------------------------------------
Other Expenses 0.28%
- --------------------------------------------------------------------------------
Total Annual Fund Operating Expenses(1) 0.68%
- --------------------------------------------------------------------------------
(1) The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amounts shown above because the Adviser and Distributor
each waived a portion of the fees in order to keep total operating expenses at a
specified level. With these fee waivers, the Fund's actual total operating
expenses were 0.57%. The Adviser and Distributor expect to continue these
waivers so that total operating expenses for the fiscal year will be 0.57%,
however, they may discontinue all or part of these waivers at any time.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
- --------------------------------------------------------------------------------
EXAMPLE
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
If you sell your shares at the end of the period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class A Shares $69 $218 $ 379 $847
64 PROSPECTUS
<PAGE> 73
ARMADA MID CAP GROWTH FUND
================================================================================
FUND SUMMARY
INVESTMENT GOAL
Capital appreciation
INVESTMENT FOCUS
Mid-cap equity securities
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
High
PRINCIPAL INVESTMENT STRATEGY
Investing in growth-oriented equity securities of medium-sized issuers
INVESTOR PROFILE
Investors seeking capital growth, and who are willing to accept the risks of
investing in equity securities
PRINCIPAL INVESTMENT STRATEGIES
The Armada Mid Cap Growth Fund's investment objective is to provide capital
appreciation by investing in a diversified portfolio of publicly traded mid cap
equity securities. The investment objective may be changed without a shareholder
vote. The Fund will normally invest at least 80% of its total assets in the
common stock of companies with mid cap stock market capitalizations. The Fund
may invest up to 20% of its total assets at the time of purchase in foreign
equity securities. In selecting investments for the Fund to buy and sell, the
Adviser invests in companies that have typically exhibited consistent,
above-average growth in revenues and earnings, strong management, sound and
improving financial fundamentals and presently exhibit the potential for growth.
The Fund considers a mid-capitalization or "mid cap" company to be one that has
a comparable market capitalization as the companies in the Russell Midcap Growth
Index. The Russell Midcap Growth Index is an unmanaged index which reflects a
medium-sized universe of growth-oriented securities.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities, and will lower Fund performance.
PRINCIPAL RISKS OF INVESTING
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country.
The Fund is also subject to the risk that its market segment, mid cap equity
securities, may underperform other equity market segments or the equity market
as a whole. For additional information about risks, see "More Information About
Risk."
65 PROSPECTUS
<PAGE> 74
ARMADA MID CAP GROWTH FUND (CONTINUED)
================================================================================
PERFORMANCE INFORMATION
There is no bar chart or performance table for the Class A, Class B or Class C
Shares because none has completed a full calendar year of operations.
The performance of Class A, Class B and Class C Shares will differ due to
differences in expenses.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price)(1) 5.50% None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as a percentage
of net asset value) None 5.00%(2) 1.00%(3)
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends
and other Distributions (as a
percentage of offering price) None None None
- --------------------------------------------------------------------------------
Redemption Fee (as a percentage
of amount redeemed, if applicable) None None None
- --------------------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
Investment Advisory Fees 1.00% 1.00% 1.00%
- --------------------------------------------------------------------------------
Distribution and Service
(12b-1) Fees 0.10% 0.75% 0.75%
- --------------------------------------------------------------------------------
Other Expenses(4) 0.47% 0.47% 0.47%
- --------------------------------------------------------------------------------
Total Annual Fund
Operating Expenses(5) 1.57% 2.22% 2.22%
- --------------------------------------------------------------------------------
(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)"Other Expenses" are based on estimated amounts for the current fiscal year.
(5)The Distributor plans to waive a portion of its fees for the current fiscal
year. The Distributor may revise or cancel this expense limitation at any time
and will notify you of any material change.
- --------------------------------------------------------------------------------
EXAMPLE
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
If you sell your shares at the end of the period:
1 YEAR 3 YEARS
- --------------------------------------------------------------------------------
Class A Shares $701 $1,018
Class B Shares $725 $1,094
Class C Shares $325 $694
If you do not sell your shares at the end of the period:
1 YEAR 3 YEARS
- --------------------------------------------------------------------------------
Class B Shares $225 $694
Class C Shares $225 $694
66 PROSPECTUS
<PAGE> 75
ARMADA LARGE CAP ULTRA FUND
================================================================================
FUND SUMMARY
INVESTMENT GOAL
Capital appreciation
INVESTMENT FOCUS
Large cap equity securities
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
High
PRINCIPAL INVESTMENT STRATEGY
Investing in equity securities of large companies that the Adviser believes have
the potential for long-term above-average growth
INVESTOR PROFILE
Investors seeking growth of capital, and who are willing to accept the risks of
investing in equity securities
PRINCIPAL INVESTMENT STRATEGIES
The Armada Large Cap Ultra Fund's investment objective is to provide capital
appreciation by investing in a diversified portfolio of publicly traded larger
cap equity securities. The investment objective may be changed without a
shareholder vote. The Fund will normally invest at least 80% of its total assets
in a diversified portfolio of common stocks and securities convertible into the
common stocks of companies with large market capitalizations.
The Adviser takes a long-term approach to managing the Fund and typically
invests in companies that have exhibited consistent, above-average growth in
revenues and earnings, strong management, and sound and improving financial
fundamentals. The Adviser will consider selling a security when there is a
deterioration of fundamentals leading to a deceleration in earnings growth.
The Fund considers a large capitalization or "large cap" company to be one that
has a comparable market capitalization as the companies in the S&P 500/Barra
Growth Index. The S&P 500/Barra Growth Index is an unmanaged index comprised of
common stocks which are capitalization-weighted and have higher price-to-book
ratios.
PRINCIPAL RISKS OF INVESTING
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
The Fund is also subject to the risk that its market segment, large cap equity
securities, may underperform other equity market segments or the equity market
as a whole. For additional information about risks, see "More Information About
Risk."
67 PROSPECTUS
<PAGE> 76
ARMADA LARGE CAP ULTRA FUND (CONTINUED)
================================================================================
PERFORMANCE INFORMATION
There is no bar chart or performance table for the Class A, Class B or Class C
Shares because none has completed a full calendar year of operations.
The performance of Class A, Class B and Class C Shares will differ due to
differences in expenses.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price)(1) 5.50% None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as a percentage
of net asset value) None 5.00%(2) 1.00%(3)
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends
and other Distributions (as a
percentage of offering price) None None None
- --------------------------------------------------------------------------------
Redemption Fee (as a percentage
of amount redeemed, if applicable) None None None
- --------------------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
Investment Advisory Fees 0.75% 0.75% 0.75%
- --------------------------------------------------------------------------------
Distribution and Service (12b-1) Fees 0.10% 0.75% 0.75%
- --------------------------------------------------------------------------------
Other Expenses(4) 0.43% 0.43% 0.43%
- --------------------------------------------------------------------------------
Total Annual Fund
Operating Expenses(5) 1.28% 1.93% 1.93%
- --------------------------------------------------------------------------------
(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)"Other Expenses" are based on estimated amounts for the current fiscal year.
(5)The Distributor plans to waive a portion of its fees for the current fiscal
year. The Distributor may revise or cancel this expense limitation at any time
and will notify you of any material change.
- --------------------------------------------------------------------------------
EXAMPLE
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
If you sell your shares at the end of the period:
1 YEAR 3 YEARS
- --------------------------------------------------------------------------------
Class A Shares $673 $934
Class B Shares $696 $1,006
Class C Shares $296 $606
If you do not sell your shares at the end of the period:
1 YEAR 3 YEARS
- --------------------------------------------------------------------------------
Class B Shares $196 $606
Class C Shares $196 $606
68 PROSPECTUS
<PAGE> 77
ARMADA U.S. GOVERNMENT INCOME FUND
================================================================================
FUND SUMMARY
INVESTMENT GOAL
Current income as well as preservation of capital
INVESTMENT FOCUS
Mortgage-backed securities
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Low
PRINCIPAL INVESTMENT STRATEGY
Investing in mortgage-related securities issued or guaranteed by the U.S.
Government
INVESTOR PROFILE
Investors seeking current income, and who are willing to accept the risks of
investing in fixed income securities
PRINCIPAL INVESTMENT STRATEGIES
The Armada U.S. Government Income Fund's investment objective is to provide
current income as well as preservation of capital by investing primarily in U.S.
Government securities. The investment objective may be changed without a
shareholder vote. The Fund invests normally at least 80% of its total assets in
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities. The types of U.S. Government securities include
mortgage-related securities, and Treasury bills, notes and bonds. The Fund may
invest up to 20% of the value of its total assets in mortgage-related debt
securities and preferred stock of non-governmental issuers and the same
proportion of its total assets in non-governmental asset backed securities. In
buying and selling securities for the Fund, the Adviser considers a number of
factors, including yield to maturity, maturity, quality and the outlook for
particular issuers and market sectors. The Fund generally maintains a
dollar-weighted average maturity of between three and ten years.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities, and will lower Fund performance.
PRINCIPAL RISKS OF INVESTING
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa. Also, longer-term securities are generally more
volatile, so the average maturity or duration of these securities affects risk.
The Fund is also subject to the risk that its market segment, U.S. Government
securities, may underperform other fixed income market segments or the fixed
income market as a whole.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
The mortgages underlying mortgage-backed securities may be paid off early, which
makes it difficult to determine their actual maturity and therefore calculate
how they will respond to changes in interest rates. The Fund may have to
reinvest prepaid amounts at lower interest rates. This risk of prepayment is an
additional risk of mortgage-backed securities.
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.
Although the Fund's U.S. Government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. Government agencies and
instrumentalities are backed by the U.S. Treasury, while others are backed
solely by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own resources. For additional information about risks, see "More
Information About Risk."
69 PROSPECTUS
<PAGE> 78
ARMADA U.S. GOVERNMENT INCOME FUND (CONTINUED)
================================================================================
PERFORMANCE INFORMATION
There is no bar chart or performance table for the Class A, Class B or Class C
Shares because none has completed a full calendar year of operations.
The performance of Class A, Class B and Class C Shares will differ due to
differences in expenses.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price)(1) 4.75% None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as a percentage
of net asset value) None 5.00%(2) 1.00%(3)
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends
and other Distributions (as a
percentage of offering price) None None None
- --------------------------------------------------------------------------------
Redemption Fee (as a percentage
of amount redeemed, if applicable) None None None
- --------------------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
Investment Advisory Fees 0.55% 0.55% 0.55%
- --------------------------------------------------------------------------------
Distribution and Service
(12b-1) Fees 0.10% 0.75% 0.75%
- --------------------------------------------------------------------------------
Other Expenses(4) 0.43% 0.43% 0.43%
- --------------------------------------------------------------------------------
Total Annual Fund
Operating Expenses(5) 1.08% 1.73% 1.73%
- --------------------------------------------------------------------------------
(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)"Other Expenses" are based on estimated amounts for the current fiscal year.
(5)The Distributor plans to waive a portion of its fees for the current fiscal
year. The Distributor may revise or cancel this expense limitation at any time
and will notify you of any material change.
- --------------------------------------------------------------------------------
EXAMPLE
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
If you sell your shares at the end of the period:
1 YEAR 3 YEARS
- --------------------------------------------------------------------------------
Class A Shares $580 $802
Class B Shares $676 $945
Class C Shares $276 $545
If you do not sell your shares at the end of the period:
1 YEAR 3 YEARS
- --------------------------------------------------------------------------------
Class B Shares $176 $545
Class C Shares $176 $545
70 PROSPECTUS
<PAGE> 79
ARMADA MICHIGAN MUNICIPAL BOND FUND
================================================================================
FUND SUMMARY
INVESTMENT GOAL
Current income exempt from federal income tax and, to the extent possible, from
Michigan personal income tax, as is consistent with conservation of capital
INVESTMENT FOCUS
Michigan tax exempt securities
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Medium
PRINCIPAL INVESTMENT STRATEGY
Investing in municipal obligations that pay interest that is exempt from federal
and Michigan state income taxes
INVESTOR PROFILE
Investors seeking tax exempt current income, and who are willing to accept
moderate share price volatility
PRINCIPAL INVESTMENT STRATEGIES
The Armada Michigan Municipal Bond Fund's investment objective is to provide
current income exempt from federal income tax and, to the extent possible, from
Michigan personal income tax, as is consistent with conservation of capital.
Such income may be subject to the federal alternative minimum tax when received
by certain shareholders. The investment objective may be changed without a
shareholder vote. The Fund invests primarily in debt securities issued by or on
behalf of the State of Michigan, its political subdivisions and its agencies and
instrumentalities that generate income exempt from federal and Michigan state
income, but may be treated as a preference item for individuals for purposes of
the federal alternative minimum tax (Michigan municipal securities). The Fund
also invests in municipal securities issued by or on behalf of territories and
possessions of the United States, the District of Columbia and their political
subdivisions, agencies, instrumentalities and authorities. In selecting
securities for the Fund to buy and sell, the Adviser considers each security's
yield and total return potential relative to other available municipal
securities. The Fund will normally invest at least 80% of the value of its total
assets in Michigan municipal securities. However, some Fund dividends will be
taxable, such as dividends that are derived from occasional taxable investments
and distributions of short and long-term capital gains. Also, Fund dividends
will generally be subject to state and local income taxes for any shareholders
who are not Michigan residents. The Fund may invest up to 100% of its total
assets in private activity bonds which may be treated as a specific tax
preference item under the federal alternative minimum tax.
The Fund invests in investment grade securities, which are those rated in one of
the four highest rating categories by a major rating agency, or determined by
the Adviser to be of equivalent quality. If a security is downgraded, the
Adviser will re-evaluate whether continuing to hold the security is in the best
interest of its shareholders. The Fund ordinarily will maintain a
dollar-weighted average portfolio maturity of between three and ten years.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and 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 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.
The Fund is also subject to the risk that its market segment, tax free municipal
securities, may underperform other fixed income market segments or the fixed
income market as a whole.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Fund's securities.
(continued)
71 PROSPECTUS
<PAGE> 80
ARMADA MICHIGAN MUNICIPAL BOND FUND (CONTINUED)
================================================================================
PRINCIPAL RISKS OF INVESTING (continued)
The Fund's focus of investments in securities of issuers located in Michigan
subjects the Fund to economic and government policies of that state.
The Fund is non-diversified, which means that it may invest in the securities of
relatively few issuers. As a result, the Fund may be more susceptible than a
diversified fund to a single adverse economic or political and regulatory
occurrences affecting one or more of these issuers, and may experience increased
volatility due to its investments in those securities. For additional
information about risks, see "More Information About Risk."
PERFORMANCE INFORMATION
There is no bar chart or performance table for the Class A, Class B or Class C
Shares because none has completed a full calendar year of operations.
The performance of Class A, Class B and Class C Shares will differ due to
differences in expenses.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price)(1) 4.75% None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as a percentage
of net asset value) None 5.00%(2) 1.00%(3)
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends
and other Distributions (as a
percentage of offering price) None None None
- --------------------------------------------------------------------------------
Redemption Fee (as a percentage of
amount redeemed, if applicable) None None None
- --------------------------------------------------------------------------------
Exchange Fee None None None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
Investment Advisory Fees 0.55% 0.55% 0.55%
- --------------------------------------------------------------------------------
Distribution and Service
(12b-1) Fees 0.10% 0.75% 0.75%
- --------------------------------------------------------------------------------
Other Expenses(4) 0.43% 0.43% 0.58%
- --------------------------------------------------------------------------------
Total Annual Fund
Operating Expenses(5) 1.08% 1.73% 1.88%
- --------------------------------------------------------------------------------
(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)"Other Expenses" are based on estimated amounts for the current fiscal year.
(5)The Distributor plans to waive a portion of its fees for the current fiscal
year. The Administrator may revise or cancel this expense limitation at any time
and will notify you of any material change.
- --------------------------------------------------------------------------------
EXAMPLE
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
If you sell your shares at the end of the period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
- --------------------------------------------------------------------------------
<S> <C> <C>
Class A Shares $580 $802
Class B Shares $676 $945
Class C Shares $291 $591
</TABLE>
If you do not sell your shares at the end of the period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
- --------------------------------------------------------------------------------
<S> <C> <C>
Class B Shares $176 $545
Class C Shares $191 $591
</TABLE>
72 PROSPECTUS
<PAGE> 81
ARMADA TREASURY PLUS MONEY MARKET FUND
================================================================================
FUND SUMMARY
INVESTMENT GOAL
Current income consistent with liquidity and stability of principal
INVESTMENT FOCUS
U.S. Treasury securities and repurchase agreements related to such securities
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Very low
PRINCIPAL INVESTMENT STRATEGY
Investing in a portfolio of high quality short-term obligations of the U.S.
Treasury designed to allow the Fund to maintain a stable net asset value of
$1.00 per share
INVESTOR PROFILE
Investors seeking current income through a liquid and stable investment
PRINCIPAL INVESTMENT STRATEGIES
The Armada Treasury Plus Money Market Fund's investment objective is to provide
current income with liquidity and stability of principal. The investment
objective may be changed without a shareholder vote. The Fund invests
exclusively in obligations issued or guaranteed by the U.S. Treasury and
repurchase agreements related to such securities.
In managing the Fund, the Adviser assesses current and projected market
conditions. Based on this assessment, the Adviser uses gradual shifts in
portfolio maturity to respond to expected changes and selects securities that it
believes offer the most attractive trade off between risk and return.
As a money market fund, the Fund invests only in money market instruments with
remaining maturities of 397 days or less and maintains an average weighted
maturity of 90 days or less.
PRINCIPAL RISKS OF INVESTING
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes. Generally, the Fund's fixed
income securities will decrease in value if interest rates rise and vice versa.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
Although the Fund's U.S. Treasury securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by the U.S. Treasury are backed by
the U.S. Treasury.
The Fund is also subject to the risk that its market segment, U.S. treasury
securities, may underperform other fixed income segments or the fixed income
market as a whole. For additional information about risks, see "More Information
About Risk."
73 PROSPECTUS
<PAGE> 82
ARMADA TREASURY PLUS MONEY MARKET FUND (CONTINUED)
================================================================================
PERFORMANCE INFORMATION
There is no bar chart or performance table for the Class A Shares because they
have not yet completed a full calendar year of operations.
FUND FEES AND EXPENSES
This table describe the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- --------------------------------------------------------------------------------
CLASS A
Investment Advisory Fees 0.30%
- --------------------------------------------------------------------------------
Distribution and Service (12b-1) Fees(1) 0.10%
- --------------------------------------------------------------------------------
Other Expenses(2) 0.31%
- --------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 0.71%
- --------------------------------------------------------------------------------
(1) The Distributor plans to waive a portion of its fees for the current fiscal
year. The Distributor may revise or cancel this expense limitation at any time
and will notify you of any material change.
(2)"Other Expenses" are based on estimated amounts for the current fiscal year.
- --------------------------------------------------------------------------------
EXAMPLE
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
If you sell your shares at the end of the period:
1 YEAR 3 YEARS
- --------------------------------------------------------------------------------
Class A Shares $73 $227
74 PROSPECTUS
<PAGE> 83
This Page Intentionally Left Blank
<PAGE> 84
MORE INFORMATION ABOUT RISK
================================================================================
<TABLE>
<CAPTION>
High- Single
Yield State
Fixed Lower Municipal Concen- Mortgage- Foreign
Equity Convertible Income Call Credit Event Rated Issuer tration Backed Security Currency Hedging
Risk Securities Risk Risk Risk Risk Securities Risk Risk Securities Risks Risk Risk
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Armada International
Equity Fund - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Armada Small Cap
Value Fund - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Armada Small Cap
Growth Fund - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Armada Equity
Growth Fund - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Armada Tax Managed
Equity Fund - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Armada Core
Equity Fund - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Armada Equity
Index Fund - -
- ------------------------------------------------------------------------------------------------------------------------------------
Armada Equity
Income Fund - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Armada Balanced
Allocation Fund - - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Armada Total Return
Advantage Fund - - - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Armada Bond Fund - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Armada Intermediate
Bond Fund - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Armada GNMA Fund - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Armada Enhanced
Income Fund - - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Armada Ohio Tax
Exempt Bond Fund - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Armada Pennsylvania
Municipal Bond Fund - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Armada National Tax
Exempt Bond Fund - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Armada Ohio Municipal
Money Market Fund - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Armada Pennsylvania
Tax Exempt Money
Market Fund - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Armada Tax Exempt
Money Market Fund - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Armada Money
Market Fund - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Armada Government
Money Market Fund -
- ------------------------------------------------------------------------------------------------------------------------------------
Armada Treasury
Money Market Fund -
- ------------------------------------------------------------------------------------------------------------------------------------
Armada Mid Cap
Growth Fund - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Armada Large Cap
Ultra Fund - -
- ------------------------------------------------------------------------------------------------------------------------------------
Armada U.S. Government
Income Fund - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Armada Michigan
Municipal Bond Fund - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Armada Treasury Plus
Money Market Fund - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Foreign
Real Tracking Year Year
Leveraging Derivatives Short Estate Regional Error 2000 2000
Risk Risk Futures Options Sales Investing Risk Risk Risk Risk
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Armada International
Equity Fund - - - - - -
- --------------------------------------------------------------------------------------------------------------------
Armada Small Cap
Value Fund - - - - - -
- --------------------------------------------------------------------------------------------------------------------
Armada Small Cap
Growth Fund - - - - - -
- --------------------------------------------------------------------------------------------------------------------
Armada Equity
Growth Fund - - - - - -
- --------------------------------------------------------------------------------------------------------------------
Armada Tax Managed
Equity Fund - - - - - -
- --------------------------------------------------------------------------------------------------------------------
Armada Core
Equity Fund - - - - -
- --------------------------------------------------------------------------------------------------------------------
Armada Equity
Index Fund - - - - -
- --------------------------------------------------------------------------------------------------------------------
Armada Equity
Income Fund - - - - - -
- --------------------------------------------------------------------------------------------------------------------
Armada Balanced
Allocation Fund - - - - - - -
- --------------------------------------------------------------------------------------------------------------------
Armada Total Return
Advantage Fund - - - - - - -
- --------------------------------------------------------------------------------------------------------------------
Armada Bond Fund - - - - -
- --------------------------------------------------------------------------------------------------------------------
Armada Intermediate
Bond Fund - - - - -
- --------------------------------------------------------------------------------------------------------------------
Armada GNMA Fund - - - - - - -
- --------------------------------------------------------------------------------------------------------------------
Armada Enhanced
Income Fund - - - - - - -
- --------------------------------------------------------------------------------------------------------------------
Armada Ohio Tax
Exempt Bond Fund - -
- --------------------------------------------------------------------------------------------------------------------
Armada Pennsylvania
Municipal Bond Fund - -
- --------------------------------------------------------------------------------------------------------------------
Armada National Tax
Exempt Bond Fund -
- --------------------------------------------------------------------------------------------------------------------
Armada Ohio Municipal
Money Market Fund - - - -
- --------------------------------------------------------------------------------------------------------------------
Armada Pennsylvania
Tax Exempt Money
Market Fund - - - -
- --------------------------------------------------------------------------------------------------------------------
Armada Tax Exempt
Money Market Fund - - -
- --------------------------------------------------------------------------------------------------------------------
Armada Money
Market Fund - - - -
- --------------------------------------------------------------------------------------------------------------------
Armada Government
Money Market Fund - - -
- --------------------------------------------------------------------------------------------------------------------
Armada Treasury
Money Market Fund - -
- --------------------------------------------------------------------------------------------------------------------
Armada Mid Cap
Growth Fund - - - - - - - -
- --------------------------------------------------------------------------------------------------------------------
Armada Large Cap
Ultra Fund -
- --------------------------------------------------------------------------------------------------------------------
Armada U.S. Government
Income Fund - - - - - - -
- --------------------------------------------------------------------------------------------------------------------
Armada Michigan
Municipal Bond Fund - - - -
- --------------------------------------------------------------------------------------------------------------------
Armada Treasury Plus
Money Market Fund - - -
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
76 PROSPECTUS
<PAGE> 85
================================================================================
EQUITY RISK --Equity securities include public and privately issued equity
securities, common and preferred stocks, warrants, rights to subscribe to common
stock and convertible securities, as well as instruments that attempt to track
the price movement of equity indices. Investments in equity securities and
equity derivatives in general are subject to market risks that may cause their
prices to fluctuate over time. The value of securities convertible into equity
securities, such as warrants or convertible debt, is also affected by prevailing
interest rates, the credit quality of the issuer and any call provision.
Fluctuations in the value of equity securities in which a mutual fund invests
will cause a fund's net asset value to fluctuate. An investment in a portfolio
of equity securities may be more suitable for long-term investors who can bear
the risk of these share price fluctuations.
CONVERTIBLE SECURITIES --Convertible securities have characteristics of
both fixed income and equity securities. The value of the convertible
security tends to move with the market value of the underlying stock, but
may also be affected by interest rates, credit quality of the issuer and
any call provisions.
FIXED INCOME RISK --The market value of fixed income investments change 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 a Fund's average weighted maturity
to fluctuate, and may require a Fund to 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 the diversification 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 S&P or Baa or higher by Moody's) due to changes in the
issuer's creditworthiness.
- - The market for high-yield, lower rated securities may be thinner and less
active, causing market price volatility and limited liquidity in the
secondary market. This may limit the ability of a Fund to sell these
securities at their fair market values either to meet redemption requests, or
in response to changes in the economy or the financial markets.
- - Market prices for high-yield, lower rated securities may also be affected by
investors' perception of the issuer's credit quality and the outlook for
economic growth. Thus, prices for high-yield, lower rated securities may move
independently of interest rates and the overall bond market.
- - The market for high-yield, lower rated securities may be adversely affected
by legislative and regulatory developments.
MUNICIPAL ISSUER RISK --There may be economic or political changes that impact
the ability of municipal issuers to repay principal and to make interest
payments on municipal securities. Changes to the financial condition or credit
rating of municipal issuers may also adversely affect the value of the Fund's
municipal securities. Constitutional or legislative limits on borrowing by
municipal issuers may result in reduced supplies of municipal securities.
Moreover, certain municipal securities are backed only by a municipal issuer's
ability to levy and collect taxes.
In addition, the Fund's concentration of investments in issuers located in a
single state makes the Fund more susceptible to adverse political or economic
developments affecting that state. The Fund also may be riskier than mutual
funds that buy securities of issuers in numerous states.
77 PROSPECTUS
<PAGE> 86
================================================================================
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.
FOREIGN SECURITY RISKS -- Investments in securities of foreign companies or
governments can be more volatile than investments in U.S. companies or
governments. 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 or governments generally are not subject to uniform accounting,
auditing, and financial reporting standards comparable to those applicable to
domestic U.S. companies or governments. Transaction costs are generally higher
than those in the U.S. and expenses for custodial arrangements of foreign
securities may be somewhat greater than typical expenses for custodial
arrangements of similar U.S. securities. Investment in sovereign debt
obligations by certain Funds involves risks not present in debt obligations of
corporate issuers. The issuer of the debt or the governmental authorities that
control the repayment of the debt may be unable or unwilling to repay principal
or interest when due in accordance with the terms of such debt, and a Fund may
have limited recourse to compel payment in the event of a default. Periods of
economic uncertainty may result in volatility of market prices of sovereign
debt, and in turn a Fund's NAV, to a greater extent than the volatility inherent
in debt obligations of U.S. issuers. Some foreign governments levy withholding
taxes against dividend and interest income. Although in some countries a portion
of these taxes are recoverable, the non-recovered portion will reduce the income
received from the securities comprising the portfolio.
In addition to these risks, certain foreign securities may be subject to the
following additional risks factors:
CURRENCY RISK -- Investments in foreign securities denominated in foreign
currencies involve additional risks, including:
- The value of a Fund's assets measured in U.S. dollars may be affected
by changes in currency rates and in exchange control regulations.
- A Fund may incur substantial costs in connection with conversions
between various currencies.
- A Fund may be unable to hedge against possible variations in foreign
exchange rates or to hedge a specific security transaction or portfolio
position.
- Only a limited market currently exists for hedging transactions
relating to currencies in certain emerging markets.
HEDGING RISK -- Hedging is a strategy designed to offset 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.
78 PROSPECTUS
<PAGE> 87
================================================================================
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:
- A 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 a fund and the prices of futures
and options on futures.
- Although the funds 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 funds may be
unable to close out their 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 Funds use derivatives to attempt to achieve their
investment objectives, while at the same time maintaining liquidity. To
collateralize (or cover) these derivatives transactions, the Funds hold
cash or U.S. Government securities.
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.
The Funds 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 Funds will only
enter into futures contracts traded on a national futures exchange or board
of trade.
Options -- The buyer of an option acquires the right 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 Funds 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 Funds 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
Funds.
Because option premiums paid or received by the Funds are small in relation
to the market value of the investments underlying the options, buying and
selling put and call options can be more speculative than investing
directly in securities.
SHORT SALES -- Short sales are transactions in which a Fund sells a
security it does not own. To complete a short sale, a Fund must borrow the
security to deliver to the buyer. The Fund is then obligated to replace the
borrowed security by purchasing the security at the market price at the
time of replacement. This price may be more or less than the price at which
the security was sold by the Fund.
REAL ESTATE INVESTING -- The Fund's investments in the securities of real estate
investment trusts (REITs) and companies principally engaged in the real estate
industry may subject the Fund to the risks associated with the direct ownership
of real estate. Risks commonly associated with the direct ownership of real
estate include fluctuations in the value of underlying properties and defaults
by borrowers or tenants. In addition to these risks, REITs are dependent on
specialized management skills and some REITs may have investments in relatively
few properties, or in a small geographic area or a single type of property.
These factors may increase the volatility of the Fund's investments in REITs.
REGIONAL RISK -- To the extent that a Fund's investments are focused in a
specific geographic region, the Fund may be subject to the political and other
developments affecting that region. Regional economies are often closely
interrelated, and political and economic developments affecting one region,
country or state often affect other regions, countries or states, thus
subjecting a Fund to additional risks.
79 PROSPECTUS
<PAGE> 88
================================================================================
TRACKING ERROR RISK -- Factors such as Fund expenses, imperfect correlation
between the Fund's investments and those of their benchmarks, rounding of share
prices, changes to the benchmark, regulatory policies, and leverage, may affect
their ability to achieve perfect correlation. The magnitude of any tracking
error may be affected by a higher portfolio turnover rate. Because an index is
just a composite of the prices of the securities it represents rather than an
actual portfolio of those securities, an index will have no expenses. As a
result, a Fund, which will have expenses such as taxes, custody, management fees
and other operational costs, and brokerage, may not achieve its investment
objective of accurately correlating to an index.
YEAR 2000 RISK -- The Funds depend on the smooth functioning of computer systems
in almost every aspect of their business. Like other mutual funds, businesses
and individuals around the world, the Funds could be adversely affected if the
computer systems used by its service providers do not properly process dates on
and after January 1, 2000, and distinguish between the year 2000 and the year
1900. The Funds have asked their service providers whether they expect to have
their computer systems adjusted for the year 2000 transition, and is seeking
assurances from each service provider that they are devoting significant
resources to prevent material adverse consequences to the Funds. While it is
likely that such assurances will be obtained, the Funds and their shareholders
may experience losses if these assurances prove to be incorrect or as a result
of year 2000 computer difficulties experienced by issuers of portfolio
securities or third parties, such as custodians, banks, broker-dealers or others
with which the Funds do business. In addition, to the extent that the operations
of issuers of securities held by a Fund are impaired by the year 2000
transition, or prices of securities held by a Fund decline as a result of real
or perceived problems relating to the year 2000, the value of such Fund's shares
may be materially affected.
Furthermore, many foreign countries are not as prepared as the U.S. for the year
2000 transition. As a result, computer difficulties in foreign markets and with
foreign institutions as a result of the year 2000 may add to the possibility of
losses to the Funds and their shareholders.
EACH FUND'S OTHER INVESTMENTS
In addition to the investments and strategies described in this prospectus, each
Fund also may invest in other securities, use other strategies and engage in
other investment practices. These investments and strategies, as well as those
described in this prospectus, are described in detail in our Statement of
Additional Information. Of course, the Trust cannot guarantee that any Fund will
achieve its investment goal.
The investments and strategies described in this prospectus are those that we
use under normal conditions. During unusual economic, market, political or other
conditions, or for temporary defensive or liquidity purposes, each Fund (except
for the money market funds) may invest up to 100% of its assets in short-term
high quality debt instruments that would not ordinarily be consistent with a
Fund's principal investment strategies. A Fund will do so only if the Adviser or
Sub-Adviser believes that the risk of loss outweighs the opportunity for
achieving a Fund's investment objective.
INVESTMENT ADVISER, SUB-ADVISER AND INVESTMENT TEAM
The Investment Adviser makes investment decisions for the Funds and continuously
reviews, supervises and administers each Fund's respective investment program.
The Investment Adviser oversees the Sub-Adviser to ensure compliance with the
Funds' investment policies and guidelines, and monitors the Sub-Adviser's
adherence to its investment style. The Adviser pays the Sub-Adviser out of the
Investment Advisory fees it receives (described on page 81).
The Board of Trustees of the Trust supervises the Adviser and establishes
policies that the Adviser must follow in its management activities.
National City Investment Management Company ("IMC"), with its principal offices
at 1900 East Ninth Street, Cleveland, Ohio 44114, serves as Adviser to the
Funds. On June 30, 1999, IMC had approximately $25.4 billion in assets under
management.
IMC utilizes a team approach for management of the Funds. No one person is
primarily responsible for making investment recommendations to the team. In the
case of the Armada Core Equity and the Armada Total Return Advantage Funds,
National Asset Management Corporation ("NAM") serves as Sub-Adviser and manages
these funds on a day-to-day basis; NAM selects, buys and sells the securities of
these Funds under the supervision of the Adviser and the Board of Trustees.
80 PROSPECTUS
<PAGE> 89
================================================================================
The table below shows the IMC management teams responsible for each fund as well
as the advisory fees IMC received for each fund for the fiscal period ended May
31, 1999.
<TABLE>
<CAPTION>
ADVISORY FEES PAID AS A
PERCENTAGE OF AVERAGE
MANAGEMENT TEAM/ NET ASSETS FOR THE FISCAL YEAR
FUND NAME INVESTMENT ADVISER ENDED MAY 31, 1999
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
International Equity Fund International Equity Team 1.04%(1)
Small Cap Value Fund Equity Value Team 0.92%(1)
Small Cap Growth Fund Equity Growth Team 0.93%(1)
Equity Growth Fund Equity Growth Team 0.75%
Tax Managed Equity Fund Equity Growth Team 0.57%(1)
Core Equity Fund National Asset Management
Corporation (sub-adviser) 0.75%
Equity Index Fund Equity Team 0.00%
Equity Income Fund Equity Value Team 0.75%
Balanced Allocation Fund Equity and Fixed Income Teams 0.75%(2)
Total Return Advantage Fund National Asset Management
Corporation (sub-adviser) 0.35%
Bond Fund Taxable Fixed Income Team 0.55%
Intermediate Bond Fund Taxable Fixed Income Team 0.40%
GNMA Fund Taxable Fixed Income Team 0.55%
Enhanced Income Fund Taxable Fixed Income Team 0.22%(1)
Ohio Tax Exempt Bond Fund Tax Exempt Fixed Income Team 0.05%(1)
Pennsylvania Municipal Bond Fund Tax Exempt Fixed Income Team 0.20%
National Tax Exempt Bond Fund Tax Exempt Fixed Income Team 0.04%(1)
Ohio Municipal Money Market Fund Tax Exempt Money Market Team 0.13%(1,2)
Pennsylvania Tax Exempt
Money Market Fund Tax Exempt Money Market Team 0.15%
Tax Exempt Money Market Fund Tax Exempt Money Market Team 0.15%
Money Market Fund Taxable Money Market Team 0.25%
Government Money Market Fund Taxable Money Market Team 0.25%
Treasury Money Market Fund Taxable Money Market Team 0.25%
Mid Cap Growth Fund Equity Growth Team 1.00%(3)
Large Cap Ultra Fund Equity Growth Team 0.75%(3)
U.S. Government Income Fund Taxable Fixed Income Team 0.55%(3)
Michigan Municipal Bond Fund Tax Exempt Fixed Income Team 0.55%(3)
Treasury Plus Money Market Fund Taxable Fixed Income Team 0.30%(3)
</TABLE>
(1) Adviser fee or waiver changed during the period
(2) Annualized
(3) The Fund has not yet commenced operations
81 PROSPECTUS
<PAGE> 90
================================================================================
PURCHASING, SELLING AND EXCHANGING FUND SHARES
This section tells you how to buy, sell (sometimes called "redeem") or exchange
Class A, Class B and Class C Shares of the Funds.
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
CLASS C SHARES
- Contingent deferred sales charge
- Higher 12b-1 fees
- $500 minimum initial investment -
no subsequent minimum
For investors purchasing shares through a Planned Investment Program, the
minimum initial investment is $50.
You may not purchase Class B Shares or Class C Shares of the Armada Money Market
Fund as part of your initial investment. Class B Shares or Class C Shares of the
Armada Money Market Fund are available only via an exchange from Class B Shares
or Class C Shares, respectively, of another Fund of the Trust.
Class A and Class B Shares are for individual and corporate investors and
retirement plans. Class C Shares are for individual investors and retirement
plans.
HOW TO PURCHASE FUND SHARES
You may purchase shares directly by:
- - Mail
- - Telephone
- - Internet
- - Wire or
- - Automated Clearing House (ACH).
To purchase shares directly from us, please call 1-800-622-FUND (3863), 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 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 SHARES THROUGH A FINANCIAL INTERMEDIARY
You may also buy shares through accounts with brokers and other institutions
that are authorized to place trades in Fund shares for their customers. If you
invest through an authorized institution, you will have to follow its
procedures. Your institution may charge a fee for its services, in addition to
the fees charged by the Trust. You will also generally have to address your
correspondence or questions regarding a Fund to your institution.
82 PROSPECTUS
<PAGE> 91
================================================================================
Your investment representative is responsible for transmitting all subscription
and redemption requests, investment information, documentation and money to the
Fund on time. Certain investment representatives have agreements with the Funds
that allow them to enter confirmed purchase or redemption orders on behalf of
clients and customers. Under this arrangement, the investment representative
must send your payment to the Funds by the time they price their shares on the
following day. If your investment representative fails to do so, it may be
responsible for any resulting fees or losses.
GENERAL INFORMATION
You may purchase shares on any day that the New York Stock Exchange is open for
business (a "Business Day").
The Trust may reject any purchase order if it is determined that accepting the
order would not be in the best interests of the Fund or its shareholders.
The price per share (the offering price) will be the net asset value per share
(NAV) next determined after a Fund receives your purchase order plus, in the
case of Class A Shares, the applicable front-end sales charge. The following
table shows when the daily NAV is calculated for each of the funds and the
deadline for submitting a purchase order to the Transfer Agent in order to
receive the current Business Day's NAV:
<TABLE>
<CAPTION>
Deadline for submitting
purchase orders to the
Time of NAV Transfer Agent to receive
Calculation the current day's NAV
- ------------------------------------------------------------------------------------
<S> <C> <C>
All Equity funds Each Business Day 4:00 p.m.
All Bond funds at 4:00 p.m. Eastern Time, Eastern Time
the regularly-scheduled
close of normal trading
on the New York
Stock Exchange
Money Market Fund Twice daily 2:30 p.m.
Government Money 3:00 p.m. Eastern Time Eastern Time
Market Fund and 4:00 p.m. Eastern Time
(close of trading on
the New York Stock
Exchange)
Treasury Money Market Fund Twice daily 12:30 p.m.
Tax Exempt Money Market Fund 1:00 p.m. Eastern Time Eastern Time
PA Tax Exempt Money Market Fund and 4:00 p.m. Eastern Time
OH Municipal Money Market Fund (close of trading on
Treasury Plus Money Market Fund the New York Stock
Exchange)
</TABLE>
So, for you to be eligible to receive dividends declared on the day you submit
your purchase order, generally a Fund must receive your order by the above
listed deadlines and federal funds (readily available funds) before 2:00 pm
(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 assets
in the Fund less liabilities and class expenses.
EQUITY AND BOND FUNDS
In calculating NAV, an equity or bond fund generally values its investment
portfolio at market price. In the event that a sale of a particular fixed income
security is not reported for that day, fixed income securities are priced at the
mean between the most recent quoted bid and asked prices. Unlisted securities
and securities traded on a national securities market for which market
quotations are readily available are valued at the mean between the most recent
bid and asked prices. In the event that a sale of a particular equity security
is not reported for that day, shares are priced at the last bid quotation. If
market prices are unavailable or a Fund thinks that they are unreliable, fair
value prices may be determined in good faith using methods approved by the Board
of Trustees.
Some Funds hold securities that are listed on foreign exchanges.
These securities may trade on weekends or other days when the Funds do not
calculate NAV. As a result, the market value of these Fund's investments may
change on days when you cannot buy and hold shares of the Fund.
MONEY MARKET FUNDS
In calculating NAV for the money market funds, we generally value a Fund's
investment portfolio using the amortized cost valuation method, which is
described in detail in our Statement of Additional Information. If this method
is determined to be unreliable during certain market conditions or for other
reasons, a Fund may value its portfolio at market price or fair value prices may
be determined in good faith using methods approved by the Board of Trustees.
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 semi-monthly, monthly or quarterly basis.
83 PROSPECTUS
<PAGE> 92
================================================================================
SALES CHARGES
FRONT-END SALES CHARGES -- CLASS A SHARES
The offering price of Class A Shares is the NAV next calculated after a Fund
receives your request, plus the front-end sales load.
The amount of any front-end sales charge included in your offering price varies,
depending on the amount of your investment:
INTERNATIONAL EQUITY, SMALL CAP VALUE, SMALL CAP GROWTH,
EQUITY GROWTH, TAX MANAGED EQUITY, CORE EQUITY, EQUITY
INCOME, LARGE CAP ULTRA AND MID CAP GROWTH FUNDS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Dealers'
Sales Charge as As a % of Net Reallowance
If your a % of Offering Asset Value as a % of Offering
Investment is: Price Per Share Per Share Price Per Share
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $25,000 5.50 5.80 5.25
- --------------------------------------------------------------------------------
$25,000 but less
than $50,000 5.25 5.50 5.00
- --------------------------------------------------------------------------------
$50,000 but less
than $100,000 4.75 5.00 4.50
- --------------------------------------------------------------------------------
$100,000 but less
than $250,000 3.75 3.90 3.50
- --------------------------------------------------------------------------------
$250,000 but less
than $500,000 3.00 3.10 2.75
- --------------------------------------------------------------------------------
$500,000 but less
than $1,000,000 2.00 2.00 1.75
- --------------------------------------------------------------------------------
$1,000,000 or more 0.00 0.00 0.00
- --------------------------------------------------------------------------------
</TABLE>
BALANCED ALLOCATION, TOTAL RETURN ADVANTAGE, BOND,
INTERMEDIATE BOND, GNMA, NATIONAL TAX EXEMPT BOND, U.S.
GOVERNMENT INCOME AND MICHIGAN MUNICIPAL BOND FUNDS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Dealers'
Sales Charge as As a % of Net Reallowance
If your a % of Offering Asset Value as a % of Offering
Investment is: Price Per Share 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>
ENHANCED INCOME FUND
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Dealers'
Sales Charge as As a % of Net Reallowance
If your a % of Offering Asset Value as a % of Offering
Investment is: Price Per Share Per Share Price Per Share
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000 2.75 2.83 2.50
- --------------------------------------------------------------------------------
$100,000 but less
than $250,000 1.75 1.78 1.50
- --------------------------------------------------------------------------------
$250,000 but less
than $500,000 1.00 1.01 0.75
- --------------------------------------------------------------------------------
$500,000 but less
than $1,000,000 0.50 0.50 0.25
- --------------------------------------------------------------------------------
$1,000,000 or more 0.00 0.00 0.00
- --------------------------------------------------------------------------------
</TABLE>
EQUITY INDEX FUND
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Dealers'
Sales Charge as As a % of Net Reallowance
If your a % of Offering Asset Value as a % of Offering
Investment is: Price Per Share Per Share Price Per Share
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000 3.75 3.90 3.50
- --------------------------------------------------------------------------------
$100,000 but less
than $250,000 2.75 2.83 2.50
- --------------------------------------------------------------------------------
$250,000 but less
than $500,000 2.00 2.04 1.75
- --------------------------------------------------------------------------------
$500,000 but less
than $1,000,000 1.25 1.27 1.00
- --------------------------------------------------------------------------------
$1,000,000 or more 0.00 0.00 0.00
- --------------------------------------------------------------------------------
</TABLE>
OHIO TAX EXEMPT BOND AND PENNSYLVANIA MUNICIPAL BOND FUNDS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Dealers'
Sales Charge as As a % of Net Reallowance
If your a % of Offering Asset Value as a % of Offering
Investment is: Price Per Share Per Share Price Per Share
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000 3.00 3.09 2.75
- --------------------------------------------------------------------------------
$100,000 but less
than $250,000 2.00 2.04 1.75
- --------------------------------------------------------------------------------
$250,000 but less
than $500,000 1.50 1.52 1.25
- --------------------------------------------------------------------------------
$500,000 but less
than $1,000,000 1.00 1.01 0.75
- --------------------------------------------------------------------------------
$1,000,000 or more 0.00 0.00 0.00
- --------------------------------------------------------------------------------
</TABLE>
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% (or .25% in the case of the Enhanced Income Fund)
of the amount invested to the financial institution placing the purchase order.
A1% (or .25% in the case of the Enhanced Income Fund) 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.
84 PROSPECTUS
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================================================================================
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 through
"one stop" networks;
- - by orders placed by qualified broker-dealers, investment advisers or
financial planners who charge a management fee for their services and place
trades for their own account or accounts of clients; and
- - by exchanges from Parkstone B Shares to the Trust's Class A Shares or by
exchanges from Parkstone A Shares to the Trust's Class A Shares. If sales
charge for new shares would be greater than sales charge paid on the previous
shares, the shareholder is responsible for paying the difference.
REPURCHASE OF CLASS A SHARES
You may repurchase any amount of Class A Shares of any Fund at NAV without the
normal front-end sales charge, up to the limit of the value of any amount of
Class A Shares (other than those which were purchased with reinvested dividends
and distributions) that you redeemed within the past 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 a Fund over a 13-month period and receive the same sales charge as
if you had purchased all the shares at the same time. The Fund will only
consider the value of Class A Shares sold subject to a sales charge. As a
result, shares of the Class A Shares purchased with dividends or distributions
will not be included in the calculation. To be entitled to a reduced sales
charge based on shares you intend to purchase over the 13-month period, you must
send the Fund a Letter of Intent. In calculating the total amount of purchases
you may include in your letter purchases made up to 90 days before the date of
the Letter. The 13-month period begins on the date of the first purchase,
including those purchases made in the 90-day period before the date of the
Letter. Please note that the purchase price of these prior purchases will not be
adjusted.
If you do not purchase the amount of shares indicated in the Letter, the Letter
authorizes the Fund to hold in escrow 4% of the total amount you intend to
purchase. If you do not complete the total intended purchase at the end of the
13-month period or you redeem the entire amount within one year from the time of
fulfillment, the Fund's transfer agent will redeem the necessary portion of the
escrowed shares to make up the difference between the reduced rate
85 PROSPECTUS
<PAGE> 94
================================================================================
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.
CONTINGENT DEFERRED SALES CHARGES --
CLASS B SHARES 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
Years Since Purchase Dollar Amount Subject to Charge
- --------------------------------------------------------------------------------
<S> <C>
First 5.0%
Second 5.0%
Third 4.0%
Fourth 3.0%
Fifth 2.0%
Sixth None
Seventh None
Eighth None
</TABLE>
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 a Fund's right to liquidate a shareholder's
account if the value of shares held in the account is less than the minimum
account size;
- - return of excess contributions;
- - redemptions following the death or disability of both shareholders in the
case of joint accounts;
- - exchanges of Class B or Class C Shares between Class B or Class C Shares of
the Funds, respectively of the Trust; and
- - distributions of less than 10% of the annual account value under a Systematic
Withdrawal Plan.
GENERAL INFORMATION ABOUT SALES CHARGES
Your securities dealer is paid a commission when you buy your 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.
86 PROSPECTUS
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HOW TO SELL YOUR FUND 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 through an account with a broker or other institution,
contact that broker or institution to sell your shares.
If you own your shares directly, you may sell (sometimes called "redeem") your
shares on any Business Day by contacting a Fund directly by mail, 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 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 have at least $1,000 in your account, you may use the Systematic
Withdrawal Plan. Under the plan you may arrange monthly, quarterly, semi-annual
or annual automatic withdrawals of at least $100 from any Fund. The proceeds of
each withdrawal will be mailed to you by check or, if you have a checking or
savings account with a bank, electronically transferred to your account. There
will be no 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.
CHECK WRITING AVAILABLE TO CLASS A SHARES
To apply for check writing privileges on your investment in A shares of any
Armada money market fund, complete the appropriate section and the signature
card in the account application. Upon receipt of your signature card, you will
be sent checks for your account. The minimum amount for a check written from
your account is $100. However, your account cannot be closed by writing a check.
You will receive daily dividends declared on the shares to be redeemed up to the
day that a check is presented for payment. The Trust will give you at least 30
days written notice before modifying or terminating your check writing
privilege.
RECEIVING YOUR MONEY
Normally, we will send your sale proceeds within seven days after we receive
your request. Your proceeds can be wired to your bank account or sent to you by
check. Armada Funds does not charge a fee to wire your funds; however, your
institution may charge a fee. IF YOU RECENTLY PURCHASED YOUR SHARES BY CHECK 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. The Armada Tax Managed Equity Fund
may fund redemptions of $1 million or more with appreciated securities rather
than cash.
INVOLUNTARY SALE OF YOUR SHARES
If your account balance drops below $500 because of redemptions, you may be
required to sell your shares. But, we will always give you at least 60 days'
written notice to give you time to add to your account and avoid the sale of
your shares.
87 PROSPECTUS
<PAGE> 96
================================================================================
SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES
The Fund may suspend your right to sell your shares if the New York Stock
Exchange restricts trading, the SEC declares an emergency or for other reasons.
More information about this is in our Statement of Additional Information.
HOW TO EXCHANGE YOUR SHARES
You may exchange your shares on any Business Day by contacting us directly by
mail, Internet or telephone.
You may also exchange shares through your financial institution by mail or
telephone. Exchange requests must be for an amount of at least $500.
The exchange privilege is a convenient way to respond to changes in
investment goals or in market conditions. This privilege is not designed for
market-timing - switching money into investments in anticipation of rising
prices or taking money out in anticipation of the market falling. As money is
shifted in and out, a Fund incurs expenses for buying and selling securities.
These costs are borne by all Fund shareholders, including the long-term
investors who do not generate the costs. Therefore, the Fund discourages
short-term trading by, among other things, limiting the number of exchanges to
one exchange every two months during a given 12-month period beginning upon the
date of the first exchange transaction. Management of the Trust reserves the
right to limit, amend or impose charges upon, terminate or otherwise modify the
exchange privilege. You will be provided 60 days' notice before any material
action is taken.
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 other
Fund shares. So, your sale price and purchase price will be based on the NAV
next calculated after the Fund receives your exchange request.
CLASS A SHARES
You may exchange Class A Shares of any Fund for Class A Shares of any other
Fund. If you exchange shares that you purchased without a sales charge or with a
lower sales charge into a Fund with a sales charge or with a higher sales
charge, the exchange is subject to an incremental sales charge (e.g., the
difference between the lower and higher applicable sales charges). If you
exchange shares into a Fund with the same, lower or no sales charge there is no
incremental sales charge for the exchange in this manner.
CLASS B SHARES
You may exchange Class B Shares of any Fund for Class B Shares of any other
Fund. No contingent deferred sales charge is imposed on redemptions of shares
you acquire in an exchange, provided you hold your shares for at least five
years from your initial purchase.
CLASS C SHARES
You may exchange Class C Shares of any Fund for Class C Shares of any other
Fund. 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.
SYSTEMATIC EXCHANGE PROGRAM AVAILABLE TO CLASS A, B AND C SHARES
The Systematic Exchange Program allows you to exchange your existing
shares of an Armada money market fund for any other Armada fund of the same
class automatically, at monthly or quarterly intervals. Exchanging in this
manner will reduce the average cost per share of a non-money market fund.
Because purchases of A shares of non-money market funds may be subject to an
initial sales charge, it may be beneficial for you to execute a Letter of Intent
indicating an intent to purchase A shares in connection with this program.
If you would like to enter a systematic exchange program concerning B or C
shares you must exchange them within six or twelve months from the date of
purchase. You may apply for participation in this program by calling 1-800-
622-FUND (3863) or completing an account application.
88 PROSPECTUS
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================================================================================
DISTRIBUTION OF FUND SHARES
Each Fund has adopted a distribution plan under Rule 12b-1, pursuant to the 1940
Act, as amended that allows each Fund to pay distribution and service fees for
the sale and distribution of its shares, and for services provided to
shareholders. Because these fees are paid out of a Fund's assets continuously,
over time these fees will increase the cost of your investment and may cost you
more than paying other types of sales charges.
Distribution fees, as a percentage of average daily net assets are as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Armada International Equity Fund 0.04% 0.75% 0.75%
Armada Small Cap Value Fund 0.04% 0.75% 0.75%
Armada Small Cap Growth Fund 0.04% 0.75% 0.75%
Armada Equity Growth Fund 0.04% 0.75% 0.75%
Armada Tax Managed Equity Fund 0.04% 0.75% 0.75%
Armada Core Equity Fund 0.04% 0.75% 0.75%
Armada Equity Index Fund 0.00% 0.75% 0.75%
Armada Equity Income Fund 0.04% 0.75% 0.75%
Armada Balanced Allocation Fund 0.04% 0.75% 0.75%
Armada Total Return Advantage Fund 0.00% 0.75% 0.75%
Armada Bond Fund 0.04% 0.75% 0.75%
Armada Intermediate Bond Fund 0.04% 0.75% 0.75%
Armada GNMA Fund 0.04% 0.75% 0.75%
Armada Enhanced Income Fund 0.00% 0.75% 0.75%
Armada Ohio Tax Exempt
Bond Fund 0.04% 0.75% 0.75%
Armada Pennsylvania
Municipal Bond Fund 0.00% 0.75% 0.75%
Armada National Tax Exempt
Bond Fund 0.04% 0.75% 0.75%
Armada Ohio Municipal
Money Market Fund 0.04% N/A N/A
Armada Pennsylvania
Tax Exempt Money Market Fund 0.04% N/A N/A
Armada Tax Exempt
Money Market Fund 0.04% N/A N/A
Armada Money Market Fund 0.04% 0.75% 0.75%
Armada Government
Money Market Fund 0.04% N/A N/A
Armada Treasury
Money Market Fund 0.04% N/A N/A
Armada Mid Cap Growth Fund* 0.04% 0.75% 0.75%
Armada Large Cap Ultra Fund* 0.04% 0.75% 0.75%
Armada U.S. Government
Income Fund* 0.04% 0.75% 0.75%
Armada Michigan
Municipal Bond Fund* 0.04% 0.75% 0.75%
Armada Treasury Plus Money
Market Fund* 0.04% N/A N/A
</TABLE>
The Distributor may, from time to time in its sole discretion, institute one or
more promotional incentive programs for dealers, which will be paid for by the
Distributor from any sales charge it receives or from any other source available
to it. Under any such program, the Distributor may provide incentives, in the
form of cash or other compensation, including merchandise, airline vouchers,
trips and vacation packages, to dealers selling shares of a Fund.
*As of the printing of this prospectus, these Funds have not yet commenced
operations.
DIVIDENDS AND TAXES
Each Fund distributes its income as follows:
<TABLE>
<S> <C>
Armada International Equity Fund Annually
Armada Small Cap Value Fund Annually
Armada Small Cap Growth Fund Annually
Armada Equity Growth Fund Quarterly
Armada Tax Managed Equity Fund Quarterly
Armada Core Equity Fund Quarterly
Armada Equity Index Fund Quarterly
Armada Equity Income Fund Quarterly
Armada Balanced Allocation Fund Quarterly
Armada Total Return Advantage Fund Monthly
Armada Bond Fund Monthly
Armada Intermediate Bond Fund Monthly
Armada GNMA Fund Monthly
Armada Enhanced Income Fund Monthly
Armada Ohio Tax Exempt Bond Fund Monthly
Armada Pennsylvania Municipal
Bond Fund Monthly
Armada National Tax Exempt
Bond Fund Monthly
Armada Ohio Municipal Money
Market Fund Monthly
Armada Pennsylvania Tax Exempt
Money Market Fund Monthly
Armada Tax Exempt Money Market Fund Monthly
Armada Money Market Fund Monthly
</TABLE>
89 PROSPECTUS
<PAGE> 98
================================================================================
<TABLE>
<S> <C>
Armada Government Money
Market Fund Monthly
Armada Treasury Money Market Fund Monthly
Armada Mid Cap Growth Fund* Quarterly
Armada Large Cap Ultra Fund* Quarterly
Armada U.S. Government Income Fund* Monthly
Armada Michigan Municipal Bond Fund* Monthly
Armada Treasury Plus Money
Market Fund* Monthly
</TABLE>
* As of the printing of this prospectus, these Funds have not yet commenced
operations.
Each Fund makes distributions of capital gains, if any, at least annually. If
you own Fund shares on a Fund's record date, you will be entitled to receive the
distribution.
You will receive dividends and distributions in the form of additional Fund
shares unless you elect to receive payment in cash. To elect cash payment, you
must notify the Fund in writing prior to the date of the distribution. Your
election will be effective for dividends and distributions paid after the Fund
receives your written notice. To cancel your election, simply send the Fund
written notice.
FEDERAL TAXES
Each Fund contemplates declaring as dividends each year all or substantially all
of its taxable income, including its net capital gain (the excess of long-term
capital gain over short-term capital loss). Distributions attributable to the
net capital gain of a Fund will be taxable to you as long-term capital gain,
regardless of how long you have held your shares. Other Fund distributions
(other than exempt-interest dividends, discussed below) will generally be
taxable as ordinary income. You will be subject to income tax on Fund
distributions regardless of whether they are paid in cash or reinvested in
additional shares. You will be notified annually of the tax status of
distributions to you.
In the case of any Fund other than a money-market Fund, you should note that if
you purchase shares just before a distribution, the purchase price will reflect
the amount of the upcoming distribution, but you will be taxable on the entire
amount of the distribution received, even though, as an economic matter, the
distribution simply constitutes a return of capital. This is known as "buying
into a dividend."
You will recognize taxable gain or loss on a sale, exchange or redemption of
your shares, including an exchange for shares of another Fund (or an in-kind
redemption), based on the difference between your tax basis in the shares and
the amount you receive for them. (To aid in computing your tax basis, you
generally should retain your account statements for the periods during which you
held shares.) Any loss realized on shares held for six months or less will be
treated as a long-term capital loss to the extent of any capital gain dividends
that were received on the shares.
The one major exception to these tax principles is that distributions on, and
sales, exchanges and redemptions of, shares held in an IRA(or other
tax-qualified plan) will not be currently taxable.
It is expected that the Armada International Equity Fund will be subject to
foreign withholding taxes with respect to dividends or interest received from
sources in foreign countries. The Armada International Equity Fund may make an
election to treat a proportionate amount of such taxes as constituting a
distribution to each shareholder, which would allow each shareholder either (1)
to credit such proportionate amount of taxes against U.S. federal income tax
liability or (2) to take such amount as an itemized deduction.
The Armada Tax Exempt Money Market Fund, Armada Pennsylvania Tax
Exempt Money Market Fund, Armada Ohio Municipal Money Market Fund, Armada Ohio
Tax Exempt Bond Fund, Armada Pennsylvania Municipal Bond Fund, Armada National
Tax Exempt Bond Fund, and Armada Michigan Municipal Bond Fund (the "Tax exempt
Funds") anticipate that substantially all of their income dividends will be
"exempt interest dividends," which are exempt from federal income taxes.
However, some dividends will be taxable, such as dividends that are derived from
occasional taxable investments, and in the case of other than money market
Funds, distributions of short and long-term capital gains. Interest on
indebtedness incurred by a shareholder to purchase or carry shares of any Tax
exempt Fund generally will not be deductible for federal income tax purposes.
You should note that a portion of the exempt-interest dividends paid by the Tax
Exempt Funds may constitute an item of tax preference for purposes of
determining federal alternative minimum tax liability. Exempt-interest dividends
will also be considered along with other adjusted gross income in determining
whether any Social Security or railroad retirement payments received by you are
subject to federal income taxes.
If you receive an exempt-interest dividend with respect to any share and the
share is held by you for six months or less, any loss on the sale or exchange of
the share will be disallowed to the extent of such dividend amount.
90 PROSPECTUS
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The foregoing is only a summary of certain tax considerations under current law,
which may be subject to change in the future. Shareholders who are nonresident
aliens, foreign trusts or estates, or foreign corporations or partnerships, may
be subject to different United States federal income tax treatment. You should
consult your tax adviser for further information regarding federal, state, local
and/or foreign tax consequences relevant to your specific situation.
STATE AND LOCAL TAXES
Shareowners may also be subject to state and local taxes on distributions and
redemptions. State income taxes may not apply, however, to the portions of each
Fund's distributions, if any, that are attributable to interest on federal
Securities or interest on securities of the particular state or localities
within the state. The Armada Pennsylvania Tax Exempt Money Market Fund and
Armada Pennsylvania Municipal Bond Fund intend to distribute income that is
exempt from Pennsylvania personal income taxes. The Armada Ohio Tax Exempt Bond
Fund and Armada Ohio Municipal Money Market Fund intend to distribute income
that is exempt from Ohio personal income taxes. The Armada Michigan Municipal
Bond Fund intends to distribute income that is exempt from Michigan income
taxes. Shareowners should consult their tax advisers regarding the tax status of
distributions in their state and locality.
Each Fund may invest a portion of its assets in securities that generate taxable
income for federal or state income taxes. Income exempt from federal tax may be
subject to state and local taxes. Any capital gains distributed by these Funds
may be taxable.
The Funds use a tax management technique known as "highest in, first out." Using
this technique, the portfolio holdings that have experienced the smallest gain
or largest loss are sold first in an effort to minimize capital gains and
enhance after-tax returns.
MORE INFORMATION ABOUT TAXES IS IN THE STATEMENT OF ADDITIONAL INFORMATION.
91 PROSPECTUS
<PAGE> 100
FINANCIAL HIGHLIGHTS
================================================================================
The tables that follow present performance information about Class A and Class B
Shares of each Fund. As of the printing of this prospectus, Class C Shares have
not yet commenced operations. This information is intended to help you
understand each Fund's financial performance for the past five years, or, if
shorter, the period of the Fund's operations. Some of this information reflects
financial information for a single Fund share. The total returns in the table
represent the rate that you would have earned (or lost) on an investment in a
Fund, assuming you reinvested all of your dividends and distributions. This
information, except from the Financial Highlights of the Bond Fund, GNMA Fund,
Pennsylvania Municipal Fund and Pennsylvania Tax Exempt Money Market Fund for
each Fund's respective commencement of operations date through May 31, 1996, has
been audited by Ernst & Young LLP, independent auditors. Their report, along
with each Fund's financial statements, appears in the annual report that
accompanies our Statement of Additional Information. The financial highlights of
the Bond Fund, GNMA Fund, Pennsylvania Municipal Fund and Pennsylvania Tax
Exempt Money Market Fund from each Fund's respective commencement of operations
date through May 31, 1996, were audited by PricewaterhouseCoopers, LLP, each
Fund's predecessor independent accountants. You can obtain the annual report,
which contains more performance information, at no charge by calling
1-800-622-FUND (3863).
ARMADA INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31, 1999 FOR THE PERIOD ENDED MAY 31, 1998
------------------------------- ---------------------------------
CLASS A CLASS B CLASS A(2) CLASS B(3)
-------------------------- -----------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $10.82 $10.83 $10.00 $ 9.30
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss) (0.01) (0.07) 0.04 0.05
Net gain on securities (realized and unrealized) 0.10 0.08 0.79 1.48
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.09 0.01 0.83 1.53
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.04) (0.01) (0.01) (0.00)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.04) (0.01) (0.01) (0.00)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.87 $10.83 $10.82 $10.83
====================================================================================================================================
TOTAL RETURN 0.84%(1) 0.10%(1) 8.28%(1,4) 16.45%(1,4)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $1,127 $ 42 $ 276 $ 1
Ratio of expenses to average net assets 1.68% 2.43% 1.39%(5) 2.08%(5)
Ratio of net investment income/(loss) to
average net assets (0.04)% (0.80)% 1.49%(5) 0.59%(5)
Ratio of expenses to average net assets
before fee waivers 1.68% 2.43% 1.47%(5) 2.14%(5)
Ratio of net investment income/(loss) to average
net assets before fee waivers (0.04)% (0.80)% 1.41%(5) 0.53%(5)
Portfolio turnover rate 78% 78% 28% 28%
</TABLE>
(1) Total return excludes sales charge.
(2) Class A commenced operations on August 1, 1997.
(3) Class B commenced operations on January 6, 1998.
(4) Returns are for the period indicated and have not been annualized.
(5) Annualized.
92 PROSPECTUS
<PAGE> 101
FINANCIAL HIGHLIGHTS
================================================================================
ARMADA SMALL CAP VALUE FUND
- --------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31, FOR THE PERIOD ENDED MAY 31,
--------------------------------------------- --------------------------------
1999 1998 1997 1996 1995
--------------------------------------------- --------------------------------
CLASS A CLASS B CLASS A CLASS B(4) CLASS A CLASS A CLASS A(1)
--------------------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.47 $15.42 $ 14.95 $15.28 $12.94 $11.26 $10.16
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss) 0.06 (0.03) 0.01 0.00 0.08 0.06 0.07
Net gain/(loss) on securities
(realized and unrealized) (0.85) (0.87) 2.84 0.14 2.83 2.37 1.11
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (0.79) (0.90) 2.85 0.14 2.91 2.43 1.18
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.04) (0.00) (0.04) (0.00) (0.05) (0.06) (0.04)
Dividends in excess of net investment income (0.00) (0.00) (0.00) (0.00) (0.00) (0.02) (0.00)
Distributions from net realized capital gains (1.33) (1.33) (2.29) (0.00) (0.85) (0.67) (0.04)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.37) (1.33) (2.33) (0.00) (0.90) (0.75) (0.08)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.31 $13.19 $ 15.47 $15.42 $14.95 $12.94 $11.26
====================================================================================================================================
TOTAL RETURN (4.38)%(3) (5.13)%(3) 19.51%(3) 19.12%(2,3) 23.26%(3) 22.28%(3) 14.80%(3,5)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $11,542 $ 515 $10,634 $ 61 $4,929 $4,702 $3,567
Ratio of expenses to average net assets 1.38% 2.08% 1.23% 1.92%(2) 1.22% 1.30% 1.34%(2)
Ratio of net investment income/(loss) to
average net assets 0.44% (0.26)% 0.19% (0.48)%(2) 0.57% 0.58% 1.09%(2)
Ratio of expenses to average net assets
before fee waivers 1.38% 2.08% 1.23% 1.92%(2) 1.22% 1.32% 1.38%(2)
Ratio of net investment income/(loss) to
average net assets before fee waivers 0.44% (0.26)% 0.19% (0.48)%(2) 0.51% 0.56% 1.05%(2)
Portfolio turnover rate 79% 79% 89% 89% 64% 106% 69%
</TABLE>
(1) Class A commenced operations on August 15, 1994.
(2) Annualized.
(3) Total return excludes sales charge.
(4) Class B commenced operations on January 6, 1998.
(5) Returns are for the period indicated and have not been annualized.
93 PROSPECTUS
<PAGE> 102
FINANCIAL HIGHLIGHTS
================================================================================
ARMADA SMALL CAP GROWTH FUND
- --------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31, 1999 FOR THE PERIOD ENDED MAY 31, 1998
------------------------------- --------------------------------
CLASS A CLASS B CLASS A(3) CLASS B(4)
------------------------------- --------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.68 $ 11.66 $10.00 $10.64
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss) (0.05)(6) (0.10)(6) 0.01 (0.01)
Net gain/(loss) on securities (realized and unrealized) (1.41) (1.44) 1.71 1.03
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (1.46) (1.54) 1.72 1.02
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.00) (0.00) (0.01) (0.00)
Distributions from net realized capital gains (0.11) (0.11) (0.03) (0.00)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.11) (0.11) (0.04) (0.00)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.11 $ 10.01 $11.68 $11.66
====================================================================================================================================
TOTAL RETURN (12.54)%(1) (13.26)%(1) 17.18%(1,2) 9.59%(1,2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $ 1,089 $ 139 $ 331 $ 1
Ratio of expenses to average net assets 1.51% 2.23% 1.23%(5) 1.92%(5)
Ratio of net investment income/(loss) to average net assets (0.51)% (1.23)% (0.32)%(5) (0.87)%(5)
Ratio of expenses to average net assets before fee waivers 1.51% 2.23% 1.34%(5) 3.06%(5)
Ratio of net investment income/(loss) to average
net assets before fee waivers (0.51)% (1.23)% (0.43)%(5) (2.01)%(5)
Portfolio turnover rate 159% 159% 31% 31%
</TABLE>
(1) Total return excludes sales charge.
(2) Returns are for the period indicated and have not been annualized.
(3) Class A commenced operations on August 1, 1997.
(4) Class B commenced operations on January 6, 1998.
(5) Annualized.
(6) Calculated based upon average shares outstanding.
94 PROSPECTUS
<PAGE> 103
FINANCIAL HIGHLIGHTS
================================================================================
ARMADA EQUITY GROWTH FUND
- --------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
-----------------------------------------------------------------------------------
1999 1998 1997 1996 1995
----------------------------------------------- --------------------------------
CLASS A CLASS B CLASS A CLASS B(3) CLASS A CLASS A CLASS A
----------------------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 21.35 $21.28 $ 18.67 $19.44 $18.05 $14.79 $13.68
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss) (0.09)(4) (0.27)(4) (0.04) (0.24) 0.05 0.10 0.18
Net gain on securities
(realized and unrealized) 4.28 4.31 4.99 2.08 4.66 3.47 1.21
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 4.19 4.04 4.95 1.84 4.71 3.57 1.39
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.00) (0.00) (0.00) (0.00) (0.05) (0.10) (0.17)
Dividends in excess of net investment income (0.00) (0.00) (0.00) (0.00) (0.01) (0.02) (0.00)
Distributions from net realized capital gains (0.99) (0.99) (2.27) (0.00) (4.03) (0.19) (0.00)
Distributions in excess of net
realized capital gains (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.11)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.99) (0.99) (2.27) (0.00) (4.09) (0.31) (0.28)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 24.55 $24.33 $ 21.35 $21.28 $18.67 $18.05 $14.79
====================================================================================================================================
TOTAL RETURN 19.88%(1) 19.22%(1) 28.32%(1) 27.90%(1,2) 29.24%(1) 24.34%(1) 10.35%(1)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $156,356 $1,400 $12,380 $ 24 $6,931 $6,013 $5,974
Ratio of expenses to average net assets 1.17% 1.88% 1.23% 1.92%(2) 1.22% 1.26% 1.27%
Ratio of net investment income/(loss)
to average net assets (0.36)% (1.07)% (0.26)% (0.92)%(2) 0.25% 0.60% 1.23%
Ratio of expenses to average net assets
before fee waivers 1.17% 1.88% 1.23% 1.92%(2) 1.22% 1.28% 1.28%
Ratio of net investment income/(loss) to
average net assets before fee waivers (0.36)% (1.07)% (0.26)% (0.92)%(2) 0.25% 0.58% 1.22%
Portfolio turnover rate 57% 57% 260% 260% 197% 74% 17%
</TABLE>
(1) Total return excludes sales charge.
(2) Annualized.
(3) Class B commenced operations on January 6, 1998.
(4) Calculated based upon average shares outstanding.
95 PROSPECTUS
<PAGE> 104
FINANCIAL HIGHLIGHTS
================================================================================
ARMADA TAX MANAGED EQUITY FUND
- --------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31, 1999 FOR THE PERIOD ENDED MAY 31, 1998
------------------------------- ---------------------------------
CLASS A CLASS B CLASS A(2) CLASS B(3)
------------------------------- ---------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.93 $ 9.93 $ 10.10 $ 10.21
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.04 (0.02) (0.00) (0.00)
Net gain/(loss) on securities (realized and unrealized) 2.24 2.23 (0.17) (0.28)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.28 2.21 (0.17) (0.28)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.04) (0.01) (0.00) (0.00)
Distributions from net realized capital gains (0.01) (0.01) (0.00) (0.00)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.05) (0.02) (0.00) (0.00)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.16 $12.12 $ 9.93 $ 9.93
====================================================================================================================================
TOTAL RETURN 23.03%(1) 22.31%(1) (23.63%)(1,4) (32.24%)(1,4)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $7,353 $5,377 $ 10 $ 85
Ratio of expenses to average net assets 1.09% 1.79% 0.54%(4) 1.23%(4)
Ratio of net investment income/(loss) to average net assets 0.11% (0.59%) 0.63%(4) 0.43%(4)
Ratio of expenses to average net assets before fee waivers 1.27% 1.97% 1.24%(4) 1.98%(4)
Ratio of net investment income/(loss) to average net
assets before fee waivers (0.07%) (0.77%) (0.07%)(4) 1.18%(4)
Portfolio turnover rate 5% 5% 0% 0%
</TABLE>
(1) Total return excludes sales charge.
(2) Class A commenced operations on May 11, 1998.
(3) Class B commenced operations on May 4, 1998.
(4) Annualized.
96 PROSPECTUS
<PAGE> 105
FINANCIAL HIGHLIGHTS
================================================================================
ARMADA CORE EQUITY FUND
- --------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31, 1999 FOR THE PERIOD ENDED MAY 31, 1998
------------------------------- ---------------------------------
CLASS A CLASS B CLASS A(3) CLASS B(4)
------------------------------- ---------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $11.34 $11.33 $10.00 $10.25
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss) (0.05)(6) (0.16)(6) 0.04 0.00
Net gain on securities (realized and unrealized) 2.93 2.97 1.34 1.08
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.88 2.81 1.38 1.08
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.00) (0.00) (0.04) (0.00)
Distributions from net realized capital gains (0.51) (0.51) (0.00) (0.00)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.51) (0.51) (0.04) (0.00)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.71 $13.63 $11.34 $11.33
====================================================================================================================================
TOTAL RETURN 25.78%(1) 25.17%(1) 13.85%(1,2) 10.54%(1,2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $1,731 $1,106 $ 408 $ 2
Ratio of expenses to average net assets 1.23% 1.94% 1.14%(5) 1.83%(5)
Ratio of net investment income/(loss) to average net assets (0.40)% (1.11%) 0.14%(5) (0.51)%(5)
Ratio of expenses to average net assets before fee waivers 1.23% 1.94% 1.30%(5) 2.00%(5)
Ratio of net investment income/(loss) to average
net assets before fee waivers (0.40)% (1.11%) 0.04%(5) (0.50)%(5)
Portfolio turnover rate 43% 43% 60% 60%
</TABLE>
(1) Total return excludes sales charge.
(2) Returns are for the period indicated and have not been annualized.
(3) Class A commenced operations on August 1, 1997.
(4) Class B commenced operations on January 6, 1998.
(5) Annualized.
(6) Calculated based upon average shares outstanding.
97 PROSPECTUS
<PAGE> 106
FINANCIAL HIGHLIGHTS
================================================================================
ARMADA EQUITY INDEX FUND
- --------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED MAY 31, 1999
---------------------------------
CLASS A(1)
---------------------------------
<S> <C>
Net asset value, beginning of period $9.09
- -------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.07
Net gain on securities (realized and unrealized) 2.18
- -------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.25
- -------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.05)
- -------------------------------------------------------------------------------------------------------------------
Total distributions (0.05)
- -------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.29
===================================================================================================================
TOTAL RETURN 24.83%(2,3)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $3,892
Ratio of expenses to average net assets 0.36%(4)
Ratio of net investment income to average net assets 1.22%(4)
Ratio of expenses to average net assets before fee waivers 0.71%(4)
Ratio of net investment income to average net assets before fee waivers 0.87%(4)
Portfolio turnover rate 9%
</TABLE>
(1)Class A commenced operations on October 15, 1998.
(2)Total return excludes sales charge.
(3)Returns are for the period indicated and have not been annualized.
(4)Annualized.
98 PROSPECTUS
<PAGE> 107
FINANCIAL HIGHLIGHTS
================================================================================
ARMADA EQUITY INCOME FUND
- --------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
For the Period
FOR THE YEAR ENDED MAY 31, ENDED MAY 31,
---------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS A CLASS B(4) CLASS A CLASS A CLASS A(1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 17.51 $17.54 $14.86 $16.28 $12.65 $11.01 $10.26
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.21 0.17 0.26 0.46 0.31 0.33 0.26
Net gain on securities (realized and unrealized) 1.55 1.39 3.41 0.86 2.68 1.77 0.75
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.76 1.56 3.67 1.32 2.99 2.10 1.01
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.23) (0.16) (0.29) (0.06) (0.27) (0.32) (0.26)
Distributions from net realized capital gains (0.25) (0.25) (0.73) (0.00) (0.51) (0.14) (0.00)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.48) (0.41) (1.02) (0.06) (0.78) (0.46) (0.26)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 18.79 $18.69 $17.51 $17.54 $14.86 $12.65 $11.01
====================================================================================================================================
Total Return 10.40%(3) 9.14%(3) 25.41%(3) 25.58%(2,3) 24.33%(3) 19.37%(3) 13.18%(2,3)
Ratios/Supplemental Data
Net assets, end of period (in 000's) $11,075 $ 997 $2,151 $ 3 $ 410 $ 263 $ 125
Ratio of expenses to average net assets 1.18% 1.89% 1.17% 1.86%(2) 1.26% 1.31% 1.41%(2)
Ratio of net investment income to
average net assets 1.82% 1.11% 1.62% 0.68%(2) 2.17% 2.75% 3.45%(2)
Ratio of expenses to average net assets
before fee waivers 1.18% 1.89% 1.17% 1.86%(2) 1.26% 1.32% 1.45%(2)
Ratio of net investment income to average
net assets before fee waivers 1.82% 1.11% 1.62% 0.68%(2) 2.17% 2.74% 3.40%(2)
Portfolio turnover rate 19% 19% 18% 18% 35% 53% 12%
</TABLE>
(1) Class A commenced operations on August 22, 1994.
(2) Annualized.
(3) Total return excludes sales charge.
(4) Class B commenced operations on January 6, 1998.
99 PROSPECTUS
<PAGE> 108
FINANCIAL HIGHLIGHTS
================================================================================
ARMADA BALANCED ALLOCATION FUND
- --------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31, 1999
-------------------------------
CLASS A(3) CLASS B(4)
-------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 9.74 $ 9.82
- -----------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.14 0.10
Net gain on securities (realized and unrealized) 0.57 0.51
- -----------------------------------------------------------------------------------------------------------------
Total from investment operations 0.71 0.61
- -----------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.14) (0.10)
- -----------------------------------------------------------------------------------------------------------------
Total distributions (0.14) (0.10)
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.31 $10.33
=================================================================================================================
TOTAL RETURN 7.26%(1,2) 6.07%(1,2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $1,466 $ 385
Ratio of expenses to average net assets 1.31%(5) 2.02%(5)
Ratio of net investment income to average net assets 2.50%(5) 1.29%(5)
Ratio of expenses to average net assets before fee waivers 1.31%(5) 2.02%(5)
Ratio of investment income to average net assets before fee waivers 2.50%(5) 1.29%(5)
Portfolio turnover rate 116% 116%
</TABLE>
(1) Total return excludes sales charge.
(2) Returns are for the period indicated and have not been annualized.
(3) Class A commenced operations on July 31, 1998.
(4) Class B commenced operations on November 11, 1998.
(5) Annualized.
100 PROSPECTUS
<PAGE> 109
FINANCIAL HIGHLIGHTS
================================================================================
ARMADA TOTAL RETURN ADVANTAGE FUND
- --------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
---------------------------------------------------- FOR THE PERIOD
1999 1998 1997 1996 ENDED MAY 31, 1995
---------------------------------------------------- ------------------
CLASS A CLASS A CLASS A CLASS A CLASS A(1)
---------------------------------------------------- ------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.25 $ 9.89 $ 9.87 $10.54 $10.16
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.56 0.61 0.64 0.62(5) 0.49(5)
Net gain/(loss) on securities (realized and unrealized) (0.23) 0.36 0.16 (0.22) 0.40
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.33 0.97 0.80 0.40 0.89
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.56) (0.61) (0.64) (0.62) (0.49)
Dividends in excess of net investment income (0.00) (0.00) (0.00) (0.14) (0.02)
Distributions from net realized capital gains (0.04) (0.00) (0.00) (0.31) (0.00)
Distributions in excess of net realized capital gains (0.00) (0.00) (0.14) (0.00) (0.00)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.60) (0.61) (0.78) (1.07) (0.51)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.98 $10.25 $ 9.89 $ 9.87 $10.54
====================================================================================================================================
TOTAL RETURN 3.18%(3) 10.08%(3) 8.35%(3) 3.74%(3) 12.65%(3,4)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $4,686 $ 640 $2,186 $2,040 $ 106
Ratio of expenses to average net assets 0.69% 0.54% 0.41% 0.36% 0.31%(2)
Ratio of net investment income to average net assets 5.48% 6.14% 6.46% 6.12% 6.92%(2)
Ratio of expenses to average net assets
before fee waivers 0.89% 0.97% 0.96% 0.89% 0.87%(2)
Ratio of net investment income to average
net assets before fee waivers 5.28% 5.71% 5.91% 5.59% 6.36%(2)
Portfolio turnover rate 142% 170% 169% 268% 166%
</TABLE>
(1) Class A commenced operations on September 6, 1994.
(2) Annualized.
(3) Total return excludes sales charge.
(4) Total returns have been annualized based upon the period from each
Class' commencement date through May 31, 1995. Gross total returns of Class
A for the period were 9.14%.
(5) Calculated based upon average shares outstanding.
101 PROSPECTUS
<PAGE> 110
FINANCIAL HIGHLIGHTS
================================================================================
ARMADA BOND FUND
- --------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
--------------------------------------------------------
1999 1998 1997
---------------------------------------------------------
CLASS A CLASS B CLASS A CLASS B(6) CLASS A(4)
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.27 $10.26 $10.02 $10.35 $ 9.97
- -----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.54 0.47 0.56 0.47 0.41
Net gain/(loss) on securities
(realized and unrealized) (0.15) (0.15) 0.25 (0.09) 0.13
- -----------------------------------------------------------------------------------------------------------
Total from investment operations 0.39 0.32 0.81 0.38 0.54
- -----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.54) (0.47) (0.56) (0.47) (0.41)
Distributions from net realized capital gains (0.14) (0.14) (0.00) (0.00) (0.00)
Distributions in excess of net realized
capital gains (0.00) (0.00) (0.00) (0.00) (0.08)
- -----------------------------------------------------------------------------------------------------------
Total distributions (0.68) (0.61) (0.56) (0.47) (0.49)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.98 $ 9.97 $10.27 $10.26 $10.02
===========================================================================================================
TOTAL RETURN 3.77%(5) 3.06%(5) 8.29%(5) 8.36%(1,5) 7.22%(1,5)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $2,804 $ 725 $ 161 $ 1 $ 23
Ratio of expenses to average net assets 0.96% 1.66% 1.05% 1.74%(1) 1.07%(1)
Ratio of net investment income to
average net assets 5.18% 4.48% 5.52% 2.71%(1) 5.64%(1)
Ratio of expenses to average net
assets before fee waivers 0.96% 1.66% 1.05% 1.74%(1) 1.07%(1)
Ratio of net investment income to
average net assets before fee waivers 5.18% 4.48% 5.52% 2.71%(1) 5.64%(1)
Portfolio turnover rate 270% 270% 220% 220% 96%
<CAPTION>
FOR THE FOR THE FOR THE
PERIOD ENDED YEAR ENDED PERIOD ENDED
MAY 31, 1996(3) APRIL 30, 1996(3) APRIL 30, 1995(3)
-----------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.04 $ 10.02 $ 10.00
- -----------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.64 0.44
Net gain/(loss) on securities
(realized and unrealized) (0.07) 0.07 0.02
- -----------------------------------------------------------------------------------------------------
Total from investment operations (0.02) 0.71 0.46
- -----------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.05) (0.64) (0.44)
Distributions from net realized capital gains (0.00) (0.05) (0.00)
Distributions in excess of net realized
capital gains (0.00) (0.00) (0.00)
- -----------------------------------------------------------------------------------------------------
Total distributions (0.05) (0.69) (0.44)
- -----------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.97 $ 10.04 $ 10.02
=====================================================================================================
TOTAL RETURN (0.19)%(2,5) 7.09%(5) 4.75%(2,5)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $88,829 $89,901 $53,316
Ratio of expenses to average net assets 0.85%(1) 0.85% 0.85%(1)
Ratio of net investment income to
average net assets 5.88%(1) 6.20% 6.17%(1)
Ratio of expenses to average net
assets before fee waivers 1.25%(1) 1.25% 1.33%(1)
Ratio of net investment income to
average net assets before fee waivers 5.48%(1) 5.80% 5.69%(1)
Portfolio turnover rate 2% 94% 172%
</TABLE>
(1) Annualized.
(2) Returns are for the period indicated and have not been annualized.
(3) Activity for the period presented includes that of a predecessor fund
through September 6, 1996. The predecessor fund commenced operations on
August 10, 1994. During 1996, the predecessor fund changed its fiscal
year-end from April 30 to May 31.
(4) Class A commenced operations on September 11, 1996.
(5) Total return excludes sales charge.
(6) Class B Shares commenced operations January 6, 1998.
102 PROSPECTUS
<PAGE> 111
FINANCIAL HIGHLIGHTS
================================================================================
ARMADA INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
----------------------------------------------- ----------------------------------
CLASS A CLASS B CLASS A CLASS B(3) CLASS A CLASS A CLASS A
----------------------------------------------- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.63 $10.63 $10.42 $10.70 $10.35 $10.60 $10.30
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.54 0.45 0.58 0.20 0.57 0.59 0.61
Net gain/ (loss) on securities
(realized and unrealized) (0.16) (0.15) 0.21 (0.07) 0.07 (0.23) 0.30
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.38 0.30 0.79 0.13 0.64 0.36 0.91
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.54) (0.46) (0.58) (0.20) (0.57) (0.59) (0.61)
Distributions from net realized capital gains (0.06) (0.06) (0.00) (0.00) (0.00) (0.00) (0.00)
Distributions in excess of net realized
capital gains (0.00) (0.00) (0.00) (0.00) (0.00) (0.02) (0.00)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.60) (0.52) (0.58) (0.20) (0.57) (0.61) (0.61)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.41 $10.41 $10.63 $10.63 $10.42 $10.35 $10.60
====================================================================================================================================
TOTAL RETURN 3.54%(1) 2.83%(1) 7.71%(1) 7.39%(1,2) 6.36%(1) 3.44%(1) 9.26%(1)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000s) $5,129 $ 709 $3,288 $ 2 $3,720 $6,216 $5,527
Ratio of expenses to average net assets 0.86% 1.57% 0.91% 1.60%(2) 0.96% 1.04% 1.09%
Ratio of net investment income to
average net assets 4.96% 4.25% 5.48% 3.38%(2) 5.52% 5.50% 5.95%
Ratio of expenses to average net assets
before fee waivers 1.00% 1.71% 1.06% 1.49%(2) 1.05% 1.06% 1.10%
Ratio of net investment income to average
net assets before fee waivers 4.82% 4.11% 5.33% 3.49%(2) 5.44% 5.48% 5.94%
Portfolio turnover rate 256% 256% 160% 160% 217% 45% 42%
</TABLE>
(1) Total return excludes sales charge.
(2) Annualized.
(3) Class B Shares commenced operations January 6, 1998.
103 PROSPECTUS
<PAGE> 112
FINANCIAL HIGHLIGHTS
================================================================================
ARMADA GNMA FUND
- --------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
------------------------------------------
1999 1998 1997
------------------------------------------
CLASS A CLASS A CLASS A(4)
<S> <C> <C> <C>
Net asset value, beginning of period $10.36 $10.15 $10.02
- ------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.59 0.58 0.45
Net gain/(loss) on securities
(realized and unrealized) (0.20) 0.31 0.23
- ------------------------------------------------------------------------------------------------
Total from investment operations 0.39 0.89 0.68
- ------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.58) (0.58) (0.45)
Dividends from net realized capital gains (0.07) (0.10) (0.01)
Distributions in excess of net
realized capital gains (0.00) (0.00) (0.09)
- ------------------------------------------------------------------------------------------------
Total distributions (0.65) (0.68) (0.55)
- ------------------------------------------------------------------------------------------------
Net asset value, end of period $10.10 $10.36 $10.15
================================================================================================
TOTAL RETURN 3.77%(5) 8.90%(5) 8.83%(1,5)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $1,497 $ 549 $ 128
Ratio of expenses to average net assets 1.03% 1.09% 1.12%(1)
Ratio of net investment income to
average net assets 5.67% 5.54% 6.17%(1)
Ratio of expenses to average net assets
before fee waivers 1.03% 1.09% 1.12%(1)
Ratio of net investment income to average
net assets before fee waivers 5.67% 5.54% 6.17%(1)
Portfolio turnover rate 85% 291% 57%
<CAPTION>
FOR THE FOR THE FOR THE
PERIOD ENDED YEAR ENDED PERIOD ENDED
MAY 31, 1996(3) APRIL 30, 1996(3) APRIL 30, 1995(3)
--------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.12 $ 10.16 $ 10.00
- ---------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.66 0.48
Net gain/(loss) on securities
(realized and unrealized) (0.09) 0.14 0.16
- ---------------------------------------------------------------------------------------------------------
Total from investment operations (0.04) 0.80 0.64
- ---------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.05) (0.66) (0.48)
Dividends from net realized capital gains (0.00) (0.18) (0.00)
Distributions in excess of net
realized capital gains (0.00) (0.00) (0.00)
- ---------------------------------------------------------------------------------------------------------
Total distributions (0.05) (0.84) (0.48)
- ---------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.03 $ 10.12 $ 10.16
=========================================================================================================
TOTAL RETURN (0.35)%(2,5) 7.97%(5) 6.61%(2,5)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $60,532 $62,161 $42,212
Ratio of expenses to average net assets 0.85%(1) 0.85% 0.85%(1)
Ratio of net investment income to
average net assets 6.33%(1) 6.30% 6.68%(1)
Ratio of expenses to average net assets
before fee waivers 1.28%(1) 1.29% 1.40%(1)
Ratio of net investment income to average
net assets before fee waivers 5.90%(1) 5.86% 6.13%(1)
Portfolio turnover rate 1% 149% 226%
</TABLE>
(1) Annualized.
(2) Returns are for the period indicated and have not been annualized.
(3) Activity for the period presented includes that of the predecessor fund
through September 6, 1996. The predecessor fund commenced operations on
August 10, 1994. During 1996, the predecessor fund changed its fiscal
year-end from April 30 to May 31.
(4) Class A commenced operations on September 11, 1996.
(5) Total return excludes sales charge.
104 PROSPECTUS
<PAGE> 113
FINANCIAL HIGHLIGHTS
================================================================================
ARMADA ENHANCED INCOME FUND
- --------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
------------------------------------------------ FOR THE PERIOD
1999 1998 1997 1996 ENDED MAY 31, 1995
------------------------------------------------ ----------------
CLASS A CLASS A CLASS A CLASS A CLASS A(1)
------------------------------------------------ ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.08 $10.00 $10.02 $10.18 $10.10
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.56 0.57 0.57 0.56 0.43(5)
Net gain/(loss) on securities (realized and unrealized) (0.05) 0.09 0.01 (0.05) 0.06
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.51 0.66 0.58 0.51 0.49
- ----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.55) (0.57) (0.57) (0.56) (0.41)
Dividends in excess of net investment income 0.00 (0.00) (0.00) (0.11) (0.00)
Distributions of net realized capital gains (0.05) (0.01) (0.03) (0.00) (0.00)
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.60) (0.58) (0.60) (0.67) (0.41)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.99 $10.08 $10.00 $10.02 $10.18
==================================================================================================================================
TOTAL RETURN 4.94%(3) 6.68%(3) 5.91%(3) 5.13%(3) 6.84%(2,3,4)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $ 550 $ 559 $2,051 $1,718 $2,547
Ratio of expenses to average net assets 0.53% 0.41% 0.31% 0.33% 0.32%(2)
Ratio of net investment income to average net assets 5.39% 5.65% 5.63% 5.55% 5.89%(2)
Ratio of expenses to average net assets
before fee waivers 0.75% 0.80% 0.75% 0.80% 0.79%(2)
Ratio of net investment income to average net
assets before fee waivers 5.17% 5.26% 5.18% 5.08% 5.42%(2)
Portfolio turnover rate 190% 135% 225% 98% 36%
</TABLE>
(1) Class A commenced operations on September 9, 1994.
(2) Annualized.
(3) Total return excludes sales charge.
(4) Total returns have been annualized based upon the period from the
commencement date through May 31, 1995. Gross total returns of Class A for
the period were 4.92%.
(5) Calculation based upon average shares outstanding.
105 PROSPECTUS
<PAGE> 114
FINANCIAL HIGHLIGHTS
================================================================================
ARMADA OHIO TAX EXEMPT BOND FUND
- --------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
-------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------------------------------------------------------------------
CLASS A CLASS A CLASS A CLASS A CLASS A
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $11.09 $10.82 $10.66 $10.70 $10.53
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.52 0.51 0.51 0.50 0.50
Net gain/(loss) on securities (realized and unrealized) (0.08) 0.28 0.16 (0.04) 0.17
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.44 0.79 0.67 0.46 0.67
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.52) (0.51) (0.51) (0.50) (0.50)
Distributions from net realized capital gains (0.01) (0.01) (0.00) (0.00) (0.00)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.53) (0.52) (0.51) (0.50) (0.50)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.00 $11.09 $10.82 $10.66 $10.70
====================================================================================================================================
TOTAL RETURN 3.93%(1) 7.39%(1) 6.38%(1) 4.35%(1) 6.64%(1)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $4,808 $4,037 $3,535 $2,869 $3,168
Ratio of expenses to average net assets 0.38% 0.25% 0.24% 0.26% 0.24%
Ratio of net investment income to average net assets 4.67% 4.59% 4.71% 4.68% 4.82%
Ratio of expenses to average net assets
before fee waivers 0.88% 0.80% 0.79% 0.83% 0.78%
Ratio of net investment income to average
net assets before fee waivers 4.17% 4.04% 4.16% 4.11% 4.27%
Portfolio turnover rate 19% 15% 23% 10% 3%
</TABLE>
(1)Total return excludes sales charge.
106 PROSPECTUS
<PAGE> 115
FINANCIAL HIGHLIGHTS
================================================================================
ARMADA PENNSYLVANIA MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
-----------------------------------------
1999 1998 1997
-----------------------------------------
CLASS A CLASS A CLASS A(4)
--------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $10.45 $10.22 $10.13
- ------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.48 0.45 0.31
Net gain/(loss) on securities
(realized and unrealized) (0.04) 0.24 0.12
- ------------------------------------------------------------------------------------------------
Total from investment operations 0.44 0.69 0.43
- ------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.48) (0.45) (0.31)
Distributions from net realized capital gains (0.01) (0.00) (0.02)
Distributions in excess of net
realized capital gains (0.00) (0.01) (0.01)
- ------------------------------------------------------------------------------------------------
Total distributions (0.49) (0.46) (0.34)
- ------------------------------------------------------------------------------------------------
Net asset value, end of period $10.40 $10.45 $10.22
================================================================================================
TOTAL RETURN 4.21%(5) 6.84%(5) 6.13%(1,5)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $ 218 $ 125 $ 81
Ratio of expenses to average net assets 0.58% 0.77% 0.99%(1)
Ratio of net investment income to
average net assets 4.70% 4.32% 4.26%(1)
Ratio of expenses to average net assets
before fee waivers 0.93% 0.94% 1.00%(1)
Ratio of net investment income to average
net assets before fee waivers 4.35% 4.15% 4.25%(1)
Portfolio turnover rate 15% 20% 42%
<CAPTION>
FOR THE FOR THE FOR THE
PERIOD ENDED YEAR ENDED PERIOD ENDED
MAY 31, 1996(3) APRIL 30, 1996(3) APRIL 30, 1995(3)
---------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.12 $ 10.04 $ 10.00
- -----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.04 0.43 0.29
Net gain/(loss) on securities
(realized and unrealized) (0.04) 0.08 0.04
- -----------------------------------------------------------------------------------------------------------
Total from investment operations 0.00 0.51 0.33
- -----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.04) (0.43) (0.29)
Distributions from net realized capital gains (0.00) (0.00) (0.00)
Distributions in excess of net
realized capital gains (0.00) (0.00) (0.00)
- -----------------------------------------------------------------------------------------------------------
Total distributions (0.04) (0.43) (0.29)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.08 $ 10.12 $ 10.04
===========================================================================================================
TOTAL RETURN (0.03)%(1,5) 5.06%(5) 3.38%(2,5)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $38,733 $38,809 $34,638
Ratio of expenses to average net assets 0.85%(1) 0.85% 0.85%(1)
Ratio of net investment income to
average net assets 4.32%(1) 4.16% 4.05%(1)
Ratio of expenses to average net assets
before fee waivers 1.31%(1) 1.24% 1.36%(1)
Ratio of net investment income to average
net assets before fee waivers 3.86%(1) 3.77% 3.54%(1)
Portfolio turnover rate 0% 22% 4%
</TABLE>
(1) Annualized.
(2) Returns are for the period indicated and have not been annualized.
(3) Activity for the period presented includes that of the predecessor fund
through September 6, 1996. The predecessor fund commenced operations on
August 10, 1994. During 1996, the predecessor fund changed its fiscal year
end from April 30 to May 31.
(4) Class A commenced operations on September 11, 1996.
(5) Total return excludes sales charge.
107 PROSPECTUS
<PAGE> 116
FINANCIAL HIGHLIGHTS
================================================================================
ARMADA NATIONAL TAX EXEMPT BOND FUND
- --------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31, 1999
---------------------------------
CLASS A(2) CLASS B(5)
---------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 10.04 $ 10.23
- -------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.41 0.13
Net gain/(loss) on securities (realized and unrealized) (0.04) (0.26)
- -------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.37 (0.13)
- -------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.41) (0.14)
Distribution from net realized capital gains (0.03) (0.00)
- -------------------------------------------------------------------------------------------------------------------------
Total distributions (0.44) (0.14)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.97 $ 9.96
=========================================================================================================================
TOTAL RETURN 3.67%(3,4) (1.22)%(3,4)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $ 4,205 $ 275
Ratio of expenses to average net assets 0.46%(1) 1.17%(1)
Ratio of net investment income to average net assets 4.29%(1) 3.58%(1)
Ratio of expenses to average net assets before fee waivers 0.97%(1) 1.68%(1)
Ratio of net investment income to average net assets before fee waivers 3.78%(1) 3.07%(1)
Portfolio turnover rate 23% 23%
</TABLE>
(1) Annualized.
(2) Class A commenced operations on June 19, 1998.
(3) Total return excludes sales charge.
(4) Returns are for the period indicated and have not been annualized.
(5) Class B commenced operations on January 29, 1999.
108 PROSPECTUS
<PAGE> 117
FINANCIAL HIGHLIGHTS
================================================================================
ARMADA OHIO MUNICIPAL MONEY MARKET FUND
- --------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED MAY 31, 1999
---------------------------------
CLASS A(1)
---------------------------------
<S> <C>
Net asset value, beginning of period $ 1.00
- -----------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.02
- -----------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.02)
- -----------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00
=====================================================================================================
TOTAL RETURN 1.50%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $11,019
Ratio of expenses to average net assets 0.50%(3)
Ratio of net investment income to average net assets 2.62%(3)
Ratio of expenses to average net assets before fee waivers 0.70%(3)
Ratio of net investment income to average net assets before fee waivers 2.42%(3)
</TABLE>
(1)Class A commenced operations on November 2, 1998.
(2)Returns are for the period indicated and have not been annualized.
(3)Annualized.
109 PROSPECTUS
<PAGE> 118
FINANCIAL HIGHLIGHTS
================================================================================
ARMADA PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND
- --------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
----------------------------------------------
1999 1998 1997
----------------------------------------------
CLASS A CLASS A CLASS A(4)
------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.03 0.03 0.02
- ------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.03) (0.03) (0.02)
- ------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00
================================================================================================
TOTAL RETURN 2.76% 3.29% 3.18%(1)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $53,822 $33,375 $20,830
Ratio of expenses to average net assets 0.49% 0.46% 0.46%(1)
Ratio of net investment income to
average net assets 2.67% 3.23% 3.27%(1)
Ratio of expenses to average net assets
before fee waivers 0.74% 0.71% 0.71%(1)
Ratio of net investment income to average
net assets before fee waivers 2.42% 2.98% 3.02%(1)
<CAPTION>
FOR THE FOR THE FOR THE
PERIOD ENDED YEAR ENDED PERIOD ENDED
MAY 31, 1996(3) APRIL 30, 1996(3) APRIL 30, 1995(3)
------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.00 0.03 0.02
- -----------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.00) (0.03) (0.02)
- -----------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00
=====================================================================================================
TOTAL RETURN 0.28%(2) 3.36% 2.32%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $68,742 $70,422 $56,668
Ratio of expenses to average net assets 0.55%(1) 0.55% 0.55%(1)
Ratio of net investment income to
average net assets 3.24%(1) 3.29% 3.21%(1)
Ratio of expenses to average net assets
before fee waivers 0.97%(1) 0.96% 1.04%(1)
Ratio of net investment income to average
net assets before fee waivers 2.82%(1) 2.88% 2.72%(1)
</TABLE>
(1) Annualized.
(2) Returns are for the period indicated and have not been annualized.
(3) Activity for the period presented includes that of the predecessor fund
through September 6, 1996. The predecessor fund commenced operations on
August 10, 1994. During 1996, the predecessor fund changed its fiscal year
end from April 30 to May 31.
(4) Class A commenced operations on September 11, 1996.
110 PROSPECTUS
<PAGE> 119
FINANCIAL HIGHLIGHTS
================================================================================
ARMADA TAX EXEMPT MONEY MARKET FUND
- --------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
-----------------------------------------------------------
1999 1998 1997 1996 1995
-----------------------------------------------------------
CLASS A CLASS A CLASS A CLASS A CLASS A
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.03 0.03 0.03 0.03 0.03
- --------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.03) (0.03) (0.03) (0.03) (0.03)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
==========================================================================================================================
TOTAL RETURN 2.85% 3.27% 3.12% 3.29% 3.04%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $190,469 $132,548 $71,917 $85,928 $51,916
Ratio of expenses to average net assets 0.44% 0.42% 0.39% 0.40% 0.46%
Ratio of net investment income to average net assets 2.78% 3.20% 3.08% 3.23% 3.17%
Ratio of expenses to average net assets before fee waivers 0.64% 0.62% 0.59% 0.61% 0.67%
Ratio of net investment income to average
net assets before fee waivers 2.58% 3.00% 2.88% 3.02% 2.96%
</TABLE>
111 PROSPECTUS
<PAGE> 120
FINANCIAL HIGHLIGHTS
================================================================================
ARMADA MONEY MARKET FUND
- --------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
--------------------------------------------------------------------------------
1999 1998 1997 1996 1995
--------------------------------------------- -------------------------------
CLASS A CLASS B CLASS A CLASS B(1) CLASS A CLASS A CLASS A
--------------------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.04 0.05 0.05 0.05 0.05 0.05
- ---------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.05) (0.04) (0.05) (0.05) (0.05) (0.05) (0.05)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=================================================================================================================================
TOTAL RETURN 4.82% 4.21% 5.26% 5.04%(2) 5.09% 5.35% 5.01%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $1,360,644 $ 27 $696,893 $ 5 $346,172 $343,087 $175,192
Ratio of expenses to average net assets 0.56% 1.27% 0.51% 1.22%(2) 0.47% 0.47% 0.47%
Ratio of net investment income to
average net assets 4.68% 3.97% 5.14% 4.39%(2) 4.97% 5.18% 5.12%
Ratio of expenses to average net assets
before fee waivers 0.66% 1.37% 0.61% 1.27%(2) 0.57% 0.58% 0.58%
Ratio of net investment income to average
net assets before fee waivers 4.58% 3.87% 5.08% 4.31%(2) 4.87% 5.07% 5.01%
</TABLE>
(1) The Money Market Fund Class B commenced operations January 5, 1998.
(2) Annualized.
112 PROSPECTUS
<PAGE> 121
FINANCIAL HIGHLIGHTS
================================================================================
ARMADA GOVERNMENT MONEY MARKET FUND
- --------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
--------------------------------------------------------------
1999 1998 1997 1996 1995
--------------------------------------------------------------
CLASS A CLASS A CLASS A CLASS A CLASS A
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.05 0.05 0.05 0.05
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.05) (0.05) (0.05) (0.05) (0.05)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=============================================================================================================================
TOTAL RETURN 4.70% 5.17% 5.04% 5.31% 4.87%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $565,095 $247,281 $159,129 $131,194 $19,174
Ratio of expenses to average net assets 0.57% 0.52% 0.47% 0.46% 0.51%
Ratio of net investment income to average net assets 4.61% 5.05% 4.93% 5.13% 5.01%
Ratio of expenses to average net assets before fee waivers 0.67% 0.62% 0.57% 0.57% 0.63%
Ratio of net investment income to average
net assets before fee waivers 4.51% 4.95% 4.83% 5.02% 4.90%
</TABLE>
113 PROSPECTUS
<PAGE> 122
FINANCIAL HIGHLIGHTS
================================================================================
ARMADA TREASURY MONEY MARKET FUND
- --------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
----------------------------------------------------------------------
1999 1998 1997 1996 1995
----------------------------------------------------------------------
CLASS A CLASS A CLASS A CLASS A CLASS A(1)
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.04 0.05 0.05 0.05 0.02
- -----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.04) (0.05) (0.05) (0.05) (0.02)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
===================================================================================================================================
TOTAL RETURN 4.23% 4.82% 4.79% 4.97% 5.41%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $83,020 $7,222 $5,680 $4,355 $ 366
Ratio of expenses to average net assets 0.55% 0.51% 0.47% 0.52% 0.56%(2)
Ratio of net investment income to average net assets 4.21% 4.71% 4.68% 4.77% 5.35%(2)
Ratio of expenses to average net assets before fee waivers 0.60% 0.56% 0.52% 0.58% 0.63%(2)
Ratio of net investment income to average net assets
before fee waivers 4.16% 4.66% 4.63% 4.71% 5.28%(2)
</TABLE>
(1) Class A commenced operations on December 22, 1994.
(2) Annualized.
114 PROSPECTUS
<PAGE> 123
NOTES
================================================================================
115 PROSPECTUS
<PAGE> 124
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
18(th) and Cherry Streets
Philadelphia, PA 19103-6996
116 PROSPECTUS
<PAGE> 125
<TABLE>
<CAPTION>
BOARD OF TRUSTEES
<S> <C>
ROBERT D. NEARY ROBERT J. FARLING
Chairman Retired Chairman, President and Chief
Retired Co-Chairman, Ernst & Young Executive Officer, Centerior Energy
Director:
Cold Metal Products, Inc.
Strategic Distribution, Inc. RICHARD W. FURST, DEAN
Garvice D. Kincaid Professor of Finance
and Dean, Gatton College of Business
HERBERT R. MARTENS, JR. and Economics, University of Kentucky
President Director:
Executive Vice President, Foam Design, Inc.
National City Corporation The Seed Corporation
Chairman, President and Chief Executive Office Suites Plus, Inc.
Officer, NatCity Investments,Inc. ihigh.com, Inc.
LEIGH CARTER GERALD L. GHERLEIN
Retired President and Chief Operating Executive Vice President and General
Officer, B.F. Goodrich Company Counsel, Eaton Corporation
Director:
Kirtland Capital Corporation
Morrison Products J. WILLIAM PULLEN
TruSeal Technologies President and Chief Executive Officer,
Whayne Supply Company
JOHN F. DURKOTT
President and Chief Operating Officer,
Kittle's Home Furnishings Center, Inc.
</TABLE>
The Armada Trustees also serve as the Trustees of the Parkstone Funds.
[ARMADA FUNDS LOGO]
<PAGE> 126
[logo etc.]
More information about the Funds 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 Armada Funds. The SAI is on file with the SEC and is
incorporated by reference into this prospectus. This means that the SAI, for
legal purposes, is a part of this prospectus.
ANNUAL AND SEMI-ANNUAL REPORTS
These reports list each Fund's holdings and contain information from the Fund's
managers about strategies, recent market conditions and trends. The reports also
contain detailed financial information about the Funds.
TO OBTAIN MORE INFORMATION:
By Telephone:
Call 1-800-622-FUND (3863)
By Mail:
P.O. Box 8421
Boston, MA 02266-8421
By Internet:
www.armadafunds.com
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 (information on the operation of the
Public Reference Room may be obtained by calling the SEC at 1-202-942-8090). You
may request documents by mail from the SEC, upon payment of a duplicating fee,
by electronic request at the following e-mail address: [email protected], or by
writing to:
Securities and Exchange Commission
Public Reference Section
Washington, DC 20549-0102
The Armada Funds' Investment Company Act
registration number is 811-4416.
ARM-F-004-02000 (12/99)
<PAGE> 1
Exhibit (17)(c)
ARMADA FUNDS PROSPECTUS
I SHARES (INSTITUTIONAL)
[PICTURE] [PICTURE] [PICTURE]
SEPTEMBER 28, 1999
[ARMADA FUNDS LOGO]
DESIGN YOUR OWN DESTINY
www.armadafunds.com
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED ANY FUND SHARES OR
DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY STATEMENT TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 2
Investment Adviser
NATIONAL CITY INVESTMENT
MANAGEMENT COMPANY
Investment Sub-Adviser
NATIONAL ASSET MANAGEMENT
CORPORATION
(ARMADA CORE EQUITY FUND AND
ARMADA TOTAL RETURN ADVANTAGE FUND)
HOW TO READ THIS PROSPECTUS
The Armada Funds (the Trust) is a mutual fund family that offers different
classes of shares in separate investment portfolios (Funds). The Funds have
individual investment goals and strategies. This prospectus gives you important
information that you should know about the Class I Shares of the Funds before
investing. Please read this prospectus and keep it for future reference.
This prospectus has been arranged into different sections so that you can easily
review this important information. On the next page, there is some general
information you should know about the Funds. For more detailed information about
each Fund, please see:
ARMADA INTERNATIONAL EQUITY FUND ..................................... 2
ARMADA SMALL CAP VALUE FUND .......................................... 4
ARMADA SMALL CAP GROWTH FUND ......................................... 6
ARMADA EQUITY GROWTH FUND ............................................ 8
ARMADA TAX MANAGED EQUITY FUND ....................................... 10
ARMADA CORE EQUITY FUND .............................................. 13
ARMADA EQUITY INDEX FUND ............................................. 15
ARMADA EQUITY INCOME FUND ............................................ 17
ARMADA BALANCED ALLOCATION FUND ...................................... 19
ARMADA TOTAL RETURN
ADVANTAGE FUND .................................................... 21
ARMADA BOND FUND ..................................................... 23
ARMADA INTERMEDIATE BOND FUND ........................................ 25
ARMADA GNMA FUND ..................................................... 27
ARMADA ENHANCED INCOME FUND .......................................... 29
ARMADA OHIO TAX EXEMPT BOND FUND ..................................... 31
ARMADA PENNSYLVANIA MUNICIPAL BOND FUND .............................. 33
ARMADA NATIONAL TAX EXEMPT BOND FUND ................................. 35
ARMADA OHIO MUNICIPAL MONEY MARKET FUND .............................. 38
ARMADA PENNSYLVANIA TAX EXEMPT
MONEY MARKET FUND ................................................. 40
ARMADA TAX EXEMPT MONEY MARKET FUND .................................. 42
ARMADA MONEY MARKET FUND ............................................. 44
ARMADA GOVERNMENT
MONEY MARKET FUND ................................................. 46
ARMADA TREASURY MONEY MARKET FUND .................................... 48
ARMADA MID CAP GROWTH FUND ........................................... 50
ARMADA LARGE CAP ULTRA FUND .......................................... 52
ARMADA U.S. GOVERNMENT INCOME FUND ................................... 54
ARMADA MICHIGAN MUNICIPAL BOND FUND .................................. 56
ARMADA TREASURY PLUS MONEY MARKET FUND ............................... 58
MORE INFORMATION ABOUT RISK .......................................... 60
EACH FUND'S OTHER INVESTMENTS ........................................ 64
THE INVESTMENT ADVISER, SUB-ADVISER
AND INVESTMENT TEAM ............................................... 64
PURCHASING, SELLING AND EXCHANGING FUND SHARES ....................... 66
DIVIDENDS AND TAXES .................................................. 68
FINANCIAL HIGHLIGHTS ................................................. 70
<PAGE> 3
INTRODUCTION
Each 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.
RISK/RETURN SUMMARY
Each Fund has its own investment goal and strategies for reaching that goal. The
investment managers invest Fund assets in a way that they believe will help a
Fund achieve its goal. Still, investing in each Fund involves risk and there is
no guarantee that a Fund will achieve its goal. An investment manager's
judgments about the markets, the economy, or companies may not anticipate actual
market movements, economic conditions or company performance, and these
judgments may affect the return on your investment.
No matter how good a job an investment manager does, you could lose money on
your investment in a Fund, just as you could with other investments.
An investment in a Fund is not a bank deposit and it is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any government
agency.
Although a money market fund seeks to keep a constant price per share of $1.00,
there is no guarantee that a money market fund will achieve this goal and it is
possible that you may lose money by investing in the fund.
The value of your investment in a Fund (other than a money market fund) is based
primarily on the market value of the securities the Fund holds. These prices
change daily due to economic and other events that affect particular companies
and other issuers. These price movements, sometimes called volatility, may be
greater or lesser depending on the types of securities a Fund owns and the
markets in which they trade. The effect on a Fund of a change in the value of a
single security will depend on how widely the Fund diversifies its holdings.
1 PROSPECTUS
<PAGE> 4
EQUITY FUNDS
ARMADA INTERNATIONAL EQUITY FUND
FUND SUMMARY
INVESTMENT GOAL
Capital appreciation
INVESTMENT FOCUS
Equity securities of foreign issuers
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
High
PRINCIPAL INVESTMENT STRATEGY
Investing in equity securities of issuers located in at least three foreign
countries
INVESTOR PROFILE
Investors seeking capital appreciation, who are willing to accept the risks of
foreign investing
PRINCIPAL INVESTMENT STRATEGIES
The Armada International Equity Fund's investment objective is to provide
capital appreciation by investing in a portfolio of equity securities of foreign
issuers. Equity securities of foreign issuers includes common stock, preferred
stock and convertible bonds, of companies headquartered outside the United
States. The investment objective may be changed without a shareholder vote. The
Fund will normally invest at least 80% of its total assets in the equity
securities of foreign issuers. The Fund focuses on issuers included in the
Morgan Stanley Capital International Europe, Australasia, Far East (World EAFE)
Index. The World EAFE is an unmanaged index which represents the performance of
more than 1,000 equity securities of companies located in those regions. The
Adviser makes judgements about the attractiveness of countries based upon a
collection of criteria. The relative valuation, growth prospects, fiscal,
monetary and regulatory government policies are considered jointly and generally
in making these judgements. The percentage of the Fund in each country is
determined by its relative attractiveness and weight in the World EAFE Index.
More than 25% of the Fund's assets may be invested in the equity securities of
issuers located in the same country. Within foreign markets, the Adviser buys
and sells securities based on its analysis of competitive position and
valuation. The adviser sells securities whose competitive position is
deteriorating or whose valuation is unattractive relative to industry peers.
Likewise, companies with strong and durable competitive advantages and
attractive valuation are considered for purchase.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities, and will lower Fund performance.
PRINCIPAL RISKS OF INVESTING
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country.
Companies making up the World EAFE Index are generally issuers of larger cap
securities of multi-national companies who are affected by risks worldwide.
Investment in a particular country of 25% or more of the Fund's total assets
will make the Fund's performance more dependent upon the political and economic
circumstances of that country than a mutual fund more widely diversified among
issuers in different countries.
The Fund is also subject to the risk that its market segment, international
equity securities, may underperform other equity market segments or the equity
market as a whole. For additional information about risks, see "More Information
About Risk."
2 PROSPECTUS
<PAGE> 5
EQUITY FUNDS
ARMADA INTERNATIONAL EQUITY FUND (CONTINUED)
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
CALENDAR YEAR TOTAL RETURN
[BAR GRAPH]
1998 19.98%
Best Quarter 20.11% (12/31/98)
Worst Quarter -15.57% (9/30/98)
The Fund's performance from January 1, 1999 to June 30, 1999 was 4.87%.
This table compares the Fund's average annual total returns for the periods
ended December 31, 1998 to those of the Morgan Stanley EAFE Index.
CLASS I SHARES 1 YEAR SINCE INCEPTION
Armada International
Equity Fund 19.98% 7.99%(1)
Morgan Stanley
(World EAFE) Index(3) 20.00% 12.35%(2)
(1) Since August 1, 1997
(2) Since August 31, 1997
(3) The Morgan Stanley Capital International Europe, Australasia and Far East
(World EAFE) Index is an unmanaged index which represents the performance of
more than 1,000 equity securities of companies located in those regions.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
CLASS I
Investment Advisory Fees 1.15%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.23%
Total Annual Fund Operating Expenses(1) 1.48%
(1) The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Distributor is waiving a
portion of the fees in order to keep total operating expenses at a specified
level. The Distributor may discontinue all or part of these waivers at any time.
With these fee waivers, the Fund's actual total operating expenses are 1.42%.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$151 $468 $808 $1,768
3 PROSPECTUS
<PAGE> 6
EQUITY FUNDS
ARMADA SMALL CAP VALUE FUND
FUND SUMMARY
INVESTMENT GOAL
Capital appreciation
INVESTMENT FOCUS
Small cap equity securities
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
High
PRINCIPAL INVESTMENT STRATEGY
Investing in value-oriented equity securities of smaller issuers
INVESTOR PROFILE
Investors seeking capital appreciation, who are willing to accept the risk of
share price volatility that may accompany small cap investing
PRINCIPAL INVESTMENT STRATEGIES
The Armada Small Cap Value Fund's investment objective is to provide capital
appreciation by investing in a diversified portfolio of publicly traded small
cap equity securities. The investment objective may be changed without a
shareholder vote. The Fund will normally invest at least 80% of its total assets
in the common stocks of small capitalization companies. The Fund may invest up
to 20% of its total assets at the time of purchase in foreign equity securities.
In buying and selling securities for the Fund, the Adviser uses a value-oriented
approach. The Adviser generally seeks to invest in equity securities based upon
price/earnings, price/book and price/cash flow ratios which are lower than the
market averages. The Adviser generally sells securities based upon
price/earnings, price/book and price/cash flow ratios which rise above market
averages or when a company no longer has a small capitalization.
The Fund considers a small capitalization or "small cap" company to be one that
has a comparable market capitalization to the companies in the Russell 2000
Value Index. The Russell 2000 Value Index is an unmanaged index comprised of
securities in the Russell 2000 Index which have less than average growth
orientation.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may increase transaction costs and capital gains tax liabilities, and will
lower Fund performance.
PRINCIPAL RISKS OF INVESTING
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
Smaller capitalization companies may be more vulnerable to adverse business or
economic events than larger, more established companies. In particular, these
companies may have limited product lines, markets and financial resources, and
may depend upon a relatively small management group. Therefore, small cap stocks
may be more volatile than those of larger companies. These securities may be
traded over-the-counter or listed on an exchange and may or may not pay
dividends.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country.
The Fund is also subject to the risk that its market segment, small cap equity
securities, may underperform other equity market segments or the equity market
as a whole. For additional information about risks, see "More Information About
Risk."
4 PROSPECTUS
<PAGE> 7
EQUITY FUNDS
ARMADA SMALL CAP VALUE FUND (CONTINUED)
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I from year
to year.
CALENDAR YEAR TOTAL RETURN
[BAR GRAPH]
1995 18.63%
1996 22.64%
1997 32.43%
1998 -6.96%
Best Quarter 17.79% (12/31/98)
Worst Quarter -17.57% (9/30/98)
The Fund's performance from January 1, 1999 to June 30, 1999 was 6.56%.
This table compares the Fund's average annual total returns for the periods
ended December 31, 1998 to those of the Russell 2000 Value Index.
CLASS I SHARES 1 YEAR SINCE INCEPTION
Armada Small Cap
Value Fund -6.96% 15.91%(1)
Russell 2000 Value
Index(3) -2.55% 14.84%(2)
(1) Since December 20, 1989
(2) Since December 31, 1989
(3) The Russell 2000 Value Index is comprised of securities in The Russell 2000
Index with a less than average growth orientation. Companies in this index
generally have low price to book and price-earnings ratios.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
CLASS I
Investment Advisory Fees 1.00%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.15%
Total Annual Fund Operating Expenses(1) 1.25%
(1) The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Distributor is waiving a
portion of the fees in order to keep total operating expenses at a specified
level. The Distributor may discontinue all or part of these waivers at any time.
With these fee waivers, the Fund's actual total operating expenses are 1.19%.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$127 $397 $686 $1,511
5 PROSPECTUS
<PAGE> 8
EQUITY FUNDS
ARMADA SMALL CAP GROWTH FUND
FUND SUMMARY
INVESTMENT GOAL
Capital appreciation
INVESTMENT FOCUS
Small cap equity securities
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
High
PRINCIPAL INVESTMENT STRATEGY
Investing in growth-oriented equity securities of smaller issuers
INVESTOR PROFILE
Investors seeking capital appreciation, who are willing to accept the risk of
share price volatility that may accompany small cap investing
PRINCIPAL INVESTMENT STRATEGIES
The Armada Small Cap Growth Fund's investment objective is to provide capital
appreciation by investing in a diversified portfolio of publicly traded small
cap equity securities. The investment objective may be changed without a
shareholder vote. The Fund normally invests at least 80% of its total assets in
the common stocks of companies with small stock market capitalizations. The Fund
may invest up to 20% of its total assets at the time of purchase in foreign
equity securities. The Adviser seeks to invest in small capitalization companies
with strong growth in revenue, earnings, and cash flow. Purchase decisions are
also based on the security's valuation relative to the company's expected growth
rate, earnings quality and competitive position, valuation compared to similar
securities and the security's trading liquidity. Reasons for selling securities
include disappointing fundamentals, negative industry developments, evidence of
management's inability to execute a sound business plan, capitalization
exceeding the Adviser's definition of "small capitalization," desire to reduce
exposure to an industry or sector, and valuation levels which cannot be
justified by the company's fundamental growth prospects.
The Fund considers a small capitalization or "small cap" company to be one that
has a comparable market capitalization to the companies in the Russell 2000
Growth Index. The Russell 2000 Growth Index is an unmanaged index comprised of
securities in the Russell 2000 Index which have less than average growth
orientation.
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
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
The smaller capitalization companies the Fund invests in may be more vulnerable
to adverse business or economic events than larger, more established companies.
In particular, these small companies may have limited product lines, markets and
financial resources, and may depend upon a relatively small management group.
Therefore, small cap stocks may be more volatile than those of larger companies
may. These securities may be traded over-the-counter or listed on an exchange
and may or may not pay dividends.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country.
6 PROSPECTUS
<PAGE> 9
EQUITY FUNDS
ARMADA SMALL CAP GROWTH FUND (CONTINUED)
The Fund is also subject to the risk that its market segment, small cap equity
securities, may underperform other equity market segments or the equity market
as a whole. For additional information about risks, see "More Information
About Risk."
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
CALENDAR YEAR TOTAL RETURN
[BAR GRAPH]
1998 7.56%
Best Quarter 22.73% (12/31/98)
Worst Quarter -21.14% (9/30/98)
The Fund's performance from January 1, 1999 to June 30, 1999 was -2.20%.
This table compares the Fund's average annual total returns for the periods
ended December 31, 1998 to those of Russell 2000 Growth Index.
CLASS I SHARES 1 YEAR SINCE INCEPTION
Armada Small Cap
Growth Fund 7.56% 10.59%(1)
Russell 2000 Growth
Index(3) -2.55% 0.81%(2)
(1) Since December 20, 1989
(2) Since August 31, 1997
(3) The Russell 2000 Growth Index is comprised of securities in the Russell 2000
Stock Index with a greater than average growth orientation.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
CLASS I
Investment Advisory Fees 1.00%
DISTRIBUTION AND SERVICE (12B-1) FEES 0.10%
Other Expenses 0.17%
Total Annual Fund Operating Expenses(1) 1.27%
(1) The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Distributor is waiving a
portion of the fees in order to keep total operating expenses at a specified
level. The Distributor may discontinue all or part of these waivers at any time.
With these fee waivers, the Fund's actual total operating expenses are 1.21%.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$129 $403 $697 $1,534
7 PROSPECTUS
<PAGE> 10
EQUITY FUNDS
ARMADA EQUITY GROWTH FUND
FUND SUMMARY
INVESTMENT GOAL
Capital appreciation
INVESTMENT FOCUS
Large cap equity securities
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
High
PRINCIPAL INVESTMENT STRATEGY
Investing in growth oriented common stocks of larger issuers
INVESTOR PROFILE
Investors seeking capital appreciation and who are willing to accept the risk of
investing in equity securities
PRINCIPAL INVESTMENT STRATEGIES
The Armada Equity Growth Fund's investment objective is to provide capital
appreciation by investing in a diversified portfolio of publicly traded larger
cap equity securities. The investment objective may be changed without
shareholder vote. The Fund will normally invest at least 80% of its total assets
in a diversified portfolio of common stocks and securities convertible into
common stocks of companies with large stock market capitalization. The Fund may
invest up to 20% of its total assets at the time of purchase in foreign equity
securities. In buying and selling securities for the Fund, the Adviser considers
factors such as historical and projected earnings growth, earnings quality and
liquidity. The Fund generally purchases common stocks that are listed on a
national securities exchange or unlisted securities with an established
over-the-counter market.
The Fund considers a large capitalization or "large cap" company to be one
that has a comparable market capitalization to the companies in the S&P 500
Composite Index. The S&P 500 Composite Index is a widely recognized, unmanaged
index of 500 common stocks which are generally representative of the U.S. stock
market as a whole.
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
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country.
The Fund is also subject to the risk that its market segment, large cap equity
securities, may underperform other equity market segments or the equity market
as a whole. For additional information about risks, see "More Information
About Risk."
8 PROSPECTUS
<PAGE> 11
EQUITY FUNDS
ARMADA EQUITY GROWTH FUND (CONTINUED)
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
CALENDAR YEAR TOTAL RETURN
[BAR GRAPH]
1990 1.28%
1991 36.12%
1992 6.38%
1993 -0.27%
1994 -0.79%
1995 28.93%
1996 20.33%
1997 36.61%
1998 29.09%
Best Quarter 22.87% (12/31/98)
Worst Quarter -13.71% (9/30/90)
The Fund's performance from January 1, 1999 to June 30, 1999 was 8.92%.
This table compares the Fund's average annual total returns for the periods
ended December 31, 1998 to those of the S&P 500 Composite Index.
SINCE
CLASS I SHARES 1 YEAR 5 YEARS INCEPTION
Armada Equity
Growth Fund 29.09% 22.11% 16.95%(1)
S&P 500 Composite
Index(3) 28.60% 24.05% 17.89%(2)
(1) Since December 20, 1989
(2) Since December 31, 1989
(3) The S&P 500 Composite Index is a widely recognized, unmanaged index of 500
common stocks which are generally representative of the U.S. stock market as a
whole.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
CLASS I
Investment Advisory Fees 0.75%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.13%
Total Annual Fund Operating Expenses(1) 0.98%
(1) The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Distributor is waiving a
portion of the fees in order to keep total operating expenses at a specified
level. The Distributor may discontinue all or part of these waivers at any time.
With these fee waivers, the Fund's actual total operating expenses are 0.92%.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$100 $312 $542 $1,201
9 PROSPECTUS
<PAGE> 12
EQUITY FUNDS
ARMADA TAX MANAGED EQUITY FUND
FUND SUMMARY
INVESTMENT GOAL
Capital appreciation, while minimizing the impact of taxes
INVESTMENT FOCUS
Equity securities
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
High
PRINCIPAL INVESTMENT STRATEGY
Investing in common stock using strategies designed to minimize the impact of
taxes
INVESTOR PROFILE
Investors who are seeking capital appreciation while minimizing the impact of
taxes and who are willing to accept the risk of investing in equity securities
PRINCIPAL INVESTMENT STRATEGIES
The Armada Tax Managed Equity Fund's investment objective is to provide capital
appreciation while minimizing the impact of taxes on shareholders' returns. The
investment objective may be changed without a shareholder vote. The Fund
normally invests at least 80% of its total assets in common stocks. The Fund may
invest up to 20% of its total assets at the time of purchase in foreign equity
securities. Equity securities of foreign issuers include common, preferred and
convertible bonds, of companies headquartered outside the United States. The
Adviser buys and sells common stocks based on factors such as historical and
projected long-term earnings growth, earnings quality and liquidity. The Adviser
attempts to minimize the realization of taxable gains by investing in the
securities of companies with above average earnings predictability and stability
which the Fund expects to hold for several years. This generally results in a
low level of portfolio turnover. In addition, the Fund seeks to distribute
relatively low levels of taxable investment income by investing in stocks with
low dividend yields. When the Fund sells appreciated securities, it will attempt
to select the share lots with the highest cost basis in order to hold realized
capital gains to a minimum. The Fund may, when consistent with its overall
investment approach, sell depreciated securities to offset realized capital
gains. The Fund may make in-kind redemptions consistent with its investment
objective. An in-kind redemption may serve to minimize any tax impact on the
remaining shareholders, because the Fund generally recognizes no taxable gain
(or loss) on the securities used to make an in-kind redemption. The Fund is not
a tax exempt fund, and it expects to distribute taxable dividends and capital
gains from time to time.
PRINCIPAL RISKS OF INVESTING
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country. For
additional information about risks, see "More Information About Risk."
10 PROSPECTUS
<PAGE> 13
EQUITY FUNDS
ARMADA TAX MANAGED EQUITY FUND (CONTINUED)
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, a Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
The bar chart shows changes in the performance of the Fund's Class I Shares from
year to year.
CALENDAR YEAR TOTAL RETURN
[BAR GRAPH]
1989 29.63%
1990 -1.08%
1991 34.07%
1992 6.89%
1993 1.20%
1994 -1.85%
1995 29.51%
1996 20.64%
1997 39.06%
1998 36.84%
Best Quarter 22.87% (12/31/98)
Worst Quarter -14.38% (9/30/90)
The Fund's performance from January 1, 1999 to June 30, 1999 was 7.60%.
THIS table compares the Fund'S average annual total returns for the periods
ended December 31, 1998 to those of the s&p 500 Composite Index.
SINCE
CLASS I SHARES 1 YEAR 5 YEARS 10 YEARS INCEPTION
Armada Tax
Managed
Equity Fund 36.84% 23.89% 18.43% 18.08%(1)
S&P 500
Composite
Index(2) 28.60% 24.05% 19.19% 18.97%(1)
(1) Since June 30, 1984
(2) The S&P 500 Composite Index is a widely recognized, unmanaged index of 500
common stocks which are generally representative of the U.S. stock market as a
whole.
The performance of the Armada Tax Managed Equity Fund for the period prior to
April 9, 1998 is represented by the performance of a common trust fund ("common
trust fund") which operated prior to the effectiveness of the registration
statement of the Tax Managed Equity Fund. The common trust fund was advised by
National City Bank, an affiliate of the Adviser. At the time of the Tax Managed
Equity Fund's inception, the common trust fund was operated using materially
equivalent investment objectives, policies, guidelines and restrictions as the
Fund. In connection with the Tax Managed Equity Fund's commencement of
operations, on April 9 1998, the common trust fund transferred its assets to the
Fund. At the time of the transfer, the Adviser did not manage any other
collective investment or common trust funds using materially equivalent
investment objectives, policies, guidelines and restrictions to those of the Tax
Managed Equity Fund. The common trust fund was not open to the public generally,
nor registered under the Investment Company Act of 1940 (the "1940 Act") or
subject to certain restrictions that are imposed by the 1940 Act and the
Internal Revenue Code. If the common trust fund had been registered under the
1940 Act, performance may have been adversely affected. Performance quotations
of the common trust fund represent past performance of the Adviser managed
common trust fund, which are separate and distinct from the Tax Managed Equity
Fund; do not represent past performance of the Fund; and should not be
considered as representative of future results of the Fund.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
CLASS I
Investment Advisory Fees 0.75%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.15%
Total Annual Fund Operating Expenses(1) 1.00%
(1) The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Distributor is waiving a
portion of the fees in order to keep total operating expenses at a specified
level. The Distributor may discontinue all or part of these waivers at any time.
With these fee waivers, the Fund's actual total operating expenses are 0.94%.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
11 PROSPECTUS
<PAGE> 14
EQUITY FUNDS
ARMADA TAX MANAGED EQUITY FUND (CONTINUED)
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also Assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$102 $318 $552 $1,225
12 PROSPECTUS
<PAGE> 15
EQUITY FUNDS
ARMADA CORE EQUITY FUND
FUND SUMMARY
INVESTMENT GOAL
Capital appreciation
INVESTMENT FOCUS
Large cap common stocks
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
High
PRINCIPAL INVESTMENT STRATEGY
Investing in large capitalization common stocks
INVESTOR PROFILE
Investors seeking capital appreciation, who are willing to accept the risk of
investing in equity securities
PRINCIPAL INVESTMENT STRATEGIES
The Armada Core Equity Fund's investment objective is to provide capital
appreciation by blending value and growth investment styles. The investment
objective may be changed without a shareholder vote. The Fund normally invests
at least 80% of its total assets in a diversified portfolio of common stocks and
securities convertible into common stocks of companies with large stock market
capitalizations. The Sub-Adviser will normally invest between 20% and 50% of its
assets in the following three types of equity securities: (1) common stocks that
meet the Sub-Adviser's criteria for five-year annual earnings-per-share growth
rates and which exhibit no decline in the normalized annual earnings-per-share
rate during the last five years; (2) common stocks with price-to-earnings ratios
below the average of the companies included in the S&P 500 Composite Index; and
(3) common stocks that pay dividends at a rate above the average of the
companies included in the S&P 500 Composite Index.
The Sub-Adviser utilizes a systematic, disciplined investment process when
selecting individual securities. This includes: (1) screening a database for
liquidity and the criteria listed above; (2) scoring each issue emphasizing
fundamental, valuation and technical indicators; and (3) security analysis that
further evaluates the company and the stock, which includes an analysis of
company fundamentals such as earnings, profitability and management, valuation
such as price/earnings, price/book and yield, and technical analysis emphasizing
individual stock price trends.
The sell discipline involves the monitoring of each company's fundamental,
valuation, and technical measures. If one of these measures is unfavorable, an
immediate review of that company is performed. If two of these three measures
are unfavorable, that stock is sold. The Fund may invest up to 20% of its total
assets at the time of purchase in foreign equity securities.
The Fund considers a large capitalization or "large cap" company to be one that
has a comparable market capitalization to the companies in the S&P 500 Composite
Index. The S&P 500 Composite Index is a widely recognized, unmanaged index of
500 common stocks which are generally representative of the U.S. stock market as
a whole.
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
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value
(continued)
13 PROSPECTUS
<PAGE> 16
EQUITY FUNDS
ARMADA CORE EQUITY FUND (CONTINUED)
PRINCIPAL RISKS OF INVESTING (continued)
of a Fund's investments. These currency movements may happen separately from and
in response to events that do not otherwise affect the value of the security in
the issuer's home country.
The Fund is also subject to the risk that its market segment, large cap equity
securities, may underperform other equity market segments or the equity market
as a whole. For additional information about risks, see "More Information About
Risk."
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
CALENDAR YEAR TOTAL RETURN
[BAR GRAPH]
1998 32.37%
Best Quarter 25.10% (12/31/98)
Worst Quarter -6.78% (9/30/98)
The Fund's performance from January 1, 1999 to June 30, 1999 was 12.91%.
This table compares the Fund's average annual total returns for the periods
ended December 31, 1998 to those of the S&P 500 Composite Index.
CLASS I SHARES 1 YEAR SINCE INCEPTION
Armada Core
Equity Fund 32.37% 24.26%(1)
S&P 500
Composite Index(3) 28.60% 28.38%(2)
(1) Since August 1, 1997
(2) Since August 31, 1997
(3) The S&P 500 Composite Index is a widely recognized, unmanaged index of 500
common stocks which are generally representative of the U.S. stock market as a
whole.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
CLASS I
Investment Advisory Fees 0.75%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.12%
Total Annual Fund Operating Expenses(1) 0.97%
(1) The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Distributor is waiving a
portion of the fees in order to keep total operating expenses at a specified
level. The Distributor may discontinue all or part of these waivers at any time.
With these fee waivers, the Fund's actual total operating expenses are 0.91%.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$99 $309 $536 $1,190
14 PROSPECTUS
<PAGE> 17
EQUITY FUNDS
ARMADA EQUITY INDEX FUND
FUND SUMMARY
INVESTMENT GOAL
To approximate, before Fund expenses, the investment results of the S&P 500
Composite Index
INVESTMENT FOCUS
Common stocks of larger issuers
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
High
PRINCIPAL INVESTMENT STRATEGY
Investing in stocks that comprise the S&P 500 Composite Index
INVESTOR PROFILE
Investors seeking returns similar to the S&P 500 Composite Index, who are
willing to accept the risk of investing in equity securities
PRINCIPAL INVESTMENT STRATEGIES
The Armada Equity Index Fund's investment objective is to provide investment
results that, before Fund expenses, approximate the aggregate price and dividend
performance of the securities included in the S&P 500 Composite Index by
investing in securities comprising the S&P 500 Composite Index. The investment
objective may be changed without a shareholder vote. The S&P 500 Composite Index
is made up of common stocks of 500 large, publicly traded companies. The Fund
buys and holds all stocks included in the S&P 500 Composite Index in exactly the
same proportion as those stocks are held in the Index. Stocks are eliminated
from the Fund when removed from the S&P 500 Composite Index. The Adviser makes
no attempt to "manage" the Fund in the traditional sense (i.e., by using
economic, financial or market analyses).
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities, and will lower Fund performance.
PRINCIPAL RISKS OF INVESTING
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
The Fund is also subject to the risk that its market segment, the S&P 500
Composite Index of common stocks, may underperform other equity market segments
or the equity market as a whole.
The Fund's ability to duplicate the performance of the S&P 500 Composite Index
will depend to some extent on the size and timing of cash flows into and out of
the Fund, as well as on the level of the Fund's expenses. For additional
information about risks, see "More Information About Risk."
15 PROSPECTUS
<PAGE> 18
EQUITY FUNDS
ARMADA EQUITY INDEX FUND (CONTINUED)
PERFORMANCE INFORMATION
There is no bar chart or performance table for Class I Shares of the Fund
because it has not completed a full calendar year of operations.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
CLASS I
INVESTMENT ADVISORY FEES 0.35%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.16%
Total Annual Fund Operating Expenses(1) 0.61%
(1) The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Distributor is waiving a
portion of the fees in order to keep total operating expenses at a specified
level. The Distributor may discontinue all or part of these waivers at any time.
With these fee waivers, the Fund's actual total operating expenses are 0.36%.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$62 $195 $340 $762
16 PROSPECTUS
<PAGE> 19
EQUITY FUNDS
ARMADA EQUITY INCOME FUND
FUND SUMMARY
INVESTMENT GOAL
Capital appreciation
INVESTMENT FOCUS
Income producing equity securities
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Medium
PRINCIPAL INVESTMENT STRATEGY
Investing in equity securities that provide a higher yield than the general
market
INVESTOR PROFILE
Investors seeking an income component as well as capital appreciation and who
are willing to accept the risk of investing in equity securities
PRINCIPAL INVESTMENT STRATEGIES
The Armada Equity Income Fund's investment objective is to provide capital
appreciation by investing in a diversified portfolio of publicly traded equity
securities which, in the aggregate, provide a premium current yield. Equity
securities include public and privately issued equity securities, common and
preferred stocks, warrants, rights to subscribe to common stock and convertible
securities, as well as instruments that attempt to track the price movement of
equity indices. The investment objective may be changed without a shareholder
vote.
The Fund normally invests at least 80% of its total assets in common stocks and
securities convertible into common stocks of companies that have the ability to
pay dividends with a yield above the s&p 500 composite index. The Fund May
invest up to 20% of its total assets at the time of purchase in foreign equity
securities. In buying and selling securities for the Fund, the Adviser
Emphasizes equity securities and convertible securities that provide a higher
yield than the general market. The Fund will generally sell securities when
their yields approach a market yield or they otherwise fail to satisfy
investment criteria.
Due to its investment strategy, the Fund may buy and sell
securities frequently. This may result in higher transaction costs and
additional capital gains tax liabilities, and will lower Fund performance.
PRINCIPAL RISKS OF INVESTING
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country.
The Fund is also subject to the risk that its market segment, income producing
equity securities, may underperform other equity market segments or the equity
market as a whole. For additional information about risks, see "More Information
About Risk."
17 PROSPECTUS
<PAGE> 20
EQUITY FUNDS
ARMADA EQUITY INCOME FUND (CONTINUED)
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
CALENDAR YEAR TOTAL RETURN
[BAR GRAPH]
1995 27.07%
1996 18.08%
1997 29.21%
1998 10.23%
Best Quarter 12.63% (6/30/97)
Worst Quarter -8.77% (9/30/98)
The Fund's performance from January 1, 1999 to June 30, 1999 was 10.58%.
This table compares the Fund's average annual total returns for the periods
ended December 31, 1998 to those of the S&P 500 Barra/Value Index.
CLASS I SHARES 1 YEAR SINCE INCEPTION
Armada Equity
Income Fund 10.23% 18.69%(1)
S&P 500 Barra/
Value Index(3) 14.68% 22.52%(2)
(1) Since July 1, 1994
(2) Since July 31, 1994
(3) The S&P Barra/Value Index is comprised of securities in
the S&P 500 Composite Stock Index that have a lower than average price-to book
ratio.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
CLASS I
Investment Advisory Fees 0.75%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.14%
Total Annual Fund Operating Expenses(1) 0.99%
(1) The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Distributor is waiving a
portion of the fees in order to keep total operating expenses at a specified
level. The Distributor may discontinue all or part of these waivers at any time.
With these fee waivers, the Fund's actual total operating expenses are 0.93%.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$101 $315 $547 $1,213
18 PROSPECTUS
<PAGE> 21
BALANCED FUND
ARMADA BALANCED ALLOCATION FUND
FUND SUMMARY
INVESTMENT GOAL
Long-term capital appreciation and current income
INVESTMENT FOCUS
A combination of growth-oriented common stocks, fixed income securities and cash
equivalents
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Medium
PRINCIPAL INVESTMENT STRATEGY
Investing in a diversified portfolio of growth-oriented common stocks,
investment grade fixed income securities and cash equivalents with varying asset
allocations depending on the Adviser's assessment of market conditions
INVESTOR PROFILE
Investors seeking a broad diversification by asset class and style to manage
risk and provide the potential for above-average total returns (as gauged by the
returns of the S&P 500 Composite Index and the Lehman Brothers Aggregate Bond
Index)
PRINCIPAL INVESTMENT STRATEGIES
The Armada Balanced Allocation Fund's investment objective is to provide
long-term capital appreciation and current income. The investment objective may
be changed without a shareholder vote. The Fund intends to invest 50% to 70% of
its net assets in common stocks and convertible securities, 25% to 55% of its
net assets in investment grade fixed income securities such as corporate bonds
and U.S. Government securities, and up to 30% of its net assets in cash and cash
equivalent securities (which include common stock, preferred stock and
convertible bonds of companies head-quartered outside the United States). The
Fund may invest up to 20% of its total assets at the time of purchase in foreign
securities (which include common stock, preferred stock and convertible bonds of
companies headquartered outside the United States). The Fund also invests in the
common stock of small capitalization companies. The Adviser buys and sells
equity securities based on their potential for long-term capital appreciation.
The Fund invests the fixed income portion of its portfolio of investments in a
broad range of investment grade debt securities (which are those rated at the
time of investment in one of the four highest rating categories by a major
rating agency) for current income. If a fixed income security is downgraded, the
Adviser will re-evaluate the holding to determine whether it is in the best
interests of investors to sell. The Adviser buys and sells fixed income
securities and cash equivalents based on a number of factors, including yield to
maturity, quality and the outlook for particular issuers and market sectors. The
Fund invests in cash equivalent, short-term obligations for stability and
liquidity.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities, and will lower Fund performance.
PRINCIPAL RISKS OF INVESTING
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa, and the volatility of lower rated securities is even
greater than that of higher rated securities. Also, longer-term securities are
generally more volatile, so the average maturity or duration of these securities
affects risk.
The Fund is also subject to the risk that the Adviser's asset allocation
decisions will not anticipate market trends successfully. For example, weighting
common stocks too heavily during a stock market decline may result in a failure
to preserve capital. Conversely, investing too heavily in fixed income
securities during a period of stock market appreciation may result in lower
total return.
The smaller capitalization companies the Fund invests in may be more vulnerable
to adverse business or economic events than larger, more established companies.
In particular, these small companies may have limited product lines, markets and
financial resources, and may depend upon a relatively small management group.
Therefore, small cap stocks may be more volatile than those of larger companies
(continued)
19 PROSPECTUS
<PAGE> 22
BALANCED FUND
ARMADA BALANCED ALLOCATION FUND (CONTINUED)
PRINCIPAL RISKS OF INVESTING (continued)
may. These securities may be traded over-the-counter or listed on an exchange
and may or may not pay dividends.
Investing in foreign countries poses additional risks since political
and economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
Although the Fund's U.S. Government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. Government agencies and
instrumentalities are backed by the U.S. Treasury, while others are backed
solely by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own resources.
The Fund is also subject to the risk that its market segments, investment grade
fixed income and growth-oriented equity securities, may underperform other fixed
income or equity market segments or the fixed income or equity markets as a
whole. For additional information about risks, see "More Information About
Risk."
PERFORMANCE INFORMATION
There is no bar chart or performance table for Class I Shares of the Fund
because it has not completed a full calendar year of operations.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
CLASS I
Investment Advisory Fees 0.75%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.21%
Total Annual Fund Operating Expenses(1) 1.06%
(1) The fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Distributor is waiving a
portion of the fees in order to keep total operating expenses at a specified
level. The Distributor may discontinue all or part of these waivers at any time.
With these fee waivers, the fund's actual total operating expenses are 1.00%.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$108 $337 $585 $1,294
20 PROSPECTUS
<PAGE> 23
FIXED INCOME FUNDS
ARMADA TOTAL RETURN ADVANTAGE FUND
FUND SUMMARY
INVESTMENT GOAL
Current income as well as preservation of capital
INVESTMENT FOCUS
Investment grade fixed
income securities
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Medium
PRINCIPAL INVESTMENT STRATEGY
Investing in investment grade fixed income securities, while maintaining an
average dollar-weighted maturity of between four and twelve years.
INVESTOR PROFILE
Investors seeking total return
with less price volatility than would be the case if the Fund were to invest in
equity securities, and who are willing to accept the risks of investing in fixed
income securities
PRINCIPAL INVESTMENT STRATEGIES
The Armada Total Return Advantage Fund's investment objective is to provide
current income as well as preservation of capital by investing primarily in a
portfolio of high and medium-grade fixed income securities. The investment
objective may be changed without a shareholder vote. The Fund normally invests
at least 80% of the value of its total assets in investment grade fixed income
securities of all types, including asset-backed securities and mortgage-backed
securities and obligations of corporate and U.S. Government issuers. Corporate
obligations may include bonds, notes and debentures. U.S. Government securities
may include U.S. Treasury obligations and obligations of certain U.S. Government
agencies or instrumentalities. Fixed income securities are designed to provide a
fixed rate of interest at maturity and return the principal value at the end of
the term. High and medium-grade fixed income securities are those rated in one
of the four highest rating categories by a major rating agency, or determined by
the Adviser to be of equivalent quality. If a security is downgraded, the
Adviser will re-evaluate whether continuing to hold the security is in the best
interest of shareholders. In buying and selling securities for the Fund, the
Adviser uses a number of strategies, including duration/maturity management,
sector allocation and individual security selection. The Fund may invest up to
15% of its assets in fixed income securities that are non-rated or rated below
investment grade, sometimes known as "junk bonds." The Fund does not intend to
invest in junk bonds rated below C.
The Fund generally maintains an average dollar-weighted maturity of between four
and twelve years.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities, and will lower Fund performance.
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 governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa, and the volatility of lower rated securities is even
greater than that of higher rated securities. Also, longer-term securities are
generally more volatile, so the average maturity or duration of these securities
affects risk.
Junk bonds involve greater risks of default or downgrade and are more volatile
than investment grade securities. Junk bonds involve greater risk of default or
price declines than investment grade securities due to actual or perceived
changes in an issuer's creditworthiness. In addition, issuers of junk bonds may
be more susceptible than other issuers to economic downturns. Junk bonds are
subject to the risk that the issuer may not be able to pay interest or dividends
on a timely basis and ultimately to repay principal upon maturity.
Discontinuation of these payments could substantially adversely affect the
market value of the security.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
The mortgages underlying mortgage-backed securities may be paid off early, which
makes it difficult to determine their actual maturity and therefore calculate
how they will respond to changes in interest rates. The Fund may have to
reinvest prepaid amounts at lower interest rates. This risk of prepayment is an
additional risk of mortgage-backed securities.
Debt extension risk is the risk that an issuer will exercise its right to pay
principal on an obligation held by the 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.
(continued)
21 PROSPECTUS
<PAGE> 24
FIXED INCOME FUNDS
ARMADA TOTAL RETURN ADVANTAGE FUND (CONTINUED)
Although the Fund's U.S. Government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. Government agencies and
instrumentalities are backed by the full faith and credit of the United States,
while others are backed solely by the ability of the agency to borrow from the
U.S. Treasury or by the agency's own resources.
The Fund is also subject to the risk that its market segment, high and
medium-grade fixed income securities, may underperform other fixed income market
segments or the fixed income market as a whole. For additional information about
risks, see "More Information About Risk."
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
CALENDAR YEAR TOTAL RETURN
[BAR GRAPH]
1995 19.18%
1996 3.11%
1997 8.91%
1998 9.05%
Best Quarter 6.92% (6/30/95)
Worst Quarter -2.52% (3/31/96)
The Fund's performance from January 1, 1999 to June 30, 1999 was -2.69%.
This table compares the Fund's average annual total returns for the periods
ended December 31, 1998 to those of the Lehman Government/Corporate Bond Index.
CLASS I SHARES 1 YEAR SINCE INCEPTION
Armada Total Return
Advantage Fund 9.05% 8.95%(1)
Lehman Government/
Corporate Bond Index(3) 9.47% 8.91%(2)
(1) Since July 7, 1994
(2) Since July 31, 1994
(3) The Lehman Government/Corporate Bond Index is a widely recognized index of
government and corporate debt securities rated investment grade or better, with
maturities of at least 1 year.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
CLASS I
Investment Advisory Fees 0.55%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.14%
Total Annual Fund Operating Expenses(1) 0.79%
(1) The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Distributor is waiving a
portion of the fees in order to keep total operating expenses at a specified
level. The Distributor may discontinue all or part of these waivers at any time.
With these fee waivers, the Fund's actual total operating expenses are 0.49%.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$81 $252 $439 $978
22 PROSPECTUS
<PAGE> 25
FIXED INCOME FUNDS
ARMADA BOND FUND
FUND SUMMARY
INVESTMENT GOAL
Current income as well as preservation of capital
INVESTMENT FOCUS
Investment-grade fixed income securities
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Medium
PRINCIPAL INVESTMENT STRATEGY
Investing in a diversified portfolio of investment-grade fixed income
securities, which maintains a dollar-weighted average maturity of between four
and twelve years
INVESTOR PROFILE
Investors seeking current income, and who are willing to accept the risks of
investing in fixed income securities
PRINCIPAL INVESTMENT STRATEGIES
The Armada Bond Fund's investment objective is to provide current income as well
as preservation of capital by investing primarily in a portfolio of high and
medium-grade fixed income securities. The investment objective may be changed
without a shareholder vote. The Fund normally invests at least 80% of the value
of its total assets in high and medium-grade fixed income securities of all
types, including obligations of corporate and U.S. Government issuers and
mortgage-backed and asset-backed securities. Corporate obligations may include
bonds, notes and debentures. U.S. Government securities may include U.S.
Treasury obligations and obligations of certain U.S. Government agencies or
instrumentalities. High and medium-grade fixed income securities are those
rated in one of the four highest rating categories by a major rating agency, or
determined by the Adviser to be of equivalent quality. If a security is
downgraded, the Adviser will re-evaluate the holding to determine whether it is
in the best interest of investors to sell. In buying and selling securities for
the Fund, the Adviser considers a number of factors, including yield to
maturity, maturity, quality and the outlook for particular issuers and market
sectors. The Fund generally maintains a dollar-weighted average maturity of
between four and twelve years.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities, and will lower Fund performance.
PRINCIPAL RISKS OF INVESTING
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa, and the volatility of lower rated securities is even
greater than that of higher rated securities. Also, longer-term securities are
generally more volatile, so the average maturity or duration of these securities
affects risk.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
The mortgages underlying mortgage-backed securities may be paid off early, which
makes it difficult to determine their actual maturity and therefore calculate
how they will respond to changes in interest rates. The Fund may have to
reinvest prepaid amounts at lower interest rates. This risk of prepayment is an
additional risk of mortgage-backed securities.
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.
Although the Fund's U.S. Government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. Government agencies and
instrumentalities are backed by the U.S. Treasury, while others are backed
solely by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own resources.
The Fund is also subject to the risk that its market segment, investment grade
fixed income securities, may underperform other fixed income market segments or
the fixed income market as a whole. For additional information about risks, see
"More Information About Risk."
23 PROSPECTUS
<PAGE> 26
FIXED INCOME FUNDS
ARMADA BOND FUND (Continued)
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
CALENDAR YEAR TOTAL RETURN
<TABLE>
[GRAPH]
<S> <C> <C> <C> <C>
14.46% 3.48% 7.97% 8.44%
1995 1996 1997 1998
</TABLE>
Best Quarter 4.75% (9/30/98)
Worst Quarter -0.98% (3/31/96)
The Fund's performance from January 1, 1999 to June 30, 1999 was -2.17%.
This table compares the Fund's average annual total returns for the periods
ended December 31, 1998 to those of the Lehman Aggregate Bond Index.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR SINCE INCEPTION
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Armada Bond Fund 8.44% 7.57%(1)
Lehman Aggregate
Bond Index(3) 8.67% 8.90%(2)
- -------------------------------------------------------------------------------
</TABLE>
(1) Since August 10, 1994
(2) Since August 31, 1994
(3) The Lehman Aggregate Bond Index is an unmanaged, fixed income, market
value-weighted index that includes treasury issues, agency issues,
corporate bond issues and mortgage-backed securities.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- ------------------------------------------------------------------------------
CLASS I
<S> <C>
Investment Advisory Fees 0.55%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.14%
Total Annual Fund Operating Expenses(1) 0.79%
- ------------------------------------------------------------------------------
</TABLE>
(1) The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Distributor is waiving a
portion of the fees in order to keep total operating expenses at a specified
level. The Distributor may discontinue all or part of these waivers at any time.
With these fee waivers, the Fund's actual total operating expenses are 0.73%.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
- -------------------------------------------------------------------------------
EXAMPLE
- -------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
$81 $252 $439 $978
</TABLE>
24 PROSPECTUS
<PAGE> 27
FIXED INCOME FUNDS
ARMADA INTERMEDIATE BOND FUND (CONTINUED)
FUND SUMMARY
INVESTMENT GOAL
High current income as well as preservation of capital
INVESTMENT FOCUS
Investment grade fixed income securities
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Medium
PRINCIPAL INVESTMENT STRATEGY
Investing in investment grade fixed income securities, while maintaining a
dollar-weighted average maturity between three and ten years
INVESTOR PROFILE
Investors seeking current income, and who are willing to accept the risks of
investing in fixed income securities
PRINCIPAL INVESTMENT STRATEGIES
The Armada Intermediate Bond Fund's investment objective is to provide current
income as well as preservation of capital by investing in a portfolio of high
and medium-grade fixed income securities. The investment objective may be
changed without a shareholder vote. The Fund normally invests at least 80% of
the value of its total assets in domestic and foreign high and medium-grade
fixed income securities of all types, including obligations of corporate and
governmental issuers and mortgage-backed and asset-backed securities. Corporate
obligations include bonds, notes and debentures. Governmental obligations
include securities issued by the U.S. Government, its agencies or
instrumentalities, as well as obligations of foreign governments. High and
medium-grade fixed income securities are those rated in one of the four highest
rating categories by a major rating agency, or determined by the Adviser to be
of equivalent quality. If a security is downgraded, the Adviser will re-evaluate
the holding to determine whether it is in the best interest of investors to
sell. In buying and selling securities for the Fund, the Adviser considers a
number of factors, including yield to maturity, maturity, quality and the
outlook for particular issuers and market sectors. The Fund generally maintains
an average maturity of between three and ten years.
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 governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa, and the volatility of lower rated securities is even
greater than that of higher rated securities. Also, longer-term securities are
generally more volatile, so the average maturity or duration of these securities
affects risk.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
The mortgages underlying mortgage-backed securities may be paid off early, which
makes it difficult to determine their actual maturity and therefore calculate
how they will respond to changes in interest rates. The Fund may have to
reinvest prepaid amounts at lower interest rates. This risk of prepayment is an
additional risk of mortgage-backed securities.
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.
Although the Fund's U.S. Government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. Government agencies and
instrumentalities are backed by the U.S. Treasury, while others are backed
solely by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own resources.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security
(continued)
25 PROSPECTUS
<PAGE> 28
FIXED INCOME FUNDS
ARMADA INTERMEDIATE BOND FUND (CONTINUED)
PRINCIPAL RISKS OF INVESTING (Continued)
in the issuer's home country. These various risks will be even greater for
investments in emerging market countries since political turmoil and rapid
changes in economic conditions are more likely to occur in these countries.
The Fund is also subject to the risk that its market segment, investment grade
fixed income securities, may underperform other fixed income market segments or
the fixed income market as a whole. For additional information about risks, see
"More Information About Risk."
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
CALENDAR YEAR TOTAL RETURN
[GRAPH]
<TABLE>
<CAPTION>
8.28% 15.69% 7.51% 10.32% -4.52% 15.74% 3.12% 6.94% 7.91%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1990 1991 1992 1993 1994 1995 1996 1997 1998
</TABLE>
Best Quarter 5.46% (12/31/90)
Worst Quarter -3.22% (3/31/94)
The Fund's performance from January 1, 1999 to June 30, 1999 was -1.05%.
This table compares the Fund's average annual total returns for the periods
ended December 31, 1998 to those of the Lehman Intermediate Government/Corporate
Bond Index.
<TABLE>
<CAPTION>
SINCE
CLASS I SHARES 1 YEAR 5 YEARS INCEPTION
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Armada Intermediate
Bond Fund 7.91% 5.63% 7.71%(1)
Lehman Intermediate
Government/Corporate
Bond Index(3) 8.42% 6.59% 8.05%(2)
- --------------------------------------------------------------------------------
</TABLE>
(1) Since December 20, 1989
(2) Since December 31, 1989
(3) The Lehman Intermediate Government/Corporate Bond Index is
representative of intermediate-term bonds.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I
<S> <C>
INVESTMENT ADVISORY FEES 0.55%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.15%
Total Annual Fund Operating Expenses(1) 0.80%
</TABLE>
(1) The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Distributor is waiving a
portion of the fees in order to keep total operating expenses at a specified
level. The Distributor may discontinue all or part of these waivers at any time.
With these fee waivers, the Fund's actual total operating expenses are 0.59%.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
- --------------------------------------------------------------------------------
EXAMPLE
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<S> <C> <C> <C>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
$82 $255 $444 $990
</TABLE>
26 PROSPECTUS
<PAGE> 29
FIXED INCOME FUNDS
ARMADA GNMA FUND
FUND SUMMARY
INVESTMENT GOAL
Current income as well as preservation of capital
INVESTMENT FOCUS
Mortgage-backed securities
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Low
PRINCIPAL INVESTMENT STRATEGY
Investing in mortgage-backed securities, guaranteed by the Government National
Mortgage Association (GNMA)
INVESTOR PROFILE
Investors seeking current income, and who are willing to accept the risks of
investing in mortgage-backed securities
PRINCIPAL INVESTMENT STRATEGIES
The Armada GNMA Fund's investment objective is to provide current income as well
as preservation of capital by investing primarily in mortgage-backed securities
guaranteed by GMNA. The investment objective may be changed without a
shareholder vote. The Fund normally invests at least 80% of the value of its
total assets in mortgage-backed securities guaranteed by GNMA, which is an
agency of the U.S. Government established to supervise and finance certain types
of mortgages. In addition to mortgage-backed securities, the Fund invests in
other types of investment grade fixed income securities such as U.S. Treasury
obligations, U.S. Government agencies, asset-backed securities and commercial
paper.
In buying and selling securities for the Fund, the Adviser assesses current and
projected market conditions by considering a number of factors, including yield
to maturity, maturity, quality and the outlook for particular issuers and market
sectors.
The Fund's dollar-weighted average portfolio maturity will be between three and
ten years. Investment grade fixed income securities are those rated in one of
the four highest rating categories by a major rating agency, or determined by
the Adviser to be of equivalent quality.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities, and will lower Fund performance.
PRINCIPAL RISKS OF INVESTING
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa. Also, longer-term securities are generally more
volatile, so the average maturity or duration of these securities affects risk.
Mortgage-backed securities are fixed income securities representing an interest
in a pool of underlying mortgage loans. They are sensitive to changes in
interest rates, but may respond to these changes differently from other fixed
income securities due to the possibility of prepayment of the underlying
mortgage loans. As a result, it may not be possible to determine in advance the
actual maturity date or average life of a mortgage-backed security. Rising
interest rates tend to discourage refinancings, with the result that the average
life and volatility of the security will increase, exacerbating its decrease in
market price. When interest rates fall, however, mortgage-backed securities may
not gain as much in market value because of the expectation of additional
mortgage prepayments that must be reinvested at lower interest rates. Prepayment
risk may make it difficult to calculate the average maturity of the fund of
mortgage-backed securities and, therefore, to assess the volatility risk of the
Fund.
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 Fund is also subject to the risk that its market segment, mortgage-backed
securities, may underperform other fixed income market segments or the fixed
income market as a whole.
(continued)
27 PROSPECTUS
<PAGE> 30
FIXED INCOME FUNDS
ARMADA GNMA FUND (CONTINUED)
PRINCIPAL RISKS OF INVESTING (continued)
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
Although the Fund's U.S. Government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. Government agencies and
instrumentalities are backed by the U.S. Treasury, while others are backed
solely by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own resources.
For additional information about risks, see "More Information About Risk."
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
[GRAPH]
<TABLE>
<CAPTION>
CALENDAR YEAR TOTAL RETURN
<S> <C> <C> <C>
16.15% 4.75% 9.31% 6.50%
1995 1996 1997 1998
</TABLE>
Best Quarter 5.15% (3/31/95)
Worst Quarter -0.42% (3/31/96)
The Fund's performance from January 1, 1999 to June 30, 1999 was -0.14%.
This table compares the Fund's average annual total returns for the periods
ended December 31, 1998 to those of the Lehman GNMA Index.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR SINCE INCEPTION
- ------------------------------------------------------------------------------
<S> <C> <C>
Armada GNMA Fund 6.50% 8.22%(1)
Lehman GNMA Index(3) 6.91% 8.70%(2)
- ------------------------------------------------------------------------------
</TABLE>
(1) Since August 10, 1994
(2) Since August 31, 1994
(3) The Lehman GNMA Index tracks GNMA issues, including single family, mobile
home, midgets and graduated payment components.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- -------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I
<S> <C>
Investment Advisory Fees 0.55%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.18%
Total Annual Fund Operating Expenses(1) 0.83%
</TABLE>
(1) The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Distributor is waiving a
portion of the fees in order to keep total operating expenses at a specified
level. The Distributor may discontinue all or part of these waivers at any time.
With these fee waivers, the Fund's actual total operating expenses are 0.77%.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
- -------------------------------------------------------------------------------
EXAMPLE
- -------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$85 $265 $460 $1,025
</TABLE>
28 PROSPECTUS
<PAGE> 31
FIXED INCOME FUNDS
ARMADA ENHANCED INCOME FUND
FUND SUMMARY
INVESTMENT GOAL
Current income as well as preservation of capital
INVESTMENT FOCUS
Investment grade debt securities
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Low
PRINCIPAL INVESTMENT STRATEGY
Investing in investment grade fixed income securities, while maintaining a
dollar-weighted average maturity of between one and five years
INVESTOR PROFILE
Investors seeking total return and who are willing to accept some risks of price
volatility
PRINCIPAL INVESTMENT STRATEGIES
The Armada Enhanced Income Fund's investment objective is to provide current
income as well as preservation of capital by investing in a portfolio of high
and medium-grade fixed-income securities. The investment objective may be
changed without a shareholder vote. The Fund normally invests at least 80% of
the value of its total assets in high and medium-grade debt securities of all
types, including obligations of corporate and U.S. Government issuers, mortgage-
backed and asset-backed securities. Corporate obligations may include bonds,
notes and debentures. U.S. Government securities may include U.S. Treasury
obligations and obligations of certain U.S. Government agencies or instru-
mentalities. High and medium-grade fixed income securities are those rated in
one of the four highest rating categories by a major rating agency, or
determined by the Adviser to be of equivalent quality. If a security is
downgraded, the Adviser will re-evaluate whether continuing to hold the security
is in the best interest of shareholders. In buying and selling securities for
the Fund, the Adviser considers a number of factors, including yield to
maturity, maturity, quality and the outlook for particular issuers and market
sectors. The Fund generally maintains an average dollar-weighted portfolio
maturity of between one and five years.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities, and will lower Fund performance.
PRINCIPAL RISKS OF INVESTING
The prices of the Fund's fixed income securities respond to economic develop-
ments, particularly interest rate changes, as well as to perceptions about the
creditworthiness of individual issuers, including governments. Generally, the
Fund's fixed income securities will decrease in value if interest rates rise and
vice versa. Also, longer-term securities are generally more volatile, so the
average maturity or duration of these securities affects risk.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
The mortgages underlying mortgage-backed securities may be paid off early,
which makes it difficult to determine their actual maturity and therefore
calculate how they will respond to changes in interest rates. The Fund may have
to reinvest prepaid amounts at lower interest rates. This risk of prepayment is
an additional risk of mortgage-backed securities.
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.
Although the Fund's U.S. Government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. Government agencies
and instrumentalities are backed by the U.S. Treasury, while others are backed
solely by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own resources.
The Fund is also subject to the risk that its market segment, investment grade
fixed income securities, may underperform other fixed income market segments
or the fixed income market as a whole. For additional information about risks,
see "More Information About Risk."
29 PROSPECTUS
<PAGE> 32
FIXED INCOME FUNDS
ARMADA ENHANCED INCOME FUND (CONTINUED)
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
<TABLE>
<CAPTION>
[GRAPH]
CALENDAR YEAR TOTAL RETURN
<S> <C> <C> <C>
7.69% 5.29% 6.43% 6.58%
1995 1996 1997 1998
</TABLE>
Best Quarter 2.95% (9/30/98)
Worst Quarter 0.65% (3/31/97)
The Fund's performance from January 1, 1999 to June 30, 1999 was 1.16%.
This table compares the Fund's average annual total returns for the periods
ended December 31, 1998 to those of the Merrill Lynch 1-3 Year
Government/Corporate Index.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR SINCE INCEPTION
- ------------------------------------------------------------------------------
<S> <C> <C>
Armada Enhanced
Income Fund 6.58% 6.23%(1)
Merrill Lynch 1-3 Year
Government/
Corporate Index (3) 7.01% 6.74%(2)
</TABLE>
(1) Since July 7, 1994
(2) Since July 31, 1994
(3) This is a market capitalization weighted index including U.S. Treasury and
Agency bonds and U.S. fixed coupon investment grade corporate bonds (U.S.
domestic and Yankee/global bonds). U.S. Treasury bonds must have at least $1
billion face value outstanding and agency and corporate bonds must have at least
150 million face value outstanding to be included in the index. Both total
return and price returns are calculated daily. Prices are taken as of
approximately 3 p.m. ET. Quality range is BBB3-AAA based on composite Moody and
S&P ratings. Maturities for all bonds are greater than or equal to one year and
less than three years. Floaters, Equipment Trust Certificates, and Title 11
securities are excluded.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- -------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I
<S> <C>
INVESTMENT ADVISORY FEES 0.45%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.18%
Total Annual Fund Operating Expenses(1) 0.73%
</TABLE>
(1) The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Distributor is waiving a
portion of the fees in order to keep total operating expenses at a specified
level. The Distributor may discontinue all or part of these waivers at any time.
With these fee waivers, the Fund's actual total operating expenses are 0.53%.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
- -------------------------------------------------------------------------------
EXAMPLE
- ------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
$75 $233 $406 $906
</TABLE>
30 PROSPECTUS
<PAGE> 33
TAX EXEMPT FUNDS
ARMADA OHIO TAX EXEMPT BOND FUND
FUND SUMMARY
INVESTMENT GOAL
Current income exempt from federal income and, to the extent possible, Ohio
personal income taxes, consistent with conservation of capital
INVESTMENT FOCUS
Ohio municipal securities
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Medium
PRINCIPAL INVESTMENT STRATEGY
Investing in municipal obligations that pay interest that is exempt from Federal
income and Ohio personal income taxes
INVESTOR PROFILE Investors seeking total return and who are willing to accept
some risks of price volatility
PRINCIPAL INVESTMENT STRATEGIES
The Armada Ohio Tax Exempt Bond Fund's investment objective is to provide
current income exempt from federal income tax and, to the extent possible, from
Ohio personal income tax, as is consistent with the conservation of capital. The
investment objective may be changed without a shareholder vote. The Fund
normally invests at least 80% of its total assets in debt securities issued by
the State of Ohio, its political subdivisions and their agencies and
instrumentalities that generate income exempt from federal income and Ohio
personal income taxes (Ohio municipal securities). However, some Fund dividends
will be taxable, such as dividends that are derived from occasional taxable
investments and distributions of short and long-term capital gains. Also, Fund
dividends will generally be subject to state and local income taxes for any
shareholders who are not Ohio residents. The Fund may invest up to 20% of its
total assets in private activity bonds which may be treated as a specific tax
preference item under the federal alternative minimum tax. In selecting
securities for the Fund to buy and sell, the Adviser considers each security's
yield and total return potential relative to other available municipal
securities.
The Fund primarily invests in investment grade securities, which are those rated
in one of the four highest rating categories by a major rating agency, or deter-
mined by the Adviser to be of equivalent quality. If a security is downgraded,
the Adviser will re-evaluate whether continuing to hold the security is in the
best interest of its shareholders. The Fund ordinarily will maintain an average
weighted portfolio maturity of between three and ten years.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and capital gains tax liabilities,
and will lower Fund performance.
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 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.
The Fund is also subject to the risk that its market segment, tax exempt
municipal securities, may underperform other fixed income market segments or the
fixed income market as a whole.
An investment in the Fund is subject to interest risk, which is the possibility
that the Fund's yield will decline due to falling interest rates.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Fund's securities.
The Fund's focus of investing in securities of issuers located in Ohio subjects
the Fund to economic and government policies of that state.
The Fund is non-diversified, which means that it may invest in the securities of
relatively few issuers. As a result, the Fund may be more susceptible than a
diversified fund to a single adverse economic or political and regulatory
occurrences affecting one or more of these issuers, and may experience increased
volatility due to its investments in those securities. For additional
information about risks, see "More Information About Risk."
31 PROSPECTUS
<PAGE> 34
TAX EXEMPT FUNDS
ARMADA OHIO TAX EXEMPT BOND FUND (CONTINUED)
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
[GRAPH]
CALENDAR YEAR TOTAL RETURN
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
8.59% 6.73% 10.14% -4.27% 13.44% 3.93% 7.24% 5.44%
1991 1992 1993 1994 1995 1996 1997 1998
</TABLE>
Best Quarter 5.13% (3/31/95)
Worst Quarter -4.88% (3/31/94)
The Fund's performance from January 1, 1999 to June 30, 1999 was -1.22%.
This table compares the Fund's average annual total returns for the periods
ended December 31, 1998 to those of the Lehman 7 Year Municipal Bond Index.
<TABLE>
<CAPTION>
SINCE
CLASS I SHARES 1 YEAR 5 YEARS INCEPTION
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Armada Ohio Tax
Exempt Bond Fund 5.44% 5.00% 6.07%(1)
Lehman 7 Year Municipal
Bond Index(3) 6.23% 5.80% 7.45%(2)
- -----------------------------------------------------------------------------
</TABLE>
(1) Since January 5, 1990
(2) Since January 31, 1990
(3) The Lehman 7 Year Municipal Bond Index is a broad based total return index.
The bonds are all investment grade, fixed rate with maturities of 7-8 years and
are selected from issues larger $50 million dated since January 1984.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- ------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- ------------------------------------------------------------------------------
CLASS I
Investment Advisory Fees 0.55%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.15%
Total Annual Fund Operating Expenses(1) 0.80%
- ------------------------------------------------------------------------------
(1) The Fund's total actual annual operating expenses for the most recent fiscal
year (restated to reflect advisory fee waivers to take effect on October 1,
1999) were less than the amount shown above because the Adviser and Distributor
are each waiving a portion of the fees in order to keep total operating expenses
at a specified level. The Adviser and Distributor may discontinue all or part of
these waivers at any time. With these fee waivers, the Fund's actual total
operating expenses are 0.59%.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
- -------------------------------------------------------------------------------
EXAMPLE
- -------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
$82 $255 $444 $990
</TABLE>
32 PROSPECTUS
<PAGE> 35
TAX EXEMPT FUNDS
ARMADA PENNSYLVANIA MUNICIPAL BOND FUND
FUND SUMMARY
INVESTMENT GOAL
Current income exempt from both regular federal income tax and, to the extent
possible, Pennsylvania personal income tax as is consistent with conservation of
capital
INVESTMENT FOCUS
Pennsylvania municipal securities
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Medium
PRINCIPAL INVESTMENT STRATEGY
Investing in municipal obligations that pay interest that is exempt from federal
income and Pennsylvania personal income taxes
INVESTOR PROFILE
Investors seeking tax exempt
current income, and who are
willing to accept moderate share
price volatility
PRINCIPAL INVESTMENT STRATEGIES
The Armada Pennsylvania Municipal Bond Fund's investment objective is to provide
current income exempt from regular federal income tax and, to the extent
possible, from Pennsylvania personal income tax, as is consistent with
conservation of capital. The investment objective may be changed without a
shareholder vote. The Fund normally invests at least 80% of its net assets in
debt securities issued by the Commonwealth of Pennsylvania, its political
subdivisions and their agencies and instrumentalities that generate income
exempt from federal income and Pennsylvania personal income taxes (Pennsylvania
municipal securities). However, some Fund dividends will be taxable, such as
dividends that are derived from occasional taxable investments and distributions
of short and long-term capital gains. Also, Fund dividends will generally be
subject to state and local income taxes for any shareholders who are not
Pennsylvania residents. The Fund may invest up to 100% of its total assets in
private activity bonds which may be treated as a specific tax preference item
under the federal alternative minimum tax. In selecting securities for the Fund
to buy and sell, the Adviser considers each security's yield and total return
potential relative to other available municipal securities.
The Fund invests primarily in investment grade securities, which are those rated
in one of the four highest rating categories by a major rating agency, or
determined by the Adviser to be of equivalent quality. If a security is
down-graded, the Adviser will re-evaluate whether continuing to hold the
security is in the best interest of shareholders. The Fund ordinarily will
maintain an average weighted portfolio maturity of between three and ten years.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and capital gains tax liabilities,
and will lower Fund performance.
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 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.
The Fund is also subject to the risk that its market segment, tax free municipal
securities, may underperform other fixed income market segments or the fixed
income market as a whole.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Fund's securities.
The Fund's focus of investing in securities of issuers located in Pennsylvania
subjects the Fund to economic conditions and government policies within that
state.
The Fund is non-diversified, which means that it may invest in the securities of
relatively few issuers. As a result, the Fund may be more susceptible than a
diversified fund to a single adverse economic or political and regulatory
occurrences affecting one or more of these issuers, and may experience increased
volatility due to its investments in those securities. For additional
information about risks, see "More Information About Risk."
33 PROSPECTUS
<PAGE> 36
TAX EXEMPT FUNDS
ARMADA PENNSYLVANIA MUNICIPAL BOND FUND (CONTINUED)
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
[GRAPH]
CALENDAR YEAR TOTAL RETURN
<TABLE>
<S> <C> <C> <C>
9.93% 3.91% 6.94% 5.62%
1995 1996 1997 1998
</TABLE>
Best Quarter 3.80% (3/31/95)
Worst Quarter -0.32% (3/31/96)
The Fund's performance from January 1, 1999 to June 30, 1999 was -1.19%.
This table compares the Fund's average annual total returns for the periods
ended December 31, 1998 to those of the Lehman 7 Year Municipal Bond Index.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR SINCE INCEPTION
- ------------------------------------------------------------------------------
<S> <C> <C>
Armada Pennsylvania
Municipal Bond Fund 5.62% 5.81%(1)
- -------------------------------------------------------------------------------
Lehman 7 Year Municipal
Bond Index(3) 6.23% 6.94%(2)
</TABLE>
(1) Since August 10, 1994
(2) Since August 31, 1994
(3) The Lehman 7 Year Municipal Bond Index is a broad based total return index.
The bonds are all investment grade, fixed rate with maturities of 7-8 years and
are selected from issues larger $50 million dated since January 1984.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- ------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I
<S> <C>
Investment Advisory Fees 0.55%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.15%
Total Annual Fund Operating Expenses(1) 0.80%
- -------------------------------------------------------------------------------
</TABLE>
(1) The Fund's total actual annual operating expenses for the most recent fiscal
year (restated to reflect advisory fee waivers to take effect on October 1,
1999) were less than the amount shown above because the Adviser and Distributor
are each waiving a portion of the fees in order to keep total operating expenses
at a specified level. The Adviser and Distributor may discontinue all or part of
these waivers at any time. With these fee waivers, the Fund's actual total
operating expenses are 0.59%.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
- -------------------------------------------------------------------------------
EXAMPLE
- -------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$82 $255 $444 $990
</TABLE>
34 PROSPECTUS
<PAGE> 37
TAX EXEMPT FUNDS
ARMADA NATIONAL TAX EXEMPT BOND FUND
FUND SUMMARY
INVESTMENT GOAL
Current income exempt from federal income tax as is consistent with conservation
of capital
INVESTMENT FOCUS
Municipal securities
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Medium
PRINCIPAL INVESTMENT STRATEGY
Investing in municipal obligations
that pay interest that is exempt from federal income tax
INVESTOR PROFILE Investors seeking tax exempt current income, and who are
willing to accept moderate share price volatility
PRINCIPAL INVESTMENT STRATEGIES
The Armada National Tax Exempt Bond Fund's investment objective is to provide
current income exempt from federal income tax as is consistent with conservation
of capital. The investment objective may be changed without a shareholder vote.
The Fund normally invests at least 80% of its total assets in debt securities
that generate income exempt from federal income tax. However, Fund dividends
will generally be taxable for state and local income tax purposes. Also, some
Fund dividends will be taxable for federal income tax purposes, such as those
derived from occasional taxable investments and distributions of short and
long-term capital gains. The Fund may invest up to 20% of its total assets in
private activity bonds, the income of which may be treated as a specific tax
preference item under the federal alternative minimum tax. The Fund invests in
municipal securities issued by or on behalf of states, territories and
possessions of the United States, the District of Columbia and their political
subdivisions, agencies, instrumentalities and authorities. In selecting
securities for the Fund to buy and sell, the Adviser considers each security's
yield and total return potential relative to other available municipal
securities.
The Fund primarily invests only in investment grade securities. Investment grade
municipal securities are those rated in one of the four highest rating
categories as determined by a major rating agency. If a security is downgraded,
the Adviser will re-evaluate whether continuing to hold the security is in the
best interest of shareholders. The Fund ordinarily will maintain a
dollar-weighted average portfolio maturity of between three and ten years.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and capital gains tax liabilities,
and will lower Fund performance.
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 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.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Fund's securities.
The Fund is also subject to the risk that its market segment, tax exempt
securities, may underperform other fixed income market segments or the fixed
income market as a whole. For additional information about risks, see "More
Information About Risk."
35 PROSPECTUS
<PAGE> 38
TAX EXEMPT FUNDS
ARMADA NATIONAL TAX EXEMPT BOND FUND (CONTINUED)
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
CALENDAR YEAR TOTAL RETURN
[GRAPHS]
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9.79% 4.65% 8.45% 9.74% 11.76% -4.58% 14.05% -1.07% 6.57% 5.95%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
</TABLE>
Best Quarter 5.44% (3/31/95)
Worst Quarter -4.13% (3/31/94)
The Fund's performance from January 1, 1999 to June 30, 1999 was -1.25%.
This table compares the Fund's average annual total returns for the periods
ended December 31, 1998 to those of the Lehman 10 Year Municipal Bond Index.
<TABLE>
<S> <C> <C> <C>
CLASS I SHARES 1 YEAR 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------
Armada National
Tax Exempt
Bond Fund 5.95% 3.98% 16.39%
- ------------------------------------------------------------------------------
Lehman 10 Year
Municipal Bond
Index(1) 6.76% 6.35% 8.32%
- ------------------------------------------------------------------------------
</TABLE>
(1)The Lehman 10 Year Municipal Bond Index is a broad based total return index.
The bonds are all investment grade, fixed rate with maturities of 9-12 years and
are selected from issues larger than $50 million dated since January 1984.
The performance of the Armada National Tax Exempt Bond Fund for the period prior
to April 19, 1998 is represented by the performance of a common trust fund
("common trust fund") which operated prior to the effectiveness of the
registration statement of the National Tax Exempt Bond Fund. The common trust
fund was advised by National City Bank, an affiliate of the Adviser. At the time
of the National Tax Exempt Bond Fund's inception, the common trust fund was
operated using materially equivalent investment objectives, policies, guidelines
and restrictions as the Fund. In connection with the National Tax Exempt Bond
Fund's commencement of operations, on April 19, 1998, the common trust fund
transferred its assets to the Fund. At the time of the transfer, the Adviser did
not manage any other collective investment or common trust funds using
materially equivalent investment objectives, policies, guidelines and
restrictions to those of the National Tax Exempt Bond Fund.
The common trust fund was not open to the public generally, nor registered under
the Investment Company Act of 1940 (the "1940 Act") or subject to certain
restrictions that are imposed by the 1940 Act and the Internal Revenue Code. If
the common trust fund had been registered under the 1940 Act, performance may
have been adversely affected. Performance quotations of the common trust fund
represent past performance of the Adviser managed common trust fund, which are
separate and distinct form the National Tax Exempt Bond Fund; do not represent
past performance of the Fund; and should not be considered as representative of
future results of the Fund.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- -------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- -------------------------------------------------------------------------------
CLASS I
Investment Advisory Fees 0.55%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.15%
Total Annual Fund Operating Expenses(1) 0.80%
- -------------------------------------------------------------------------------
(1) The Fund's total actual annual operating expenses for the most recent fiscal
year (restated to reflect advisory fee waivers to take effect on October 1,
1999) were less than the amount shown above because the Adviser and Distributor
are each waiving a portion of the fees in order to keep total operating expenses
at a specified level. The Adviser and Distributor may discontinue all or part of
these waivers at any time. With these fee waivers, the Fund's actual total
operating expenses are 0.59%.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
36 PROSPECTUS
<PAGE> 39
TAX EXEMPT FUNDS
ARMADA NATIONAL TAX EXEMPT BOND FUND (CONTINUED)
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<S> <C> <C> <C>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------
$82 $255 $444 $990
</TABLE>
37 PROSPECTUS
<PAGE> 40
MONEY MARKET FUNDS
ARMADA OHIO MUNICIPAL MONEY MARKET FUND
FUND SUMMARY
INVESTMENT GOAL
Current income exempt from regular federal income tax and Ohio personal income
tax consistent with stability of principal
INVESTMENT FOCUS
Ohio municipal money market instruments
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Very low
PRINCIPAL INVESTMENT STRATEGY
Investing in a portfolio of high quality short-term debt securities designed to
allow the Fund to maintain a stable net asset value of $1.00 per share
INVESTOR PROFILE
Conservative taxable investors in higher tax brackets seeking current income
exempt from federal and Ohio income taxes
PRINCIPAL INVESTMENT STRATEGIES
The Armada Ohio Municipal Money Market Fund's investment objective is to provide
current income exempt from regular federal income tax and Ohio personal income
taxes, consistent with stability of principal. The investment objective may be
changed without a shareholder vote. The Fund invests exclusively in high quality
money market instruments issued by or on behalf of the State of Ohio, political
subdivisions thereof or agencies or instrumentalities of Ohio or its political
subdivisions, the income from which is exempt from regular federal income tax
and Ohio personal income tax (Ohio money market instruments). However, some Fund
dividends may be taxable if the Fund, as it is permitted to do, invests some of
its assets in taxable instruments. Also, Fund dividends will generally be
subject to state and local income taxes for any shareholders who are not Ohio
residents. High quality money market instruments are securities that present
minimal credit risks as determined by the Adviser and generally include
securities that are rated at the time of purchase by a major rating agency in
the two highest rating categories for such securities, and certain securities
that are not rated but are of comparable quality as determined by the Adviser.
The Fund may invest 100% of its assets in private activity bonds, the interest
from which is a preference item for the federal alternative minimum tax. Under
normal market conditions, at least 80% of the value of the Fund's total assets
will be invested in Ohio money market instruments. This policy is fundamental
and may not be changed without the affirmative vote of the holders of a majority
of the Fund's outstanding shares.
In managing the Fund, the Adviser assesses current and projected market
conditions, particularly interest rates. Based on this assessment and a separate
credit analysis, the Adviser uses gradual shifts in portfolio maturity to
respond to expected changes and selects securities that it believes offer the
most attractive risk/return trade off.
As a money market fund, the Fund invests only in instruments with remaining
maturities of 397 days or less that the Adviser believes present minimal credit
risk. The Fund maintains an average weighted maturity of 90 days or less.
PRINCIPAL RISKS OF INVESTING
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
The Fund is also subject to the risk that its market segment, Ohio municipal
money market securities, may underperform other fixed income market segments or
the fixed income market as a whole.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Fund's securities.
The Fund's focus of investments in securities of issuers located in Ohio
subjects the Fund to economic and government policies of that state. For
additional information about risks, see "More Information About Risk."
38 PROSPECTUS
<PAGE> 41
MONEY MARKET FUNDS
ARMADA OHIO MUNICIPAL MONEY MARKET FUND (CONTINUED)
PERFORMANCE INFORMATION
There is no bar chart or performance table for Class I Shares of the Fund
because it has not completed a full calendar year of operations.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- -------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- -------------------------------------------------------------------------------
CLASS I
Investment Advisory Fees 0.35%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.17%
Total Annual Fund Operating Expenses(1) 0.62%
- -------------------------------------------------------------------------------
(1) The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Adviser and Distributor
are each waiving a portion of the fees in order to keep total operating expenses
at a specified level. The Adviser and Distributor may discontinue all or part of
these waivers at any time. With these fee waivers, the Fund's actual total
operating expenses are 0.36%.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
- -------------------------------------------------------------------------------
EXAMPLE
- -------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
$63 $199 $346 $774
39 PROSPECTUS
<PAGE> 42
MONEY MARKET FUNDS
ARMADA PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND
FUND SUMMARY
INVESTMENT GOAL
High current income exempt from regular federal income tax and Pennsylvania
personal income tax, consistent with stability of principal
INVESTMENT FOCUS
Pennsylvania municipal money market instruments
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Very low
PRINCIPAL INVESTMENT STRATEGY
Investing in a portfolio of high quality short-term debt securities designed to
allow the Fund to maintain a stable net asset value of $1.00 per share
INVESTOR PROFILE
Conservative taxable investors in higher tax brackets seeking current income
exempt from federal and Pennsylvania income taxes
PRINCIPAL INVESTMENT STRATEGIES
The Armada Pennsylvania Tax Exempt Money Market Fund's investment objective is
to provide current income exempt from regular federal income tax and
Pennsylvania personal income tax, consistent with stability of principal. The
investment objective may be changed without a shareholder vote. The Fund invests
exclusively in high quality money market instruments issued by or on behalf of
the Commonwealth of Pennsylvania and its political subdivisions and financing
authorities, and obligations of the United States, including territories and
possessions of the United States, the income from which is exempt from regular
federal income tax and Pennsylvania income taxes (Pennsylvania municipal money
market instruments). However, some Fund dividends may be taxable if the Fund, as
it is permitted to do, invests some of its assets in taxable instruments. Also,
Fund dividends will generally be subject to state and local income taxes for any
shareholders who are not Pennsylvania residents. High quality money market
instruments are securities that present minimal credit risks as determined by
the Adviser and generally include securities that are rated at the time of
purchase by a major rating agency in the two highest rating categories for such
securities, and certain securities that are not rated but are of comparable
quality as determined by the Adviser. As a matter of fundamental policy, the
Fund invests its assets so that at least 80% of its annual interest income is
not only exempt from regular federal income tax and Pennsylvania personal income
tax, but it is not considered a preference item for purposes of the federal
alternative minimum tax.
In managing the Fund, the Adviser assesses current and projected market
conditions, particularly interest rates. Based on this assessment and a separate
credit analysis, the Adviser uses gradual shifts in portfolio maturity to
respond to expected changes and selects securities that it believes offer the
most attractive risk/return trade off.
As a money market fund, the Fund invests only in instruments with remaining
maturities of 397 days or less that the Adviser believes present minimal credit
risk. The Fund maintains an average weighted maturity of 90 days or less.
PRINCIPAL RISKS OF INVESTING
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
The Fund is also subject to the risk that its market segment, tax exempt money
market securities, may underperform other fixed income market segments or the
fixed income market as a whole.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Fund's securities.
The Fund's focus of investments in securities of issuers located in Pennsylvania
subjects the Fund to economic and government policies of that state. For
additional information about risks, see "More Information About Risk."
40 PROSPECTUS
<PAGE> 43
MONEY MARKET FUNDS
ARMADA PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND (CONTINUED)
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
[GRAPH]
CALENDAR YEAR TOTAL RETURN
<TABLE>
<S> <C> <C> <C>
3.50% 3.14% 3.43% 3.14%
1995 1996 1997 1998
</TABLE>
Best Quarter 0.92% (6/30/95)
Worst Quarter 0.72% (9/30/98)
The Fund's performance from January 1, 1999 to June 30, 1999 was 1.39%.
This table shows the Fund's average annual total returns for the periods ended
December 31, 1998.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR SINCE INCEPTION
- -------------------------------------------------------------------------------
Armada Pennsylvania
<S> <C> <C>
Tax Exempt Money
Market Fund 3.14% 3.27%(1)
- ------------------------------------------------------------------------------
</TABLE>
(1) Since August 10, 1994
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- -------------------------------------------------------------------------------
CLASS I
<S> <C>
Investment Advisory Fees 0.40%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.16%
Total Annual Fund Operating Expenses(1) 0.66%
</TABLE>
(1) The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Adviser and Distributor
are each waiving a portion of the fees in order to keep total operating expenses
at a specified level. The Adviser and Distributor may discontinue all or part of
these waivers at any time. With these fee waivers, the Fund's actual total
operating expenses are 0.35%.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
- -------------------------------------------------------------------------------
EXAMPLE
- -------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------
<S> <C> <C> <C>
$67 $211 $368 $822
</TABLE>
41 PROSPECTUS
<PAGE> 44
MONEY MARKET FUNDS
ARMADA TAX EXEMPT MONEY MARKET FUND
FUND SUMMARY
INVESTMENT GOAL
High current interest income exempt from federal income tax consistent with
stability of principal while maintaining liquidity
INVESTMENT FOCUS
Municipal money market instruments
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Very low
PRINCIPAL INVESTMENT STRATEGY
Investing in a portfolio of high quality short-term debt securities designed to
allow the Fund to maintain a stable net asset value of $1.00 per share
INVESTOR PROFILE
Conservative taxable investors in higher tax brackets seeking current income
exempt from federal income taxes
PRINCIPAL INVESTMENT STRATEGIES
The Armada Tax Exempt Money Market Fund's investment objective is to provide as
high a level of current interest income exempt from federal income tax as is
consistent with liquidity and stability of principal. The investment objective
may be changed without a shareholder vote. The Fund invests primarily in high
quality money market instruments issued by or on behalf of states, territories
and possessions of the United States, the District of Columbia and their
political subdivisions, agencies, instrumentalities and authorities that pay
interest exempt from federal taxes (municipal money market instruments).
However, Fund dividends will generally be taxable for state and local income tax
purposes. Also, some Fund dividends may be taxable for federal income tax
purposes if the Fund, as it is permitted to do, invests some of its assets in
taxable instruments. High quality money market instruments are securities that
present minimal credit risks as determined by the Adviser and generally include
securities that are rated at the time of purchase by a major rating agency in
the highest two rating categories for such securities, and certain securities
that are not rated but are of comparable quality as determined by the Adviser.
As a matter of fundamental policy, the Fund invests its assets so that at least
80% of its annual interest income is not only exempt from regular federal income
tax, but is not considered a preference item for purposes of the federal
alternative minimum tax.
In managing the Fund, the Adviser assesses current and projected market
conditions, particularly interest rates. Based on this assessment and a separate
credit analysis, the Adviser uses gradual shifts in portfolio maturity to
respond to expected changes and selects securities that it believes offer the
most attractive risk/return trade off.
As a money market fund, the Fund invests only in money market instruments with
remaining maturities of 397 days or less that the Adviser believes present
minimum credit risk. The Fund maintains an average weighted maturity of 90 days
or less.
PRINCIPAL RISKS OF INVESTING
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Fund's securities.
The Fund is also subject to the risk that its market segment, tax exempt money
market instruments, may underperform other fixed income market segments or the
fixed income market as a whole. For additional information about risks, see
"More Information About Risk."
42 PROSPECTUS
<PAGE> 45
MONEY MARKET FUNDS
ARMADA TAX EXEMPT MONEY MARKET FUND (CONTINUED)
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
[GRAPH]
CALENDAR YEAR TOTAL RETURN
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6.20% 5.83% 4.26% 2.52% 2.02% 2.51% 3.57% 3.21% 3.37% 3.23%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
</TABLE>
Best Quarter 1.47% (12/31/90)
Worst Quarter 0.47% (3/31/94)
The Fund's performance from January 1, 1999 to June 30, 1999 was 1.38%.
This table shows the Fund's average annual total returns for the periods ended
December 31, 1998.
<TABLE>
<CAPTION>
SINCE
CLASS I SHARES 1 YEAR 5 YEARS 10 YEARS INCEPTION
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Armada Tax
Exempt Money
Market Fund 3.23% 3.18% 3.66% 3.75%(1)
- -------------------------------------------------------------------------------
</TABLE>
(1) Since July 20, 1988
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- -------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I
<S> <C>
Investment Advisory Fees 0.35%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.12%
Total Annual Fund Operating Expenses(1) 0.57%
</TABLE>
(1) The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Adviser and Distributor
are each waiving a portion of the fees in order to keep total operating expenses
at a specified level. The Adviser and Distributor may discontinue all or part of
these waivers at any time. With these fee waivers, the Fund's actual total
operating expenses are 0.31%.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
- -------------------------------------------------------------------------------
EXAMPLE
- -------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
$58 $183 $318 $714
</TABLE>
43 PROSPECTUS
<PAGE> 46
MONEY MARKET FUNDS
ARMADA MONEY MARKET FUND
FUND SUMMARY
INVESTMENT GOAL
High current income consistent
with stability of principal while maintaining liquidity
INVESTMENT FOCUS
Money market instruments
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Very low
PRINCIPAL INVESTMENT STRATEGY
Investing in a portfolio of high quality short-term debt securities designed to
allow the Fund to maintain a stable net asset value of $1.00 per share
INVESTOR PROFILE
Conservative investors seeking current income through a liquid investment
PRINCIPAL INVESTMENT STRATEGIES
The Armada Money Market Fund's investment objective is to provide as high a
level of current income as is consistent with liquidity and stability of
principal. The investment objective may be changed without a shareholder vote.
The Fund invests in a variety of high quality money market securities, including
certificates of deposit and other obligations issued by domestic and foreign
banks, as well as commercial paper. Foreign government obligations are U.S.
dollar-denominated obligations (limited to commercial paper and other notes)
issued or guaranteed by a foreign government or other entity located or
organized in a foreign country that maintains a short-term foreign currency
rating in the highest short-term ratings category by the requisite number of
Nationally Recognized Statistical Rating Organizations (NRSROs). The Adviser
also invests in securities issued or guaranteed by the U.S. Government or its
agencies (government obligations) and repurchase agreements collateralized by
government obligations and issued by financial institutions such as banks and
broker-dealers. High quality money market instruments are securities that
present minimal credit risks as determined by the Adviser and generally include
securities that are rated at the time of purchase by a major rating agency in
the highest two rating categories for such securities, and certain securities
that are not rated but are of comparable quality as determined by the Adviser.
In selecting investments for the Fund, the Adviser actively buys throughout
the money market curve, laddering maturities to meet or exceed shareholder
liquidity needs while seeking the highest possible yield consistent with the
Fund's risk profile.
As a money market fund, the Fund invests only in money market instruments with
remaining maturities of 397 days or less that the Adviser believes present
minimum credit risk. The Fund maintains an average weighted maturity of 90 days
or less.
PRINCIPAL RISKS OF INVESTING
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
The Fund is also subject to the risk that its market segment, money market
securities, may underperform other fixed income market segments or the fixed
income market as a whole. For additional information about risks, see "More
Information About Risk."
44 PROSPECTUS
<PAGE> 47
MONEY MARKET FUNDS
ARMADA MONEY MARKET FUND (CONTINUED)
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future. The table measures
performance in terms of total return. However, this Fund is managed for yield
and not total return.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
[GRAPH]
CALENDAR YEAR TOTAL RETURN
9.20% 8.16% 5.67% 3.33% 2.76% 3.98% 5.72% 5.19% 5.32% 5.25%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
Best Quarter 2.01% (6/30/90)
Worst Quarter 0.67% (6/30/93)
The Fund's performance from January 1, 1999 to June 30, 1999 was 2.29%.
This table shows the Fund's average annual total returns for the periods ended
December 31, 1998.
SINCE
CLASS I SHARES 1 YEAR 5 YEARS 10 YEARS INCEPTION
- -----------------------------------------------------------------------------
Armada Money
Market Fund 5.25% 5.09% 5.44% 5.68%(1)
- -----------------------------------------------------------------------------
(1) Since September 3, 1986
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- ------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- ------------------------------------------------------------------------------
CLASS I
Investment Advisory Fees 0.35%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.10%
Total Annual Fund Operating Expenses(1) 0.55%
(1) The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Adviser and Distributor
are each waiving a portion of the fees in order to keep total operating expenses
at a specified level. The Adviser and Distributor may discontinue all or part of
these waivers at any time. with these fee waivers, the fund's actual total
operating expenses are 0.39%.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
- ------------------------------------------------------------------------------
EXAMPLE
- ------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------
$56 $176 $307 $689
45 PROSPECTUS
<PAGE> 48
MONEY MARKET FUNDS
ARMADA GOVERNMENT MONEY MARKET FUND
FUND SUMMARY
INVESTMENT GOAL
High current income consistent with stability of principal while maintaining
liquidity
INVESTMENT FOCUS
Money market instruments issued or guaranteed by the U.S. Government, its
agencies and instrumentalities and repurchase agreements
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Very low
PRINCIPAL INVESTMENT STRATEGY
Investing in a portfolio of high quality short-term debt securities issued by
the U.S. Government, its agencies and instrumentalities and repurchase
agreements related to such securities designed to allow the Fund to maintain a
stable net asset value of $1.00 per share
INVESTOR PROFILE
Conservative investors seeking current income through a liquid investment
PRINCIPAL INVESTMENT STRATEGIES
The Armada Government Money Market Fund's investment objective is to provide as
high a level of current income as is consistent with liquidity and stability of
principal. The investment objective may be changed without a shareholder vote.
The Fund invests exclusively in obligations issued or guaranteed as to the
payment of principal and interest by the U.S. Government, its agencies and
instrumentalities and repurchase agreements. U.S. Government securities include
direct obligations of the U.S. Treasury, and obligations of certain agencies
such as GNMA and FNMA.
In managing the Fund, the Adviser actively buys throughout the money market
curve, laddering maturities to meet or exceed shareholder liquidity needs while
seeking the highest possible yield consistent with the Fund's risk profile.
As a money market fund, the Fund invests only in money market instruments with
remaining maturities of 397 days or less and maintains an average weighted
maturity of 90 days or less.
PRINCIPAL RISKS OF INVESTING
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
Although the Fund's U.S. Government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. Government agencies and
instrumentalities are backed by the U.S. Treasury, while others are backed
solely by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own resources.
The Fund is also subject to the risk that its market segment, money market
instruments issued or guaranteed by the U.S. Government, may underperform other
fixed income market segments or the fixed income market as a whole.
For additional information about risks, see "More Information About Risk."
46 PROSPECTUS
<PAGE> 49
MONEY MARKET FUNDS
ARMADA GOVERNMENT MONEY MARKET FUND (CONTINUED)
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
[GRAPH]
CALENDAR YEAR TOTAL RETURN
9.01% 7.94% 5.65% 3.36% 2.75% 3.91% 5.63% 5.14% 5.25% 5.15%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
Best Quarter 1.95% (6/30/90)
Worst Quarter 0.67% (6/30/93)
The Fund's performance from January 1, 1999 to June 30, 1999 was 2.25%.
This table shows the Fund's average annual total returns for the periods ended
December 31, 1998.
<TABLE>
<CAPTION>
SINCE
CLASS I SHARES 1 YEAR 5 YEARS 10 YEARS INCEPTION
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Armada
Government
Money Market
Fund 5.15% 5.02% 5.36% 5.57%(1)
- ------------------------------------------------------------------------------
</TABLE>
(1) Since March 3, 1987
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- ------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class I
<S> <C>
Investment Advisory Fees 0.35%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.10%
Total Annual Fund Operating Expenses(1) 0.55%
</TABLE>
(1) The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Adviser and Distributor
are each waiving a portion of the fees in order to keep total operating expenses
at a specified level. The Adviser and Distributor may discontinue all or part of
these waivers at any time. With these fee waivers, the Fund's actual total
operating expenses are 0.39%.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
- -----------------------------------------------------------------------------
EXAMPLE
- -----------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------
$56 $176 $307 $689
47 PROSPECTUS
<PAGE> 50
MONEY MARKET FUNDS
ARMADA TREASURY MONEY MARKET FUND
FUND SUMMARY
INVESTMENT GOAL
High current income consistent
with stability of principal while maintaining liquidity
INVESTMENT FOCUS
U.S. Treasury securities
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Very low
PRINCIPAL INVESTMENT STRATEGY
Investing in a portfolio of high quality short-term obligations of the U.S.
Treasury designed to allow the Fund to maintain a stable net asset value of
$1.00 per share
INVESTOR PROFILE
Conservative investors seeking current income through a liquid investment
PRINCIPAL INVESTMENT STRATEGIES
The Armada Treasury Money Market Fund's investment objective is to provide as
high a level of current income as is consistent with liquidity and stability of
principal. The investment objective may be changed without a shareholder vote.
The Fund invests exclusively in direct obligations of the U.S. Treasury, such as
Treasury bills and notes, and in other money market funds that invest
exclusively in such obligations.
In managing the Fund, the Adviser actively buys throughout the money market
curve, laddering maturities to meet or exceed shareholder liquidity needs while
seeking the highest possible yield consistent with the Fund's risk profile.
As a money market fund, the Fund invests only in money market instruments with
remaining maturities of 397 days or less and maintains an average weighted
maturity of 90 days or less.
PRINCIPAL RISKS OF INVESTING
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
The Fund is also subject to the risk that its market segment, U.S. Treasury
securities, may underperform other fixed income market segments or the fixed
income market as a whole. For additional information about risks, see "More
Information About Risk."
48 PROSPECTUS
<PAGE> 51
MONEY MARKET FUNDS
ARMADA TREASURY MONEY MARKET FUND (CONTINUED)
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
[GRAPH]
CALENDAR YEAR TOTAL RETURN
5.38% 4.86% 4.92% 4.70%
1995 1996 1997 1998
Best Quarter 1.36% (6/30/95)
Worst Quarter 1.04% (12/31/98)
The Fund's performance from January 1, 1999 to June 30, 1999 was 2.07%.
This table shows the Fund's average annual total returns for the periods ended
December 31, 1998.
CLASS I SHARES 1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------
Armada Treasury
Money Market Fund 4.70% 4.89%(1)
- ---------------------------------------------------------------------------
(1) Since June 16, 1994
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- -------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I
<S> <C>
Investment Advisory Fees 0.30%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.13%
Total Annual Fund Operating Expenses(1) 0.53%
</TABLE>
(1) The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Adviser and Distributor
are each waiving a portion of the fees in order to keep total operating expenses
at a specified level. The Adviser and Distributor may discontinue all or part of
these waivers at any time. With these fee waivers, the Fund's actual total
operating expenses are 0.42%.
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
- -------------------------------------------------------------------------------
EXAMPLE
- -------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------
$54 $170 $296 $665
49 PROSPECTUS
<PAGE> 52
ARMADA MID CAP GROWTH FUND
FUND SUMMARY
INVESTMENT GOAL
Capital appreciation
INVESTMENT FOCUS
Mid-cap equity securities
Share Price Volatility
(relative to mutual funds generally)
High
PRINCIPAL INVESTMENT STRATEGY
Investing in growth-oriented equity securities of medium-sized issuers
INVESTOR PROFILE
Investors seeking capital growth, and who are willing to accept the risks of
investing in equity securities
PRINCIPAL INVESTMENT STRATEGIES
The Armada Mid Cap Growth Fund's investment objective is to provide capital
appreciation by investing in a diversified portfolio of publicly traded mid cap
equity securities. The investment objective may be changed without a shareholder
vote. The Fund will normally invest at least 80% of its total assets in the
common stock of companies with mid stock market capitalizations. The Fund may
invest up to 20% of its total assets at the time of purchase in foreign equity
securities. In selecting investments for the Fund to buy and sell, the Adviser
invests in companies that have typically exhibited consistent, above-average
growth in revenues and earnings, strong management, sound and improving
financial fundamentals and presently exhibit the potential for growth.
The Fund considers a "mid-capitalization (mid cap)" company to be one that has a
comparable market capitalization within the range as the companies in the
Russell Mid Cap Growth Index. The Russell MidCap Growth Index is an unmanaged
index which reflects a medium-sized universe of growth-oriented securities.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities, and will lower Fund performance.
PRINCIPAL RISKS OF INVESTING
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country.
The Fund is also subject to the risk that its market segment, mid cap equity
securities, may underperform other equity market segments or the equity market
as a whole. For additional information about risks, see "More Information About
Risk."
50 PROSPECTUS
<PAGE> 53
ARMADA MID CAP GROWTH FUND (CONTINUED)
PERFORMANCE INFORMATION
There is no bar chart or performance table for Class I Shares of the Fund
because it is not yet operating.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- ------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I
<S> <C>
Investment Advisory Fees 1.00%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses(1) 0.22%
Total Annual Fund Operating Expenses 1.32%
</TABLE>
(1) "Other Expenses" are based on estimated amounts for the current fiscal year.
- -------------------------------------------------------------------------------
EXAMPLE
- -------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS
- -----------------------------------------------------------------------------
$134 $418
51 PROSPECTUS
<PAGE> 54
ARMADA LARGE CAP ULTRA FUND
FUND SUMMARY
INVESTMENT GOAL
Capital appreciation
INVESTMENT FOCUS
Large cap equity securities
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
High
PRINCIPAL INVESTMENT STRATEGY
Investing in equity securities of large companies that the Adviser believes have
the potential for long-term above-average growth
INVESTOR PROFILE
Investors seeking growth of capital, and who are willing to accept the risks of
investing in equity securities
PRINCIPAL INVESTMENT STRATEGIES
The Armada Large Cap Ultra Fund's investment objective is to provide capital
appreciation by investing in a diversified portfolio of publicly traded larger
cap equity securities. The investment objective may be changed without a
shareholder vote. The Fund will normally invest at least 80% of its total assets
in the common stock of companies with large market capitalizations.
The Adviser takes a long-term approach to managing the Fund and typically
invests in companies that have exhibited consistent, above-average growth in
revenues and earnings, strong management, and sound and improving financial
fundamentals.
The Fund considers a large capitalization or "large cap" company to be one that
has a comparable market capitalization as the companies in the S&P 500/Barra
Growth Index. The S&P 500/Barra Growth Index is an unmanaged index comprised of
common stocks which are capitalization-weighted and have higher price-to-book
ratios.
PRINCIPAL RISKS OF INVESTING
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
The Fund is also subject to the risk that its market segment, large cap equity
securities, may underperform other equity market segments or the equity market
as a whole. For additional information about risks, see "More Information About
Risk."
52 PROSPECTUS
<PAGE> 55
ARMADA LARGE CAP ULTRA FUND (CONTINUED)
PERFORMANCE INFORMATION
There is no bar chart or performance table for Class I Shares of the Fund
because it is not yet operating.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- ------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- ------------------------------------------------------------------------------
CLASS I
Investment Advisory Fees 0.75%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses(1) 0.18%
Total Annual Fund Operating Expenses 1.03%
- ------------------------------------------------------------------------------
(1 )"Other Expenses" are based on estimated amounts for the current fiscal year.
- -------------------------------------------------------------------------------
EXAMPLE
- -------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS
- ----------------------------------------------------------------------------
$105 $328
53 PROSPECTUS
<PAGE> 56
ARMADA U.S. GOVERNMENT INCOME FUND
FUND SUMMARY
INVESTMENT GOAL
Current income as well as preservation of capital
INVESTMENT FOCUS
Mortgage backed securities
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Low
PRINCIPAL INVESTMENT STRATEGY
Investing in mortgage-related securities issued or guaranteed by
the U.S. Government
INVESTOR PROFILE
Investors seeking current income, and who are willing to accept the risks of
investing in fixed income securities
PRINCIPAL INVESTMENT STRATEGIES
The Armada U.S. Government Income Fund's investment objective is to provide
current income as well as preservation of capital by investing primarily in U.S.
Government securities. The investment objective may be changed without a
shareholder vote. The Fund normally invests at least 80% of its total assets in
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities. The types of U.S. Government securities include
mortgage-related securities, and Treasury bills, notes and bonds. The Fund may
invest up to 20% of the value of its total assets in mortgage-related debt
securities and preferred stock of non-governmental issuers and the same
proportion of its total assets in non-governmental asset backed securities. In
buying and selling securities for the Fund, the Adviser considers a number of
factors, including yield to maturity, maturity, quality and the outlook for
particular issuers and market sectors. The Fund generally maintains a
dollar-weighted average maturity of between three and ten years.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities, and will lower Fund performance.
PRINCIPAL RISKS OF INVESTING
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa. Also, longer-term securities are generally more
volatile, so the average maturity or duration of these securities affects risk.
The Fund is also subject to the risk that its market segment, U.S. Government
securities, may underperform other fixed income market segments or the fixed
income market as a whole.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
The mortgages underlying mortgage-backed securities may be paid off early, which
makes it difficult to determine their actual maturity and therefore calculate
how they will respond to changes in interest rates. The Fund may have to
reinvest prepaid amounts at lower interest rates. This risk of prepayment is an
additional risk of mortgage-backed securities.
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.
Although the Fund's U.S. Government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. Government agencies and
instrumentalities are backed by the U.S. Treasury, while others are backed
solely by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own resources. For additional information about risks, see "More
Information About Risk."
54 PROSPECTUS
<PAGE> 57
ARMADA U.S. GOVERNMENT INCOME FUND (CONTINUED)
PERFORMANCE INFORMATION
There is no bar chart or performance table for Class I Shares of the Fund
because it is not yet operating.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- -------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- -------------------------------------------------------------------------------
CLASS I
Investment Advisory Fees 0.55%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses(1) 0.18%
Total Annual Fund Operating Expenses 0.83%
(1) "Other Expenses" are based on estimated amounts for the current fiscal year.
- -------------------------------------------------------------------------------
EXAMPLE
- -------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS
- -----------------------------------------------------------------------------
$85 $265
55 PROSPECTUS
<PAGE> 58
ARMADA MICHIGAN MUNICIPAL BOND FUND
FUND SUMMARY
INVESTMENT GOAL
Current income exempt from federal income tax and, to the extent possible, from
Michigan personal income tax, as is consistent with conservation of capital
INVESTMENT FOCUS
Michigan tax exempt securities
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Medium
PRINCIPAL INVESTMENT STRATEGY
Investing in municipal obligations that pay interest that is exempt from federal
and Michigan state income taxes
INVESTOR PROFILE
Investors seeking tax exempt current income, and who are willing to accept
moderate share price volatility
PRINCIPAL INVESTMENT STRATEGIES
The Armada Michigan Municipal Bond Fund's investment objective is to provide
current income exempt from federal income tax and, to the extent possible, from
Michigan personal income tax, as is consistent with conservation of capital.
Such income may be subject to the federal alternative minimum tax when received
by certain shareholders. The investment objective may be changed without a
shareholder vote. The Fund invests primarily in debt securities issued by or on
behalf of the State of Michigan, its political subdivisions and its agencies and
instrumentalities that generate income exempt from federal and Michigan state
income, but may be treated as a preference item for individuals for purposes of
the federal alternative minimum tax (Michigan municipal securities). The Fund
also invests in municipal securities issued by or on behalf of territories and
possessions of the United States, the District of Columbia and their political
subdivisions, agencies, instrumentalities and authorities. In selecting
securities for the Fund to buy and sell, the Adviser considers each security's
yield and total return potential relative to other available municipal
securities. The Fund will normally invest at least 80% of the value of its total
assets in Michigan municipal securities. However, some Fund dividends will be
taxable, such as dividends that are derived from occasional taxable investments
and distributions of short and long-term capital gains. Also, Fund dividends
will generally be subject to state and local income taxes for any shareholders
who are not Michigan residents. The Fund may invest up to 100% of its total
assets in private activity bonds which may be treated as a specific tax
preference item under the federal alternative minimum tax.
The Fund invests in investment grade securities, which are those rated in one of
the four highest rating categories by a major rating agency, or determined by
the Adviser to be of equivalent quality. If a security is downgraded, the
Adviser will re-evaluate whether continuing to hold the security is in the best
interest of its shareholders. The Fund ordinarily will maintain a
dollar-weighted average portfolio maturity of between three and ten years.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and 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 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.
The Fund is also subject to the risk that its market segment, tax free municipal
securities, may underperform other fixed income market segments or the fixed
income market as a whole.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Fund's securities.
(continued)
56 PROSPECTUS
<PAGE> 59
ARMADA MICHIGAN MUNICIPAL BOND FUND (CONTINUED)
PRINCIPAL RISKS OF INVESTING (continued)
The Fund's focus of investments in securities of issuers located in Michigan
subjects the Fund to economic and government policies of that state.
The Fund is non-diversified, which means that it may invest in the securities of
relatively few issuers. As a result, the Fund may be more susceptible than a
diversified fund to a single adverse economic or political and regulatory
occurrences affecting one or more of these issuers, and may experience increased
volatility due to its investments in those securities. For additional
information about risks, see "More Information About Risk."
PERFORMANCE INFORMATION
There is no bar chart or performance table for Class I Shares of the Fund
because it is not yet operating.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- -------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- -------------------------------------------------------------------------------
CLASS I
Investment Advisory Fees 0.55%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses(1) 0.18%
Total Annual Fund Operating Expenses 0.83%
(1) "Other Expenses" are based on estimated amounts for the current fiscal year.
- ----------------------------------------------------------------------
EXAMPLE
- ----------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS
- ----------------------------------------------------------------------
$85 $265
57 PROSPECTUS
<PAGE> 60
ARMADA TREASURY PLUS MONEY MARKET FUND
FUND SUMMARY
INVESTMENT GOAL
Current income consistent with liquidity and stability of principal
INVESTMENT FOCUS
U.S. Treasury securities and repurchase agreements related to such securities
SHARE PRICE VOLATILITY
(RELATIVE TO MUTUAL FUNDS GENERALLY)
Very low
PRINCIPAL INVESTMENT STRATEGY
Investing in a portfolio of high quality short-term obligations of the U.S.
Treasury designed to allow the Fund to maintain a stable net asset value of
$1.00 per share
INVESTOR PROFILE
Investors seeking current income through a liquid and stable investment
PRINCIPAL INVESTMENT STRATEGIES
The Armada Treasury Plus Money Market Fund's investment objective is to provide
current income with liquidity and stability of principal. The investment
objective may be changed without a shareholder vote. The Fund invests
exclusively in obligations issued or guaranteed by the U.S. Treasury and
repurchase agreements related to such securities.
In managing the Fund, the Adviser assesses current and projected market
conditions. Based on this assessment, the Adviser uses gradual shifts in
portfolio maturity to respond to expected changes and selects securities that it
believes offer the most attractive trade off between risk and return.
As a money market fund, the Fund invests only in money market instruments
with remaining maturities of 397 days or less and maintains an average weighted
maturity of 90 days or less.
PRINCIPAL RISKS OF INVESTING
The prices of the Fund's fixed income securities respond to economic develop-
ments, particularly interest rate changes. Generally, the Fund's fixed income
securities will decrease in value if interest rates rise and vice versa.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
Although the Fund's U.S. Treasury securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by the U.S. Treasury are backed by
the U.S. Treasury.
The Fund is also subject to the risk that its market segment, U.S. Treasury
securities, may underperform other fixed income market segments or the fixed
income market as a whole. For additional information about risks, see "More
Information About Risk."
58 PROSPECTUS
<PAGE> 61
ARMADA TREASURY PLUS MONEY MARKET FUND (CONTINUED)
PERFORMANCE INFORMATION
There is no bar chart or performance table for Class I shares of the fund
because it is not yet operating.
FUND FEES AND EXPENSES
This table describes the shareholder fees that you may pay if you buy and hold
shares of the Fund.
- -------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- -------------------------------------------------------------------------------
CLASS I
Investment Advisory Fees 0.40%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses(1) 0.16%
Total Annual Fund Operating Expenses 0.66%
(1) "Other Expenses" are based on estimated amounts for the current fiscal year.
- -------------------------------------------------------------------------------
EXAMPLE
- -------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS
- -------------------------------------------------------------------------------
$67 $211
59 PROSPECTUS
<PAGE> 62
MORE INFORMATION ABOUT RISK
<TABLE>
<CAPTION>
High- Single
Yield State
Conver- Fixed Lower Municipal Concen- Mortgage- Foreign
Equity tible Income Call Credit Event Rated Issuer tration Backed Security Currency
Risk Securities Risk Risk Risk Risk Securities Risk Risk Securities Risk Risk
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Armada International
Equity Fund X X X
Armada Small Cap
Value Fund X X X
Armada Small Cap
Growth Fund X X X
Armada Equity
Growth Fund X X X X
Armada Tax Managed
Equity Fund X X X X
Armada Core
Equity Fund X X X
Armada Equity
Index Fund X
Armada Equity
Income Fund X X X X
Armada Balanced
Allocation Fund X X X X X X X X
Armada Total Return
Advantage Fund X X X X X X X X X
Armada Bond Fund X X X X X
Armada Intermediate
Bond Fund X X X X X X X
Armada GNMA Fund X X X X X
Armada Enhanced
Income Fund X X X X X X X X
Armada Ohio Tax
Exempt Bond Fund X X X X X X
Armada Pennsylvania
Municipal Bond Fund X X X X X X
Armada National Tax
Exempt Bond Fund X X X X X
Armada Ohio Municipal
Money Market Fund X X X X X
Armada Pennsylvania
Tax Exempt Money
Market Fund X X X X X
Armada Tax Exempt
Money Market Fund X X X X
Armada Money
Market Fund X X X X X
Armada Government
Money Market Fund X
Armada Treasury
Money Market Fund X
Armada Mid Cap
Growth Fund X X X X X X X
Armada Large Cap
Ultra Fund X X
Armada U.S. Government
Income Fund X X X X X
Armada Michigan
Municipal Bond Fund X X X X X X
Armada Treasury Plus
Money Market Fund X X X X
<CAPTION>
Foreign
Real Tracking Year Year
Hedging Leveraging Derivitives Short Estate Regional Error 2000 2000
Risk Risk Risk Futures Options Sales Investing Risk Risk Risk Risk
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Armada International
Equity Fund X X X X X X X
Armada Small Cap
Value Fund X X X X X X X
Armada Small Cap
Growth Fund X X X X X X X
Armada Equity
Growth Fund X X X X X X X
Armada Tax Managed
Equity Fund X X X X X X X
Armada Core
Equity Fund X X X X X X
Armada Equity
Index Fund X X X X X X
Armada Equity
Income Fund X X X X X X X
Armada Balanced
Allocation Fund X X X X X X X X
Armada Total Return
Advantage Fund X X X X X X X X
Armada Bond Fund X X X X X X
Armada Intermediate
Bond Fund X X X X X X
Armada GNMA Fund X X X X X X X X
Armada Enhanced
Income Fund X X X X X X X X
Armada Ohio Tax
Exempt Bond Fund X X
Armada Pennsylvania
Municipal Bond Fund X X
Armada National Tax
Exempt Bond Fund X
Armada Ohio Municipal
Money Market Fund X X X X
Armada Pennsylvania
Tax Exempt Money
Market Fund X X X X
Armada Tax Exempt
Money Market Fund X X X
Armada Money
Market Fund X X X X
Armada Government
Money Market Fund X X X
Armada Treasury
Money Market Fund X X
Armada Mid Cap
Growth Fund X X X X X X X X X X
Armada Large Cap
Ultra Fund X
Armada U.S. Government
Income Fund X X X X X X X X X
Armada Michigan
Municipal Bond Fund X X X X X
Armada Treasury Plus
Money Market Fund X X X X
</TABLE>
60 PROSPECTUS
<PAGE> 63
EQUITY RISK -- Equity securities include public and privately issued equity
securities, common and preferred stocks, warrants, rights to subscribe to common
stock and convertible securities, as well as instruments that attempt to track
the price movement of equity indices. Investments in equity securities and
equity derivatives in general are subject to market risks that may cause their
prices to fluctuate over time. The value of securities convertible into equity
securities, such as warrants or convertible debt, is also affected by prevailing
interest rates, the credit quality of the issuer and any call provision.
Fluctuations in the value of equity securities in which a mutual fund invests
will cause a fund's net asset value to fluctuate. An investment in a portfolio
of equity securities may be more suitable for long-term investors who can bear
the risk of these share price fluctuations.
CONVERTIBLE SECURITIES -- Convertible securities have characteristics of
both fixed income and equity securities. The value of the convertible
security tends to move with the market value of the underlying stock, but
may also be affected by interest rates, credit quality of the issuer and
any call provisions.
FIXED INCOME RISK -- The market value of fixed income investments change 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 a Fund's average weighted maturity
to fluctuate, and may require a Fund to 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 the diversification 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 S&Por Baa or higher by Moody's) due to changes in
the issuer's creditworthiness.
- - The market for high-yield, lower rated securities may be thinner and less
active, causing market price volatility and limited liquidity in the
secondary market. This may limit the ability of a Fund to sell these
securities at their fair market values either to meet redemption requests,
or in response to changes in the economy or the financial markets.
- - Market prices for high-yield, lower rated securities may also be affected
by investors' perception of the issuer's credit quality and the outlook for
economic growth. Thus, prices for high-yield, lower rated securities may
move independently of interest rates and the overall bond market.
- - The market for high-yield, lower rated securities may be adversely affected
by legislative and regulatory developments.
MUNICIPAL ISSUER RISK --There may be economic or political changes that impact
the ability of municipal issuers to repay principal and to make interest
payments on municipal securities. Changes to the financial condition or credit
rating of municipal issuers may also adversely affect the value of the Fund's
municipal securities. Constitutional or legislative limits on borrowing by
municipal issuers may result in reduced supplies of municipal securities.
Moreover, certain municipal securities are backed only by a municipal issuer's
ability to levy and collect taxes.
In addition, the Fund's concentration of investments in issuers located in a
single state makes the Fund more susceptible to adverse political or economic
developments affecting that state. The Fund also may be riskier than mutual
funds that buy securities of issuers in numerous states.
61 PROSPECTUS
<PAGE> 64
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.
FOREIGN SECURITY RISKS --Investments in securities of foreign companies or
governments can be more volatile than investments in U.S. companies or
governments. 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 or governments generally are not subject to uniform accounting,
auditing, and financial reporting standards comparable to those applicable to
domestic U.S. companies or governments. Transaction costs are generally higher
than those in the U.S. and expenses for custodial arrangements of foreign
securities may be somewhat greater than typical expenses for custodial
arrangements of similar U.S. securities. Investment in sovereign debt
obligations by certain Funds involves risks not present in debt obligations of
corporate issuers. The issuer of the debt or the governmental authorities that
control the repayment of the debt may be unable or unwilling to repay principal
or interest when due in accordance with the terms of such debt, and a Fund may
have limited recourse to compel payment in the event of a default. Periods of
economic uncertainty may result in volatility of market prices of sovereign
debt, and in turn a Fund's NAV, to a greater extent than the volatility inherent
in debt obligations of U.S. issuers. Some foreign governments levy withholding
taxes against dividend and interest income. Although in some countries a portion
of these taxes are recoverable, the non-recovered portion will reduce the income
received from the securities comprising the portfolio.
In addition to these risks, certain foreign securities may be subject to the
following additional risks factors:
CURRENCY RISK --Investments in foreign securities denominated in foreign
currencies involve additional risks, including:
- The value of a Fund's assets measured in U.S. dollars may be affected
by changes in currency rates and in exchange control regulations.
- A Fund may incur substantial costs in connection with conversions
between various currencies.
- A Fund may be unable to hedge against possible variations in foreign
exchange rates or to hedge a specific security transaction or portfolio
position.
- Only a limited market currently exists for hedging transactions
relating to currencies in certain emerging markets.
HEDGING RISK --Hedging is a strategy designed to offset 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:
- - A 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 a fund and the prices of futures and
options on futures.
62 PROSPECTUS
<PAGE> 65
- - Although the funds 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 funds may be unable to close
out their 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 Funds use derivatives to attempt to achieve their
investment objectives, while at the same time maintaining liquidity. To
collateralize (or cover) these derivatives transactions, the Funds hold
cash or U.S. government securities.
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.
The Funds 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 Funds will only
enter into futures contracts traded on a national futures exchange or board
of trade.
OPTIONS -- The buyer of an option acquires the right 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 Funds 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 Funds 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
Funds.
Because option premiums paid or received by the Funds are small in relation
to the market value of the investments underlying the options, buying and
selling put and call options can be more speculative than investing
directly in securities.
SHORT SALES -- Short sales are transactions in which a Fund sells a
security it does not own. To complete a short sale, a Fund must borrow the
security to deliver to the buyer. The Fund is then obligated to replace the
borrowed security by purchasing the security at the market price at the
time of replacement. This price may be more or less than the price at which
the security was sold by the Fund.
REAL ESTATE INVESTING -- The Fund's investments in the securities of real estate
investment trusts (REITs) and companies principally engaged in the real estate
industry may subject the Fund to the risks associated with the direct ownership
of real estate. Risks commonly associated with the direct ownership of real
estate include fluctuations in the value of underlying properties and defaults
by borrowers or tenants. In addition to these risks, REITs are dependent on
specialized management skills and some REITs may have investments in relatively
few properties, or in a small geographic area or a single type of property.
These factors may increase the volatility of the Fund's investments in REITs.
REGIONAL RISK -- To the extent that a Fund's investments are focused in a
specific geographic region, the Fund may be subject to the political and other
developments affecting that region. Regional economies are often closely
interrelated, and political and economic developments affecting one region,
country or state often affect other regions, countries or states, thus
subjecting a Fund to additional risks.
TRACKING ERROR RISK -- Factors such as Fund expenses, imperfect correlation
between the Fund's investments and those of their benchmarks, rounding of share
prices, changes to the benchmark, regulatory policies, and leverage, may affect
their ability to achieve perfect correlation. The magnitude of any tracking
error may be affected by a higher portfolio turnover rate. Because an index is
just a composite of the prices of the securities it represents rather than an
actual portfolio of those securities, an index will have no expenses. As a
result, a Fund, which will have expenses such as taxes, custody, management fees
and other operational costs, and brokerage, may not achieve its investment
objective of accurately correlating to an index.
63 PROSPECTUS
<PAGE> 66
YEAR 2000 RISK -- The Funds depend on the smooth functioning of computer systems
in almost every aspect of their business. Like other mutual funds, businesses
and individuals around the world, the Funds could be adversely affected if the
computer systems used by its service providers do not properly process dates on
and after January 1, 2000, and distinguish between the year 2000 and the year
1900. The Funds have asked their service providers whether they expect to have
their computer systems adjusted for the year 2000 transition, and is seeking
assurances from each service provider that they are devoting significant
resources to prevent material adverse consequences to the Funds. While it is
likely that such assurances will be obtained, the Funds and their shareholders
may experience losses if these assurances prove to be incorrect or as a result
of year 2000 computer difficulties experienced by issuers of portfolio
securities or third parties, such as custodians, banks, broker-dealers or others
with which the Funds do business. In addition, to the extent that the operations
of issuers of securities held by a Fund are impaired by the year 2000
transition, or prices of securities held by a Fund decline as a result of real
or perceived problems relating to the year 2000, the value of such Fund's shares
may be materially affected.
Furthermore, many foreign countries are not as prepared as the U.S. for the year
2000 transition. As a result, computer difficulties in foreign markets and with
foreign institutions as a result of the year 2000 may add to the possibility of
losses to the Funds and their shareholders.
EACH FUND'S OTHER INVESTMENTS
In addition to the investments and strategies described in this prospectus, each
Fund also may invest in other securities, use other strategies and engage in
other investment practices. These investments and strategies, as well as those
described in this prospectus, are described in detail in our Statement of
Additional Information. Of course, the Trust cannot guarantee that any Fund will
achieve its investment goal.
The investments and strategies described in this prospectus are those that we
use under normal conditions. During unusual economic, market, political or other
conditions, or for temporary defensive or liquidity purposes, each Fund (except
for the money market funds) may invest up to 100% of its assets in short-term
high quality debt instruments that would not ordinarily be consistent with a
Fund's principal investment strategies. AFund will do so only if the Adviser or
Sub-Adviser believes that the risk of loss outweighs the opportunity for
achieving a Fund's investment objective.
INVESTMENT ADVISER, SUB-ADVISER AND INVESTMENT TEAM
The Investment Adviser makes investment decisions for the Funds and continuously
reviews, supervises and administers each Fund's respective investment program.
The Investment Adviser oversees the Sub-Adviser to ensure compliance with the
Funds' investment policies and guidelines, and monitors the Sub-Adviser's
adherence to its investment style. The Adviser pays the Sub-Adviser out of the
Investment Advisory fees it receives (described below).
The Board of Trustees of the Trust supervises the Adviser and establishes
policies that the Adviser must follow in its management activities.
National City Investment Management Company ("IMC"), with its principal offices
at 1900 East Ninth Street, Cleveland, Ohio 44114, serves as Adviser to the
Funds. On June 30, 1999, IMC had approximately $25.4 billion in assets under
management.
IMC utilizes a team approach for management of the Funds. No one person is
primarily responsible for making investment recommendations to the team. In the
case of the Armada Core Equity and the Armada Total Return Advantage Funds,
National Asset Management Corporation ("NAM") serves as Sub-Adviser and manages
these funds on a day-to-day basis; NAM selects, buys and sells the securities of
these Funds under the supervision of the Adviser and the Board of Trustees.
64 PROSPECTUS
<PAGE> 67
The table below shows the IMC management teams responsible for each fund as well
as the advisory fees IMC received for each fund for the fiscal period ended May
31, 1999.
<TABLE>
<CAPTION>
ADVISORY FEES PAID AS
A PERCENTAGE OF AVERAGE
MANAGEMENT TEAM/ NET ASSETS FOR THE FISCAL YEAR
FUND NAME INVESTMENT ADVISER ENDED MAY 31, 1999
<S> <C> <C>
International Equity Fund International Equity Team 1.04% (1)
Small Cap Value Fund Equity Value Team 0.92% (1)
Small Cap Growth Fund Equity Growth Team 0.93% (1)
Equity Growth Fund Equity Growth Team 0.75%
Tax Managed Equity Fund Equity Growth Team 0.57%
Core Equity Fund National Asset Management
Corporation (sub-adviser) 0.75%
Equity Index Fund Equity Team 0.00%
Equity Income Fund Equity Value Team 0.75%
Balanced Allocation Fund Equity and Fixed Income Teams 0.75% (2)
Total Return Advantage Fund National Asset Management
Corporation (sub-adviser) 0.35%
Bond Fund Taxable Fixed Income Team 0.55%
Intermediate Bond Fund Taxable Fixed Income Team 0.40%
GNMA Fund Taxable Fixed Income Team 0.55%
Enhanced Income Fund Taxable Fixed Income Team 0.22% (1)
Ohio Tax Exempt Bond Fund Tax Exempt Fixed Income Team 0.05% (1)
Pennsylvania Municipal Bond Fund Tax Exempt Fixed Income Team 0.20%
National Tax Exempt Bond Fund Tax Exempt Fixed Income Team 0.04% (1)
Ohio Municipal Money Market Fund Tax Exempt Money Market Team 0.13% (1,2)
Pennsylvania Tax Exempt
Money Market Fund Tax Exempt Money Market Team 0.15%
Tax Exempt Money Market Fund Tax Exempt Money Market Team 0.15%
Money Market Fund Taxable Money Market Team 0.25%
Government Money Market Fund Taxable Money Market Team 0.25%
Treasury Money Market Fund Taxable Money Market Team 0.25%
Mid Cap Growth Fund Equity Growth Team 1.00% (3)
Large Cap Ultra Fund Equity Growth Team 0.75% (3)
U.S. Government Income Fund Taxable Fixed Income Team 0.55% (3)
Michigan Municipal Bond Fund Tax Exempt Fixed Income Team 0.55% (3)
Treasury Plus Money Market Fund Taxable Fixed Income Team 0.30% (3)
</TABLE>
(1)Advisor fee or waiver changed during the period.
(2)Annualized.
(3)The Fund has not yet commenced operations.
65 PROSPECTUS
<PAGE> 68
PURCHASING, SELLING AND EXCHANGING FUND SHARES
This section tells you how to buy, sell (sometimes called "redeem") or exchange
Class I Shares of the Funds.
Class I Shares have no sales charge and no minimum initial investment.
Class I Shares are for financial institutions investing for their own or their
customers' accounts. For information on how to open an account and set up
procedures for placing transactions call 1-800-622-FUND (3863).
HOW TO PURCHASE FUND SHARES
You may buy shares through accounts with brokers and other institutions that are
authorized to place trades in Fund shares for their customers. If you invest
through an authorized institution, you will have to follow its procedures. Your
institution may charge a fee for its services, in addition to the fees charged
by the Trust. You will also generally have to address your correspondence or
questions regarding a Fund to your institution.
GENERAL INFORMATION
You may purchase shares on any day that the New York Stock Exchange is open for
business (a "Business Day").
The Trust may reject any purchase order if it is determined that accepting the
order would not be in the best interests of the Fund or its shareholders.
The price per share (the offering price) will be the net asset value of $1.00
per share (NAV) next determined after a Fund receives your purchase order. The
NAV per share of the Armada Money Market and Government Money Market Funds is
calculated first at 3:00 p.m. (Eastern time), then as of the close of trading of
the New York Stock Exchange. The NAV per share of the Armada Treasury Money
Market, Tax Exempt Money Market, Pennsylvania Tax Exempt Money Market, Ohio
Municipal Money Market and Treasury Plus Money Market Funds are calculated on
each business day first at 1:00 p.m. (Eastern time), then as of the close of
trading of the New York Stock Exchange.
Each bond and equity fund calculates its NAV once each Business Day at the
regularly-scheduled close of normal trading on the New York Stock Exchange
(normally, 4:00 p.m. (Eastern time)). So, for you to receive the current
Business Day's NAV, generally a Fund must receive your purchase order before
4:00 p.m. (Eastern time).
So, for you to be eligible to receive dividends declared on the day you submit
your purchase order, generally a Fund must receive your order before 4:00 p.m.
(Eastern time) and federal funds (readily available funds) before 2:00 p.m.
(Eastern time) the following business day.
Purchase orders for shares of the Armada Money Market and Government Money
Market Funds which are received by the Transfer Agent by 3:00 p.m. (Eastern
time) are processed that day. Purchase orders for shares of the Armada Treasury
Money Market, Tax Exempt Money Market, Pennsylvania Tax Exempt Money Market,
Ohio Municipal Money Market and Treasury Plus Money Market Funds which are
received by the Transfer Agent by 1:00 p.m. (Eastern time) are also processed
that day.
HOW WE CALCULATE NAV
NAV for one Fund share is the value of that share's portion of all of the assets
in the Fund less liabilities and class expenses.
NON-MONEY MARKET FUNDS
In calculating NAV, a non-money market fund generally values its investment
portfolio at market price. In the event that a sale of a particular fixed income
security is not reported for that day, fixed income securities are priced at the
mean between the most recent quoted bid and asked prices. Unlisted securities
and securities traded on a national securities market for which market
quotations are readily available are valued at the mean between the most recent
bid and asked prices. In the event that a sale of a particular equity security
is not reported for that day, shares are priced at the last bid quotation. If
market prices are unavailable or a Fund thinks that they are unreliable, fair
value prices may be determined in good faith using methods approved by the Board
of Trustees.
MONEY MARKET FUNDS
In calculating NAV for the money market funds, we generally value a Fund's
investment portfolio using the amortized cost valuation method, which is
described in detail in our Statement of Additional Information. If this method
is determined to be unreliable during certain market conditions or for other
reasons, a Fund may value its portfolio at market price or fair value prices may
be determined in good faith using methods approved by the Board of Trustees.
Some Funds hold securities that are listed on foreign exchanges. These
securities may trade on weekends or other days when the Funds do not calculate
NAV. As a result, the market value of these Fund's investments may change on
days when you cannot purchase or sell Fund shares.
66 PROSPECTUS
<PAGE> 69
HOW TO SELL YOUR FUND SHARES
Holders of Class I Shares may sell shares by following procedures established
when they opened their account or accounts. If you have questions, call
1-800-622-FUND (3863).
If you own your shares through an account with a broker or other institution,
contact that broker or institution to sell your shares.
The sale price of each share will be the next NAV determined after the Fund
receives your request.
RECEIVING YOUR MONEY
Normally, we will send your sale proceeds within seven Business Days after we
receive your request in good order. Good order means that your request includes
complete information on your purchase, exchange or redemption and that the Fund
has received the appropriate assets. Your proceeds can be wired to your bank
account. Armada Funds do not charge a fee to wire your funds; however, your
institution may charge a fee. IF YOU RECENTLY PURCHASED YOUR SHARES BY CHECK,
REDEMPTION PROCEEDS MAY NOT BE AVAILABLE UNTIL YOUR CHECK HAS CLEARED (WHICH MAY
TAKE UP TO 15 DAYS FROM YOUR DATE OF PURCHASE).
REDEMPTIONS IN KIND
We generally pay sale (redemption) proceeds in cash. However, under unusual
conditions that make the payment of cash unwise (and for the protection of the
Fund's remaining shareholders) we might pay all or part of your redemption
proceeds in liquid securities with a market value equal to the redemption price
(redemption in kind). It is highly unlikely that your shares would ever be
redeemed in kind, but if they were you would probably have to pay transaction
costs to sell the securities distributed to you, as well as taxes on any capital
gains from the sale as with any redemption. The Armada Tax Managed Equity Fund
may fund redemptions of $1 million or more with appreciated securities rather
than cash.
SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES
A Fund may suspend your right to sell your shares if the New York Stock Exchange
restricts trading, the SEC declares an emergency or for other reasons. More
information about this is in our Statement of Additional Information.
DISTRIBUTION OF FUND SHARES
Each Fund has adopted a distribution plan under Rule 12b-1, pursuant to the 1940
Act, that allows each Fund to pay distribution and service fees for the sale and
distribution of its shares, and for services provided to shareholders. Because
these fees are paid out of a Fund's assets continuously, over time these fees
will increase the cost of your investment and may cost you more than paying
other types of sales charges.
Distribution fees, as a percentage of average daily net assets are as follows:
<TABLE>
<S> <C>
Armada International Equity Fund 0.04%
Armada Small Cap Value Fund 0.04%
Armada Small Cap Growth Fund 0.04%
Armada Equity Growth Fund 0.04%
Armada Tax Managed Equity Fund 0.04%
Armada Core Equity Fund 0.04%
Armada Equity Index Fund N/A
Armada Equity Income Fund 0.04%
Armada Balanced Allocation Fund 0.04%
Armada Total Return Advantage Fund N/A
Armada Bond Fund 0.04%
Armada Intermediate Bond Fund 0.04%
Armada GNMA Fund 0.04%
Armada Enhanced Income Fund N/A
Armada Ohio Tax Exempt Bond Fund 0.04%
Armada Pennsylvania Municipal Bond Fund N/A
Armada National Tax Exempt Bond Fund 0.04%
Armada Ohio Municipal Money Market Fund 0.04%
Armada Pennsylvania Tax Exempt
Money Market Fund 0.04%
Armada Tax Exempt Money Market Fund 0.04%
Armada Money Market Fund 0.04%
Armada Government Money Market Fund 0.04%
Armada Treasury Money Market Fund 0.04%
Armada Mid Cap Growth Fund Not yet in operation
Armada Large Cap Ultra Fund Not yet in operation
Armada U.S. Government Income Fund Not yet in operation
Armada Michigan Municipal
Bond Fund Not yet in operation
Armada Treasury Plus Money
Market Fund Not yet in operation
</TABLE>
The Distributor may, from time to time in its sole discretion, institute one or
more promotional incentive programs for dealers, which will be paid for by the
Distributor from any sales charge it receives or from any other source available
to it. Under any such program, the Distributor may provide incentives, in the
form of cash or other compensation, including merchandise, airline vouchers,
trips and vacation packages, to dealers selling shares of a Fund.
67 PROSPECTUS
<PAGE> 70
DIVIDENDS AND TAXES
Each Fund distributes its income as follows:
<TABLE>
<S> <C>
Armada International Equity Fund Annually
Armada Small Cap Value Fund Annually
Armada Small Cap Growth Fund Annually
Armada Equity Growth Fund Quarterly
Armada Tax Managed Equity Fund Quarterly
Armada Core Equity Fund Quarterly
Armada Equity Index Fund Quarterly
Armada Equity Income Fund Quarterly
Armada Balanced Allocation Fund Quarterly
Armada Total Return Advantage Fund Monthly
Armada Bond Fund Monthly
Armada Intermediate Bond Fund Monthly
Armada GNMA Fund Monthly
Armada Enhanced Income Fund Monthly
Armada Ohio Tax Exempt Bond Fund Monthly
Armada Pennsylvania Municipal
Bond Fund Monthly
Armada National Tax Exempt
Bond Fund Monthly
Armada Ohio Municipal Money
Market Fund Monthly
Armada Pennsylvania Tax Exempt
Money Market Fund Monthly
Armada Tax Exempt Money Market Fund Monthly
Armada Money Market Fund Monthly
Armada Government Money
Market Fund Monthly
Armada Treasury Money Market Fund Monthly
Armada Mid Cap Growth Fund Monthly*
Armada Large Cap Ultra Fund Monthly*
Armada U.S. Government Income Fund Monthly*
Armada Michigan Municipal Bond Fund Monthly*
Armada Treasury Plus Money
Market Fund Monthly*
</TABLE>
* As of the printing of this prospectus, these Funds have not yet commenced
operations.
Each Fund makes distributions of capital gains, if any, at least annually. If
you own Fund shares on a Fund's record date, you will be entitled to receive the
distribution.
You will receive dividends and distributions in the form of additional Fund
shares unless you elect to receive payment in cash. To elect cash payment, you
must notify the Fund in writing prior to the date of the distribution. Your
election will be effective for dividends and distributions paid after the Fund
receives your written notice. To cancel your election, simply send the Fund
written notice.
FEDERAL TAXES
Each Fund contemplates declaring as dividends each year all or substantially all
of its taxable income, including its net capital gain (the excess of long-term
capital gain over short-term capital loss). Distributions attributable to the
net capital gain of a Fund will be taxable to you as long-term capital gain,
regardless of how long you have held your shares. Other Fund distributions
(other than exempt-interest dividends, discussed below) will generally be
taxable as ordinary income. You will be subject to income tax on Fund
distributions regardless of whether they are paid in cash or reinvested in
additional shares. You will be notified annually of the tax status of
distributions to you.
In the case of any Fund other than a money-market Fund, you should note that if
you purchase shares just before a distribution, the purchase price will reflect
the amount of the upcoming distribution, but you will be taxable on the entire
amount of the distribution received, even though, as an economic matter, the
distribution simply constitutes a return of capital. This is known as "buying
into a dividend."
You will recognize taxable gain or loss on a sale, exchange or redemption of
your shares, including an exchange for shares of another Fund, or an in-kind
redemption, based on the difference between your tax basis in the shares and the
amount you receive for them. (To aid in computing your tax basis, you generally
should retain your account statements for the periods during which you held
shares.) Any loss realized on shares held for six months or less will be treated
as a long-term capital loss to the extent of any capital gain dividends that
were received on the shares.
The one major exception to these tax principles is that distributions on, and
sales, exchanges and redemptions of, shares held in an IRA(or other
tax-qualified plan) will not be currently taxable.
It is expected that the Armada International Equity Fund will be subject to
foreign withholding taxes with respect to dividends or interest received from
sources in foreign countries. The Armada International Equity Fund may make an
election to treat a proportionate amount of such taxes as constituting a
distribution to each shareholder, which would allow each shareholder either (1)
to credit such proportionate amount of taxes against U.S. federal income tax
liability or (2) to take such amount as an itemized deduction.
68 PROSPECTUS
<PAGE> 71
The Armada Tax Exempt Money Market Fund, Armada Pennsylvania Tax Exempt Money
Market Fund, Armada Ohio Municipal Money Market Fund, Armada Ohio Tax Exempt
Bond Fund, Armada Pennsylvania Municipal Bond Fund, Armada National Tax Exempt
Bond Fund, and Armada Michigan Municipal Bond Fund (the "Tax Exempt Funds")
anticipate that substantially all of their income dividends will be "exempt
interest dividends," which are exempt from federal income taxes. However, some
dividends will be taxable, such as dividends that are derived from occasional
taxable investments, and in the case of other than money market Funds,
distributions of short and long-term capital gains. Interest on indebtedness
incurred by a shareholder to purchase or carry shares of any Tax Exempt Fund
generally will not be deductible for federal income tax purposes.
You should note that a portion of the exempt-interest dividends paid by the Tax
Exempt Funds may constitute an item of tax preference for purposes of
determining federal alternative minimum tax liability. Exempt-interest dividends
will also be considered along with other adjusted gross income in determining
whether any Social Security or railroad retirement payments received by you are
subject to federal income taxes.
If you receive an exempt-interest dividend with respect to any share and the
share is held by you for six months or less, any loss on the sale or exchange of
the share will be disallowed to the extent of such dividend amount.
The foregoing is only a summary of certain tax considerations under current law,
which may be subject to change in the future. Shareholders who are nonresident
aliens, foreign trusts or estates, or foreign corporations or partnerships, may
be subject to different United States federal income tax treatment. You should
consult your tax adviser for further information regarding federal, state, local
and/or foreign tax consequences relevant to your specific situation.
STATE AND LOCAL TAXES
Shareowners may also be subject to state and local taxes on distributions and
redemptions. State income taxes may not apply, however, to the portions of each
Fund's distributions, if any, that are attributable to interest on Federal
Securities or interest on securities of the particular state or localities
within the state. The Armada Pennsylvania Tax Exempt Money Market Fund and
Armada Pennsylvania Municipal Bond Fund intend to distribute income that is
exempt from Pennsylvania personal income taxes. The Armada Ohio Tax Exempt Bond
Fund and Armada Ohio Municipal Money Market Fund intend to distribute income
that is exempt from Ohio personal income taxes. The Armada Michigan Municipal
Bond Fund intends to distribute income that is exempt from Michigan income
taxes. Shareowners should consult their tax advisers regarding the tax status of
distributions in their state and locality.
Each Fund may invest a portion of its assets in securities that generate taxable
income for federal or state income taxes. Income exempt from federal tax may be
subject to state and local taxes. Any capital gains distributed by these Funds
may be taxable.
The Funds use a tax management technique known as "highest in, first out." Using
this technique, the portfolio holdings that have experienced the smallest gain
or largest loss are sold first in an effort to minimize capital gains and
enhance after-tax returns.
MORE INFORMATION ABOUT TAXES IS IN THE STATEMENT OF ADDITIONAL INFORMATION.
69 PROSPECTUS
<PAGE> 72
FINANCIAL HIGHLIGHTS
The tables that follow present performance information about Class I Shares of
each Fund. This information is intended to help you understand each Fund's
financial performance for the past five years, or, if shorter, the period of the
Fund's operations. Some of this information reflects financial information for a
single Fund share. The total returns in the table represent the rate that you
would have earned (or lost) on an investment in a Fund, assuming you reinvested
all of your dividends and distributions. This information , except for the
Financial Highlights of the Bond Fund, GNMA Fund, Pennsylvania Municipal Fund
and Pennsylvania Tax Exempt Money Market Fund for each Fund's respective
commencement of operations date through May 31, 1996, has been audited by Ernst
& Young LLP, independent auditors. Their report, along with each Fund's
financial statements, appears in the annual report that accompanies our
Statement of Additional Information. The Financial Highlights of the Bond Fund,
GNMA Fund, Pennsylvania Municipal Fund and Pennsylvania Tax Exempt Money Market
Fund and for each Fund's respective commencement of operations date through May
31, 1996 were audited by Coopers & Lybrand, L.L.P., each Fund's predecessor
independent accountants. You can obtain the annual report, which contains more
performance information, at no charge by calling 1-800-622-FUND (3863).
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ARMADA INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
FOR THE YEAR ENDED FOR THE PERIOD ENDED
MAY 31, 1999 MAY 31, 1998
-------------------------------------------
CLASS I CLASS I(1)
-------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 10.86 $ 10.00
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss) (0.01) 0.08
Net gain on securities (realized
and unrealized) 0.11 0.79
- --------------------------------------------------------------------------------
Total from investment operations 0.10 0.87
- --------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.05) (0.01)
- --------------------------------------------------------------------------------
Total distributions (0.05) (0.01)
- --------------------------------------------------------------------------------
Net asset value, end of period $ 10.91 $ 10.86
================================================================================
TOTAL RETURN 0.95% 8.76%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's) $ 199,205 $135,942
Ratio of expenses to average
net assets 1.43% 1.09%(3)
Ratio of net investment income/
(loss) to average net assets 0.12% 1.19%(3)
Ratio of expenses to average net
assets before fee waivers 1.43% 1.24%(3)
Ratio of net investment income/
(loss) to average net assets
before fee waivers 0.12% 1.04%(3)
Portfolio turnover rate 78% 28%
</TABLE>
(1) Total Class I commenced operations on August 1, 1997.
(2) Total Returns are for the period indicated and have not been annualized.
(3) Total Annualized.
70 PROSPECTUS
<PAGE> 73
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
ARMADA SMALL CAP VALUE FUND
- --------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31, FOR THE PERIOD ENDED MAY 31,
--------------------------- --------------------------------------
1999 1998 1997 1996 1995
----------------------------------------------------------------------
CLASS I CLASS I CLASS I CLASS I CLASS I(1)
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.72 $ 15.15 $ 13.10 $ 11.38 $ 10.00
- -------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.09 0.06 0.09 0.08 0.10
Net gain/(loss) on securities (realized and unrealized) (0.78) 2.87 2.90 2.41 1.36
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (0.69) 2.93 2.99 2.49 1.46
- -------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.05) (0.07) (0.09) (0.08) (0.04)
Dividends in excess of net investment income (0.00) (0.00) (0.00) (0.02) (0.00)
Distributions from net realized capital gains (1.33) (2.29) (0.85) (0.67) (0.04)
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.38) (2.36) (0.94) (0.77) (0.08)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.65 $ 15.72 $ 15.15 $ 13.10 $ 11.38
===============================================================================================================================
TOTAL RETURN (3.67)% 19.82% 23.61% 22.64% 17.42%(3)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $ 270,382 $284,295 $199,311 $ 99,294 $ 50,993
Ratio of expenses to average net assets 1.12% 0.98% 0.97% 1.05% 1.01%(2)
Ratio of net investment income/(loss) to
average net assets 0.70% 0.43% 0.83% 0.83% 1.31%(2)
Ratio of expenses to average net assets
before fee waivers 1.12% 0.98% 0.97% 1.06% 1.15%(2)
Ratio of net investment income/(loss) to average
net assets before fee waivers 0.70% 0.43% 0.83% 0.82% 1.17%(2)
Portfolio turnover rate 79% 89% 64% 106% 69%
</TABLE>
(1) Class I commenced operations on July 26, 1994.
(2) Annualized.
(3) Returns are for the period indicated and have not been annualized.
71 PROSPECTUS
<PAGE> 74
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
ARMADA SMALL CAP GROWTH FUND
- --------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE PERIOD ENDED
MAY 31, 1999 MAY 31, 1998
----------------------------------------------
CLASS I CLASS I(2)
----------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 11.69 $ 10.00
- -------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss) (0.03)(4) 0.01
Net gain/(loss) on securities (realized and unrealized) (1.41) 1.72
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (1.44) 1.73
- -------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.00) (0.01)
Distributions from net realized capital gains (0.11) (0.03)
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.11) (0.04)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.14 $ 11.69
===============================================================================================================================
TOTAL RETURN (12.36)% 17.35%(1)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $ 80,145 $ 54,476
Ratio of expenses to average net assets 1.27% 0.98%(3)
Ratio of net investment income/(loss) to average net assets (0.27)% 0.14%(3)
Ratio of expenses to average net assets before fee waivers 1.27% 1.09%(3)
Ratio of net investment income/(loss) to average net assets before fee waivers (0.27)% 0.03%(3)
Portfolio turnover rate 159% 31%
</TABLE>
(1) Returns are for the period indicated and have not been annualized.
(2) Class I commenced operations on August 1, 1997.
(3) Annualized.
(4) Calculated based upon average shares outstanding.
72 PROSPECTUS
<PAGE> 75
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
ARMADA EQUITY GROWTH FUND
- --------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
--------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------------------------------------------------------------------
CLASS I CLASS I CLASS I CLASS I CLASS I
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 21.35 $ 18.63 $ 18.02 $ 14.77 $ 13.66
- -----------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss) (0.03)(1) (0.00) 0.09 0.14 0.21
Net gain on securities (realized and unrealized) 4.28 5.00 4.66 3.46 1.21
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 4.25 5.00 4.75 3.60 1.42
- -----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.00) (0.01) (0.09) (0.14) (0.20)
Dividends in excess of net investment income (0.00) (0.00) (0.02) (0.02) (0.00)
Distributions from net realized capital gains (0.99) (2.27) (4.03) (0.19) (0.00)
Distributions in excess of net realized capital gains (0.00) (0.00) (0.00) (0.00) (0.11)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.99) (2.28) (4.14) (0.35) (0.31)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 24.61 $ 21.35 $ 18.63 $ 18.02 $ 14.77
===================================================================================================================================
TOTAL RETURN 20.16% 28.65% 29.57% 24.61% 10.62%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $1,262,154 $ 352,413 $ 255,594 $ 166,671 $119,634
Ratio of expenses to average net assets 0.92% 0.98% 0.97% 1.01% 1.01%
Ratio of net investment income/(loss)
to average net assets (0.11)% (0.01)% 0.49% 0.85% 1.53%
Ratio of expenses to average net assets
before fee waivers 0.92% 0.98% 0.97% 1.03% 1.02%
Ratio of net investment income/(loss) to average
net assets before fee waivers (0.11)% (0.01)% 0.49% 0.83% 1.51%
Portfolio turnover rate 57% 260% 197% 74% 17%
</TABLE>
(1) Calculated based upon average shares outstanding.
73 PROSPECTUS
<PAGE> 76
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
ARMADA TAX MANAGED EQUITY FUND
- --------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE PERIOD ENDED
MAY 31, 1999 MAY 31, 1998
----------------------------------------------
CLASS I CLASS I(1)
----------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 9.93 $ 10.00
- -------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 (0.00)
Net gain/(loss) on securities (realized and unrealized) 2.21 (0.07)
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.26 (0.07)
- -------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.05) (0.00)
Distributions from net realized capital gains (0.01) (0.00)
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.06) (0.00)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.13 $ 9.93
===============================================================================================================================
TOTAL RETURN 22.82% (4.81%)(2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $ 241,501 $ 158,867
Ratio of expenses to average net assets 0.83% 0.29%(2)
Ratio of net investment income/(loss) to average net assets 0.37% 0.91%(2)
Ratio of expenses to average net assets before fee waivers 1.01% 1.02%(2)
Ratio of net investment income/(loss) to average net assets before fee waivers 0.19% 0.18%(2)
Portfolio turnover rate 5% 0%
</TABLE>
(1) Class I commenced operations on April 9, 1998.
(2) Annualized.
74 PROSPECTUS
<PAGE> 77
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
ARMADA CORE EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE PERIOD ENDED
MAY 31, 1999 MAY 31, 1998
----------------------------------------------
CLASS I CLASS I(2)
----------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 11.35 $ 10.00
- -------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss) (0.02)(4) 0.05
Net gain on securities (realized and unrealized) 2.94 1.35
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.92 1.40
- -------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.01) (0.05)
Distributions from net realized capital gains (0.51) (0.00)
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.52) (0.05)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.75 $ 11.35
===============================================================================================================================
TOTAL RETURN 26.08% 14.03%(1)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $ 145,603 $ 110,504
Ratio of expenses to average net assets 0.98% 0.89%(3)
Ratio of net investment income/(loss) to average net assets (0.15)% 0.61%(3)
Ratio of expenses to average net assets before fee waivers 0.98% 1.06%(3)
Ratio of net investment income/(loss) to average net assets before fee waivers (0.15)% 0.44%(3)
Portfolio turnover rate 43% 60%
</TABLE>
(1) Returns are for the period indicated and have not been annualized.
(2) Class I commenced operations on August 1, 1997.
(3) Annualized.
(4) Calculated based upon average shares outstanding.
75 PROSPECTUS
<PAGE> 78
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
ARMADA EQUITY INDEX FUND
- --------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED MAY 31, 1999
---------------------------------
CLASS I(1)
---------------------------------
<S> <C>
Net asset value, beginning of period $ 10.00
- -------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.11
Net gain on securities (realized and unrealized) 1.29
- -------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.40
- -------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.08)
- -------------------------------------------------------------------------------------------------------------------------
Total distributions (0.08)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.32
=========================================================================================================================
TOTAL RETURN 14.16%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $ 253,854
Ratio of expenses to average net assets 0.20%(3)
Ratio of net investment income to average net assets 1.38%(3)
Ratio of expenses to average net assets before fee waivers 0.55%(3)
Ratio of net investment income to average net assets before fee waivers 1.03%(3)
Portfolio turnover rate 9%
</TABLE>
(1) Class I commenced operations on July 10, 1998.
(2) Returns are for the period indicated and have not been annualized.
(3) Annualized.
76 PROSPECTUS
<PAGE> 79
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
ARMADA EQUITY INCOME FUND
- --------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
--------------------------------------------- FOR THE PERIOD
1999 1998 1997 1996 ENDED MAY 31, 1995
--------------------------------------------- ------------------
CLASS I CLASS I CLASS I CLASS I CLASS I(1)
--------------------------------------------- ------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 17.53 $ 14.87 $ 12.66 $ 11.01 $ 10.00
- -------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.30 0.27 0.30 0.34 0.34
Net gain on securities (realized and unrealized) 1.50 3.44 2.73 1.79 0.94
Total from investment operations 1.80 3.71 3.03 2.13 1.28
- -------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.28) (0.32) (0.31) (0.34) (0.27)
Distributions from net realized capital gains (0.25) (0.73) (0.51) (0.14) (0.00)
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.53) (1.05) (0.82) (0.48) (0.27)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 18.80 $ 17.53 $ 14.87 $ 12.66 $ 11.01
===============================================================================================================================
TOTAL RETURN 10.62% 25.69% 24.62% 19.72% 14.34%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $ 548,361 $193,923 $127,130 $61,978 $ 36,194
Ratio of expenses to average net assets 0.93% 0.92% 1.01% 1.06% 0.99%(2)
Ratio of net investment income to
average net assets 2.07% 1.80% 2.44% 3.02% 3.87%(2)
Ratio of expenses to average net assets
before fee waivers 0.93% 0.92% 1.01% 1.08% 1.21%(2)
Ratio of net investment income to average
net assets before fee waivers 2.07% 1.80% 2.44% 3.00% 3.66%(2)
Portfolio turnover rate 19% 18% 35% 53% 12%
</TABLE>
(1) Class I commenced operations on July 1, 1994.
(2) Annualized.
77 PROSPECTUS
<PAGE> 80
FINANCIAL HIGHLIGHTS
ARMADA BALANCED ALLOCATION FUND
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED MAY 31, 1999
---------------------------------
CLASS I(2)
---------------------------------
<S> <C>
Net asset value, beginning of period $ 10.00
- -------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.18
Net gain on securities (realized and unrealized) 0.28
- -------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.46
- -------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.15)
- -------------------------------------------------------------------------------------------------------------------------
Total distributions (0.15)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.31
=========================================================================================================================
TOTAL RETURN 4.57%(1)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $ 85,027
Ratio of expenses to average net assets 1.06%(3)
Ratio of net investment income to average net assets 2.25%(3)
Ratio of expenses to average net assets before fee waivers 1.06%(3)
Ratio of investment income to average net assets before fee waivers 2.25%(3)
Portfolio turnover rate 116%
</TABLE>
(1) Returns are for the period indicated and have not been annualized.
(2) Class I commenced operations on July 10, 1998.
(3) Annualized.
78 PROSPECTUS
<PAGE> 81
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
ARMADA TOTAL RETURN ADVANTAGE FUND
- --------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
---------------------------------------------------
FOR THE PERIOD
1999 1998 1997 1996 ENDED MAY 31, 1995
--------------------------------------------------- ------------------
CLASS I CLASS I CLASS I CLASS I CLASS I(1)
--------------------------------------------------- ------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.25 $ 9.89 $ 9.88 $ 10.55 $ 10.00
- -----------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.58 0.64 0.67 0.70(4) 0.65(4)
Net gain/(loss) on securities (realized and unrealized) (0.22) 0.36 0.15 (0.24) 0.43
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.36 1.00 0.82 0.46 1.08
- -----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.58) (0.64) (0.67) (0.70) (0.53)
Dividends in excess of net investment income (0.00) (0.00) (0.00) (0.12) (0.00)
Distributions from net realized capital gains (0.04) (0.00) (0.00) (0.31) (0.00)
Distributions in excess of net realized capital gains (0.00) (0.00) (0.14) (0.00) (0.00)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.62) (0.64) (0.81) (1.13) (0.53)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.99 $ 10.25 $ 9.89 $ 9.88 $ 10.55
===================================================================================================================================
TOTAL RETURN 3.54% 10.35% 8.51% 4.22% 12.52%(3)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $ 328,417 $296,075 $259,228 $280,401 $261,403
Ratio of expenses to average net assets 0.45% 0.31% 0.16% 0.13% 0.18%(2)
Ratio of net investment income to average net assets 5.72% 6.29% 6.70% 6.67% 7.23%(2)
Ratio of expenses to average net assets before fee waivers 0.65% 0.72% 0.71% 0.69% 0.77%(2)
Ratio of net investment income to average
net assets before fee waivers 5.52% 5.88% 6.15% 6.11% 6.64%(2)
Portfolio turnover rate 142% 170% 169% 268% 166%
</TABLE>
(1) Class I commenced operations on July 7, 1994.
(2) Annualized.
(3) Total returns have been annualized based upon the period from commencement
date through May 31, 1995. Gross total returns of Class I for the period
were 11.22%.
(4) Calculated based on average shares outstanding.
79 PROSPECTUS
<PAGE> 82
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
ARMADA BOND FUND
- --------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
-----------------------------------------------------------------------------------------
1999 1998 1997 FOR THE FOR THE FOR THE
--------------------------------------- PERIOD ENDED YEAR ENDED PERIOD ENDED
CLASS I CLASS I CLASS I(3) MAY 31,1996(3) APRIL 30,1996(3) APRIL 30,1995(3)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.27 $ 10.02 $ 9.97 $ 10.04 $ 10.02 $ 10.00
- -----------------------------------------------------------------------------------------------------------------------------------
Income From Investment Operations
Net investment income 0.56 0.59 0.59 0.05 0.64 0.44
Net gain/(loss) on securities
(realized and unrealized) (0.17) 0.25 0.13 (0.07) 0.07 0.02
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.39 0.84 0.72 (0.02) 0.71 0.46
- -----------------------------------------------------------------------------------------------------------------------------------
Less Distributions
Dividends from net investment income (0.56) (0.59) (0.59) (0.05) (0.64) (0.44)
Distributions from net realized capital gains (0.14) (0.00) (0.00) (0.00) (0.05) (0.00)
Distributions in excess of net
realized capital gains (0.00) (0.00) (0.08) (0.00) (0.00) (0.00)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.70) (0.59) (0.67) (0.05) (0.69) (0.44)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.96 $ 10.27 $ 10.02 $ 9.97 $ 10.04 $ 10.02
===================================================================================================================================
Total Return 3.82% 8.55% 7.41% (0.19)%(2,4) 7.09%(4) 4.75%(2,4)
Ratios/Supplemental Data
Net assets, end of period (in 000's) $758,713 $132,620 $91,161 $88,829 $89,901 $53,316
Ratio of expenses to average net assets 0.70% 0.80% 0.83% 0.85%(1) 0.85% 0.85%(1)
Ratio of net investment income to
average net assets 5.44% 5.72% 5.83% 5.88%(1) 6.20% 6.17%(1)
Ratio of expenses to average
net assets before fee waivers 0.70% 0.80% 0.96% 1.25%(1) 1.25% 1.33%(1)
Ratio of net investment income to average
net assets before fee waivers 5.44% 5.72% 5.71% 5.48%(1) 5.80% 5.69%(1)
Portfolio turnover rate 270% 220% 96% 2% 94% 172%
</TABLE>
(1) Annualized.
(2) Returns are for the period indicated and have not been annualized.
(3) Activity for the period presented includes that of a predecessor fund
through September 6, 1996. The predecessor fund commenced operations on
August 10, 1994. During 1996, the predecessor fund changed its fiscal year-
end from April 30 to May 31.
(4) Total return excludes sales charge.
80 PROSPECTUS
<PAGE> 83
- --------------------------------------------------------------------------------
ARMADA INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
----------------------------------------------------------------------------
1999 1998 1997 1996 1995
----------------------------------------------------------------------------
CLASS I CLASS I CLASS I CLASS I CLASS I
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.59 $ 10.37 $ 10.30 $ 10.54 $ 10.24
- -----------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.56 0.60 0.60 0.61 0.63
Net gain/(loss) on securities (realized and unrealized) (0.14) 0.22 0.07 (0.22) 0.30
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.42 0.82 0.67 0.39 0.93
- -----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.56) (0.60) (0.60) (0.61) (0.63)
Distributions from net realized capital gains (0.06) (0.00) (0.00) (0.00) (0.00)
Distributions in excess of net realized capital gains (0.00) (0.00) (0.00) (0.02) (0.00)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.62) (0.60) (0.60) (0.63) (0.63)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.39 $ 10.59 $ 10.37 $ 10.30 $ 10.54
===================================================================================================================================
TOTAL RETURN 3.98% 8.09% 6.63% 3.79% 9.55%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000s) $313,368 $166,710 $121,271 $111,240 $88,047
Ratio of expenses to average net assets 0.61% 0.65% 0.70% 0.80% 0.85%
Ratio of net investment income to average net assets 5.21% 5.71% 5.76% 5.78% 6.24%
Ratio of expenses to average net assets
before fee waivers 0.75% 0.80% 0.79% 0.82% 0.86%
Ratio of net investment income to average
net assets before fee waivers 5.07% 5.56% 5.66% 5.76% 6.23%
Portfolio turnover rate 256% 160% 217% 45% 42%
</TABLE>
81 PROSPECTUS
<PAGE> 84
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
ARMADA GNMA FUND
- -------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
----------------------------------
1999 1998 1997 FOR THE FOR THE FOR THE
---------------------------------- PERIOD ENDED YEAR ENDED PERIOD ENDED
CLASS I CLASS I CLASS I(3) MAY 31, 1996(3) APRIL 30, 1996(3) APRIL 30, 1995(3)
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.36 $ 10.15 $ 10.03 $ 10.12 $ 10.16 $ 10.00
- -----------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.61 0.61 0.65 0.05 0.66 0.48
Net gain/(loss) on securities
(realized and unrealized) (0.20) 0.31 0.22 (0.09) 0.14 0.16
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.41 0.92 0.87 (0.04) 0.80 0.64
- -----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.60) (0.61) (0.65) (0.05) (0.66) (0.48)
Dividends from net realized capital gains (0.07) (0.10) (0.01) (0.00) (0.18) (0.00)
Distributions in excess of net
realized capital gains (0.00) (0.00) (0.09) (0.00) (0.00) (0.00)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.67) (0.71) (0.75) (0.05) (0.84) (0.48)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.10 $ 10.36 $ 10.15 $ 10.03 $ 10.12 $ 10.16
===================================================================================================================================
TOTAL RETURN 4.02% 9.17% 9.03% (0.35)%(2,4) 7.97%(4) 6.61%(2,4)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $ 96,808 $ 83,624 $ 64,501 $ 60,532 $62,161 $ 42,212
Ratio of expenses to average net assets 0.78% 0.84% 0.86% 0.85%(1) 0.85% 0.85%(1)
Ratio of net investment income to
average net assets 5.92% 5.83% 6.45% 6.33%(1) 6.30% 6.68%(1)
Ratio of expenses to average net assets
before fee waivers 0.78% 0.84% 1.01% 1.28%(1) 1.29% 1.40%(1)
Ratio of net investment income to average
net assets before fee waivers 5.92% 5.83% 6.30% 5.90%(1) 5.86%(1) 6.13%(1)
Portfolio turnover rate 85% 291% 57% 1% 149% 226%
</TABLE>
(1) Annualized.
(2) Returns are for the period indicated and have not been annualized.
(3) Activity for the period presented includes that of the predecessor fund
through September 6, 1996. The predecessor fund commenced operations on
August 10, 1994. During 1996, the predecessor fund changed its fiscal year-
end from April 30 to May 31.
(4) Total return excludes sales charge.
82 PROSPECTUS
<PAGE> 85
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
ARMADA ENHANCED INCOME FUND
- -------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
----------------------------------------------------
FOR THE PERIOD
1999 1998 1997 1996 ENDED MAY 31, 1995
---------------------------------------------------- ------------------
CLASS I CLASS I CLASS I CLASS I CLASS I(1)
---------------------------------------------------- ------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.06 $ 9.99 $ 10.01 $ 10.16 $ 10.00
- -----------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.56 0.57 0.58 0.58 0.51(5)
Net gain/(loss) on securities (realized and unrealized) (0.05) 0.08 0.01 (0.05) 0.06
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.51 0.65 0.59 0.53 0.57
- -----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.56) (0.57) (0.58) (0.58) (0.41)
Dividends in excess of net investment income 0.00 (0.00) (0.00) (0.10) (0.00)
Distributions of net realized capital gains (0.05) (0.01) (0.03) (0.00) (0.00)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.61) (0.58) (0.61) (0.68) (0.41)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.96 $ 10.06 $ 9.99 $ 10.01 $ 10.16
===================================================================================================================================
TOTAL RETURN 5.14% 6.68% 6.02% 5.36% 6.54%(2,3)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $72,291 $ 71,888 $ 61,031 $66,918 $ 60,467
Ratio of expenses to average net assets 0.43% 0.33% 0.21% 0.23% 0.21%(2)
Ratio of net investment income to average net assets 5.49% 5.69% 5.74% 5.72% 5.70%(2)
Ratio of expenses to average net assets before
fee waivers 0.65% 0.69% 0.66% 0.70% 0.71%(2)
Ratio of net investment income to average
net assets before fee waivers 5.27% 5.33% 5.29% 5.25% 5.20%(2)
Portfolio turnover rate 190% 135% 225% 98% 36%
</TABLE>
(1) Class I commenced operations on July 7, 1994.
(2) Annualized.
(3) Total return excludes sales charge.
(4) Total returns have been annualized based upon the period from the Class'
commencement date through May 31, 1995. Gross total returns of Class I for
the period was 5.87%.
(5) Calculation based upon average shares outstanding.
83 PROSPECTUS
<PAGE> 86
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
Armada Ohio Tax Exempt Bond Fund
- -------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
-------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------------------------------------------------------------------
CLASS I CLASS I CLASS I CLASS I CLASS I
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.13 $ 10.86 $ 10.70 $ 10.74 $ 10.57
- -----------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.53 0.51 0.51 0.50 0.50
Net gain/(loss) on securities (realized and unrealized) (0.09) 0.28 0.16 (0.04) 0.17
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.44 0.79 0.67 0.46 0.67
- -----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.53) (0.51) (0.51) (0.50) (0.50)
Distributions from net realized capital gains (0.01) (0.01) (0.00) (0.00) (0.00)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.54) (0.52) (0.51) (0.50) (0.50)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.03 $ 11.13 $ 10.86 $ 10.70 $ 10.74
===================================================================================================================================
TOTAL RETURN 3.94% 7.43% 6.37% 4.36% 6.61%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $ 205,365 $ 165,395 $ 91,366 $ 82,886 $71,996
Ratio of expenses to average net assets 0.28% 0.25% 0.24% 0.26% 0.24%
Ratio of net investment income to average net assets 4.77% 4.67% 4.71% 4.68% 4.82%
Ratio of expenses to average net assets
before fee waivers 0.78% 0.80% 0.79% 0.83% 0.80%
Ratio of net investment income to average
net assets before fee waivers 4.27% 4.12% 4.16% 4.11% 4.26%
Portfolio turnover rate 19% 15% 23% 10% 3%
</TABLE>
84 PROSPECTUS
<PAGE> 87
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
ARMADA PENNSYLVANIA MUNICIPAL BOND FUND
- -------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
-------------------------------------------
1999 1998 1997 FOR THE FOR THE FOR THE
------------------------------------------- PERIOD ENDED YEAR ENDED PERIOD ENDED
CLASS I CLASS I CLASS I(3) MAY 31, 1996(3) APRIL 30, 1996(3) APRIL 30, 1995(3)
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.45 $ 10.22 $ 10.08 $ 10.12 $ 10.04 $ 10.00
- -----------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.51 0.46 0.44 0.04 0.43 0.29
Net gain/(loss) on securities
(realized and unrealized) (0.07) 0.24 0.17 (0.04) 0.08 0.04
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.44 0.70 0.61 0.00 0.51 0.33
- -----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.49) (0.46) (0.44) (0.04) (0.43) (0.29)
Distributions from net realized
capital gains (0.01) (0.00) (0.02) (0.00) (0.00) (0.00)
Distributions in excess of net
realized capital gains (0.00) (0.01) (0.01) (0.00) (0.00) (0.00)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.50) (0.47) (0.47) (0.04) (0.43) (0.29)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.39 $ 10.45 $ 10.22 $ 10.08 $ 10.12 $ 10.04
===================================================================================================================================
TOTAL RETURN 4.21% 6.95% 6.21% (0.03)%(1,4) 5.06%(4) 3.38%(2,4)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's) $40,171 $ 38,753 $ 36,769 $ 38,733 $ 38,809 $ 34,638
Ratio of expenses to average
net assets 0.48% 0.69% 0.87% 0.85%(1) 0.85% 0.85%(1)
Ratio of net investment income to
average net assets 4.80% 4.40% 4.35% 4.32%(1) 4.16% 4.05%(1)
Ratio of expenses to average net
assets before fee waivers 0.83% 0.84% 1.02% 1.31%(1) 1.24% 1.36%(1)
Ratio of net investment income to
average net assets before
fee waivers 4.45% 4.25% 4.20% 3.86%(1) 3.77% 3.54%(1)
Portfolio turnover rate 15% 20% 42% 0% 22% 4%
</TABLE>
(1) Annualized.
(2) Returns are for the period indicated and have not been annualized.
(3) Activity for the period presented includes that of the predecessor fund
through September 6, 1996. The predecessor fund commenced operations on
August 10, 1994. During 1996, the predecessor fund changed its fiscal year
end from April 30 to May 31.
(4) Total return excludes sales charge.
85 PROSPECTUS
<PAGE> 88
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
ARMADA NATIONAL TAX EXEMPT BOND FUND
- -------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31, 1999
-------------------------------
CLASS I CLASS I(1)
-------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 10.03 $ 10.00
- -------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.45 0.07
Net gain/(loss) on securities (realized and unrealized) (0.04) 0.03
- -------------------------------------------------------------------------------------------------------
Total from investment operations 0.41 0.10
- -------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.45) (0.07)
Distribution from net realized capital gains (0.03) (0.00)
- -------------------------------------------------------------------------------------------------------
Total distributions (0.48) (0.07)
- -------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.96 $ 10.03
=======================================================================================================
TOTAL RETURN 4.07% 7.03%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $ 100,638 $ 80,259
Ratio of expenses to average net assets 0.36% 0.33%(2)
Ratio of net investment income to average net assets 4.39% 4.62%(2)
Ratio of expenses to average net assets before fee waivers 0.87% 0.87%(2)
Ratio of net investment income to average net assets before fee waivers 3.88% 4.08%(2)
Portfolio turnover rate 23% 0%
</TABLE>
(1) Class I commenced operations on April 9, 1998.
(2) Annualized.
86 PROSPECTUS
<PAGE> 89
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
ARMADA OHIO MUNICIPAL MONEY MARKET FUND
- -------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED MAY 31, 1999
--------------------------------------
CLASS I(1)
--------------------------------------
<S> <C>
Net asset value, beginning of period $1.00
- --------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.02
- --------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.02)
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00
====================================================================================================================
TOTAL RETURN 2.01%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $99,342
Ratio of expenses to average net assets 0.35%(3)
Ratio of net investment income to average net assets 2.77%(3)
Ratio of expenses to average net assets before fee waivers 0.55%(3)
Ratio of net investment income to average net assets before fee waivers 2.57%(3)
</TABLE>
(1) Class I commenced operations on September 15, 1998.
(2) Returns are for the period indicated and have not been annualized.
(3) Annualized.
87 PROSPECTUS
<PAGE> 90
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------
ARMADA PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND
- -----------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
For the Year Ended May 31,
------------------------------------------
1999 1998 1997 For the For the For the
------------------------------------------ Period Ended Year Ended Period Ended
Class I Class I Class I(3) May 31, 1996(3) April 30, 1996(3) April 30, 1995(3)
------------------------------------------- --------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.03 0.03 0.03 0.00 0.03 0.02
- -------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment
income (0.03) (0.03) (0.03) (0.00) (0.03) (0.02)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 2.92% 3.41% 3.26% 0.28%(2) 3.36% 2.32%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's) $77,214 $73,264 $60,876 $68,742 $70,422 $56,668
Ratio of expenses to average net
assets 0.34% 0.34% 0.41% 0.55%(1) 0.55% 0.55%(1)
Ratio of net investment income to
average net assets 2.82% 3.35% 3.20% 3.24%(1) 3.29% 3.21%(1)
Ratio of expenses to average net
assets before fee waivers 0.59% 0.58% 0.74% 0.97%(1) 0.96% 1.04%(1)
Ratio of net investment income to
average net assets before
fee waivers 2.57% 3.11% 2.87% 2.82%(1) 2.88% 2.72%(1)
</TABLE>
(1) Annualized.
(2) Returns are for the period indicated and have not been annualized.
(3) Activity for the period presented includes that of the predecessor fund
through September 6, 1996. The predecessor fund commenced operations on
August 10, 1994. During 1996, the predecessor fund changed its fiscal year
end from April 30 to May 31.
88 PROSPECTUS
<PAGE> 91
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
ARMADA TAX EXEMPT MONEY MARKET FUND
- -------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
-----------------------------------------------------------------------------
1999 1998 1997 1996 1995
-----------------------------------------------------------------------------
CLASS I CLASS I CLASS I CLASS I CLASS I
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.03 0.03 0.03 0.03 0.03
- -----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.03) (0.03) (0.03) (0.03) (0.03)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
===================================================================================================================================
TOTAL RETURN 3.00% 3.40% 3.23% 3.40% 3.14%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $434,178 $418,953 $370,679 $261,808 $172,643
Ratio of expenses to average net assets 0.30% 0.30% 0.29% 0.30% 0.35%
Ratio of net investment income to average net assets 2.92% 3.32% 3.18% 3.33% 3.15%
Ratio of expenses to average net assets before fee waivers 0.50% 0.50% 0.49% 0.51% 0.56%
Ratio of net investment income to average
net assets before fee waivers 2.72% 3.12% 2.98% 3.12% 2.94%
</TABLE>
89 PROSPECTUS
<PAGE> 92
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
ARMADA MONEY MARKET FUND
- -------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
-----------------------------------------------------------------------------
1999 1998 1997 1996 1995
-----------------------------------------------------------------------------
CLASS I CLASS I CLASS I CLASS I CLASS I
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.05 0.05 0.05 0.05
- -----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.05) (0.05) (0.05) (0.05) (0.05)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
===================================================================================================================================
TOTAL RETURN 4.96% 5.39% 5.19% 5.45% 5.11%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $2,133,839 $1,911,689 $1,943,021 $1,344,414 $1,083,243
Ratio of expenses to average net assets 0.42% 0.38% 0.37% 0.37% 0.37%
Ratio of net investment income to average net assets 4.82% 5.27% 5.07% 5.30% 5.07%
Ratio of expenses to average net assets
before fee waivers 0.52% 0.48% 0.47% 0.48% 0.48%
Ratio of net investment income to average
net assets before fee waivers 4.72% 5.17% 4.97% 5.19% 4.96%
</TABLE>
90 PROSPECTUS
<PAGE> 93
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
ARMADA GOVERNMENT MONEY MARKET FUND
- ------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
---------------------------------------------------------------------------------
1999 1998 1997 1996 1995
--------------------------------------------------------------------------------
CLASS I CLASS I CLASS I CLASS I CLASS I
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.05 0.05 0.05 0.05
- -----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.05) (0.05) (0.05) (0.05) (0.05)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
===================================================================================================================================
Total Return 4.86% 5.30% 5.15% 5.41% 4.97%
Ratios/Supplemental Data
Net assets, end of period (in 000's) $1,094,979 $1,137,078 $811,662 $741,894 $618,058
Ratio of expenses to average net assets 0.42% 0.40% 0.36% 0.36% 0.39%
Ratio of net investment income to average net assets 4.76% 5.17% 5.03% 5.27% 4.83%
Ratio of expenses to average net assets before fee waivers 0.52% 0.50% 0.46% 0.47% 0.50%
Ratio of net investment income to average
net assets before fee waivers 4.66% 5.07% 4.93% 5.16% 4.72%
</TABLE>
91 PROSPECTUS
<PAGE> 94
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
ARMADA TREASURY MONEY MARKET FUND
- --------------------------------------------------------------------------------
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
-----------------------------------------------------------------------
1999 1998 1997 1996 1995
-----------------------------------------------------------------------
CLASS I CLASS I CLASS I CLASS I CLASS I(1)
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.04 0.05 0.05 0.05 0.05
- --------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.04) (0.05) (0.05) (0.05) (0.05)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 1.00 1.00 1.00 1.00
================================================================================================================================
TOTAL RETURN 4.39% 4.95% 4.89% 5.07% 4.86%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $ 346,092 $ 359,605 $ 276,327 $ 312,255 $ 142,877
Ratio of expenses to average net assets 0.41% 0.39% 0.37% 0.41% 0.43%(2)
Ratio of net investment income to average net assets 4.35% 4.84% 4.79% 4.88% 4.78%(2)
Ratio of expenses to average net assets
before fee waivers 0.46% 0.44% 0.42% 0.47% 0.49%(2)
Ratio of net investment income to average
net assets before fee waivers 4.30% 4.79% 4.74% 4.82% 4.72%(2)
</TABLE>
(1) Class I commenced operations on June 16, 1994.
(2) Annualized.
92 PROSPECTUS
<PAGE> 95
NOTES
93 PROSPECTUS
<PAGE> 96
NOTES
94 PROSPECTUS
<PAGE> 97
NOTES
95 PROSPECTUS
<PAGE> 98
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
96 PROSPECTUS
<PAGE> 99
BOARD OF TRUSTEES
ROBERT D. NEARY
Chairman
Retired Co-Chairman, Ernst & Young LLP
Director:
Cold Metal Products, Inc.
Strategic Distribution, Inc.
HERBERT R. MARTENS, JR.
President
Executive Vice President,
National City Corporation
Chairman, President and Chief Executive
Officer, NatCity Investments,Inc.
LEIGH CARTER
Retired President and Chief Operating
Officer, B.F. Goodrich Company
Director:
Kirtland Capital Corporation
Morrison Products
TruSeal Technologies
JOHN F. DURKOTT
President and Chief Operating Officer,
Kittle's Home Furnishings Center, Inc.
ROBERT J. FARLING
Retired Chairman, President and Chief
Executive Officer, Centerior Energy
RICHARD W. FURST, DEAN
Garvice D. Kincaid Professor of Finance
and Dean, Carol Martin Gatton College
of Business and Economics, University of
Kentucky
Director:
Foam Design, Inc.
The Seed Corporation
GERALD L. GHERLEIN
Executive Vice President and General
Counsel, Eaton Corporation
Trustee:
WVIZ Educational Television
J. WILLIAM PULLEN
President and Chief Executive Officer,
Whayne Supply Company
The Armada Trustees also serve as the Trustees of the Parkstone Funds.
[ARMADA FUNDS]
<PAGE> 100
ARMADA More information about Armada Funds is available without
FUNDS through the following:
DESIGN YOUR OWN DESTINY STATEMENT OF
www.armadafunds.com ADDITIONAL INFORMATION (SAI)
The SAI dated September 20, 1999, includes more
detailed information about 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 Funds' holdings and contain
information from the Funds' managers about strategies
and recent market conditions and trends. The reports
also contain detailed financial information about the
Funds.
TO OBTAIN MORE INFORMATION:
By Telephone:
Call 1-800-622-FUND (3863)
By Mail:
Write to Armada Funds at:
PO Box 8421
Boston, MA 02266-8421
By Internet:
http://www.armadafunds.com
FROM THE SEC:
You can also obtain the SAI or the Annual or Semi-
Annual Reports,as well as other information about
Armada Funds, from the SEC's website
(http://www.sec.gov). You may review and copy
documents at the SEC Public Reference Room in
Washington, DC (for information, call
1-800-SEC-0330). You may request documents by
mail from the SEC, upon payment of a duplicating
fee, by writing to:
BULK RATE Securities and Exchange Commission
U.S. POSTAGE Public Reference Section
PAID Washington, DC 20549-6009
CINCINNATI CORPORATE
MAIL PERMIT #9463 The Funds' Investment Company Act
CINCINNATI, OH registration number is 811-4416.
ARM-F-003-01000 (9/99)
<PAGE> 1
Exhibit (17)(d)
PARKSTONE
FUNDS
INVESTOR A and INVESTOR B SHARES
SEPTEMBER 17, 1999
PROSPECTUS
The Securities and Exchange Commission has not
approved or disapproved these securities or passed
upon the adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C> <C>
RISK/RETURN SUMMARY
[LOGO]
4 International Discovery Fund
5 Small Capitalization Fund
6 Mid Capitalization Fund
8 Large Capitalization Fund
10 Fund Expenses -- Growth Funds
12 Equity Income Fund
14 Balanced Allocation Fund
16 Fund Expenses -- Growth and Income Funds
18 Bond Fund
20 Intermediate Government Obligations Fund
22 U.S. Government Income Fund
24 Limited Maturity Bond Fund
26 Fund Expenses -- Income Funds
28 Michigan Municipal Bond Fund
30 National Tax Exempt Bond Fund
32 Fund Expenses -- Tax-Free Income Funds
34 Tax-Free Fund
35 Prime Obligations Fund
36 U.S. Government Obligations Fund
37 Treasury Fund
38 Fund Expenses -- Money Market Funds
DESCRIPTION OF THE FUNDS
[LOGO]
40 Description of the Funds
Investment Objectives, Strategies and Risks
51 Additional Risk Considerations
MANAGEMENT OF THE FUNDS
[LOGO]
52 The Investment Adviser
53 Portfolio Management Team
53 The Distributor and Administrator
53 Year 2000
PURCHASE AND SALE OF SHARES
[LOGO]
55 How NAV is Calculated
56 Purchasing and Adding to Your Shares
59 Selling Your Shares
62 Distribution Arrangements/Sales Charges
67 Exchanging Your Shares
DIVIDENDS, DISTRIBUTIONS AND TAXES
[LOGO]
69 Dividends and Distributions
69 Federal Taxes
70 State and Local Taxes
FINANCIAL HIGHLIGHTS
[LOGO]
71
</TABLE>
2
<PAGE> 3
[LOGO]
RISK/RETURN SUMMARY
- -
The following is a summary of certain key information about the Funds. You
will find additional information about the Funds, including a detailed
description of the risks of an investment in a Fund, after this summary.
In this summary, we will describe certain kinds of risks that apply to one or
more of the Funds. The summary also describes specific risks that may apply
to one Fund. These risks are:
- MARKET RISK This is the risk that the value of a Fund's investments will
fluctuate as the stock or bond markets fluctuate and that prices overall
will decline over short or longer-term periods.
- INTEREST RATE RISK This is the risk that changes in interest rates will
affect the value of a Fund's investments in income-producing or
fixed-income or debt securities. Increases in interest rates may cause the
value of a Fund's investments to decline.
- CREDIT RISK This is the risk that the issuer of a security will be unable
or unwilling to make timely payments of interest or principal, or to
otherwise honor its obligations.
- FOREIGN RISK This is the risk of investments in issuers located in foreign
countries, which may have greater price volatility and less liquidity.
Investments in foreign securities also are subject to political,
regulatory, and diplomatic risks. Foreign risk includes currency risk,
which may occur due to fluctuations in the exchange rates between the U.S.
dollar and foreign currencies. This risk could negatively affect the value
of a Fund's investments.
- MANAGEMENT RISK This is the risk that investments selected by a Fund's
manager may not perform well and that the Fund will not perform as well as
a result.
Other important things for you to note:
- You may lose money by investing in a Fund.
- An investment in a Fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
For convenience of reference, the Funds are sometimes referred to as part of
a general grouping as described below:
- GROWTH FUNDS (International Discovery Fund, Small Capitalization Fund, Mid
Capitalization Fund and Large Capitalization Fund) The Growth Funds offer
investors seeking growth of capital a range of alternative approaches to
investing according to risk tolerance.
- GROWTH AND INCOME FUNDS (Equity Income Fund and Balanced Allocation Fund)
The Growth and Income Funds offer investors seeking current income with
preservation of capital a range of alternative approaches to investing.
- INCOME FUNDS (Bond Fund, Intermediate Government Obligations Fund, U.S.
Government Income Fund and Limited Maturity Bond Fund) The Income Funds
offer investors seeking current income with preservation of capital a range
of alternative approaches to investing.
- TAX-FREE INCOME FUNDS (Michigan Municipal Bond Fund and National Tax Exempt
Bond Fund (formerly Municipal Bond Fund)) The Tax-Free Income Funds offer
investors seeking income exempt from federal income tax as well as
preservation of capital a range of alternative approaches to investing.
- MONEY MARKET FUNDS (Tax-Free Fund, Prime Obligations Fund, U.S. Government
Obligations Fund and Treasury Fund) The Money Market Funds offer investors
seeking current income as well as preservation of capital a range of
alternative approaches to investing. An investment in one of the Money
Market Funds is not a deposit of any bank and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government
agency. Although each of the Money Market Funds seeks to preserve the value
of your investment at $1.00 per share, it is possible to lose money by
investing in one of the Money Market Funds.
Each Fund's investment objective may be changed without shareholder approval,
except as otherwise stated.
3
<PAGE> 4
[LOGO]
RISK/RETURN SUMMARY INTERNATIONAL DISCOVERY FUND
- -
- INVESTMENT OBJECTIVE. The Fund's investment objective is to provide capital
appreciation by investing in equity securities of foreign issuers.
- PRINCIPAL INVESTMENT STRATEGIES. The Fund normally invests at least 80% of
its total assets in equity securities of at least three foreign issuers.
The Fund's assets normally will be invested in the securities of issuers
located in at least three foreign countries. Foreign investments also may
include debt obligations issued or guaranteed by foreign governments or
their agencies, authorities, instrumentalities or political subdivisions,
including a foreign state, province or municipality. The Fund does not
presently intend to invest in common stock of domestic companies.
- PRINCIPAL INVESTMENT RISKS. The principal risks of investing in the Fund
are market risk, foreign risk, and management risk. Because the Fund
invests in foreign securities, the Fund's returns will be more volatile and
differ, sometimes significantly, from U.S. stock returns generally.
- WHO MAY WANT TO INVEST? Consider investing in the Fund if you:
- Are seeking increased diversification and new investment opportunities.
- Can stay invested for a minimum of three to five years.
- Are willing to accept short-term price fluctuations and higher than
average risk.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
PERFORMANCE SUMMARY
The chart and table on this
page show how the
International Discovery Fund
has performed and how its
performance has varied from
year to year. The bar chart
gives an indication of risk by
showing changes in the Fund's
yearly performance over six
years to demonstrate that the
Fund has gained or lost value
at different times. The table
below compares the Fund's
average annual returns for 1
and 5 year periods and since
inception to those of the
Morgan Stanley Capital
International Europe,
Australasia and Far East
(EAFE) Index, which represents
the performance of the major
stock markets in those
regions. Past performance does
not indicate how the Fund will
perform in the future.
The returns for Investor B
Shares will differ from the
Investor A returns shown in
the bar chart because of
differences in expenses of
each class. The table below
assumes that Investor B
shareholders redeem all their
fund shares at the end of the
period indicated.
PERFORMANCE BAR CHART
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
INVESTOR A SHARES(1)
<TABLE>
<CAPTION>
<S> <C>
1993 33.26%
94 -6.87%
95 7.85%
96 16.31%
97 1.61%
98 12.35%
</TABLE>
The bar chart above does not reflect the impact
of any applicable sales charges or account fees
which would reduce returns.
During the period shown in the bar chart, the
Fund's:
Best Quarter was 18.17% 4th quarter 1998
Worst Quarter was -15.63% 3rd quarter 1998
PERFORMANCE TABLE
Average Annual Total Returns
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
FUND OR CLASS PAST PAST PAST SINCE
INCEPTION YEAR 5 YEARS 10 YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
Investor A Shares
(with 5.50% sales charge) 12/29/92 6.17% 4.74% N/A 9.02%
Investor B Shares
(with applicable Contingent Deferred Sales
Charge) 2/4/94 6.51% N/A N/A 3.58%
Morgan Stanley Capital International EAFE Index 12/29/92 20.33% 9.50% N/A 13.10%
</TABLE>
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
4
<PAGE> 5
[LOGO]
RISK/RETURN SUMMARY SMALL CAPITALIZATION FUND
- -
- INVESTMENT OBJECTIVE. The Fund's investment objective is to provide capital
appreciation with a diversified portfolio of publicly traded smaller cap
equity securities.
- PRINCIPAL INVESTMENT STRATEGIES. The Fund normally invests at least 80% of
its total assets in equity securities of companies with small stock market
capitalization. The Fund considers a "small capitalization" company to be
one that has the same market capitalization as the companies in the Russell
2000 Growth Index. The Fund may invest up to 25% of its total assets in
foreign securities.
- PRINCIPAL INVESTMENT RISKS. The principal risks of investing in the Fund
are market risk and management risk. The Fund's risks also include
capitalization risk, which is the risk of investing in securities of small
companies. Prices of these companies' securities tend to be more volatile
than those of large companies' securities. In addition, small-
capitalization companies may have more risk because they often have
less-seasoned management and more limited product lines, markets, or
financial resources. To the extent the Fund invests in foreign securities,
your investment may have foreign risk.
- WHO MAY WANT TO INVEST? Consider investing in the Fund if you:
- Wish to take advantage of the growth potential of small company stocks.
- Can remain invested for a minimum of three to five years.
- Are willing to accept higher than average volatility and risk.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
PERFORMANCE SUMMARY
The chart and table on this
page show how the Small
Capitalization Fund has
performed and how its
performance has varied from
year to year. The bar chart
gives an indication of risk by
showing changes in the Fund's
yearly performance over ten
years to demonstrate that the
Fund has gained or lost value
at different times. The table
below compares the Fund's
average annual returns for 1,
5 and 10 year periods and
since inception to those of
the Russell 2000 Growth Index,
which is comprised of
securities in the Russell 2000
Stock Index with a greater
than average growth
orientation. Past performance
does not indicate how the Fund
will perform in the future.
The returns for Investor B
Shares will differ from the
Investor A returns shown in
the bar chart because of
differences in expenses of
each class. The table below
assumes that Investor B
shareholders redeem all their
fund shares at the end of the
period indicated.
PERFORMANCE BAR CHART
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
INVESTOR A SHARES(1)
<TABLE>
<CAPTION>
<S> <C>
1989 32.39%
90 -1.37%
91 43.94%
92 19.15%
93 21.48%
94 4.97%
95 35.67%
96 27.59%
97 -6.29%
98 -5.51%
</TABLE>
The bar chart above does not reflect the impact of any applicable sales charges
or account fees which would reduce returns.
During the period shown in the bar chart, the Fund's:
Best Quarter was 31.41% 4th quarter 1992
Worst Quarter was -26.96% 3rd quarter 1998
PERFORMANCE TABLE
Average Annual Total Returns(1)
(for the periods ending December 31, 1998)
<TABLE>
<CAPTION>
FUND OR CLASS PAST PAST PAST SINCE
INCEPTION YEAR 5 YEARS 10 YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
Investor A Shares
(with 5.50% sales charge) 10/31/88 -10.69% 8.74% 15.26% 14.99%
Investor B Shares
(with applicable Contingent Deferred Sales Charge) 2/4/94 -10.34% N/A N/A 10.13%
Russell 2000 Growth Index 10/31/88 1.23% 10.22% 11.54% 11.43%
</TABLE>
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
5
<PAGE> 6
[LOGO]
RISK/RETURN SUMMARY MID CAPITALIZATION FUND
- -
- INVESTMENT OBJECTIVE. The Fund's investment objective is to provide capital
appreciation with a diversified portfolio of publicly traded mid cap equity
securities.
- PRINCIPAL INVESTMENT STRATEGIES. The Fund normally invests at least 80% of
its total assets in securities of companies with mid stock market
capitalization. The Fund considers a "mid capitalization" company to be one
that has the same market capitalization as the companies in the Russell Mid
Cap Growth Index. The Fund may invest up to 25% of its total assets in
foreign securities.
- PRINCIPAL INVESTMENT RISKS. The principal risks of investing in the Fund
are market risk and management risk. The Fund's risks also include
capitalization risk, which is the risk of investing in the securities of
mid-capitalization companies. Prices of mid-capitalization companies'
securities tend to be more volatile than those of large companies'
securities. In addition, mid-capitalization companies may have more risk
because they often have less-seasoned management and more limited product
lines, markets, or financial resources. To the extent the Fund invests in
foreign securities, your investment may have foreign risk.
- WHO MAY WANT TO INVEST? Consider investing in the Fund if you:
- Want to take advantage of the long-term growth potential historically
provided by stock investments.
- Can remain invested for a minimum of three to five years.
- Are willing to accept short-term price fluctuations and higher than
average risk in return for potential above-average long-term growth.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
6
<PAGE> 7
RISK/RETURN SUMMARY MID CAPITALIZATION FUND
PERFORMANCE SUMMARY
The chart and table on this
page show how the Mid
Capitalization Fund has
performed and how its
performance has varied from
year to year. The bar chart
gives an indication of risk by
showing changes in the Fund's
yearly performance over ten
years to demonstrate that the
Fund has gained or lost value
at different times. The table
below compares the Fund's
average annual returns for 1,
5 and 10 year periods and
since inception to those of
the Russell Mid-Cap Growth
Index, an unmanaged index
which focuses on the
mid-capitalization sector of
the U.S. stock market. Past
performance does not indicate
how the Fund will perform in
the future.
The returns for Investor B
Shares will differ from the
Investor A returns shown in
the bar chart because of
differences in expenses of
each class. The table below
assumes that Investor B
shareholders redeem all their
fund shares at the end of the
period indicated.
PERFORMANCE BAR CHART
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
INVESTOR A SHARES(1)
<TABLE>
<CAPTION>
<S> <C>
1989 35.53%
90 -3.31%
91 27.60%
92 15.22%
93 12.89%
94 -5.43%
95 29.58%
96 18.53%
97 11.60%
98 11.04%
</TABLE>
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees which would reduce returns.
During the period shown in the bar chart,
the Fund's:
Best Quarter was 21.94% 4th quarter 1998
Worst Quarter was -19.28% 3rd quarter 1998
PERFORMANCE TABLE
Average Annual Total Returns(1)
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
FUND OR CLASS PAST PAST PAST SINCE
INCEPTION YEAR 5 YEARS 10 YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
Investor A Shares
(with 5.50% sales charge) 10/31/88 4.96% 11.21% 13.98% 13.73%
Investor B Shares
(with applicable Contingent Deferred Sales Charge) 2/4/94 5.41% N/A N/A 12.00%
Russell Mid-Cap Growth Index 10/31/88 17.86% 17.34% 17.30% 17.13%
</TABLE>
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
7
<PAGE> 8
[LOGO]
RISK/RETURN SUMMARY LARGE CAPITALIZATION FUND
- -
- INVESTMENT OBJECTIVE. The Fund's investment objective is to provide capital
appreciation with a diversified portfolio of publicly traded larger cap
equity securities.
- PRINCIPAL INVESTMENT STRATEGIES. The Fund normally invests at least 80% of
its total assets in a diversified portfolio of common stocks and securities
convertible into common stocks of companies with large stock market
capitalization. The Fund considers a "large capitalization" company to be
one that has the same market capitalization as the companies in the S&P
Barra Growth Index. The Fund may also invest up to 25% of its total assets
in foreign securities.
- PRINCIPAL INVESTMENT RISKS. The principal risks of investing in the Fund
are market risk and management risk. To the extent the Fund invests in
foreign securities, your investment may have foreign risk.
- WHO MAY WANT TO INVEST? Consider investing in the Fund if you:
- Want to take advantage of the long-term growth potential historically
provided by stock investments.
- Wish to invest in large companies whose names or products/services are
well known.
- Can remain invested for a minimum of three to five years.
- Are willing to accept short-term price fluctuations and higher than
average risk in return for potential above-average long-term growth.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
8
<PAGE> 9
RISK/RETURN SUMMARY LARGE CAPITALIZATION FUND
PERFORMANCE SUMMARY
The chart and table on this
page show how the Large
Capitalization Fund has
performed and how its
performance has varied from
year to year. The bar chart
gives an indication of risk by
showing changes in the Fund's
yearly performance over two
years to demonstrate that the
Fund has gained or lost value
at different times. The table
below compares the Fund's
average annual returns for a
one year period and since
inception to those of the S&P
Barra Growth Index, which is
comprised of securities in the
Standard & Poor's 500 Stock
Index that have a higher than
average price-to-book ratio.
Past performance does not
indicate how the Fund will
perform in the future.
The returns for Investor B
Shares will differ from the
Investor A returns shown in
the bar chart because of
differences in expenses of
each class. The table below
assumes that Investor B
shareholders redeem all their
fund shares at the end of the
period indicated.
PERFORMANCE BAR CHART
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
INVESTOR A SHARES(1)
<TABLE>
<CAPTION>
<S> <C>
1997 28.76%
98 42.37%
</TABLE>
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees which would reduce returns.
During the period shown in the bar chart,
the Fund's:
Best Quarter was 25.48% 4th quarter 1998
Worst Quarter was -9.17% 3rd quarter 1998
PERFORMANCE TABLE
Average Annual Total Returns(1)
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
FUND OR CLASS PAST PAST PAST SINCE
INCEPTION YEAR 5 YEARS 10 YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
Investor A Shares
(with 5.50% sales charge) 2/1/96 34.57% N/A N/A 28.23%
Investor B Shares
(with applicable Contingent Deferred Sales Charge) 2/1/96 36.30% N/A N/A 28.99%
S&P Barra Growth Index 2/1/96 42.16% N/A N/A 33.31%
</TABLE>
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
9
<PAGE> 10
[LOGO]
RISK/RETURN SUMMARY FUND EXPENSES
FEES AND EXPENSES -- GROWTH FUNDS
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD A OR B SHARES OF THE FUNDS.
Annual Fund operating expenses are paid out of Fund assets and are reflected
in the share price. The fees and expenses for each Fund and Class are based
upon current contractual investment advisory fees (as of October 1, 1999) and
the other actual operating expenses of that Fund and Class for the fiscal
year ended May 31, 1999.
FEE TABLE
<TABLE>
<CAPTION>
INTERNATIONAL SMALL
DISCOVERY FUND CAPITALIZATION FUND(6)
INVESTOR A INVESTOR B INVESTOR A INVESTOR B
<S> <C> <C> <C> <C>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load)(1) Imposed on Purchases (as a
percentage of offering price) 5.50% None 5.50% None
Maximum Deferred Sales Charge (Load)(2)
(as a percentage of offering price or sale price,
whichever is less) None 5.00% None 5.00%
Redemption Fee(3) None None None None
Exchange Fee(4) None None None None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED
FROM FUND ASSETS)
Management Fees 1.15% 1.15% 1.00% 1.00%
Distribution and Service (12b-1) Fees(5) 0.25% 1.00% 0.25% 1.00%
Other Expenses 0.41% 0.41% 0.45% 0.45%
Total Annual Fund Operating Expenses 1.81% 2.56% 1.70% 2.45%
</TABLE>
<TABLE>
<CAPTION>
MID LARGE
CAPITALIZATION FUND CAPITALIZATION FUND
INVESTOR A INVESTOR B INVESTOR A INVESTOR B
<S> <C> <C> <C> <C>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load)(1) Imposed on Purchases (as a
percentage of offering price) 5.50% None 5.50% None
Maximum Deferred Sales Charge (Load)(2)
(as a percentage of offering price or sale price,
whichever is less) None 5.00% None 5.00%
Redemption Fee(3) None None None None
Exchange Fee(4) None None None None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED
FROM FUND ASSETS)
Management Fees 1.00% 1.00% 0.75% 0.75%
Distribution and Service (12b-1) Fees(5) 0.25% 1.00% 0.25% 1.00%
Other Expenses 0.32% 0.32% 0.31% 0.31%
Total Annual Fund Operating Expenses 1.57% 2.32% 1.31% 2.06%
</TABLE>
10
<PAGE> 11
RISK/RETURN SUMMARY FUND EXPENSES
- -
FEES AND EXPENSES (CONTINUED)
(1) The sales charge may be reduced or eliminated under certain
circumstances. See "Distribution Arrangements/Sales Charges."
(2) The CDSC on Investor B Shares declines over five years starting with year
one and ending in year six from: 5.00%, 5.00%, 4.00%, 3.00%, 2.00%.
Investor B Shares which were purchased prior to January 1, 1997, are
subject to a CDSC which declines over four years ending in year five
from: 4.00%, 4.00%, 3.00%, 2.00%.
(3) If you invest $1,000,000 or more in Investor A Shares of the Funds, your
shares will be subject to a redemption fee of 1.00% for redemptions of
such shares made within one year of the date of purchase. In addition,
although no such fee is currently in place the Transfer Agent has
reserved the right in the future to charge a fee for wire transfers of
redemption proceeds.
(4) Exchanges into the Funds from a Money Market Fund will be normally
subject to a sales charge.
(5) Shareholders should be aware that due to the distribution fees, a
long-term shareholder in a Fund may pay over time more than the economic
equivalent of the maximum front-end sales charge permitted under the
rules of the National Association of Securities Dealers, Inc.
(6) The fees and expenses for the Small Capitalization Fund are based upon
current fees.
EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
INTERNATIONAL DISCOVERY FUND
INVESTOR A SHARES $724 $1,088 $1,476 $2,560
INVESTOR B SHARES
ASSUMING REDEMPTION $759 $1,196 $1,560 $2,626
ASSUMING NO REDEMPTION $259 $ 796 $1,360 $2,626
SMALL CAPITALIZATION FUND
INVESTOR A SHARES $713 $1,056 $1,422 $2,448
INVESTOR B SHARES
ASSUMING REDEMPTION $748 $1,164 $1,506 $2,514
ASSUMING NO REDEMPTION $248 $ 764 $1,306 $2,514
MID CAPITALIZATION FUND
INVESTOR A SHARES $701 $1,018 $1,358 $2,315
INVESTOR B SHARES
ASSUMING REDEMPTION $735 $1,124 $1,440 $2,381
ASSUMING NO REDEMPTION $235 $ 724 $1,240 $2,381
LARGE CAPITALIZATION FUND
INVESTOR A SHARES $676 $ 942 $1,229 $2,042
INVESTOR B SHARES
ASSUMING REDEMPTION $709 $1,046 $1,308 $2,104
ASSUMING NO REDEMPTION $209 $ 646 $1,108 $2,104
</TABLE>
This Example is intended to help
you compare the cost of
investing in the Funds with
the cost of investing in
other mutual funds.
The Example assumes that you
invest $10,000 in the Funds
for the time periods
indicated and then redeem all
of your shares at the end of
those periods. The Example
also assumes that your
investment has a 5% return
each year and that each
Fund's operating expenses
remain the same. Although
your actual costs may be
higher or lower, based on
these assumptions your costs
would be:
11
<PAGE> 12
[LOGO]
RISK/RETURN SUMMARY EQUITY INCOME FUND
- -
- INVESTMENT OBJECTIVE. The Fund's investment objective is to provide capital
appreciation with a diversified portfolio of publicly traded larger cap
equity securities which, in the aggregate, provide an above-average current
yield.
- PRINCIPAL INVESTMENT STRATEGIES. The Fund invests at least 80% of the value
of its total assets in income producing, large cap common stocks and
securities convertible into common stocks. The Fund considers a "large
capitalization" company to be one that has the same market capitalization
as the companies in the S&P Barra Value Index. The Fund expects that its
core holdings will consist of securities with a high dividend yield,
although it may balance these holdings with lower yielding but
higher-growth oriented securities.
- PRINCIPAL INVESTMENT RISKS. The principal risks of investing in the Fund
are market risk, interest rate risk, credit risk and management risk. To
the extent the Fund invests in foreign securities, your investment has
foreign securities risk.
- WHO MAY WANT TO INVEST? Consider investing in the Fund if you:
- Would like to invest in the stock market but wish to do so in a way that
helps reduce some of the risks associated with other types of stock
funds.
- Want a dependable source of monthly income.
- Can stay invested for a minimum of three to five years.
- Are willing to accept some short-term price fluctuations in return for
potential above-average, long-term returns.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
12
<PAGE> 13
RISK/RETURN SUMMARY EQUITY INCOME FUND
- -
PERFORMANCE SUMMARY
The chart and table on this
page show how the Equity
Income Fund has performed and
how its performance has varied
from year to year. The bar
chart gives an indication of
risk by showing changes in the
Fund's yearly performance over
ten years to demonstrate that
the Fund has gained or lost
value at different times. The
table below compares the
Fund's average annual returns
for 1, 5 and 10 year periods
and since inception to those
of the S&P Barra Value Index,
which is comprised of
securities in the Standard &
Poor's 500 Stock Index that
have a lower than average
price-to-book ratio. Past
performance does not indicate
how the Fund will perform in
the future.
The returns for Investor B
Shares will differ from the
Investor A returns shown in
the bar chart because of
differences in expenses of
each class. The table below
that Investor B shareholders
redeem all their fund shares
at the end of the period
indicated.
PERFORMANCE BAR CHART
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
INVESTOR A SHARES(1)
<TABLE>
<CAPTION>
<S> <C>
1989 28.13%
90 0.13%
91 24.96%
92 9.40%
93 12.50%
94 -8.34%
95 27.39%
96 17.32%
97 25.13%
98 10.76%
</TABLE>
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees which would reduce returns.
During the period shown in the bar chart,
the Fund's:
Best Quarter was 13.52% 4th quarter 1998
Worst Quarter was -10.78% 3rd quarter 1998
PERFORMANCE TABLE
Average Annual Total Returns(1)
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
FUND OR CLASS PAST PAST 5 PAST 10 SINCE
INCEPTION YEAR YEARS YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
Investor A Shares
(with 5.50% sales charge) 10/31/88 4.65% 12.40% 13.48% 13.50%
Investor B Shares
(with applicable Contingent Deferred Sales Charge) 2/4/94 5.04% N/A N/A 12.57%
S&P Barra Value Index 10/31/88 14.67% 19.87% 16.67% 16.39%
</TABLE>
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
13
<PAGE> 14
[LOGO]
RISK/RETURN SUMMARY BALANCED ALLOCATION FUND
- -
- INVESTMENT OBJECTIVE. The Fund's investment objective is to provide long
term capital appreciation and current income.
- PRINCIPAL INVESTMENT STRATEGIES. The Fund invests in a broad range of
securities including common stocks, convertible securities and fixed-income
securities. Normally, the Fund expects to invest 50% to 70% of its net
assets in common stocks and convertible securities and 25% to 55% of its
net assets in fixed-income securities. The Fund also may invest up to 30%
of its net assets in cash and cash-equivalent securities, which include
highly liquid securities with a maturity of less than three months. The
Fund may invest up to 20% of its net assets in foreign securities.
- PRINCIPAL INVESTMENT RISKS. The principal risks of investing in the Fund
are market risk, interest rate risk, credit risk and management risk. In
addition, the Fund has the risk that the allocation of its investments
between equity and fixed-income securities could have a negative effect on
the Fund's net asset value when one of these asset classes is not
performing as well as the other. To the extent the Fund invests in foreign
securities, your investment has foreign risk.
- WHO MAY WANT TO INVEST? Consider investing in the Fund if you:
- Want exposure to stocks, bonds, and cash equivalents in a single fund.
- Wish to rely on professional fund managers to increase or decrease
exposure to different investment categories as market conditions change.
- Can stay invested for a minimum of three to five years.
- Are willing to accept some short-term price fluctuations in return for
potential above-average long-term returns.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
14
<PAGE> 15
RISK/RETURN SUMMARY BALANCED ALLOCATION FUND
PERFORMANCE SUMMARY
The chart and table on this
page show how the Balanced
Allocation Fund has performed
and how its performance has
varied from year to year. The
bar chart gives an indication
of risk by showing changes in
the Fund's yearly performance
over six years to demonstrate
that the Fund has gained or
lost value at different times.
The table below compares the
Fund's average annual returns
for 1 and 5 year periods and
since inception to those of
the Standard & Poor's 500
Stock Index ("S&P 500 Index"),
a widely recognized, unmanaged
index of common stocks
generally representative of
the U.S. stock market as a
whole and the Lehman Brothers
Aggregate Bond Index, an
unmanaged, fixed income,
market value-weighted index
that includes treasury issues,
agency issues, corporate bond
issues and mortgage backed
securities. Past performance
does not indicate how the Fund
will perform in the future.
The returns for Investor B
Shares will differ from the
Investor A returns shown in
the bar chart because of
differences in expenses of
each class. The table below
assumes that Investor B
shareholders redeem all their
fund shares at the end of the
period indicated.
PERFORMANCE BAR CHART
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
INVESTOR A SHARES(1)
<TABLE>
<CAPTION>
<S> <C>
1993 11.34%
94 -2.93%
95 22.65%
96 12.93%
97 11.38%
98 12.74%
</TABLE>
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees which would reduce returns.
During the period shown in the bar chart,
the Fund's:
Best Quarter was 10.11% 4th quarter 1998
Worst Quarter was -6.85% 3rd quarter 1998
PERFORMANCE TABLE
Average Annual Total Returns(1)
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
FUND OR CLASS PAST PAST PAST SINCE
INCEPTION YEAR 5 YEARS 10 YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
Investor A Shares
(with 4.75% sales charge) 1/31/92 7.40% 9.96% N/A 10.45%
Investor B Shares
(with applicable Contingent Deferred Sales Charge) 2/4/94 6.94% N/A N/A 10.24%
S&P 500 Stock Index 1/31/92 28.58% 24.06% N/A 20.08%
Lehman Brothers Aggregate Bond Index 1/31/92 8.67% 7.27% N/A 7.95%
</TABLE>
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
15
<PAGE> 16
[LOGO]
RISK/RETURN SUMMARY FUND EXPENSES
- -
FEES AND EXPENSES -- GROWTH AND INCOME FUNDS
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD A OR B SHARES OF THE FUNDS.
Annual Fund operating expenses are paid out of Fund assets and are reflected
in the share price. The fees and expenses for each Fund and Class are based
upon current contractual investment advisory fees (as of October 1, 1999) and
the other actual operating expenses of that Fund and Class for the fiscal
year ended May 31, 1999.
FEE TABLE
<TABLE>
<CAPTION>
EQUITY INCOME FUND BALANCED ALLOCATION FUND
INVESTOR A INVESTOR B INVESTOR A INVESTOR B
<S> <C> <C> <C> <C>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load)(1) Imposed on Purchases (as a
percentage of offering price) 5.50% None 4.75% None
Maximum Deferred Sales Charge (Load)(2)
(as a percentage of offering price or sale price,
whichever is less) None 5.00% None 5.00%
Redemption Fee(3) None None None None
Exchange Fee(4) None None None None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED
FROM FUND ASSETS)
Management Fees 0.75% 0.75% 0.75% 0.75%
Distribution and Service (12b-1) Fees(5) 0.25% 1.00% 0.25% 1.00%
Other Expenses 0.34% 0.34% 0.36% 0.36%
Total Annual Fund Operating Expenses 1.34% 2.09% 1.36% 2.11%
</TABLE>
(1) The sales charge may be reduced or eliminated under certain
circumstances. See "Distribution Arrangements/Sales Charges."
(2) The CDSC on Investor B Shares declines over five years starting with year
one and ending in year six from: 5.00%, 5.00%, 4.00%, 3.00%, 2.00%.
Investor B Shares which were purchased prior to January 1, 1997, are
subject to a CDSC which declines over four years ending in year five
from: 4.00%, 4.00%, 3.00%, 2.00%.
(3) If you invest $1,000,000 or more in Investor A Shares of the Funds, your
shares will be subject to a redemption fee of 1.00% for redemptions of
such shares made within one year of the date of purchase. In addition,
although no such fee is currently in place the Transfer Agent has
reserved the right in the future to charge a fee for wire transfers of
redemption proceeds.
(4) Exchanges into the Funds from a Money Market Fund will be normally
subject to a sales charge.
(5) Shareholders should be aware that due to the distribution fees, a
long-term shareholder in a Fund may pay over time more than the economic
equivalent of the maximum front-end sales charge permitted under the
rules of the National Association of Securities Dealers, Inc.
16
<PAGE> 17
RISK/RETURN SUMMARY FUND EXPENSES
- -
FEES AND EXPENSES (CONTINUED)
<TABLE>
EXAMPLE
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
EQUITY INCOME FUND
INVESTOR A SHARES $679 $ 951 $1,244 $2,074
INVESTOR B SHARES
ASSUMING REDEMPTION $712 $1,055 $1,324 $2,139
ASSUMING NO REDEMPTION $212 $ 655 $1,124 $2,139
BALANCED ALLOCATION FUND
INVESTOR A SHARES $607 $ 885 $1,184 $2,032
INVESTOR B SHARES
ASSUMING REDEMPTION $714 $1,061 $1,334 $2,160
ASSUMING NO REDEMPTION $214 $ 661 $1,134 $2,160
</TABLE>
This Example is intended to help
you compare the cost of
investing in the Funds with
the cost of investing in
other mutual funds.
The Example assumes that you
invest $10,000 in the Funds
for the time periods
indicated and then redeem all
of your shares at the end of
those periods. The Example
also assumes that your
investment has a 5% return
each year and that each
Fund's operating expenses
remain the same. Although
your actual costs may be
higher or lower, based on
these assumptions your costs
would be:
17
<PAGE> 18
[LOGO]
RISK/RETURN SUMMARY BOND FUND
- -
- INVESTMENT OBJECTIVE. The Fund's investment objective is to provide current
income as well as preservation of capital by investing in a portfolio of
high- and medium-grade fixed-income securities.
- PRINCIPAL INVESTMENT STRATEGIES. The Fund invests at least 80% of its total
assets in investment grade securities of all types. Such securities will be
rated at the time of purchase within the four highest rating categories
assigned by a nationally recognized statistical rating organization
("NRSRO") or, if unrated, which the Adviser deems are of comparable
quality. The Fund expects to maintain a dollar-weighted average portfolio
maturity of 4 to 12 years.
- PRINCIPAL INVESTMENT RISKS. The principal risks of investing in the Fund
are interest rate risk, credit risk and management risk. Increases in
interest rates may cause the value of the Fund's investments to decline and
the decrease in value may not be offset by higher interest income. Because
the Fund may invest in mortgage-related or asset-backed securities, it is
subject to the risk that mortgages or other assets may be prepaid when
interest rates decline, forcing the Fund to invest in securities with lower
interest rates. For this and other reasons, mortgage-related and
asset-backed securities may have significantly greater price and yield
volatility than traditional fixed-income securities.
- WHO MAY WANT TO INVEST? Consider investing in the Fund if you:
- Wish to preserve and protect your assets while potentially staying ahead
of inflation.
- Want a dependable source of monthly income.
- Need additional diversification in your portfolio to reduce volatility.
- Can keep your money invested for a minimum of two to three years.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
18
<PAGE> 19
RISK/RETURN SUMMARY BOND FUND
- -
PERFORMANCE SUMMARY
The chart and table on this
page show how the Bond Fund
has performed and how its
performance has varied from
year to year. The bar chart
gives an indication of risk by
showing changes in the Fund's
yearly performance over ten
years to demonstrate that the
Fund has gained or lost value
at different times. The table
below compares the Fund's
average annual returns for 1,
5 and 10 year periods and
since inception to those of
the Lehman Brothers Aggregate
Bond Index. Past performance
does not indicate how the Fund
will perform in the future.
The returns for Investor B
Shares will differ from the
Investor A returns shown in
the bar chart because of
differences in expenses of
each class. The table below
assumes that Investor B
shareholders redeem all their
fund shares at the end of the
period indicated.
PERFORMANCE BAR CHART
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
INVESTOR A SHARES(1)
<TABLE>
<CAPTION>
<S> <C>
1989 11.91%
90 8.12%
91 15.03%
92 6.24%
93 9.89%
94 -3.64%
95 17.08%
96 3.13%
97 9.06%
98 7.28%
</TABLE>
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees which would reduce returns.
During the period shown in the bar chart,
the Fund's:
Best Quarter was 6.89% 2nd quarter 1989
Worst Quarter was -2.62% 1st quarter 1994
PERFORMANCE TABLE
Average Annual Total Returns(1)
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
FUND OR CLASS PAST PAST PAST SINCE
INCEPTION YEAR 5 YEARS 10 YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
Investor A Shares
(with 4.75% sales charge) 10/31/88 2.13% 5.32% 7.73% 7.49%
Investor B Shares
(with applicable Contingent Deferred Sales Charge) 2/4/94 1.47% N/A N/A 5.33%
Lehman Brothers Aggregate Bond Index 10/31/88 8.67% 7.27% 9.26% 8.98%
</TABLE>
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
19
<PAGE> 20
[LOGO]
RISK/RETURN SUMMARY INTERMEDIATE GOVERNMENT OBLIGATIONS FUND
- -
- INVESTMENT OBJECTIVE. The Fund's investment objective is to provide current
income as well as preservation of capital by investing primarily in U.S.
government securities.
- PRINCIPAL INVESTMENT STRATEGIES. The Fund normally invests at least 80% of
its total assets in obligations issued or guaranteed by the U.S. government
or its agencies or instrumentalities. The Fund expects to maintain a
dollar-weighted average portfolio maturity of three to ten years. The Fund
normally invests in U.S. Treasury bills, notes or bonds and other U.S.
government securities. The Fund also may invest in mortgage-related
securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities.
- PRINCIPAL INVESTMENT RISKS. The principal risks of investing in the Fund
are interest rate risk, credit risk and management risk. Increases in
interest rates may cause the value of the Fund's investments to decline and
a decrease in value may not be offset by higher interest income. Because
the Fund may invest in mortgage-related securities, it is subject to the
risk that mortgages may be prepaid when interest rates decline, forcing the
Fund to invest in securities with lower interest rates. For this and other
reasons, mortgage-related securities may have significantly greater price
and yield volatility than traditional debt securities.
- WHO MAY WANT TO INVEST? Consider investing in the Fund if you:
- Wish to preserve and protect your assets while potentially staying ahead
of inflation.
- Want a dependable source of monthly income.
- Need additional diversification in your portfolio to reduce volatility.
- Can keep your money invested for a minimum of two to three years.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
20
<PAGE> 21
RISK/RETURN SUMMARY INTERMEDIATE GOVERNMENT OBLIGATIONS FUND
- -
PERFORMANCE SUMMARY
The chart and table on this
page show how the Intermediate
Government Obligations Fund
has performed and how its
performance has varied from
year to year. The bar chart
gives an indication of risk by
showing changes in the Fund's
yearly performance over ten
years to demonstrate that the
Fund has gained or lost value
at different times. The table
below compares the Fund's
average annual returns for 1,
5 and 10 year periods and
since inception to those of
the Lehman Brothers
Intermediate Government Index.
Past performance does not
indicate how the Fund will
perform in the future.
The returns for Investor B
Shares will differ from the
Investor A returns shown in
the bar chart because of
differences in expenses of
each class. The table below
assumes that Investor B
shareholders redeem all their
fund shares at the end of the
period indicated.
PERFORMANCE BAR CHART
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
INVESTOR A SHARES(1)
<TABLE>
<CAPTION>
<S> <C>
1989 10.05%
90 8.81%
91 13.77%
92 5.33%
93 7.37%
94 -2.45%
95 13.20%
96 2.88%
97 6.62%
98 7.35%
</TABLE>
The bar chart above does not reflect the impact
of any applicable sales charges or account fees
which would reduce returns.
During the period shown in the bar chart, the
Fund's:
Best Quarter was 5.23% 2nd quarter 1989
Worst Quarter was -1.88% 1st quarter 1994
PERFORMANCE TABLE
Average Annual Total Returns(1)
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
FUND OR CLASS PAST PAST PAST SINCE
INCEPTION YEAR 5 YEARS 10 YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
Investor A Shares
(with 4.75% sales charge) 10/31/88 2.26% 4.36% 6.67% 6.44%
Investor B Shares
(with applicable Contingent Deferred Sales Charge) 2/4/94 1.50% N/A N/A 4.28%
Lehman Brothers Intermediate Government Index 10/31/88 8.47% 6.45% 8.34% 8.11%
</TABLE>
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
21
<PAGE> 22
[LOGO]
RISK/RETURN SUMMARY U.S. GOVERNMENT INCOME FUND
- -
- INVESTMENT OBJECTIVE. The Fund's investment objective is to provide current
income as well as preservation of capital by investing primarily in U.S.
government securities.
- PRINCIPAL INVESTMENT STRATEGIES. The Fund normally invests at least 80% of
its total assets in obligations issued or guaranteed by the U.S. government
or its agencies or instrumentalities. The Fund also may invest up to 20% of
its total assets in mortgage-related securities and short-term obligations.
The Fund expects to maintain a dollar-weighted average portfolio maturity
of three to ten years.
- PRINCIPAL INVESTMENT RISKS. The principal risks of investing in the Fund
are interest rate risk, credit risk and management risk. Increases in
interest rates may cause the value of the Fund's investments to decline and
the decrease in value may not be offset by higher interest income. Because
the Fund invests primarily in mortgage-related securities, it is subject to
the risk that mortgages may be prepaid when interest rates decline, forcing
the Fund to invest in securities with lower interest rates. For this and
other reasons, mortgage-related securities may have significantly greater
price and yield volatility than traditional debt securities.
- WHO MAY WANT TO INVEST? Consider investing in the Fund if you:
- Want a high level of monthly income without a high degree of risk.
- Wish to diversify your investment portfolio to reduce volatility.
- Can keep your money invested for a minimum of two to three years.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
22
<PAGE> 23
RISK/RETURN SUMMARY U.S. GOVERNMENT INCOME FUND
- -
PERFORMANCE SUMMARY
The chart and table on this
page show how the U.S.
Government Income Fund has
performed and how its
performance has varied from
year to year. The bar chart
gives an indication of risk by
showing changes in the Fund's
yearly performance over six
years to demonstrate that the
Fund has gained or lost value
at different times. The table
below compares the Fund's
average annual returns for 1
and 5 year periods and since
inception to those of the
Lehman Brothers Mortgage-
Backed Securities Index which
covers all fixed-rate
securities backed by mortgage
pools of the Government
National Mortgage Association
(GNMA), Federal Home Loan
Mortgage Corporation (FHLMC)
and Federal National Mortgage
Association (FNMA). Past
performance does not indicate
how the Fund will perform in
the future.
The returns for Investor B
Shares will differ from the
Investor A returns shown in
the bar chart because of
differences in expenses of
each class. The table below
assumes that Investor B
shareholders redeem all their
fund shares at the end of the
period indicated.
PERFORMANCE BAR CHART
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
INVESTOR A SHARES(1)
<TABLE>
<CAPTION>
<S> <C>
1993 7.41%
94 -0.70%
95 13.50%
96 4.54%
97 7.84%
98 6.80%
</TABLE>
The bar chart above does not reflect the impact
of any applicable sales charges or account fees
which would reduce returns.
During the period shown in the bar chart, the
Fund's:
Best Quarter was 3.88% 2nd quarter 1995
Worst Quarter was -1.13% 1st quarter 1994
PERFORMANCE TABLE
Average Annual Total Returns(1)
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
FUND OR CLASS PAST PAST PAST SINCE
INCEPTION YEAR 5 YEARS 10 YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
Investor A Shares
(with 4.75% sales charge) 11/12/92 1.75% 5.27% N/A 5.56%
Investor B Shares
(with applicable Contingent
Deferred Sales Charge) 2/4/94 1.12% N/A N/A 5.22%
Lehman Brothers Mortgage-Backed
Securities Index 11/12/92 6.97% 7.23% N/A 7.24%
</TABLE>
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
23
<PAGE> 24
[LOGO]
RISK/RETURN SUMMARY LIMITED MATURITY BOND FUND
- -
- INVESTMENT OBJECTIVE. The Fund's investment objective is to provide current
income as well as preservation of capital by investing in a portfolio of
high- and medium-grade fixed-income securities.
- PRINCIPAL INVESTMENT STRATEGIES. The Fund normally invests at least 80% of
its total assets in investment grade debt securities of all types. The Fund
invests primarily in corporate bonds, U.S. government obligations, and
mortgage-related and asset-backed securities. Such securities will be rated
at the time of purchase within the four highest rating categories assigned
by a nationally recognized statistical rating organization ("NRSRO") or, if
unrated, which the Adviser deems are of comparable quality. The Fund
expects to maintain a dollar-weighted average portfolio maturity of one to
five years.
- PRINCIPAL INVESTMENT RISKS. The principal risks of investing in the Fund
are interest rate risk and credit risk. Increases in interest rates may
cause the value of the Fund's investments to decline and the decrease in
value may not be offset by higher interest income. Because the Fund may
invest in mortgage-related or asset-backed securities, it is subject to the
risk that mortgages or other assets may be prepaid when interest rates
decline, forcing the Fund to invest in securities with lower interest
rates. For this and other reasons, mortgage-related and asset-backed
securities may have significantly greater price and yield volatility than
traditional debt securities.
- WHO MAY WANT TO INVEST? Consider investing in the Fund if you:
- Wish to preserve and protect your assets while potentially staying ahead
of inflation.
- Want a dependable source of monthly income.
- Need additional diversification in your portfolio to reduce volatility.
- Can keep your money invested for a minimum of two to three years.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
24
<PAGE> 25
RISK/RETURN SUMMARY LIMITED MATURITY BOND FUND
- -
PERFORMANCE SUMMARY
The chart and table on this
page show how the Limited
Maturity Bond Fund has
performed and how its
performance has varied from
year to year. The bar chart
gives an indication of risk by
showing changes in the Fund's
yearly performance over ten
years to demonstrate that the
Fund has gained or lost value
at different times. The table
below compares the Fund's
average annual returns for 1,
5 and 10 year periods and
since inception to those of
the Merrill Lynch 1-3 Year
Government/Corporate Index,
which represents the total
returns of short-term
government and corporate
bonds. Past performance does
not indicate how the Fund will
perform in the future.
The returns for Investor B
Shares will differ from the
Investor A returns shown in
the bar chart because of
differences in expenses of
each class. The table below
assumes that Investor B
shareholders redeem all their
fund shares at the end of the
period indicated.
PERFORMANCE BAR CHART
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
INVESTOR A SHARES(1)
<TABLE>
<CAPTION>
<S> <C>
1989 9.55%
90 7.83%
91 12.23%
92 5.76%
93 6.88%
94 -0.97%
95 10.96%
96 3.86%
97 5.66%
98 6.13%
</TABLE>
The bar chart above does not reflect the impact
of any applicable sales charges or account fees
which would reduce returns.
During the period shown in the bar chart, the
Fund's:
Best Quarter was 4.82% 2nd quarter 1989
Worst Quarter was -1.25% 1st quarter 1994
PERFORMANCE TABLE
Average Annual Total Returns(1)
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
FUND OR CLASS PAST PAST PAST SINCE
INCEPTION YEAR 5 YEARS 10 YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
Investor A Shares
(with 2.75% sales charge) 10/31/88 3.20% 4.48% 6.43% 6.34%
Investor B Shares
(with applicable Contingent Deferred Sales Charge) 2/4/94 0.36% N/A N/A 3.97%
Merrill Lynch 1-3 Year Government/Corporate Index 10/31/88 7.01% 6.04% 7.45% 7.33%
</TABLE>
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
25
<PAGE> 26
[LOGO]
RISK/RETURN SUMMARY FUND EXPENSES
FEES AND EXPENSES -- INCOME FUNDS
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD A OR B SHARES OF THE FUNDS.
Annual Fund operating expenses are paid out of Fund assets and are reflected
in the share price. The fees and expenses for each Fund and Class are based
upon current contractual investment advisory fees (as of October 1, 1999) and
the other actual operating expenses of that Fund and Class for the fiscal
year ended May 31, 1999.
FEE TABLE
<TABLE>
<CAPTION>
INTERMEDIATE
GOVERNMENT U.S. GOVERNMENT
SHAREHOLDER FEES (FEES PAID BOND FUND OBLIGATIONS FUND INCOME FUND
DIRECTLY FROM YOUR INVESTMENT) INVESTOR A INVESTOR B INVESTOR A INVESTOR B INVESTOR A INVESTOR B
<S> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load)(1)
Imposed on Purchases (as a
percentage of offering price) 4.75% None 4.75% None 4.75% None
Maximum Deferred Sales Charge
(Load)(2) (as a percentage of
offering price or sale price,
whichever is less) None 5.00% None 5.00% None 5.00%
Redemption Fee(3) None None None None None None
Exchange Fee(4) None None None None None None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM
FUND ASSETS)
Management Fees 0.55% 0.55% 0.55% 0.55% 0.55% 0.55%
Distribution and Service (12b-1)
Fees(5) 0.25% 1.00% 0.25% 1.00% 0.25% 1.00%
Other Expenses 0.29% 0.29% 0.34% 0.34% 0.35% 0.35%
Total Annual Fund Operating
Expenses 1.09% 1.84% 1.14% 1.89% 1.15% 1.90%
Fee Waivers/Reimbursements(6) 0.05% 0.05% 0.05% 0.05% 0.05% 0.05%
Net Annual Fund Operating Expenses 1.04% 1.79% 1.09% 1.84% 1.10% 1.85%
<CAPTION>
LIMITED MATURITY
SHAREHOLDER FEES (FEES PAID BOND FUND
DIRECTLY FROM YOUR INVESTMENT) INVESTOR A INVESTOR B
<S> <C> <C>
Maximum Sales Charge (Load)(1)
Imposed on Purchases (as a
percentage of offering price) 2.75% None
Maximum Deferred Sales Charge
(Load)(2) (as a percentage of
offering price or sale price,
whichever is less) None 5.00%
Redemption Fee(3) None None
Exchange Fee(4) None None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM
FUND ASSETS)
Management Fees 0.45% 0.45%
Distribution and Service (12b-1)
Fees(5) 0.25% 1.00%
Other Expenses 0.33% 0.33%
Total Annual Fund Operating
Expenses 1.03% 1.78%
Fee Waivers/Reimbursements(6) 0.05% 0.05%
Net Annual Fund Operating Expenses 0.98% 1.73%
</TABLE>
(1) The sales charge may be reduced or eliminated under certain
circumstances. See "Distribution Arrangements/Sales Charges"
(2) The CDSC on Investor B Shares declines over five years starting with year
one and ending in year six from: 5.00%, 5.00%, 4.00%, 3.00%, 2.00%.
Investor B Shares which were purchased prior to January 1, 1997, are
subject to a CDSC which declines over four years ending in year five
from: 4.00%, 4.00%, 3.00%, 2.00%.
(3) If you invest $1,000,000 or more in Investor A Shares of the Funds, your
shares will be subject to a redemption fee of 1.00% (and 0.25% for the
Limited Maturity Bond Fund) for redemptions of such shares made within
one year of the date of purchase. In addition, although no such fee is
currently in place the Transfer Agent has reserved the right in the
future to charge a fee for wire transfers of redemption proceeds.
(4) Exchanges into the Funds from a Money Market Fund will be normally
subject to a sales charge.
(5) Shareholders should be aware that due to the distribution fees, a
long-term shareholder in a Fund may pay over time more than the economic
equivalent of the maximum front-end sales charge permitted under the
rules of the National Association of Securities Dealers, Inc.
(6) The Administrator is currently waiving a portion of its fees for the
current fiscal year. The Administrator may revise or cancel this expense
limitation at any time and will notify you of any material change.
26
<PAGE> 27
RISK/RETURN SUMMARY FUND EXPENSES
- -
FEES AND EXPENSES (CONTINUED)
EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
BOND FUND
INVESTOR A SHARES $581 $ 805 $1,047 $1,741
INVESTOR B SHARES
ASSUMING REDEMPTION $687 $ 979 $1,195 $1,870
ASSUMING NO REDEMPTION $187 $ 579 $ 995 $1,870
INTERMEDIATE GOVERNMENT
OBLIGATIONS FUND
INVESTOR A SHARES $586 $ 820 $1,073 $1,795
INVESTOR B SHARES
ASSUMING REDEMPTION $692 $ 994 $1,221 $1,924
ASSUMING NO REDEMPTION $192 $ 594 $1,021 $1,924
U.S. GOVERNMENT INCOME FUND
INVESTOR A SHARES $587 $ 823 $1,078 $1,806
INVESTOR B SHARES
ASSUMING REDEMPTION $693 $ 997 $1,226 $1,935
ASSUMING NO REDEMPTION $193 $ 597 $1,026 $1,935
LIMITED MATURITY BOND FUND
INVESTOR A SHARES $377 $ 594 $ 828 $1,500
INVESTOR B SHARES
ASSUMING REDEMPTION $681 $ 960 $1,164 $1,804
ASSUMING NO REDEMPTION $181 $ 560 $ 964 $1,804
</TABLE>
This Example is intended to help
you compare the cost of
investing in the Funds with
the cost of investing in
other mutual funds.
The Example assumes that you
invest $10,000 in the Funds
for the time periods
indicated and then redeem all
of your shares at the end of
those periods. The Example
also assumes that your
investment has a 5% return
each year and that each
Fund's operating expenses
remain the same. Although
your actual costs may be
higher or lower, based on
these assumptions your costs
would be:
27
<PAGE> 28
[LOGO]
RISK/RETURN SUMMARY MICHIGAN MUNICIPAL BOND FUND
- -
- INVESTMENT OBJECTIVE. The Fund's investment objective is to provide current
income exempt from federal income taxes and, to the extent possible, from
Michigan personal income taxes, as is consistent with conservation of
capital.
- PRINCIPAL INVESTMENT STRATEGIES. The Fund normally invests at least 80% of
its net assets in Michigan municipal securities and debt obligations issued
by the government of Puerto Rico, the U.S. territories and possessions of
Guam, the U.S. Virgin Islands, or such other governmental entities whose
debt obligations, either by law or treaty, generate interest income which
is exempt from federal and Michigan State income and intangible taxes,
although such income may be subject to the federal alternative minimum tax
when received by certain shareholders. The Fund expects to maintain a
dollar-weighted average portfolio maturity of three to ten years.
- PRINCIPAL INVESTMENT RISKS. The principal risks of investing in the Fund
are interest rate risk and credit risk. The Fund's investments in Michigan
municipal income securities may also include exposure to special factors
that may adversely affect the value of municipal securities and have a
significant effect on the value of the Fund's investments. These factors
include political or legislative changes, uncertainties related to the tax
status of municipal securities or the rights of investors in these
securities.
Due to the level of investment in municipal obligations issued by the State
of Michigan and its political subdivisions, the performance of the Fund
will be closely tied to the economic and political conditions in the State
of Michigan, and, therefore, an investment in the Fund may be riskier than
an investment in other types of municipal bond funds. The State's economy
is principally dependent upon manufacturing (particularly automobiles,
office equipment and other durable goods), tourism and agriculture and
historically has been highly cyclical. When a Fund's assets are
concentrated in obligations from revenues of similar projects issued by
issuers located in the same state or in industrial development bonds, the
Fund will be subject to the particular risks (including legal and economic
conditions) related to such securities to a greater extent than if its
assets were not so concentrated.
In addition, the Fund is not "diversified," meaning that it can invest a
greater percentage of its assets in a particular issuer. Factors affecting
these issuers could have a more significant adverse effect on the Fund's
net asset value.
- WHO MAY WANT TO INVEST? Consider investing in the Fund if you:
- Wish to earn investment income that is exempt from federal income tax.
- Live in Michigan and wish to earn investment income that is also exempt
from state income tax.
- Want to support Michigan municipalities by purchasing their debt
securities.
- Seek to reduce volatility in your portfolio through increased
diversification.
- Can keep your money invested for a minimum of one to two years.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
28
<PAGE> 29
RISK/RETURN SUMMARY MICHIGAN MUNICIPAL BOND FUND
- -
PERFORMANCE SUMMARY
The chart and table on this
page show how the Michigan
Municipal Bond Fund has
performed and how its
performance has varied from
year to year. The bar chart
gives an indication of risk by
showing changes in the Fund's
yearly performance over eight
years to demonstrate that the
Fund has gained or lost value
at different times. The table
below compares the Fund's
average annual returns for 1
and 5 year periods and since
inception to those of the
Lehman Brothers 7 Year
Municipal Bond Index. Past
performance does not indicate
how the Fund will perform in
the future.
The table measures performance
in terms of total return.
However, this Fund is managed
for yield and not total
return.
The returns for Investor B
Shares will differ from the
Investor A returns shown in
the bar chart because of
differences in expenses of
each class. The table assumes
that Investor B shareholders
redeem all their fund shares
at the end of the period
indicated.
PERFORMANCE BAR CHART
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
INVESTOR A SHARES(1)
<TABLE>
<CAPTION>
<S> <C>
1991 9.78%
92 6.98%
93 9.67%
94 -3.00%
95 13.24%
96 2.84%
97 6.91%
98 4.75%
</TABLE>
The bar chart above does not reflect the impact of any applicable sales charges
or account fees which would reduce returns.
During the period shown in the bar chart, the Fund's:
Best Quarter was 5.19% 1st quarter 1995
Worst Quarter was -3.27% 1st quarter 1994
PERFORMANCE TABLE
Average Annual Total Returns(1)
(for the periods ending December 31, 1998)
<TABLE>
<CAPTION>
FUND OR CLASS PAST PAST PAST SINCE
INCEPTION YEAR 5 YEARS 10 YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
Investor A Shares
(with 4.75% sales charge) 7/02/90 -0.20% 3.80% N/A 5.70%
Investor B Shares
(with applicable Contingent Deferred Sales Charge) 2/04/94 -1.00% N/A N/A 3.65%
Lehman Brothers 7 Year Municipal Bond Index 6/30/90 6.23% 5.80% N/A 7.55%
</TABLE>
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
29
<PAGE> 30
[LOGO]
RISK/RETURN SUMMARY NATIONAL TAX EXEMPT BOND FUND
FORMERLY MUNICIPAL BOND FUND
- -
- INVESTMENT OBJECTIVE. The Fund's investment objective is to provide current
income exempt from federal income taxes as is consistent with conservation
of capital.
- PRINCIPAL INVESTMENT STRATEGIES. The Fund normally invests at least 80% of
its net assets in a diversified portfolio of municipal securities the
interest on which is both exempt from federal income taxes and not treated
as a preference item for individuals for purposes of the federal
alternative minimum tax. Interest income from certain types of municipal
securities may be subject to federal alternative minimum tax. These
securities are not treated as tax-exempt obligations for purposes of
measuring compliance with the 80% limitation. The Fund expects to maintain
a dollar-weighted average portfolio maturity of three to ten years.
- PRINCIPAL INVESTMENT RISKS. The principal risks of investing in the Fund
are interest rate risk and credit risk. The Fund's investments in municipal
securities may also have exposure to special factors that may adversely
affect the value of these securities, and have a significant effect on the
value of the Fund's investments. These factors include political or
legislative changes, uncertainties related to the tax status of municipal
securities or the rights of investors in these securities.
- WHO MAY WANT TO INVEST? Consider investing in the Fund if you:
- Wish to earn investment income that is exempt from federal income tax.
- Want to support U.S. cities and states by purchasing their debt
securities.
- Seek to reduce volatility in your portfolio through increased
diversification.
- Can keep your money invested for a minimum of one to two years.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
30
<PAGE> 31
RISK/RETURN SUMMARY NATIONAL TAX EXEMPT BOND FUND
- -
PERFORMANCE SUMMARY
The chart and table on this
page show how the National Tax
Exempt Bond Fund has performed
and how its performance has
varied from year to year. The
bar chart gives an indication
of risk by showing changes in
the Fund's yearly performance
over ten years to demonstrate
that the Fund has gained or
lost value at different times.
The table below compares the
Fund's average annual returns
for 1, 5 and 10 year periods
and since inception to those
of the Lehman Brothers
Municipal Bond Index. Past
performance does not indicate
how the Fund will perform in
the future.
This table measures
performance in terms of total
return. However, this Fund is
managed for yield and not
total return.
The returns for Investor B
Shares will differ from the
Investor A returns shown in
the bar chart because of
differences in expenses of
each class. The table assumes
that Investor B shareholders
redeem all their fund shares
at the end of the period
indicated.
PERFORMANCE BAR CHART
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
INVESTOR A SHARES(1)
<TABLE>
<CAPTION>
<S> <C>
1989 7.57%
90 6.01%
91 9.16%
92 7.46%
93 9.01%
94 -3.30%
95 13.29%
96 2.63%
97 6.22%
98 4.73%
</TABLE>
The bar chart above does not reflect the impact of any applicable sales charges
or account fees which would reduce returns.
During the period shown in the bar chart, the Fund's:
Best Quarter was 5.62% 1st quarter 1995
Worst Quarter was -3.24% 1st quarter 1994
PERFORMANCE TABLE
Average Annual Total Returns(1)
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
FUND OR CLASS PAST PAST PAST SINCE
INCEPTION YEAR 5 YEARS 10 YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
Investor A Shares
(with 4.75% sales charge) 10/31/88 -0.27% 3.56% 5.67% 5.63%
Investor B Shares
(with applicable Contingent Deferred Sales Charge) 2/4/94 -1.09% N/A N/A 3.38%
Lehman Brothers Municipal Bond Index 10/31/88 6.48% 6.23% 8.22% 8.09%
</TABLE>
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
31
<PAGE> 32
[LOGO]
RISK/RETURN SUMMARY FUND EXPENSES
- -
FEES AND EXPENSES -- TAX-FREE INCOME FUNDS
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD A OR B SHARES OF THE FUNDS.
Annual Fund operating expenses are paid out of Fund assets and are reflected
in the share price. The fees and expenses for each Fund and Class are based
upon current contractual investment advisory fees (as of October 1, 1999) and
the other actual operating expenses of that Fund and Class for the fiscal
year ended May 31, 1999.
FEE TABLE
<TABLE>
<CAPTION>
MICHIGAN MUNICIPAL BOND FUND NATIONAL TAX EXEMPT BOND FUND(7)
INVESTOR A INVESTOR B INVESTOR A INVESTOR B
<S> <C> <C> <C> <C>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load)(1) Imposed on
Purchases (as a percentage of offering price) 4.75% None 4.75% None
Maximum Deferred Sales Charge (Load)(2)
(as a percentage of offering price or sale
price whichever is less) None 5.00% None 5.00%
Redemption Fee(3) None None None None
Exchange Fee(4) None None None None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Fees 0.55% 0.55% 0.55% 0.55%
Distribution and Service (12b-1) Fees(5) 0.25% 1.00% 0.25% 1.00%
Other Expenses 0.31% 0.31% 0.41% 0.40%
Total Annual Fund Operating Expenses 1.11% 1.86% 1.21% 1.95%
Fee Waivers/Reimbursements(6) 0.10% 0.10% 0.10% 0.10%
Net Annual Fund Operating Expenses 1.01% 1.76% 1.11% 1.85%
</TABLE>
(1) The sales charge may be eliminated under certain circumstances. See
"Distribution Arrangements/Sales Charges."
(2) The CDSC on Investor B Shares declines over five years starting with year
one and ending in year six from: 5.00%, 5.00%, 4.00%, 3.00%, 2.00%.
Investor B Shares which were purchased prior to January 1, 1997, are
subject to a CDSC which declines over four years ending in year five
from: 4.00%, 4.00%, 3.00%, 2.00%.
(3) If you invest $1,000,000 or more in Investor A Shares of the Funds, your
shares will be subject to a redemption fee of 1.00% for redemptions of
such shares made within one year of the date of purchase. In addition,
although no such fee is currently in place the Transfer Agent has
reserved the right in the future to charge a fee for wire transfers of
redemption proceeds.
(4) Exchanges into the Funds from a Money Market Fund will be normally
subject to a sales charge.
(5) Shareholders should be aware that due to the distribution fees, a
long-term shareholder in a Fund may pay over time more than the economic
equivalent of the maximum front-end sales charge permitted under the
rules of the National Association of Securities Dealers, Inc.
(6) The Administrator is currently waiving a portion of its fees for the
current fiscal year. The Administrator may revise or cancel this expense
limitation at any time and will notify you of any material change.
(7) The fees and expenses for the National Tax Exempt Bond Fund are based
upon current fees.
32
<PAGE> 33
RISK/RETURN SUMMARY FUND EXPENSES
- -
FEES AND EXPENSES (CONTINUED)
EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
MICHIGAN MUNICIPAL BOND FUND
INVESTOR A SHARES $583 $ 811 $1,058 $1,762
INVESTOR B SHARES
ASSUMING REDEMPTION $689 $ 985 $1,206 $1,892
ASSUMING NO REDEMPTION $189 $ 585 $1,006 $1,892
NATIONAL TAX EXEMPT BOND FUND
INVESTOR A SHARES $592 $ 841 $1,108 $1,871
INVESTOR B SHARES
ASSUMING REDEMPTION $698 $1,012 $1,252 $1,993
ASSUMING NO REDEMPTION $198 $ 612 $1,052 $1,993
</TABLE>
This Example is intended to help
you compare the cost of
investing in the Funds with
the cost of investing in
other mutual funds.
The Example assumes that you
invest $10,000 in the Funds
for the time periods
indicated and then redeem all
of your shares at the end of
those periods. The Example
also assumes that your
investment has a 5% return
each year and that each
Fund's operating expenses
remain the same. Although
your actual costs may be
higher or lower, based on
these assumptions your costs
would be:
33
<PAGE> 34
[LOGO]
RISK/RETURN SUMMARY TAX-FREE FUND
- -
- INVESTMENT OBJECTIVE. The Fund's investment objective is to provide as high
a level of current interest income free from federal income taxes,
consistent with the preservation of capital and relative stability of
principal.
- PRINCIPAL INVESTMENT STRATEGIES. The Fund is a money market fund that seeks
to maintain a stable net asset value of $1.00 per share, although there is
no guarantee that the net asset value will not vary. The Fund normally
invests at least 80% of its total assets in municipal obligations the
interest on which is exempt from federal income tax and not subject to the
federal alternative minimum tax. These securities will have short-term debt
ratings in the two highest rating categories of at least two nationally
recognized statistical rating organizations, or will be unrated securities
of comparable quality. The Fund's dollar-weighted average portfolio
maturity will not exceed 90 days. The Fund will not purchase any security
which matures in more than 397 days.
- PRINCIPAL INVESTMENT RISKS. The principal risks of investing in the Fund
are interest rate risk, credit risk and management risk. The Fund's
investments in municipal securities may also have exposure to special
factors that may adversely affect the value of municipal securities, and
have a significant effect on the value of the Fund's investments. These
factors include political or legislative changes, uncertainties related to
the tax status of municipal securities or the rights of investors in these
securities.
- WHO MAY WANT TO INVEST? Consider investing in the Fund if you are:
- An investor in a high tax bracket.
- Seeking liquidity.
- Seeking current income exempt from federal income taxes.
An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
PERFORMANCE SUMMARY
The chart and table on this
page show how the Tax-Free
Fund has performed and how its
performance has varied from
year to year. The bar chart
gives an indication of risk by
showing changes in the Fund's
yearly performance over ten
years to demonstrate that the
Fund's return has varied at
different times. The Fund does
not offer Investor B Shares.
Past performance does not
indicate how the Fund will
perform in the future.
PERFORMANCE BAR CHART
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
INVESTOR A SHARES(1)
<TABLE>
<CAPTION>
<S> <C>
1989 6.08%
90 5.46%
91 3.96%
92 2.53%
93 1.81%
94 2.24%
95 3.16%
96 2.69%
97 2.97%
98 2.75%
</TABLE>
During the period shown in the bar chart, the
Fund's:
Best Quarter was 1.58% 4th quarter 1989
Worst Quarter was 0.41% 1st quarter 1994
PERFORMANCE TABLE
Average Annual Total Returns
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
INCEPTION PAST PAST PAST SINCE
DATE YEAR 5 YEARS 10 YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
Investor A Shares 7/30/87 2.75% 2.76% 3.36% 3.52%
</TABLE>
For current yield information on the Fund, call 1-800-451-8377. The Tax-Free
Fund's yield appears in The Wall Street Journal each Thursday.
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
34
<PAGE> 35
[LOGO]
RISK/RETURN SUMMARY PRIME OBLIGATIONS FUND
- -
- INVESTMENT OBJECTIVE. The Fund's investment objective is to provide current
income with liquidity and stability of principal.
- PRINCIPAL INVESTMENT STRATEGIES. The Fund is a money market fund that seeks
to maintain a stable net asset value of $1.00 per share, although there is
no guarantee that the net asset value per share will not vary. The Fund
invests in high-quality money market instruments, including municipal
securities and other instruments deemed to be of comparable high quality as
determined by the Board of Trustees. These securities will have short-term
debt ratings in the two highest rating categories of at least two
nationally recognized statistical rating organizations, or will be unrated
securities of comparable quality. The Fund's dollar-weighted average
portfolio maturity will not exceed 90 days. The Fund will not purchase any
security which matures in more than 397 days.
- PRINCIPAL INVESTMENT RISKS. The principal risks of investing in the Fund
are interest rate risk, credit risk and management risk.
- WHO MAY WANT TO INVEST? Consider investing in the Fund if you are:
- Seeking current income through a liquid investment.
- Looking for a conservative investment to balance out more aggressive
investments.
An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
PERFORMANCE SUMMARY
The chart and table on this
page show how the Prime
Obligations Fund has performed
and how its performance has
varied from year to year. The
bar chart gives an indication
of risk by showing changes in
the Fund's yearly performance
over ten years to demonstrate
that the Fund's return has
varied at different times.
Past performance does not
indicate how the Fund will
perform in the future.
The returns for Investor B
Shares will differ from the
Investor A returns shown in
the bar chart because of
differences in expenses of
each class. The table assumes
that Investor B shareholders
redeem all their fund shares
at the end of the period
indicated.
PERFORMANCE BAR CHART
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
INVESTOR A SHARES(1)
<TABLE>
<CAPTION>
<S> <C>
1989 8.98%
90 7.90%
91 5.96%
92 3.56%
93 2.61%
94 3.62%
95 5.32%
96 4.46%
97 5.01%
98 4.94%
</TABLE>
During the period shown in the bar chart,
the Fund's:
<TABLE>
<S> <C> <C> <C>
Best Quarter was 2.31% 2nd quarter 1989
Worst Quarter was 0.63% 2nd quarter 1993
</TABLE>
PERFORMANCE TABLE
Average Annual Total Returns
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
CLASS PAST PAST PAST SINCE
INCEPTION YEAR 5 YEARS 10 YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
Investor A Shares 8/24/87 4.94% 4.67% 5.22% 5.45%
Investor B Shares*
(with applicable Contingent Deferred Sales Charge) 9/30/97 4.00% N/A N/A 4.04%
</TABLE>
For current yield information on the Fund, call 1-800-451-8377. The Prime
Obligations Fund's yield appears in The Wall Street Journal each Thursday.
* The table above reflects the impact of any contingent deferred sales
charges that apply to Investor B Shares of the Prime Obligations Fund.
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
35
<PAGE> 36
[LOGO]
RISK/RETURN SUMMARY U.S. GOVERNMENT OBLIGATIONS FUND
- -
- - INVESTMENT OBJECTIVE. The Fund's investment objective is to provide current
income with liquidity and stability of principal.
- - PRINCIPAL INVESTMENT STRATEGIES. The Fund is a money market fund that seeks
to maintain a stable net asset value of $1.00 per share, although there is
no guarantee that the net asset value per share will not vary. The Fund
normally invests at least 65% of its total assets in short-term U.S.
Treasury bills, notes and other obligations issued or guaranteed by the
U.S. government or its agencies or instrumentalities. Other securities
purchased by the Fund will be high quality money market instruments and
comparable investments. These securities will have short-term debt ratings
in the two highest rating categories of at least two nationally recognized
statistical rating organizations or will be unrated securities of
comparable quality. The Fund's dollar-weighted average portfolio maturity
will not exceed 90 days. The Fund will not purchase any security which
matures in more than 397 days.
- - PRINCIPAL INVESTMENT RISKS. The principal risks of investing in the Fund
are interest rate risk, credit risk and management risk.
- - WHO MAY WANT TO INVEST? Consider investing in the Fund if you are:
- - Seeking current income through a liquid investment.
- Seeking current income.
- Looking for a conservative investment to balance out more aggressive
investments.
An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
PERFORMANCE SUMMARY
The chart and table on this
page show how the U.S.
Government Obligations Fund
has performed and how its
performance has varied from
year to year. The bar chart
gives an indication of risk by
showing changes in the Fund's
yearly performance over ten
years to demonstrate that the
Fund's return has varied at
different times. The Fund does
not offer Investor B Shares.
Past performance does not
indicate how the Fund will
perform in the future.
PERFORMANCE BAR CHART
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
INVESTOR A SHARES(1)
<TABLE>
<CAPTION>
<S> <C>
1989 8.66%
90 7.69%
91 5.62%
92 3.72%
93 2.54%
94 3.56%
95 5.28%
96 4.76%
97 4.88%
98 4.83%
</TABLE>
During the period shown in the bar chart,
the Fund's:
<TABLE>
<S> <C> <C> <C>
Best Quarter was 2.23% 2nd quarter 1989
Worst Quarter was 0.61% 3rd quarter 1993
</TABLE>
PERFORMANCE TABLE
Average Annual Total Returns(1)
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
CLASS PAST PAST PAST SINCE
INCEPTION YEAR 5 YEARS 10 YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
Investor A Shares 8/24/87 4.83% 4.66% 5.14% 5.35%
</TABLE>
For current yield information on the Fund, call 1-800-451-8377. The U.S.
Government Obligations Fund's yield appears in The Wall Street Journal each
Thursday.
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
36
<PAGE> 37
[LOGO]
RISK/RETURN SUMMARY TREASURY FUND
- -
- INVESTMENT OBJECTIVE. The Fund's investment objective is to provide current
income with liquidity and stability of principal.
- PRINCIPAL INVESTMENT STRATEGIES. The Fund is a money market fund that seeks
to maintain a stable net asset value of $1.00 per share. The Fund normally
invests exclusively in obligations issued or guaranteed by the U.S.
Treasury, its agencies or instrumentalities and repurchase agreements
related to these securities. Other securities purchased by the Fund will be
high quality money market instruments and other comparable investments.
These securities will have short-term debt ratings in the two highest
rating categories of at least two nationally recognized statistical rating
organizations, or will be unrated securities of comparable quality. The
Fund's dollar-weighted average portfolio maturity will not exceed 90 days.
The Fund will not purchase any security which matures in more than 397
days.
- PRINCIPAL INVESTMENT RISKS. The principal risks of investing in the Fund
are interest rate risk and management risk.
- WHO MAY WANT TO INVEST? Consider investing in the Fund if you are:
- Seeking current income through a liquid investment.
- Looking for a conservative investment to balance out more aggressive
investments.
An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
PERFORMANCE SUMMARY
The chart and table on this
page show how the Treasury
Fund has performed and how its
performance has varied from
year to year. The bar chart
gives an indication of risk by
showing changes in the Fund's
yearly performance over five
years to demonstrate that the
Fund's return has varied at
different times. The Fund does
not offer Investor B Shares.
Past performance does not
indicate how the Fund will
perform in the future.
PERFORMANCE BAR CHART
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
INVESTOR A SHARES(1)
<TABLE>
<CAPTION>
<S> <C>
1994 3.60%
95 5.32%
96 4.79%
97 4.96%
98 4.86%
</TABLE>
During the period shown in the bar chart,
the Fund's:
<TABLE>
<S> <C> <C> <C>
Best Quarter was 1.34% 2nd quarter 1995
Worst Quarter was 0.63% 1st quarter 1994
</TABLE>
PERFORMANCE TABLE
Average Annual Total Returns(1)
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
PAST
CLASS PAST 5 PAST SINCE
INCEPTION YEAR YEARS 10 YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
Investor A Shares 12/1/93 4.86% 4.70% N/A 4.67%
</TABLE>
For current yield information on the Fund, call 1-800-451-8377. The Treasury
Fund's yield appears in The Wall Street Journal each Thursday.
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
37
<PAGE> 38
[LOGO]
RISK/RETURN SUMMARY FUND EXPENSES
- -
FEES AND EXPENSES -- MONEY MARKET FUNDS
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD A OR B SHARES OF THE FUNDS.
Annual Fund operating expenses are paid out of Fund assets and are reflected
in the share price. The fees and expenses for each Fund and Class are based
upon current contractual investment advisory fees (as of October 1, 1999) and
the other actual operating expenses of that Fund and Class for the fiscal
year ended May 31, 1999.
FEE TABLE
<TABLE>
<CAPTION>
U.S.
GOVERNMENT
TAX-FREE Obligations
FUND PRIME OBLIGATIONS FUND Fund(5)
INVESTOR A INVESTOR A INVESTOR B INVESTOR A
<S> <C> <C> <C> <C>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price) None None None None
Maximum Deferred Sales Charge (Load) (as a percentage of
offering price or sale price, whichever is less) None None 5.00%(1) None
Redemption Fee(2) None None None None
Exchange Fee None None None None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED
FROM FUND ASSETS)
Management Fees 0.35% 0.35% 0.35% 0.35%
Distribution and Service (12b-1) Fees(3) 0.25% 0.25% 1.00% 0.25%
Other Expenses 0.29% 0.28% 0.27% 0.36%
Total Annual Fund Operating Expenses 0.89% 0.88% 1.62% 0.96%
Fee Waivers/Reimbursements(3,4) 0.17% 0.17% 0.01% 0.17%
Net Annual Fund Operating Expenses 0.72% 0.71% 1.61% 0.79%
<CAPTION>
Treasury
Fund
INVESTOR A
<S> <C>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price) None
Maximum Deferred Sales Charge (Load) (as a percentage of
offering price or sale price, whichever is less) None
Redemption Fee(2) None
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED
FROM FUND ASSETS)
Management Fees 0.30%
Distribution and Service (12b-1) Fees(3) 0.25%
Other Expenses 0.26%
Total Annual Fund Operating Expenses 0.81%
Fee Waivers/Reimbursements(3,4) 0.24%
Net Annual Fund Operating Expenses 0.57%
</TABLE>
(1) The CDSC on Investor B Shares declines over five years starting with year
one and ending in year six from: 5.00%, 5.00%, 4.00%, 3.00%, 2.00%.
(2) If you invest $1,000,000 or more in Investor A Shares of the Funds, your
shares will be subject to a redemption fee of 1.00% for redemptions of
such shares made within one year of the date of purchase. In addition,
although no such fee is currently in place the Transfer Agent has
reserved the right in the future to charge a fee for wire transfers of
redemption proceeds.
(3) The Distributor is currently limiting the 12b-1 fees for Investor A
Shares to 0.10%. Shareholders should be aware that due to the
distribution fees, a long-term shareholder in a Fund may pay over time
more than the economic equivalent of the maximum front-end sales charge
permitted under the rules of the National Association of Securities
Dealers, Inc.
(4) The Administrator is currently waiving a portion of its fees for the
current fiscal year. The Administrator may revise or cancel this expense
limitation at any time and will notify you of any material change.
(5) The fees and expenses for the U.S. Government Obligations Fund are based
upon current fees.
38
<PAGE> 39
RISK/RETURN SUMMARY FUND EXPENSES
- -
FEES AND EXPENSES (CONTINUED)
EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
TAX-FREE FUND
INVESTOR A SHARES $ 91 $284 $ 493 $1,096
PRIME OBLIGATIONS FUND
INVESTOR A SHARES $ 90 $281 $ 488 $1,084
INVESTOR B SHARES
ASSUMING REDEMPTION $665 $911 $1,081 $1,631
ASSUMING NO REDEMPTION $165 $511 $ 881 $1,631
U.S. GOVERNMENT OBLIGATIONS FUND
INVESTOR A SHARES $ 98 $306 $ 531 $1,178
TREASURY FUND
INVESTOR A SHARES $ 83 $259 $ 450 $1,002
</TABLE>
This Example is intended to
help you compare the cost of
investing in the Funds with
the cost of investing in
other mutual funds.
The Example assumes that you
invest $10,000 in the Funds
for the time periods
indicated and then redeem all
of your shares at the end of
those periods. The Example
also assumes that your
investment has a 5% return
each year and that each
Fund's operating expenses
remain the same. Although
your actual costs may be
higher or lower, based on
these assumptions your costs
would be:
39
<PAGE> 40
[LOGO]
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
DESCRIPTION OF THE FUNDS
- -
This section of the Prospectus provides a more complete description of the
Funds' principal investment objectives strategies and risks. Of course, there
can be no assurance that the Funds will achieve their investment objectives.
Additional descriptions of the Funds' risks, strategies, and investments, as
well as other strategies and investments not described below may be found in
the Funds' Statement of Additional Information or SAI.
This section describes risks that affect the Funds' portfolios as a whole.
Certain of these risks may apply to one or more of the Funds. These risks
are:
- MARKET RISK. This is the risk that market influences will affect
expected returns of all equities and bonds in ways that were not
anticipated.
- INTEREST RATE RISK. This is the risk that returns will be better or
worse than expected because of changes in the level of interest rates.
- CREDIT RISK. This is the risk associated with the ability of the firm or
institution that issues securities to meet its obligations on those
securities.
- MANAGEMENT RISK. This risk is the possibility that investments selected
by the Funds' managers may not perform well and that the Funds will not
perform as well as a result.
THIS SECTION ALSO DESCRIBES SPECIFIC RISKS THAT MAY AFFECT A PARTICULAR
FUND'S PORTFOLIO.
- -
PARKSTONE INTERNATIONAL DISCOVERY FUND
TICKER SYMBOL: INVESTOR A SHARES PIDAX INVESTOR B SHARES PIDBX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The Fund's investment objective is to provide capital appreciation by
investing in equity securities of foreign issuers. The Fund normally invests
at least 80% of its total assets in equity securities of foreign issuers. The
Fund's assets normally will be invested in the securities of issuers located
in at least three foreign countries. Foreign investments also may include
debt obligations issued or guaranteed by foreign governments or their
agencies, authorities, instrumentalities or political subdivisions, including
a foreign state, province or municipality. The Fund does not presently intend
to invest in common stock of domestic companies.
The Fund will invest primarily in equity securities, including common and
preferred stocks, rights, warrants, securities convertible into common stocks
and American Depository Receipts ("ADRs") of companies included in the Morgan
Stanley Capital International Europe, Australasia and Far East ("EAFE")
Index, a broadly diversified international index consisting of more than
1,000 equity securities of companies located in Australia, Austria, Belgium,
Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, the
Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland, and
the United Kingdom. The Fund, however, will not be an "index" fund, and is
neither sponsored by nor affiliated with Morgan Stanley Capital
International. The Fund will not presently make investments in markets where,
in the judgment of the Adviser, property rights are not defined and supported
by adequate legal infrastructure. More than 25% of the Fund's assets may be
invested in the securities or issuers located in the same country. Criteria
for determining the appropriate distribution of investments among countries
may include relative valuation, growth prospects and fiscal, monetary and
regulatory governmental policies. The Fund emphasizes country selection.
Although not currently anticipated, the Fund may invest up to 35% of its
assets in U.S. companies. The Fund may temporarily invest cash in short-term
debt instruments of U.S. and foreign issuers for cash management purposes or
pending investment.
During temporary defensive periods as determined by the Adviser, the Fund may
hold up to 100% of its total assets in short-term obligations including
domestic bank certificates of deposit, bankers' acceptances and repurchase
agreements secured by bank instruments. However, to the extent that the Fund
is so invested, its investment objective may not be achieved during that
time. Uninvested cash reserves will not earn income.
40
<PAGE> 41
DESCRIPTION OF THE FUNDS INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
PARKSTONE SMALL CAPITALIZATION FUND
TICKER SYMBOL: INVESTOR A SHARES PKSAX INVESTOR B SHARES PKSBX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The Fund's investment objective is to provide capital appreciation with a
diversified portfolio of publicly traded smaller cap equity securities. The
Fund normally invests at least 80% of its total assets in equity securities
of companies with small stock market capitalization. The Fund considers a
"small capitalization" company as one that has the same market capitalization
as the companies in the Russell 2000 Growth Index.
The Fund's Adviser assesses a company's growth potential by evaluating the
management team, examining products and services, analyzing financial
statements, reviewing earnings models with Wall Street analysts, and studying
company fundamentals. Companies that participate in sectors that are
identified as having long-term growth potential generally make up a
substantial portion of the Fund's holdings. These companies often have
established the market niche or have developed the unique products or
technologies that are expected to produce superior growth in revenues and
earnings. The Fund's Adviser constantly reviews the Fund's securities
holdings and sells stocks when there is a breakdown in company or industry
group fundamentals or when a company's market capitalization exceeds that of
companies represented in the Russell 2000 Growth Index.
The Fund also may invest:
- up to 25% of its net assets in foreign securities either directly or
through the purchase of American Depository Receipts ("ADRs") and
European Depository Receipts ("EDRs");
- up to 20% of the value of its total assets in preferred stocks, corporate
bonds, notes, units of real estate investment trusts, warrants, and
short-term obligations (with maturities of 12 months or less) consisting
of commercial paper (including variable amount master demand notes),
bankers' acceptances, certificates of deposit, repurchase agreements,
obligations issued or guaranteed by the U.S. government or its agencies
or instrumentalities, and demand and time deposits of domestic and
foreign banks and savings and loan associations;
- securities of other investment companies and depository or custodial
receipts representing beneficial interests in any of the foregoing
securities; and
- in securities issued by foreign branches of U.S. banks and foreign banks,
Canadian Commercial Paper ("CCP"), which is commercial paper issued by a
Canadian corporation or counterpart of a U.S. corporation, and in U.S.
dollar-denominated commercial paper of a foreign issuer.
During temporary defensive periods as determined by the Adviser, the Fund may
hold up to 100% of its total assets in short-term obligations including
domestic bank certificates of deposit, bankers' acceptances and repurchase
agreements secured by bank instruments. However, to the extent that the Fund
is so invested, its investment objective may not be achieved during that
time. Uninvested cash reserves will not earn income.
- -
PARKSTONE MID CAPITALIZATION FUND
TICKER SYMBOL: INVESTOR A SHARES PKEAX INVESTOR B SHARES PQIBX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The Fund's investment objective is to provide capital appreciation with a
diversified portfolio of publicly traded mid cap equity securities. The Fund
normally invests at least 80% of its total assets in securities of companies
with mid stock market capitalization. The Fund considers a "mid
capitalization" company as one that has the same market capitalization as the
companies in the Russell Mid Cap Growth Index. The Fund normally invests 80%
of its total assets in common stocks and convertible securities.
The Fund's Adviser assesses a company's growth potential by evaluating the
management team, examining products and services, analyzing financial
statements, reviewing earnings models with Wall Street analysts, and studying
company fundamentals. The Fund invests in companies that typically have
exhibited consistent, above-average growth in revenues and earnings, strong
management, and sound and improving financial fundamentals. Often, these
- -
41
<PAGE> 42
DESCRIPTION OF THE FUNDS INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
companies are market or industry leaders, have excellent products and/or
services, and exhibit the potential for growth. The Fund's core holdings are
companies that participate in long-term growth industries, although the Fund
also may invest in companies in non-growth industries that exhibit the
desired characteristics. The Fund's Adviser constantly reviews the Fund's
securities holdings and sells stocks when there is a breakdown in company or
industry group fundamentals or when a company's market capitalization exceeds
that of companies represented in the Russell MidCap Growth Index.
The Fund also may invest:
- up to 25% of its net assets in foreign securities either directly or
through the purchase of ADRs or EDRs;
- up to 20% of the value of its total assets in preferred stocks, corporate
bonds, notes, units of real estate investment trusts, warrants, and
short-term obligations (with maturities of 12 months or less) consisting
of commercial paper (including variable amount master demand notes),
bankers' acceptances, certificates of deposit, repurchase agreements,
obligations issued or guaranteed by the U.S. government or its agencies
or instrumentalities, and demand and time deposits of domestic and
foreign banks and savings and loan associations;
- securities of other investment companies and depository or custodial
receipts representing beneficial interests in any of the foregoing
securities; and
- in securities issued by foreign branches of U.S. banks and foreign banks,
CCP and in U.S. dollar-denominated commercial paper of a foreign issuer.
During temporary defensive periods as determined by the Adviser, the Fund may
hold up to 100% of its total assets in short-term obligations including
domestic bank certificates of deposit, bankers' acceptances and repurchase
agreements secured by bank instruments. However, to the extent that the Fund
is so invested, its investment objective may not be achieved during that
time. Uninvested cash reserves will not earn income.
- -
PARKSTONE LARGE CAPITALIZATION FUND
TICKER SYMBOL: INVESTOR A SHARES PLCAX INVESTOR B SHARES PKLCX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The Fund's investment objective is to provide capital appreciation with a
diversified portfolio of publicly traded larger cap equity securities. The
Fund normally invests at least 80% of its total assets in a diversified
portfolio of common stocks and securities convertible into common stocks of
companies with large stock market capitalization. The Fund considers a "large
capitalization" company as one that has the same market capitalization as the
companies in the S&P Barra Growth Index.
The Fund invests in companies that typically have exhibited consistent,
above-average growth in revenues and earnings, strong management, and sound
and improving financial fundamentals. Often, these companies are market or
industry leaders, have excellent products and/or services, and exhibit the
potential for growth. The Fund's core holdings are companies that participate
in long-term growth industries, although the Fund also may invest in
companies in non-growth industries that exhibit the desired characteristics.
The Fund also may invest:
- up to 25% of its net assets in foreign securities either directly or
through the purchase of ADRs or EDRs; and
- up to 20% of the value of its total assets in preferred stocks, corporate
bonds, notes, units of real estate investment trusts, warrants, and
short-term obligations (with maturities of 12 months or less) consisting
of commercial paper (including variable amount master demand notes),
bankers' acceptances, certificates of deposit, repurchase agreements,
obligations issued or guaranteed by the U.S. government or its agencies
or instrumentalities, and demand and time deposits of domestic and
foreign banks and savings and loan associations;
- securities of other investment companies and depository or custodial
receipts representing beneficial interests in any of the foregoing
securities; and
- in securities issued by foreign branches of U.S. banks and foreign banks,
CCP and in U.S. dollar-denominated commercial paper of a foreign issuer.
- -
42
<PAGE> 43
DESCRIPTION OF THE FUNDS INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
During temporary defensive periods as determined by the Adviser, the Fund may
hold up to 100% of its total assets in short-term obligations including
domestic bank certificates of deposit, bankers' acceptances and repurchase
agreements secured by bank instruments. However, to the extent that the Fund
is so invested, its investment objective may not be achieved during that
time. Uninvested cash reserves will not earn income.
RISK FACTORS FOR THE GROWTH FUNDS
The principal risks of the Growth Funds are market risk and management risk.
To the extent that the Funds may invest in small- to mid-capitalization
companies, they may have capitalization risk. These investments tend to be
more volatile than investments in large-cap companies. In addition, small-cap
companies may have more risk because they often have limited product lines,
markets, or financial resources. To the extent that the Funds may invest in
foreign securities, they may have foreign risk. This is the risk of
investments in issuers located in foreign countries, which may have greater
price volatility and less liquidity. Investments in foreign securities also
are subject to political, regulatory, and diplomatic risks. Foreign risk
includes currency risk, which may occur due to fluctuations in the exchange
rates between the U.S. dollar and foreign currencies. This risk could
negatively affect the value of a Fund's investments.
- -
PARKSTONE EQUITY INCOME FUND
TICKER SYMBOL: INVESTOR A SHARES PKHAX INVESTOR B SHARES PKHBX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The Fund's investment objective is to provide capital appreciation with a
diversified portfolio of publicly traded larger cap equity securities which,
in the aggregate, provide an above-average current yield. The Fund invests at
least 80% of the value of its total assets in income-producing large cap
common stocks and securities convertible into common stocks. The Fund
considers a "large capitalization" company as one that has the same market
capitalization as the companies in the Standard & Poor's Barra Value Index.
The Fund expects that its core holdings will consist of securities with a
high dividend yield, although it may balance these holdings with lower
yielding but higher-growth oriented securities.
The Fund also may invest:
- up to 20% of its total assets in preferred stocks, corporate bonds or
notes;
- in units of real estate investment trusts, warrants, and short-term
obligations (with maturities of 12 months or less) consisting of
commercial paper (including variable amount master demand notes),
bankers' acceptances, certificates of deposit, repurchase agreements,
obligations issued or guaranteed by the U.S. government or its agencies
or instrumentalities, and demand and time deposits of domestic and
foreign banks and savings and loan associations;
- in securities of other investment companies and depository or custodial
receipts representing beneficial interests in any of the foregoing
securities; and
- up to 25% of its net assets in foreign securities either directly or
through the purchase of ADRs, securities issued by foreign branches of
U.S. banks and foreign banks, in CCP, and in Europaper.
During temporary defensive periods as determined by the Adviser, the Fund may
hold up to 100% of its total assets in short-term obligations including
domestic bank certificates of deposit, bankers' acceptances and repurchase
agreements secured by bank instruments. However, to the extent that the Fund
is so invested, its investment objective may not be achieved during that
time. Uninvested cash reserves will not earn income.
- -
PARKSTONE BALANCED ALLOCATION FUND
TICKER SYMBOL: INVESTOR A SHARES PKBFX INVESTOR B SHARES PKBBX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The Fund's investment objective is to provide long-term capital appreciation
and current income. The Fund invests in a broad range of securities including
common stocks, convertible securities and fixed-income securities. Normally,
the Fund expects to invest 50% to 70% of its net assets in common stocks and
convertible securities and 25% to 55% of
- -
43
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DESCRIPTION OF THE FUNDS INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
its net assets in fixed-income securities. The Fund also may invest up to 30%
of its net assets in cash and cash-equivalent securities, which include
highly liquid securities with a maturity of less than three months. The Fund
may invest up to 20% of its total assets in foreign securities.
The Fund's investments in common stocks, debt securities, and cash
equivalents may vary from time to time depending on the Adviser's assessment
of business, economic, and market conditions, including potential advantages
of price shifts between the stock and bond markets. The Fund invests in
stocks for growth and in debt securities for stability. The Fund's Adviser
adjusts the mix of stocks, bonds, and cash equivalents periodically to take
advantage of rising markets or decrease exposure to declining markets.
The Fund holds common stocks held primarily for the purpose of providing
long-term growth of capital. When choosing such stocks, the potential for
long-term capital appreciation will be the primary basis for selection. The
Fund invests primarily in those companies that are growth-oriented and have
exhibited consistent, above-average growth in revenues and earnings.
The fixed-income portion of the Fund's portfolio consists of bonds,
debentures, notes, zero-coupon securities, mortgage-related securities,
state, municipal or industrial revenue bonds, obligations issued or
guaranteed by the U.S. government or its agencies or instrumentalities,
certificates of deposit, time deposits, high quality commercial paper,
bankers' acceptances and variable amount master demand notes. In addition, a
portion of the Fund's assets may, from time to time, be invested in first
mortgage loans and participation certificates in pools of mortgages issued or
guaranteed by the U.S. government or its agencies or instrumentalities. Some
of the securities in which the Fund invests may have warrants or options
attached. The Fund may also invest in repurchase agreements.
The Fund expects to invest in a variety of U.S. Treasury obligations,
differing in their interest rates, maturities, and time of issuance, as well
as "stripped" U.S. Treasury obligations such as Treasury receipts issued by
the U.S. Treasury representing either future interest or principal payments,
and other obligations issued or guaranteed by the U.S. government or its
agencies or instrumentalities.
The Fund will invest only in corporate fixed-income securities which are
rated at the time of purchase within the four highest rating categories
assigned by a nationally recognized statistical rating organization ("NRSRO")
or, if unrated, which the Adviser deems present attractive opportunities and
are of comparable quality.
The Fund also may invest in:
- short-term obligations (with maturities of 12 months or less) consisting
of domestic and foreign commercial paper, variable amount master demand
notes, bankers' acceptances, certificates of deposit and time deposits of
domestic and foreign branches of U.S. banks and foreign banks, and
repurchase agreements. The Fund may also invest in securities of other
investment companies; and
- obligations of the Export-Import Bank of the United States, in U.S.
dollar-denominated international bonds for which the primary trading
market is the United States ("Yankee Bonds"), or for which the primary
trading market is abroad ("Eurodollar Bonds"), and in Canadian bonds and
bonds issued by institutions, such as the World Bank and the European
Economic Community, organized for a specific purpose by two or more
foreign governments ("Supranational Agency Bonds"). The Fund's
investments in foreign securities may be made either directly or through
the purchase of ADRs and the Fund may also invest in securities issued by
foreign branches of U.S. banks and foreign banks, in CCP, and in
Europaper;
- short-term securities in whatever proportion deemed desirable for
temporary defensive periods during adverse market conditions as
determined by the Adviser.
During temporary defensive periods as determined by the Adviser, the Fund may
hold up to 100% of its total assets in short-term obligations including
domestic bank certificates of deposit, bankers' acceptances and repurchase
agreements secured by bank instruments. However, to the extent that the Fund
is so invested, its investment objective may not be achieved during that
time. Uninvested cash reserves will not earn income.
RISK FACTORS FOR THE GROWTH AND INCOME FUNDS
The principal risks of the Growth and Income Funds are market risk, interest
rate risk, credit risk and management risk. The Balanced Allocation Fund has
the risk that the allocation of its investments between equity and debt
securities may have a more significant effect on the Fund's net asset value
when one of these asset classes is
- -
44
<PAGE> 45
DESCRIPTION OF THE FUNDS INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
performing more poorly than the other. To the extent that the Funds may
invest in foreign securities, they may have foreign risk. This is the risk of
investments in issuers located in foreign countries, which may have greater
price volatility and less liquidity. Investments in foreign securities also
are subject to political, regulatory, and diplomatic risks. Foreign risk
includes currency risk, which may occur due to fluctuations in the exchange
rates between the U.S. dollar and foreign currencies. This risk could
negatively affect the value of a Fund's investments.
- -
PARKSTONE BOND FUND
TICKER SYMBOL: INVESTOR A SHARES PBOAX INVESTOR B SHARES PKBIX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The Fund's investment objective is to provide current income with
preservation of capital by investing in high- and medium-grade fixed-income
securities. The Fund invests at least 80% of its total assets in investment
grade debt securities of all types. The Fund expects to maintain a
dollar-weighted average portfolio maturity of 4 to 12 years. The Fund also
expects to invest in U.S. Treasury obligations with different interest rates
and maturities, as well as "stripped" U.S. Treasury obligations and other
U.S. government obligations.
Fixed-income securities include bonds, debentures, notes with remaining
maturities at the time of purchase of one year or more, zero-coupon
securities, mortgage-related securities, state, municipal or industrial
revenue bonds, obligations issued or guaranteed by the U.S. government or its
agencies or instrumentalities, debt securities convertible into, or
exchangeable for, common stocks, first mortgage loans and participation
certificates in pools of mortgages issued or guaranteed by the U.S.
government or its agencies or instrumentalities.
The Fund will invest in state and municipal securities when, in the opinion
of the Adviser, their yields are competitive with comparable taxable debt
obligations.
In making investment decisions for the Fund, the Adviser will consider many
factors other than current yield, including the preservation of capital, the
potential for realizing capital appreciation, maturity and yield to maturity.
The Fund will invest only in corporate debt securities which are rated at the
time of purchase within the four highest rating categories assigned by a
nationally recognized statistical rating organization ("NRSRO") or, if
unrated, of comparable quality.
The Fund also may invest:
- up to 20% of its assets in preferred stocks and notes with remaining
maturities at the time or purchase of less than one year, short-term debt
obligations consisting of domestic and foreign commercial paper
(including variable amount master demand notes), bankers' acceptances,
certificates of deposit and time deposits of domestic and foreign
branches of U.S. banks and foreign banks, repurchase agreements,
securities of other investment companies, and guaranteed investment
contracts ("GICs") issued by insurance companies. Some of the securities
in which the Fund invests may have warrants or options attached;
- up to 25% of its net assets in foreign securities either directly or
through the purchase of ADRs and securities issued by foreign branches of
U.S. banks and foreign banks, in CCP, and in Europaper;
- in Stripped Treasury Obligations, and other obligations issued or
guaranteed by the U.S. government or its agencies or instrumentalities;
- in corporate debt securities which are rated at the time of purchase
within the four highest rating categories assigned by an NRSRO or, if
unrated, which the Adviser deems present attractive opportunities and are
of comparable quality; and
- in obligations of the Export-Import Bank of the United States, in Yankee
Bonds, in Eurodollar Bonds, in Canadian Bonds and in Supranational Agency
Bonds.
During temporary defensive periods as determined by the Adviser, the Fund may
hold up to 100% of its total assets in short-term obligations including
domestic bank certificates of deposit, bankers' acceptances and repurchase
agreements secured by bank instruments. However, to the extent that the Fund
is so invested, its investment objective may not be achieved during that
time. Uninvested cash reserves will not earn income.
- -
45
<PAGE> 46
DESCRIPTION OF THE FUNDS INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
PARKSTONE INTERMEDIATE GOVERNMENT OBLIGATIONS FUND
TICKER SYMBOL: INVESTOR A SHARES PKIAX INVESTOR B SHARES PIOGX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The Fund's investment objective is to provide current income as well as
preservation of capital by investing primarily in U.S. government securities.
The Fund normally invests at least 80% of it total assets in U.S. government
debt securities. The Fund expects to maintain a dollar-weighted average
portfolio maturity of three to ten years.
The Fund normally invests in U.S. Treasury bills, notes or bonds and other
U.S. government securities. The Fund also may invest in mortgage-related
securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities. The Fund may invest up to 20% of its total assets in debt
securities, preferred stocks and other investments without regard to
maturity.
During temporary defensive periods as determined by the Adviser, the Fund may
hold up to 100% of its total assets in short-term obligations including
domestic bank certificates of deposit, bankers' acceptances and repurchase
agreements secured by bank instruments. However, to the extent that the Fund
is so invested, its investment objective may not be achieved during that
time. Uninvested cash reserves will not earn income.
- -
PARKSTONE U.S. GOVERNMENT INCOME FUND
TICKER SYMBOL: INVESTOR A SHARES PKGAX INVESTOR B SHARES PKGBX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The Fund's investment objective is to provide current income as well as
preservation of capital by investing primarily in U.S. government securities.
The Fund normally invests at least 80% of its total assets in obligations
that are issued or guaranteed by the U.S. government or its agencies or
instrumentalities. The Fund also may invest up to 20% of its total assets in
mortgage-related securities, debt securities and preferred stock of
non-governmental entities. The Fund expects to maintain a dollar-weighted
average portfolio maturity of three to ten years. Normally, the Fund invests
in a variety of U.S. government obligations, including mortgage-related
securities, U.S. Treasury bills, notes and bonds, "stripped" U.S. Treasury
obligations and other U.S. government securities.
The Fund also may invest in:
- short-term obligations (with maturities of 12 months or less) consisting
of domestic and foreign commercial paper (including variable amount
master demand notes), rated at the time of purchase within the top two
rating categories assigned by an NRSRO or, if unrated, which the Adviser
deems present attractive opportunities and are of comparable quality,
bankers' acceptances, certificates of deposit and time deposits of
domestic and foreign branches of U.S. banks and foreign banks, and
repurchase and reverse repurchase agreements; and
- corporate debt securities which are rated at the time of purchase within
the top three rating categories assigned by an NRSRO or, if unrated,
which the Adviser deems present attractive opportunities and are of
comparable quality.
During temporary defensive periods as determined by the Adviser, the Fund may
hold up to 100% of its total assets in short-term obligations including
domestic bank certificates of deposit, bankers' acceptances and repurchase
agreements secured by bank instruments. However, to the extent that the Fund
is so invested, its investment objective may not be achieved during that
time. Uninvested cash reserves will not earn income.
- -
46
<PAGE> 47
DESCRIPTION OF THE FUNDS INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
PARKSTONE LIMITED MATURITY BOND FUND
TICKER SYMBOL: INVESTOR A SHARES PLMAX INVESTOR B SHARES PLMBX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The Fund's investment objective is to provide current income as well as
preservation of capital by investing in a portfolio of high- and medium-grade
fixed-income securities. The Fund normally invests at least 80% of its total
assets in investment grade debt securities of all types. The Fund invests
primarily in corporate bonds, U.S. government obligations, and
mortgage-related securities. The Fund expects to maintain a dollar- weighted
average portfolio maturity of one to five years. The Fund also expects to
invest in U.S. Treasury obligations with different interest rates and
maturities, as well as "stripped" U.S. Treasury obligations and other U.S.
government obligations.
Fixed-income securities consist of bonds, debentures, notes with remaining
maturities at the time of purchase of one year or more, zero-coupon
securities, mortgage-related securities, state, municipal or industrial
revenue bonds, obligations issued or guaranteed by the U.S. government or its
agencies or instrumentalities, debt securities convertible into, or
exchangeable for, common stocks, first mortgage loans and participation
certificates in pools of mortgages issued or guaranteed by the U.S.
government or its agencies or instrumentalities.
In making investment decisions for the Fund, the Adviser considers many
factors other than current yield, including the preservation of capital,
maturity, and yield to maturity. By doing so, the Fund attempts to minimize
the fluctuation in its shares' net asset value relative to those funds which
invest in longer-term obligations. The Fund may invest in state and municipal
securities when, in the opinion of the Adviser, their yields are competitive
with comparable taxable debt obligations. The Fund will invest only in
corporate debt securities that are rated at the time of purchase within the
four highest rating groups or, if unrated, of comparable quality.
The Fund also may invest:
- up to 20% of its total assets in debt securities without regard to
maturity, preferred stocks and short-term debt obligations consisting of
domestic and foreign commercial paper (including variable amount master
demand notes), bankers' acceptances, certificates of deposit and time
deposits of domestic and foreign branches of U.S. banks and foreign
banks, repurchase agreements, securities of other investment companies
and GICs;
- up to 25% of its net assets in foreign securities either directly or
through the purchase of ADRs and securities issued by foreign branches of
U.S. banks and foreign banks, in CCP, and in Europaper;
- in Stripped Treasury Obligations, and other obligations issued or
guaranteed by the U.S. government or its agencies or instrumentalities;
- in corporate debt securities which are rated at the time of purchase
within the four highest rating categories assigned by an NRSRO or, if
unrated, which the Adviser deems present attractive opportunities and are
of comparable quality; and
- in obligations of the Export-Import Bank of the United States, in Yankee
Bonds, in Eurodollar Bonds, in Canadian Bonds and in Supranational Agency
Bonds.
Some of the securities listed above may have options or warrants attached.
During temporary defensive periods as determined by the Adviser, the Fund may
hold up to 100% of its total assets in short-term obligations including
domestic bank certificates of deposit, bankers' acceptances and repurchase
agreements secured by bank instruments. However, to the extent that the Fund
is so invested, its investment objective may not be achieved during that
time. Uninvested cash reserves will not earn income.
RISK FACTORS FOR THE INCOME FUNDS
The principal risks of the Income Funds are market risk, interest rate risk,
credit risk and management risk. Changes in interest rates may significantly
affect the Funds. Increases in interest rates will cause a decline in the
value of your investment.
The Income Funds may invest a significant portion of their assets in
mortgage-related securities. These securities have sensitivities to changes
in interest rates that are different from many other types of debt
securities. When interest rates rise, the maturities of these types of
securities tend to lengthen and the value of the securities decreases more
significantly. In addition, these types of securities are subject to
prepayment when interest rates fall, which generally results in lower returns
because the Funds must reinvest their assets in debt securities with lower
interest rates.
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47
<PAGE> 48
DESCRIPTION OF THE FUNDS INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
PARKSTONE MICHIGAN MUNICIPAL BOND FUND
TICKER SYMBOL: INVESTOR A SHARES PMMAX INVESTOR B SHARES PMMBX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The Fund's investment objective is to provide current income exempt from
federal income taxes and, to the extent possible, from Michigan personal
income taxes, as is consistent with conservation of capital. The Fund
normally invests at least 80% of its net assets in a portfolio of Michigan
municipal securities. The Fund's primary consideration in selecting Michigan
municipal securities is quality.
The Fund normally invests in Michigan municipal securities and expects to
maintain a dollar-weighted average portfolio maturity of three to ten years.
However, the Fund may invest in Michigan municipal securities of any maturity
and the Adviser may extend or shorten the average weighted maturity of its
portfolio depending upon anticipated changes in interest rates or other
relevant market factors. In addition, the average weighted rating of the
Fund's portfolio may vary depending upon the availability of suitable
municipal securities or other relevant market factors.
The Fund invests in Michigan municipal securities that are rated at the time
of purchase within the four highest rating categories assigned by an NRSRO
or, in the case of notes, tax-exempt commercial paper or variable rate demand
obligations, rated within the two highest rating categories by an NRSRO. The
Fund also may purchase Michigan municipal securities which are unrated at the
time of purchase but are determined to be of comparable quality by the
Adviser pursuant to guidelines approved by the Board of Trustees.
Interest income from certain types of municipal securities may be subject to
federal alternative minimum tax. The Fund will not treat these bonds as
municipal securities for purposes of measuring compliance with the 80% test
described above.
Investments of the Fund may be made in taxable obligations if, for example,
suitable tax-exempt obligations are unavailable or if acquisition of U.S.
government or other taxable securities is deemed appropriate for temporary
defensive purposes as determined by the Adviser to be warranted due to market
conditions. Such taxable obligations consist of government securities,
certificates of deposit, time deposits and bankers' acceptances of selected
banks, commercial paper meeting the Fund's quality standards for tax-exempt
commercial paper (as described above), and such taxable obligations as may be
subject to repurchase agreements.
During temporary defensive periods as determined by the Adviser, the Fund may
hold up to 100% of its total assets in short-term obligations including
domestic bank certificates of deposit, bankers' acceptances and repurchase
agreements secured by bank instruments. However, to the extent that the Fund
is so invested, its investment objective may not be achieved during that
time. Uninvested cash reserves will not earn income.
- -
PARKSTONE NATIONAL TAX EXEMPT BOND FUND
TICKER SYMBOL: INVESTOR A SHARES PMUAX INVESTOR B SHARES PKBMX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The Fund's investment objective is to provide current income exempt from
federal income taxes as is consistent with conservation of capital. The Fund
normally invests at least 80% of its assets in a diversified portfolio of
municipal securities the interest on which is both exempt from federal income
taxes and not treated as a preference item for individuals for the purpose of
the federal alternative minimum tax.
The Fund normally invests in long-term municipal securities and expects to
maintain a dollar-weighted average portfolio maturity of three to ten years.
The Fund intends, under normal market conditions, to maintain an average
weighted credit rating of Aa/AA. The average weighted rating of the Fund's
portfolio may vary depending upon the availability of suitable municipal
securities or other relevant market factors. Although it does not intend to
do so on a regular basis, the Fund may invest more than 25% of its net assets
in (i) municipal securities whose issuers are in the same state and (ii)
municipal securities the interest on which is paid solely from revenues of
similar projects.
- -
48
<PAGE> 49
DESCRIPTION OF THE FUNDS INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
The Fund may invest up to 20% of its total assets in private activity bonds
which may be treated as a specific tax preference item under the federal
alternative minimum tax.
Interest income from certain types of municipal securities may be subject to
federal alternative minimum tax. The Fund will not treat these bonds as
municipal securities for purposes of measuring compliance with the 80% test
described above.
Investments of the Fund may be made in taxable obligations if, for example,
suitable tax-exempt obligations are unavailable or if acquisition of U.S.
government or other taxable securities is deemed appropriate for temporary
defensive purposes as determined by the Adviser to be warranted due to market
conditions. Such taxable obligations consist of government securities,
certificates of deposit, time deposits and bankers' acceptances of selected
banks, commercial paper meeting the Fund's quality standards for tax-exempt
commercial paper (as described above), and such taxable obligations as may be
subject to repurchase agreements.
During temporary defensive periods as determined by the Adviser, the Fund may
hold up to 100% of its total assets in short-term obligations including
domestic bank certificates of deposit, bankers' acceptances and repurchase
agreements secured by bank instruments. However, to the extent that the Fund
is so invested, its investment objective may not be achieved during that
time. Uninvested cash reserves will not earn income.
RISK FACTORS FOR THE TAX-FREE INCOME FUNDS
The Tax-Free Income Funds have interest rate risk and credit risk. In
addition the Funds have municipal market risk. This is the risk that special
factors may adversely affect the value of municipal securities and have a
significant adverse effect on the value of the Funds' investments. These
factors include political or legislative changes, uncertainties related to
the tax status of municipal securities, or the rights of investors in these
securities. The Michigan Municipal Bond Fund is not "diversified," meaning
that it can invest in a relatively small number of issuers. Factors affecting
these issuers could have a more significant adverse effect on this Fund's net
asset value.
MONEY MARKET FUNDS
All of the Money Market Funds seek to maintain a stable net asset value of
$1.00 per share and invest exclusively in United States dollar-denominated
instruments that the Board of Trustees and the Adviser determine present
minimal credit risks and which at the time of acquisition are (a) U.S.
government securities, (b) money market fund shares, or (c) rated by at least
two NRSROs or by the only NRSRO providing a rating in one of the two highest
rating categories for short-term debt obligations or, if unrated, which the
Adviser deems to be of comparable quality. There is no assurance, however,
that they will be able to maintain the $1.00 net asset value per share on a
continuous basis. Each Fund pursues its strategy by maintaining a portfolio
of high-quality money market investments. As money market funds, the Funds
must meet the requirements of SEC Rule 2a-7. The Rule imposes strict
requirements on the investment quality, maturity and diversification of the
Funds' investments. Under Rule 2a-7, the Funds' investments must each have a
remaining maturity of no more than 397 days and each Money Market Fund must
maintain a dollar-weighted average portfolio maturity that does not exceed 90
days.
- -
PARKSTONE TAX-FREE FUND
TICKER SYMBOL: INVESTOR A SHARES PFAXX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The Fund's investment objective is to provide as high a level of current
interest income free from federal income taxes, consistent with the
preservation of capital and relative stability of principal. The Fund
normally invests at least 80% of its total assets in municipal securities.
The Fund may invest up to 20% of its total assets in obligations the interest
on which is either subject to federal income taxation or treated as a
preference item for purposes of the federal alternative minimum tax. The Fund
invests exclusively in high quality instruments with a remaining maturity of
no more than 397 days.
The Fund also may:
- invest in commercial paper (subject to the quality standards for
tax-exempt commercial paper).
If the Adviser deems it appropriate for temporary defensive purposes, the
Fund may increase its holdings in taxable obligations to over 20% of its
total assets and may also hold uninvested cash reserves pending investment.
Taxable obligations may include obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities
- -
49
<PAGE> 50
DESCRIPTION OF THE FUNDS INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
(some of which may be subject to repurchase agreements), certificates of
deposit and bankers' acceptances of selected banks, and commercial paper
meeting the Fund's quality standards for tax-exempt commercial paper.
During temporary defensive periods as determined by the Adviser, the Fund may
hold up to 100% of its total assets in short-term obligations including
domestic bank certificates of deposit, bankers' acceptances and repurchase
agreements secured by bank instruments. However, to the extent that the Fund
is so invested, its investment objective may not be achieved during that
time. Uninvested cash reserves will not earn income.
- -
PARKSTONE PRIME OBLIGATIONS FUND
TICKER SYMBOL: INVESTOR A SHARES POAXX INVESTOR B SHARES TICKER NOT YET
AVAILABLE
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The Fund's investment objective is to provide current income with liquidity
and stability of principal. The Fund invests in high-quality money market
instruments, including municipal securities and other instruments of
comparable high quality. The Fund also may invest in commercial paper, other
short-term promissory notes issued by corporations (including variable amount
master demand notes) rated at the time of purchase within the two highest
rating categories assigned by at least two NRSROs or by the only NRSRO
providing a rating or, if not rated, which the Adviser deems to be of
comparable quality bankers' acceptances, CCP, Europaper, certificates of
deposit and time deposits.
During temporary defensive periods as determined by the Adviser, the Fund may
hold up to 100% of its total assets in short-term obligations including
domestic bank certificates of deposit, bankers' acceptances and repurchase
agreements secured by bank instruments. However, to the extent that the Fund
is so invested, its investment objective may not be achieved during that
time. Uninvested cash reserves will not earn income.
- -
PARKSTONE U.S. GOVERNMENT OBLIGATIONS FUND
TICKER SYMBOL: INVESTOR A SHARES PGAXX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The Fund's investment objective is to provide current income with liquidity
and stability of principal. The Fund normally invests at least 65% of its
total assets in short-term U.S. Treasury bills, notes, and other government
obligations and agency securities. The Fund invests exclusively in high
quality instruments with a remaining maturity of no more than 397 days. The
Fund may invest up to 35% of its total assets in high-quality money market
instruments, including:
- municipal securities;
- bankers' acceptances;
- certificates of deposit, time deposits, and other instruments deemed to
be of comparable high quality.
The Fund also may invest in commercial paper and other short-term promissory
notes issued by corporations (including variable amount master demand notes)
rated at the time of purchase within the two highest rating categories
assigned by at least two NRSROs or by the only NRSRO providing a rating or,
if not rated, which the Adviser deems to be of comparable quality.
During temporary defensive periods as determined by the Adviser, the Fund may
hold up to 100% of its total assets in short-term obligations including
domestic bank certificates of deposit, bankers' acceptances and repurchase
agreements secured by bank instruments. However, to the extent that the Fund
is so invested, its investment objective may not be achieved during that
time. Uninvested cash reserves will not earn income.
- -
50
<PAGE> 51
DESCRIPTION OF THE FUNDS INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
- -
PARKSTONE TREASURY FUND
TICKER SYMBOL: INVESTOR A SHARES PTUXX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The Fund's investment objective is to provide current income with liquidity
and stability of principal. The Fund normally invests exclusively in U.S.
government obligations and in repurchase agreements backed by these
securities. The Fund invests exclusively in high quality instruments with a
remaining maturity of no more than 397 days.
During temporary defensive periods as determined by the Adviser, the Fund may
hold up to 100% of its total assets in short-term obligations including
domestic bank certificates of deposit, bankers' acceptances and repurchase
agreements secured by bank instruments. However, to the extent that the Fund
is so invested, its investment objective may not be achieved during that
time. Uninvested cash reserves will not earn income.
- -
ADDITIONAL RISK CONSIDERATIONS
RISK FACTORS FOR THE MONEY MARKET FUNDS
The Money Market Funds are subject to management risk. In addition, specific
risks of the Funds' portfolios include:
INTEREST RATE RISK. Because the Funds invest in short-term securities, a
decline in interest rates will affect the Funds' yields as these securities
mature or are sold and the Funds purchase new short-term securities with
lower yields. Generally, an increase in interest rates causes the value of a
debt instrument to decrease. The change in value for shorter-term securities
is usually smaller than for securities with longer maturities. Because the
Funds invest in securities with short maturities and seek to maintain a
stable net asset value of $1.00 per share, it is possible, though very
unlikely, that an increase in interest rates would change the value of your
investment.
CREDIT RISK. This is the risk that a security's credit rating will be
downgraded or that the issuer of a security will default (fail to make
scheduled interest and principal payments).
MUNICIPAL MARKET RISK. The Tax-Free Fund faces the risk that special factors
may adversely affect the value of municipal securities and have a significant
effect on the value of the Fund's investments. These factors include
political or legislative changes, uncertainties related to the tax status of
municipal securities, or the rights of investors in these securities.
Investments in certain municipal securities with principal or interest
payments that are made from a specific project or facility, and not from
general tax revenues, may have increased risks. Factors affecting the project
or facility, such as local or economic conditions, could have significant
effect on the project's ability to make payments of principal and interest on
these securities.
The most recent information about each of the Fund's portfolio holdings can
be found in its annual or semi-annual report. For information about receiving
this report, see the back cover.
51
<PAGE> 52
[LOGO]
MANAGEMENT OF THE FUNDS
- -
INVESTMENT ADVISER
National City Investment Management Company, ("IMC" or the "Adviser"), 1900
East Ninth Street, Cleveland, Ohio 44114 is the adviser for the Funds. IMC a
wholly-owned subsidiary of National City Corporation and an affiliate of
National City Bank, was founded in 1998. IMC manages more than $23.7 billion
in assets, including $4.3 billion in the Parkstone Group of Funds. Through
its portfolio management teams, IMC makes the day-to-day investment decisions
and continuously reviews, supervises and administers the Funds' investment
programs.
For these advisory services, the Funds paid as follows during their fiscal
year ended May 31, 1999:
<TABLE>
<CAPTION>
PERCENTAGE OF
AVERAGE NET ASSETS
<S> <C>
------------------------------
Parkstone International Discovery Fund 1.16%*
------------------------------
Parkstone Small Capitalization Fund 1.00%
------------------------------
Parkstone Mid Capitalization Fund 1.00%
------------------------------
Parkstone Large Capitalization Fund 0.80%
------------------------------
Parkstone Equity Income Fund 1.00%
------------------------------
Parkstone Balanced Allocation Fund 0.75%**
------------------------------
Parkstone Bond Fund 0.70%**
------------------------------
Parkstone Intermediate Government Obligations Fund 0.70%**
------------------------------
Parkstone U.S. Government Income Fund 0.45%**
------------------------------
Parkstone Limited Maturity Bond Fund 0.55%**
------------------------------
Parkstone Michigan Municipal Bond Fund 0.55%**
------------------------------
Parkstone National Tax Exempt Bond Fund 0.55%**
------------------------------
Parkstone Tax-Free Fund 0.40%
------------------------------
Parkstone Prime Obligations Fund 0.40%
------------------------------
Parkstone U.S. Government Obligations Fund 0.40%
------------------------------
Parkstone Treasury Fund 0.40%
------------------------------------------------------------ ------------------------------
</TABLE>
* Calculated based on 1.25% on the first $50 million, in average daily net
assets, 1.20% on the next $50 million, 1.15% on the next $300 million and
1.05% over $400 million.
** IMC waived a portion of its contractual fees with the Funds for the most
recent fiscal year. Contractual fees (without waivers) were: Balanced
Allocation Fund, 1.00%; Bond Fund, 0.74%; Limited Maturity Bond Fund,
0.74%; Intermediate Government Obligations Fund, 0.74%; U.S. Government
Income Fund, 0.74%; National Tax Exempt Bond Fund, 0.74%; Michigan
Municipal Bond Fund, 0.74%.
52
<PAGE> 53
MANAGEMENT OF THE FUNDS
- -
PORTFOLIO MANAGEMENT TEAM
IMC utilizes a team approach for management of the funds. No one person is
primarily responsible for making investment recommendations to the team. The
table below shows the IMC management team responsible for each fund:
<TABLE>
<S> <C>
PORTFOLIO PORTFOLIO MANAGEMENT TEAM
---------------------------------------------
Parkstone International Discovery Fund International Equity Team
---------------------------------------------
Parkstone Small Capitalization Fund Equity Growth Team
---------------------------------------------
Parkstone Mid Capitalization Fund Equity Growth Team
---------------------------------------------
Parkstone Large Capitalization Fund Equity Growth Team
---------------------------------------------
Parkstone Equity Income Fund Equity Value Team
---------------------------------------------
Parkstone Balanced Allocation Fund Equity and Fixed Income Teams
---------------------------------------------
Parkstone Bond Fund Taxable Fixed-Income Team
---------------------------------------------
Parkstone Intermediate Government Obligations Fund Taxable Fixed-Income Team
---------------------------------------------
Parkstone U.S. Government Income Fund Taxable Fixed-Income Team
---------------------------------------------
Parkstone Limited Maturity Bond Fund Taxable Fixed-Income Team
---------------------------------------------
Parkstone Michigan Municipal Bond Fund Tax Exempt Fixed Income Team
---------------------------------------------
Parkstone National Tax Exempt Bond Fund Tax Exempt Fixed Income Team
---------------------------------------------
Parkstone Tax-Free Fund Tax Exempt Money Market Team
---------------------------------------------
Parkstone Prime Obligations Fund Taxable Money Market Team
---------------------------------------------
Parkstone U.S. Government Obligations Fund Taxable Money Market Team
---------------------------------------------
Parkstone Treasury Fund Taxable Money Market Team
------------------------------------------------------------ ---------------------------------------------
</TABLE>
- -
THE DISTRIBUTOR AND ADMINISTRATOR
SEI Investments Distribution Co. (the "Distributor"), a wholly-owned
subsidiary of SEI Investments, distributes the shares of the Parkstone Group
of Funds (the "Trust"). The Trust reserves the right to reject a purchase
order when the Trust determines that it is not in the best interest of the
Trust to accept such order.
With respect to the Trust, the Distributor may, from time to time and at its
own expense, provide promotional incentives, in the form of cash or other
compensation, to financial institutions whose representatives have sold or
are expected to sell significant amounts of these Funds.
BISYS Fund Services ("BISYS"), whose address is 3435 Stelzer Road, Columbus,
Ohio 43219-3035, serves as the Funds' administrator.
The Statement of Additional Information has more detailed information about
the Investment Adviser and other service providers.
- -
YEAR 2000
Like other funds and business organizations around the world, the Funds could
be adversely affected if the computer systems used by the Adviser and the
Funds' other service providers do not properly process and calculate
date-related information for the year 2000 and beyond. In addition, Year 2000
issues may adversely affect companies in which the Funds invest where, for
example, such companies incur substantial costs to address Year 2000 issues
or suffer losses caused by the failure to adequately or timely do so.
The Funds have been assured that the Adviser and the Funds' other service
providers (i.e., Administrator, Transfer Agent, Fund Accounting Agent,
Custodian and Distributor) have developed and are implementing
clearly-defined and documented plans intended to minimize risks to services
critical to the Funds' operations associated with Year 2000 issues. Internal
efforts include a commitment to dedicate adequate staff and funding to
identify and remedy Year 2000
- -
53
<PAGE> 54
MANAGEMENT OF THE FUNDS
- -
issues, and specific actions such as inventorying software systems,
determining inventory items that may not function properly after December 31,
1999, reprogramming or replacing such systems, and retesting for Year 2000
readiness. The Funds' Adviser and service providers are likewise seeking
assurances from their respective vendors and suppliers that such entities are
addressing any Year 2000 issues, and each provider intends to engage, where
appropriate, in private and/or industry interface testing of systems for Year
2000 readiness.
In the event that any systems upon which the Funds are dependent are not Year
2000 ready by December 31, 1999, administrative errors and account
maintenance failures may occur. While the ultimate costs or consequences of
incomplete or untimely resolution of Year 2000 issues by the Adviser or the
Funds' service providers cannot be accurately assessed at this time, the
Funds currently have no reason to believe that the Year 2000 plans of the
Adviser and the Funds' service providers will not be completed by December
31, 1999, or that the anticipated costs associated with full implementation
of their plans will have a material adverse impact on either their business
operations or financial condition or those of the Funds. The Funds and the
Adviser will continue to closely monitor developments relating to this issue,
and the Adviser and the Funds' service providers are developing contingency
plans for providing back-up computer services in the event of a systems
failure or the inability of any provider to achieve Year 2000 readiness.
Separately, the Adviser will monitor potential investment risk related to
Year 2000 issues.
54
<PAGE> 55
[LOGO]
PURCHASE AND SALE OF SHARES
HOW NAV IS CALCULATED
Each of the Money Market Funds
seeks to maintain a net asset
value, or NAV, of $1.00 per share
by valuing the obligations in
accordance with SEC regulations.
Amortized cost will normally
approximate market value.
NAV =
Total Assets - Liabilities
----------------------------------
Number of Shares
Outstanding
----------------------------------
The NAV is calculated by adding the total value of a Fund's investments and
other assets, subtracting its liabilities and then dividing that figure by the
number of outstanding shares of the Fund:
You can find most Funds' NAV daily in The Wall Street Journal and other
newspapers. NAV is calculated separately for each class of shares.
MONEY MARKET FUNDS
The NAV of the Treasury and Tax-Free Funds is determined and the shares are
priced as of 1:00 p.m. Eastern time and as of the close of trading on the New
York Stock Exchange ("NYSE"), normally at 4 p.m. Eastern time on each
business day. The NAV of the Prime Obligations and U.S. Government
Obligations Funds is determined and the shares are priced as of 3:00 p.m.
Eastern time and as of the close of trading on the NYSE on each business day.
The Money Market Funds value their securities at their amortized cost. The
amortized cost method involves valuing a portfolio security initially at its
cost on the date of the purchase and thereafter assuming a constant
amortization to maturity of the difference between the principal amount due
at maturity and initial cost.
OTHER FUNDS
The per share NAV for each non-Money Market Fund is determined and its shares
are priced at the close of regular trading on the New York Stock Exchange,
normally at 4:00 p.m. Eastern time on each business day.
Your order for purchase of shares is priced at the next NAV calculated after
your order is received by the Distributor. Your order for redemption of
shares is priced at the next NAV calculated after shares are properly
tendered for redemption.
The Funds' securities are generally valued at current market prices. If
market quotations are not available, prices will be based on fair value as
determined by a method which the Funds' Trustees believes accurately reflects
fair value.
Foreign securities are valued based on quotations from the primary market in
which they are traded and are translated from the local currency into U.S.
dollars using current exchange rates.
Some of the Funds have portfolio securities that are primarily listed on
foreign exchanges that trade on weekends or other days when these Funds do
not price their shares. As a result, the net asset value of a Fund's shares
may change on days when shareholders will not be able to purchase or redeem
the Fund's shares.
BUSINESS DAYS DEFINED
A business day for the Funds is generally a day that the New York Stock
Exchange is open for business. The Funds will not be open in observance of
the following holidays: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Columbus Day (Money Market Funds only), Veterans Day (Money Market Funds
only), Thanksgiving and Christmas Day.
55
<PAGE> 56
PURCHASE AND SALE OF SHARES
- -
PURCHASING AND ADDING TO YOUR SHARES
You may purchase Funds through the
Funds' Distributor or through banks,
brokers and other investment
representatives, which may charge
additional fees and may require higher
minimum investments or impose other
limitations on buying and selling
shares. If you purchase shares through
an investment representative, the
investment representative is
responsible for transmitting orders by
close of business and may have an
earlier cut-off time for purchase and
sale requests. Your investment
representative is responsible for
transmitting all subscription and
redemption requests, investment
information, documentation and money to
the Funds on time.
Certain investment representatives have
agreements with the Funds that allow
them to enter confirmed purchase or
redemption orders on behalf of clients
and customers. Under this arrangement,
the investment representative must send
your payment to the Funds by the time
they price their shares on the
following day. If your investment
representative fails to do so, it may
be responsible for any resulting fees
or losses. Consult your investment
representative or institution for
specific information.
A Fund may waive its minimum purchase
requirement and the Distributor may
reject a purchase order if it considers
it in the best interest of a Fund and
its shareholders.
Investor A Shares and Investor B Shares
of the Michigan Municipal Bond Fund may
only be sold in those states where the
Fund has filed the required
notification documents, at the time of
filing this prospectus only Colorado,
District of Columbia, Florida, Georgia,
Hawaii, Illinois, Indiana, Michigan,
Mississippi, New Jersey, Ohio, and
Virginia.
The Trust reserves the right to reject
all or part of any order for the
purchase of Investor A Shares or
Investor B Shares.
<TABLE>
<CAPTION>
MINIMUM MINIMUM
INITIAL SUBSEQUENT
ACCOUNT TYPE INVESTMENT INVESTMENT
<S> <C> <C>
INVESTOR A OR B SHARES
Regular (non-retirement) $500 None
----------------------------------------------------
Retirement (IRA) $500 None
----------------------------------------------------
Automatic Investment Plan $ 50 $50/mo.
</TABLE>
- - All purchases must be in U.S. dollars.
- - A fee may be charged for any checks that do not clear.
- - Third-party checks are not accepted.
--------------------------------------------------------------
AVOID 31% TAX WITHHOLDING
Each Fund is required to withhold 31% of taxable dividends,
capital gains distributions and redemptions paid to
shareholders who have not provided the Fund with their
certified taxpayer identification number in compliance with
IRS rules. To avoid this, make sure you provide your correct
Tax Identification Number (Social Security Number for most
investors) as well as your signature on your account
application.
--------------------------------------------------------------
56
<PAGE> 57
PURCHASE AND SALE OF SHARES
INSTRUCTIONS FOR OPENING OR
ADDING TO AN ACCOUNT
BY REGULAR MAIL
If purchasing through your financial advisor or brokerage account, simply
tell your advisor or broker that you wish to purchase shares of the Funds and
he or she will take care of the necessary documentation. For all other
purchases, follow the instructions below.
Initial Investment:
1. Carefully read and complete an account application. Establishing your
account privileges now saves you the inconvenience of having to add them
later.
2. Make check, bank draft or money order payable to "The Parkstone Group of
Funds" and include the name of the appropriate Fund(s) on the check.
3. Mail to: The Parkstone Group of Funds, P.O. Box 8590, Boston, MA
02266-8590
Subsequent Investment:
1. Use the investment slip attached to your account
statement, or
2. Include the following information on a piece of
paper:
- Fund name
- Share class
- Amount invested
- Account name
- Account number
Include your account number on your check.
3. Mail to: The Parkstone Group of Funds, P.O. Box
8590, Boston, MA 02266-8590.
Note: If you pay by check, the transaction will not be processed until the
check is received by the Trust's Transfer Agent. If a check received to
purchase Investor A Shares or Investor B Shares does not clear, the purchase
will be cancelled. You could be liable for any new fees or losses incurred.
BY OVERNIGHT SERVICE
See instructions 1-2 above for subsequent investments and Send to: The
Parkstone Group of Funds c/o Boston Financial, 66 Brooks Drive, Braintree, MA
02184
ELECTRONIC PURCHASES
Your bank must participate in the Automated Clearing House (ACH) and must be
a U. S. bank. Your bank or broker may be charged for this service.
Establish the electronic purchase option on your account application or call
1-800-451-8377. Your account can generally be set up for electronic purchases
within 15 days.
Call 1-800-451-8377 to arrange a transfer from your bank account.
ELECTRONIC VS. WIRE TRANSFER
Wire transfers allow financial institutions to send funds to each other, almost
instantaneously. With an electronic purchase or sale, the transaction is made
through the Automated Clearing House (ACH) and may take up to eight days to
clear.
57
<PAGE> 58
PURCHASE AND SALE OF SHARES
- -
BY WIRE TRANSFER
Note: Your bank may charge a wire transfer fee.
Once your account has been established and you have an account number follow
the instructions below:
For initial and subsequent investments:
Instruct your bank to wire transfer your investment to:
State Street Bank and Trust Company ABA #0110-0002-8
DDA#99053811
Include:
Your name
Your account number
Name of Fund and Class
After instructing your bank to wire the funds, call 800-451-8377 to advise us
of the amount being transferred and the name of your bank.
Note: If the wire transfer is not received by the Fund's Transfer Agent
within three business days of the transaction, the purchase will be cancelled
and you could be liable for fees incurred.
--------------------------------------------------------------
You can add to your account by using the convenient options
described below. The Fund reserves the right to change or
eliminate these privileges at any time with 60 days notice.
--------------------------------------------------------------
AUTO INVEST PLAN
You can make automatic investments in the Funds from your bank
account. Your Auto Invest Plan can be started with a minimum initial
investment of $50.
To invest regularly from your bank account:
Complete the appropriate portion on your Account Application or call
the Funds at 1-800-451-8377. Make sure you note:
- Your bank name, address and account number
- The amount you wish to invest automatically (minimum $50)
- How often you want to invest (monthly, bi-monthly or
quarterly)
Attach a voided personal check or deposit slip.
DIRECTED DIVIDEND OPTION
--------------------------------------------------------------
By selecting the appropriate box in the Account Application,
you can elect to receive your distributions in cash (check) or
have distributions (capital gains and dividends) reinvested in
the Fund you are currently invested in or another Parkstone
Fund without a sales charge. You must maintain the minimum
balance in each Fund into which you plan to reinvest dividends
or the reinvestment will be suspended and your dividends paid
to you. The Fund may modify or terminate this reinvestment
option without notice. You can change or terminate your
participation in the reinvestment option at any time by
writing the Distributor.
--------------------------------------------------------------
58
<PAGE> 59
PURCHASE AND SALE OF SHARES
- -
SELLING YOUR SHARES
You may sell your shares at any
time. Your sales price will be
the next NAV after your sell
order is received in good order
by the Fund, its transfer agent,
or your investment
representative. Good order means
that your request includes
complete information on your
purchase, exchange or redemption
and that the Fund has received
the appropriate assets. Normally
you will receive your proceeds
within a week after your request
is received.
WITHDRAWING MONEY FROM YOUR FUND INVESTMENT
As a mutual fund shareholder, you are
technically selling shares when you
request a withdrawal in cash. This is
also known as redeeming shares or a
redemption of shares.
CONTINGENT DEFERRED SALES CHARGE
When you sell Investor B Shares, you will be charged a fee for any shares
that have not been held for a sufficient length of time. These fees will be
deducted from the money paid to you. See the section on "Distribution
Arrangements/Sales Charges" below for details.
INSTRUCTIONS FOR SELLING SHARES
If selling your shares through your financial adviser or broker, ask him or
her for redemption procedures. Your adviser and/or broker may have
transaction minimums and/or transaction times which will affect your
redemption. For all other sales transactions, follow the instructions below.
BY TELEPHONE (unless you have declined telephone sales privileges)
Call 1-800-451-8377 with instructions as to how you wish to receive your
funds (mail, wire, electronic transfer). (See "General Policies on Selling
Shares -- Verifying Telephone Redemptions" below)
BY MAIL
1. Call 1-800-451-8377 to request redemption forms or write a letter of
instruction indicating:
- your Fund and account number
- amount you wish to redeem
- address where your check should be sent
- account owner signature or signature of eligible guarantor institution
2. Mail to: State Street Bank and Trust Company, c/o The Parkstone Group of
Funds, P.O. Box 8590, Boston, MA 02266-8590
BY OVERNIGHT SERVICE
(See "General Policies on Selling Shares -- Redemptions in Writing Required"
below)
See instruction 1 above.
2. Send to: The Parkstone Group of Funds, c/o Boston Financial, 66 Brooks
Drive, Braintree, MA 02184
59
<PAGE> 60
PURCHASE AND SALE OF SHARES
- -
WIRE TRANSFER
You must indicate this option on your application.
Call 1-800-451-8377 to request a wire transfer.
If you call by 4 p.m. Eastern time, your payment will normally be wired to
your bank on the next business day.
The Fund may charge a wire transfer fee.
Note: Your financial institution may charge a wire transfer fee.
ELECTRONIC REDEMPTIONS
Call 1-800-451-8377 to request an electronic redemption.
Your bank must participate in the Automated Clearing House (ACH) and must be
a U.S. bank.
If you call by 4 p.m. Eastern time, the NAV of your shares will normally be
determined on the same day and the proceeds credited within 8 days.
Your bank may charge for this service.
AUTO WITHDRAWAL PLAN
You can receive automatic payments from your account on a monthly or
quarterly basis. The minimum withdrawal is $100. There will be no contingent
deferred sales charge on Investor B Shares so long as the amounts withdrawn
do not exceed 10% annually of the account at the time the shareholder elects
to participate in the plan. To activate this feature:
- Call 1-800-451-8377.
- Your account must have a value of $500 or more to start withdrawals.
- If the value of your account falls below $500, you may be asked to add
sufficient funds to bring the account back to $500, or the Fund may close
your account and mail the proceeds to you.
REDEMPTION BY CHECK WRITING -- THE MONEY MARKET FUNDS (INVESTOR A SHARES)
You may write checks in amounts of $100 or more on your account in the Money
Market Funds. To obtain checks, complete the signature card section of the
Account Application or contact the Fund to obtain a signature card. Dividends
and distributions will continue to be paid up to the day the check is
presented for payment. The check writing feature may be modified or
terminated upon 30-days' written notice. You must maintain the minimum
required account balance of $500. You may not close a Money Market Fund
account by writing a check.
- -
GENERAL POLICIES ON SELLING SHARES
REDEMPTIONS IN WRITING REQUIRED
You must request redemption in writing in the following situations:
1. Redemptions from Individual Retirement Accounts ("IRAs").
2. Redemption requests requiring a signature guarantee, which include each of
the following:
- Your account registration or the name(s) in your account has changed
within the last 15 days.
- The check is not being mailed to the address on your account.
- The check is not being made payable to the owner of the account.
- The redemption proceeds are being transferred to another fund account
with a different registration.
- Your redemption is in the amount of $10,000 or more.
A signature guarantee can be obtained from a financial institution, such as
a bank, broker-dealer, or credit union, or from members of the STAMP
(Securities Transfer Agents Medallion Program), MSP (New York Stock
Exchange Medallion Signature Program) or SEMP (Stock Exchanges Medallion
Program). Members are subject to dollar limitations which must be
considered when requesting their guarantee. The Transfer Agent may reject
any signature guarantee if it believes the transaction would otherwise be
improper.
- -
60
<PAGE> 61
PURCHASE AND SALE OF SHARES
- -
VERIFYING TELEPHONE REDEMPTIONS
The Trust makes every effort to insure that telephone redemptions are only
made by authorized shareholders. All telephone calls are recorded for your
protection and you will be asked for information to verify your identity.
Given these precautions, unless you have specifically indicated on your
application that you do not want the telephone redemption feature, you may be
responsible for any fraudulent telephone orders.
REDEMPTIONS WITHIN 15 DAYS OF INITIAL INVESTMENT
When you have made your initial investment by check, the proceeds of your
redemption may be held up to 15 calendar days until the Transfer Agent is
satisfied that the check has cleared. You can avoid this delay by purchasing
shares by federal funds, bank wire, certified or cashier's check.
REFUSAL OF REDEMPTION REQUEST
Payment for shares may be delayed under extraordinary circumstances or as
permitted by the Securities and Exchange Commission in order to protect
remaining shareholders.
REDEMPTION IN KIND
Each Fund reserves the right to make payment in securities rather than cash,
known as "redemption in kind." This could occur under extraordinary
circumstances, such as a very large redemption that could affect Fund
operations. If the Fund deems it advisable for the benefit of all
shareholders, redemption in kind will consist of securities equal in market
value to your shares. When you convert these securities to cash, you will pay
brokerage charges.
CLOSING OF SMALL ACCOUNTS
If your account falls below $500, a Fund may ask you to increase your
balance. If it is still below $500 after 60 days, the Fund may close your
account and send you the proceeds at the current NAV.
UNDELIVERABLE REDEMPTION CHECKS
For any shareholder who chooses to receive distributions in cash: If
distribution checks (1) are returned and marked as "undeliverable" or (2)
remain uncashed for six months, your account will be changed automatically so
that all future distributions are reinvested in your account. Checks that
remain uncashed for six months will be canceled and the money reinvested in
the appropriate Fund.
MONEY MARKET FUNDS
To the extent possible, requests for same day payments upon redemption of
Investor A Shares and Investor B Shares of the Money Market Funds will be
honored if the request for redemption is received by the Transfer Agent
before 1:00 p.m. Eastern time, for the Tax-Free and Treasury Funds or 3:00
p.m. Eastern time for the Prime Obligations and U.S. Government Obligations
Funds on a business day. If the request for a redemption is received after
1:00 p.m. or 3:00 p.m. Eastern time respectively, payments will be made on
the next business day to the extent possible.
NON-MONEY MARKET FUNDS
Payment to shareholders redeeming shares will be made within seven days after
the Transfer Agent receives the request for redemption in good order. To the
extent possible, payments upon redemption of shares will be made the
following business day. If received after 4:00 p.m. (Eastern Time), payments
will be made within two business days to the extent possible.
61
<PAGE> 62
PURCHASE AND SALE OF SHARES
- -
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
This section describes the sales charges and fees you will pay as an investor
in different share classes offered by the Funds and ways to qualify for
reduced sales charges.
<TABLE>
<S> <C> <C>
INVESTOR A SHARES INVESTOR B SHARES
Sales Charge (Load) Front-end sales charge (not No front-end sales charge. A
applicable to money market funds); Contingent Deferred Sales Charge
reduced sales charges available. (CDSC) may be imposed on shares
redeemed within five or six years
after purchase (depending on the
date purchased); shares
automatically convert to Investor
A Shares after 8 years. Maximum
investment is $250,000.
Distribution and Service (12b-1) Subject to annual distribution and Subject to annual distribution and
Fee shareholder servicing fees of up shareholder servicing fees of up
to 0.25% of the average daily net to 1.00% of the average daily net
assets of each Fund's Investor A assets of each Fund's Investor B
Shares. Shares.
Fund Expenses Lower annual expenses than Higher annual expenses than
Investor B Shares. Investor A Shares.
</TABLE>
Certain qualified institutional buyers are eligible to purchase Institutional
Shares of the Funds. Institutional Shares are offered by another prospectus
which is available by calling (800) 451-8377.
CALCULATION OF SALES CHARGES
INVESTOR A SHARES
Investor A Shares are sold at their public offering price. This price
includes the initial sales charge. Therefore, part of the money you invest
will be used to pay the sales charge. The remainder is invested in Fund
shares. The sales charge decreases with larger purchases. There is no sales
charge on reinvested dividends and distributions.
The current sales charge rates are as follows:
GROWTH FUNDS
EQUITY INCOME FUND
<TABLE>
<S> <C> <C> <C>
SALES CHARGE SALES CHARGE DEALERS' REALLOWANCE
AS A % OF AS A % OF AS A % OF
IF YOUR INVESTMENT IS OFFERING PRICE NET AMOUNT INVESTED OFFERING PRICE PER SHARE
Less than $25,000 5.50% 5.80% 5.25%
$25,000 but less than $50,000 5.25% 5.50% 5.00%
$50,000 but less than $100,000 4.75% 5.00% 4.50%
$100,000 but less than $250,000 3.75% 3.90% 3.50%
$250,000 but less than $500,000 3.00% 3.10% 2.75%
$500,000 but less than $1,000,000 2.00% 2.00% 1.75%
$1,000,000 or more(1) 0.00% 0.00% 0.00%
</TABLE>
62
<PAGE> 63
PURCHASE AND SALE OF SHARES
- -
BALANCED ALLOCATION FUND
INCOME FUNDS (EXCEPT LIMITED MATURITY BOND FUND)
TAX-FREE INCOME FUNDS
<TABLE>
<S> <C> <C> <C>
SALES CHARGE SALES CHARGE DEALERS' REALLOWANCE
AS A % OF AS A % OF AS A % OF
IF YOUR INVESTMENT IS OFFERING PRICE NET AMOUNT INVESTED OFFERING PRICE PER SHARE
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(1) 0.00% 0.00% 0.00%
</TABLE>
LIMITED MATURITY BOND FUND
<TABLE>
<S> <C> <C> <C>
SALES CHARGE SALES CHARGE DEALERS' REALLOWANCE
AS A % OF AS A % OF AS A % OF
IF YOUR INVESTMENT IS OFFERING PRICE NET AMOUNT INVESTED OFFERING PRICE PER SHARE
Less than $100,000 2.75% 2.83% 2.50%
$100,000 but less than $250,000 1.75% 1.78% 1.50%
$250,000 but less than $500,000 1.00% 1.01% 0.75%
$500,000 but less than $1,000,000 0.50% 0.50% 0.25%
$1,000,000 or more(1) 0.00% 0.00% 0.00%
</TABLE>
(1) A Fund will assess a 1.00% redemption fee (0.25% in the case of the
Limited Maturity Bond Fund) 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. With respect to purchases of $1,000,000 or more of a Fund, the
Adviser may pay from its own funds a fee of 1.00% (0.25% in case of the
Limited Maturity Bond Fund) of the amount invested to the financial
institution placing the purchase order.
63
<PAGE> 64
PURCHASE AND SALE OF SHARES
- -
INVESTOR B SHARES
Investor B Shares are offered at NAV, without any up-front sales charge.
Therefore, all the money you invest is used to purchase Fund shares. However,
if you sell your Investor B Shares of a Fund before the fifth anniversary of
purchase (or the fourth anniversary if purchased prior to January 1, 1997),
you will have to pay a contingent deferred sales charge (CDSC) at the time of
redemption. The CDSC will be based upon the lower of the NAV at the time of
purchase or the NAV at the time of redemption according to the schedule
below. There is no CDSC imposed on reinvested dividends or distributions.
INVESTOR B SHARES PURCHASED AFTER JANUARY 1, 1997
<TABLE>
<S> <C>
CDSC AS A %
YEARS SINCE PURCHASE OF DOLLAR AMOUNT
SUBJECT TO CHARGE
0-1 5.00%
1-2 5.00%
2-3 4.00%
3-4 3.00%
4-5 2.00%
more than 5 None
</TABLE>
INVESTOR B SHARES PURCHASED PRIOR TO JANUARY 1, 1997
<TABLE>
<S> <C>
CDSC AS A %
YEARS SINCE PURCHASE OF DOLLAR AMOUNT
SUBJECT TO CHARGE
0-1 4.00%
1-2 4.00%
2-3 3.00%
3-4 2.00%
more than 4 None
</TABLE>
If you sell some but not all of your Investor B Shares, certain shares not
subject to the CDSC (i.e., shares purchased with reinvested dividends) will
be redeemed first, followed by shares subject to the lowest CDSC (typically
shares held for the longest time).
CONVERSION FEATURE
INVESTOR B SHARES
- Investor B Shares automatically convert to Investor A Shares of the same
Fund after eight years from the end of the month of purchase. The dollar
value of Investor A Shares you receive will equal the dollar value of the
Investor B Shares converted although the number of shares you receive may
differ.
- After conversion, your shares will be subject to the lower distribution
and shareholder servicing fees charged on Investor A Shares which will
increase your investment return compared to the Investor B Shares.
- You will not pay any sales charge or fees when your shares convert, nor
will the transaction be subject to any tax.
- If you purchased Investor B Shares of one Parkstone Fund which you
exchanged for Investor B Shares of another Parkstone Fund, your holding
period will be calculated from the time of your original purchase of
Investor B Shares.
64
<PAGE> 65
PURCHASE AND SALE OF SHARES
- -
SALES CHARGE REDUCTIONS
INVESTOR A SHARES
You may qualify for reduced sales charges under the following circumstances.
- Letter of Intent. You may purchase Investor 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 Investor A Shares of a Fund over a 13-month period and receive
the same sales charge as if you had purchased all the shares at the same
time. The Fund will only consider the value of Investor A Shares sold
subject to a sales charge. As a result, Investor 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 the
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 intend to
purchase) and the sales charge that would normally apply (based on the
actual amount you purchased).
- Right of Accumulation. When the value of shares you already own plus the
amount you intend to invest reaches the amount needed to qualify for
reduced sales charges, your added investment will qualify for the reduced
sales charge.
- Combination Privilege. Combine concurrent purchases of Investor A Shares
of one Fund and of one or more of the other Funds of the Trust and of
Armada Funds, a group of funds from the same family of funds, that are
sold with a sales charge.
- Concurrent Purchases. Accounts of multiple Funds or accounts of immediate
family household members (spouse and children under 21) and the
purchaser's retirement plan account to achieve reduced sales charges. To
qualify for this privilege, the purchaser must, at the time of purchase,
give the Transfer Agent or Distributor sufficient information to permit
confirmation of qualification.
SALES CHARGE WAIVERS
INVESTOR A SHARES
The following may qualify for waivers of sales charges:
- Certain orders placed by investment representatives through fee-based
investment products or accounts.
- Proceeds from redemptions from a Parkstone or Armada fund within 180 days
after redemption, if you paid a sales load or commission for those
shares. Notification must be given to the transfer agent regarding this
repurchase by calling 1-800-451-8377.
- Reinvestment of distributions from a deferred compensation plan, agency,
trust, or custody account that was maintained by the Adviser or its
affiliates or invested in any Parkstone Fund.
- Shares purchased for trust or other advisory accounts established with
the Adviser or its affiliates.
- Shares purchased by (1) trustees and retired trustees of the Trust, (2)
officers of the Trust; (3) directors, retired directors, employees and
retired employees of the Adviser and its affiliates; and (4) family
members (spouse, parents, siblings, children and grandchildren) of (1),
(2) and (3).
- Purchases by certain qualified employee benefit plans.
- Investors who place trades for their own accounts and are clients of
qualified broker-dealers, investment advisers or financial planners who
charge a management fee for these services.
- Investors purchasing Fund shares through payroll deduction plan.
- Investors purchasing Fund shares through "one-stop" mutual fund networks.
65
<PAGE> 66
PURCHASE AND SALE OF SHARES
- -
SALES CHARGE WAIVERS
INVESTOR B SHARES
The CDSC may be waived under certain circumstances, including the following:
- Distributions from retirement plans if the distributions are made
following the death or disability of shareholders or plan participants.
- Certain minimum required distributions from retirement accounts or
retirement plans where such redemptions are necessary to make
distributions to plan participants.
- Redemptions from accounts other than retirement accounts following the
death or disability of the shareholder and/or joint shareholders.
- Returns of excess contributions to retirement plans.
- Distributions of less than 10% of the annual account value under an
Automatic Withdrawal Plan.
- Shares issued in a plan of reorganization sponsored by the Adviser, or
shares redeemed involuntarily in a similar situation.
- Redemptions by participants in a qualified plan for retirement loans,
financial hardship, termination and certain participant expenses.
- Purchases by certain qualified employee benefit plans.
DISTRIBUTION AND SERVICE (12b-1) FEES
The Funds have adopted plans under Rule 12b-1 that allow the Funds to pay
distribution fees for the sale and distribution of Fund shares. 12b-1 fees
compensate the Distributor and other dealers and investment representatives
for services and expenses relating to the sale and distribution of the Fund's
shares and/or for providing shareholder services. 12b-1 fees are paid from
Fund assets on an ongoing basis, and will increase the cost of your
investment.
- The 12b-1 fees vary by share class as follows:
- Investor A Shares pay a 12b-1 fee of up to 0.25% of the average daily
net assets of a Fund.
- Investor B Shares pay a 12b-1 fee of up to 1.00% of the average daily
net assets of the applicable Fund. This will cause expenses for
Investor B Shares to be higher and dividends to be lower than for
Investor A Shares.
- The higher 12b-1 fee on Investor B Shares, together with the CDSC, help
the Distributor sell Investor B Shares without an "up-front" sales
charge. In particular, these fees help to defray the Distributor's costs
of advancing brokerage commissions to investment representatives.
- The Distributor may use up to 0.25% of the 12b-1 fee for Investor B
Shares for shareholder servicing and up to 0.75% for distribution.
Over time, shareholders may pay more than the equivalent of the maximum
permitted front-end sales charge because 12b-1 distribution and service fees
are paid out of a Fund's assets on an on-going basis.
66
<PAGE> 67
PURCHASE AND SALE OF SHARES
- -
EXCHANGING YOUR SHARES
INVESTOR A SHARES
If you own Investor A Shares,
you may acquire in an exchange
Investor A Shares that are
offered by another Fund of the
Trust or fund of Armada with a
different investment objective.
The exchange must occur on the
same Business Day.
To Exchange a Money Market Fund
for another Money Market Fund.
If you own Investor A Shares of
any of the Trust's Money Market
Funds or a money market fund of
Armada you may exchange those
Investor A Shares at net asset
value without any sales charge
for Investor A Shares offered by
any of the Trust's other Money
Market Funds or an Armada Money
Market Fund. The amount to be
exchanged must meet the
applicable minimum investment
requirements and the exchange
must be made in states where it
is legally authorized.
INSTRUCTIONS FOR EXCHANGING SHARES
Exchanges may be made by sending a written
request to The Parkstone Group of
Funds, P.O. Box 8590, Boston, MA
02266-8590, or by calling
1-800-451-8377. Please provide the
following information:
- Your name and telephone number
- The exact name on your account and account number
- Taxpayer identification number (usually your Social Security number)
- Dollar value or number of shares to be exchanged
- The name of the Fund from which the exchange is to be made
- The name of the Fund into which the exchange is being made.
- The registration and tax identification numbers of the two accounts involved
in the exchange must be identical.
See "Selling your Shares" for important information about telephone
transactions.
To Exchange a Non-Money Market Fund for another Non-Money Market Fund. If you
own Investor A Shares of any of the Trust's non-Money Market Funds or any
fund of Armada which is not an Armada Money Market Fund you may exchange
those Investor A Shares at net asset value without any sales charge for
Investor A Shares offered by any Fund of the Trust and any fund of Armada. If
you paid a sales charge on the Investor A Shares that you are to exchange
that is less than the sales charge applicable to the Investor A Shares you
would like to acquire, you must pay a sales charge on the exchange equal to
the difference between the two sales charges.
To Exchange a Money Market Fund for a Non-Money Market Fund. If you own
Investor A Shares of a Parkstone or Armada Money Market Fund, you may
exchange those Investor A Shares for Investor A Shares of a Parkstone or
Armada non-Money Market Fund, but a sales load will be charged on the
exchange.
INVESTOR B SHARES
If you own Investor B Shares, you may acquire in an exchange Investor B
Shares that are offered by another Fund of the Trust or A Shares of a Fund of
Armada Funds. The exchange must occur on the same business day.
If you own Investor B Shares of one Fund of the Trust, you may exchange your
Investor B Shares for A Shares of a Fund of Armada at net asset value. These
exchanges will be executed only if they meet the applicable minimum
investment requirements within states where the exchanges are authorized.
The exchange privilege is a convenient way to respond to changes in
investment goals or in market conditions. This privilege is not designed for
market-timing -- switching money into investments in anticipation of rising
prices or taking money out in anticipation of the market falling. As money is
shifted in and out, a fund incurs expenses for buying and selling securities.
These costs are borne by all fund shareholders, including the long-term
investors who do not generate the costs. Therefore, the Fund discourages
short-term trading by, among other things, limiting the number of exchanges
to one exchange every two months during a given 12-month period beginning
upon the date of the first exchange transaction. Management of the Trust
reserves the right to limit, amend, impose charges upon, terminate or
otherwise modify the exchange privilege. You will be notified before any
action is taken.
The Trust does not charge an exchange fee. If you would like to exchange your
shares you may contact the Funds at (800) 451-8377 or write to the Transfer
Agent. You should obtain and review the current Prospectus of the Fund of the
Trust or the fund of Armada in which you wish to invest before making the
exchange. To obtain an Armada Prospectus please call 1-800-622-FUND (3863).
- -
67
<PAGE> 68
PURCHASE AND SALE OF SHARES
- -
SYSTEMATIC EXCHANGE PROGRAM
The Systematic Exchange Program enables you to purchase Investor A Shares or
Investor B Shares through automatic monthly or quarterly deductions from any
account invested in one of the Parkstone Money Market Funds. If you invest
directly in Investor B Shares of the Prime Obligations Fund, as opposed to
obtaining shares through an exchange, you will be asked to participate in the
Systematic Exchange Program and to establish the time and amount of your
systematic exchanges so that all of the shares of the Prime Obligations Fund
purchased initially will be exchanged for shares of Investor B Shares of
other non-Money Market Funds within two years of purchase. Under the program,
you will enter into an agreement to purchase shares of one or more specified
Funds over a specified period of time. The program requires you to:
- Initially purchase shares of one of the Money Market Funds in an amount
equal to the total amount of your investment.
- Specify an amount to be deducted on a monthly or quarterly basis from
your Money Market Fund and exchanged for shares of specified funds you
have chosen.
An investment program, in which a fixed dollar amount is invested at regular
intervals over time has the effect of reducing the average cost per share of
the Funds. Because Investor A Shares are subject to an initial sales charge,
it may be beneficial for you to execute a Letter of Intent indicating an
intent to purchase Investor A Shares in connection with the Systematic
Exchange Program. In order to participate in the Systematic Exchange Program
contact your financial representative or call 1-800-451-8377.
68
<PAGE> 69
[LOGO]
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -
DIVIDENDS AND DISTRIBUTIONS
All dividends and distributions will be automatically reinvested unless you
request otherwise. There are no sales charges for reinvested distributions.
Dividends are higher for Investor A Shares than for Investor B Shares,
because Investor A Shares have lower distribution expenses. Capital gains, if
any, are distributed at least annually.
DISTRIBUTIONS ARE MADE ON A PER SHARE BASIS REGARDLESS OF HOW LONG YOU'VE
OWNED YOUR SHARES. THEREFORE, IF YOU INVEST SHORTLY BEFORE THE DISTRIBUTION
DATE, SOME OF YOUR INVESTMENT WILL BE RETURNED TO YOU IN THE FORM OF A
DISTRIBUTION.
FEDERAL TAXES
Each Fund contemplates declaring as dividends each year all or substantially
all of its taxable income, including its net capital gain (the excess of
long-term capital gain over short-term capital loss). Distributions
attributable to the net capital gain of a Fund will be taxable to you as
long-term capital gain, regardless of how long you have held your shares.
Other Fund distributions (other than exempt-interest dividends, discussed
below) will generally be taxable as ordinary income. You will be subject to
income tax on Fund distributions regardless of whether they are paid in cash
or reinvested in additional shares. You will be notified annually of the tax
status of distributions to you.
In the case of any fund other than a Money Market Fund, you should note that
if you purchase shares just before a distribution, the purchase price will
reflect the amount of the upcoming distribution, but you will be taxed on the
entire amount of the distribution received, even though, as an economic
matter, the distribution simply constitutes a return of capital. This is
known as "buying into a dividend."
You will recognize taxable gain or loss on a sale, exchange or redemption of
your shares, including an exchange for shares of another Fund, based on the
difference between your tax basis in the shares and the amount you receive
for them. (To aid in computing your tax basis, you generally should retain
your account statements for the periods during which you held shares.)
Any loss realized on shares held for six months or less will be treated as a
long-term capital loss to the extent of any capital gain dividends that were
received on the shares.
The one major exception to these tax principles is that distributions on, and
sales, exchanges and redemptions of, shares held in an IRA (or other
tax-qualified plan) will not be currently taxable.
It is expected that the Parkstone International Discovery Fund will be
subject to foreign withholding taxes with respect to dividends or interest
received from sources in foreign countries. The Parkstone International
Discovery Fund may make an election to treat a proportionate amount of such
taxes as constituting a distribution to each shareholder, which would allow
each shareholder either (1) to credit such proportionate amount of taxes
against U.S. federal income tax liability or (2) to take such amount as an
itemized deduction.
The Parkstone National Tax Exempt Bond Fund, Parkstone Michigan Municipal
Bond Fund and Parkstone Tax-Free Fund (the "Exempt Funds") anticipate that
substantially all of their income dividends will be "exempt interest
dividends," which are exempt from federal income taxes. However, some
dividends will be taxable, such as dividends that are derived from occasional
taxable investments, and in the case of other than the Parkstone Tax-Free
Fund, distributions of short and long-term capital gains.
Interest on indebtedness incurred by a shareholder to purchase or carry
shares of the Exempt Funds generally will not be deductible for federal
income tax purposes.
You should note that a portion of the exempt-interest dividends paid by the
Exempt Funds may constitute an item of tax preference for purposes of
determining federal alternative minimum tax liability. Exempt-interest
dividends will also be considered along with other adjusted gross income in
determining whether any Social Security or railroad retirement payments
received by you are subject to federal income taxes.
69
<PAGE> 70
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -
If you receive an exempt-interest dividend with respect to any share and the
share is held by you for six months or less, any loss on the sale or exchange
of the share will be disallowed to the extent of such dividend amount.
The Parkstone Michigan Municipal Bond Fund intends to distribute income that
is exempt from Michigan income taxes.
The foregoing is only a summary of certain tax considerations under current
law, which may be subject to change in the future. Shareholders who are
nonresident aliens, foreign trusts or estates, or foreign corporations or
partnerships, may be subject to different United States federal income tax
treatment. You should consult your tax adviser for further information
regarding federal, state, local and/or foreign tax consequences relevant to
your specific situation.
- -
STATE AND LOCAL TAXES
Shareowners may also be subject to state and local taxes on distributions and
redemptions. State income taxes may not apply however, to the portions of
each Fund's distributions, if any, that are attributable to interest on
federal securities or interest on securities of the particular state or
localities within the state. Shareowners should consult their tax advisers
regarding the tax status of distributions in their state and locality.
70
<PAGE> 71
[LOGO]
FINANCIAL HIGHLIGHTS
- -
The financial highlights table is intended to help you understand the Funds'
financial performance for the past five years or, if shorter, the period of
the Funds' operations. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP, whose report, along with the Funds'
financial statements, are included in the annual report, which is available
upon request.
71
<PAGE> 72
FINANCIAL HIGHLIGHTS
- -
INTERNATIONAL DISCOVERY FUND
<TABLE>
<CAPTION>
INVESTOR A
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.51 $ 16.25 $ 14.01 $ 12.23 $ 13.18
---------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) (0.15) (0.09) (0.07) (0.02) 0.03
Net Realized and Unrealized Gains (Losses)
from Investments and Foreign Currencies (0.68) 0.86 2.31 1.81 (0.36)
---------------------------------------------------------------------------------------------------------------------
Total from Investment Activities (0.83) 0.77 2.24 1.79 (0.33)
---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income -- -- -- -- --
Net Realized Gains (0.87) (0.51) -- (0.01) (0.62)
---------------------------------------------------------------------------------------------------------------------
Total Distributions (0.87) (0.51) -- (0.01) (0.62)
---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.81 $ 16.51 $ 16.25 $ 14.01 $ 12.23
---------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) (5.20)% 5.17%(a) 15.99% 14.65% (2.19)%
---------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $24,914 $43,268 $48,557 $39,575 $34,228
Ratio of Expenses to Average Net Assets 1.82% 1.82%(b) 1.80% 1.80% 1.78%
Ratio of Net Investment Income (Loss) to
Average Net Assets (0.45)% (0.75)%(b) (0.54)% (0.11)% 0.08%
Ratio of Expenses to Average Net Assets* (d) (d) (d) 1.88% 1.91%
Portfolio Turnover (c) 84.66% 34.15% 45.18% 54.47% 104.39%
<CAPTION>
INVESTOR A
YEAR ENDED
JUNE 30,
1994
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.50
----------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) (0.02)
Net Realized and Unrealized Gains (Losses)
from Investments and Foreign Currencies 1.74
----------------------------------------------------------------------
Total from Investment Activities 1.72
----------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income (0.02)
Net Realized Gains (0.02)
----------------------------------------------------------------------
Total Distributions (0.04)
----------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.18
----------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 14.99%
----------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $36,297
Ratio of Expenses to Average Net Assets 1.63%
Ratio of Net Investment Income (Loss) to
Average Net Assets (0.29)%
Ratio of Expenses to Average Net Assets* 1.84%
Portfolio Turnover (c) 37.23%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
(d) No fees were waived during this period.
72
<PAGE> 73
FINANCIAL HIGHLIGHTS
- -
INTERNATIONAL DISCOVERY FUND
<TABLE>
<CAPTION>
INVESTOR B
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $15.98 $ 15.85 $ 13.77 $12.15 $13.21 $14.12
------------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) (0.27) (0.19) (0.16) (0.08) (0.04) (0.01)
Net Realized and Unrealized Gains (Losses)
from Investments and Foreign Currencies (0.64) 0.83 2.24 1.70 (0.40) (0.90)
------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities (0.91) 0.64 2.08 1.62 (0.44) (0.91)
------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income -- -- -- -- -- --
Net Realized Gains (0.87) (0.51) -- -- (0.62) --
------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.87) (0.51) -- -- (0.62) --
------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $14.20 $ 15.98 $ 15.85 $13.77 $12.15 $13.21
------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) (5.89)% 4.47%(b) 15.11% 13.33% (3.03)% (6.44)%(b)
------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $7,604 $12,840 $13,516 $9,489 $5,469 $2,680
Ratio of Expenses to Average Net Assets 2.57% 2.56%(c) 2.55% 2.55% 2.57% 2.56%(c)
Ratio of Net Investment Income (Loss) to
Average Net Assets (1.21)% (1.49)%(c) (1.29)% (0.86)% (0.49)% (0.22)%(c)
Ratio of Expenses to Average Net Assets* (e) (e) (e) 2.63% 2.92% 2.61%(c)
Portfolio Turnover (d) 84.66% 34.15% 45.18% 54.47% 104.39% 37.23%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Period from February 4, 1994 (commencement of offering of Investor B
shares) to June 30, 1994.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
(e) No fees were waived during this period.
73
<PAGE> 74
FINANCIAL HIGHLIGHTS
- -
SMALL CAPITALIZATION FUND
<TABLE>
<CAPTION>
INVESTOR A
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 25.72 $ 27.55 $ 34.17 $ 25.88 $ 19.75 $ 20.31
-----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) (0.34) (0.35) (0.29) (0.23) (0.18) (0.15)
Net Realized and Unrealized Gains (Losses)
from Investments (4.36) (0.18) (1.08) 12.17 8.46 0.09
-----------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities (4.70) (0.53) (1.37) 11.94 8.28 (0.06)
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Realized Gains (2.53) (1.30) (5.25) (3.65) (2.15) (0.50)
-----------------------------------------------------------------------------------------------------------------------------
Total Distributions (2.53) (1.30) (5.25) (3.65) (2.15) (0.50)
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 18.49 $ 25.72 $ 27.55 $ 34.17 $ 25.88 $ 19.75
-----------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) (18.92)% (1.90)%(a) (4.53)% 49.93% 44.88% (0.55)%
-----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $57,813 $163,178 $188,645 $187,016 $71,894 $42,791
Ratio of Expenses to Average Net Assets 1.61% 1.60%(b) 1.57% 1.54% 1.55% 1.40%
Ratio of Net Investment Income (Loss) to
Average Net Assets (1.07)% (1.23)%(b) (1.19)% (1.18)% (1.27)% (1.24)%
Ratio of Expenses to Average Net Assets* (d) (d) (d) (d) 1.58% 1.55%
Portfolio Turnover (c) 99.86% 46.17% 48.45% 67.22% 50.53% 72.64%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
(d) No fees were waived during this period.
74
<PAGE> 75
FINANCIAL HIGHLIGHTS
- -
SMALL CAPITALIZATION FUND
<TABLE>
<CAPTION>
INVESTOR B
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 25.02 $ 26.99 $ 33.78 $ 25.79 $19.83 $22.71
-----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) (0.50) (0.53) (0.41) (0.39) (0.19) (0.09)
Net Realized and Unrealized Gains (Losses)
from Investments (4.21) (0.14) (1.13) 12.03 8.30 (2.79)
-----------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities (4.71) (0.67) (1.54) 11.64 8.11 (2.88)
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Realized Gains (2.53) (1.30) (5.25) (3.65) (2.15) --
-----------------------------------------------------------------------------------------------------------------------------
Total Distributions (2.53) (1.30) (5.25) (3.65) (2.15) --
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 17.78 $ 25.02 $ 26.99 $ 33.78 $25.79 $19.83
-----------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) (19.52)% (2.47)%(b) (5.13)% 48.87% 43.78% (12.68)%(b)
-----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $18,736 $41,399 $46,895 $30,310 $9,990 $2,130
Ratio of Expenses to Average Net Assets 2.37% 2.35%(c) 2.32% 2.29% 2.32% 2.35%(c)
Ratio of Net Investment Income (Loss) to
Average Net Assets (1.82)% (1.99)%(c) (1.94)% (1.93)% (2.03)% (2.19)%(c)
Ratio of Expenses to Average Net Assets* (e) (e) (e) (e) 2.55% 2.61%(c)
Portfolio Turnover (d) 99.86% 46.17% 48.45% 67.22% 50.53% 72.64%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Period from February 4, 1994 (commencement of offering of Investor B
shares) to June 30, 1994.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
(e) No fees were waived during this period.
75
<PAGE> 76
FINANCIAL HIGHLIGHTS
- -
MID CAPITALIZATION FUND
<TABLE>
<CAPTION>
INVESTOR A
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30,
1999 1998 1997 1996
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.98 $ 15.72 $ 20.71 $ 16.56
-------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) (0.19) (0.14) (0.16) (0.16)
Net Realized and Unrealized Gains (Losses)
from Investments 1.15 2.51 1.30 4.97
-------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.96 2.37 1.14 4.81
-------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Realized Gains (1.84) (3.11) (6.13) (0.66)
In Excess of Net Realized Gains -- -- -- --
-------------------------------------------------------------------------------------------------------------------
Total Distributions (1.84) (3.11) (6.13) (0.66)
-------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.10 $ 14.98 $ 15.72 $ 20.71
-------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 8.08% 16.84%(a) 5.78% 29.57%
-------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $50,605 $90,183 $80,634 $66,260
Ratio of Expenses to Average Net Assets 1.57% 1.55%(b) 1.56% 1.54%
Ratio of Expenses to Average Net Assets* (d) (d) (d) (d)
Ratio of Net Investment Income (Loss) to
Average Net Assets (1.00)% (1.02)%(b) (1.05)% (0.94)%
Ratio of Net Investment Income (Loss) to
Average Net Assets* (d) (d) (d) (d)
Portfolio Turnover (c) 100.19% 38.41% 38.47% 49.27%
<CAPTION>
INVESTOR A
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1995 1994
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.69 $ 15.11
-------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) (0.12) (0.10)
Net Realized and Unrealized Gains (Losses)
from Investments 3.46 (0.28)
-------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 3.34 (0.38)
-------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Realized Gains (0.48) (0.04)
In Excess of Net Realized Gains (0.99) --
-------------------------------------------------------------------------------------------------------------------
Total Distributions (1.47) (0.04)
-------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 16.56 $ 14.69
-------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 24.85% (2.57)%
-------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $43,803 $36,108
Ratio of Expenses to Average Net Assets 1.51% 1.38%
Ratio of Expenses to Average Net Assets* 1.54% 1.53%
Ratio of Net Investment Income (Loss) to
Average Net Assets (0.87)% (0.75)%
Ratio of Net Investment Income (Loss) to
Average Net Assets* (0.90)% (0.90)%
Portfolio Turnover (c) 46.39% 70.87%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
(d) No fees were waived during this period.
76
<PAGE> 77
FINANCIAL HIGHLIGHTS
- -
MID CAPITALIZATION FUND
<TABLE>
<CAPTION>
INVESTOR B
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30,
1999 1998 1997 1996
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.20 $ 15.12 $ 20.28 $ 16.35
-------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) (0.28) (0.23) (0.24) (0.23)
Net Realized and Unrealized Gains (Losses)
from Investments 1.06 2.42 1.21 4.82
-------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.78 2.19 0.97 4.59
-------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Realized Gains (1.84) (3.11) (6.13) (0.66)
In Excess of Net Realized Gains -- -- -- --
-------------------------------------------------------------------------------------------------------------------
Total Distributions (1.84) (3.11) (6.13) (0.66)
-------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.14 $ 14.20 $ 15.12 $ 20.28
-------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 7.19% 16.27%(b) 4.94% 28.59%
-------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $16,629 $23,780 $21,994 $15,840
Ratio of Expenses to Average Net Assets 2.32% 2.30%(c) 2.31% 2.29%
Ratio of Expenses to Average Net Assets* (e) (e) (e) (e)
Ratio of Net Investment Income (Loss) to
Average Net Assets (1.75)% (1.77)%(c) (1.80)% (1.70)%
Ratio of Net Investment Income (Loss) to
Average Net Assets* (e) (e) (e) (e)
Portfolio Turnover (c) 100.19% 38.41% 38.47% 49.27%
<CAPTION>
INVESTOR B
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1995 1994(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $14.63 $16.66
--------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) (0.11) (0.05)
Net Realized and Unrealized Gains (Losses)
from Investments 3.30 (1.98)
--------------------------------------------------------------------------------------
Total from Investment Activities 3.19 (2.03)
--------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Realized Gains (0.48) --
In Excess of Net Realized Gains (0.99) --
--------------------------------------------------------------------------------------
Total Distributions (1.47) --
--------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $16.35 $14.63
--------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 23.88% (12.18)%(b)
--------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $6,073 $1,616
Ratio of Expenses to Average Net Assets 2.29% 2.30%(c)
Ratio of Expenses to Average Net Assets* 2.54% 2.56%(c)
Ratio of Net Investment Income (Loss) to
Average Net Assets (1.61)% (1.57)%(c)
Ratio of Net Investment Income (Loss) to
Average Net Assets* (1.87)% (1.83)%(c)
Portfolio Turnover (c) 46.39% 70.87%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Period from February 4, 1994 (commencement of offering of Investor B
shares) to June 30, 1994.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
(e) No fees were waived during this period.
77
<PAGE> 78
FINANCIAL HIGHLIGHTS
- -
LARGE CAPITALIZATION FUND
<TABLE>
<CAPTION>
INVESTOR A
ELEVEN MONTHS DECEMBER 28,
YEAR ENDED ENDED YEAR ENDED 1995 TO
MAY 31, MAY 31, JUNE 30, JUNE 30,
1999 1998 1997 1996(a)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.19 $ 14.44 $ 11.23 $10.00
--------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) (0.11) (0.06) -- 0.03
Net Realized and Unrealized Gains (Losses)
from Investments 3.89 3.51 3.30 1.23
--------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 3.78 3.45 3.30 1.26
--------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income -- -- (0.01) (0.03)
Net Realized Gains (0.30) (1.67) (0.08) --
Tax Return of Capital -- (0.03) -- --
--------------------------------------------------------------------------------------------------------------------
Total Distributions (0.30) (1.70) (0.09) (0.03)
--------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 19.67 $ 16.19 $ 14.44 $11.23
--------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 23.42% 25.95%(b) 29.52% 8.99%(b)
--------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $24,513 $21,628 $12,260 $1,657
Ratio of Expenses to Average Net Assets 1.35% 1.35%(c) 1.37% 1.40%(c)
Ratio of Net Investment Income (Loss) to
Average Net Assets (0.59)% (0.45)%(c) (0.14)% 0.31%(c)
Ratio of Expenses to Average Net Assets* (d) (d) (d) 2.62%(c)
Portfolio Turnover (e) 50.51% 24.74% 48.44% 0.86%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) No fees were waived during this period.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
78
<PAGE> 79
FINANCIAL HIGHLIGHTS
- -
LARGE CAPITALIZATION FUND
<TABLE>
<CAPTION>
INVESTOR B
ELEVEN MONTHS DECEMBER 28,
YEAR ENDED ENDED YEAR ENDED 1995 TO
MAY 31, MAY 31, JUNE 30, JUNE 30,
1999 1998 1997 1996(a)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.95 $ 14.34 $11.22 $10.00
--------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) (0.23) (0.12) (0.05) 0.01
Net Realized and Unrealized Gains (Losses)
from Investments 3.79 3.43 3.25 1.23
--------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 3.56 3.31 3.20 1.24
--------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income -- -- -- (0.02)
Net Realized Gains (0.30) (1.67) (0.08) --
Tax Return of Capital -- (0.03) -- --
--------------------------------------------------------------------------------------------------------------------
Total Distributions (0.30) (1.70) (0.08) (0.02)
--------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 19.21 $ 15.95 $14.34 $11.22
--------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 22.38% 25.12%(b) 28.62% 8.77%(b)
--------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $14,128 $10,169 $4,130 $ 832
Ratio of Expenses to Average Net Assets 2.11% 2.09%(c) 2.12% 1.78%(c)
Ratio of Net Investment Income (Loss) to
Average Net Assets (1.34)% (1.21)%(c) (0.88)% (0.32)%(c)
Ratio of Expenses to Average Net Assets* (d) (d) (d) 4.07%(c)
Portfolio Turnover (e) 50.51% 24.74% 48.44% 0.86%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) No fees were waived during this period.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
79
<PAGE> 80
FINANCIAL HIGHLIGHTS
- -
EQUITY INCOME FUND
<TABLE>
<CAPTION>
INVESTOR A
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30,
1999 1998 1997 1996
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 18.78 $ 19.20 $ 17.31 $ 14.49
------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) 0.22 0.25 0.29 0.30
Net Realized and Unrealized Gains (Losses)
from Investments 1.76 2.72 3.57 3.27
------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.98 2.97 3.86 3.57
------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income (0.22) (0.21) (0.28) (0.30)
In Excess of Net Investment Income -- -- -- --
Net Realized Gains (2.24) (3.18) (1.69) (0.45)
In Excess of Net Realized Gains -- -- -- --
------------------------------------------------------------------------------------------------------------------
Total Distributions (2.46) (3.39) (1.97) (0.75)
------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 18.30 $ 18.78 $ 19.20 $ 17.31
------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 12.06% 17.08%(a) 23.81% 25.05%
------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $82,733 $104,503 $99,423 $82,396
Ratio of Expenses to Average Net Assets 1.59% 1.58%(b) 1.58% 1.57%
Ratio of Net Investment Income (Loss) to
Average Net Assets 1.23% 1.39%(b) 1.62% 1.86%
Ratio of Expenses to Average Net Assets* (d) (d) (d) (d)
Portfolio Turnover (c) 51.09% 18.62% 20.14% 40.75%
<CAPTION>
INVESTOR A
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1995 1994
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.50 $ 14.69
------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) 0.36 0.37
Net Realized and Unrealized Gains (Losses)
from Investments 1.00 (0.56)
------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.36 (0.19)
------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income (0.36) (0.37)
In Excess of Net Investment Income (0.01) --
Net Realized Gains -- (0.24)
In Excess of Net Realized Gains -- (0.39)
------------------------------------------------------------------------------------------------------------------
Total Distributions (0.37) (1.00)
------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.49 $ 13.50
------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 10.32% (1.63)%
------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $71,063 $76,108
Ratio of Expenses to Average Net Assets 1.54% 1.40%
Ratio of Net Investment Income (Loss) to
Average Net Assets 2.65% 2.56%
Ratio of Expenses to Average Net Assets* 1.57% 1.55%
Portfolio Turnover (c) 77.70% 69.35%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
(d) No fees were waived during this period.
80
<PAGE> 81
FINANCIAL HIGHLIGHTS
- -
EQUITY INCOME FUND
<TABLE>
<CAPTION>
INVESTOR B
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30,
1999 1998 1997 1996
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 18.68 $ 19.14 $ 17.27 $ 14.47
------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) 0.09 0.11 0.16 0.19
Net Realized and Unrealized Gains (Losses)
from Investments 1.75 2.71 3.57 3.25
------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.84 2.82 3.73 3.44
------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income (0.13) (0.10) (0.17) (0.19)
In Excess of Net Investment Income -- -- -- --
Net Realized Gains (2.24) (3.18) (1.69) (0.45)
In Excess of Net Realized Gains -- -- -- --
------------------------------------------------------------------------------------------------------------------
Total Distributions (2.37) (3.28) (1.86) (0.64)
------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 18.15 $ 18.68 $ 19.14 $ 17.27
------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 11.22% 16.28%(b) 22.96% 24.11%
------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $22,456 $27,767 $21,038 $12,590
Ratio of Expenses to Average Net Assets 2.34% 2.33%(c) 2.33% 2.32%
Ratio of Net Investment Income (Loss) to
Average Net Assets 0.48% 0.64%(c) 0.88% 1.11%
Ratio of Expenses to Average Net Assets* (e) (e) (e) (e)
Portfolio Turnover (d) 51.09% 18.62% 20.14% 40.75%
<CAPTION>
INVESTOR B
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1995 1994(a)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $13.49 $14.92
------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) 0.26 0.13
Net Realized and Unrealized Gains (Losses)
from Investments 0.99 (1.43)
------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.25 (1.30)
------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income (0.26) (0.13)
In Excess of Net Investment Income (0.01) --
Net Realized Gains -- --
In Excess of Net Realized Gains -- --
------------------------------------------------------------------------------------------------------------------
Total Distributions (0.27) (0.13)
------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $14.47 $13.49
------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 9.41% (8.76)%(b)
------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $7,131 $3,836
Ratio of Expenses to Average Net Assets 2.32% 2.33%(c)
Ratio of Net Investment Income (Loss) to
Average Net Assets 1.86% 1.87%(c)
Ratio of Expenses to Average Net Assets* 2.57% 2.59%(c)
Portfolio Turnover (d) 77.70% 69.35%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Period from February 4, 1994 (commencement of offering of Investor B
shares) to June 30, 1994.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
(e) No fees were waived during this period.
81
<PAGE> 82
FINANCIAL HIGHLIGHTS
- -
BALANCED ALLOCATION FUND
<TABLE>
<CAPTION>
INVESTOR A
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.82 $ 13.00 $ 13.37 $ 12.19 $ 10.67 $ 11.09
-----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) 0.27 0.29 0.32 0.32 0.28 0.26
Net Realized and Unrealized Gains (Losses)
from Investments and Foreign Currencies 0.07 1.21 1.12 1.74 1.69 (0.43)
-----------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.34 1.50 1.44 2.06 1.97 (0.17)
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income (0.27) (0.32) (0.33) (0.31) (0.29) (0.25)
Net Realized Gains (0.37) (0.36) (1.48) (0.57) (0.01) --
In Excess of Net Realized Gains -- -- -- -- (0.15) --
-----------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.64) (0.68) (1.81) (0.88) (0.45) (0.25)
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.52 $ 13.82 $ 13.00 $ 13.37 $ 12.19 $ 10.67
-----------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 2.47% 11.87%(a) 11.61% 17.51% 18.96% (1.63)%
-----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $15,760 $19,404 $18,826 $17,097 $12,849 $11,901
Ratio of Expenses to Average Net Assets 1.36% 1.36%(b) 1.36% 1.41% 1.47% 1.18%
Ratio of Net Investment Income (Loss) to
Average Net Assets 2.05% 2.32%(b) 2.47% 2.37% 2.54% 2.38%
Ratio of Expenses to Average Net Assets* 1.61% 1.62%(b) 1.61% 1.66% 1.78% 1.63%
Portfolio Turnover (c) 158.56% 117.80% 425.05% 437.90% 250.66% 192.39%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
82
<PAGE> 83
FINANCIAL HIGHLIGHTS
- -
BALANCED ALLOCATION FUND
<TABLE>
<CAPTION>
INVESTOR B
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $13.81 $13.00 $13.36 $12.18 $10.67 $11.71
-----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) 0.18 0.19 0.21 0.23 0.20 0.10
Net Realized and Unrealized Gains (Losses)
from Investments and Foreign Currencies 0.07 1.21 1.13 1.74 1.67 (1.05)
-----------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.25 1.40 1.34 1.97 1.87 (0.95)
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income (0.17) (0.23) (0.22) (0.22) (0.20) (0.09)
Net Realized Gains (0.37) (0.36) (1.48) (0.57) (0.06) --
In Excess of Net Realized Gains -- -- -- -- (0.10) --
-----------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.54) (0.59) (1.70) (0.79) (0.36) (0.09)
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $13.52 $13.81 $13.00 $13.36 $12.18 $10.67
-----------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 1.72% 11.05%(b) 10.82% 16.71% 17.96% (8.16)%(b)
-----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $5,723 $7,988 $6,299 $4,278 $1,291 $ 744
Ratio of Expenses to Average Net Assets 2.11% 2.11%(c) 2.11% 2.16% 2.25% 2.05%(c)
Ratio of Net Investment Income (Loss) to
Average Net Assets 1.30% 1.57%(c) 1.73% 1.64% 1.74% 1.94%(c)
Ratio of Expenses to Average Net Assets* 2.36% 2.37%(c) 2.36% 2.45% 2.77% 2.61%(c)
Portfolio Turnover (d) 158.56% 117.80% 425.05% 437.90% 250.66% 192.39%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Period from February 4, 1994 (commencement of offering of Investor B
shares) to June 30, 1994.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
83
<PAGE> 84
FINANCIAL HIGHLIGHTS
- -
BOND FUND
<TABLE>
<CAPTION>
INVESTOR A
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.99 $ 9.68 $ 9.51 $ 9.67 $ 9.30 $ 10.54
-----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) 0.52 0.52 0.56 0.57 0.58 0.59
Net Realized and Unrealized Gains (Losses)
from Investments (0.28) 0.32 0.17 (0.16) 0.38 (0.72)
-----------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.24 0.84 0.73 0.41 0.96 (0.13)
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income (0.53) (0.53) (0.56) (0.57) (0.58) (0.57)
Net Realized Gains (0.02) -- -- -- -- --
In Excess of Net Realized Gains -- -- -- -- (0.01) (0.54)
-----------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.55) (0.53) (0.56) (0.57) (0.59) (1.11)
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.68 $ 9.99 $ 9.68 $ 9.51 $ 9.67 $ 9.30
-----------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 2.55% 8.83%(a) 7.92% 4.27% 10.85% (1.62)%
-----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $11,916 $16,669 $19,760 $ 20,175 $ 17,572 $18,391
Ratio of Expenses to Average Net Assets 1.19% 1.19%(b) 1.19% 1.19% 1.24% 0.98%
Ratio of Net Investment Income (Loss) to
Average Net Assets 5.29% 5.81%(b) 5.88% 5.71% 6.32% 5.86%
Ratio of Expenses to Average Net Assets* 1.28% 1.28%(b) 1.28% 1.28% 1.39% 1.27%
Portfolio Turnover (c) 268.66% 545.68% 827.00% 1,189.27% 1,010.64% 893.27%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
84
<PAGE> 85
FINANCIAL HIGHLIGHTS
- -
BOND FUND
<TABLE>
<CAPTION>
INVESTOR B
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00 $ 9.69 $ 9.51 $ 9.68 $ 9.26 $ 9.95
-----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) 0.46 0.46 0.50 0.50 0.52 0.22
Net Realized and Unrealized Gains (Losses)
from Investments (0.29) 0.32 0.16 (0.17) 0.42 (0.70)
-----------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.17 0.78 0.66 0.33 0.94 (0.48)
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income (0.46) (0.47) (0.48) (0.50) (0.52) (0.21)
Net Realized Gains (0.02) -- -- -- -- --
In Excess of Net Realized Gains -- -- -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.48) (0.47) (0.48) (0.50) (0.52) (0.21)
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.69 $10.00 $ 9.69 $ 9.51 $ 9.68 $ 9.26
-----------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 1.66% 8.18%(b) 7.09% 3.46% 10.62% (4.84)%(b)
-----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $4,548 $6,423 $5,967 $ 4,426 $ 1,330 $ 485
Ratio of Expenses to Average Net Assets 1.94% 1.94%(c) 1.94% 1.94% 2.03% 1.89%(c)
Ratio of Net Investment Income (Loss) to
Average Net Assets 4.53% 5.07%(c) 5.15% 4.97% 5.54% 5.34%(c)
Ratio of Expenses to Average Net Assets* 2.03% 2.03%(c) 2.03% 2.03% 2.39% 2.29%(c)
Portfolio Turnover (d) 268.66% 545.68% 827.00% 1,189.27% 1,010.64% 893.27%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Period from February 4, 1994 (commencement of offering of Investor B
shares) to June 30, 1994.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
85
<PAGE> 86
FINANCIAL HIGHLIGHTS
- -
INTERMEDIATE GOVERNMENT OBLIGATIONS FUND
<TABLE>
<CAPTION>
INVESTOR A
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.88 $ 9.73 $ 9.70 $ 9.93 $ 9.62 $ 10.53
-----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) 0.48 0.49 0.52 0.60 0.50 0.59
Net Realized and Unrealized Gains (Losses)
from Investments (0.11) 0.16 0.04 (0.25) 0.31 (0.66)
-----------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.37 0.65 0.56 0.35 0.81 (0.07)
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income (0.48) (0.49) (0.53) (0.58) (0.50) (0.59)
Tax Return of Capital -- (0.01) -- -- -- --
In Excess of Net Realized Gains -- -- -- -- -- (0.25)
-----------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.48) (0.50) (0.53) (0.58) (0.50) (0.84)
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.77 $ 9.88 $ 9.73 $ 9.70 $ 9.93 $ 9.62
-----------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 3.83% 6.78%(a) 5.91% 3.69% 8.69% (0.90)%
-----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $10,244 $14,461 $ 18,552 $22,954 $27,521 $36,106
Ratio of Expenses to Average Net Assets 1.24% 1.22%(b) 1.23% 1.21% 1.25% 1.00%
Ratio of Net Investment Income (Loss) to
Average Net Assets 4.81% 5.42%(b) 5.41% 5.51% 5.22% 5.80%
Ratio of Expenses to Average Net Assets* 1.33% 1.31%(b) 1.32% 1.30% 1.41% 1.29%
Portfolio Turnover (c) 53.07% 774.28% 1,516.78% 916.39% 549.13% 546.06%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
86
<PAGE> 87
FINANCIAL HIGHLIGHTS
- -
INTERMEDIATE GOVERNMENT OBLIGATIONS FUND
<TABLE>
<CAPTION>
INVESTOR B
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.85 $ 9.71 $ 9.67 $ 9.89 $ 9.60 $ 10.14
-----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) 0.40 0.43 0.45 0.53 0.43 0.21
Net Realized and Unrealized Gains (Losses)
from Investments (0.11) 0.15 0.03 (0.24) 0.30 (0.54)
-----------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.29 0.58 0.48 0.29 0.73 (0.33)
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income (0.40) (0.43) (0.44) (0.51) (0.44) (0.21)
Tax Return of Capital -- (0.01) -- -- -- --
In Excess of Net Realized Gains -- -- -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.40) (0.44) (0.44) (0.51) (0.44) (0.21)
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.74 $ 9.85 $ 9.71 $ 9.67 $ 9.89 $ 9.60
-----------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 2.96% 6.07%(b) 5.09% 2.93% 7.84% (3.31)%(b)
-----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $1,255 $1,852 $ 1,972 $1,843 $ 977 $ 531
Ratio of Expenses to Average Net Assets 1.99% 1.97%(c) 1.98% 1.96% 2.06% 1.92%(c)
Ratio of Net Investment Income (Loss) to
Average Net Assets 4.05% 4.67%(c) 4.67% 4.78% 4.41% 4.80%(c)
Ratio of Expenses to Average Net Assets* 2.08% 2.06%(c) 2.07% 2.05% 2.42% 2.32%(c)
Portfolio Turnover (d) 53.07% 774.28% 1,516.78% 916.39% 549.13% 546.06%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Period from February 4, 1994 (commencement of offering of Investor B
shares) to June 30, 1994.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
87
<PAGE> 88
FINANCIAL HIGHLIGHTS
- -
U.S. GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
INVESTOR A
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.27 $ 9.15 $ 9.25 $ 9.42 $ 9.41 $ 10.04
-----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) 0.55 0.61 0.70 0.73 0.75 0.74
Net Realized and Unrealized Gains (Losses)
from Investments (0.14) 0.08 (0.10) (0.17) -- (0.64)
-----------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.41 0.69 0.60 0.56 0.75 0.10
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income (0.55) (0.53) (0.59) (0.65) (0.66) (0.72)
Tax Return of Capital -- (0.04) (0.11) (0.08) (0.08) (0.01)
-----------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.55) (0.57) (0.70) (0.73) (0.74) (0.73)
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.13 $ 9.27 $ 9.15 $ 9.25 $ 9.42 $ 9.41
-----------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 4.46% 7.80%(a) 6.86% 5.97% 8.46% 0.94%
-----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $38,190 $54,710 $58,589 $52,250 $50,931 $54,027
Ratio of Expenses to Average Net Assets 1.00% 1.00%(b) 1.02% 1.01% 1.04% 0.82%
Ratio of Net Investment Income (Loss) to
Average Net Assets 5.92% 7.20%(b) 7.64% 7.70% 8.03% 7.42%
Ratio of Expenses to Average Net Assets* 1.34% 1.34%(b) 1.36% 1.35% 1.44% 1.36
Portfolio Turnover (c) 52.60% 278.94% 499.53% 348.01% 114.71% 102.24%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
88
<PAGE> 89
FINANCIAL HIGHLIGHTS
- -
U.S. GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
INVESTOR B
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.24 $ 9.13 $ 9.21 $ 9.39 $ 9.38 $ 9.88
-----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) 0.47 0.55 0.63 0.66 0.68 0.28
Net Realized and Unrealized Gains (Losses)
from Investments (0.13) 0.07 (0.09) (0.18) 0.01 (0.50)
-----------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.34 0.62 0.54 0.48 0.69 (0.22)
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income (0.47) (0.47) (0.52) (0.59) (0.61) (0.27)
Tax Return of Capital -- (0.04) (0.10) (0.07) (0.07) (0.01)
-----------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.47) (0.51) (0.62) (0.66) (0.68) (0.28)
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.11 $ 9.24 $ 9.13 $ 9.21 $ 9.39 $ 9.38
-----------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales And
Redemption Charges) 3.76% 6.98%(b) 6.06% 5.22% 7.71% (2.26)%(b)
-----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $16,373 $23,739 $23,448 $19,556 $ 8,478 $ 2,787
Ratio of Expenses to Average Net Assets 1.75% 1.75%(c) 1.77% 1.76% 1.83% 1.77%(c)
Ratio of Net Investment Income (Loss) to
Average Net Assets 5.15% 6.45%(c) 6.89% 6.92% 7.28% 6.72%(c)
Ratio of Expenses to Average Net Assets* 2.09% 2.09%(c) 2.11% 2.10% 2.44% 2.42%(c)
Portfolio Turnover (d) 52.60% 278.94% 499.53% 348.01% 114.71% 102.24%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Period from February 4, 1994 (commencement of offering of Investor B
shares) to June 30, 1994.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
89
<PAGE> 90
FINANCIAL HIGHLIGHTS
- -
LIMITED MATURITY BOND FUND
<TABLE>
<CAPTION>
INVESTOR A
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.50 $ 9.49 $ 9.48 $ 9.71 $ 9.57 $ 10.18
-----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) 0.53 0.47 0.55 0.62 0.56 0.62
Net Realized and Unrealized Gains (Losses)
from Investments (0.08) 0.01 0.01 (0.21) 0.13 (0.58)
-----------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.45 0.48 0.56 0.41 0.69 0.04
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income (0.53) (0.47) (0.55) (0.62) (0.55) (0.61)
Net Realized Gains -- -- -- (0.01) -- --
In Excess of Net Realized Gains -- -- -- -- -- (0.04)
Tax Return of Capital -- -- -- (0.01) -- --
-----------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.53) (0.47) (0.55) (0.64) (0.55) (0.65)
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.42 $ 9.50 $ 9.49 $ 9.48 $ 9.71 $ 9.57
-----------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 4.84% 5.23%(a) 6.11% 4.37% 7.53% 0.32%
-----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $24,246 $41,571 $27,381 $14,390 $18,930 $24,907
Ratio of Expenses to Average Net Assets 1.08% 1.07%(b) 1.11% 1.09% 1.05% 0.86%
Ratio of Net Investment Income (Loss) to
Average Net Assets 5.55% 5.37%(a) 5.76% 6.09% 5.89% 6.22%
Ratio of Expenses to Average Net Assets* 1.32% 1.31%(a) 1.35% 1.33% 1.36% 1.30%
Portfolio Turnover (c) 126.98% 225.88% 607.84% 618.60% 397.97% 353.28%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
90
<PAGE> 91
FINANCIAL HIGHLIGHTS
- -
LIMITED MATURITY BOND FUND
<TABLE>
<CAPTION>
INVESTOR B
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.50 $ 9.49 $ 9.46 $ 9.70 $ 9.56 $ 9.99
-----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) 0.46 0.40 0.48 0.55 0.49 0.23
Net Realized and Unrealized Gains (Losses)
from Investments (0.08) 0.02 0.02 (0.22) 0.12 (0.44)
-----------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.38 0.42 0.50 0.33 0.61 (0.21)
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income (0.46) (0.41) (0.47) (0.55) (0.47) (0.22)
Net Realized Gains -- -- -- -- -- --
In Excess of Net Realized Gains -- -- -- -- -- --
Tax Return of Capital -- -- -- (0.02) -- --
-----------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.46) (0.41) (0.47) (0.57) (0.47) (0.22)
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.42 $ 9.50 $ 9.49 $ 9.46 $ 9.70 $ 9.56
-----------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales And
Redemption Charges) 4.03% 4.50%(b) 5.39% 3.43% 6.68% (2.09)%(b)
-----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $ 826 $ 1,553 $ 1,492 $ 1,547 $ 892 $ 629
Ratio of Expenses to Average Net Assets 1.83% 1.82%(c) 1.86% 1.84% 1.85% 1.78%(c)
Ratio of Net Investment Income (Loss) to
Average Net Assets 4.81% 4.63%(c) 5.02% 5.35% 5.14% 5.36%(c)
Ratio of Expenses to Average Net Assets* 2.07% 2.06%(c) 2.10% 2.08% 2.36% 2.33%(c)
Portfolio Turnover (d) 126.98% 225.88% 607.84% 618.60% 397.97% 353.28%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Period from February 4, 1994 (commencement of offering of Investor B
shares) to June 30, 1994.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
91
<PAGE> 92
FINANCIAL HIGHLIGHTS
- -
MICHIGAN MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
INVESTOR A
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.06 $ 10.89 $ 10.76 $ 10.75 $ 10.53 $ 10.97
-----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) 0.44 0.42 0.49 0.47 0.48 0.47
Net Realized and Unrealized Gains (Losses)
from Investments (0.08) 0.23 0.14 0.04 0.23 (0.36)
-----------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.36 0.65 0.63 0.51 0.71 0.11
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income (0.44) (0.45) (0.46) (0.47) (0.48) (0.45)
Net Realized Gains (0.07) (0.03) (0.04) (0.03) (0.01) (0.01)
In Excess of Net Realized Gains -- -- -- -- -- (0.09)
-----------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.51) (0.48) (0.50) (0.50) (0.49) (0.55)
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.91 $ 11.06 $ 10.89 $ 10.76 $ 10.75 $ 10.53
-----------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 3.38% 5.96%(a) 5.89% 4.87% 6.99% 0.92%
-----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $28,305 $38,536 $38,302 $36,681 $37,874 $42,204
Ratio of Expenses to Average Net Assets 1.01% 0.99%(b) 1.01% 1.02% 1.00% 0.85%
Ratio of Net Investment Income (Loss) to
Average Net Assets 3.96% 4.09%(b) 4.48% 4.32% 4.57% 4.25%
Ratio of Expenses to Average Net Assets* 1.29% 1.28%(b) 1.30% 1.31% 1.32% 1.29%
Portfolio Turnover (c) 6.52% 26.24% 28.48% 27.66% 26.06% 6.69%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
92
<PAGE> 93
FINANCIAL HIGHLIGHTS
- -
MICHIGAN MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
INVESTOR B
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.07 $10.90 $10.76 $10.75 $10.52 $11.09
-----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) 0.36 0.34 0.41 0.40 0.40 0.16
Net Realized and Unrealized Gains (Losses)
from Investments (0.08) 0.23 0.13 0.04 0.24 (0.57)
-----------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.28 0.57 0.54 0.44 0.64 (0.41)
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income (0.36) (0.37) (0.36) (0.40) (0.40) (0.16)
Net Realized Gains (0.07) (0.03) (0.04) (0.03) (0.01) --
In Excess of Net Realized Gains -- -- -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.43) (0.40) (0.40) (0.43) (0.41) (0.16)
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.92 $11.07 $10.90 $10.76 $10.75 $10.52
-----------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 2.52% 5.32%(b) 5.05% 4.13% 6.28% (3.69)%(b)
-----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $3,217 $3,983 $3,503 $3,565 $2,270 $1,302
Ratio of Expenses to Average Net Assets 1.76% 1.74%(c) 1.76% 1.77% 1.78% 1.77%(c)
Ratio of Net Investment Income (Loss) to
Average Net Assets 3.21% 3.34%(c) 3.73% 3.57% 3.80% 3.51%(c)
Ratio of Expenses to Average Net Assets* 2.05% 2.03%(c) 2.05% 2.06% 2.32% 2.32%(c)
Portfolio Turnover (d) 6.52% 26.24% 28.48% 27.66% 26.06% 6.69%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Period from February 4, 1994 (commencement of offering of Investor B
shares) to June 30, 1994.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
93
<PAGE> 94
FINANCIAL HIGHLIGHTS
- -
NATIONAL TAX EXEMPT BOND FUND (FORMERLY MUNICIPAL BOND FUND)
<TABLE>
<CAPTION>
INVESTOR A
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.53 $10.53 $10.43 $10.39 $ 10.29 $ 10.92
-----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) 0.37 0.35 0.44 0.41 0.41 0.40
Net Realized and Unrealized Gains (Losses)
from Investments (0.03) 0.22 0.12 0.03 0.27 (0.31)
-----------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.34 0.57 0.56 0.44 0.68 0.09
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income (0.37) (0.39) (0.41) (0.40) (0.41) (0.39)
Net Realized Gains (0.12) (0.18) (0.05) -- -- (0.21)
In Excess of Net Realized Gains -- -- -- -- (0.17) (0.12)
-----------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.49) (0.57) (0.46) (0.40) (0.58) (0.72)
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.38 $10.53 $10.53 $10.43 $ 10.39 $ 10.29
-----------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 3.29% 5.46%(a) 5.47% 4.29% 7.02% 0.71%
-----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $6,886 $9,502 $9,601 $7,835 $11,378 $13,123
Ratio of Expenses to Average Net Assets 1.02% 1.02%(b) 1.06% 1.05% 1.02% 0.87%
Ratio of Net Investment Income (Loss) to
Average Net Assets 3.51% 3.64%(b) 4.19% 3.85% 4.00% 3.72%
Ratio of Expenses to Average Net Assets* 1.31% 1.31%(b) 1.35% 1.34% 1.33% 1.32%
Portfolio Turnover (c) 6.67% 85.56% 48.83% 47.46% 35.15% 44.39%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
94
<PAGE> 95
FINANCIAL HIGHLIGHTS
- -
NATIONAL TAX EXEMPT BOND FUND (FORMERLY MUNICIPAL BOND FUND)
<TABLE>
<CAPTION>
INVESTOR B
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.50 $10.51 $10.39 $10.36 $10.26 $10.76
-----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) 0.29 0.28 0.36 0.33 0.33 0.13
Net Realized and Unrealized Gains (Losses)
from Investments (0.02) 0.21 0.13 0.03 0.27 (0.50)
-----------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.27 0.49 0.49 0.36 0.60 (0.37)
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income (0.29) (0.32) (0.32) (0.33) (0.33) (0.13)
Net Realized Gains (0.12) (0.18) (0.05) -- -- --
In Excess of Net Realized Gains -- -- -- -- (0.17) --
-----------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.41) (0.50) (0.37) (0.33) (0.50) (0.13)
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.36 $10.50 $10.51 $10.39 $10.36 $10.26
-----------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 2.53% 4.75%(b) 4.81% 3.48% 6.17% (3.41)%(b)
-----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $ 491 $ 706 $ 993 $ 735 $ 447 $ 359
Ratio of Expenses to Average Net Assets 1.77% 1.77%(c) 1.81% 1.80% 1.80% 1.80%(c)
Ratio of Net Investment Income (Loss) to
Average Net Assets 2.76% 2.89%(c) 3.43% 3.11% 3.22% 2.88%(c)
Ratio of Expenses to Average Net Assets* 2.06% 2.06%(c) 2.10% 2.09% 2.33% 2.37%(c)
Portfolio Turnover (d) 6.67% 85.56% 48.83% 47.46% 35.15% 44.39%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Period from February 4, 1994 (commencement of offering of Investor B
shares) to June 30, 1994.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
95
<PAGE> 96
FINANCIAL HIGHLIGHTS
- -
TAX-FREE FUND
<TABLE>
<CAPTION>
INVESTOR A
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income 0.025 0.026 0.028 0.029 0.029 0.018
DISTRIBUTIONS:
Net Investment Income (0.025) (0.026) (0.028) (0.029) (0.029) (0.018)
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-----------------------------------------------------------------------------------------------------------------------------
Total Return 2.56% 2.66%(a) 2.83% 2.91% 2.90% 1.81%
-----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $ 621 $55,106 $47,466 $41,713 $45,102 $48,256
Ratio of Expenses to Average Net Assets 0.77% 0.76%(b) 0.78% 0.76% 0.74% 0.68%
Ratio of Net Investment Income to Average
Net Assets 2.71% 2.86%(b) 2.82% 2.89% 2.88% 1.81%
Ratio of Expenses to Average Net Assets* 0.94% 0.93%(b) 0.95% 0.93% 0.95% 0.93%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratio would have been as
indicated.
(a) Not annualized.
(b) Annualized.
96
<PAGE> 97
FINANCIAL HIGHLIGHTS
- -
PRIME OBLIGATIONS FUND
<TABLE>
<CAPTION>
YEAR ENDED ELEVEN MONTHS YEAR ENDED YEAR ENDED
MAY 31, 1999 ENDED MAY 31, 1998 JUNE 30, 1997 JUNE 30, 1996
----------------------- -------------------------- ------------- -------------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B(a) INVESTOR A INVESTOR A
---------- ---------- ---------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 1.000 $1.000 $ 1.000 $1.000 $ 1.000 $ 1.000
---------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income 0.046 0.037 0.045 0.027 0.048 0.050
DISTRIBUTIONS:
Net Investment Income (0.046) (0.037) (0.045) (0.027) (0.048) (0.050)
---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $1.000 $ 1.000 $1.000 $ 1.000 $ 1.000
---------------------------------------------------------------------------------------------------------------------
Total Return 4.66% 3.73% 4.63%(b) 2.75%(b) 4.91% 5.07%
---------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period
(000) $14,924 $ 764 $217,934 $ 387 $195,046 $147,478
Ratio of Expenses to Average
Net Assets 0.76% 1.66% 0.76%(c) 1.66%(c) 0.73% 0.74%
Ratio of Net Investment
Income to Average Net
Assets 4.76% 3.59% 4.93%(c) 4.01%(c) 4.80% 4.93%
Ratio of Expenses to Average
Net Assets* 0.93% 1.67% 0.93%(c) 1.68%(c) 0.90% 0.91%
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1995 JUNE 30, 1994
------------- -------------
INVESTOR A INVESTOR A
------------- -------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 1.000 $ 1.000
---------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income 0.047 0.027
DISTRIBUTIONS:
Net Investment Income (0.047) (0.027)
---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000
---------------------------------------------------------------------------------------------------------------------
Total Return 4.81% 2.75%
---------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period
(000) $108,565 $105,611
Ratio of Expenses to Average
Net Assets 0.75% 0.74%
Ratio of Net Investment
Income to Average Net
Assets 4.71% 2.71%
Ratio of Expenses to Average
Net Assets* 0.92% 0.91%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratio would have been as
indicated.
(a) For the period September 30, 1997 (commencement of offering Investor B
shares) to May 31, 1998.
(b) Not annualized.
(c) Annualized.
97
<PAGE> 98
FINANCIAL HIGHLIGHTS
- -
U.S. GOVERNMENT OBLIGATIONS FUND
<TABLE>
<CAPTION>
INVESTOR A
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income 0.044 0.044 0.047 0.049 0.047 0.027
DISTRIBUTIONS:
Net Investment Income (0.044) (0.044) (0.047) (0.049) (0.047) (0.027)
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-----------------------------------------------------------------------------------------------------------------------------
Total Return 4.53% 4.53%(a) 4.79% 4.99% 4.76% 2.69%
-----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $2,032 $169,210 $212,082 $186,944 $169,179 $172,482
Ratio of Expenses to Average Net Assets 0.75% 0.76%(b) 0.74% 0.74% 0.77% 0.77%
Ratio of Net Investment Income to Average Net
Assets 4.75% 4.83%(b) 4.69% 4.88% 4.62% 2.64%
Ratio of Expenses to Average Net Assets* 0.92% 0.93%(b) 0.91% 0.91% 0.94% 0.94%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratio would have been as
indicated.
(a) Not annualized.
(b) Annualized.
98
<PAGE> 99
FINANCIAL HIGHLIGHTS
- -
TREASURY FUND
<TABLE>
<CAPTION>
INVESTOR A
ELEVEN MONTHS DECEMBER 1,
YEAR ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED 1993 TO
MAY 31, MAY 31, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income 0.044 0.045 0.047 0.049 0.047 0.016
DISTRIBUTIONS:
Net Investment Income (0.044) (0.045) (0.047) (0.049) (0.047) (0.016)
-------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------------------------------------------------------------------------
Total Return 4.51% 4.61%(b) 4.82% 5.04% 4.81% 1.66%(b)
-------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $9,161 $240,208 $176,006 $158,723 $105,391 $56,535
Ratio of Expenses to Average Net Assets 0.67% 0.67%(c) 0.67% 0.70% 0.75% 0.64%(c)
Ratio of Net Investment Income to Average
Net Assets 4.77% 4.90%(c) 4.72% 4.87% 4.82% 2.84%(c)
Ratio of Expenses to Average Net Assets* 0.91% 0.92%(c) 0.92% 0.95% 1.04% 0.99%(c)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratio would have been as
indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
99
<PAGE> 100
For more information about the Funds, the following documents are available free
upon request:
ANNUAL/SEMI-ANNUAL REPORTS (REPORTS):
The Funds' annual and semi-annual reports to shareholders contain additional
information on the Funds' investments. In the annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected a Fund's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI):
The SAI provides more detailed information about the Funds, including their
operations and investment policies. It is incorporated by reference and is
legally considered a part of this prospectus.
You can get free copies of Annual/Semi-Annual Reports and the SAI, of the
Parkstone Group of Funds, or request other information and discuss your
questions about the Funds by contacting a Broker or Bank that sells the
Funds, or contact the Fund at:
The Parkstone Group of Funds
P.O. Box 8590
Boston, Massachusetts 02266-8590
Telephone: 1-800-451-8377
You can review information about the Funds and SAI at the Public Reference Room
of the Securities and Exchange Commission in Washington D.C. You can get copies:
o For a duplicating fee, by writing the Public Reference Section of the
Securities and Exchange Commission in Washington, D.C. 20549-6009 or
calling 1-800-SEC-0330.
o Free from the Commission's Website at http://www.sec.gov
Investment Company Act file no. 811-5105.
PARKSTONE
FUNDS
PAR-F-009-0100 9/99
<PAGE> 101
PARKSTONE FUNDS
Board of Trustees
ROBERT D. NEARY
Chairman
Retired Co-Chairman, Ernst & Young
Director:
Cold Metal Products, Inc.
Strategic Distribution, Inc.
HERBERT R. MARTENS, JR.
President
Executive Vice President,
National City Corporation
Chairman, President and
Chief Executive
Officer, NatCity
Investments, Inc.
LEIGH CARTER
Retired President and
Chief Operating Officer,
B.F. Goodrich Company
Director:
Kirtland Capital Corporation
Morrison Products
TruSeal Technologies
JOHN F. DURKOTT
President and Chief
Operating Officer,
Kittle's Home Furnishings
Center, Inc.
ROBERT J. FARLING
Retired Chairman, President
and Chief Executive Officer,
Centerior Energy
RICHARD W. FURST, DEAN
Garvice D. Kincaid Professor of
Finance and Dean,
Carol Martin Gatton College
of Business and Economics,
University of Kentucky
Director:
Foam Design, Inc.
The Seed Corporation
GERALD L. GHERLEIN
Executive Vice President and
General Counsel, Eaton
Corporation
Trustee:
WVIZ Educational Television
J. WILLIAM PULLEN
President and Chief Executive Officer,
Whayne Supply Company
<PAGE> 102
[THIS PAGE LEFT BLANK INTENTIONALLY.]
<PAGE> 1
Exhibit (17)(e)
PARKSTONE
FUNDS
INSTITUTIONAL SHARES
SEPTEMBER 17, 1999
PROSPECTUS
The Securities and Exchange Commission has not
approved or disapproved these securities or passed
upon the adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
RISK/RETURN SUMMARY
[LOGO]
4 International Discovery Fund
5 Small Capitalization Fund
6 Mid Capitalization Fund
7 Large Capitalization Fund
8 Fund Expenses -- Growth Funds
9 Equity Income Fund
10 Balanced Allocation Fund
11 Fund Expenses -- Growth and Income Funds
12 Bond Fund
13 Intermediate Government Obligations Fund
14 U.S. Government Income Fund
15 Limited Maturity Bond Fund
16 Fund Expenses -- Income Funds
17 Michigan Municipal Bond Fund
19 National Tax Exempt Bond Fund
20 Fund Expenses -- Tax-Free Income Funds
21 Tax-Free Fund
22 Prime Obligations Fund
23 U.S. Government Obligations Fund
24 Treasury Fund
25 Fund Expenses -- Money Market Funds
DESCRIPTION OF THE FUNDS
[LOGO]
[LOGO]
26 Description of the Funds
Investment Objectives, Strategies and Risks
37 Additional Risk Considerations
MANAGEMENT OF THE FUNDS
[LOGO]
[LOGO]
38 Investment Adviser
39 Portfolio Management Team
39 Distributor and Administrator
40 Year 2000
PURCHASE AND SALE OF SHARES
[LOGO]
41 How NAV is Calculated
42 Purchasing and Adding to Your Shares
43 Selling Your Shares
DIVIDENDS, DISTRIBUTIONS AND TAXES
[LOGO]
44 Dividends and Distributions
44 Federal Taxes
45 State and Local Taxes
FINANCIAL HIGHLIGHTS
[LOGO]
46
</TABLE>
2
<PAGE> 3
[LOGO]
RISK/RETURN SUMMARY
- -
The following is a summary of certain key information about the Funds. You
will find additional information about the Funds, including a detailed
description of the risks of an investment in a Fund, after this summary.
In this summary, we will describe certain kinds of risks that apply to one or
more of the Funds. The summary also describes specific risks that may apply
to one Fund. These risks are:
- MARKET RISK This is the risk that the value of a Fund's investments will
fluctuate as the stock or bond markets fluctuate and that prices overall
will decline over short or longer-term periods.
- INTEREST RATE RISK This is the risk that changes in interest rates will
affect the value of a Fund's investments in income-producing or
fixed-income or debt securities. Increases in interest rates may cause the
value of a Fund's investments to decline.
- CREDIT RISK This is the risk that the issuer of a security will be unable
or unwilling to make timely payments of interest or principal, or to
otherwise honor its obligations.
- FOREIGN RISK This is the risk of investments in issuers located in foreign
countries, which may have greater price volatility and less liquidity.
Investments in foreign securities also are subject to political,
regulatory, and diplomatic risks. Foreign risk includes currency risk,
which may occur due to fluctuations in the exchange rates between the U.S.
dollar and foreign currencies. This risk could negatively affect the value
of a Fund's investments.
- MANAGEMENT RISK This is the risk that investments selected by a Fund's
manager may not perform well and that the Fund will not perform as well as
a result.
Other important things for you to note:
- You may lose money by investing in a Fund.
- An investment in a Fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
For convenience of reference, the Funds are sometimes referred to as part of
a general grouping as described below:
- GROWTH FUNDS (International Discovery Fund, Small Capitalization Fund, Mid
Capitalization Fund and Large Capitalization Fund) The Growth Funds offer
investors seeking growth of capital a range of alternative approaches to
investing according to risk tolerance.
- GROWTH AND INCOME FUNDS (Equity Income Fund and Balanced Allocation Fund)
The Growth and Income Funds offer investors seeking current income with
preservation of capital a range of alternative approaches to investing.
- INCOME FUNDS (Bond Fund, Intermediate Government Obligations Fund, U.S.
Government Income Fund and Limited Maturity Bond Fund) The Income Funds
offer investors seeking current income with preservation of capital a range
of alternative approaches to investing.
- TAX-FREE INCOME FUNDS (Michigan Municipal Bond Fund and National Tax Exempt
Bond Fund (formerly Municipal Bond Fund)) The Tax-Free Income Funds offer
investors seeking income exempt from federal income tax as well as
preservation of capital a range of alternative approaches to investing.
- MONEY MARKET FUNDS (Tax-Free Fund, Prime Obligations Fund, U.S. Government
Obligations Fund and Treasury Fund) The Money Market Funds offer investors
seeking current income as well as preservation of capital a range of
alternative approaches to investing. An investment in one of the Money
Market Funds is not a deposit of any bank and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government
agency. Although each of the Money Market Funds seeks to preserve the value
of your investment at $1.00 per share, it is possible to lose money by
investing in one of the Money Market Funds.
Each Fund's investment objective may be changed without shareholder approval,
except as otherwise stated.
3
<PAGE> 4
[SCALE ICON]
RISK/RETURN SUMMARY INTERNATIONAL DISCOVERY FUND
- -
- INVESTMENT OBJECTIVE. The Fund's investment objective is to provide capital
appreciation by investing in equity securities of foreign issuers.
- PRINCIPAL INVESTMENT STRATEGIES. The Fund normally invests at least 80% of
its total assets in equity securities of at least three foreign issuers.
The Fund's assets normally will be invested in the securities of issuers
located in at least three foreign countries. Foreign investments also may
include debt obligations issued or guaranteed by foreign governments or
their agencies, authorities, instrumentalities or political subdivisions,
including a foreign state, province or municipality. The Fund does not
presently intend to invest in common stock of domestic companies.
- PRINCIPAL INVESTMENT RISKS. The principal risks of investing in the Fund
are market risk, foreign risk, and management risk. Because the Fund
invests in foreign securities, the Fund's returns will be more volatile and
differ, sometimes significantly, from U.S. stock returns generally.
- WHO MAY WANT TO INVEST? Consider investing in the Fund if you:
- Are seeking increased diversification and new investment opportunities.
- Can stay invested for a minimum of three to five years.
- Are willing to accept short-term price fluctuations and higher than
average risk.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
PERFORMANCE SUMMARY
The chart and table on this
page show how the
International Discovery Fund
has performed and how its
performance has varied from
year to year. The bar chart
gives an indication of risk by
showing changes in the Fund's
yearly performance over six
years to demonstrate that the
Fund has gained or lost value
at different times. The table
below compares the Fund's
average annual returns for 1
and 5 year periods and since
inception to those of the
Morgan Stanley Capital
International Europe,
Australasia and Far East
(EAFE) Index, which represents
the performance of the major
stock markets in those
regions. Past performance does
not indicate how the Fund will
perform in the future.
PERFORMANCE BAR CHART
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
INSTITUTIONAL SHARES(1)
<TABLE>
<CAPTION>
INTERNATIONAL DISCOVERY FUND
----------------------------
<S> <C>
1993 33.88%
94 -6.68%
95 8.01%
96 16.56%
97 1.80%
98 12.66%
</TABLE>
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees which would reduce returns.
During the period shown in the bar chart,
the Fund's:
Best Quarter was 18.24% 4th quarter 1998
Worst Quarter was -15.56% 3rd quarter 1998
PERFORMANCE TABLE
Average Annual Total Returns(1)
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
FUND OR CLASS PAST PAST PAST SINCE
INCEPTION YEAR 5 YEARS 10 YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
International Discovery Fund Institutional Shares 12/29/92 12.66% 6.14% N/A 10.32%
Morgan Stanley Capital International EAFE Index 12/29/92 20.33% 9.50% N/A 13.10%
</TABLE>
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
4
<PAGE> 5
[SCALE ICON]
RISK/RETURN SUMMARY SMALL CAPITALIZATION FUND
- -
- INVESTMENT OBJECTIVE. The Fund's investment objective is to provide capital
appreciation with a diversified portfolio of publicly traded smaller cap
equity securities.
- PRINCIPAL INVESTMENT STRATEGIES. The Fund normally invests at least 80% of
its total assets in equity securities of companies with small stock market
capitalization. The Fund considers a "small capitalization" company to be
one that has the same market capitalization as the companies in the Russell
2000 Growth Index. The Fund may invest up to 25% of its total assets in
foreign securities.
- PRINCIPAL INVESTMENT RISKS. The principal risks of investing in the Fund
are market risk and management risk. The Fund's risks also include
capitalization risk, which is the risk of investing in securities of small
companies. Prices of these companies' securities tend to be more volatile
than those of large companies' securities. In addition, small-
capitalization companies may have more risk because they often have
less-seasoned management and more limited product lines, markets, or
financial resources. To the extent the Fund invests in foreign securities,
your investment may have foreign risk.
- WHO MAY WANT TO INVEST? Consider investing in the Fund if you:
- Wish to take advantage of the growth potential of small company stocks.
- Can remain invested for a minimum of three to five years.
- Are willing to accept higher than average volatility and risk.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
PERFORMANCE SUMMARY
The chart and table on this
page show how the Small
Capitalization Fund has
performed and how its
performance has varied from
year to year. The bar chart
gives an indication of risk by
showing changes in the Fund's
yearly performance over ten
years to demonstrate that the
Fund has gained or lost value
at different times. The table
below compares the Fund's
average annual returns for 1,
5 and 10 year periods and
since inception to those of
the Russell 2000 Growth Index,
which is comprised of
securities in the Russell 2000
Stock Index with a greater
than average growth
orientation. Past performance
does not indicate how the Fund
will perform in the future.
PERFORMANCE BAR CHART
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
INSTITUTIONAL SHARES(1)
[PERFORMANCE BAR CHART]
<TABLE>
<CAPTION>
SMALL CAPITALIZATION FUND
-------------------------
<S> <C>
1989 32.39%
90 -1.37%
91 43.94%
92 19.15%
93 21.93%
94 5.17%
95 35.86%
96 27.70%
97 -5.97%
98 -5.31%
</TABLE>
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees which would reduce returns.
During the period shown in the bar chart,
the Fund's:
Best Quarter was 31.41% 4th quarter 1992
Worst Quarter was -26.91% 3rd quarter 1998
PERFORMANCE TABLE
Average Annual Total Returns(1)
(for the periods ending December 31, 1998)
<TABLE>
<CAPTION>
FUND OR CLASS PAST PAST PAST SINCE
INCEPTION YEAR 5 YEARS 10 YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
Small Capitalization Fund Institutional Shares 10/31/88 -5.31% 10.19% 16.07% 15.78%
Russell 2000 Growth Index 10/31/88 1.23% 10.22% 11.54% 11.43%
</TABLE>
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
5
<PAGE> 6
[SCALE ICON]
RISK/RETURN SUMMARY MID CAPITALIZATION FUND
- -
- INVESTMENT OBJECTIVE. The Fund's investment objective is to provide capital
appreciation with a diversified portfolio of publicly traded mid cap equity
securities.
- PRINCIPAL INVESTMENT STRATEGIES. The Fund normally invests at least 80% of
its total assets in securities of companies with mid stock market
capitalization. The Fund considers a "mid capitalization' company to be one
that has the same market capitalization as the companies in the Russell Mid
Cap Growth Index. The Fund may invest up to 25% of its total assets in
foreign securities.
- PRINCIPAL INVESTMENT RISKS. The principal risks of investing in the Fund
are market risk and management risk. The Fund's risks also include
capitalization risk, which is the risk of investing in the securities of
mid-capitalization companies. Prices of mid-capitalization companies'
securities tend to be more volatile than those of large companies'
securities. In addition, mid-capitalization companies may have more risk
because they often have less-seasoned management and more limited product
lines, markets, or financial resources. To the extent the Fund invests in
foreign securities, your investment may have foreign risk.
- WHO MAY WANT TO INVEST? Consider investing in the Fund if you:
- Want to take advantage of the long-term growth potential historically
provided by stock investments.
- Can remain invested for a minimum of three to five years.
- Are willing to accept short-term price fluctuations and higher than
average risk in return for potential above-average long-term growth.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
PERFORMANCE SUMMARY
The chart and table on this
page show how the Mid
Capitalization Fund has
performed and how its
performance has varied from
year to year. The bar chart
gives an indication of risk by
showing changes in the Fund's
yearly performance over ten
years to demonstrate that the
Fund has gained or lost value
at different times. The table
below compares the Fund's
average annual returns for 1,
5 and 10 year periods and
since inception to those of
the Russell Mid-Cap Growth
Index, an unmanaged index
which focuses on the
mid-capitalization sector of
the U.S. stock market. Past
performance does not indicate
how the Fund will perform in
the future.
PERFORMANCE BAR CHART
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
INSTITUTIONAL SHARES(1)
<TABLE>
<CAPTION>
MID CAPITALIZATION FUND
-----------------------
<S> <C>
1989 35.54%
90 -3.30%
91 27.60%
92 15.22%
93 12.97%
94 -5.30%
95 29.86%
96 18.32%
97 11.70%
98 11.31%
</TABLE>
The bar chart above does not reflect the impact of
any applicable sales charges or account fees which
would reduce returns.
During the period shown in the bar chart, the
Fund's:
Best Quarter was 21.95% 4th quarter 1998
Worst Quarter was -19.22% 3rd quarter 1998
PERFORMANCE TABLE
Average Annual Total Returns(1)
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
FUND OR CLASS PAST PAST PAST SINCE
INCEPTION YEAR 5 YEARS 10 YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
Mid Capitalization Fund Institutional Shares 10/31/88 11.31% 12.59% 14.69% 14.43%
Russell Mid-Cap Growth Index 10/31/88 17.86% 17.34% 17.30% 17.13%
</TABLE>
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
6
<PAGE> 7
[SCALE ICON]
RISK/RETURN SUMMARY LARGE CAPITALIZATION FUND
- -
- INVESTMENT OBJECTIVE. The Fund's investment objective is to provide capital
appreciation with a diversified portfolio of publicly traded larger cap
equity securities.
- PRINCIPAL INVESTMENT STRATEGIES. The Fund normally invests at least 80% of
its total assets in a diversified portfolio of common stocks and securities
convertible into common stocks of companies with large stock market
capitalization. The Fund considers a "large capitalization" company to be
one that has the same market capitalization as the companies in the S&P
Barra Growth Index. The Fund may also invest up to 25% of its total assets
in foreign securities.
- PRINCIPAL INVESTMENT RISKS. The principal risks of investing in the Fund
are market risk and management risk. To the extent the Fund invests in
foreign securities, your investment may have foreign risk.
- WHO MAY WANT TO INVEST? Consider investing in the Fund if you:
- Want to take advantage of the long-term growth potential historically
provided by stock investments.
- Wish to invest in large companies whose names or products/services are
well known.
- Can remain invested for a minimum of three to five years.
- Are willing to accept short-term price fluctuations and higher than
average risk in return for potential above-average long-term growth.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
PERFORMANCE SUMMARY
The chart and table on this
page show how the Large
Capitalization Fund has
performed and how its
performance has varied from
year to year. The bar chart
gives an indication of risk by
showing changes in the Fund's
yearly performance over three
years to demonstrate that the
Fund has gained or lost value
at different times. The table
below compares the Fund's
average annual returns for a
one year period and since
inception to those of the S&P
Barra Growth Index, which is
comprised of securities in the
Standard & Poor's 500 Stock
Index that have a higher than
average price-to-book ratio.
Past performance does not
indicate how the Fund will
perform in the future.
PERFORMANCE BAR CHART
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
INSTITUTIONAL SHARES(1)
<TABLE>
<CAPTION>
LARGE CAPITALIZATION FUND
-------------------------
<S> <C>
1996 23.23%
97 29.08%
98 42.62%
</TABLE>
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees which would reduce returns.
During the period shown in the bar chart,
the Fund's:
Best Quarter was 25.53% 4th quarter 1998
Worst Quarter was -9.12% 3rd quarter 1998
PERFORMANCE TABLE
Average Annual Total Returns(1)
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
FUND OR CLASS PAST PAST PAST SINCE
INCEPTION YEAR 5 YEARS 10 YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
Large Capitalization Fund Institutional Shares 12/28/95 42.62% N/A N/A 31.39%
S&P Barra Growth Index 12/28/95 42.16% N/A N/A 33.99%
</TABLE>
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
7
<PAGE> 8
[LOGO]
[SCALE ICON]
RISK/RETURN SUMMARY FUND EXPENSES
- -
FEES AND EXPENSES -- GROWTH FUNDS
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD INSTITUTIONAL SHARES OF THE FUNDS.
Annual Fund operating expenses are paid out of Fund assets and are reflected
in the share price. The fees and expenses for each Fund are based upon
current contractual advisory fees (as of October 1, 1999) and the other
actual operating expenses of that Fund for the fiscal year ended May 31,
1999.
FEE TABLE
<TABLE>
<CAPTION>
INTERNATIONAL SMALL MID LARGE
DISCOVERY CAPITALIZATION CAPITALIZATION CAPITALIZATION
FUND FUND(3) FUND FUND
<S> <C> <C> <C> <C>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) None None None None
Maximum Deferred Sales Charge (Load) (as a
percentage of offering price or sale price,
whichever is less) None None None None
Redemption Fee(1) None None None None
Exchange Fee None None None None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT
ARE DEDUCTED FROM FUND ASSETS)
Management Fees 1.15% 1.00% 1.00% 0.75%
Distribution and Service (12b-1) Fees 0.00% 0.00% 0.00% 0.00%
Other Expenses 0.41% 0.45% 0.32% 0.30%
Total Annual Fund Operating Expenses(2) 1.56% 1.45% 1.32% 1.05%
</TABLE>
(1) Although no such fee is currently in place, the Transfer Agent has
reserved the right in the future to charge a fee for wire transfers of
redemption proceeds.
(2) Certain purchases of the Funds through financial institutions may be
subject to fees for additional services provided to investors.
(3) The fees and expenses for the Small Capitalization Fund are based upon
current fees.
EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
INTERNATIONAL DISCOVERY FUND
INSTITUTIONAL SHARES $159 $493 $850 $1,856
SMALL CAPITALIZATION FUND
INSTITUTIONAL SHARES $148 $459 $792 $1,735
MID CAPITALIZATION FUND
INSTITUTIONAL SHARES $134 $418 $723 $1,590
LARGE CAPITALIZATION FUND
INSTITUTIONAL SHARES $107 $334 $579 $1,283
</TABLE>
This Example is intended to help
you compare the cost of
investing in the Funds with
the cost of investing in
other mutual funds.
The Example assumes that you
invest $10,000 in the Funds
for the time periods
indicated and then redeem all
of your shares at the end of
those periods. The Example
also assumes that your
investment has a 5% return
each year and that each
Fund's operating expenses
remain the same. Although
your actual costs may be
higher or lower, based on
these assumptions your costs
would be:
8
<PAGE> 9
[SCALE ICON]
RISK/RETURN SUMMARY EQUITY INCOME FUND
- -
- INVESTMENT OBJECTIVE. The Fund's investment objective is to provide capital
appreciation by investing in a diversified portfolio of publicly traded
larger cap equity securities which, in the aggregate, provide an
above-average current yield.
- PRINCIPAL INVESTMENT STRATEGIES. The Fund invests at least 80% of the value
of its total assets in income-producing, large cap common stocks and
securities convertible into common stocks. The Fund considers a "large
capitalization" company to be one that has the same market capitalization
as the companies in the S&P Barra Value Index. The Fund expects that its
core holdings will consist of securities with a high dividend yield,
although it may balance these holdings with lower yielding but
higher-growth oriented securities.
- PRINCIPAL INVESTMENT RISKS. The principal risks of investing in the Fund
are market risk, interest rate risk, credit risk and management risk. To
the extent the Fund invests in foreign securities, your investment has
foreign securities risk.
- WHO MAY WANT TO INVEST? Consider investing in the Fund if you:
- Would like to invest in the stock market but wish to do so in a way that
helps reduce some of the risks associated with other types of stock
funds.
- Want a dependable source of monthly income.
- Can stay invested for a minimum of three to five years.
- Are willing to accept some short-term price fluctuations in return for
potential above-average long-term returns.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
PERFORMANCE SUMMARY
The chart and table on this
page show how the Equity
Income Fund has performed and
how its performance has varied
from year to year. The bar
chart gives an indication of
risk by showing changes in the
Fund's yearly performance over
ten years to demonstrate that
the Fund has gained or lost
value at different times. The
table below compares the
Fund's average annual returns
for 1, 5 and 10 year periods
and since inception to those
of the S&P Barra Value Index,
which is comprised of
securities in the Standard &
Poor's 500 Stock Index that
have a lower than average
price-to-book ratio. Past
performance does not indicate
how the Fund will perform in
the future.
PERFORMANCE BAR CHART
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
INSTITUTIONAL SHARES(1)
<TABLE>
<CAPTION>
EQUITY INCOME FUND
------------------
<S> <C>
1989 28.13%
90 0.13%
91 24.96%
92 9.40%
93 12.65%
94 -8.26%
95 27.71%
96 17.17%
97 25.48%
98 10.95%
</TABLE>
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees which would reduce returns.
During the period shown in the bar chart, the
Fund's:
Best Quarter was 13.54% 4th quarter 1998
Worst Quarter was -10.73% 3rd quarter 1998
PERFORMANCE TABLE
Average Annual Total Returns(1)
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
FUND OR CLASS PAST PAST PAST SINCE
INCEPTION YEAR 5 YEARS 10 YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
Equity Income Fund Institutional Shares 10/31/88 10.95% 13.83% 14.21% 14.22%
S&P Barra Value Index 10/31/88 14.67% 19.87% 16.67% 16.39%
</TABLE>
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
9
<PAGE> 10
[SCALE ICON]
RISK/RETURN SUMMARY BALANCED ALLOCATION FUND
- -
- INVESTMENT OBJECTIVE. The Fund's investment objective is to provide
long-term capital appreciation and current income.
- PRINCIPAL INVESTMENT STRATEGIES. The Fund invests in a broad range of
securities including common stocks, convertible securities and fixed-income
securities. Normally, the Fund expects to invest 50% to 70% of its net
assets in common stocks and convertible securities and 25% to 55% of its
net assets in fixed-income securities. The Fund also may invest up to 30%
of it net assets in cash and cash-equivalent securities, which include
highly liquid securities with a maturity of less than three months. The
Fund may invest up to 20% of its net assets in foreign securities.
- PRINCIPAL INVESTMENT RISKS. The principal risks of investing in the Fund
are market risk, interest rate risk, credit risk and management risk. In
addition, the Fund has the risk that the allocation of its investments
between equity and fixed-income securities could have a negative effect on
the Fund's net asset value when one of these asset classes is not
performing as well as the other. To the extent the Fund invests in foreign
securities, your investment has foreign risk.
- WHO MAY WANT TO INVEST. Consider investing in the Fund if you:
- Want exposure to stocks, bonds, and cash equivalents in a single fund.
- Wish to rely on professional fund managers to increase or decrease
exposure to different investment categories as market conditions change.
- Can stay invested for a minimum of three to five years.
- Are willing to accept some short-term price fluctuations in return for
potential above-average long-term returns.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
PERFORMANCE SUMMARY
The chart and table on this
page show how the Balanced
Allocation Fund has performed
and how its performance has
varied from year to year. The
bar chart gives an indication
of risk by showing changes in
the Fund's yearly performance
over six years to demonstrate
that the Fund has gained or
lost value at different times.
The table below compares the
Fund's average annual returns
for 1 and 5 year periods and
since inception to those of
the Standard & Poor's 500
Stock Index ("S&P 500 Index"),
a widely recognized, unmanaged
index of common stocks
generally representative of
the U.S. stock market as a
whole and the Lehman Brothers
Aggregate Bond Index, an
unmanaged, fixed income,
market value-weighted index
that includes treasury issues,
agency issues, corporate bond
issues and mortgage backed
securities. Past performance
does not indicate how the Fund
will perform in the future.
PERFORMANCE BAR CHART
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
INSTITUTIONAL SHARES(1)
<TABLE>
<CAPTION>
BALANCED ALLOCATION FUND
------------------------
<S> <C>
1993 11.42%
94 -2.77%
95 22.96%
96 13.10%
97 11.67%
98 13.04%
</TABLE>
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees which would reduce returns.
During the period shown in the bar chart,
the Fund's:
<TABLE>
<S> <C> <C> <C>
Best Quarter was 10.21% 4th quarter 1998
Worst Quarter was -6.87% 3rd quarter 1998
</TABLE>
PERFORMANCE TABLE
Average Annual Total Returns(1)
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
FUND OR CLASS PAST PAST PAST SINCE
INCEPTION YEAR 5 YEARS 10 YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
Balanced Allocation Fund Institutional Shares 1/31/92 13.04% 11.29% N/A 11.42%
S&P 500 Index 1/31/92 28.58% 24.06% N/A 20.08%
Lehman Brothers Aggregate Bond Index 1/31/92 8.67% 7.27% N/A 7.95%
</TABLE>
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
10
<PAGE> 11
[LOGO]
[SCALE ICON]
RISK/RETURN SUMMARY FUND EXPENSES
- -
FEES AND EXPENSES -- GROWTH AND INCOME FUNDS
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD INSTITUTIONAL SHARES OF THE FUNDS.
Annual Fund operating expenses are paid out of Fund assets, and are reflected
in the share price. The fees and expenses for each Fund are based upon
current contractual advisory fees (as of October 1, 1999) and the other
actual operating expenses of that Fund for the fiscal year ended May 31,
1999.
FEE TABLE
<TABLE>
<CAPTION>
EQUITY INCOME BALANCED ALLOCATION
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) FUND FUND
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) None None
Maximum Deferred Sales Charge (Load) (as a percentage of
offering or sale price, whichever is less) None None
Redemption Fee(1) None None
Exchange Fee None None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED
FROM FUND ASSETS)
Management Fees 0.75% 0.75%
Distribution and Service (12b-1) Fees 0.00% 0.00%
Other Expenses 0.34% 0.36%
Total Annual Fund Operating Expenses(2) 1.09% 1.11%
</TABLE>
(1) Although no such fee is currently in place, the Transfer Agent has
reserved the right in the future to charge a fee for wire transfers of
redemption proceeds.
(2) Certain purchases of the Funds through financial institutions may be
subject to fees for additional services provided to investors.
EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
EQUITY INCOME FUND
INSTITUTIONAL SHARES $111 $347 $601 $1,329
BALANCED ALLOCATION FUND
INSTITUTIONAL SHARES $113 $353 $612 $1,352
</TABLE>
This Example is intended to help
you compare the cost of investing
in the Funds with the cost of
investing in other mutual funds.
The Example assumes that you
invest $10,000 in the Funds for
the time periods indicated and
then redeem all of your shares
at the end of those periods. The
Example also assumes that your
investment has a 5% return each
year and that each Fund's
operating expenses remain the
same. Although your actual costs
may be higher or lower, based on
these assumptions you costs
would be:
11
<PAGE> 12
[SCALE ICON]
RISK/RETURN SUMMARY BOND FUND
- -
- INVESTMENT OBJECTIVE. The Fund's investment objective is to provide current
income as well as preservation of capital by investing in high- and
medium-grade fixed-income securities.
- PRINCIPAL INVESTMENT STRATEGIES. The Fund invests at least 80% of its total
assets in investment grade debt securities of all types. Such securities
will be rated at the time of purchase within the four highest rating
categories assigned by a nationally recognized statistical rating
organization ("NRSRO") or, if unrated, which the Adviser deems are of
comparable quality. The Fund expects to maintain a dollar-weighted average
portfolio maturity of 4 to 12 years.
- PRINCIPAL INVESTMENT RISKS. The principal risks of investing in the Fund
are interest rate risk, credit risk and management risk. Increases in
interest rates may cause the value of the Fund's investments to decline and
the decrease in value may not be offset by higher interest income. Because
the Fund may invest in mortgage-related or asset-backed securities, it is
subject to the risk that mortgages or other assets may be prepaid when
interest rates decline, forcing the Fund to invest in securities with lower
interest rates. For this and other reasons, mortgage-related and
asset-backed securities may have significantly greater price and yield
volatility than traditional fixed-income securities.
- WHO MAY WANT TO INVEST? Consider investing in the Fund if you:
- Wish to preserve and protect your assets while potentially staying ahead
of inflation.
- Want a dependable source of monthly income
- Need additional diversification in your portfolio to reduce volatility.
- Can keep your money invested for a minimum of two to three years.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
PERFORMANCE SUMMARY
The chart and table on this
page show how the Bond Fund
has performed and how its
performance has varied from
year to year. The bar chart
gives an indication of risk by
showing changes in the Fund's
yearly performance over ten
years to demonstrate that the
Fund has gained or lost value
at different times. The table
below compares the Fund's
average annual returns for 1,
5 and 10 year periods and
since inception to those of
the Lehman Brothers Aggregate
Bond Index. Past performance
does not indicate how the Fund
will perform in the future.
PERFORMANCE BAR CHART
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
INSTITUTIONAL SHARES(1)
[PERFORMANCE BAR CHART]
<TABLE>
<CAPTION>
INCOME FUNDS
------------
<S> <C>
1989 11.91%
90 8.12%
91 15.04%
92 6.23%
93 9.83%
94 -3.50%
95 18.05%
96 3.41%
97 9.28%
98 7.50%
</TABLE>
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees which would reduce returns.
During the period shown in the bar chart,
the Fund's:
<TABLE>
<S> <C> <C> <C>
Best Quarter was 6.89% 2nd quarter 1989
Worst Quarter was -2.67% 1st quarter 1994
</TABLE>
PERFORMANCE TABLE
Average Annual Total Returns(1)
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
FUND OR CLASS PAST PAST PAST SINCE
INCEPTION YEAR 5 YEARS 10 YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
Bond Fund Institutional Shares 10/31/88 7.50% 6.72% 8.44% 8.18%
Lehman Brothers Aggregate Bond Index 10/31/88 8.67% 7.27% 9.26% 8.98%
</TABLE>
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
12
<PAGE> 13
[SCALE ICON]
RISK/RETURN SUMMARY INTERMEDIATE GOVERNMENT OBLIGATIONS FUND
- -
- INVESTMENT OBJECTIVE. The Fund's investment objective is to provide current
income as well as preservation of capital by investing primarily in U.S.
government securities.
- PRINCIPAL INVESTMENT STRATEGIES. The Fund normally invests at least 80% of
its total assets in obligations issued or guaranteed by the U.S. government
or its agencies or instrumentalities. The Fund expects to maintain a
dollar-weighted average portfolio maturity of three to ten years. The Fund
normally invests in U.S. Treasury bills, notes or bonds and other U.S.
government securities. The Fund also may invest in mortgage-related
securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities.
- PRINCIPAL INVESTMENT RISKS. The principal risks of investing in the Fund
are interest rate risk, credit risk and management risk. Increases in
interest rates may cause the value of the Fund's investments to decline and
a decrease in value may not be offset by higher interest income. Because
the Fund may invest in mortgage-related securities, it is subject to the
risk that mortgages may be prepaid when interest rates decline, forcing the
Fund to invest in securities with lower interest rates. For this and other
reasons, mortgage-related securities may have significantly greater price
and yield volatility than traditional debt securities.
- WHO MAY WANT TO INVEST? Consider investing in the Fund if you:
- Wish to preserve and protect your assets while potentially staying ahead
of inflation.
- Want a dependable source of monthly income.
- Need additional diversification in your portfolio to reduce volatility.
- Can keep your money invested for a minimum of two to three years.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
PERFORMANCE SUMMARY
The chart and table on this
page show how the Intermediate
Government Obligations Fund
has performed and how its
performance has varied from
year to year. The bar chart
gives an indication of risk by
showing changes in the Fund's
yearly performance over ten
years to demonstrate that the
Fund has gained or lost value
at different times. The table
below compares the Fund's
average annual returns for 1,
5 and 10 year periods and
since inception to those of
the Lehman Brothers
Intermediate Government Index.
Past performance does not
indicate how the Fund will
perform in the future.
PERFORMANCE BAR CHART
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
INSTITUTIONAL SHARES(1)
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT OBLIGATIONS FUND
----------------------------------------
<S> <C>
1989 10.05%
90 8.81%
91 13.77%
92 5.33%
93 7.44%
94 -2.33%
95 13.49%
96 3.17%
97 6.88%
98 7.62%
</TABLE>
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees which would reduce returns.
During the period shown in the bar chart,
the Fund's:
<TABLE>
<S> <C> <C> <C>
Best Quarter was 5.23% 2nd quarter 1989
Worst Quarter was -1.91% 1st quarter 1994
</TABLE>
PERFORMANCE TABLE
Average Annual Total Returns(1)
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
FUND OR CLASS PAST PAST PAST SINCE
INCEPTION YEAR 5 YEARS 10 YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
Intermediate Government Obligations Institutional Shares 10/31/88 7.62% 5.64% 7.33% 7.09%
Lehman Brothers Intermediate Government Index 10/31/88 8.47% 6.45% 8.34% 8.11%
</TABLE>
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
13
<PAGE> 14
[SCALE ICON]
RISK/RETURN SUMMARY U.S. GOVERNMENT INCOME FUND
- -
- INVESTMENT OBJECTIVE. The Fund's investment objective is to provide current
income as well as preservation of capital by investing primarily in U.S.
government securities.
- PRINCIPAL INVESTMENT STRATEGIES. The Fund normally invests at least 80% of
its total assets in obligations issued or guaranteed by the U.S. government
or its agencies or instrumentalities. The Fund also may invest up to 20% of
its total assets in other mortgage-related securities and short-term
obligations. The Fund expects to maintain a dollar-weighted average
portfolio maturity of three to ten years.
- PRINCIPAL INVESTMENT RISKS. The principal risks of investing in the Fund
are interest rate risk, credit risk and management risk. Increases in
interest rates may cause the value of the Fund's investments to decline and
the decrease in value may not be offset by higher interest income. Because
the Fund invests primarily in mortgage-related securities, it is subject to
the risk that mortgages may be prepaid when interest rates decline, forcing
the Fund to invest in securities with lower interest rates. For this and
other reasons, mortgage-related securities may have significantly greater
price and yield volatility than traditional debt securities.
- WHO MAY WANT TO INVEST? Consider investing in the Fund if you:
- Want a high level of monthly income without a high degree of risk.
- Wish to diversify your investment portfolio to reduce volatility.
- Can keep your money invested for a minimum of two to three years.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
PERFORMANCE SUMMARY
The chart and table on this
page show how the U.S.
Government Income Fund has
performed and how its
performance has varied from
year to year. The bar chart
gives an indication of risk by
showing changes in the Fund's
yearly performance over six
years to demonstrate that the
Fund has gained or lost value
at different times. The table
below compares the Fund's
average annual returns for 1
and 5 year periods and since
inception to those of the
Lehman Brothers Mortgage-
Backed Securities Index which
covers all fixed-rate
securities backed by mortgage
pools of the Government
National Mortgage Association
(GNMA), Federal Home Loan
Mortgage Corporation (FHLMC),
and Federal National Mortgage
Association (FNMA). Past
performance does not indicate
how the Fund will perform in
the future.
PERFORMANCE BAR CHART
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
INSTITUTIONAL SHARES(1)
<TABLE>
<CAPTION>
U.S. GOVERNMENT INCOME FUND
---------------------------
<S> <C>
1993 7.48%
94 -0.55%
95 13.78%
96 4.70%
97 8.10%
98 7.08%
</TABLE>
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees which would reduce returns.
During the period shown in the bar chart,
the Fund's:
<TABLE>
<S> <C> <C> <C>
Best Quarter was 3.94% 2nd quarter 1995
Worst Quarter was -1.06% 1st quarter 1994
</TABLE>
PERFORMANCE TABLE
Average Annual Total Returns(1)
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
FUND OR CLASS PAST PAST PAST SINCE
INCEPTION YEAR 5 YEARS 10 YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
U.S. Government Income Fund Institutional Shares 11/12/92 7.08% 6.52% N/A 6.60%
Lehman Brothers Mortgage-Backed Securities Index 11/12/92 6.97% 7.23% N/A 7.24%
</TABLE>
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
14
<PAGE> 15
[SCALE ICON]
RISK/RETURN SUMMARY LIMITED MATURITY BOND FUND
- -
- INVESTMENT OBJECTIVE. The Fund's investment objective is to provide current
income as well as preservation of capital by investing in a portfolio of
high- and medium-grade fixed income securities.
- PRINCIPAL INVESTMENT STRATEGIES. The Fund normally invests at least 80% of
its total assets in investment grade debt securities of all types. The Fund
invests primarily in corporate bonds, U.S. government obligations, and
mortgage-related and asset-backed securities. Such securities will be rated
at the time of purchase within the four highest rating categories assigned
by a nationally recognized statistical rating organization ("NRSRO") or, if
unrated, which the Adviser deems are of comparable quality. The Fund
expects to maintain a dollar-weighted average portfolio maturity of one to
five years.
- PRINCIPAL INVESTMENT RISKS. The principal risks of investing in the Fund
are interest rate risk and credit risk. Increases in interest rates may
cause the value of the Fund's investments to decline and the decrease in
value may not be offset by higher interest income. Because the Fund may
invest in mortgage-related or asset-backed securities, it is subject to the
risk that mortgages or other assets may be prepaid when interest rates
decline, forcing the Fund to invest in securities with lower interest
rates. For this and other reasons, mortgage-related and asset-backed
securities may have significantly greater price and yield volatility than
traditional debt securities.
- WHO MAY WANT TO INVEST? Consider investing in the Fund if you:
- Wish to preserve and protect your assets while potentially staying ahead
of inflation.
- Want a dependable source of monthly income.
- Need additional diversification in your portfolio to reduce volatility.
- Can keep your money invested for a minimum of two to three years.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
PERFORMANCE SUMMARY
The chart and table on this
page show how the Limited
Maturity Bond Fund has
performed and how its
performance has varied from
year to year. The bar chart
gives an indication of risk by
showing changes in the Fund's
yearly performance over ten
years to demonstrate that the
Fund has gained or lost value
at different times. The table
below compares the Fund's
average annual returns for 1,
5 and 10 year periods and
since inception to those of
the Merrill Lynch 1-3 Year
Government/Corporate Index,
which represents the total
returns of short-term
government and corporate
bonds. Past performance does
not indicate how the Fund will
perform in the future.
PERFORMANCE BAR CHART
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
INSTITUTIONAL SHARES(1)
<TABLE>
<CAPTION>
LIMITED MATURITY BOND FUND
--------------------------
<S> <C>
1989 9.54%
90 7.83%
91 12.24%
92 5.76%
93 6.85%
94 -0.72%
95 11.27%
96 4.16%
97 5.80%
98 6.51%
</TABLE>
The bar chart above does not reflect the impact of any applicable sales charges
or account fees which would reduce returns.
During the period shown in the bar chart, the Fund's:
<TABLE>
<S> <C> <C> <C>
Best Quarter was 4.82% 2nd quarter 1989
Worst Quarter was -1.08% 1st quarter 1994
</TABLE>
PERFORMANCE TABLE
Average Annual Total Returns(1)
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
FUND OR CLASS PAST PAST PAST SINCE
INCEPTION YEAR 5 YEARS 10 YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
Limited Maturity Bond Fund Institutional Shares 10/31/88 6.51% 5.34% 6.87% 6.76%
Merrill Lynch 1-3 Year Government/Corporate Index 10/31/88 7.01% 6.04% 7.45% 7.33%
</TABLE>
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
15
<PAGE> 16
[LOGO]
[SCALE ICON]
RISK/RETURN SUMMARY FUND EXPENSES
- -
FEES AND EXPENSES -- INCOME FUNDS
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD INSTITUTIONAL SHARES OF THE FUNDS.
Annual Fund operating expenses are paid out of Fund assets, and are reflected
in the share price. The fees and expenses for each Fund are based upon
current contractual advisory fees (as of October 1, 1999) and the other
actual operating expenses of that Fund for the fiscal year ended May 31,
1999.
FEE TABLE
<TABLE>
<CAPTION>
SHAREHOLDER FEES INTERMEDIATE GOVERNMENT U.S. GOVERNMENT
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) BOND FUND OBLIGATIONS FUND INCOME FUND
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) None None None
Maximum Deferred Sales Charge (Load) (as a
percentage of offering price or sale price,
whichever is less) None None None
Redemption Fee(1) None None None
Exchange Fee None None None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Fees 0.55% 0.55% 0.55%
Distribution and Service (12b-1) Fees 0.00% 0.00% 0.00%
Other Expenses 0.29% 0.34% 0.35%
Total Annual Fund Operating Expenses(2) 0.84% 0.89% 0.90%
Fee Waivers/Reimbursements(3) 0.05% 0.05% 0.05%
Net Annual Fund Operating Expenses 0.79% 0.84% 0.85%
<CAPTION>
SHAREHOLDER FEES LIMITED MATURITY
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) BOND FUND
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) None
Maximum Deferred Sales Charge (Load) (as a
percentage of offering price or sale price,
whichever is less) None
Redemption Fee(1) None
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Fees 0.45%
Distribution and Service (12b-1) Fees 0.00%
Other Expenses 0.33%
Total Annual Fund Operating Expenses(2) 0.78%
Fee Waivers/Reimbursements(3) 0.05%
Net Annual Fund Operating Expenses 0.73%
</TABLE>
(1) Although no such fee is currently in place, the Transfer Agent has
reserved the right in the future to charge a fee for wire transfers of
redemption proceeds.
(2) Certain purchases of the Funds through financial institutions may be
subject to fees for additional services provided to investors.
(3) The Administrator is currently waiving a portion of its fees for the
current fiscal year. The Administrator may revise or cancel this expense
limitation at any time and will notify you of any material change.
EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
BOND FUND
INSTITUTIONAL SHARES $86 $268 $466 $1,037
INTERMEDIATE GOVERNMENT
OBLIGATIONS FUND
INSTITUTIONAL SHARES $91 $284 $493 $1,096
U.S. GOVERNMENT INCOME FUND
INSTITUTIONAL SHARES $92 $287 $498 $1,108
LIMITED MATURITY BOND FUND
INSTITUTIONAL SHARES $80 $249 $433 $ 966
</TABLE>
This Example is intended to help
you compare the cost of
investing in the Funds with
the cost of investing in
other mutual funds.
The Example assumes that you
invest $10,000 in the Funds
for the time periods
indicated and then redeem all
of your shares at the end of
those periods. The Example
also assumes that your
investment has a 5% return
each year and that each
Fund's operating expenses
remain the same. Although
your actual costs may be
higher or lower, based on
these assumptions you costs
would be:
16
<PAGE> 17
[LOGO]
RISK/RETURN SUMMARY MICHIGAN MUNICIPAL BOND FUND
- -
- INVESTMENT OBJECTIVE. The Fund's investment objective is to provide current
income exempt from federal income taxes and, to the extent possible, from
Michigan personal income taxes, as is consistent with conservation of
capital.
- PRINCIPAL INVESTMENT STRATEGIES. The Fund normally invests at least 80% of
its net assets in Michigan municipal securities and debt obligations issued
by the government of Puerto Rico, the U.S. territories and possessions of
Guam, the U.S. Virgin Islands, or such other governmental entities whose
debt obligations, either by law or treaty, generate interest income which
is exempt from federal and Michigan State income and intangible taxes,
although such income may be subject to the federal alternative minimum tax
when received by certain shareholders. The Fund expects to maintain a
dollar-weighted average portfolio maturity of three to ten years.
- PRINCIPAL INVESTMENT RISKS. The principal risks of investing in the Fund
are interest rate risk and credit risk. The Fund's investments in Michigan
municipal income securities may also include exposure to special factors
that may adversely affect the value of municipal securities and have a
significant effect on the value of the Fund's investments. These factors
include political or legislative changes, uncertainties related to the tax
status of municipal securities or the rights of investors in these
securities.
Due to the level of investment in municipal obligations issued by the State
of Michigan and its political subdivisions, the performance of the Fund
will be closely tied to the economic and political conditions in the State
of Michigan, and, therefore, an investment in the Fund may be riskier than
an investment in other types of municipal bond funds. The State's economy
is principally dependent upon manufacturing (particularly automobiles,
office equipment and other durable goods), tourism and agriculture and
historically has been highly cyclical. When a Fund's assets are
concentrated in obligations from revenues of similar projects issued by
issuers located in the same state or in industrial development bonds, the
Fund will be subject to the particular risks (including legal and economic
conditions) related to such securities to a greater extent than if its
assets were not so concentrated.
In addition, the Fund is not "diversified," meaning that it can invest a
greater percentage of its assets in a particular issuer. Factors affecting
these issuers could have a more significant adverse effect on the Fund's
net asset value.
- WHO MAY WANT TO INVEST? Consider investing in the Fund if you:
- Wish to earn investment income that is exempt from federal income tax
- Live in Michigan and wish to earn investment income that is also exempt
from state income tax
- Want to support Michigan municipalities by purchasing their debt
securities
- Seek to reduce volatility in your portfolio through increased
diversification
- Can keep your money invested for a minimum of one to two years
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
17
<PAGE> 18
RISK/RETURN SUMMARY MICHIGAN MUNICIPAL BOND FUND
- -
PERFORMANCE SUMMARY
The chart and table on this
page show how the Michigan
Municipal Bond Fund has
performed and how its
performance has varied from
year to year. The bar chart
gives an indication of risk by
showing changes in the Fund's
yearly performance over eight
years to demonstrate that the
Fund has gained or lost value
at different times. The table
below compares the Fund's
average annual returns for 1
and 5 year periods and since
inception to those of the
Lehman Brothers 7 Year
Municipal Bond Index. Past
performance does not indicate
how the Fund will perform in
the future.
The table measures performance
in terms of total return.
However, this Fund is managed
for yield and not total
return.
PERFORMANCE BAR CHART
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
INSTITUTIONAL SHARES(1)
<TABLE>
<CAPTION>
MICHIGAN MUNICIPAL BOND FUND
----------------------------
<S> <C>
1991 9.78%
92 6.98%
93 9.74%
94 -2.86%
95 13.63%
96 3.03%
97 7.18%
98 5.00%
</TABLE>
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees which would reduce returns.
During the period shown in the bar chart,
the Fund's:
Best Quarter was 5.25% 1st quarter 1995
Worst Quarter was -3.28% 1st quarter 1994
PERFORMANCE TABLE
Average Annual Total Returns(1)
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
FUND OR CLASS PAST PAST PAST SINCE
INCEPTION YEAR 5 YEARS 10 YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
Michigan Municipal Bond Fund Institutional Shares 7/02/90 5.00% 5.06% N/A 6.46%
Lehman Brothers 7 Year Municipal Bond Index 6/30/90 6.23% 5.80% N/A 7.55%
</TABLE>
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
18
<PAGE> 19
[SCALE ICON]
RISK/RETURN SUMMARY NATIONAL TAX EXEMPT BOND FUND
FORMERLY MUNICIPAL BOND FUND
- -
- INVESTMENT OBJECTIVE. The Fund's investment objective is to provide current
income exempt from federal income taxes as is consistent with conservation
of capital.
- PRINCIPAL INVESTMENT STRATEGIES. The Fund normally invests at least 80% of
its net assets in a diversified portfolio of municipal securities the
interest on which is both exempt from federal income taxes and not treated
as a preference item for individuals for purposes of the federal
alternative minimum tax. Interest income from certain types of municipal
securities may be subject to federal alternative minimum tax. These
securities are not treated as tax-exempt obligations for purposes of
measuring compliance with the 80% limitation. The Fund expects to maintain
a dollar-weighted average portfolio maturity of three to ten years.
- PRINCIPAL INVESTMENT RISKS. The principal risks of investing in the Fund
are interest rate risk and credit risk. The Fund's investments in municipal
securities may also have exposure to special factors that may adversely
affect the value of these securities, and have a significant effect on the
value of the Fund's investments. These factors include political or
legislative changes, uncertainties related to the tax status of municipal
securities or the rights of investors in these securities.
- WHO MAY WANT TO INVEST? Consider investing in the Fund if you:
- Wish to earn investment income that is exempt from federal income tax.
- Want to support U.S. cities and states by purchasing their debt
securities.
- Seek to reduce volatility in your portfolio through increased
diversification.
- Can keep your money invested for a minimum of one to two years.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
PERFORMANCE SUMMARY
The chart and table on this
page show how the National Tax
Exempt Bond Fund has performed
and how its performance has
varied from year to year. The
bar chart gives an indication
of risk by showing changes in
the Fund's yearly performance
over ten years to demonstrate
that the Fund has gained or
lost value at different times.
The table below compares the
Fund's average annual returns
for 1, 5 and 10 year periods
and since inception to those
of the Lehman Brothers
Municipal Bond Index. Past
performance does not indicate
how the Fund will perform in
the future.
This table measures
performance in terms of total
return. However, this Fund is
managed for yield and not
total return.
PERFORMANCE BAR CHART
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
INSTITUTIONAL SHARES(1)
<TABLE>
<CAPTION>
NATIONAL TAX EXEMPT BOND FUND
-----------------------------
<S> <C>
1989 7.57%
90 6.01%
91 9.16%
92 7.46%
93 9.18%
94 -3.25%
95 13.57%
96 2.92%
97 6.52%
98 4.98%
</TABLE>
The bar chart above does not reflect the impact of any applicable sales charges
or account fees which would reduce returns.
During the period shown in the bar chart, the Fund's:
Best Quarter was 5.69% 1st quarter 1995
Worst Quarter was -3.27% 1st quarter 1994
PERFORMANCE TABLE
Average Annual Total Returns(1)
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
FUND OR CLASS PAST PAST PAST SINCE
INCEPTION YEAR 5 YEARS 10 YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
National Tax Exempt Bond Fund Institutional Shares 10/31/88 4.98% 4.80% 6.32% 6.27%
Lehman Brothers Municipal Bond Index 10/31/88 6.48% 6.23% 8.22% 8.09%
</TABLE>
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
19
<PAGE> 20
[LOGO]
[SCALE ICON]
RISK/RETURN SUMMARY FUND EXPENSES
- -
FEES AND EXPENSES -- TAX-FREE INCOME FUNDS
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD INSTITUTIONAL SHARES OF THE FUNDS.
Annual Fund operating expenses are paid out of Fund assets, and are reflected
in the share price. The fees and expenses for each Fund are based upon
current contractual advisory fees (as of October 1, 1999) and the other
actual operating expenses of that Fund for the fiscal year ended May 31,
1999.
FEE TABLE
<TABLE>
<CAPTION>
MICHIGAN MUNICIPAL NATIONAL TAX EXEMPT
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) BOND FUND BOND FUND(4)
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price) None None
Maximum Deferred Sales Charge (Load) (as a percentage of
offering or sale price, whichever is less) None None
Redemption Fee(1) None None
Exchange Fee None None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED
FROM FUND ASSETS)
Management Fees 0.55% 0.55%
Distribution and Service (12b-1) Fees 0.00% 0.00%
Other Expenses 0.31% 0.41%
Total Annual Fund Operating Expenses(2) 0.86% 0.96%
Fee Waivers/Reimbursements(3) 0.10% 0.10%
Net Annual Fund Operating Expenses 0.76% 0.86%
</TABLE>
(1) Although no such fee is currently in place, the Transfer Agent has
reserved the right in the future to charge a fee for wire transfers of
redemption proceeds.
(2) Certain purchases of the Funds through financial institutions may be
subject to fees for additional services provided to investors.
(3) The Administrator is currently waiving a portion of its fees for the
current fiscal year. The Administrator may revise or cancel this expense
limitation at any time and will notify you of any material change.
(4) The fees and expenses for the National Tax Exempt Bond Fund are based
upon current fees.
EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
MICHIGAN MUNICIPAL BOND FUND
INSTITUTIONAL SHARES $88 $274 $477 $1,061
NATIONAL TAX EXEMPT BOND FUND
INSTITUTIONAL SHARES $98 $306 $531 $1,178
</TABLE>
This Example is intended to help
you compare the costs of
investing in the Funds with
the costs of investing in
other mutual funds.
The Example assumes that you
invest $10,000 in the Funds
for the time periods
indicated and then redeem all
of your shares at the end of
those periods. The Example
also assumes that your
investment has a 5% return
each year and that each
Fund's operating expenses
remain the same. Although
your actual costs may be
higher or lower, based on
these assumptions you costs
would be:
20
<PAGE> 21
[SCALE ICON]
RISK/RETURN SUMMARY TAX-FREE FUND
- -
- INVESTMENT OBJECTIVE The Fund's investment objective is to provide as high
a level of current interest income free from federal income taxes,
consistent with the preservation of capital and relative stability of
principal.
- PRINCIPAL INVESTMENT STRATEGIES The Fund is a money market fund that seeks,
to maintain a stable net asset value of $1.00 per share, although there is
no guarantee that the net asset value will not vary. The Fund normally
invests at least 80% of its total assets in municipal obligations the
interest on which is exempt from federal income tax and not subject to the
federal alternative minimum tax. These securities will have short-term debt
ratings in the two highest rating categories of at least two nationally
recognized statistical rating organizations, or will be unrated securities
of comparable quality. The Fund's dollar-weighted average portfolio
maturity will not exceed 90 days. The Fund will not purchase any security
which matures in more than 397 days.
- PRINCIPAL INVESTMENT RISKS The principal risks of investing in the Fund are
interest rate risk, credit risk and management risk. The Fund's investments
in municipal securities may also have exposure to special factors that may
adversely affect the value of municipal securities, and have a significant
effect on the value of the Fund's investments. These factors include
political or legislative changes, uncertainties related to the tax status
of municipal securities or the rights of investors in these securities.
- WHO MAY WANT TO INVEST? Consider investing in the Fund if you are:
- An investor in a high tax bracket.
- Seeking liquidity.
- Seeking current income exempt from federal income taxes.
An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
PERFORMANCE SUMMARY
The chart and table on this page
show how the Tax-Free Fund has
performed and how its
performance has varied from year
to year. The bar chart gives an
indication of risk by showing
changes in the Fund's yearly
performance over ten years to
demonstrate that the Fund's
return has varied at different
times. Past performance does not
indicate how the Fund will
perform in the future.
PERFORMANCE BAR CHART
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
INSTITUTIONAL SHARES(1)
<TABLE>
<CAPTION>
TAX-FREE FUND
-------------
<S> <C>
1989 6.08%
90 5.46%
91 3.96%
92 2.53%
93 1.88%
94 2.34%
95 3.26%
96 2.79%
97 3.08%
98 2.86%
</TABLE>
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees which would reduce returns.
During the period shown in the bar chart,
the Fund's:
<TABLE>
<S> <C> <C> <C>
Best Quarter was 1.58% 4th quarter 1989
Worst Quarter was 0.43% 1st quarter 1994
</TABLE>
PERFORMANCE TABLE
Average Annual Total Returns(1)
(for the periods ending December 31, 1998)
<TABLE>
<CAPTION>
INCEPTION PAST PAST PAST SINCE
DATE YEAR 5 YEARS 10 YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
Tax-Free Fund Institutional Shares 7/30/87 2.86% 2.87% 3.42% 3.57%
</TABLE>
For current yield information on the Fund, call 1-800-451-8377. The Tax-Free
Fund's yield appears in the Wall Street Journal each Thursday.
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
21
<PAGE> 22
[SCALE ICON]
RISK/RETURN SUMMARY PRIME OBLIGATIONS FUND
- -
- INVESTMENT OBJECTIVE The Fund's investment objective is to provide current
income with liquidity and stability of principal.
- PRINCIPAL INVESTMENT STRATEGIES The Fund is a money market fund that seeks
to maintain a stable net asset value of $1.00 per share, although there is
no guarantee that the net asset value per share will not vary. The Fund
invests in high-quality money market instruments, including municipal
securities and other instruments deemed to be of comparable high quality as
determined by the Board of Trustees. These securities will have short-term
debt ratings in the two highest rating categories of at least two
nationally recognized statistical rating organizations, or will be unrated
securities of comparable quality. The Fund's dollar-weighted average
portfolio maturity will not exceed 90 days. The Fund will not purchase any
security which matures in more than 397 days.
- PRINCIPAL INVESTMENT RISKS The principal risks of investing in the Fund are
interest rate risk, credit risk and management risk.
- WHO MAY WANT TO INVEST? Consider investing in the Fund if you are:
- Seeking current income through a liquid investment.
- Looking for a conservative investment to balance out more aggressive
investments.
An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
PERFORMANCE SUMMARY
The chart and table on this
page show how the Prime
Obligations Fund has performed
and how its performance has
varied from year to year. The
bar chart gives indication of
risk by showing changes in the
Fund's yearly performance over
ten years to demonstrate that
the Fund's return has varied
at different times. Past
performance does not indicate
how the Fund will perform in
the future.
PERFORMANCE BAR CHART
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
INSTITUTIONAL SHARES(1)
<TABLE>
<CAPTION>
PRIME OBLIGATIONS FUND
----------------------
<S> <C>
1989 8.98%
90 7.90%
91 5.96%
92 3.56%
93 2.68%
94 3.72%
95 5.42%
96 4.99%
97 5.11%
98 5.04%
</TABLE>
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees which would reduce returns.
During the period shown in the bar chart,
the Fund's:
<TABLE>
<S> <C> <C> <C>
Best Quarter was 2.31% 2nd quarter 1989
Worst Quarter was 0.65% 2nd quarter 1993
</TABLE>
PERFORMANCE TABLE
Average Annual Total Returns(1)
(for the periods ending December 31, 1998)
<TABLE>
<CAPTION>
INCEPTION PAST PAST PAST SINCE
DATE YEAR 5 YEARS 10 YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
Prime Obligations Fund Institutional
Shares 8/24/87 5.04% 4.86% 5.32% 5.54%
</TABLE>
For current yield information on the Fund, call 1-800-451-8377. The Prime
Obligations Fund's yield appears in The Wall Street Journal each Thursday.
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
22
<PAGE> 23
[SCALE ICON]
RISK/RETURN SUMMARY U.S. GOVERNMENT OBLIGATIONS FUND
- -
- INVESTMENT OBJECTIVE. The Fund's investment objective is to provide current
income with liquidity and stability of principal.
- PRINCIPAL INVESTMENT STRATEGIES. The Fund is a money market fund that seeks
to maintain a stable net asset value of $1.00 per share, although there is
no guarantee that the net asset value per share will not vary. The Fund
normally invests at least 65% of its total assets in short-term U.S.
Treasury bills, notes and other obligations issued or guaranteed by the
U.S. government or its agencies or instrumentalities. Other securities
purchased by the Fund will be high quality money market instruments and
comparable investments. These securities will have short-term debt ratings
in the two highest rating categories of at least two nationally recognized
statistical rating organizations or will be unrated securities of
comparable quality. The Fund's dollar-weighted average portfolio maturity
will not exceed 90 days. The Fund will not purchase any security which
matures in more than 397 days.
- PRINCIPAL INVESTMENT RISKS. The principal risks of investing in the Fund
are interest rate risk, credit risk and management risk.
- WHO MAY WANT TO INVEST? Consider investing in the Fund if you are:
- Seeking current income through a liquid investment.
- Seeking current income.
- Looking for a conservative investment to balance out more aggressive
investments.
An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
PERFORMANCE SUMMARY
The chart and table on this
page show how the U.S.
Government Obligations Fund
has performed and how its
performance has varied from
year to year. The bar chart
gives an indication of risk by
showing changes in the Fund's
yearly performance over ten
years to demonstrate that the
Fund's return has varied at
different times. Past
performance does not indicate
how the Fund will perform in
the future.
PERFORMANCE BAR CHART
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
INSTITUTIONAL SHARES(1)
<TABLE>
<CAPTION>
U.S. GOVERNMENT OBLIGATIONS FUND
--------------------------------
<S> <C>
1989 8.66%
90 7.69%
91 5.62%
92 3.72%
93 2.62%
94 3.66%
95 5.39%
96 4.86%
97 4.98%
98 4.94%
</TABLE>
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees which would reduce returns.
During the period shown in the bar chart,
the Fund's:
<TABLE>
<S> <C> <C> <C>
Best Quarter was 2.23% 2nd quarter 1989
Worst Quarter was 0.64% 3rd quarter 1993
</TABLE>
PERFORMANCE TABLE
Average Annual Total Returns(1)
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
INCEPTION PAST PAST PAST SINCE
DATE YEAR 5 YEARS 10 YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
U.S. Government Obligations Fund Institutional
Shares 8/24/87 4.94% 4.77% 5.20% 5.40%
</TABLE>
For current yield information on the Fund, call 1-800-451-8377. The U.S.
Government Obligations Fund's yield appears in The Wall Street Journal each
Thursday.
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
23
<PAGE> 24
[LOGO]
[SCALE ICON]
RISK/RETURN SUMMARY TREASURY FUND
- -
- INVESTMENT OBJECTIVE. The Fund's investment objective is to provide current
income with liquidity and stability of principal.
- PRINCIPAL INVESTMENT STRATEGIES. The Fund is a money market fund that seeks
to maintain a stable net asset value of $1.00 per share. The Fund normally
invests exclusively in obligations issued or guaranteed by the U.S.
Treasury, its agencies or instrumentalities and repurchase agreements
related to these securities. Other securities purchased by the Fund will be
high quality money market instruments and other comparable investments.
These securities will have short-term debt ratings in the two highest
rating categories of at least two nationally recognized statistical rating
organizations, or will be unrated securities of comparable quality. The
Fund's dollar-weighted average portfolio maturity will not exceed 90 days.
The Fund will not purchase any security which matures in more than 397
days.
- PRINCIPAL INVESTMENT RISKS. The principal risks of investing in the Fund
are interest rate risk and management risk.
- WHO MAY WANT TO INVEST? Consider investing in the Fund if you are:
- Seeking current income through a liquid investment.
- Looking for a conservative investment to balance out more aggressive
investments.
An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
PERFORMANCE BAR CHART
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
INSTITUTIONAL SHARES(1)
<TABLE>
<CAPTION>
TREASURY FUND
-------------
<S> <C>
1994 3.71%
95 5.42%
96 4.89%
97 5.06%
98 4.96%
</TABLE>
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees which would reduce returns.
During the period shown in the bar chart,
the Fund's:
<TABLE>
<S> <C> <C> <C>
Best Quarter was 1.36% 2nd quarter 1995
Worst Quarter was 0.65% 1st quarter 1994
</TABLE>
PERFORMANCE SUMMARY
The chart and table on this
page show how the Treasury
Fund has performed and how its
performance has varied from
year to year. The bar chart
gives an indication of risk by
showing changes in the Fund's
yearly performance over five
years to demonstrate that the
Fund's return has varied at
different times. Past
performance does not indicate
how the Fund will perform in
the future.
PERFORMANCE TABLE
Average Annual Total Returns(1)
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
INCEPTION PAST PAST PAST SINCE
DATE YEAR 5 YEARS 10 YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
Treasury Fund Institutional Shares 12/1/93 4.96% 4.81% N/A 4.77%
</TABLE>
For current yield information on the Fund, call 1-800-451-8377. The Treasury
Fund's yield appears in The Wall Street Journal each Thursday.
(1) Both the chart and the table assume reinvestment of dividends and
distributions.
24
<PAGE> 25
[LOGO]
[SCALE ICON]
RISK/RETURN SUMMARY FUND EXPENSES
- -
FEES AND EXPENSES -- MONEY MARKET FUNDS
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD INSTITUTIONAL SHARES OF THE FUNDS.
Annual Fund operating expenses are paid out of Fund assets and are reflected
in the share price. The fees and expenses for each Fund are based upon
current contractual advisory fees (as of October 1, 1999) and the other
actual operating expenses of that Fund for the fiscal year ended May 31,
1999.
The Fund's Administrator has voluntarily agreed to waive a portion of its fee
with respect to certain Funds. The voluntary fee waiver will cause a Fund's
return to be higher than it would otherwise be without the fee waiver. (See
the footnotes to the Fee Table below.)
FEE TABLE
<TABLE>
<CAPTION>
PRIME U.S. GOVERNMENT
TAX-FREE OBLIGATIONS OBLIGATIONS TREASURY
FUND FUND FUND(4) FUND
<S> <C> <C> <C> <C>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) None None None None
Maximum Deferred Sales Charge (Load) (as a
percentage of offering price or sale price,
whichever is less) None None None None
Redemption Fee(1) None None None None
Exchange Fee None None None None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT
ARE DEDUCTED FROM FUND ASSETS)
Management Fees 0.35% 0.35% 0.35% 0.30%
Distribution and Service (12b-1) Fees 0.00% 0.00% 0.00% 0.00%
Other Expenses 0.30% 0.27% 0.36% 0.28%
Total Annual Fund Operating Expenses(2) 0.65% 0.62% 0.71% 0.58%
Fee Waivers/Reimbursements(3) 0.02% 0.02% 0.02% 0.10%
Net Annual Fund Operating Expenses 0.63% 0.60% 0.69% 0.48%
</TABLE>
(1) Although no such fee is currently in place, the Transfer Agent has
reserved the right in the future to charge a fee for wire transfers of
redemption proceeds.
(2) Certain purchases of the Funds through financial institutions may be
subject to fees for additional services provided to investors.
(3) The Administrator is currently waiving a portion of its fees for the
current fiscal year. The Administrator may revise or cancel this expense
limitation at any time and will notify you of any material change.
(4) The fees and expenses for the U.S. Government Obligations Fund are based
upon current fees.
EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
TAX-FREE FUND
INSTITUTIONAL SHARES $66 $208 $362 $810
PRIME OBLIGATIONS FUND INSTITUTIONAL
SHARES $63 $199 $346 $774
U.S. GOVERNMENT OBLIGATIONS FUND
INSTITUTIONAL SHARES $73 $227 $395 $883
TREASURY FUND INSTITUTIONAL SHARES $59 $186 $324 $726
</TABLE>
This Example is intended to help
you compare the cost of
investing in the Funds with
the cost of investing in
other mutual funds.
The Example assumes that you
invest $10,000 in the Funds
for the time periods
indicated and then redeem all
of your shares at the end of
those periods. The Example
also assumes that your
investment has a 5% return
each year and that each
Fund's operating expenses
remain the same. Although
your actual costs may be
higher or lower, based on
these assumptions you costs
would be:
- -
25
<PAGE> 26
[MAGNIFYING GLASS
ICON]
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
DESCRIPTION OF THE FUNDS
- -
This section of the Prospectus provides a more complete description of the
Funds' principal investment objectives, strategies and risks. Of course,
there can be no assurance that the Funds will achieve their investment
objectives. Additional descriptions of the Funds' risks, strategies, and
investments, as well as other strategies and investments not described below
may be found in the Funds' Statement of Additional Information or SAI.
This section describes risks that affect the Funds' portfolios as a whole.
Certain of these risks may apply to one or more of the Funds. These risks
are:
- MARKET RISK. This is the risk that market influences will affect
expected returns of all equities and bonds in ways that were not
anticipated.
- INTEREST RATE RISK. This is the risk that returns will be better or
worse than expected because of changes in the level of interest rates.
- CREDIT RISK. This is the risk associated with the ability of the firm or
institution that issues securities to meet its obligations on those
securities.
- MANAGEMENT RISK. This risk is the possibility that investments selected
by the Funds' managers may not perform well and that the Funds will not
perform as well as a result.
THIS SECTION ALSO DESCRIBES SPECIFIC RISKS THAT MAY AFFECT A PARTICULAR
FUND'S PORTFOLIO.
- -
PARKSTONE INTERNATIONAL DISCOVERY FUND
TICKER SYMBOL: INSTITUTIONAL SHARES PKIDX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The Fund's investment objective is to provide capital appreciation by
investing in equity securities of foreign issuers. The Fund normally invests
at least 80% of its total assets in equity securities of foreign issuers. The
Fund's assets normally will be invested in the securities of issuers located
in at least three foreign countries. Foreign investments also may include
debt obligations issued or guaranteed by foreign governments or their
agencies, authorities, instrumentalities or political subdivisions, including
a foreign state, province or municipality. The Fund does not presently intend
to invest in common stock of domestic companies.
The Fund will invest primarily in equity securities, including common and
preferred stocks, rights, warrants, securities convertible into common stocks
and American Depository Receipts ("ADRs") of companies included in the Morgan
Stanley Capital International Europe, Australasia, Far East ("EAFE") Index, a
broadly diversified international index consisting of more than 1,000 equity
securities of companies located in Australia, Austria, Belgium, Denmark,
Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, Malaysia, the
Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland, and
the United Kingdom. The Fund, however, will not be an "index" fund, and is
neither sponsored by nor affiliated with Morgan Stanley Capital
International. The Fund will not presently make investments in markets where,
in the judgement of the Adviser, property rights are not defined and
supported by adequate legal infrastructure. More than 25% of the Fund's
assets may be invested in the securities or issuers located in the same
country. Criteria for determining the appropriate distribution of investments
among countries may include relative valuation, growth prospects and fiscal,
monetary and regulatory governmental policies. The Fund emphasizes country
selection.
Although not currently anticipated, the Fund may invest up to 35% of its
assets in U.S. companies. The Fund may temporarily invest cash in short-term
debt instruments of U.S. and foreign issuers for cash management purposes or
pending investment.
During temporary defensive periods as determined by the Adviser, the Fund may
hold up to 100% of its total assets in short-term obligations including
domestic bank certificates of deposit, bankers' acceptances and repurchase
agreements secured by bank instruments. However, to the extent that the Fund
is so invested, its investment objective may not be achieved during that
time. Uninvested cash reserves will not earn income.
26
<PAGE> 27
DESCRIPTION OF THE FUNDS INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
- -
PARKSTONE SMALL CAPITALIZATION FUND
TICKER SYMBOL: INSTITUTIONAL SHARES PKSCX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The Fund's investment objective is to provide capital appreciation with a
diversified portfolio of publicly traded smaller cap equity securities. The
Fund normally invests at least 80% of its total assets in equity securities
of companies with small stock market capitalization. The Fund considers a
"small capitalization" company as one that has the same market capitalization
as the companies in the Russell 2000 Growth Index.
The Fund's Adviser assesses a company's growth potential by evaluating the
management team, examining products and services, analyzing financial
statements, reviewing earnings models with Wall Street analysts, and studying
company fundamentals. Companies that participate in sectors that are
identified as having long-term growth potential generally make up a
substantial portion of the Fund's holdings. These companies often have
established the market niche or have developed the unique products or
technologies that are expected to produce superior growth in revenues and
earnings. The Fund's Adviser constantly reviews the Fund's securities
holdings and sells stocks when there is a breakdown in company or industry
group fundamentals or when a company's market capitalization exceeds that of
companies represented in the Russell 2000 Growth Index.
The Fund also may invest:
- up to 25% of its net assets in foreign securities either directly or
through the purchase of American Depository Receipts ("ADRs") and
European Depository Receipts ("EDRs");
- up to 20% of the value of its total assets in preferred stocks, corporate
bonds, notes, units of real estate investment trusts, warrants, and
short-term obligations (with maturities of 12 months or less) consisting
of commercial paper (including variable amount master demand notes),
bankers' acceptances, certificates of deposit, repurchase agreements,
obligations issued or guaranteed by the U.S. government or its agencies
or instrumentalities, and demand and time deposits of domestic and
foreign banks and savings and loan associations;
- securities of other investment companies and depository or custodial
receipts representing beneficial interests in any of the foregoing
securities; and
- in securities issued by foreign branches of U.S. banks and foreign banks,
Canadian Commercial Paper ("CCP"), which is commercial paper issued by a
Canadian corporation or counterpart of a U.S. Corporation and in U.S.
dollar-denominated commercial paper of a foreign issuer.
During temporary defensive periods as determined by the Adviser, the Fund may
hold up to 100% of its total assets in short-term obligations including
domestic bank certificates of deposit, bankers' acceptances and repurchase
agreements secured by bank instruments. However, to the extent that the Fund
is so invested, its investment objective may not be achieved during that
time. Uninvested cash reserves will not earn income.
- -
PARKSTONE MID CAPITALIZATION FUND
TICKER SYMBOL: INSTITUTIONAL SHARES PKEQX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The Fund's investment objective is to provide capital appreciation with a
diversified portfolio of publicly traded mid cap equity securities. The Fund
normally invests at least 80% of its total assets in securities of companies
with mid stock market capitalization. The Fund considers a "mid
capitalization" company as one that has the same market capitalization as the
companies in the Russell Mid Cap Growth Index. The Fund normally invests 80%
of its total assets in common stocks and convertible securities.
The Fund's Adviser assesses a company's growth potential by evaluating the
management team, examining products and services, analyzing financial
statements, reviewing earnings models with Wall Street analysts, and studying
company fundamentals. The Fund invests in companies that typically have
exhibited consistent, above-average growth in revenues and earnings, strong
management, and sound and improving financial fundamentals. Often, these
companies are market or industry leaders, have excellent products and/or
services, and exhibit the potential for growth. The Fund's core holdings are
companies that participate in long-term growth industries, although the Fund
also may
27
<PAGE> 28
DESCRIPTION OF THE FUNDS INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
- -
invest in companies in non-growth industries that exhibit the desired
characteristics. The Fund's Adviser constantly reviews the Fund's securities
holdings and sells stocks when there is a breakdown in company or industry
group fundamentals or when a company's market capitalization exceeds that of
companies represented in the Russell MidCap Growth Index.
The Fund also may invest:
- up to 25% of its net assets in foreign securities either directly or
through the purchase of ADRs or EDRs;
- up to 20% of the value of its total assets in preferred stocks, corporate
bonds, notes, units of real estate investment trusts, warrants, and
short-term obligations (with maturities of 12 months or less) consisting
of commercial paper (including variable amount master demand notes),
bankers' acceptances, certificates of deposit, repurchase agreements,
obligations issued or guaranteed by the U.S. government or its agencies
or instrumentalities, and demand and time deposits of domestic and
foreign banks and savings and loan associations;
- securities of other investment companies and depository or custodial
receipts representing beneficial interests in any of the foregoing
securities; and
- in securities issued by foreign branches of U.S. banks and foreign banks,
CCP and in U.S. dollar-denominated commercial paper of a foreign issuer.
During temporary defensive periods as determined by the Adviser, the Fund may
hold up to 100% of its total assets in short-term obligations including
domestic bank certificates of deposit, bankers' acceptances and repurchase
agreements secured by bank instruments. However, to the extent that the Fund
is so invested, its investment objective may not be achieved during that
time. Uninvested cash reserves will not earn income.
- -
PARKSTONE LARGE CAPITALIZATION FUND
TICKER SYMBOL: INSTITUTIONAL SHARES PLCIX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The Fund's investment objective is to provide capital appreciation with a
diversified portfolio of publicly traded larger cap equity securities. The
Fund normally invests at least 80% of its total assets in a diversified
portfolio of common stocks and securities convertible into common stocks of
companies with large stock market capitalization. The Fund considers a "large
capitalization" company as one that has the same market capitalization as the
companies in the S&P Barra Growth Index.
The Fund invests in companies that typically have exhibited consistent,
above-average growth in revenues and earnings, strong management, and sound
and improving financial fundamentals. Often, these companies are market or
industry leaders, have excellent products and/or services, and exhibit the
potential for growth. The Fund's core holdings are companies that participate
in long-term growth industries, although the Fund also may invest in
companies in non-growth industries that exhibit the desired characteristics.
The Fund also may invest:
- up to 25% of its net assets in foreign securities either directly or
through the purchase of ADRs or EDRs; and
- up to 20% of the value of its total assets in preferred stocks, corporate
bonds, notes, units of real estate investment trusts, warrants, and
short-term obligations (with maturities of 12 months or less) consisting
of commercial paper (including variable amount master demand notes),
bankers' acceptances, certificates of deposit, repurchase agreements,
obligations issued or guaranteed by the U.S. government or its agencies
or instrumentalities, and demand and time deposits of domestic and
foreign banks and savings and loan associations;
- securities of other investment companies and depository or custodial
receipts representing beneficial interests in any of the foregoing
securities; and
- in securities issued by foreign branches of U.S. banks and foreign banks,
CCP and in U.S. dollar-denominated commercial paper of a foreign issuer.
During temporary defensive periods as determined by the Adviser, the Fund may
hold up to 100% of its total assets in short-term obligations including
domestic bank certificates of deposit, bankers' acceptances and repurchase
agreements secured by bank instruments. However, to the extent that the Fund
is so invested, its investment objective may not be achieved during that
time. Uninvested cash reserves will not earn income.
28
<PAGE> 29
DESCRIPTION OF THE FUNDS INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
- -
RISK FACTORS FOR THE GROWTH FUNDS
The principal risks of the Growth Funds are market risk and management risk.
To the extent that the Funds may invest in small- to mid-capitalization
companies, they may have capitalization risk. These investments tend to be
more volatile than investments in large-cap companies. In addition, small-cap
companies may have more risk because they often have limited product lines,
markets, or financial resources. To the extent that the Funds may invest in
foreign securities, they may have foreign risk. This is the risk of
investments in issuers located in foreign countries, which may have greater
price volatility and less liquidity. Investments in foreign securities also
are subject to political, regulatory, and diplomatic risks. Foreign risk
includes currency risk, which may occur due to fluctuations in the exchange
rates between the U.S. dollar and foreign currencies. This risk could
negatively affect the value of a Fund's investments.
- -
PARKSTONE EQUITY INCOME FUND
TICKER SYMBOL: INSTITUTIONAL SHARES PKHEX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The Fund's investment objective is to provide capital appreciation by
investing in a diversified portfolio of publicly traded larger cap equity
securities which, in the aggregate, provide an above-average current yield.
The Fund invests at least 80% of the value of its total assets in
income-producing, large cap common stocks and securities convertible into
common stocks. The Fund considers a "large capitalization" company as one
that has the same market capitalization as the companies in the Standard &
Poor's Barra Value Index. The Fund expects that its core holdings will
consist of securities with a high dividend yield, although it may balance
these holdings with lower yielding but higher-growth oriented securities.
The Fund also may invest:
- up to 20% of its total assets in preferred stocks, corporate bonds or
notes;
- in units of real estate investment trusts, warrants, and short-term
obligations (with maturities of 12 months or less) consisting of
commercial paper (including variable amount master demand notes),
bankers' acceptances, certificates of deposit, repurchase agreements,
obligations issued or guaranteed by the U.S. government or its agencies
or instrumentalities, and demand and time deposits of domestic and
foreign banks and savings and loan associations;
- in securities of other investment companies and depository or custodial
receipts representing beneficial interests in any of the foregoing
securities; and
- up to 25% of its net assets in foreign securities either directly or
through the purchase of ADRs, securities issued by foreign branches of
U.S. banks and foreign banks, in CCP, and in Europaper.
During temporary defensive periods as determined by the Adviser, the Fund may
hold up to 100% of its total assets in short-term obligations including
domestic bank certificates of deposit, bankers' acceptances and repurchase
agreements secured by bank instruments. However, to the extent that the Fund
is so invested, its investment objective may not be achieved during that
time. Uninvested cash reserves will not earn income.
- -
PARKSTONE BALANCED ALLOCATION FUND
TICKER SYMBOL: INSTITUTIONAL SHARES PKBAX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The Fund's investment objective is to provide long-term capital appreciation
and current income. The Fund invests in a broad range of securities including
common stocks, convertible securities and fixed-income securities. Normally,
the Fund expects to invest 50% to 70% of its net assets in common stocks and
convertible securities and 25% to 55% of its net assets in fixed-income
securities. The Fund also may invest up to 30% of it net assets in cash and
cash-equivalent securities, which include highly liquid securities with a
maturity of less than three months. The Fund may invest up to 20% of its
total assets in foreign securities.
The Fund's investments in common stocks, debt securities, and cash
equivalents may vary from time to time depending on the Adviser's assessment
of business, economic, and market conditions, including potential advantages
of price shifts between the stock and bond markets. The Fund invests in
stocks for growth and in debt securities for
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<PAGE> 30
DESCRIPTION OF THE FUNDS INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
- -
stability. The Fund's Adviser adjusts the mix of stocks, bonds, and cash
equivalents periodically to take advantage of rising markets or decrease
exposure to declining markets.
The Fund holds common stocks held primarily for the purpose of providing
long-term growth of capital. When choosing such stocks, the potential for
long-term capital appreciation will be the primary basis for selection. The
Fund invests primarily in those companies that are growth-oriented and have
exhibited consistent, above-average growth in revenues and earnings.
The fixed-income portion of the Fund's portfolio consists of bonds,
debentures, notes, zero-coupon securities, mortgage-related securities,
state, municipal or industrial revenue bonds, obligations issued or
guaranteed by the U.S. government or its agencies or instrumentalities,
certificates of deposit, time deposits, high quality commercial paper,
bankers' acceptances and variable amount master demand notes. In addition, a
portion of the Fund's assets may, from time to time, be invested in first
mortgage loans and participation certificates in pools of mortgages issued or
guaranteed by the U.S. government or its agencies or instrumentalities. Some
of the securities in which the Fund invests may have warrants or options
attached. The Fund may also invest in repurchase agreements.
The Fund expects to invest in a variety of U.S. Treasury obligations,
differing in their interest rates, maturities, and time of issuance, as well
as "stripped" U.S. Treasury obligations such as Treasury receipts issued by
the U.S. Treasury representing either future interest or principal payments,
and other obligations issued or guaranteed by the U.S. government or its
agencies or instrumentalities.
The Fund will invest only in corporate fixed-income securities which are
rated at the time of purchase within the four highest rating categories
assigned by a nationally recognized statistical rating organization ("NRSRO")
or, if unrated, which the Adviser deems present attractive opportunities and
are of comparable quality.
The Fund also may invest in:
- short-term obligations (with maturities of 12 months or less) consisting
of domestic and foreign commercial paper, variable amount master demand
notes, bankers' acceptances, certificates of deposit and
- time deposits of domestic and foreign branches of U.S. banks and foreign
banks, and repurchase agreements. The Fund may also invest in securities
of other investment companies;
- obligations of the Export-Import Bank of the United States, in U.S.
dollar-denominated international bonds for which the primary trading
market is the United States ("Yankee Bonds"), or for which the primary
trading market is abroad ("Eurodollar Bonds"), and in Canadian bonds and
bonds issued by institutions, such as the World Bank and the European
Economic Community, organized for a specific purpose by two or more
foreign governments ("Supranational Agency Bonds"). The Fund's
investments in foreign securities may be made either directly or through
the purchase of ADRs and the Fund may also invest in securities issued by
foreign branches of U.S. banks and foreign banks, in CCP, and in
Europaper; and
- short-term securities in whatever proportion deemed desirable for
temporary defensive periods during adverse market conditions as
determined by the Adviser.
During temporary defensive periods as determined by the Adviser, the Fund may
hold up to 100% of its total assets in short-term obligations including
domestic bank certificates of deposit, bankers' acceptances and repurchase
agreements secured by bank instruments. However, to the extent that the Fund
is so invested, its investment objective may not be achieved during that
time. Uninvested cash reserves will not earn income.
RISK FACTORS FOR THE GROWTH AND INCOME FUNDS
The principal risks of the Growth and Income Funds are market risk, interest
rate risk, credit risk and management risk. The Balanced Allocation Fund has
the risk that the allocation of its investments between equity and debt
securities may have a more significant effect on the Fund's net asset value
when one of these asset classes is performing more poorly than the other. To
the extent that the Funds may invest in foreign securities, they may have
foreign risk. This is the risk of investments in issuers located in foreign
countries, which may have greater price volatility and less liquidity.
Investments in foreign securities also are subject to political, regulatory,
and diplomatic risks. Foreign risk includes currency risk, which may occur
due to fluctuations in the exchange rates between the U.S. dollar and foreign
currencies. This risk could negatively affect the value of a Fund's
investments.
30
<PAGE> 31
DESCRIPTION OF THE FUNDS INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
- -
PARKSTONE BOND FUND
TICKER SYMBOL: INSTITUTIONAL SHARES PKBDX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The Fund's investment objective is to provide current income with
preservation of capital by investing in high- and medium-grade fixed-income
securities. The Fund invests at least 80% of its total assets in investment
grade debt securities of all types. The Fund expects to maintain a
dollar-weighted average portfolio maturity of 4 to 12 years. The Fund also
expects to invest in U.S. Treasury obligations with different interest rates
and maturities, as well as "stripped" U.S. Treasury obligations and other
U.S. government obligations.
Fixed-income securities include bonds, debentures, notes with remaining
maturities at the time of purchase of one year or more, zero-coupon
securities, mortgage-related securities, state, municipal or industrial
revenue bonds, obligations issued or guaranteed by the U.S. government or its
agencies or instrumentalities, debt securities convertible into, or
exchangeable for, common stocks, first mortgage loans and participation
certificates in pools of mortgages issued or guaranteed by the U.S.
government or its agencies or instrumentalities.
The Fund will invest in state and municipal securities when, in the opinion
of the Adviser, their yields are competitive with comparable taxable debt
obligations.
In making investment decisions for the Fund, the Adviser will consider many
factors other than current yield, including the preservation of capital, the
potential for realizing capital appreciation, maturity and yield to maturity.
The Fund will invest only in corporate debt securities which are rated at the
time of purchase within the four highest rating categories assigned by a
nationally recognized statistical rating organization ("NRSRO") or, if
unrated, of comparable quality.
The Fund also may invest:
- up to 20% of its assets in preferred stocks and notes with remaining
maturities at the time or purchase of less than one year, short-term debt
obligations consisting of domestic and foreign commercial paper
(including variable amount master demand notes), bankers' acceptances,
certificates of deposit and time deposits of domestic and foreign
branches of U.S. banks and foreign banks, repurchase agreements,
securities of other investment companies, and guaranteed investment
contracts ("GICs") issued by insurance companies. Some of the securities
in which the Fund invests may have warrants or options attached;
- up to 25% of its net assets in foreign securities either directly or
through the purchase of ADRs and securities issued by foreign branches of
U.S. banks and foreign banks, in CCP, and in Europaper;
- in Stripped Treasury Obligations, and other obligations issued or
guaranteed by the U.S. government or its agencies or instrumentalities;
- in corporate debt securities which are rated at the time of purchase
within the four highest rating categories assigned by an NRSRO or, if
unrated, which the Adviser deems present attractive opportunities and are
of comparable quality;
- in obligations of the Export-Import Bank of the United States, in Yankee
Bonds, in Eurodollar Bonds, in Canadian Bonds and in Supranational Agency
Bonds; and
During temporary defensive periods as determined by the Adviser, the Fund may
hold up to 100% of its total assets in short-term obligations including
domestic bank certificates of deposit, bankers' acceptances and repurchase
agreements secured by bank instruments. However, to the extent that the Fund
is so invested, its investment objective may not be achieved during that
time. Uninvested cash reserves will not earn income.
31
<PAGE> 32
DESCRIPTION OF THE FUNDS INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
- -
PARKSTONE INTERMEDIATE GOVERNMENT OBLIGATIONS FUND
TICKER SYMBOL: INSTITUTIONAL SHARES PKIEX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The Fund's investment objective is to provide current income as well as
preservation of capital by investing primarily in U.S. government securities.
The Fund normally invests at least 80% of it total assets in U.S. government
debt securities. The Fund expects to maintain a dollar-weighted average
portfolio maturity of three to ten years.
The Fund normally invests in U.S. Treasury bills, notes or bonds and other
U.S. government securities. The Fund also may invest in mortgage-related
securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities. The Fund may invest up to 20% of its total assets in debt
securities, preferred stocks and other investments without regard to
maturity.
During temporary defensive periods as determined by the Adviser, the Fund may
hold up to 100% of its total assets in short-term obligations including
domestic bank certificates of deposit, bankers' acceptances and repurchase
agreements secured by bank instruments. However, to the extent that the Fund
is so invested, its investment objective may not be achieved during that
time. Uninvested cash reserves will not earn income.
- -
PARKSTONE U.S. GOVERNMENT INCOME FUND
TICKER SYMBOL: INSTITUTIONAL SHARES PKGIX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The Fund's investment objective is to provide current income as well as
preservation of capital by investing primarily in U.S. government securities.
The Fund normally invests at least 80% of its total assets in obligations
that are issued or guaranteed by the U.S. government or its agencies or
instrumentalities. The Fund also may invest up to 20% of its total assets in
mortgage-related securities, debt securities and preferred stock of
non-governmental entities. The Fund expects to maintain a dollar-weighted
average portfolio maturity of three to ten years. Normally, the Fund invests
in a variety of U.S. government obligations, including mortgage-related
securities, U.S. Treasury bills, notes and bonds, "stripped" U.S. Treasury
obligations and other U.S. government securities.
The Fund also may invest in:
- short-term obligations (with maturities of 12 months or less) consisting
of domestic and foreign commercial paper (including variable amount
master demand notes), rated at the time of purchase within the top two
rating categories assigned by an NRSRO or, if unrated, which the Adviser
deems present attractive opportunities and are of comparable quality,
bankers' acceptances, certificates of deposit and time deposits of
domestic and foreign branches of U.S. banks and foreign banks, and
repurchase and reverse repurchase agreements; and
- corporate debt securities which are rated at the time of purchase within
the top three rating categories assigned by an NRSRO or, if unrated,
which the Adviser deems present attractive opportunities and are of
comparable quality.
During temporary defensive periods as determined by the Adviser, the Fund may
hold up to 100% of its total assets in short-term obligations including
domestic bank certificates of deposit, bankers' acceptances and repurchase
agreements secured by bank instruments. However, to the extent that the Fund
is so invested, its investment objective may not be achieved during that
time. Uninvested cash reserves will not earn income.
32
<PAGE> 33
DESCRIPTION OF THE FUNDS INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
- -
PARKSTONE LIMITED MATURITY BOND FUND
TICKER SYMBOL: INSTITUTIONAL SHARES PKLMX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The Fund's investment objective is to provide current income as well as
preservation of capital by investing in a portfolio of high- and medium-grade
fixed-income securities. The Fund normally invests at least 80% of its total
assets in investment grade debt securities of all types. The Fund invests
primarily in corporate bonds, U.S. government obligations, and
mortgage-related and asset-backed securities. The Fund expects to maintain a
dollar- weighted average portfolio maturity of one to five years. The Fund
also expects to invest in U.S. Treasury obligations with different interest
rates and maturities, as well as "stripped" U.S. Treasury obligations and
other U.S. government obligations.
Fixed-income securities consist of bonds, debentures, notes with remaining
maturities at the time of purchase of one year or more, zero-coupon
securities, mortgage-related securities, state, municipal or industrial
revenue bonds, obligations issued or guaranteed by the U.S. government or its
agencies or instrumentalities, debt securities convertible into, or
exchangeable for, common stocks, first mortgage loans and participation
certificates in pools of mortgages issued or guaranteed by the U.S.
government or its agencies or instrumentalities.
In making investment decisions for the Fund, the Adviser considers many
factors other than current yield, including the preservation of capital,
maturity, and yield to maturity. By doing so, the Fund attempts to minimize
the fluctuation in its shares' net asset value relative to those funds which
invest in longer-term obligations. The Fund may invest in state and municipal
securities when, in the opinion of the Adviser, their yields are competitive
with comparable taxable debt obligations. The Fund will invest only in
corporate debt securities that are rated at the time of purchase within the
four highest rating groups or, if unrated, of comparable quality.
The Fund also may invest:
- up to 20% of its total assets in debt securities without regard to
maturity, preferred stocks and short-term debt obligations consisting of
domestic and foreign commercial paper (including variable amount master
demand notes), bankers' acceptances, certificates of deposit and time
deposits of domestic and foreign branches of U.S. banks and foreign
banks, repurchase agreements, securities of other investment companies
and GICs;
- up to 25% of its net assets in foreign securities either directly or
through the purchase of ADRs and securities issued by foreign branches of
U.S. banks and foreign banks, in CCP, and in Europaper;
- in Stripped Treasury Obligations, and other obligations issued or
guaranteed by the U.S. government or its agencies or instrumentalities;
- in corporate debt securities which are rated at the time of purchase
within the four highest rating categories assigned by an NRSRO or, if
unrated, which the Adviser deems present attractive opportunities and are
of comparable quality; and
- in obligations of the Export-Import Bank of the United States, in Yankee
Bonds, in Eurodollar Bonds, in Canadian Bonds and in Supranational Agency
Bonds.
Some of the securities listed above may have options or warrants attached.
During temporary defensive periods as determined by the Adviser, the Fund may
hold up to 100% of its total assets in short-term obligations including
domestic bank certificates of deposit, bankers' acceptances and repurchase
agreements secured by bank instruments. However, to the extent that the Fund
is so invested, its investment objective may not be achieved during that
time. Uninvested cash reserves will not earn income.
RISK FACTORS FOR THE INCOME FUNDS
The principal risks of the Income Funds are market risk, interest rate risk,
credit risk and management risk. Changes in interest rates may significantly
affect the Funds. Increases in interest rates will cause a decline in the
value of your investment.
The Income Funds may invest a significant portion of their assets in
mortgage-related securities. These securities have sensitivities to changes
in interest rates that are different from many other types of debt
securities. When interest rates rise, the maturities of these types of
securities tend to lengthen and the value of the securities decreases more
significantly. In addition, these types of securities are subject to
prepayment when interest rates fall, which generally results in lower returns
because the Funds must reinvest their assets in debt securities with lower
interest rates.
33
<PAGE> 34
DESCRIPTION OF THE FUNDS INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
- -
PARKSTONE MICHIGAN MUNICIPAL BOND FUND
TICKER SYMBOL: INSTITUTIONAL SHARES PKMIX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The Fund's investment objective is to provide current income exempt from
federal income taxes and, to the extent possible, from Michigan personal
income taxes, as is consistent with conservation of capital. The Fund
normally invests at least 80% of its net assets in a portfolio of Michigan
municipal securities. The Fund's primary consideration in selecting Michigan
municipal securities is quality.
The Fund normally invests in Michigan municipal securities and expects to
maintain a dollar-weighted average portfolio maturity of three to ten years.
However, the Fund may invest in Michigan municipal securities of any maturity
and the Adviser may extend or shorten the average weighted maturity of its
portfolio depending upon anticipated changes in interest rates or other
relevant market factors. In addition, the average weighted rating of the
Fund's portfolio may vary depending upon the availability of suitable
municipal securities or other relevant market factors.
The Fund invests in Michigan municipal securities that are rated at the time
of purchase within the four highest rating categories assigned by an NRSRO
or, in the case of notes, tax-exempt commercial paper or variable rate demand
obligations, rated within the two highest rating categories by an NRSRO. The
Fund also may purchase Michigan municipal securities which are unrated at the
time of purchase but are determined to be of comparable quality by the
Adviser pursuant to guidelines approved by the Board of Trustees.
Interest income from certain types of municipal securities may be subject to
federal alternative minimum tax. The Fund will not treat these bonds as
municipal securities for purposes of measuring compliance with the 80% test
described above.
Investments of the Fund may be made in taxable obligations if, for example,
suitable tax-exempt obligations are unavailable or if acquisition of U.S.
government or other taxable securities is deemed appropriate for temporary
defensive purposes as determined by the Adviser to be warranted due to market
conditions. Such taxable obligations consist of government securities,
certificates of deposit, time deposits and bankers' acceptances of selected
banks, commercial paper meeting the Fund's quality standards for tax-exempt
commercial paper (as described above), and such taxable obligations as may be
subject to repurchase agreements.
During temporary defensive periods as determined by the Adviser, the Fund may
hold up to 100% of its total assets in short-term obligations including
domestic bank certificates of deposit, bankers' acceptances and repurchase
agreements secured by bank instruments. However, to the extent that the Fund
is so invested, its investment objective may not be achieved during that
time. Uninvested cash reserves will not earn income.
- -
PARKSTONE NATIONAL TAX EXEMPT BOND FUND
TICKER SYMBOL: INSTITUTIONAL SHARES PKMBX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The Fund's investment objective is to provide current income exempt from
federal income taxes as is consistent with conservation of capital. The Fund
normally invests at least 80% of its assets in a diversified portfolio of
municipal securities the interest on which is both exempt from federal income
taxes and not treated as a preference item for individuals for the purpose of
the federal alternative minimum tax.
The Fund normally invests in long-term municipal securities and expects to
maintain a dollar-weighted average portfolio maturity of three to ten years.
The Fund intends, under normal market conditions, to maintain an average
weighted credit rating of Aa/AA. The average weighted rating of the Fund's
portfolio may vary depending upon the availability of suitable municipal
securities or other relevant market factors. Although it does not intend to
do so an a regular basis, the Fund may invest more than 25% of its net assets
in (i) municipal securities whose issuers are in the same state and (ii)
municipal securities the interest on which is paid solely from revenues of
similar projects.
34
<PAGE> 35
DESCRIPTION OF THE FUNDS INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
- -
The Fund may invest up to 20% of its total assets in private activity bonds
which may be treated as a specific tax preference item under the federal
alternative minimum tax.
Interest income from certain types of municipal securities may be subject to
federal alternative minimum tax. The Fund will not treat these bonds as
municipal securities for purposes of measuring compliance with the 80% tests
described above.
Investments of the Fund may be made in taxable obligations if, for example,
suitable tax-exempt obligations are unavailable or if acquisition of U.S.
government or other taxable securities is deemed appropriate for temporary
defensive purposes as determined by the Adviser to be warranted due to market
conditions. Such taxable obligations consist of government securities,
certificates of deposit, time deposits and bankers' acceptances of selected
banks, commercial paper meeting the Fund's quality standards for tax-exempt
commercial paper (as described above), and such taxable obligations as may be
subject to repurchase agreements.
During temporary defensive periods as determined by the Adviser, the Fund may
hold up to 100% of its total assets in short-term obligations including
domestic bank certificates of deposit, bankers' acceptances and repurchase
agreements secured by bank instruments. However, to the extent that the Fund
is so invested, its investment objective may not be achieved during that
time. Uninvested cash reserves will not earn income.
RISK FACTORS FOR THE TAX-FREE INCOME FUNDS
The Tax-Free Income Funds have interest rate risk and credit risk. In
addition the Funds have municipal market risk. This is the risk that special
factors may adversely affect the value of municipal securities and have a
significant adverse effect on the value of the Funds' investments. These
factors include political or legislative changes, uncertainties related to
the tax status of municipal securities, or the rights of investors in these
securities. The Michigan Municipal Bond Fund is not "diversified," meaning
that it can invest in a relatively small number of issuers. Factors affecting
these issuers could have a more significant adverse effect on this Fund's net
asset value.
MONEY MARKET FUNDS
All of the Money Market Funds seek to maintain a stable net asset value of
$1.00 per share and invest exclusively in United States dollar-denominated
instruments that the Board of Trustees and the Adviser determine present
minimal credit risks and which at the time of acquisition are (a) U.S.
government securities, (b) money market fund shares, or (c) rated by at least
two NRSROs or by the only NRSRO providing a rating in one of the two highest
rating categories for short-term debt obligations or, if unrated, which the
Adviser deems to be of comparable quality. There is no assurance, however,
that they will be able to maintain the $1.00 net asset value per share on a
continuous basis. Each Fund pursues its strategy by maintaining a portfolio
of high-quality money market investments. As money market funds, the Funds
must meet the requirements of SEC Rule 2a-7. The Rule imposes strict
requirements on the investment quality, maturity and diversification of the
Funds' investments. Under Rule 2a-7, the Funds' investments must each have a
remaining maturity of no more than 397 days and each Money Market Fund must
maintain a dollar-weighted average portfolio maturity that does not exceed 90
days.
- -
PARKSTONE TAX-FREE FUND
TICKER SYMBOL: INSTITUTIONAL SHARES PKTXX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The Fund's investment objective is to provide as high a level of current
interest income free from federal income taxes, consistent with the
preservation of capital and relative stability of principal. The Fund
normally invests at least 80% of its total assets in municipal securities.
The Fund may invest up to 20% of its total assets in obligations the interest
on which is either subject to federal income taxation or treated as a
preference item for purposes of the federal alternative minimum tax. The Fund
invests exclusively in high quality instruments with a remaining maturity of
no more than 397 days.
The Fund also may:
- invest in commercial paper (subject to the quality standards for
tax-exempt commercial paper).
35
<PAGE> 36
DESCRIPTION OF THE FUNDS INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
- -
If the Adviser deems it appropriate for temporary defensive purposes, the
Fund may increase its holdings in taxable obligations to over 20% of its
total assets and may also hold uninvested cash reserves pending investment.
Taxable obligations may include obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities (some of which may be subject
to repurchase agreements), certificates of deposit and bankers' acceptances
of selected banks, and commercial paper meeting the Fund's quality standards
for tax-exempt commercial paper.
During temporary defensive periods as determined by the Adviser, the Fund may
hold up to 100% of its total assets in short-term obligations including
domestic bank certificates of deposit, bankers' acceptances and repurchase
agreements secured by bank instruments. However, to the extent that the Fund
is so invested, its investment objective may not be achieved during that
time. Uninvested cash reserves will not earn income.
- -
PARKSTONE PRIME OBLIGATIONS FUND
TICKER SYMBOL: INSTITUTIONAL SHARES PKPXX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The Fund's investment objective is to provide current income with liquidity
and stability of principal. The Fund invests in high-quality money market
instruments, including municipal securities and other instruments of
comparable high quality. The Fund also may invest in commercial paper, other
short-term promissory notes issued by corporations (including variable amount
master demand notes) rated at the time of purchase within the two highest
rating categories assigned by at least two NRSROs or by the only NRSRO
providing a rating or, if not rated, which the Adviser deems to be of
comparable quality, bankers' acceptances, CCP, Europaper, certificates of
deposit and time deposits.
During temporary defensive periods as determined by the Adviser, the Fund may
hold up to 100% of its total assets in short-term obligations including
domestic bank certificates of deposit, bankers' acceptances and repurchase
agreements secured by bank instruments. However, to the extent that the Fund
is so invested, its investment objective may not be achieved during that
time. Uninvested cash reserves will not earn income.
- -
PARKSTONE U.S. GOVERNMENT OBLIGATIONS FUND
TICKER SYMBOL: INSTITUTIONAL SHARES PKGXX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The Fund's investment objective is to provide current income with liquidity
and stability of principal. The Fund normally invests at least 65% of its
total assets in short-term U.S. Treasury bills, notes, and other government
obligations and agency securities. The Fund invests exclusively in high
quality instruments with a remaining maturity of no more than 397 days. The
Fund may invest up to 35% of its total assets in high-quality money market
instruments, including:
- municipal securities;
- bankers' acceptances;
- certificates of deposit, time deposits, and other instruments deemed to
be of comparable high quality.
The Fund also may invest in commercial paper and other short-term promissory
notes issued by corporations (including variable amount master demand notes)
rated at the time of purchase within the two highest rating categories
assigned by at least two NRSROs or by the only NRSRO providing a rating or,
if not rated, which the Adviser deems to be of comparable quality.
During temporary defensive periods as determined by the Adviser, the Fund may
hold up to 100% of its total assets in short-term obligations including
domestic bank certificates of deposit, bankers' acceptances and repurchase
agreements secured by bank instruments. However, to the extent that the Fund
is so invested, its investment objective may not be achieved during that
time. Uninvested cash reserves will not earn income.
36
<PAGE> 37
DESCRIPTION OF THE FUNDS INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
- -
PARKSTONE TREASURY FUND
TICKER SYMBOL: INSTITUTIONAL SHARES PSCXX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The Fund's investment objective is to provide current income with liquidity
and stability of principal. The Fund normally invests exclusively in U.S.
government obligations and in repurchase agreements backed by these
securities. The Fund invests exclusively in high quality instruments with a
remaining maturity of 397 days.
During temporary defensive periods as determined by the Adviser, the Fund may
hold up to 100% of its total assets in short-term obligations including
domestic bank certificates of deposit, bankers' acceptances and repurchase
agreements secured by bank instruments. However, to the extent that the Fund
is so invested, its investment objective may not be achieved during that
time. Uninvested cash reserves will not earn income.
- -
ADDITIONAL RISK CONSIDERATIONS
RISK FACTORS FOR THE MONEY MARKET FUNDS
The Money Market Funds are subject to management risk. In addition, specific
risks of the Funds' portfolios include:
INTEREST RATE RISK. Because the Funds invest in short-term securities, a
decline in interest rates will affect the Funds' yields as these securities
mature or are sold and the Funds purchase new short-term securities with
lower yields. Generally, an increase in interest rates causes the value of a
debt instrument to decrease. The change in value for shorter-term securities
is usually smaller than for securities with longer maturities. Because the
Funds invest in securities with short maturities and seek to maintain a
stable net asset value of $1.00 per share, it is possible, though very
unlikely, that an increase in interest rates would change the value of your
investment.
CREDIT RISK. This is the risk that a security's credit rating will be
downgraded or that the issuer of a security will default (fail to make
scheduled interest and principal payments).
MUNICIPAL MARKET RISK. The Tax-Free Fund faces the risk that special factors
may adversely affect the value of municipal securities and have a significant
effect on the value of the Fund's investments. These factors include
political or legislative changes, uncertainties related to the tax status of
municipal securities, or the rights of investors in these securities.
Investments in certain municipal securities with principal or interest
payments that are made from a specific project or facility, and not from
general tax revenues, may have increased risks. Factors affecting the project
or facility, such as local or economic conditions, could have significant
effect on the project's ability to make payments of principal and interest on
these securities.
The most recent information about each of the Fund's portfolio holdings can
be found in its annual or semi-annual report. For information about receiving
this report, see the back cover.
37
<PAGE> 38
[LOGO]
MANAGEMENT OF THE FUNDS
- -
INVESTMENT ADVISER
National City Investment Management Company, ("IMC" or the "Adviser"), 1900
East Ninth Street, Cleveland, Ohio 44114 is the adviser for the Funds. IMC, a
wholly-owned subsidiary of National City Corporation and an affiliate of
National City Bank, was founded in 1998. IMC manages more than $23.7 billion
in assets including $4.3 billion in the Parkstone Group of Funds. Through its
portfolio management teams, IMC makes the day-to-day investment decisions and
continuously reviews, supervises and administers the Funds' investment
programs.
For these advisory services, the Funds paid as follows during their fiscal
year ended May 31, 1999:
<TABLE>
<CAPTION>
PERCENTAGE OF
AVERAGE NET ASSETS
<S> <C>
------------------------------
Parkstone International Discovery Fund 1.16%*
------------------------------
Parkstone Small Capitalization Fund 1.00%
------------------------------
Parkstone Mid Capitalization Fund 1.00%
------------------------------
Parkstone Large Capitalization Fund 0.80%
------------------------------
Parkstone Equity Income Fund 1.00%
------------------------------
Parkstone Balanced Allocation Fund 0.75%**
------------------------------
Parkstone Bond Fund 0.70%**
------------------------------
Parkstone Intermediate Government Obligations Fund 0.70%**
------------------------------
Parkstone U.S. Government Income Fund 0.45%**
------------------------------
Parkstone Limited Maturity Bond Fund 0.55%**
------------------------------
Parkstone Michigan Municipal Bond Fund 0.55%**
------------------------------
Parkstone National Tax Exempt Bond Fund 0.55%**
------------------------------
Parkstone Tax-Free Fund 0.40%
------------------------------
Parkstone Prime Obligations Fund 0.40%
------------------------------
Parkstone U.S. Government Obligations Fund 0.40%
------------------------------
Parkstone Treasury Fund 0.40%
------------------------------------------------------------ ------------------------------
</TABLE>
* Calculated based on 1.25% on the first $50 million, in average daily net
assets, 1.20% on the next $50 million, 1.15% on the next $300 million and
1.05% over $400 million.
** IMC waived a portion of its contractual fees with the Funds for the most
recent fiscal year. Contractual fees (without waivers) were: Balanced
Allocation Fund, 1.00%; Bond Fund, 0.74%; Limited Maturity Bond Fund,
0.74%; Intermediate Government Obligations Fund, 0.74%; U.S. Government
Income Fund, 0.74%; National Tax Exempt Bond Fund, 0.74%; Michigan
Municipal Bond Fund, 0.74%.
38
<PAGE> 39
MANAGEMENT OF THE FUNDS
- -
PORTFOLIO MANAGEMENT TEAM
IMC utilizes a team approach for management of the funds. No one person is
primarily responsible for making investment recommendations to the team. The
table below shows the IMC management team responsible for each fund:
<TABLE>
<S> <C>
PORTFOLIO PORTFOLIO MANAGEMENT TEAM
---------------------------------------------
Parkstone International Discovery Fund International Equity Team
---------------------------------------------
Parkstone Small Capitalization Fund Equity Growth Team
---------------------------------------------
Parkstone Mid Capitalization Fund Equity Growth Team
---------------------------------------------
Parkstone Large Capitalization Fund Equity Growth Team
---------------------------------------------
Parkstone Equity Income Fund Equity Value Team
---------------------------------------------
Parkstone Balanced Allocation Fund Equity and Fixed Income Teams
---------------------------------------------
Parkstone Bond Fund Taxable Fixed Income Team
---------------------------------------------
Parkstone Intermediate Government Obligations Fund Taxable Fixed Income Team
---------------------------------------------
Parkstone U.S. Government Income Fund Taxable Fixed Income Team
---------------------------------------------
Parkstone Limited Maturity Bond Fund Taxable Fixed Income Team
---------------------------------------------
Parkstone Michigan Municipal Bond Fund Tax Exempt Fixed Income Team
---------------------------------------------
Parkstone National Tax Exempt Bond Fund Tax Exempt Fixed Income Team
---------------------------------------------
Parkstone Tax-Free Fund Tax Exempt Money Market Team
---------------------------------------------
Parkstone Prime Obligations Fund Taxable Money Market Team
---------------------------------------------
Parkstone U.S. Government Obligations Fund Taxable Money Market Team
---------------------------------------------
Parkstone Treasury Fund Taxable Money Market Team
------------------------------------------------------------ ---------------------------------------------
</TABLE>
THE DISTRIBUTOR AND ADMINISTRATOR
SEI Investments Distribution Company (the "Distributor"), a wholly-owned
subsidiary of SEI Investments, distributes the shares of the Parkstone Group
of Funds (the "Trust").
The Trust reserves the right to reject a purchase order when the Trust
determines that it is not in the best interest of the Trust to accept such
order.
With respect to the Trust, the Distributor may, from time to time and at its
own expense, provide promotional incentives, in the form of cash or other
compensation, to financial institutions whose representatives have sold or
are expected to sell significant amounts of these Funds.
BISYS Fund Services ("BISYS"), whose address is 3435 Stelzer Road, Columbus,
Ohio 43219-3035, serves as the Funds' administrator.
The Statement of Additional Information has more detailed information about
the Investment Adviser and other service providers.
39
<PAGE> 40
MANAGEMENT OF THE FUNDS
- -
YEAR 2000
Like other funds and business organizations around the world, the Funds could
be adversely affected if the computer systems used by the Adviser and the
Funds' other service providers do not properly process and calculate
date-related information for the year 2000 and beyond. In addition, Year 2000
issues may adversely affect companies in which the Funds invest where, for
example, such companies incur substantial costs to address Year 2000 issues
or suffer losses caused by the failure to adequately or timely do so.
The Funds have been assured that the Adviser and the Funds' other service
providers (i.e., Administrator, Transfer Agent, Fund Accounting Agent,
Custodian and Distributor) have developed and are implementing
clearly-defined and documented plans intended to minimize risks to services
critical to the Funds' operations associated with Year 2000 issues. Internal
efforts include a commitment to dedicate adequate staff and funding to
identify and remedy Year 2000 issues, and specific actions such as
inventorying software systems, determining inventory items that may not
function properly after December 31, 1999, reprogramming or replacing such
systems, and retesting for Year 2000 readiness. The Funds' Adviser and
service providers are likewise seeking assurances from their respective
vendors and suppliers that such entities are addressing any Year 2000 issues,
and each provider intends to engage, where appropriate, in private and/or
industry interface testing of systems for Year 2000 readiness.
In the event that any systems upon which the Funds are dependent are not Year
2000 ready by December 31, 1999, administrative errors and account
maintenance failures may occur. While the ultimate costs or consequences of
incomplete or untimely resolution of Year 2000 issues by the Adviser or the
Funds' service providers cannot be accurately assessed at this time, the
Funds currently have no reason to believe that the Year 2000 plans of the
Adviser and the Funds' service providers will not be completed by December
31, 1999, or that the anticipated costs associated with full implementation
of their plans will have a material adverse impact on either their business
operations or financial condition or those of the Funds. The Funds and the
Adviser will continue to closely monitor developments relating to this issue,
and the Adviser and the Funds' service providers are developing contingency
plans for providing back-up computer services in the event of a systems
failure or the inability of any provider to achieve Year 2000 readiness.
Separately, the Adviser will monitor potential investment risk related to
Year 2000 issues.
40
<PAGE> 41
PURCHASE AND SALE OF SHARES
- -
HOW NAV IS CALCULATED
Each of the Money Market Funds
seeks to maintain a net asset
value, or NAV, of $1.00 per share
by valuing the obligations in
accordance with SEC regulations.
Amortized cost will normally
approximate market value.
NAV =
Total Assets - Liabilities
----------------------------------
Number of Shares
Outstanding
----------------------------------
The NAV is calculated by adding the total value of a Fund's investments and
other assets, subtracting its liabilities
and then dividing that figure by the
number of outstanding shares of the Fund:
You can find most Funds' NAV daily in The Wall Street Journal and other
newspapers. NAV is calculated separately
for each class of shares.
MONEY MARKET FUNDS
The NAV of the Treasury and Tax-Free Funds is determined and the shares are
priced as of 1:00 p.m. Eastern time and as of the close of trading on the New
York Stock Exchange ("NYSE"), normally at 4 p.m. Eastern time each business
day. The NAV of the Prime Obligations and U.S. Government Obligations Funds
is determined and the shares are priced as of 3:00 p.m. Eastern time and as
of the close of trading on the NYSE on each business day. The Money Market
Funds value their securities at their amortized cost. The amortized cost
method involves valuing a portfolio security initially at its cost on the
date of the purchase and thereafter assuming a constant amortization to
maturity of the difference between the principal amount due at maturity and
initial cost.
OTHER FUNDS
The per share NAV for each non-Money Market Fund is determined and its shares
are priced at the close of regular trading on the New York Stock Exchange,
normally at 4:00 p.m. Eastern time on each business day.
Your order for purchase of shares is priced at the next NAV calculated after
your order is received by the Distributor. Your order for redemption of
shares is priced at the next NAV calculated after shares are properly
tendered for redemption.
The Funds' securities are generally valued at current market prices. If
market quotations are not available, prices will be based on fair value as
determined by a method which the Funds' Trustees believe accurately reflects
fair value.
Foreign securities are valued based on quotations from the primary market in
which they are traded and are translated from the local currency into U.S.
dollars using current exchange rates.
Some of the Funds have portfolio securities that are primarily listed on
foreign exchanges that trade on weekends or other days when these Funds do
not price its shares. As a result, the net asset value of a Fund's share may
change on days when shareholders will not by able to purchase or redeem the
Fund's shares.
BUSINESS DAYS DEFINED
A business day for the Funds is generally a day that the New York Stock
Exchange is open for business. The Funds will not be open in observance of
the following holidays: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Columbus Day (Money Market Funds only), Veterans Day (Money Market Funds
only), Thanksgiving and Christmas Day.
41
<PAGE> 42
PURCHASE AND SALE OF SHARES
- -
PURCHASING AND ADDING TO YOUR SHARES
Institutional Shares may be purchased through procedures established by the
Distributor in connection with the requirement of customer accounts
maintained by or on behalf of certain financial institutions acting as
fiduciary or agent for their customers ("Customer Accounts"). These
procedures may include instructions under which a Customer Account is "swept"
automatically at least weekly and amounts in excess of a minimum amount
agreed upon by the financial institution and the customer are invested by the
Distributor in Institutional Shares of the Money Market Funds, depending upon
the type of Customer Account and/or the instructions of the customer.
Institutional Shares sold to financial institutions acting in a fiduciary,
advisory, custodial, or other similar capacity on behalf of customers will
normally be held of record by the financial institution. It is the
responsibility of the particular financial institution to transmit purchase
or redemption orders to the Distributor and to deliver federal funds for
purchase on a timely basis. Beneficial ownership of Institutional Shares will
be recorded by the financial institution and reflected in the account
statement provided by the financial institution to customers. A financial
institution may exercise voting authority for those Institutional Shares for
which it is granted authority by the customer.
- There is no sales charge imposed in connection with the purchase of
Institutional Shares.
- Depending upon the terms of your particular Customer Account, a financial
institution may charge you fees for automatic investment and other cash
management services provided in connection with your investment.
- Information concerning these services and any charges may be obtained
from the financial institution.
This Prospectus should be read in conjunction with any information received
from your financial institution.
FOR INFORMATION ON PURCHASING INSTITUTIONAL SHARES OF THE FUNDS CALL
1-800-451-8377.
- All purchases must be in U.S. dollars.
- A fee will be charged for any checks that do not clear.
- Third-party checks are not accepted.
- The Distributor may reject a purchase order if it considers it in the
best interest of a Fund and its shareholders.
--------------------------------------------------------------
AVOID 31% TAX WITHHOLDING
Each Fund is required to withhold 31% of taxable dividends,
capital gains distributions and redemptions paid to
shareholders who have not provided the Fund with their
certified taxpayer identification number in compliance with
IRS rules. To avoid this, make sure you provide your correct
Tax Identification Number (Social Security Number for most
investors) on your account application.
--------------------------------------------------------------
42
<PAGE> 43
PURCHASE AND SALE OF SHARES
- -
SELLING YOUR SHARES
You may sell your shares at any
time. Your sales price will be
the next NAV after your sell
order is received in good order
by a Fund, its transfer agent, or
your investment representative.
Good order means that your
request includes complete
information on your purchase,
exchange or redemption and that
the Fund has received the
appropriate assets. Normally you
will receive your proceeds within
a week after your request is
received.
WITHDRAWING MONEY FROM YOUR FUND INVESTMENT
As a mutual fund shareholder, you are technically selling shares when you
request a withdrawal in cash. This is
also known as redeeming shares or a
redemption of shares.
INSTRUCTIONS FOR SELLING SHARES
When selling shares, you should contact your trust administrator or other
financial consultant responsible for your Customer Account.
OTHER INFORMATION REGARDING REDEMPTION OF SHARES
All or part of your Institutional Shares may be redeemed in accordance with
instructions and limitations pertaining to your Customer Account with your
financial institution. For example, if you have agreed with a bank to
maintain a minimum balance in your account with the bank, and the balance in
that account falls below that minimum, your Institutional Shares may be
redeemed to the extent necessary to maintain the required minimum balance.
MONEY MARKET FUNDS
To the greatest extent possible, requests for same day payments upon
redemption of Institutional Shares of the Money Market Funds will be honored
if the request for redemption is received by the transfer agent before 1:00
p.m. Eastern time, for the Tax-Free and Treasury Funds or 3:00 p.m. Eastern
time for the Prime Obligations and U.S. Government Obligations Funds on a
business day or, if received after 1:00 p.m. or 3:00 p.m. Eastern time
respectively, on the next business day, unless it would be disadvantageous to
the Funds or the shareholders of a Fund to sell or liquidate portfolio
securities in an amount sufficient to satisfy requests for payments in that
manner. You should contact your trust administrator or other financial
consultant responsible for the account to determine the financial
institution's requirements for effectuating redemptions.
43
<PAGE> 44
[LINE GRAPH ICON]
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -
DIVIDENDS AND DISTRIBUTIONS
All dividends and distributions will be automatically reinvested unless you
request otherwise. Capital gains, if any, are distributed at least annually.
DISTRIBUTIONS ARE MADE ON A PER SHARE BASIS REGARDLESS OF HOW LONG YOU'VE
OWNED YOUR SHARES. THEREFORE, IF YOU INVEST SHORTLY BEFORE THE DISTRIBUTION
DATE, SOME OF YOUR INVESTMENT WILL BE RETURNED TO YOU IN THE FORM OF A
DISTRIBUTION.
- -
FEDERAL TAXES
Each Fund contemplates declaring as dividends each year all or substantially
all of its taxable income, including its net capital gain (the excess of
long-term capital gain over short-term capital loss). Distributions
attributable to the net capital gain of a Fund will be taxable to you as
long-term capital gain, regardless of how long you have held your shares.
Other Fund distributions (other than exempt-interest dividends, discussed
below) will generally be taxable as ordinary income. You will be subject to
income tax on Fund distributions regardless of whether they are paid in cash
or reinvested in additional shares. You will be notified annually of the tax
status of distributions to you.
In the case of any fund other than a Money Market Fund, you should note that
if you purchase shares just before a distribution, the purchase price will
reflect the amount of the upcoming distribution, but you will be taxed on the
entire amount of the distribution received, even though, as an economic
matter, the distribution simply constitutes a return of capital. This is
known as "buying into a dividend."
You will recognize taxable gain or loss on a sale, exchange or redemption of
your shares, including an exchange for shares of another Fund, based on the
difference between your tax basis in the shares and the amount you receive
for them. (To aid in computing your tax basis, you generally should retain
your account statements for the periods during which you held shares.)
Any loss realized on shares held for six months or less will be treated as a
long-term capital loss to the extent of any capital gain dividends that were
received on the shares.
The one major exception to these tax principles is that distributions on, and
sales, exchanges and redemptions of, shares held in an IRA (or other
tax-qualified plan) will not be currently taxable.
It is expected that the Parkstone International Discovery Fund will be
subject to foreign withholding taxes with respect to dividends or interest
received from sources in foreign countries. The Parkstone International
Discovery Fund may make an election to treat a proportionate amount of such
taxes as constituting a distribution to each shareholder, which would allow
each shareholder either (1) to credit such proportionate amount of taxes
against U.S. federal income tax liability or (2) to take such amount as an
itemized deduction.
The Parkstone National Tax Exempt Bond Fund, Parkstone Michigan Municipal
Bond Fund and Parkstone Tax-Free Fund (the "Exempt Funds") anticipate that
substantially all of their income dividends will be "exempt interest
dividends," which are exempt from federal income taxes. However, some
dividends will be taxable, such as dividends that are derived from occasional
taxable investments, and in the case of other than the Parkstone Tax-Free
Fund, distributions of short and long-term capital gains.
Interest on indebtedness incurred by a shareholder to purchase or carry
shares of the Exempt Funds generally will not be deductible for federal
income tax purposes.
You should note that a portion of the exempt-interest dividends paid by the
Exempt Funds may constitute an item of tax preference for purposes of
determining federal alternative minimum tax liability. Exempt-interest
dividends will also be considered along with other adjusted gross income in
determining whether any Social Security or railroad retirement payments
received by you are subject to federal income taxes.
If you receive an exempt-interest dividend with respect to any share and the
share is held by you for six months or less, any loss on the sale or exchange
of the share will be disallowed to the extent of such dividend amount.
44
<PAGE> 45
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -
The Parkstone Michigan Municipal Bond Fund intends to distribute income that
is exempt from Michigan income taxes.
The foregoing is only a summary of certain tax considerations under current
law, which may be subject to change in the future. Shareholders who are
nonresident aliens, foreign trusts or estates, or foreign corporations or
partnerships, may be subject to different United States federal income tax
treatment. You should consult your tax adviser for further information
regarding federal, state, local and/or foreign tax consequences relevant to
your specific situation.
- -
STATE AND LOCAL TAXES
Shareowners may also be subject to state and local taxes on distributions and
redemptions. State income taxes may not apply, however, to the portions of
each Fund's distributions, if any, that are attributable to interest on
federal securities or interest on securities of the particular state or
localities within the state. Shareowners should consult their tax advisers
regarding the tax status of distributions in their state and locality.
45
<PAGE> 46
[MONEY IN HAND
ICON]
FINANCIAL HIGHLIGHTS
- -
The financial highlights table is intended to help you understand the Funds'
financial performance for the past 5 years [or, if shorter, the period of the
Funds' operations]. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned [or lost] on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP, whose report, along with the Funds'
financial statements, are included in the annual report, which is available
upon request.
46
<PAGE> 47
FINANCIAL HIGHLIGHTS
- -
INTERNATIONAL DISCOVERY FUND
<TABLE>
<CAPTION>
INSTITUTIONAL
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30,
1999 1998 1997 1996
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.70 $ 16.41 $ 14.11 $ 12.33
----------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) (0.10) (0.04) (0.05) 0.02
Net Realized and Unrealized Gains (Losses)
from Investments and Foreign Currencies (0.70) 0.84 2.35 1.80
----------------------------------------------------------------------------------------------------------------------
Total from Investment Activities (0.80) 0.80 2.30 1.82
----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income -- -- -- (0.02)
Net Realized Gains (0.87) (0.51) -- (0.02)
----------------------------------------------------------------------------------------------------------------------
Total Distributions (0.87) (0.51) -- (0.04)
----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.03 $ 16.70 $ 16.41 $ 14.11
----------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) (4.94)% 5.31%(a) 16.34% 14.76%
----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $267,764 $427,922 $426,111 $364,095
Ratio of Expenses to Average Net Assets 1.57% 1.56%(b) 1.55% 1.55%
Ratio of Net Investment Income (Loss) to
Average Net Assets (0.20)% (0.47)%(b) (0.29)% 0.12%
Ratio of Expenses to Average Net Assets* (d) (d) (d) 1.55%
Portfolio Turnover (c) 84.66% 34.15% 45.18% 54.47%
<CAPTION>
INSTITUTIONAL
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1995 1994
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.24 $ 11.54
-----------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) 0.04 (0.01)
Net Realized and Unrealized Gains (Losses)
from Investments and Foreign Currencies (0.33) 1.75
------------------------------------------------------------------------------------------------------
Total from Investment Activities (0.29) 1.74
-------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income -- (0.02)
Net Realized Gains (0.62) (0.02)
----------------------------------------------------------------------------------------------------------------------
Total Distributions (0.62) (0.04)
----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.33 $ 13.24
----------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) (1.86)% 15.12%
----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $264,759 $261,798
Ratio of Expenses to Average Net Assets 1.56% 1.52%
Ratio of Net Investment Income (Loss) to
Average Net Assets 0.31% (0.30)%
Ratio of Expenses to Average Net Assets* 1.59% 1.57%
Portfolio Turnover (c) 104.39% 37.23%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
(d) No fees were waived during this period.
47
<PAGE> 48
FINANCIAL HIGHLIGHTS
- -
SMALL CAPITALIZATION FUND
<TABLE>
<CAPTION>
INSTITUTIONAL
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30,
1999 1998 1997 1996
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 26.15 $ 27.91 $ 34.50 $ 26.08
----------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) (0.23) (0.27) (0.22) (0.27)
Net Realized and Unrealized Gains (Losses)
from Investments (4.50) (0.19) (1.12) 12.34
----------------------------------------------------------------------------------------------------------------------
Total from Investment Activities (4.73) (0.46) (1.34) 12.07
----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Realized Gains (2.53) (1.30) (5.25) (3.65)
----------------------------------------------------------------------------------------------------------------------
Total Distributions (2.53) (1.30) (5.25) (3.65)
----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 18.89 $ 26.15 $ 27.91 $ 34.50
----------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) (18.71)% (1.62)%(a) (4.39)% 50.03%
----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $226,139 $527,805 $602,787 $528,866
Ratio of Expenses to Average Net Assets 1.36% 1.35%(b) 1.32% 1.29%
Ratio of Net Investment Income (Loss) to
Average Net Assets (0.82)% (0.99)%(b) (0.94)% (0.93)%
Ratio of Expenses to Average Net Assets* (d) (d) (d) (d)
Portfolio Turnover (c) 99.86% 46.17% 48.45% 67.22%
<CAPTION>
INSTITUTIONAL
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1995 1994
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 19.83 $ 20.31
----------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) (0.25) (0.28)
Net Realized and Unrealized Gains (Losses)
from Investments 8.65 0.30
----------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 8.40 0.02
----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Realized Gains (2.15) (0.50)
----------------------------------------------------------------------------------------------------------------------
Total Distributions (2.15) (0.50)
----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 26.08 $ 19.83
----------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 45.32% (0.15)%
----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $354,825 $271,425
Ratio of Expenses to Average Net Assets 1.33% 1.30%
Ratio of Net Investment Income (Loss) to
Average Net Assets 1.06% (1.14)%
Ratio of Expenses to Average Net Assets* 1.33% 1.30%
Portfolio Turnover (c) 50.53% 72.64%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
(d) No fees were waived during this period.
48
<PAGE> 49
FINANCIAL HIGHLIGHTS
- -
MID CAPITALIZATION FUND
<TABLE>
<CAPTION>
INSTITUTIONAL
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30,
1999 1998 1997 1996
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.12 $ 15.82 $ 20.83 $ 16.62
----------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) (0.14) (0.11) (0.13) (0.16)
Net Realized and Unrealized Gains (Losses)
from Investments 1.13 2.52 1.25 5.03
----------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.99 2.41 1.12 4.87
----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Realized Gains (1.84) (3.11) (6.13) (0.66)
In Excess of Net Realized Gains -- -- -- --
----------------------------------------------------------------------------------------------------------------------
Total Distributions (1.84) (3.11) (6.13) (0.66)
----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.27 $ 15.12 $ 15.82 $ 20.83
----------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 8.20% 16.98%(a) 5.58% 29.83%
----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $319,733 $518,080 $544,082 $650,495
Ratio of Expenses to Average Net Assets 1.32% 1.30%(b) 1.31% 1.29%
Ratio of Net Investment Income (Loss) to
Average Net Assets (0.75)% (0.77%)(b) (0.80)% (0.68)%
Ratio of Expenses to Average Net Assets* (d) (d) (d) (d)
Ratio of Net Investment Income (Loss) to
Average Net Assets* (d) (d) (d) (d)
Portfolio Turnover (c) 100.19% 38.41% 38.47% 49.27%
<CAPTION>
INSTITUTIONAL
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1995 1994
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.70 $ 15.10
----------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) (0.08) (0.11)
Net Realized and Unrealized Gains (Losses)
from Investments 3.47 (0.25)
----------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 3.39 (0.36)
----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Realized Gains (0.49) (0.04)
In Excess of Net Realized Gains (0.98) --
----------------------------------------------------------------------------------------------------------------------
Total Distributions (1.47) (0.04)
----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 16.62 $ 14.70
----------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 25.20% (2.44)%
----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $683,320 $533,260
Ratio of Expenses to Average Net Assets 1.29% 1.28%
Ratio of Net Investment Income (Loss) to
Average Net Assets (0.64)% (0.65)%
Ratio of Expenses to Average Net Assets* 1.29% 1.28%
Ratio of Net Investment Income (Loss) to
Average Net Assets* (0.65)% (0.65)%
Portfolio Turnover (c) 46.39% 70.87%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
(d) No fees were waived during this period.
49
<PAGE> 50
FINANCIAL HIGHLIGHTS
- -
LARGE CAPITALIZATION FUND
<TABLE>
<CAPTION>
INSTITUTIONAL
ELEVEN MONTHS DECEMBER 28,
YEAR ENDED ENDED YEAR ENDED 1995 TO
MAY 31, MAY 31, JUNE 30, JUNE 30,
1999 1998 1997 1996(A)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.27 $ 14.48 $ 11.25 $ 10.00
-----------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) (0.06) (0.03) 0.03 0.03
Net Realized and Unrealized Gains (Losses)
from Investments 3.90 3.52 3.31 1.25
-----------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 3.84 3.49 3.34 1.28
-----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income -- -- (0.03) (0.03)
Net Realized Gains (0.30) (1.67) (0.08) --
Tax Return of Capital -- (0.03) -- --
-----------------------------------------------------------------------------------------------------------------------
Total Distributions (0.30) (1.70) (0.11) (0.03)
-----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 19.81 $ 16.27 $ 14.48 $ 11.25
-----------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 23.67% 26.18%(b) 29.81% 12.86%(b)
-----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $409,107 $358,221 $338,388 $274,150
Ratio of Expenses to Average Net Assets 1.10% 1.10%(c) 1.12% 2.19%(c)
Ratio of Net Investment Income (Loss) to
Average Net Assets (0.33)% (0.19)%(c) 0.19% 1.26%(c)
Ratio of Expenses to Average Net Assets* (d) (d) (d) 2.26%(c)
Portfolio Turnover (e) 50.51% 24.74% 48.44% 0.86%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Period from commencement of operations.
(b) Not Annualized.
(c) Annualized.
(d) No fees were waived during this period.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
50
<PAGE> 51
FINANCIAL HIGHLIGHTS
- -
EQUITY INCOME FUND
<TABLE>
<CAPTION>
INSTITUTIONAL
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30,
1999 1998 1997 1996
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 18.69 $ 19.13 $ 17.30 $ 14.49
----------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) 0.27 0.29 0.34 0.34
Net Realized and Unrealized Gains (Losses)
from Investments 1.75 2.70 3.51 3.26
----------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.02 2.99 3.85 3.60
----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income (0.27) (0.25) (0.33) (0.34)
In Excess of Net Investment Income -- -- -- --
Net Realized Gains (2.24) (3.18) (1.69) (0.45)
In Excess of Net Realized Gains -- -- -- --
----------------------------------------------------------------------------------------------------------------------
Total Distributions (2.51) (3.43) (2.02) (0.79)
----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 18.20 $ 18.69 $ 19.13 $ 17.30
----------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 12.40% 17.31%(a) 23.80% 25.30%
----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $221,399 $281,395 $315,878 $337,318
Ratio of Expenses to Average Net Assets 1.34% 1.33%(b) 1.33% 1.32%
Ratio of Net Investment Income (Loss) to
Average Net Assets 1.49% 1.65%(b) 1.89% 2.11%
Ratio of Expenses to Average Net Assets* (d) (d) (d) (d)
Portfolio Turnover (c) 51.09% 18.62% 20.14% 40.75%
<CAPTION>
INSTITUTIONAL
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1995 1994
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.50 $ 14.69
-----------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) 0.39 0.39
Net Realized and Unrealized Gains (Losses)
from Investments 1.00 (0.56)
------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.39 (0.17)
-------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income (0.39) (0.39)
In Excess of Net Investment Income (0.01) --
Net Realized Gains -- (0.24)
In Excess of Net Realized Gains -- (0.39)
----------------------------------------------------------------------------------------------------------------------
Total Distributions (0.40) (1.02)
----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.49 $ 13.50
----------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 10.55% (1.53)%
----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $346,164 $355,538
Ratio of Expenses to Average Net Assets 1.32% 1.30%
Ratio of Net Investment Income (Loss) to
Average Net Assets 2.86% 2.64%
Ratio of Expenses to Average Net Assets* 1.32% 1.30%
Portfolio Turnover (c) 77.70% 69.35%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
(d) No fees were waived during this period.
51
<PAGE> 52
FINANCIAL HIGHLIGHTS
- -
BALANCED ALLOCATION FUND
<TABLE>
<CAPTION>
INSTITUTIONAL
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30,
1999 1998 1997 1996
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.80 $ 12.99 $ 13.37 $ 12.19
-------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) 0.31 0.32 0.35 0.36
Net Realized and Unrealized Gains (Losses)
from Investments and Foreign Currencies 0.07 1.20 1.12 1.74
-------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.38 1.52 1.47 2.10
-------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income (0.31) (0.35) (0.37) (0.35)
Net Realized Gains (0.37) (0.36) (1.48) (0.57)
In Excess of Net Realized Gains -- -- -- --
-------------------------------------------------------------------------------------------------------
Total Distributions (0.68) (0.71) (1.85) (0.92)
-------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.50 $ 13.80 $ 12.99 $ 13.37
-------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 2.73% 12.06%(a) 11.86% 17.81%
-------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $177,203 $262,533 $245,347 $113,493
Ratio of Expenses to Average Net Assets 1.11% 1.12%(b) 1.10% 1.16%
Ratio of Net Investment Income (Loss) to
Average Net Assets 2.31% 2.57%(b) 2.77% 2.62%
Ratio of Expenses to Average Net Assets* 1.36% 1.37%(b) 1.36% 1.41%
Portfolio Turnover (c) 158.56% 117.80% 425.05% 437.90%
<CAPTION>
INSTITUTIONAL
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1995 1994
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.67 $ 11.08
-------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) 0.31 0.27
Net Realized and Unrealized Gains (Losses)
from Investments and Foreign Currencies 1.68 (0.41)
-------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.99 (0.14)
-------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income (0.31) (0.27)
Net Realized Gains (0.03) --
In Excess of Net Realized Gains (0.13) --
-------------------------------------------------------------------------------------------------------
Total Distributions (0.47) (0.27)
-------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.19 $ 10.67
-------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 19.22% (1.44)%
-------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $ 89,294 $ 71,427
Ratio of Expenses to Average Net Assets 1.25% 1.09%
Ratio of Net Investment Income (Loss) to
Average Net Assets 2.75% 2.49%
Ratio of Expenses to Average Net Assets* 1.52% 1.39%
Portfolio Turnover (c) 250.66% 192.39%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
52
<PAGE> 53
FINANCIAL HIGHLIGHTS
- -
BOND FUND
<TABLE>
<CAPTION>
INSTITUTIONAL
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30,
1999 1998 1997 1996
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.04 $ 9.73 $ 9.56 $ 9.72
-------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) 0.56 0.56 0.59 0.59
Net Realized and Unrealized Gains (Losses)
from Investments (0.29) 0.31 0.17 (0.16)
-------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.27 0.87 0.76 0.43
-------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income (0.56) (0.56) (0.59) (0.59)
Net Realized Gains (0.02) -- -- --
In Excess of Net Realized Gains -- -- -- --
-------------------------------------------------------------------------------------------------------
Total Distributions (0.58) (0.56) (0.59) (0.59)
-------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.73 $ 10.04 $ 9.73 $ 9.56
-------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 2.70% 9.15%(a) 8.20% 4.49%
-------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $366,230 $481,998 $492,102 $549,336
Ratio of Expenses to Average Net Assets 0.94% 0.94%(b) 0.94% 0.94%
Ratio of Net Investment Income (Loss) to
Average Net Assets 5.53% 6.06%(b) 6.13% 5.96%
Ratio of Expenses to Average Net Assets* 1.03% 1.04%(b) 1.03% 1.03%
Portfolio Turnover (c) 268.66% 545.68% 827.00% 1,189.27%
<CAPTION>
INSTITUTIONAL
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1995 1994
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.29 $ 10.53
-------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) 0.61 0.60
Net Realized and Unrealized Gains (Losses)
from Investments 0.43 (0.72)
-------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.04 (0.12)
-------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income (0.61) (0.58)
Net Realized Gains -- --
In Excess of Net Realized Gains -- (0.54)
-------------------------------------------------------------------------------------------------------
Total Distributions (0.61) (1.12)
-------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.72 $ 9.29
-------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 11.78% (1.52)%
-------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $509,189 $469,903
Ratio of Expenses to Average Net Assets 1.02% 0.88%
Ratio of Net Investment Income (Loss) to
Average Net Assets 6.54% 5.97%
Ratio of Expenses to Average Net Assets* 1.14% 1.02%
Portfolio Turnover (c) 1,010.64% 893.27%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
53
<PAGE> 54
FINANCIAL HIGHLIGHTS
- -
INTERMEDIATE GOVERNMENT OBLIGATIONS FUND
<TABLE>
<CAPTION>
INSTITUTIONAL
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30,
1999 1998 1997 1996
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.88 $ 9.73 $ 9.71 $ 9.93
-------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) 0.50 0.52 0.55 0.62
Net Realized and Unrealized Gains (Losses)
from Investments (0.12) 0.16 0.03 (0.24)
-------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.38 0.68 0.58 0.38
-------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income (0.50) (0.52) (0.56) (0.60)
Tax Return of Capital -- (0.01) -- --
In Excess of Net Realized Gains -- -- -- --
-------------------------------------------------------------------------------------------------------
Total Distributions (0.50) (0.53) (0.56) (0.60)
-------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.76 $ 9.88 $ 9.73 $ 9.71
-------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 4.01% 7.03%(a) 6.11% 3.95%
-------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $133,678 $171,481 $187,856 $225,313
Ratio of Expenses to Average Net Assets 0.99% 0.97%(b) 0.98% 0.96%
Ratio of Net Investment Income (Loss) to
Average Net Assets 5.06% 5.67%(b) 5.66% 5.76%
Ratio of Expenses to Average Net Assets* 1.08% 1.06%(b) 1.07% 1.05%
Portfolio Turnover (c) 53.07% 774.28% 1,516.78% 916.39%
<CAPTION>
INSTITUTIONAL
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1995 1994
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.62 $ 10.53
-------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) 0.52 0.60
Net Realized and Unrealized Gains (Losses)
from Investments 0.31 (0.66)
-------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.83 (0.06)
-------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income (0.52) (0.60)
Tax Return of Capital -- --
In Excess of Net Realized Gains -- (0.25)
-------------------------------------------------------------------------------------------------------
Total Distributions (0.52) (0.85)
-------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.93 $ 9.62
-------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 9.02% (0.80)%
-------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $249,169 $281,232
Ratio of Expenses to Average Net Assets 1.04% 0.90%
Ratio of Net Investment Income (Loss) to
Average Net Assets 5.43% 5.90%
Ratio of Expenses to Average Net Assets* 1.16% 1.04%
Portfolio Turnover (c) 549.13% 546.06%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
54
<PAGE> 55
FINANCIAL HIGHLIGHTS
- -
U.S. GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
INSTITUTIONAL
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30,
1999 1998 1997 1996
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.27 $ 9.15 $ 9.25 $ 9.42
----------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) 0.57 0.63 0.72 0.75
Net Realized and Unrealized Gains (Losses)
from Investments (0.14) 0.08 (0.10) (0.17)
----------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.43 0.71 0.62 0.58
----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income (0.57) (0.55) (0.61) (0.67)
Tax Return of Capital -- (0.04) (0.11) (0.08)
----------------------------------------------------------------------------------------------------------------------
Total Distributions (0.57) (0.59) (0.72) (0.75)
----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.13 $ 9.27 $ 9.15 $ 9.25
----------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 4.73% 8.04%(a) 6.91% 6.34%
----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $150,113 $161,567 $148,854 $130,615
Ratio of Expenses to Average Net Assets 0.75% 0.75%(b) 0.77% 0.76%
Ratio of Net Investment Income (Loss) to
Average Net Assets 6.15% 7.44%(b) 7.90% 7.94%
Ratio of Expenses to Average Net Assets* 1.09% 1.09%(b) 1.11% 1.10%
Portfolio Turnover (c) 52.60% 278.94% 499.53% 348.01%
<CAPTION>
INSTITUTIONAL
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1995 1994
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.41 $ 10.04
----------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) 0.76 0.74
Net Realized and Unrealized Gains (Losses)
from Investments 0.01 (0.63)
----------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.77 0.11
----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income (0.68) (0.73)
Tax Return of Capital (0.08) (0.01)
----------------------------------------------------------------------------------------------------------------------
Total Distributions (0.76) (0.74)
----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.42 $ 9.41
----------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 8.70% 1.04%
----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $110,190 $101,506
Ratio of Expenses to Average Net Assets 0.83% 0.72%
Ratio of Net Investment Income (Loss) to
Average Net Assets 8.25% 7.51%
Ratio of Expenses to Average Net Assets* 1.19% 1.11%
Portfolio Turnover (c) 114.71% 102.24%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
55
<PAGE> 56
FINANCIAL HIGHLIGHTS
- -
LIMITED MATURITY BOND FUND
<TABLE>
<CAPTION>
INSTITUTIONAL
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30,
1999 1998 1997 1996
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.50 $ 9.49 $ 9.48 $ 9.71
----------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) 0.56 0.50 0.57 0.65
Net Realized and Unrealized Gains (Losses)
from Investments (0.08) 0.01 0.02 (0.21)
----------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.48 0.51 0.59 0.44
----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income (0.56) (0.50) (0.58) (0.65)
Net Realized Gains -- -- -- (0.01)
In Excess of Net Realized Gains -- -- -- --
Tax Return of Capital -- -- -- (0.01)
----------------------------------------------------------------------------------------------------------------------
Total Distributions (0.56) (0.50) (0.58) (0.67)
----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.42 $ 9.50 $ 9.49 $ 9.48
----------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 5.12% 5.46%(a) 6.42% 4.65%
----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $123,137 $150,510 $136,126 $136,681
Ratio of Expenses to Average Net Assets 0.84% 0.82%(b) 0.85% 0.84%
Ratio of Net Investment Income (Loss) to
Average Net Assets 5.83% 5.63%(b) 6.03% 6.32%
Ratio of Expenses to Average Net Assets* 1.07% 1.06%(b) 1.10% 1.08%
Portfolio Turnover (c) 126.98% 225.88% 607.84% 618.60%
<CAPTION>
INSTITUTIONAL
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1995 1994
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.57 $ 10.18
----------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) 0.58 0.64
Net Realized and Unrealized Gains (Losses)
from Investments 0.13 (0.59)
----------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.71 0.05
----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income (0.57) (0.62)
Net Realized Gains -- --
In Excess of Net Realized Gains -- (0.04)
Tax Return of Capital -- --
----------------------------------------------------------------------------------------------------------------------
Total Distributions (0.57) (0.66)
----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.71 $ 9.57
----------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 7.76% 0.43%
----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $141,781 $156,678
Ratio of Expenses to Average Net Assets 0.84% 0.76%
Ratio of Net Investment Income (Loss) to
Average Net Assets 6.11% 6.32%
Ratio of Expenses to Average Net Assets* 1.11% 1.05%
Portfolio Turnover (c) 397.97% 353.28%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
56
<PAGE> 57
FINANCIAL HIGHLIGHTS
- -
MICHIGAN MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
INSTITUTIONAL
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30,
1999 1998 1997 1996
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.06 $ 10.89 $ 10.77 $ 10.76
-------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) 0.47 0.44 0.51 0.50
Net Realized and Unrealized Gains (Losses)
from Investments (0.08) 0.23 0.14 0.04
-------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.39 0.67 0.65 0.54
-------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income (0.47) (0.47) (0.49) (0.50)
Net Realized Gains (0.07) (0.03) (0.04) (0.03)
In Excess of Net Realized Gains -- -- -- --
-------------------------------------------------------------------------------------------------------
Total Distributions (0.54) (0.50) (0.53) (0.53)
-------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.91 $ 11.06 $ 10.89 $ 10.77
-------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 3.54% 6.30%(a) 6.11% 5.12%
-------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $192,536 $206,246 $194,950 $185,191
Ratio of Expenses to Average Net Assets 0.76% 0.74%(b) 0.76% 0.77%
Ratio of Net Investment Income (Loss) to
Average Net Assets 4.21% 4.34%(b) 4.73% 4.57%
Ratio of Expenses to Average Net Assets* 1.05% 1.03%(b) 1.05% 1.06%
Portfolio Turnover (c) 6.52% 26.24% 28.48% 27.66%
<CAPTION>
INSTITUTIONAL
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1995 1994
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.53 $ 10.97
-------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) 0.50 0.48
Net Realized and Unrealized Gains (Losses)
from Investments 0.25 (0.36)
-------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.75 0.12
-------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income (0.50) (0.46)
Net Realized Gains (0.02) (0.01)
In Excess of Net Realized Gains -- (0.09)
-------------------------------------------------------------------------------------------------------
Total Distributions (0.52) (0.56)
-------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.76 $ 10.53
-------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 7.33% 1.02%
-------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $176,068 $181,051
Ratio of Expenses to Average Net Assets 0.78% 0.75%
Ratio of Net Investment Income (Loss) to
Average Net Assets 4.79% 4.35%
Ratio of Expenses to Average Net Assets* 1.07% 1.04%
Portfolio Turnover (c) 26.06% 6.69%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
57
<PAGE> 58
FINANCIAL HIGHLIGHTS
- -
NATIONAL TAX-EXEMPT BOND FUND (FORMERLY MUNICIPAL BOND FUND)
<TABLE>
<CAPTION>
INSTITUTIONAL
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30,
1999 1998 1997 1996
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.53 $ 10.54 $ 10.43 $ 10.39
-------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) 0.40 0.37 0.46 0.43
Net Realized and Unrealized Gains (Losses)
from Investments (0.02) 0.21 0.14 0.04
-------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.38 0.58 0.60 0.47
-------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income (0.40) (0.41) (0.44) (0.43)
Net Realized Gains (0.12) (0.18) (0.05) --
In Excess of Net Realized Gains -- -- -- --
-------------------------------------------------------------------------------------------------------
Total Distributions (0.52) (0.59) (0.49) (0.43)
-------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.39 $ 10.53 $ 10.54 $ 10.43
-------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 3.56% 5.71%(a) 5.89% 4.55%
-------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $ 96,946 $123,856 $134,579 $132,527
Ratio of Expenses to Average Net Assets 0.77% 0.77%(b) 0.81% 0.80%
Ratio of Net Investment Income (Loss) to
Average Net Assets 3.76% 3.89%(b) 4.41% 4.10%
Ratio of Expenses to Average Net Assets* 1.06% 1.07%(b) 1.10% 1.09%
Portfolio Turnover (c) 6.67% 85.56% 48.83% 47.46%
<CAPTION>
INSTITUTIONAL
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1995 1994
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.29 $ 10.92
-------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income (Loss) 0.46 0.41
Net Realized and Unrealized Gains (Losses)
from Investments 0.27 (0.31)
-------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.73 0.10
-------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income (0.46) (0.40)
Net Realized Gains -- (0.21)
In Excess of Net Realized Gains (0.17) (0.12)
-------------------------------------------------------------------------------------------------------
Total Distributions (0.63) (0.73)
-------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.39 $ 10.29
-------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales and
Redemption Charges) 7.25% 0.81%
-------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $134,784 $147,687
Ratio of Expenses to Average Net Assets 0.80% 0.77%
Ratio of Net Investment Income (Loss) to
Average Net Assets 4.21% 3.83%
Ratio of Expenses to Average Net Assets* 1.08% 1.06%
Portfolio Turnover (c) 35.15% 44.39%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
58
<PAGE> 59
FINANCIAL HIGHLIGHTS
- -
TAX-FREE FUND
<TABLE>
<CAPTION>
INSTITUTIONAL
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30,
1999 1998 1997 1996
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income 0.026 0.027 0.029 0.030
DISTRIBUTIONS:
Net Investment Income (0.026) (0.027) (0.029) (0.030)
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------------------------------------------------
Total Return 2.66% 2.75%(a) 2.94% 3.02%
-------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $110,136 $104,062 $108,884 $106,154
Ratio of Expenses to Average Net Assets 0.68% 0.66%(b) 0.68% 0.66%
Ratio of Net Investment Income to Average
Net Assets 2.62% 2.96%(b) 2.90% 2.97%
Ratio of Expenses to Average Net Assets* 0.70% 0.68%(b) 0.70% 0.68%
<CAPTION>
INSTITUTIONAL
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1995 1994
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000
-------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income 0.030 0.019
DISTRIBUTIONS:
Net Investment Income (0.030) (0.019)
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000
-------------------------------------------------------------------------------------------------------
Total Return 3.00% 1.92%
-------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $98,489 $84,465
Ratio of Expenses to Average Net Assets 0.64% 0.58%
Ratio of Net Investment Income to Average
Net Assets 2.97% 1.90%
Ratio of Expenses to Average Net Assets* 0.70% 0.68%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratio would have been as
indicated.
(a) Not annualized.
(b) Annualized.
59
<PAGE> 60
FINANCIAL HIGHLIGHTS
- -
PRIME OBLIGATIONS FUND
<TABLE>
<CAPTION>
INSTITUTIONAL
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30,
1999 1998 1997 1996
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income 0.047 0.046 0.049 0.051
DISTRIBUTIONS:
Net Investment Income (0.047) (0.046) (0.049) (0.051)
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------------------------------------------------
Total Return 4.76% 4.73%(a) 5.01% 5.17%
-------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $628,553 $690,947 $677,324 $596,075
Ratio of Expenses to Average Net Assets 0.65% 0.66%(b) 0.63% 0.64%
Ratio of Net Investment Income to Average
Net Assets 4.67% 5.04%(b) 4.90% 5.05%
Ratio of Expenses to Average Net Assets* 0.67% 0.68%(b) 0.65% 0.66%
<CAPTION>
INSTITUTIONAL
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1995 1994
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000
-------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income 0.048 0.028
DISTRIBUTIONS:
Net Investment Income (0.048) (0.028
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000
-------------------------------------------------------------------------------------------------------
Total Return 4.91% 2.85%
-------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $640,380 $561,697
Ratio of Expenses to Average Net Assets 0.65% 0.64%
Ratio of Net Investment Income to Average
Net Assets 4.83% 2.84%
Ratio of Expenses to Average Net Assets* 0.67% 0.66%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratio would have been as
indicated.
(a) Not annualized.
(b) Annualized.
60
<PAGE> 61
FINANCIAL HIGHLIGHTS
- -
U.S. GOVERNMENT OBLIGATIONS FUND
<TABLE>
<CAPTION>
INSTITUTIONAL
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30,
1999 1998 1997 1996
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income 0.045 0.045 0.048 0.050
DISTRIBUTIONS:
Net Investment Income (0.045) (0.045) (0.048) (0.050)
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------------------------------------------------
Total Return 4.64% 4.62%(a) 4.89% 5.10%
-------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $121,475 $185,384 $210,162 $207,451
Ratio of Expenses to Average Net Assets 0.67% 0.66%(b) 0.64% 0.64%
Ratio of Net Investment Income to Average
Net Assets 4.57% 4.93%(b) 4.79% 4.99%
Ratio of Expenses to Average Net Assets* 0.69% 0.68%(b) 0.66% 0.66%
<CAPTION>
INSTITUTIONAL
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1995 1994
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000
-------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income 0.048 0.028
DISTRIBUTIONS:
Net Investment Income (0.048) (0.028)
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000
-------------------------------------------------------------------------------------------------------
Total Return 4.87% 2.79%
-------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $227,565 $192,612
Ratio of Expenses to Average Net Assets 0.67% 0.67%
Ratio of Net Investment Income to Average
Net Assets 4.76% 2.74%
Ratio of Expenses to Average Net Assets* 0.69% 0.69%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratio would have been as
indicated.
(a) Not annualized.
(b) Annualized.
61
<PAGE> 62
FINANCIAL HIGHLIGHTS
- -
TREASURY FUND
<TABLE>
<CAPTION>
INSTITUTIONAL
ELEVEN MONTHS YEAR
YEAR ENDED ENDED ENDED YEAR ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30,
1999 1998 1997 1996
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income 0.045 0.046 0.048 0.050
DISTRIBUTIONS:
Net Investment Income (0.045) (0.046) (0.048) (0.050)
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------------------------------------------------
Total Return 4.61% 4.70%(b) 4.93% 5.14%
-------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $269,534 $321,584 $324,377 $223,416
Ratio of Expenses to Average Net Assets 0.58% 0.57%(c) 0.57% 0.60%
Ratio of Net Investment Income to Average
Net Assets 4.52% 5.00%(c) 4.83% 4.98%
Ratio of Expenses to Average Net Assets* 0.68% 0.67%(c) 0.67% 0.70%
<CAPTION>
INSTITUTIONAL
1993
YEAR ENDED TO
JUNE 30, JUNE 30,
1995 1994(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000
-------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Income 0.048 0.017
DISTRIBUTIONS:
Net Investment Income (0.048) (0.017)
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000
-------------------------------------------------------------------------------------------------------
Total Return 4.91% 1.72%(b)
-------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at End of Period (000) $192,232 $ 76,035
Ratio of Expenses to Average Net Assets 0.64% 0.54%(c)
Ratio of Net Investment Income to Average
Net Assets 4.95% 3.15%(c)
Ratio of Expenses to Average Net Assets* 0.78% 0.74%(c)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
62
<PAGE> 63
PARKSTONE FUNDS
Board of Trustees
ROBERT D. NEARY
Chairman
Retired Co-Chairman, Ernst & Young
Director:
Cold Metal Products, Inc.
Strategic Distribution, Inc.
HERBERT R. MARTENS, JR.
President
Executive Vice President,
National City Corporation
Chairman, President and
Chief Executive
Officer, NatCity
Investments, Inc.
LEIGH CARTER
Retired President and
Chief Operating Officer,
B.F. Goodrich Company
Director:
Kirtland Capital Corporation
Morrison Products
TruSeal Technologies
JOHN F. DURKOTT
President and Chief
Operating Officer,
Kittle's Home Furnishings
Center, Inc.
ROBERT J. FARLING
Retired Chairman, President
and Chief Executive Officer,
Centerior Energy
RICHARD W. FURST, DEAN
Garvice D. Kincaid Professor
of Finance and Dean,
Carol Martin Gatton College
of Business and Economics,
University of Kentucky
Director:
Foam Design, Inc.
The Seed Corporation
GERALD L. GHERLEIN
Executive Vice President and
General Counsel, Eaton
Corporation
Trustee:
WVIZ Educational Television
J. WILLIAM PULLEN
President and Chief Executive Officer,
Whayne Supply Company
<PAGE> 64
For more information about the Funds, the following documents are available free
upon request:
ANNUAL/SEMI-ANNUAL REPORTS (REPORTS):
The Funds' annual and semi-annual reports to shareholders contain additional
information on the Funds' investments. In the annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected a Fund's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI):
The SAI provides more detailed information about the Funds, including its
operations and investment policies. It is incorporated by reference and is
legally considered a part of this prospectus.
You can get free copies of Annual/Semi-Annual Reports and the SAI, of the
Parkstone Group of Funds, or request other information and discuss your
questions about the Funds by contacting a Broker or Bank that sells the
Funds, or contact the Fund at:
The Parkstone Group of Funds
P.O. Box 8590
Boston, Massachusetts 02266-8590
Telephone: 1-800-451-8377
You can review information about the Fund and SAI at the Public Reference Room
of the Securities and Exchange Commission in Washington D.C. You can get copies:
o For a duplicating fee, by writing the Public Reference Section of the
Securities and Exchange Commission in Washington, D.C. 20549-6009 or
calling 1-800-SEC-0330.
o Free from the Commission's Website at http://www.sec.gov
Investment Company Act file no. 811-5105.
PARKSTONE
FUNDS
PAR-F-008-0100 9/99
<PAGE> 65
[THIS PAGE LEFT BLANK INTENTIONALLY.]
<PAGE> 1
Exhibit (17)(f)
ARMADA FUNDS
STATEMENT OF ADDITIONAL INFORMATION
DECEMBER 10, 1999
ARMADA INTERNATIONAL EQUITY FUND
ARMADA SMALL CAP VALUE FUND
ARMADA SMALL CAP GROWTH FUND
ARMADA EQUITY GROWTH FUND
ARMADA TAX MANAGED EQUITY FUND
ARMADA CORE EQUITY FUND
ARMADA EQUITY INDEX FUND
ARMADA EQUITY INCOME FUND
ARMADA BALANCED ALLOCATION FUND
ARMADA TOTAL RETURN ADVANTAGE FUND
ARMADA BOND FUND
ARMADA INTERMEDIATE BOND FUND
ARMADA GNMA FUND
ARMADA ENHANCED INCOME FUND
ARMADA OHIO TAX EXEMPT BOND FUND
ARMADA PENNSYLVANIA MUNICIPAL BOND FUND
ARMADA NATIONAL TAX EXEMPT BOND FUND
ARMADA OHIO MUNICIPAL MONEY MARKET FUND
ARMADA PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND
ARMADA TAX EXEMPT MONEY MARKET FUND
ARMADA MONEY MARKET FUND
ARMADA GOVERNMENT MONEY MARKET FUND
ARMADA TREASURY MONEY MARKET FUND
ARMADA MID CAP GROWTH FUND
ARMADA LARGE CAP ULTRA FUND
ARMADA U.S. GOVERNMENT INCOME FUND
ARMADA MICHIGAN MUNICIPAL BOND FUND
ARMADA TREASURY PLUS MONEY MARKET FUND
This Statement of Additional Information is not a prospectus but should be read
in conjunction with the current Prospectus for the above Funds of Armada Funds
(the "Trust"), dated September 28, 1999 for Class I Shares of the Funds, and
dated December 10, 1999 for Class A, Class B and Class C Shares of the Funds, as
such Prospectuses may be amended or supplemented from time to time. A copy of
the Prospectuses may be obtained by calling or writing the Trust at
1-800-622-FUND (3863), One Freedom Valley Drive, Oaks, Pennsylvania 19456.
<PAGE> 2
TABLE OF CONTENTS
PAGE
STATEMENT OF ADDITIONAL INFORMATION....................................1
INVESTMENT OBJECTIVE AND POLICIES......................................2
INVESTMENT LIMITATIONS................................................66
NET ASSET VALUE.......................................................69
DIVIDENDS.............................................................70
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION........................70
DESCRIPTION OF SHARES.................................................80
ADDITIONAL INFORMATION CONCERNING TAXES...............................84
TRUSTEES AND OFFICERS.................................................90
ADVISORY, ADMINISTRATION, DISTRIBUTION, CUSTODIAN SERVICES
AND TRANSFER AGENCY AGREEMENTS...............................95
SHAREHOLDER SERVICES PLANS...........................................106
PORTFOLIO TRANSACTIONS...............................................107
AUDITORS.............................................................109
COUNSEL..............................................................110
YIELD AND PERFORMANCE INFORMATION....................................110
STANDARDIZED YIELD QUOTATIONS........................................119
MISCELLANEOUS........................................................124
FINANCIAL STATEMENTS.................................................155
APPENDIX A...........................................................A-1
APPENDIX B...........................................................B-1
i-
<PAGE> 3
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
This Statement of Additional Information should be read in
conjunction with the Prospectuses of Armada Funds (the "Trust") that describes:
International Equity, Small Cap Value, Small Cap Growth, Equity Growth, Tax
Managed Equity, Core Equity, Equity Income, Total Return Advantage, Mid Cap
Growth, and Large Cap Ultra Funds (collectively, the "Equity Funds"); the
Balanced Allocation Fund; the Bond (formerly, the Intermediate Government Fund),
Intermediate Bond (formerly, the "Fixed Income Fund"), GNMA, Enhanced Income and
Government Income Funds (collectively, the "Fixed Income Funds"); Ohio Municipal
Money Market Fund, Pennsylvania Tax Exempt Money Market ("Pennsylvania Tax
Exempt Fund"), Tax Exempt Money Market, Money Market, Government Money Market,
and Treasury Money Market and Treasury Plus Money Market Funds (collectively,
the "Money Market Funds"); Ohio Tax Exempt Bond, Pennsylvania Municipal Bond,
Michigan Municipal Bond and National Tax Exempt Bond Funds (collectively "The
Funds"). The information contained in this Statement of Additional Information
expands upon matters discussed in the Prospectuses. No investment in shares of a
Fund should be made without first reading the Prospectus for such Fund.
The Trust was organized as a Massachusetts business trust on
January 28, 1986. The Trust is a series fund authorized to issue the separate
classes or series of shares of beneficial interest.
The Pennsylvania Tax Exempt Fund commenced operations on
August 8, 1994 as a separate investment portfolio (the "Predecessor Fund") of
Inventor Funds, Inc., which was organized as a Maryland corporation. On
September 9, 1996, the Predecessor Fund was reorganized as a new portfolio of
the Trust. Prior to the reorganization, the Predecessor Fund offered and sold
shares of stock that were similar to the Trust's A Shares of beneficial
interest.
The Bond, GNMA and Pennsylvania Municipal Bond Funds commenced
operations on August 10, 1994 as separate investment portfolios (the
"Predecessor Intermediate Government Fund," "Predecessor GNMA Fund," and
"Predecessor Pennsylvania Tax Exempt Bond Fund," collectively the "Predecessor
Funds") of Inventor Funds, Inc. which was organized as a Maryland corporation.
On September 9, 1996, the Predecessor Funds were reorganized as new portfolios
of Armada. Prior to the reorganization, the Predecessor Funds offered and sold
shares of stock that were similar to Armada's Class A Shares of beneficial
interest.
-1-
<PAGE> 4
INVESTMENT OBJECTIVE AND POLICIES
---------------------------------
ADDITIONAL INFORMATION ON FUND MANAGEMENT
Further information on National City Investment Management
Company's ("IMC" or the "Adviser") management strategies, techniques, policies
and related matters may be included from time to time in advertisements, sales
literature, communications to shareholders and other materials. See also, "Yield
and Performance Information" below.
Attached to this Statement of Additional Information is
Appendix A which contains descriptions of the rating symbols used by Standard &
Poor's Rating Group ("S&P"), Fitch IBCA, Inc. ("Fitch"), Duff & Phelps Credit
Rating Co. ("Duff"), and Moody's Investors Service, Inc. ("Moody's") for
securities which may be held by the Funds.
ADDITIONAL INFORMATION ABOUT THE FUNDS
- --------------------------------------
The following information supplements and should be read in
conjunction with the principal strategies and risk disclosure relating to the
Funds in the Prospectuses.
ARMADA INTERNATIONAL EQUITY FUND
The Fund seeks to achieve its investment objective by
investing, under normal market conditions, at least 80% of its total assets in
equity securities of foreign issuers. The Fund's assets normally will be
invested in the securities of issuers located in at least three foreign
countries. Foreign investments may also include debt obligations issued or
guaranteed by foreign governments or their agencies, authorities,
instrumentalities or political subdivisions, including a foreign state, province
or municipality. The Adviser does not presently intend to invest in common stock
of domestic companies.
The Fund will invest primarily in equity securities, including
common and preferred stocks, rights, warrants, securities convertible into
common stocks and American Depository Receipts ("ADRs") of companies included in
the Morgan Stanley Capital International Europe, Australia, Far East ("EAFE")
Index, a broadly diversified international index consisting of more than 1,000
equity securities of companies located in Australia, Austria, Belgium, Denmark,
Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, Malaysia, the
Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland, and the
United Kingdom. The Fund, however, is not an "index" fund, and is neither
sponsored by nor affiliated with Morgan Stanley Capital International. The Fund
does not anticipate making investments in markets where, in the judgment of the
Adviser, property rights are not defined and supported by adequate legal
infrastructure.
More than 25% of the Fund's assets may be invested in the
securities of issuers located in the same country. Investment in a particular
country of 25% or more of the Fund's total assets will make the Fund's
performance more dependent upon the political and economic circumstances of that
country than a mutual fund more widely diversified among issuers in
-2-
<PAGE> 5
different countries. Criteria for determining the appropriate distribution of
investments among countries may include relative valuation, growth prospects,
and fiscal, monetary, and regulatory government policies. See "Additional
Information about Portfolio Instruments - Foreign Securities and Currencies"
below.
ARMADA SMALL CAP VALUE FUND
Under normal conditions, at least 80% of the value of the
Fund's total assets will be invested in equity securities of companies with
market capitalizations comparable to those of companies in the Russell 2000
Value Index. The Fund will be managed with a value approach, exhibiting
aggregate valuation characteristics such as price/earnings, price/book, and
price cash/flow ratios which are at a discount to the market averages.
Additional factors such as private market value, balance sheet strength, and
long term earnings potential are also considered in stock selection. See
"Special Risk Factors -- Small Capitalization Stocks" below.
ARMADA SMALL CAP GROWTH FUND
The Fund will normally invest at least 80% of its total assets
in equity securities of companies with stock market capitalizations comparable
to that of companies in the Russell 2000 Growth Index. The Adviser will seek
companies with above-average growth prospects. Factors considered in selecting
such issuers include participation in a fast growing industry, a strategic niche
position in a specialized market, and fundamental value. The Adviser will also
consider the relationship between price and book value, and other factors such
as trading volume and bid-ask spreads in an effort to allow the Fund to achieve
diversification. See "Special Risk Factors -- Small Capitalization Stocks"
below.
Special Risk Factors for Small Capitalization Stocks
Securities held by the Small Cap Value and Small Cap Growth
Funds generally will be issued by public companies with small capitalizations
relative to those which predominate the major market indices, such as the S&P's
500 or the Dow Jones Industrial Average. Securities of these small companies may
at times yield greater returns on investment than stocks of larger, more
established companies as a result of inefficiencies in the marketplace. Small
capitalization companies are generally not as well-known to investors and have
less of an investor following than larger companies.
However, the positions of small capitalization companies in
the market may be more tenuous because they typically are subject to a greater
degree of change in earnings and business prospects than larger, more
established companies. In addition, securities of small capitalization companies
are traded in lower volume than those of larger companies and may be more
volatile. As a result, the Funds may be subject to greater price volatility than
a fund consisting of large capitalization stocks. By maintaining a broadly
diversified portfolio, the sub-adviser will attempt to reduce this volatility.
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<PAGE> 6
ARMADA EQUITY GROWTH FUND
Under normal conditions, at least 80% of the Fund's total
assets will be invested in a diversified portfolio of common stocks and
securities convertible into common stocks with large stock market
capitalizations comparable to that of companies in the S&P 500. The Fund's
Adviser selects common stocks based on a number of factors, including historical
and projected earnings growth, earnings quality and liquidity, each in relation
to the market price of the stock. Stocks purchased for the Fund generally will
be listed on a national securities exchange or will be unlisted securities with
an established over-the-counter market.
ARMADA TAX MANAGED EQUITY FUND
The Fund invests primarily in common stocks. The Fund will use
several methods to reduce the impact of federal and state income taxes on
investment income and realized capital gains distributed by the Fund.
The Fund will seek to distribute relatively low levels of
taxable investment income by investing in stocks with low dividend yields.
The Fund will endeavor to hold taxes on realized capital gains
to a minimum by investing primarily in the securities of companies with above
average earnings predictability and stability which the Fund expects to hold for
several years. The Fund will generally seek to avoid realizing short-term
capital gains, and expects to have a relatively low overall portfolio turnover
rate. When the Fund sells appreciated securities, it will attempt to select the
share lots with the highest cost basis in order to hold realized capital gains
to a minimum. The Fund may, when consistent with its overall investment
approach, sell depreciated securities to offset realized capital gains.
Although the Fund expects to use some or all of the foregoing
methods in seeking to reduce the impact of federal and state income taxes on the
Fund's dividends and distributions, portfolio management decisions will also be
based on non-tax considerations when appropriate. Certain equity and other
securities held by the Fund will produce ordinary taxable income on a regular
basis. The Fund may also sell a particular security, even though it may realize
a short-term capital gain, if the value of that security is believed to have
reached its peak or is expected to decline before the Fund would have held it
for the long-term holding period. The Fund may also be required to sell
securities in order to generate cash to pay expenses or satisfy shareholder
redemptions.
Accordingly, while the Fund seeks to minimize the effect of
taxes on its dividends and distributions, the Fund is not a tax-exempt fund, and
may be expected to distribute taxable income and realize capital gains from time
to time.
The Fund will normally invest at least 80% of its total assets
in common stocks and other equity securities. The Fund's Adviser selects common
stocks based on a number of factors, including historical and projected
long-term earnings growth, earnings quality and
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<PAGE> 7
liquidity, each in relation to the market price of the stock. Stocks purchased
for the Fund generally will be listed on a national securities exchange or will
be unlisted securities with an established over-the-counter market. The Fund may
invest up to 5% of its net assets in each of the following types of equity
securities: preferred stocks; securities convertible into common stocks; rights;
and warrants.
The Fund's long-term investment horizon is reflected in its
low portfolio turnover investment approach. The portfolio turnover rate reflects
the frequency with which securities are purchased and sold within the Fund's
portfolio. The Fund's annual portfolio turnover is not expected to exceed 25%
under normal market conditions. (A rate of turnover of 100% could occur, for
example, if all the securities held by the Fund are replaced within a period of
one year.) When a Fund sells securities realizing gains, tax laws require that
such gains be distributed to investors every year. As a result, such investors
are taxed on their pro-rata shares of the gains. By attempting to minimize
portfolio turnover, the Fund will generally have a low turnover rate. It is
impossible to predict the impact of such a strategy on the realization of gains
or losses for the Fund. For example, the Fund may forego the opportunity to
realize gains or reduce losses as a result of this policy.
The Fund may be appropriate for investors who seek capital
appreciation and whose tax status under federal and state regulations increase
the importance of such strategies.
ARMADA CORE EQUITY FUND
The Fund seeks to achieve its objective by investing in a
diversified portfolio of common stocks of issuers with large capitalizations
comparable to that of companies in the S&P 500. The Fund normally invests in
three types of equity securities: (i) growth securities, defined as common
stocks having a five-year annual earnings-per-share growth rate of 10% or more,
with no decline in the annual earnings-per-share rate during the last five
years; (ii) securities with low price-to-earnings ratios (i.e., at least 20%
below the average of the companies included in the S&P 500); and (iii)
securities that pay high dividend yields (i.e., at least 20% above such
average). The Fund will normally invest 20% to 50% of its total assets in each
of these three types of equity securities. The Fund is fully invested at all
times.
The S&P 500 is an index composed of approximately 500 common
stocks, most of which are listed on the New York Stock Exchange (the "NYSE").
The Sub-adviser believes that the S&P 500 is an appropriate benchmark for the
Fund because it is diversified, familiar to many investors and widely accepted
as a reference for common stock investments.
Standard & Poor's Ratings Group is not a sponsor of, or in any
way affiliated with, the Fund.
ARMADA EQUITY INDEX FUND
The S&P 500 is composed of approximately 500 common stocks,
most of which are listed on the NYSE. S&P selects the stocks for the S&P 500 on
a statistical basis. As of May
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<PAGE> 8
31, 1999, the stocks in the S&P 500 had an average market capitalization of 94.1
billion and the total market capitalization of all U.S. common stocks was 10.7
trillion. "Market capitalization" of a company is the market price per share of
stock multiplied by the number of shares outstanding. The Adviser believes that
the S&P 500 is an appropriate benchmark for the Fund because it is diversified,
familiar to many investors and widely accepted as a reference for common stock
investments.
The Fund will normally invest substantially all of its total
assets in the stocks that comprise the S&P 500 in approximately the same
percentages as the stocks represent in the index. The Fund may also acquire
derivative instruments designed to replicate the performance of the S&P 500,
such as S&P 500 stock index futures contracts or Standard & Poor's Depository
Receipts. The Fund may invest in all the approximately 500 stocks comprising the
S&P 500, or it may use a statistical sampling technique by selecting
approximately 90% of the stocks listed in the index. The Fund will only purchase
a security that is included in the S&P 500 at the time of such purchase. The
Fund, may, however, temporarily continue to hold a security that has been
deleted from the S&P 500 pending the rebalancing of the Fund's portfolio. The
Fund is not required to buy or sell securities solely because the percentage of
its assets invested in index stocks changes when the market value of its
holdings increases or decreases. In addition, the Fund may omit or remove an
index stock from its portfolio if the Adviser believes the stock to be
insufficiently liquid or believes the merit of the investment has been
substantially impaired by extraordinary events or financial conditions. With
respect to the remaining portion of its net assets, the Fund may hold temporary
cash balances which may be invested in U.S. government obligations and money
market investments. In extraordinary circumstances, the Fund may exclude a stock
listed on the index from its holdings or include a similar stock in its place if
it believes that doing so will help achieve its investment objective. The Fund
also may enter into repurchase agreements, reverse repurchase agreements, and
lend its portfolio securities.
While there can be no guarantee that the Fund's investment
results will precisely match the results of the S&P 500, the Adviser believes
that, before deduction of operating expenses, there will be a very high
correlation between the returns generated by the Fund and the S&P 500. The Fund
will attempt to achieve a correlation between the performance of its asset
portfolio and that of the S&P 500 of at least 95% before deduction of operating
expenses. A correlation of 100% would indicate perfect correlation, which would
be achieved when the Fund's net asset value, including the value of its dividend
and capital gains distributions, increases or decreases in exact proportion to
changes in the index. The Fund's ability to correlate its performance with the
S&P 500, however, may be affected by, among other things, changes in securities
markets, the manner in which S&P calculates its index, and the timing of
purchases and redemptions. The Adviser monitors the correlation of the
performance of the Fund in relation to the index under the supervision of the
Board of Trustees. The Fund intends to actively rebalance its portfolio to
achieve high correlation of performance with the S&P 500. To reduce transaction
costs and minimize shareholders' current capital gains liability, the Fund's
investment portfolio will not be automatically rebalanced to reflect changes in
the S&P 500. In the unlikely event that a high correlation is not achieved, the
Board of Trustees will take appropriate steps based on the reasons for the lower
than expected correlation.
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<PAGE> 9
The Indexing Approach
The Fund is not managed in a traditional sense, that is, by
making discretionary judgments based on analysis of economic, financial and
market conditions. Under ordinary circumstances, stocks will only be eliminated
from or added to the Fund to reflect additions to or deletions from the S&P 500
(including mergers or changes in the composition of the index), to raise cash to
meet withdrawals, or to invest cash contributions. Accordingly, sales may result
in losses that may not have been realized if the Fund were actively managed and
purchases may be made that would not have been made if the Fund were actively
managed. Adverse events, such as reported losses, dividend cuts or omissions,
legal proceedings and defaults will not normally result in the sale of a common
stock. The Fund will remain substantially fully invested in common stocks and
equity derivative instruments whether stock prices are rising or falling.
The Adviser believes that the indexing approach should involve
less portfolio turnover, notwithstanding periodic additions to and deletions
from the S&P 500, and thus lower brokerage costs, transfer taxes and operating
expenses, than in more traditionally managed funds, although there is no
assurance that this will be the case. The costs and other expenses incurred in
securities transactions, apart from any difference between the investment
results of the Fund and those of the S&P 500, may cause the return of the Fund
to be lower than the return of the index.
The inclusion of a security in the S&P 500 in no way implies
an opinion by S&P as to its attractiveness as an investment. S&P is not a
sponsor of, or in any way affiliated with, the Fund.
The common stock of National City Corporation, the parent
company of the Adviser, is included in the S&P 500. Like the other stocks in the
S&P 500, the Fund will invest in the common stock of National City Corporation
in approximately the same proportion as the percentage National City Corporation
common stock represents in the S&P 500. As of May 31, 1999, National City
Corporation common stock represented 1.7% of the index.
ARMADA EQUITY INCOME FUND
The Fund will normally invest at least 80% of the value of its
total assets in income-producing common stocks and securities convertible into
common stocks assigned a rating of Ba/BB or higher by Moody's, S&P, Fitch or
Duff. The Fund's Adviser will generally attempt to select securities that
provide a higher yield than that of the general market and will generally
dispose of securities whose yields approach a market yield or that otherwise
fail to satisfy investment criteria.
ARMADA BALANCED ALLOCATION FUND
The Fund may invest in any type or class of security. The Fund
normally invest in common stocks, fixed income securities, securities
convertible into common stocks (i.e., warrants, convertible preferred stock,
fixed rate preferred stock, convertible fixed income securities, options and
rights) and cash equivalent securities. The Fund intends to invest 50% to
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<PAGE> 10
70% of its net assets in common stocks and securities convertible into common
stocks, 25% to 55% of its net assets in fixed income securities and up to 30% of
its net assets in cash and cash equivalents. Of these investments, no more than
20% of the Fund's total assets will be invested in foreign securities.
The Fund holds common stocks primarily for the purpose of
providing long-term growth of capital. When selecting stocks for the Fund, the
Adviser will consider primarily their potential for long-term capital
appreciation. The Fund intends to invest predominantly in those companies which
are growth-oriented and have exhibited consistent, above-average growth in
revenues and earnings.
The Fund invests the fixed income portion of its portfolio of
investments in a broad range of investment grade debt securities which are rated
at the time of purchase within the four highest rating categories assigned by
Moody's, S&P, Fitch or Duff (defined under "Ratings Criteria" below). These
fixed income securities will consist of bonds, debentures, notes, zero coupon
securities, asset-backed securities, state, municipal and industrial revenue
bonds, obligations issued or guaranteed by the U.S. government or its agencies
or instrumentalities, certificates of deposit, time deposits, high quality
commercial paper, bankers' acceptances and variable amount master demand notes.
In addition, a portion of the Fund's assets may be invested from time to time in
first mortgage loans and participation certificates in pools of mortgages issued
or guaranteed by the U.S. government or its agencies or instrumentalities. Some
fixed income securities may have warrants or options attached.
ARMADA TOTAL RETURN ADVANTAGE FUND
The Fund will normally invest at least 80% of the value of its
total assets in debt securities of all types, although up to 20% of the value of
its total assets may be invested in preferred stocks and other investments.
Under normal market conditions, the Fund maintains an average dollar-weighted
portfolio maturity of four to twelve years.
Although the Total Return Advantage Fund normally invests
substantially all of its assets in investment grade debt securities, it may
invest up to 15% of its net assets in non-rated securities and securities rated
below investment grade (commonly referred to as "junk bonds"). For a discussion
of risk factors relating to such securities, see "Risks Related to Lower Rated
Securities Which May Be Purchased by the Total Return Advantage Fund." See
"Additional Information about Portfolio Instruments - Risks Related to Lower
Rated Securities Which May Be Purchased by the Total Return Advantage Fund."
ARMADA BOND FUND
The Fund seeks to achieve its objective by normally investing
at least 80% of its total assets in investment grade fixed-income securities.
The Fund uses the Lehman Aggregate Bond Index ("Lehman Aggregate") as its
performance benchmark. The average maturity of the Fund will be from four to
twelve years.
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<PAGE> 11
ARMADA INTERMEDIATE BOND FUND
The Fund normally invests at least 80% of the value of its
total assets in debt securities of all types, although up to 20% of the value of
its total assets may be invested in preferred stocks and other investments. The
Fund normally maintains an average dollar-weighted portfolio maturity of three
to ten years. The Fund uses the Lehman Intermediate Government/Corporate Bond
Index as its performance benchmark.
ARMADA GNMA FUND
The Fund seeks to achieve its objective by normally investing primarily
(at least 80% of its total assets under normal conditions) in mortgage
pass-through securities guaranteed by the Government National Mortgage
Association (GNMA). Any remaining assets may consist of other investment grade
fixed income securities. GNMA was established as an instrumentality of the U.S.
government to supervise and finance certain types of activities. Under normal
market conditions, the estimated average life of the GNMA Fund's holdings of
mortgage pass-through and mortgage-backed securities will range between 3 and 10
years. The Fund employs the Lehman GNMA Index as its performance benchmark.
ARMADA ENHANCED INCOME FUND
The Fund will normally invest at least 80% of the value of its
total assets in investment grade debt securities of all types. However, up to
20% of the value of its total assets may be invested in preferred stocks and
other investments. In making investment decisions, the Fund's adviser will focus
on a number of factors, including yield to maturity, maturity, quality and the
outlook for specific issuers and market sectors. The Fund normally intends to
maintain an average dollar-weighted portfolio maturity for its debt securities
of from 1 to 5 years. The two components of total rate of return are current
income and change in the value of portfolio securities. The Merrill Lynch 1-3
Year Government/Corporate Bond Index is composed of U.S. Treasury and Agency
bonds and U.S. fixed coupon investment grade corporate bonds that mature in one
to three years. The average dollar-weighted maturity of the Index is generally
from 2-1/2 to 3 years. The Index is unmanaged, and its total rate of return does
not reflect the expenses that a mutual fund normally incurs. The Fund's
objective refers to a return after deduction of Fund expenses.
ARMADA OHIO TAX EXEMPT BOND FUND
The Fund seeks to achieve its objective by investing
substantially all of its assets in a portfolio of obligations issued by or on
behalf of states, territories and possessions of the United States, the District
of Columbia and their political subdivisions, agencies, instrumentalities and
authorities, the interest on which, in the opinion of counsel issued on the date
of the issuance thereof, is exempt from regular federal income tax (Municipal
Securities).
The Fund normally will invest at least 80% of the value of its
Fund's total assets in Municipal Securities. This policy is fundamental and may
not be changed without the affirmative
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<PAGE> 12
vote of the holders of a majority of the Fund's outstanding shares (as defined
under "Shareholder Vote" below). In addition, the Fund will normally invest at
least 80% of the value of its total assets in Municipal Securities issued by or
on behalf of the State of Ohio, political subdivisions thereof, or agencies or
instrumentalities of the State or its political subdivisions (Ohio Municipal
Securities). Dividends paid by the Fund which are derived from interest properly
attributable to Ohio Municipal Securities will be exempt from regular federal
income tax and Ohio personal income tax. Dividends derived from interest on
Municipal Securities of other governmental issuers will be exempt from regular
federal income tax but may be subject to Ohio personal income tax. See
"Additional Tax Information Concerning the Ohio Tax Exempt Bond Fund."
ARMADA PENNSYLVANIA MUNICIPAL BOND FUND
The Fund seeks to achieve its objective by investing
substantially all of its assets in Municipal Securities issued by or on behalf
of the Commonwealth of Pennsylvania and its political subdivisions and financing
authorities, obligations of the United States, including territories and
possessions of the United States, the income from which is, in the opinion of
counsel, exempt from regular federal income tax and Pennsylvania state income
tax imposed upon non-corporate taxpayers, and securities of money market
investment companies that invest primarily in such securities (Pennsylvania
Municipal Securities).
The Fund will normally be fully invested in Pennsylvania
Municipal Securities. This policy is fundamental and may not be changed without
the affirmative vote of the holders of a majority of the Fund's outstanding
shares (as defined under "Shareholder Vote"). Dividends paid by the Fund which
are derived from interest properly attributable to Pennsylvania Municipal
Securities will be exempt from regular federal income tax and Pennsylvania
personal income tax. Dividends derived from interest on Municipal Securities of
other governmental issuers will be exempt from regular federal income tax but
may be subject to Pennsylvania personal income tax. See "Additional Tax
Information concerning the Pennsylvania Municipal Bond Fund."
ARMADA NATIONAL TAX EXEMPT BOND FUND
The Fund will normally invest at least 80% of the value of its
total assets in Municipal Securities. This policy is fundamental and may not be
changed without the affirmative vote of the holders of a majority of the Fund's
outstanding shares (as defined under "Shareholder Vote").
Armada Ohio Tax Exempt Bond, Pennsylvania Municipal Bond and National
Tax Exempt Bond Funds
Although each Fund's average weighted maturity will vary in
light of current market and economic conditions, the comparative yields on
instruments with different maturities, and other factors, the Ohio Tax Exempt
Bond and Pennsylvania Municipal Bond and National Tax Exempt Bond Funds
anticipate that they will maintain a dollar-weighted average portfolio maturity
of three to ten years.
For temporary defensive or liquidity purposes when, in the
opinion of the Funds' adviser, Ohio Municipal Securities or Pennsylvania
Municipal Securities of sufficient quality, as the
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<PAGE> 13
case may be, are not readily available, the Ohio Tax Exempt Bond and
Pennsylvania Municipal Bond Funds may invest up to 100% of their assets in other
Municipal Securities and in taxable securities.
All Funds may hold up to 100% of their assets in uninvested
cash reserves, pending investment, during temporary defensive periods; however,
uninvested cash reserves will not earn income.
Each Fund may invest in other investments as described below
under "Other Investment Policies" including stand-by commitments, variable and
floating rate obligations, certificates of participation, other investment
companies, illiquid securities, Taxable Money Market Instruments (as defined
below), zero coupon obligations and repurchase agreements and engage in
when-issued transactions.
Special Risk Considerations
Armada Ohio Tax Exempt Bond, Pennsylvania Municipal Bond, National Tax
Exempt Bond Funds
The Ohio Tax Exempt and Pennsylvania Tax Exempt Bond Funds are
classified as non-diversified under the Investment Company Act of 1940, as
amended (the "1940 Act"). Investment return on a non-diversified portfolio
typically is dependent upon the performance of a smaller number of securities
relative to the number held in a diversified portfolio. Consequently, the change
in value of any one security may affect the overall value of a non-diversified
portfolio more than it would a diversified portfolio, and thereby subject the
market-based net asset value per share of the non-diversified portfolio to
greater fluctuations. In addition, a non-diversified portfolio may be more
susceptible to economic, political and regulatory developments than a
diversified investment portfolio with similar objectives may be.
Although (i) all of the Funds may invest 25% or more of their
respective net assets in Municipal Securities the interest on which is paid
solely from revenues of similar projects, (ii) the Ohio Tax Exempt Bond and
National Tax Exempt Bond Funds may invest up to 20% of their respective total
assets in private activity bonds (described below) and taxable investments,
(iii) the Pennsylvania Municipal Bond Fund may invest up to 100% of its total
assets in Pennsylvania private activity bonds and (iv) the National Tax Exempt
Bond Fund may invest 25% or more of its net assets in Municipal Securities whose
issues are in the same state, the Funds do not presently intend to do so unless,
in the opinion of the adviser, the investment is warranted. To the extent that a
Fund's assets are invested in such investments, the Fund will be subject to the
peculiar risks presented by the laws and economic conditions relating to such
projects and private activity bonds to a greater extent than it would be if its
assets were not so invested.
See "Municipal Securities," "Special Considerations Regarding
Investment in Ohio Municipal Securities," and "Special Considerations Regarding
Investment in Pennsylvania Municipal Securities" below.
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<PAGE> 14
ARMADA OHIO MUNICIPAL MONEY MARKET FUND
The Fund seeks to achieve its objective by investing
substantially all of its assets in Municipal Securities (defined below) issued
by or on behalf of the State of Ohio, political subdivisions thereof or agencies
or instrumentalities of the State or its political subdivisions (Ohio Municipal
Securities).
The Fund will normally invest at least 80% of the value of its
total assets in Ohio Municipal Securities. This policy is fundamental and may
not be changed without the affirmative vote of the holders of a majority of the
Fund's outstanding shares (as defined under "Shareholder Vote"). Dividends paid
by the Fund which are derived from interest properly attributable to Ohio
Municipal Securities will be exempt from regular federal income tax and Ohio
personal income tax. Dividends derived from interest on Municipal Securities of
other governmental issuers will be exempt from regular federal income tax but
may be subject to Ohio personal income tax. The Fund may invest up to 100% of
its assets in Municipal Securities known as private activity bonds (described
below) the interest on which is an item of tax preference for purposes of the
federal alternative minimum tax ("AMT Paper"). The Fund may also invest up to
100% of its assets in non-Ohio Municipal Securities and in taxable securities,
during temporary defensive periods when, in the opinion of the Adviser, Ohio
Municipal Securities of sufficient quality are unavailable.
The Ohio Municipal Money Market Fund is concentrated in
securities issued by the State of Ohio or entities within the State of Ohio, and
therefore, investment in the Fund may be riskier than an investment in other
types of money market funds.
See "Special Risk Considerations of the Ohio Municipal Money
Market Fund" below.
ARMADA PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND
The Fund seeks to achieve its objective by investing
substantially all of its assets in Municipal Securities defined below issued by
or on behalf of the Commonwealth of Pennsylvania and its political subdivisions
and financing authorities, and obligations of the United States, including
territories and possessions of the United States, the income from which, in the
opinion of bond counsel, is exempt from regular federal income tax and
Pennsylvania income tax imposed upon non-corporate taxpayers (Pennsylvania
Municipal Securities).
As a matter of fundamental policy, the Fund normally invests
its assets so that at least 80% of its annual interest income is not only exempt
from regular federal income tax and Pennsylvania personal income taxes, but is
not considered a preference item for purposes of the federal alternative minimum
tax. However, the Fund may invest up to 100% of its assets in non-Pennsylvania
Municipal Securities and in taxable securities, during temporary defensive
periods when, in the opinion of the Adviser, Pennsylvania Municipal Securities
of sufficient quality are unavailable.
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<PAGE> 15
The Pennsylvania Tax Exempt Money Market Fund is concentrated
in securities issued by the Commonwealth of Pennsylvania or entities within the
Commonwealth of Pennsylvania, and therefore, investment in the Fund may be
riskier than an investment in other types of money market funds.
See "Special Risk Considerations of the Pennsylvania Tax
Exempt Money Market Fund" below.
ARMADA TAX EXEMPT MONEY MARKET FUND
The Fund seeks to achieve its objective by investing
substantially all of its assets in a diversified fund of obligations issued by
or on behalf of states, territories and possessions of the United States, the
District of Columbia and their political subdivisions, agencies,
instrumentalities and authorities, the income from which, in the opinion of bond
counsel, is exempt from regular federal income tax ("Municipal Securities").
The Fund will normally invest at least 80% of the value of its
total assets in Municipal Securities. This policy is fundamental and may not be
changed without the affirmative vote of the holders of a majority of the Fund's
outstanding shares.
See "Special Risk Considerations of the Tax Exempt Money
Market Fund."
Special Risk Considerations -- Ohio Municipal Money Market,
Pennsylvania Tax Exempt Money Market and the Tax Exempt Money Market Funds
Although the Tax Exempt Money Market Fund may invest 25% or
more of its net assets in Municipal Securities whose issuers are in the same
state and the Ohio Municipal Money Market, Pennsylvania Tax Exempt Money Market
and Tax Exempt Money Market Funds may invest 25% or more of their respective net
assets in Municipal Securities the interest on which is paid solely from
revenues of similar projects, the Funds do not presently intend to do so unless
in the opinion of the Adviser the investment is warranted. The Ohio Municipal
Money Market Fund may invest up to 100% of its assets in private activity bonds.
In addition, although the Pennsylvania Tax Exempt Money Market and Tax Exempt
Money Market Funds may invest up to 20% of their respective total assets in
private activity bonds (described below) and taxable investments, these Funds do
not currently intend to do so unless in the opinion of the Adviser the
investment is warranted. To the extent that a Fund's assets are invested in
Municipal Securities that are payable from the revenues of similar projects or
are issued by issuers located in the same state or are invested in private
activity bonds, the Fund will be subject to the peculiar risks presented by the
laws and economic conditions relating to such states, projects and bonds to a
greater extent than it would be if its assets were not so invested.
ARMADA MONEY MARKET FUND
The Fund seeks to achieve its objective by investing in "money
market" instruments such as certificates of deposit and other obligations issued
by domestic and foreign
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<PAGE> 16
banks, and commercial paper (including variable and floating rate instruments)
rated high quality by an unaffiliated Rating Agency, or determined to be of
comparable quality by the Adviser. The Money Market Fund may also invest in
obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities, and repurchase agreements issued by financial institutions
such as banks and broker-dealers.
ARMADA GOVERNMENT MONEY MARKET FUND
The Fund seeks to achieve its objective by investing in
obligations issued or guaranteed as to payment of principal and interest by the
U.S. government, its agencies or instrumentalities, and repurchase agreements
issued by financial institutions such as banks and broker-dealers. The Fund is
currently rated by S&P.
ARMADA TREASURY MONEY MARKET FUND
The Fund seeks to achieve its objective by investing
exclusively in direct obligations of the U.S. Treasury, such as Treasury bills
and notes, and investment companies that invest exclusively in such obligations.
The Fund is currently rated by S&P.
ARMADA MID CAP GROWTH FUND
The Fund normally will invest at least 80% of the value of its
total assets in common stocks and securities convertible into common stocks of
companies believed by the Adviser to be characterized by sound management and
the ability to finance expected long-term growth. The Fund normally will invest
at least 80% of the value of its total assets in common stocks and securities
convertible into common stocks of companies with market capitalizations
comparable to companies in the Russell Mid Cap Growth Index. The Fund may also
invest up to 20% of the value of its total assets in preferred stocks, corporate
bonds, notes, units of real estate investment trusts, warrants, and short-term
obligations (with maturities of 12 months or less) consisting of commercial
paper (including variable amount master demand notes), bankers' acceptances,
certificates of deposit, repurchase agreements, obligations issued or guaranteed
by the U.S. government or, its agencies or instrumentalities, and demand and
time deposits of domestic and foreign banks and savings and loan associations.
The Fund may also hold securities of other investment companies and depository
or custodial receipts representing beneficial interests in any of the foregoing
securities.
Subject to the foregoing policies, the Fund may also invest up
to 25% of its net assets in foreign securities either directly or through the
purchase of American Depository Receipts ("ADRs"), European Depository Receipts
("EDRs"), Global Depository Receipts ("GDRs") and other similar global
instruments, and may also invest in securities issued by foreign branches of
U.S. banks and foreign banks, Canadian commercial paper and in U.S.
dollar-denominated commercial paper of a foreign issuer.
The Fund anticipates investing in growth-oriented,
medium-sized companies. Medium-sized companies are considered to be those with a
market capitalization comparable to
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<PAGE> 17
companies in the Russell Mid Cap Growth Index. Investments will be in companies
that have typically exhibited consistent, above-average growth in revenues and
earnings, strong management, and sound and improving financial fundamentals.
Often, these companies are market or industry leaders, have excellent products
and/or services, and exhibit the potential for growth. Primary holdings of the
Fund are in companies that participate in long-term growth industries, although
these will be supplemented by holdings in non-growth industries that exhibit the
desired characteristics.
Consistent with the foregoing, the Fund will focus its
investments in those companies and types of companies that the Adviser believes
will enable the Fund to achieve its investment objective.
ARMADA LARGE CAP ULTRA FUND
The Large Cap Ultra Fund normally will invest at least 80% of
the value of its total assets in common stocks and securities convertible into
common stocks of companies believed by the Investment Adviser to be
characterized by sound management and the ability to finance expected long-term
growth and with market capitalizations comparable to companies in the Standard &
Poor's Barra Growth Index. The Large Cap Ultra Fund may also invest up to 20% of
the value of its total assets in preferred stocks, corporate bonds, notes, units
of real estate investment trusts, warrants, and short-term obligations (with
maturities of 12 months or less) consisting of commercial paper (including
variable amount master demand notes), bankers' acceptances, certificates of
deposit, repurchase agreements, obligations issued or guaranteed by the U.S.
Government or its agencies or instrumentalities, and demand and time deposits of
domestic and foreign banks and savings and loan associations. The Large Cap
Ultra Fund may also hold securities of other investment companies and depository
or custodial receipts representing beneficial interests in any of the foregoing
securities.
Subject to the foregoing policies, the Large Cap Ultra Fund
may also invest up to 25% of its net assets in foreign securities either
directly or through the purchase of American depository receipts ("ADRs") or
European depository receipts ("EDRs") and may also invest in securities issued
by foreign branches of U.S. banks and foreign banks, CCP, and in U.S.
dollar-denominated commercial paper of a foreign issuer.
The Large Cap Ultra Fund anticipates investing in
growth-oriented companies with large market capitalization, defined as
capitalization comparable to companies in the Standard & Poor's Barra Growth
Index. The Large Cap Ultra Fund will invest in companies that have typically
exhibited consistent, above-average growth in revenues and earnings, strong
management, and sound and improving financial fundamentals. Often, these
companies are market or industry leaders, have excellent products and/or
services, and exhibit the potential for growth. Core holdings of the Large Cap
Ultra Fund are in companies that participate in long-term growth industries,
although these will be supplemented by holdings in non-growth industries that
exhibit the desired characteristics.
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<PAGE> 18
Consistent with the foregoing, the Large Cap Ultra Fund will
focus its investments in those companies and types of companies that the
Investment Adviser believes will enable such Fund to achieve its investment
objective.
ARMADA U.S. GOVERNMENT INCOME FUND
The Fund will normally invest at least 80% of its total assets
in obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities, although up to 20% of the value of its total assets may be
invested in debt securities and preferred stocks of non-governmental issuers.
The Fund also may invest up to 20% of its total assets in mortgage-related
securities issued by non-Governmental entities and in other securities described
below. The Fund anticipates that it will acquire securities with average
remaining maturities of 3 to 10 years.
The types of U.S. government obligations, including
mortgage-related securities, invested in by the Fund will include obligations
issued or guaranteed as to payment of principal and interest by the full faith
and credit of the U.S. Treasury, such as Treasury bills, notes and bonds,
Stripped Treasury Obligations and government securities.
The Fund may also hold short-term obligations (with maturities
of 12 months or less) consisting of domestic and foreign commercial paper
(including variable amount master demand notes), rated at the time of purchase
within the top two rating categories assigned by a Rating Agency or, if unrated,
which the Adviser deems present attractive opportunities and are of comparable
quality, bankers' acceptances, certificates of deposit and time deposits of
domestic and foreign branches of U.S. banks and foreign banks, and repurchase
and reverse repurchase agreements. The Fund may also invest in corporate debt
securities which are rated at the time of purchase within the top four rating
categories assigned by a Rating Agency or, if unrated, which the Adviser deems
present attractive opportunities and are of comparable quality.
ARMADA MICHIGAN MUNICIPAL BOND FUND
As a fundamental policy, the Fund will normally invest at
least 80% of its net assets in a portfolio of securities exempt from Michigan
state taxes. The Fund may invest up to 100% of its assets in private activity
bonds which may be treated as a special tax preference item under the federal
alternative minimum tax.
"Michigan Municipal Securities" include debt obligations,
consisting of notes, bonds and commercial paper, issued by or on behalf of the
State of Michigan, its political subdivisions, municipalities and public
authorities, the interest on which is, in the opinion of bond counsel to the
issuer, exempt from federal income tax and Michigan state income taxes (but may
be treated as a preference item for individuals for purposes of the federal
alternative minimum tax) and debt obligations issued by the government of Puerto
Rico, the U.S. territories and possessions of Guam, the U.S. Virgin Islands or
such other governmental entities whose debt obligations, either by law or
treaty, generate interest income which is exempt from federal and Michigan state
income taxes.
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<PAGE> 19
The Fund normally will be invested in long-term Michigan
Municipal Securities and the average weighted maturity of such investments will
be 2 to 10 years, although the Fund may invest in Michigan Municipal Securities
of any maturity and the Adviser may extend or shorten the average weighted
maturity of its portfolio depending upon anticipated changes in interest rates
or other relevant market factors. In addition, the average weighted rating of
the Fund's portfolio may vary depending upon the availability of suitable
Michigan Municipal Securities or other relevant market factors.
The Fund invests in Michigan Municipal Securities which are
rated at the time of purchase within the four highest rating categories assigned
by a Rating Agency or, in the case of notes, tax-exempt commercial paper or
variable rate demand obligations, rated within the two highest rating categories
assigned by a Rating Agency. The Fund may also purchase Michigan Municipal
Securities which are unrated at the time of purchase but are determined to be of
comparable quality by the Adviser pursuant to guidelines approved by the Trust's
Board of Trustees. The applicable Michigan Municipal Securities ratings are
described in Appendix A.
Interest income from certain types of municipal securities may
be subject to federal alternative minimum tax. The Fund will not treat these
bonds as "Michigan Municipal Securities" for purposes of measuring compliance
with the 80% and 65% tests described above. To the extent the Fund invests in
these bonds, individual shareholders, depending on their own tax status, may be
subject to alternative minimum tax on that part of the Fund's distributions
derived from these bonds.
The Fund may invest in taxable obligations if, for example,
suitable tax-exempt obligations are unavailable or if acquisition of U.S.
government or other taxable securities is deemed appropriate for temporary
defensive purposes as determined by the Adviser to be warranted due to market
conditions. Such taxable obligations consist of government securities,
certificates of deposit, time deposits and bankers' acceptances of selected
banks, commercial paper meeting the Fund's quality standards for tax-exempt
commercial paper (as described above), and such taxable obligations as may be
subject to repurchase agreements. These obligations are described further in the
Statement of Additional Information. Under such circumstances and during the
period of such investment, the Fund may not achieve its stated investment
objective.
Because the Fund invests primarily in securities issued by the
State of Michigan and its political subdivisions, municipalities and public
authorities, the Fund's performance is closely tied to the general economic
conditions within the state as a whole and to the economic conditions within
particular industries and geographic areas represented or located within the
state. However, the Fund attempts to diversify, to the extent the Adviser deems
appropriate, among issuers and geographic areas in the State of Michigan.
The Fund is classified as a "non-diversified" investment
company, which means that the amount of assets of the Fund that may be invested
in the securities of a single issuer is not limited by the 1940 Act.
Nevertheless, the Fund intends to conduct its operations so as to qualify as a
"regulated investment company" for purposes of the Internal Revenue Code of
1986,
-17-
<PAGE> 20
as amended (the "Code"). The Code requires that, at the end of each
quarter of a fund's taxable year, (i) at least 50% of the market value of its
total assets be invested in cash, U.S. government securities, securities of
other regulated investment companies and other securities, with such other
securities of any one issuer limited for the purposes of this calculation to an
amount not greater than 5% of the value of the fund's total assets and 10% of
the outstanding voting securities of such issuer, and (ii) not more than 25% of
the value of its total assets be invested in the securities of any one issuer
(other than U.S. government securities or the securities of other regulated
investment companies). Since a relatively high percentage of the Fund's assets
may be invested in the obligations of a limited number of issuers, some of which
may be within the same economic sector, the Fund's portfolio securities may be
more susceptible to any single economic, political or regulatory occurrence than
the portfolio securities of a diversified investment company.
See "Special Considerations Regarding Investment in Michigan
Municipal Securities" below.
ARMADA TREASURY PLUS MONEY MARKET FUND
The Fund will only purchase "eligible securities" that present
minimal credit risks as determined by the Adviser pursuant to guidelines
established by the Trust's Board of Trustees. Eligible securities generally
include (i) U.S. government obligations, (ii) securities that are rated (at the
time of purchase) by nationally recognized statistical rating organizations
("Rating Agencies") in the two highest rating categories for such securities,
and (iii) certain securities that are not so rated but are of comparable quality
to rated securities as determined by the Adviser. A description of ratings is
also contained in the Statement of Additional Information.
The Fund's assets have remaining maturities of 397 calendar
days or less (except for certain variable and floating rate instruments and
securities underlying certain repurchase agreements) as defined by the SEC, and
the Fund's dollar-weighted average portfolio maturity may not exceed 90 days.
RATINGS CRITERIA
----------------
The Balanced Allocation and Michigan Municipal Bonds Fund may
invest in investment grade debt securities which are rated at the time of
purchase within the four highest ratings groups assigned by Moody's (Aaa, Aa, A
and Baa), S&P (AAA, AA, A and BBB), Fitch (AAA, AA, A and BBB) or Duff (AAA, AA,
A and BBB), or, if unrated, which are determined by the Adviser to be of
comparable quality pursuant to guidelines approved by the Trust's Board of
Trustees. Debt securities rated in the lowest investment grade debt category
(Baa by Moody's or BBB by S&P, Fitch or Duff) have speculative characteristics;
changes in economic conditions or other circumstances are more likely to lead to
a weakened capacity to make principal and interest payments than is the case
with higher grade securities.
In the event that, subsequent to its purchase by a Fund, a
rated security ceases to be rated or its rating is reduced below investment
grade, the Adviser will consider whether the
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<PAGE> 21
Fund should continue to hold the security. The Adviser expects, however, to sell
promptly any securities that are non-investment grade as a result of such events
that exceed 5% of a Fund's net assets where the Adviser has determined that such
sale is in the best interest of the particular Fund.
SHAREHOLDER VOTE
- ----------------
As used in this Statement of Additional Information, a "vote
of the holders of a majority of the outstanding shares" of the Trust or a
particular investment fund means, with respect to the approval of an investment
advisory agreement, a distribution plan or a change in a fundamental investment
policy, the affirmative vote of the lesser of (a) 50% or more of the outstanding
shares of the Trust or such fund or (b) 67% or more of the shares of the Trust
or such fund present at a meeting if more than 50% of the outstanding shares of
the Trust or such fund are represented at the meeting in person or by proxy.
ADDITIONAL INFORMATION ABOUT PORTFOLIO INSTRUMENTS
- --------------------------------------------------
ELIGIBLE SECURITIES
- -------------------
The Money Market Funds may purchase "eligible securities" that
present minimal credit risks as determined by the Adviser pursuant to guidelines
established by the Trust's Board of Trustees. Eligible securities generally
include: (1) securities that are rated by two or more Rating Agencies (or the
only Rating Agency which has issued a rating) in one of the two highest rating
categories for short term debt securities; (2) securities that have no short
term rating, if the issuer has other outstanding short term obligations that are
comparable in priority and security as determined by the Adviser ("Comparable
Obligations") and that have been rated in accordance with (1) above; (3)
securities that have no short term rating, but are determined to be of
comparable quality to a security satisfying (1) or (2) above, and the issuer
does not have Comparable Obligations rated by a Rating Agency; and (4)
securities with credit supports that meet specified rating criteria similar to
the foregoing and other criteria in accordance with applicable Securities and
Exchange Commission ("SEC") regulations. Securities issued by a money market
fund and securities issued by the U.S. Government may constitute eligible
securities if permitted under applicable SEC regulations and Trust procedures.
The Board of Trustees will approve or ratify any purchases by the Money Market
Funds of securities that are rated by only one Rating Agency or that qualify
under (3) above as long as required by applicable regulations or Trust
procedures.
VARIABLE AND FLOATING RATE INSTRUMENTS
- --------------------------------------
Each Fund (other than the Equity Index, Treasury Money Market
and Treasury Plus Money Market Funds) may purchase variable and floating rate
obligations (including variable amount master demand notes) which are unsecured
instruments that permit the indebtedness thereunder to vary and provide for
periodic adjustments in the interest rate. Because variable and floating rate
obligations are direct lending arrangements between the Fund and the issuer,
they are not normally traded although certain variable and floating rate
obligations, such as Student Loan Marketing Association variable rate
obligations, may have a more active secondary market because
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<PAGE> 22
they are issued or guaranteed by the U.S. Government or its agencies or
instrumentalities. Even though there may be no active secondary market in such
instruments, a Fund may demand payment of principal and accrued interest at a
time specified in the instrument or may resell them to a third party. Such
obligations may be backed by bank letters of credit or guarantees issued by
banks, other financial institutions or the U.S. Government, its agencies or
instrumentalities. The quality of any letter of credit or guarantee will be
rated high quality or, if unrated, will be determined to be of comparable
quality by the Adviser. In the event an issuer of a variable or floating rate
obligation defaulted on its payment obligation, a Fund might be unable to
dispose of the instrument because of the absence of a secondary market and
could, for this or other reasons, suffer a loss to the extent of the default.
The Funds may purchase variable rate and floating rate
obligations. The Adviser will consider the earning power, cash flows and other
liquidity ratios of the issuers and guarantors of such notes and will
continuously monitor their financial status to meet payment on demand. In
determining average weighted portfolio maturity, a variable or floating rate
instrument issued or guaranteed by the U.S. government or an agency or
instrumentality thereof will be deemed to have a maturity equal to the period
remaining until the obligation's next interest rate adjustment. Other variable
and floating rate obligations will be deemed to have a maturity equal to the
longer or shorter of the periods remaining to the next interest rate adjustment
or the demand notice period in accordance with applicable regulations or Trust
procedures.
Variable and floating rate obligations held by a Fund may have
maturities of more than 397 days, provided: (a) (i) the Fund is entitled to
payment of principal and accrued interest upon not more than 30 days' notice or
at specified intervals not exceeding one year (upon not more than 30 days'
notice) and (ii) the rate of interest on such instrument is adjusted
automatically at periodic intervals which normally will not exceed 31 days, but
may extend up to one year, or (b) if the obligation is an asset-backed security,
and if permitted under Trust procedures and applicable regulations, the security
has a feature permitting the holder unconditionally to receive principal and
interest within 13 months of making demand.
GUARANTEED INVESTMENT CONTRACTS
- -------------------------------
The International Equity, Small Cap Value, Small Cap Growth,
Equity Growth, Tax Managed Equity, Core Equity, Equity Income, Balanced
Allocation, Total Return Advantage, Intermediate Bond and Enhanced Income Funds
and the Money Market Funds may make limited investments in "GICs" issued by U.S.
insurance companies. When investing in "GICs" a Fund makes cash contributions to
a deposit fund or an insurance company's general account. The insurance company
then credits to that Fund monthly a guaranteed minimum interest which is based
on an index. The GICs provide that this guaranteed interest will not be less
than a certain minimum rate. The insurance company may assess periodic charges
against a GIC for expense and service costs allocable to it, and the charges
will be deducted from the value of the deposit fund. A Fund will purchase a GIC
only when its Adviser or Sub-Adviser has determined, under guidelines
established by the Board of Trustees, that the GIC presents minimal credit risks
to the Fund and is of comparable quality to instruments that are rated high
quality by one or more rating agencies. For the Money Market Fund, the Fund's
investments in GICs will not exceed 10% of the Fund's net
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<PAGE> 23
assets. In addition, because each Fund may not receive the principal amount of a
GIC from the insurance company on seven days' notice or less, the GIC is
considered an illiquid investment, and, together with other instruments in the
Fund which are not readily marketable, will not exceed 15%, 10% in the case of
the Money Market Fund of the Fund's net assets.
The term of a GIC will be one year or less. In determining
average weighted portfolio maturity, a GIC will be deemed to have a maturity
equal to the period of time remaining until the next readjustment of the
guaranteed interest rate.
BANK OBLIGATIONS AND COMMERCIAL PAPER
- -------------------------------------
The Ohio Municipal Money Market, Pennsylvania Tax Exempt Money
Market, Money Market, Mid Cap Growth and Michigan Municipal Bond Funds may
invest in bank obligations. Bank obligations include bankers' acceptances
generally having a maturity of six months or less and negotiable certificates of
deposit. Bank obligations also include U.S. dollar denominated bankers'
acceptances and certificates of deposit. Investment in bank obligations is
limited to the obligations of financial institutions having more than $1 billion
in total assets at the time of purchase. For purposes of the Money Market Fund's
investment policy with respect to bank obligations, the assets of a bank or
savings institution will be deemed to include the assets of its domestic and
foreign branches.
Investments by the Ohio Municipal, Pennsylvania Tax Exempt
Fund, Mid Cap Growth and Michigan Tax Exempt Bond Funds in commercial paper and
other short term promissory notes issued by corporations, municipalities and
other entities (including variable and floating rate instruments) must be rated
at the time of purchase "A-2" or better by S&P, "Prime-2" or better by Moody's,
"F-2" or better by Fitch, "Duff 2" or better by Duff, or if not rated,
determined by the adviser to be of comparable quality pursuant to guidelines
approved by the Trust's Board of Trustees. Investments may also include
corporate notes. In addition, the Mid Cap Growth Fund may invest in Canadian
commercial paper, which is U.S. dollar denominated commercial paper issued by a
Canadian corporation or a Canadian counterpart of a U.S. corporation.
REPURCHASE AGREEMENTS
- ---------------------
Securities held by the International Equity, Small Cap Growth,
Tax Managed Equity, Core Equity, Equity Index, Balanced Allocation, Total Return
Advantage, Bond, Intermediate Bond, GNMA, Enhanced Income, Ohio Municipal Money
Market, Pennsylvania Tax-Exempt Money Market, Money Market, Government Money
Market, Treasury Plus Money Market, Mid Cap Growth, U.S. Government Income and
Michigan Municipal Bond Funds may be subject to repurchase agreements. Under the
terms of a repurchase agreement, a Fund purchases securities from financial
institutions such as banks and broker-dealers which the Fund's Adviser or Sub
Adviser deems creditworthy under guidelines approved by the Board of Trustees,
subject to the seller's agreement to repurchase such securities at a mutually
agreed-upon date and price. The repurchase price generally equals the price paid
by the Fund plus interest negotiated on the basis of
-21-
<PAGE> 24
current short term rates, which may be more or less than the rate on the
underlying portfolio securities.
The seller under a repurchase agreement will be required to
maintain the value of collateral held pursuant to the agreement at not less than
the repurchase price (including accrued interest). If the seller were to default
on its repurchase obligation or become insolvent, the Fund holding such
obligation would suffer a loss to the extent that the proceeds from a sale of
the underlying portfolio securities were less than the repurchase price under
the agreement, or to the extent that the disposition of such securities by the
Fund were delayed pending court action. Although there is no controlling legal
precedent confirming that a Fund would be entitled, as against a claim by such
seller or its receiver or trustee in bankruptcy, to retain the underlying
securities, the Board of Trustees of the Trust believes that, under the regular
procedures normally in effect for custody of a Fund's securities subject to
repurchase agreements and under federal laws, a court of competent jurisdiction
would rule in favor of the Trust if presented with the question. Securities
subject to repurchase agreements will be held by the Trust's custodian or
another qualified custodian or in the Federal Reserve/Treasury book-entry
system. Repurchase agreements are considered to be loans by a Fund under the
1940 Act.
With respect to the Ohio Municipal Money Market, Pennsylvania
Tax Exempt Money Market, Tax Exempt Money Market, Money Market, Government Money
Market and Treasury Plus Money Market Funds, although the securities subject to
repurchase agreements may bear maturities exceeding 397 days, the Funds
presently intend to enter only into repurchase agreements which terminate within
seven days after notice by the Funds. If a Fund were to enter into repurchase
agreements which provide for a notice period greater than seven days in the
future, the Fund would do so only if such investment, together with other
illiquid securities, did not exceed 10% of the Fund's net assets.
REVERSE REPURCHASE AGREEMENTS
- -----------------------------
The International Equity, Small Cap Value, Small Cap Growth,
Equity Growth, Tax Managed Equity, Core Equity, Equity Index, Equity Income,
Balanced Allocation, Total Return Advantage, Ohio Municipal Money Market,
Pennsylvania Tax Exempt Money Market, Money Market, Government Money Market and
Mid Cap Growth Funds may enter into reverse repurchase agreements in accordance
with its investment restrictions. Pursuant to such agreements, a Fund would sell
portfolio securities to financial institutions such as banks and broker-dealers,
and agree to repurchase them at a mutually agreed-upon date and price. A Fund
intends to enter into reverse repurchase agreements only to avoid otherwise
selling securities during unfavorable market conditions to meet redemptions. At
the time a Fund enters into a reverse repurchase agreement, it will place in a
segregated custodial account assets such as U.S. Government securities or other
liquid, high grade debt securities consistent with the Fund's investment
restrictions having a value at least equal to the repurchase price (including
accrued interest), and will subsequently monitor the account to ensure that such
equivalent value is maintained. Whenever the Ohio Municipal Money Market,
Pennsylvania Tax-Exempt Money Market, Money Market and Government Money Market
Funds enter into a reverse repurchase agreement as described in the
Prospectuses, it will place in a segregated custodial account liquid assets at
least equal to the repurchase price marked to market
-22-
<PAGE> 25
daily (including accrued interest) and will subsequently monitor the account to
ensure such equivalent value is maintained. Reverse repurchase agreements
involve the risk that the market value of the securities sold by a Fund may
decline below the price at which it is obligated to repurchase the securities.
Reverse repurchase agreements are considered to be borrowings by the Fund under
the 1940 Act.
LENDING OF PORTFOLIO SECURITIES
The International Equity, Small Cap Value, Small Cap Growth,
Equity Growth, Tax Managed Equity, Core Equity, Equity Index, Equity Income,
Balanced Allocation, Total Return Advantage, Bond, Intermediate Bond, GNMA,
Enhanced Income, Money Market, Government Money Market, Treasury Plus Money
Market, Mid Cap Growth and U.S. Government Income Funds may lend securities to
broker-dealers, banks or other institutional borrowers pursuant to agreements
requiring that the loans be continuously secured by cash, securities of the U.S.
government or its agencies, or any combination of cash and such securities, as
collateral equal to 100% of the market value at all times of the securities
lent. Such loans will not be made if, as a result, the aggregate amount of all
outstanding securities loans for a Fund exceed one-third of the value of its
total assets taken at fair market value. Collateral must be valued daily by the
Fund's Adviser or Sub-adviser and the borrower will be required to provide
additional collateral should the market value of the loaned securities increase.
During the time portfolio securities are on loan, the borrower pays the Fund
involved any dividends or interest paid on such securities. Loans are subject to
termination by the Fund or the borrower at any time. While a Fund does not have
the right to vote securities on loan, it intends to terminate the loan and
regain the right to vote if this is considered important with respect to the
investment. A Fund will only enter into loan arrangements with broker-dealers,
banks or other institutions which its Adviser or Sub-adviser has determined are
creditworthy under guidelines established by the Trust's Board of Trustees.
A Fund will continue to receive interest on the securities
lent while simultaneously earning interest on the investment of the cash
collateral in U.S. government securities. However, a Fund will normally pay
lending fees to such broker-dealers and related expenses from the interest
earned on invested collateral. There may be risks of delay in receiving
additional collateral or risks of delay in recovery of the securities or even
loss of rights in the collateral should the borrower of the securities fail
financially. However, loans are made only to borrowers deemed by the Adviser to
be of good standing and when, in the judgment of the adviser, the consideration
which can be earned currently from such securities loans justifies the attendant
risk. Any loan may be terminated by either party upon reasonable notice to the
other party.
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<PAGE> 26
ILLIQUID SECURITIES
- -------------------
The International Equity, Small Cap Value, Small Cap Growth,
Equity Growth, Tax Managed Equity, Core Equity, Equity Index, Equity Income,
Total Return Advantage, Bond, Intermediate Bond, GNMA, Enhanced Income, Ohio Tax
Exempt Bond, Pennsylvania Municipal Bond, National Tax Exempt Bond, Mid Cap
Growth, U.S. Government Income and Michigan Municipal Bond Funds will not invest
more than 15% of their respective net assets in securities that are illiquid.
The Money Market Funds will not knowingly invest more than 10% of the value of
their respective net assets in securities that are illiquid. Illiquid securities
would generally include repurchase agreements and GICs with notice/termination
dates in excess of seven days and certain securities which are subject to
trading restrictions because they are not registered under the Securities Act of
1933, as amended (the "1933 Act").
Each Fund may purchase securities which are not registered
under the 1933 Act but which can be sold to "qualified institutional buyers" in
accordance with Rule 144A under the 1933 Act. Any such security will not be
considered illiquid so long as it is determined by the Board of Trustees or the
Fund's Adviser or Sub-adviser, acting under guidelines approved and monitored by
the Board, that an adequate trading market exists for that security. This
investment practice could have the effect of increasing the level of illiquidity
in a Fund during any period that qualified institutional buyers become
uninterested in purchasing these restricted securities.
TAXABLE MONEY MARKET INSTRUMENTS
- --------------------------------
The Ohio Tax Exempt Bond, Pennsylvania Municipal, National Tax
Exempt Bond and Michigan Municipal Bond Funds may invest, from time to time, a
portion of its assets for temporary defensive or liquidity purposes in
short-term money market instruments, the income from which is subject to federal
income tax ("Taxable Money Market Instruments"). Taxable Money Market
Instruments may include: obligations of the U.S. government and its agencies and
instrumentalities; debt securities (including commercial paper) of issuers
having, at the time of purchase, a quality rating within the highest rating
category of S&P, Fitch, Duff, or Moody's; certificates of deposit; bankers'
acceptances; and repurchase agreements with respect to such obligations.
FOREIGN SECURITIES AND CURRENCIES
- ---------------------------------
The International Equity, Small Cap Value, Small Cap Growth,
Equity Growth, Tax Managed Equity, Core Equity, Equity Income, Balanced
Allocation and Mid Cap Growth Funds may invest up to 20% (100% in the case of
the International Equity Fund) of its total assets at the time of purchase in
securities issued by foreign entities and ADRs, EDRs and GDRs (defined below).
The Total Return Advantage, Intermediate Bond, Enhanced Income
and U.S. Government Income Funds may also invest in securities issued by foreign
issuers either directly or indirectly through investments in American, European
or Global Depository Receipts (see
-24-
<PAGE> 27
"American, European and Global Depository Receipts" below). Such securities may
or may not be listed on foreign or domestic stock exchanges.
Investments in foreign securities involve certain inherent
risks, such as political or economic instability of the issuer or the country of
issue, the difficulty of predicting international trade patterns, changes in
exchange rates of foreign currencies and the possibility of adverse changes in
investment or exchange control regulations. There may be less publicly available
information about a foreign company than about a domestic company. Foreign
companies generally are not subject to uniform accounting, auditing and
financial reporting standards comparable to those applicable to domestic
companies. Further, foreign stock markets are generally not as developed or
efficient as those in the U.S., and in most foreign markets, volume and
liquidity are less than in the U.S. Fixed commissions on foreign stock exchanges
are generally higher than the negotiated commissions on U.S. exchanges, and
there is generally less government supervision and regulation of foreign stock
exchanges, brokers and companies than in the U.S.
With respect to certain foreign countries, there is a
possibility of expropriation or confiscatory taxation, limitations on the
removal of funds or other assets, or diplomatic developments that could affect
investment within those countries. Because of these and other factors,
securities of foreign companies acquired by the Fund may be subject to greater
fluctuation in price than securities of domestic companies.
Since the Funds will invest substantially in securities
denominated in or quoted in currencies other than the U.S. dollar, changes in
currency exchange rates (as well as changes in market values) will affect the
value in U.S. dollars of securities held by the Fund. Foreign exchange rates are
influenced by trade and investment flows, policy decisions of governments, and
investor sentiment about these and other issues. In addition, costs are incurred
in connection with conversions between various currencies.
The conversion of the eleven member states of the European
Union to a common currency, the "euro," is scheduled to occur on January 1,
1999. As a result of the conversion, securities issued by the member states will
be subject to certain risks, including competitive implications of increased
price transparency of European Union markets (including labor markets) resulting
from adoption of a common currency and issuers' plans for pricing their own
products and services in euro; an issuer's ability to make any required
information technology updates on a timely basis, and costs associated with the
conversion (including costs of dual currency operations through January 1,
2002); currency exchange rate risk and derivatives exposure (including the
disappearance of price sources, such as certain interest rate indices) and
continuity of material contracts and potential tax consequences. Other risks
include whether the payment and operational systems of banks and other financial
institutions will be ready by the scheduled launch date; the creation of
suitable clearing and settlement payment systems for the new currency; the legal
treatment of certain outstanding financial contracts after January 1, 1999 that
refer to existing currencies rather than the euro; the establishment and
maintenance of exchange rates for currencies being converted into the euro; the
fluctuation of the euro relative to non-euro currencies during the transition
period from January 1, 1999 to December 31, 2000 and
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<PAGE> 28
beyond; whether the interest rate, tax and labor regimes of participating
European countries will converge over time; and whether the conversion of the
currencies of other EU countries such as the United Kingdom, Denmark and Greece
into the euro and the possible admission of other non-EU countries such as
Poland, Latvia and Lithuania as members of the EU may have an impact on the
euro.
These or other factors, including political and economic
risks, could cause market disruptions before or after the introduction of the
euro, and could adversely affect the value of securities and foreign currencies
held by the Funds. Commissions on transactions in foreign securities may be
higher than those for similar transactions on domestic stock markets. In
addition, clearance and settlement procedures may be different in foreign
countries and, in certain markets, such procedures have been unable to keep pace
with the volume of securities transactions, thus making it difficult to conduct
such transactions.
The expense ratio of a Fund can be expected to be higher than
that of funds investing in domestic securities. The costs of investing abroad
are generally higher for several reasons, including the cost of investment
research, increased costs of custody for foreign securities, higher commissions
paid for comparable transactions involving foreign securities, and costs arising
from delays in settlements of transactions involving foreign securities.
Interest and dividends payable on the Fund's foreign portfolio
securities may be subject to foreign withholding taxes. To the extent such taxes
are not offset by tax credits or deductions allowed to investors under U.S.
federal income tax provisions, they may reduce the return to the Fund's
shareholders.
The Funds may invest in ADRs. Some of the Funds may also
invest in SPDRs, EDRs, GDRs and other similar global instruments. The Mid Cap
Growth Fund may also invest in MidCap SPDRs. ADRs are receipts issued in
registered form by a U.S. bank or trust company evidencing ownership of
underlying securities issued by a foreign issuer. ADRs may be listed on a
national securities exchange or may be traded in the over-the-counter markets.
ADR prices are denominated in U.S. dollars although the underlying securities
may be denominated in a foreign currency. SPDRs are receipts designed to
replicate the performance of the S&P 500. MidCap SPDRs represent ownership in
the MidCap SPDR Trust, a unit investment trust which holds a portfolio of common
stocks that closely tracks the price performance and dividend yield of the S&P
MidCap 400 Index. EDRs, which are sometimes referred to as Continental
Depository Receipts, are receipts issued in Europe typically by non-U.S. banks
or trust companies and foreign branches of U.S. banks that evidence ownership of
foreign or U.S. securities. EDRs are designed for use in European exchange and
over-the-counter markets. GDRs are receipts structured similarly to EDRs and are
marketed globally. GDRs are designed for trading in non-U.S. securities markets.
Investments in ADRs, EDRs and GDRs involve risks similar to those accompanying
direct investments in foreign securities, but those that are traded in the
over-the-counter market which do not have an active or substantial secondary
market will be considered illiquid and, therefore, will be subject to a Fund's
limitation with respect to illiquid securities.
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<PAGE> 29
The principal difference between sponsored and unsponsored
ADR, EDR and GDR programs is that unsponsored ones are organized independently
and without the cooperation of the issuer of the underlying securities.
Consequently, available information concerning the issuer may not be as current
as for sponsored ADRs, EDRs and GDRs, and the prices of unsponsored ADRs, EDRs
and GDRs may be more volatile.
FOREIGN GOVERNMENT OBLIGATIONS
- ------------------------------
The International Equity, Balanced Allocation, Mid Cap Growth
and U.S. Government Income Funds may purchase debt obligations issued or
guaranteed by governments (including states, provinces or municipalities) of
countries other than the United States, or by their agencies, authorities or
instrumentalities. The percentage of assets invested in securities of a
particular country or denominated in a particular currency will vary in
accordance with the Adviser's or Sub-Adviser's assessment of gross domestic
product in relation to aggregate debt, current account surplus or deficit, the
trend of the current account, reserves available to defend the currency, and the
monetary and fiscal policies of the government.
FOREIGN CURRENCY TRANSACTIONS
- -----------------------------
In order to protect against a possible loss on investments
resulting from a decline or appreciation in the value of a particular foreign
currency against the U.S. dollar or another foreign currency or for other
reasons, the International Equity, Equity Income, Balanced Allocation, Total
Return Advantage, Enhanced Income, Mid Cap Growth and U.S. Government Income
Funds are authorized to enter into forward currency exchange contracts. These
contracts involve an obligation to purchase or sell a specified currency at a
future date at a price set at the time of the contract. Forward currency
contracts do not eliminate fluctuations in the values of portfolio securities
but rather allow the Funds to establish a rate of exchange for a future point in
time.
When entering into a contract for the purchase or sale of a
security, these Funds may enter into a forward foreign currency exchange
contract for the amount of the purchase or sale price to protect against
variations, between the date the security is purchased or sold and the date on
which payment is made or received, in the value of the foreign currency relative
to the U.S. dollar or other foreign currency.
When the Adviser or Sub-Adviser anticipates that a particular
foreign currency may decline substantially relative to the U.S. dollar or other
leading currencies, in order to reduce risk, the Fund may enter into a forward
contract to sell, for a fixed amount, the amount of foreign currency
approximating the value of some or all of the Fund's securities denominated in
such foreign currency. Similarly, when the obligations held by the Fund create a
short position in a foreign currency, the Fund may enter into a forward contract
to buy, for a fixed amount, an amount of foreign currency approximating the
short position. With respect to any forward foreign currency contract, it will
not generally be possible to match precisely the amount covered by that contract
and the value of the securities involved due to the changes in the values of
such securities resulting from market movements between the date the forward
contract is entered into and the date it matures. In addition, while forward
contracts may offer protection from losses resulting from
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<PAGE> 30
declines or appreciation in the value of a particular foreign currency, they
also limit potential gains which might result from changes in the value of such
currency. A Fund will also incur costs in connection with forward foreign
currency exchange contracts and conversions of foreign currencies and U.S.
dollars.
A separate account consisting of liquid assets, such as cash,
U.S. Government securities or other liquid high grade debt obligations equal to
the amount of the International Equity, Equity Income, Balanced Allocation,
Total Return Advantage and Enhanced Income Funds' assets that could be required
to consummate forward contracts will be established with the Trust's custodian
except to the extent the contracts are otherwise "covered." For the purpose of
determining the adequacy of the securities in the account, the deposited
securities will be valued at market or fair value. If the market or fair value
of such securities declines, additional cash or liquid securities will be placed
in the account daily so that the value of the account will equal the amount of
such commitments by the Funds. A forward contract to sell a foreign currency is
"covered" if the Fund owns the currency (or securities denominated in the
currency) underlying the contract, or holds a forward contract (or call option)
permitting the Fund to buy the same currency at a price no higher than the
Fund's price to sell the currency. A forward contract to buy a foreign currency
is "covered" if the Fund holds a forward contract (or call option) permitting
the Funds to sell the same currency at a price as high as or higher than the
Fund's price to buy the currency.
EXCHANGE RATE-RELATED SECURITIES
- --------------------------------
The International Equity, Equity Income, Balanced Allocation,
Total Return Advantage and Enhanced Income Funds may invest in debt securities
for which the principal due at maturity, while paid in U.S. dollars, is
determined by reference to the exchange rate between the U.S. dollar and the
currency of one or more foreign countries ("Exchange Rate-Related Securities").
The interest payable on these securities is also denominated in U.S. dollars and
is not subject to foreign currency risk and, in most cases, is paid at rates
higher than most other similarly rated securities in recognition of the risks
associated with these securities. There is the possibility of significant
changes in rates of exchange between the U.S. dollar and any foreign currency to
which an Exchange Rate-Related Security is linked. In addition, there is no
assurance that sufficient trading interest to create a liquid secondary market
will exist for a particular Exchange Rate-Related Security due to conditions in
the debt and foreign currency markets. Illiquidity in the forward foreign
exchange market and the high volatility of the foreign exchange market may, from
time to time, combine to make it difficult to sell an Exchange Rate-Related
Security prior to maturity without incurring a significant price loss.
CONVERTIBLE SECURITIES
- ----------------------
The Equity Growth, Balanced Allocation and Mid Cap Growth
Funds may invest in convertible securities entitling the holder to receive
interest paid or accrued on debt or the dividend paid on preferred stock until
the securities mature or are redeemed, converted or exchanged. Prior to
conversion, convertible securities have characteristics similar to ordinary debt
securities in that they normally provide a stable stream of income with
generally higher yields than those of common stock of the same or similar
issuers. Convertible securities rank senior to common stock in a
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<PAGE> 31
corporation's capital structure and therefore generally entail less risk than
the corporation's common stock. The value of the convertibility feature depends
in large measure upon the degree to which the convertible security sells above
its value as a fixed income security.
In selecting convertible securities, the Adviser or
Sub-Adviser will consider, among other factors, the creditworthiness of the
issuers of the securities; the interest or dividend income generated by the
securities; the potential for capital appreciation of the securities and the
underlying common stocks; the prices of the securities relative to other
comparable securities and to the underlying common stocks; whether the
securities are entitled to the benefits of sinking funds or other protective
conditions; diversification of the Fund's portfolio as to issuers; and the
ratings of the securities. Since credit rating agencies may fail to timely
change the credit ratings of securities to reflect subsequent events, the
Adviser or Sub-Adviser will consider whether such issuers will have sufficient
cash flow and profits to meet required principal and interest payments. A Fund
may retain a portfolio security whose rating has been changed if the Adviser
deems that retention of such security is warranted.
CORPORATE DEBT OBLIGATIONS
- --------------------------
The Balanced Allocation, Total Return Advantage, Bond,
Intermediate Bond, GNMA, Enhanced Income, Mid Cap Growth, U.S. Government
Income, Michigan Municipal Bond and the Money Market Funds may invest in
corporate debt obligations. In addition to obligations of corporations,
corporate debt obligations include securities issued by banks and other
financial institutions. Corporate debt obligations are subject to the risk of an
issuer's inability to meet principal and interest payments on the obligations.
OTHER DEBT SECURITIES
- ---------------------
The Balanced Allocation, Total Return Advantage, Intermediate
Bond and Enhanced Income Funds may also invest in debt securities which may
include: equipment lease and trust certificates; collateralized mortgage
obligations; state, municipal and private activity bonds; obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities; securities
of supranational organizations such as the World Bank; participation
certificates in pools of mortgages, including mortgages issued or guaranteed by
the U.S. government, its agencies or instrumentalities; asset-backed securities
such as mortgage backed securities, Certificates of Automobile Receivables
("CARS") and Certificates of Amortizing Revolving Debts ("CARDS"); private
placements; and income participation loans. Some of the securities in which the
Fund invests may have warrants or options attached.
The Balanced Allocation, Total Return Advantage, Intermediate
Bond and Enhanced Income Funds' appreciation may result from an improvement in
the credit standing of an issuer whose securities are held or a general decline
in the level of interest rates or a combination of both. An increase in the
level of interest rates generally reduces the value of the fixed rate debt
instruments held by the Fund; conversely, a decline in the level of interest
rates generally increases the value of such investments. An increase in the
level of interest rates may
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<PAGE> 32
temporarily reduce the value of the floating rate debt instruments held by the
Fund; conversely, a decline in the level of interest rates may temporarily
increase the value of those investments.
The Balanced Allocation, Total Return Advantage, Intermediate
Bond, and Enhanced Income Funds invest only in investment grade debt securities
which are rated at the time of purchase within the four highest ratings groups
assigned by Moody's (Aaa, Aa, A and Baa), S&P (AAA, AA, A and BBB), Fitch (AAA,
AA, A and BBB), or Duff (AAA, AA, A and BBB) or, if unrated, which are
determined by the Fund's adviser to be of comparable quality pursuant to
guidelines approved by the Trust's Board of Trustees. Debt securities rated in
the lowest investment grade debt category (Baa by Moody's or BBB by S&P, Fitch
or Duff or IBCA) may have speculative characteristics; changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
to make principal and interest payments than is the case with higher grade
securities.
In the event that subsequent to its purchase by the Fund, a
rated security ceases to be rated or its rating is reduced below investment
grade, the adviser will consider whether the Fund should continue to hold the
security. The adviser expects, however, to sell promptly any securities that are
non-investment grade as a result of such events that exceed 5% of the Fund's net
assets where the adviser has determined that such sale is in the best interest
of the Fund.
RISKS RELATED TO LOWER RATED SECURITIES WHICH MAY BE PURCHASED BY THE TOTAL
- ---------------------------------------------------------------------------
RETURN ADVANTAGE FUND
- ---------------------
While any investment carries some risk, certain risks
associated with lower rated securities (commonly referred to as "junk bonds")
are different than those for investment grade securities. The risk of loss
through default is greater because lower rated securities are usually unsecured
and are often subordinate to an issuer's other obligations. Additionally, the
issuers of these securities frequently have high debt levels and are thus more
sensitive to difficult economic conditions, individual corporate developments
and rising interest rates. Consequently, the market price of these securities
may be quite volatile and may result in wider fluctuations in the Total Return
Advantage Fund's net asset value per share.
In addition, an economic downturn or increase in interest
rates could have a negative impact on both the markets for lower rated
securities (resulting in a greater number of bond defaults) and the value of
lower rated securities held by the Total Return Advantage Fund. Current laws,
such as those requiring federally insured savings and loan associations to
remove investments in lower rated securities from their funds, as well as other
pending proposals, may also have a material adverse effect on the market for
lower rated securities.
The economy and interest rates may affect lower rated
securities differently than other securities. For example, the prices of lower
rated securities are more sensitive to adverse economic changes or individual
corporate developments than are the prices of higher rated investments. In
addition, during an economic downturn or period in which interest rates are
rising significantly, highly leveraged issuers may experience financial
difficulties, which, in turn,
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<PAGE> 33
would adversely affect their ability to service their principal and interest
payment obligations, meet projected business goals and obtain additional
financing.
If an issuer of a security held by the Total Return Advantage
Fund defaults, the Fund may incur additional expenses to seek recovery. In
addition, periods of economic uncertainty would likely result in increased
volatility for the market prices of lower rated securities as well as the Fund's
net asset value. In general, both the prices and yields of lower rated
securities will fluctuate.
In certain circumstances it may be difficult to determine a
security's fair value due to a lack of reliable objective information. Such
instances occur where there is no established secondary market for the security
or the security is lightly traded. As a result, the Total Return Advantage
Fund's valuation of a security and the price it is actually able to obtain when
it sells the security could differ.
Adverse publicity and investor perceptions, whether or not
based on fundamental analysis, may decrease the value and liquidity of lower
rated securities held by the Total Return Advantage Fund, especially in a thinly
traded market. Illiquid or restricted securities held by the Fund may involve
special registration responsibilities, liabilities and costs, and could involve
other liquidity and valuation difficulties.
The ratings of Moody's, S&P, Fitch and Duff evaluate the
safety of a lower rated security's principal and interest payments, but do not
address market value risk. Because the ratings of the rating agencies may not
always reflect current conditions and events, in addition to using recognized
rating agencies and other sources, the Sub-adviser performs its own analysis of
the issuers of lower rated securities purchased by the Fund. Because of this,
the Fund's performance may depend more on its own credit analysis than is the
case for mutual funds investing in higher rated securities.
The Sub-adviser continuously monitors the issuers of lower
rated securities held by the Total Return Advantage Fund for their ability to
make required principal and interest payments, as well as in an effort to
control the liquidity of the Fund so that it can meet redemption requests.
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<PAGE> 34
WARRANTS
- --------
The International Equity, Small Cap Value, Small Cap Growth,
Equity Growth, Tax Managed Equity, Core Equity, Equity Income, Balanced
Allocation and Mid Cap Growth Funds may invest in warrants. Warrants enable the
owner to subscribe to and purchase a specified number of shares of the issuing
corporation at a specified price during a specified period of time. The prices
of warrants do not necessarily correlate with the prices of the underlying
securities. The purchase of warrants involves the risk that the purchaser could
lose the purchase value of the warrant if the right to subscribe to additional
shares is not exercised prior to the warrant's expiration. Also, the purchase of
warrants involves the risk that the effective price paid for the warrant added
to the subscription price of the related security may exceed the value of the
subscribed security's market price such as when there is no movement in the
level of the underlying security.
FUTURES AND RELATED OPTIONS
- ---------------------------
The International Equity, Small Cap Value, Small Cap Growth,
Equity Growth, Tax Managed Equity, Core Equity, Equity Index, Equity Income and
Mid Cap Growth Funds may invest in stock index futures contracts and options of
futures contracts in attempting to hedge against changes in the value of
securities that it holds or intends to purchase. The Balanced Allocation Fund
may invest in stock index, interest rate, bond index and foreign currency
futures contracts and options on these futures contracts. The Total Return
Advantage, Bond and Enhanced Income Funds may invest in interest rate and Bond
index futures contracts and options on futures contracts and the Bond and GNMA
Funds may invest in futures contracts on U.S. Treasury Obligations in order to
offset an expected decrease in the value of their respective portfolios that
might otherwise result from a market decline. The International Equity, Small
Cap Value, Small Cap Growth, Equity Growth, Tax Managed Equity, Equity Index and
Equity Income Funds may invest in stock index futures contracts in attempting to
hedge against changes in the value of securities that it holds or intends to
purchase or to maintain liquidity. The International Equity Fund may also invest
in foreign current futures contract and options in anticipation of changes in
currency exchange rates. The U.S. Government Income Fund may invest in futures
contracts on U.S. Treasury obligations. A Fund might sell a futures contract in
order to offset an expected decrease in the value of its portfolio that might
otherwise result from a market decline. Each of these Funds may invest in the
instruments described either to hedge the value of their respective portfolio
securities as a whole, or to protect against declines occurring prior to sales
of securities in the value of the securities to be sold. Conversely, a Fund may
purchase a futures contract in anticipation of purchases of securities. In
addition, each of these Funds may utilize futures contracts in anticipation of
changes in the composition of its holdings for hedging purposes or to maintain
liquidity.
Futures contracts obligate a Fund, at maturity, to take or
make delivery of certain securities or the cash value of an index or the cash
value of a stated amount of a foreign currency. When interest rates are rising,
futures contracts can offset a decline in value of the securities held by a
Fund. When rates are falling or prices of securities are rising, these contracts
can secure higher yields for securities a Fund intends to purchase.
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<PAGE> 35
Each of the International Equity, Small Cap Value, Small Cap
Growth, Equity Growth, Tax Managed Equity, Equity Index, Equity Income, Balanced
Allocation, Total Return Advantage, Bond, GNMA, Enhanced Income, Mid Cap Growth
and U.S. Government Income Funds intend to comply with the regulations of the
Commodity Futures Trading Commission (CFTC) exempting it from registration as a
"commodity pool operator." A Fund's commodities transactions must constitute
bona fide hedging or other permissible transactions pursuant to such
regulations. In addition, a Fund may not engage in such transactions if the sum
of the amount of initial margin deposits and premiums paid for unexpired
commodity options, other than for bona fide hedging transactions, would exceed
5% of the liquidation value of its assets, after taking into account unrealized
profits and unrealized losses on such contracts it has entered into; provided,
however, that in the case of an option that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in calculating the percentage
limitation. In connection with a Fund's position in a futures contract or option
thereon, it will create a segregated account of liquid assets, such as cash,
U.S. government securities or other liquid high grade debt obligations, or will
otherwise cover its position in accordance with applicable requirements of the
SEC.
The International Equity, Small Cap Value, Small Cap Growth,
Equity Growth, Tax Managed Equity, Equity Index, Equity Income, Balanced
Allocation, Total Return Advantage, Enhanced Income, Mid Cap Growth and U.S.
Government Income Funds may purchase and sell call and put options on futures
contracts traded on an exchange or board of trade. When a Fund purchases an
option on a futures contract, it has the right to assume a position as a
purchaser or seller of a futures contract at a specified exercise price at any
time during the option period. When a Fund sells an option on a futures
contract, it becomes obligated to purchase or sell a futures contract if the
option is exercised. In anticipation of a market advance, a Fund may purchase
call options on futures contracts as a substitute for the purchase of futures
contracts to hedge against a possible increase in the price of securities which
the Fund intends to purchase. Similarly, if the value of a Fund's securities is
expected to decline, it might purchase put options or sell call options on
futures contracts rather than sell futures contracts.
The Funds may write covered call options, buy put options, buy
call options and sell or "write" secured put options on a national securities
exchange and issued by the Options Clearing Corporation for hedging purposes.
Such transactions may be effected on a principal basis with primary reporting
dealers in U.S. government securities in an amount not exceeding 5% of a Fund's
net assets. Such options may relate to particular securities, stock or bond
indices, financial instruments or foreign currencies. Purchasing options is a
specialized investment technique which entails a substantial risk of a complete
loss of the amounts paid as premiums to the writer of the option.
A call option for a particular security gives the purchaser of
the option the right to buy, and a writer the obligation to sell, the underlying
security at the stated exercise price at any time prior to or only at the
expiration of the option, regardless of the market price of the security. The
premium paid to the writer is the consideration for undertaking the obligations
under the
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<PAGE> 36
option contract. A put option for a particular security gives the purchaser the
right to sell the underlying security at the stated exercise price at any time
prior to the expiration date of the option, regardless of the market price of
the security. In contrast to an option on a particular security, an option on a
securities index provides the holder with the right to make or receive a cash
settlement upon exercise of the option.
Each Fund may purchase and sell put options on portfolio
securities at or about the same time that it purchases the underlying security
or at a later time. By buying a put, a Fund limits its risk of loss from a
decline in the market value of the security until the put expires. Any
appreciation in the value of and yield otherwise available from the underlying
security, however, will be partially offset by the amount of the premium paid
for the put option and any related transaction costs. Call options may be
purchased by a Fund in order to acquire the underlying security at a later date
at a price that avoids any additional cost that would result from an increase in
the market value of the security. A Fund may also purchase call options to
increase its return to investors at a time when the call is expected to increase
in value due to anticipated appreciation of the underlying security. Prior to
its expiration, a purchased put or call option may be sold in a closing sale
transaction (a sale by a Fund, prior to the exercise of an option that it has
purchased, of an option of the same series), and profit or loss from the sale
will depend on whether the amount received is more or less than the premium paid
for the option plus the related transaction costs.
In addition, each Fund may write covered call and secured put
options. A covered call option means that a Fund owns or has the right to
acquire the underlying security subject to call at all times during the option
period. A secured put option means that a Fund maintains in a segregated account
with its custodian cash or U.S. government securities in an amount not less than
the exercise price of the option at all times during the option period. Such
options will be listed on a national securities exchange and issued by the
Options Clearing Corporation and may be effected on a principal basis with
primary reporting dealers in the U.S.
The aggregate value of the securities subject to options
written by a Fund will not exceed 25% of the value of its net assets. In order
to close out an option position prior to maturity, a Fund may enter into a
"closing purchase transaction" by purchasing a call or put option (depending
upon the position being closed out) on the same security with the same exercise
price and expiration date as the option which it previously wrote.
Options trading is a highly specialized activity and carries
greater than ordinary investment risk. Purchasing options may result in the
complete loss of the amounts paid as premiums to the writer of the option. In
writing a covered call option, a Fund gives up the opportunity to profit from an
increase in the market price of the underlying security above the exercise price
(except to the extent the premium represents such a profit). Moreover, it will
not be able to sell the underlying security until the covered call option
expires or is exercised or a Fund closes out the option. In writing a secured
put option, a Fund assumes the risk that the market value of the security will
decline below the exercise price of the option. The use of covered call and
secured put options will not be a primary investment technique of a Fund. For a
detailed description of these investments and related risks, see Appendix B
attached to this
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<PAGE> 37
Statement of Additional Information.
Risk Factors Associated with Futures and Related Options
To the extent the Total Return Advantage, Bond, GNMA and
Enhanced Income Funds are engaging in a futures transaction as a hedging device,
due to the risk of an imperfect correlation between securities in their funds
that are the subject of a hedging transaction and the futures contract used as a
hedging device, it is possible that the hedge will not be fully effective in
that, for example, losses on the portfolio securities may be in excess of gains
on the futures contract or losses on the futures contract may be in excess of
gains on the portfolio securities that were the subject of the hedge. In futures
contracts based on indices, the risk of imperfect correlation increases as the
composition of the Funds varies from the composition of the index. In an effort
to compensate for the imperfect correlation of movements in the price of the
securities being hedged and movements in the price of futures contracts, the
Funds may buy or sell futures contracts in a greater or lesser dollar amount
than the dollar amount of the securities being hedged if the historical
volatility of the futures contract has been less or greater than that of the
securities. Such "over hedging" or "under hedging" may adversely affect a Fund's
net investment results if market movements are not as anticipated when the hedge
is established.
Successful use of futures by the Funds also are subject to the
Adviser's or Sub-adviser's ability to predict correctly movements in the
direction of securities prices, interest rates and other economic factors. For
example, if the Funds have hedged against the possibility of a decline in the
market adversely affecting the value of securities held in their funds and
prices increase instead, the Funds will lose part or all of the benefit of the
increased value of securities which they have hedged because they will have
offsetting losses in their futures positions. In addition, in such situations,
if a Fund has insufficient cash, it may have to sell securities to meet daily
variation margin requirements. Such sales of securities may, but will not
necessarily, be at increased prices which reflect the rising market. The Funds
may have to sell securities at a time when it may be disadvantageous to do so.
Although the Total Return Advantage, Bond, GNMA and Enhanced
Income Funds intend to enter into futures contracts and the Total Return
Advantage and Enhanced Income Funds into options transactions only if there is
an active market for such investments, no assurance can be given that a liquid
market will exist for any particular contract or transaction at any particular
time. See "Illiquid Securities." Many futures exchanges and boards of trade
limit the amount of fluctuation permitted in futures contract prices during a
single trading day. Once the daily limit has been reached in a particular
contract, no trades may be made that day at a price beyond that limit or trading
may be suspended for specified periods during the trading day. Futures contracts
prices could move to the limit for several consecutive trading days with little
or no trading, thereby preventing prompt liquidation of futures positions and
potentially subjecting the Funds to substantial losses. If it is not possible,
or a Fund determines not, to close a futures position in anticipation of adverse
price movements, it will be required to make daily cash payments of variation
margin. In such circumstances, an increase in the value of the portion of the
Fund being hedged, if any, may offset partially or completely losses on the
futures contract.
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The primary risks associated with the use of futures contracts
and options are:
1. the imperfect correlation between the change in market
value of the securities held by a Fund and the price of the futures contract or
option;
2. possible lack of a liquid secondary market for a futures
contract and the resulting inability to close a futures contract when desired;
3. losses greater than the amount of the principal invested as
initial margin due to unanticipated market movements which are potentially
unlimited; and
4. the Adviser's or Sub-adviser's, in the case of the Total
Return Advantage Fund, ability to predict correctly the direction of securities
prices, interest rates and other economic factors.
MORTGAGE-BACKED SECURITIES
- --------------------------
The Balanced Allocation, Total Return Advantage, Bond,
Intermediate Bond, GNMA, Enhanced Income and U.S. Government Income Funds may
purchase securities that are secured or backed by mortgages and are issued by
entities such as Government National Mortgage Association (GNMA), Federal
National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation
(FHLMC), or private mortgage conduits.
Mortgage-backed securities represent an ownership interest in
a pool of mortgages, the interest and principal payments on which may be
guaranteed by an agency or instrumentality of the U.S. government, although not
necessarily by the U.S. government itself. Mortgage-backed securities include
CMOs and mortgage pass-through certificates.
Mortgage pass-through certificates, which represent interests
in pools of mortgage loans, provide the holder with a pro rata interest in the
underlying mortgages. One type of such certificate in which the Fund may invest
is a GNMA Certificate which is backed as to the timely payment of principal and
interest by the full faith and credit of the U.S. government. Another type is a
FNMA Certificate, the principal and interest of which are guaranteed only by
FNMA itself, not by the full faith and credit of the U.S. government. Another
type is a FHLMC Participation Certificate which is guaranteed by FHLMC as to
timely payment of principal and interest. However, like a FNMA security it is
not guaranteed by the full faith and credit of the U.S. government. Privately
issued mortgage backed securities will carry an investment grade rating at the
time of purchase by S&P or by Moody's or, if unrated, will be in the adviser's
opinion equivalent in credit quality to such rating. Mortgage-backed securities
issued by private issuers, whether or not such obligations are subject to
guarantees by the private issuer, may entail greater risk than obligations
directly or indirectly guaranteed by the U.S. government.
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The yield and average life characteristics of mortgage-backed
securities differ from traditional debt securities. A major difference is that
the principal amount of the obligations may be prepaid at any time because the
underlying assets (i.e., loans) generally may be prepaid at any time. As a
result, if a mortgage-backed security is purchased at a premium, a prepayment
rate that is faster than expected will reduce the expected yield to maturity and
average life, while a prepayment rate that is slower than expected will have the
opposite effect of increasing yield to maturity and average life. Conversely, if
a mortgage-backed security is purchased at a discount, faster than expected
prepayments will increase, while slower than expected prepayments will decrease,
the expected yield to maturity and average life. There can be no assurance that
the Trust's estimation of the duration of mortgage-backed securities it holds
will be accurate or that the duration of such instruments will always remain
within the maximum target duration. In calculating the average weighted maturity
of the Funds, the maturity of mortgage-backed securities will be based on
estimates of average life.
Prepayments on mortgage-backed securities generally increase
with falling interest rates and decrease with rising interest rates;
furthermore, prepayment rates are influenced by a variety of economic and social
factors. Like other fixed income securities, when interest rates rise, the value
of mortgage-backed securities generally will decline; however, when interest
rates decline, the value of mortgage-backed securities may not increase as much
as that of other similar duration fixed income securities, and, as noted above,
changes in market rates of interest may accelerate or retard prepayments and
thus affect maturities.
These characteristics may result in a higher level of price
volatility for these assets under certain market conditions. In addition, while
the market for Mortgage-backed securities is ordinarily quite liquid, in times
of financial stress the market for these securities can become restricted.
DOLLAR ROLLS
- ------------
The Balanced Allocation, U.S. Government Income and Michigan
Municipal Bond Funds may invest in reverse repurchase agreements in the form of
Dollar Rolls. Dollar Rolls are transactions in which securities are sold by the
Fund for delivery in the current month and the Fund simultaneously contracts to
repurchase substantially similar securities on a specified future date. Any
difference between the sale price and the purchase price is netted against the
interest income foregone on the securities sold to arrive at an implied
borrowing rate. Alternatively, the sale and purchase transactions can be
executed at the same price, with the Fund being paid a fee as consideration for
entering into the commitment to purchase. Dollar Rolls may be renewed prior to
cash settlement and initially may involve only a firm commitment agreement by
the Fund to buy a security. If the broker-dealer to which the Fund sells the
security becomes insolvent, the Fund's right to repurchase the security may be
restricted. Other risks involved in entering into Dollar Rolls include the risk
that the value of the security may change adversely over the term of the Dollar
Roll and that the security the Fund is required to repurchase may be worth less
than the security that the Fund originally held. At the time a Fund enters into
a Dollar Roll, it will place in a segregated custodial account assets such as
U.S. government securities or other liquid, high grade debt securities
consistent with the Fund's investment restrictions having
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a value equal to the repurchase price (including accrued interest), and will
subsequently monitor the account to ensure that such equivalent value is
maintained.
SHORT SALES
- -----------
The Tax Managed Equity, Balanced Allocation, GNMA, Mid Cap
Growth, U.S. Government Income and Michigan Municipal Bond Funds may engage in
short sales of its securities. Selling securities short involves selling
securities the seller does not own (but has borrowed) in anticipation of a
decline in the market price of such securities. To deliver the securities to the
buyer, the seller must arrange through a broker to borrow the securities and, in
so doing, the seller becomes obligated to replace the securities borrowed at
their market price at the time of replacement. In a short sale, the proceeds the
seller receives from the sale are retained by a broker until the seller replaces
the borrowed securities. The seller may have to pay a premium to borrow the
securities and must pay any dividends or interest payable on the securities
until they are replaced.
ASSET-BACKED SECURITIES
- -----------------------
As described in the Prospectuses, the Balanced Allocation,
Total Return Advantage and the Fixed Income Funds may purchase asset-backed
securities, which are securities backed by mortgages, installment contracts,
credit card receivables or other assets. Asset-backed securities represent
interests in "pools" of assets in which payments of both interest and principal
on the securities are made monthly, thus in effect "passing through" monthly
payments made by the individual borrowers on the assets that underlie the
securities, net of any fees paid to the issuer or guarantor of the securities.
The average life of asset-backed securities varies with the maturities of the
underlying instruments, and the average life of a mortgage-backed instrument, in
particular, is likely to be substantially less than the original maturity of the
mortgage pools underlying the securities as a result of mortgage prepayments.
For this and other reasons, an asset-backed security's stated maturity may be
shortened, and the security's total return may be difficult to predict
precisely. Asset-backed securities acquired by the Fund may include
collateralized mortgage obligations (CMOs) issued by private companies.
In general, the collateral supporting non-mortgage,
asset-backed securities is of shorter maturity than mortgage loans and is less
likely to experience substantial prepayments. Such securities may also be debt
instruments, which are also known as collateralized obligations and are
generally issued as the debt of a special purpose entity organized solely for
the purpose of owning such assets and issuing such debt. Asset-backed securities
are not issued or guaranteed by the U.S. government or its agencies or
instrumentalities.
Each Fund may invest in securities the timely payment of
principal and interest on which are guaranteed by the GNMA a wholly-owned U.S.
Government corporation within the Department of Housing and Urban Development.
The market value and interest yield of these instruments can vary due to market
interest rate fluctuations and early prepayments of underlying mortgages. These
securities represent ownership in a pool of federally insured mortgage loans.
GNMA certificates consist of underlying mortgages with a maximum maturity of 30
years.
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<PAGE> 41
However, due to scheduled and unscheduled principal payments, GNMA certificates
have a shorter average maturity and, therefore, less principal volatility than a
comparable 30-year bond. Since prepayment rates vary widely, it is not possible
to predict accurately the average maturity of a particular GNMA pool. GNMA
securities differ from conventional bonds in that principal is paid back to the
certificate holders over the life of the loan rather than at maturity. The
scheduled monthly interest and principal payments relating to mortgages in the
pool are "passed through" to investors. In addition, there may be unscheduled
principal payments representing prepayments on the underlying mortgages.
Although GNMA certificates may offer yields higher than those available from
other types of U.S. Government securities, GNMA certificates may be less
effective than other types of securities as a means of "locking in" attractive
long-term rates because of the prepayment feature. For instance, when interest
rates decline, the value of a GNMA certificate likely will not rise as much as
comparable debt securities due to the prepayment feature. In addition, these
prepayments can cause the price of a GNMA certificate originally purchased at a
premium to decline in price to its par value, which may result in a loss.
There are a number of important differences among the agencies
and instrumentalities of the U.S. Government that issue mortgage-related
securities and among the securities that they issue. Mortgage-related securities
guaranteed by the GNMA include GNMA Mortgage Pass-Through Certificates (also
known as Ginnie Maes) which are guaranteed as to the timely payment of principal
and interest by GNMA and such guarantee is backed by the full faith and credit
of the United States. GNMA is a wholly-owned U.S. Government corporation within
the Department of Housing and Urban Development. GNMA certificates also are
supported by the authority of GNMA to borrow funds from the U.S. Treasury to
make payments under its guarantee. Mortgage-backed securities issued by the FNMA
include FNMA Guaranteed Mortgage Pass-Through Certificates (also known as
"Fannie Maes") which are solely the obligations of the FNMA and are not backed
by or entitled to the full faith and credit of the United States, but are
supported by the right of the issuer to borrow from the Treasury. FNMA is a
government-sponsored organization owned entirely by private stockholders. Fannie
Maes are guaranteed as to timely payment of the principal and interest by FNMA.
Mortgage-related securities issued by the FHLMC include FHLMC Mortgage
Participation Certificates (also known as "Freddie Macs" or "Pcs"). FHLMC is a
corporate instrumentality of the United States, created pursuant to an Act of
Congress, which is owned entirely by Federal Home Loan Banks. Freddie Macs are
not guaranteed by the United States or by any Federal Home Loan Banks and do not
constitute a debt or obligation of the United States or of any Federal Home Loan
Bank. Freddie Macs entitle the holder to timely payment of interest, which is
guaranteed by the FHLMC. FHLMC guarantees either ultimate collection or timely
payment of all principal payments on the underlying mortgage loans. When FHLMC
does not guarantee timely payment of principal, FHLMC may remit the amount due
on account of its guarantee of ultimate payment of principal at any time after
default on an underlying mortgage, but in no event later than one year after it
becomes payable.
Non-mortgage asset-backed securities involve certain risks
that are not presented by mortgage-backed securities. Primarily, these
securities may not have the benefit of the same security interest in the
underlying collateral. Credit card receivables are generally unsecured and the
debtors are entitled to the protection of a number of state and federal consumer
credit laws, many of which have given debtors the right to set off certain
amounts owed on the credit cards,
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<PAGE> 42
thereby reducing the balance due. Most issuers of automobile receivables permit
the servicers to retain possession of the underlying obligations. If the
servicer were to sell these obligations to another party, there is a risk that
the purchaser would acquire an interest superior to that of the holders of the
related automobile receivables. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under state
laws, the trustee for the holders of the automobile receivables may not have an
effective security interest in all of the obligations backing such receivables.
Therefore, there is a possibility that recoveries on repossessed collateral may
not, in some cases, be able to support payments on these securities.
INTEREST RATE AND TOTAL RETURN SWAPS
- ------------------------------------
The Balanced Allocation, Total Return Advantage, GNMA,
Enhanced Income and U.S. Government Income Funds may enter into interest rate
swaps for hedging purposes and not for speculation. The Balance Allocation Fund
may also use total return swaps for the same purposes. The Fund will typically
use interest rate or total return swaps to preserve a return on a particular
investment or portion of its portfolio or to shorten the effective duration of
its investments. Swaps involve the exchange by the Fund with another party of
their respective commitments to pay or receive interest or the total return of a
predefined "index," such as an exchange of fixed rate payments for floating rate
payments or an exchange of a floating rate payment for the total return on an
index.
The net amount of the excess, if any, of a Fund's obligations
over its entitlements with respect to each interest rate swap will be accrued on
a daily basis and an amount of liquid assets, such as cash, U.S. government
securities or other liquid high grade debt securities, having an aggregate net
asset value at least equal to such accrued excess will be maintained in a
segregated account by the Fund's custodian. A Fund will not enter into any
interest rate swap unless the unsecured commercial paper, senior debt, or claims
paying ability of the other party is rated, with respect to the Enhanced Income
and Total Return Advantage Funds, either "A" or "A-1" or better by S&P, Duff or
Fitch, or "A" or "P-1" or better by Moody's or, with respect to the GNMA Fund,
the claims paying ability of the other party is deemed creditworthy and any such
obligation the GNMA Fund may have under such an arrangement will be covered by
setting aside liquid high grade securities in a segregated account.
The Balanced Allocation, Total Return Advantage, GNMA, and
Enhanced Income Fund will only enter into swaps on a net basis, (i.e., the two
payment streams are netted out, with the Fund receiving or paying, as the case
may be, only the net amount of the two payments). Inasmuch as these transactions
are entered into for good faith hedging purposes, the Funds and their respective
Adviser or Sub-adviser believe that such obligations do not constitute senior
securities as defined in the 1940 Act and, accordingly, will not treat them as
being subject to the Fund's borrowing restrictions. The net amount of the
excess, if any, of the Fund's obligations over their entitlements with respect
to each swap will be accrued on a daily basis and an amount of liquid assets,
such as cash, U.S. government securities or other liquid high grade debt
securities, having an aggregate net asset value at least equal to such accrued
excess will be maintained in a segregated account by the Fund's custodian.
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<PAGE> 43
If there is a default by the other party to a swap
transaction, the Fund involved will have contractual remedies pursuant to the
agreements related to the transaction. The swap market has grown substantially
in recent years with a large number of banks and investment banking firms acting
both as principals and as agents utilizing standardized swap documentation. As a
result, the swap market has become relatively liquid in comparison with markets
for other similar instruments which are traded in the Interbank market.
ZERO COUPON OBLIGATIONS
- -----------------------
The Ohio Tax Exempt Bond, U.S. Government Income and Michigan
Municipal Bond Funds may invest in zero coupon obligations. Zero coupon
obligations are discount debt obligations that do not make periodic interest
payments although income is generally imputed to the holder on a current basis.
Such obligations may have higher price volatility than those which require the
payment of interest periodically. The Adviser will consider the liquidity needs
of the Fund when any investment in zero coupon obligations is made.
INCOME PARTICIPATION LOANS
- --------------------------
The Balanced Allocation, Total Return Advantage, Intermediate
Bond, and Enhanced Income Funds may make or acquire participations in privately
negotiated loans to borrowers. Frequently, such loans have variable interest
rates and may be backed by a bank letter of credit; in other cases they may be
unsecured. Such transactions may provide an opportunity to achieve higher yields
than those that may be available from other securities offered and sold to the
general public.
Privately arranged loans, however, will generally not be rated
by a credit rating agency and will normally be liquid, if at all, only through a
provision requiring repayment following demand by the lender. Such loans made by
a Fund may have a demand provision permitting the Fund to require repayment
within seven days. Participations in such loans, however, may not have such a
demand provision and may not be otherwise marketable. Recovery of an investment
in any such loan that is illiquid and payable on demand will depend on the
ability of the borrower to meet an obligation for full repayment of principal
and payment of accrued interest within the demand period, normally seven days or
less (unless the Fund determines that a particular loan issue, unlike most such
loans, has a readily available market). As it deems appropriate, the Board of
Trustees of the Trust will establish procedures to monitor the credit standing
of each such borrower, including its ability to honor contractual payment
obligations.
CERTIFICATES OF PARTICIPATION
- -----------------------------
The Michigan Municipal Bond Fund may purchase Michigan
Municipal Securities in the form of "certificates of participation" which
represent undivided proportional interests in lease payments by a governmental
or nonprofit entity. The Tax-Exempt Funds may also purchase certificates of
participation. The municipal leases underlying the certificates of participation
in which the Fund invests will be subject to the same quality rating standards
applicable to Municipal Securities. Certificates of participation may be
purchased from a bank,
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<PAGE> 44
broker-dealer or other financial institution. The lease payments and other
rights under the lease provide for and secure the payments on the certificates.
Lease obligations may be limited by law, municipal charter or
the duration or nature of the appropriation for the lease and may be subject to
periodic appropriation. In particular, lease obligations, may be subject to
periodic appropriation. If the entity does not appropriate funds for future
lease payments, the entity cannot be compelled to make such payments.
Furthermore, a lease may provide that the certificate trustee cannot accelerate
lease obligations upon default; in such event, the trustee would only be able to
enforce lease payments as they became due. In the event of a default or failure
of appropriation, it is unlikely that the trustee would be able to obtain an
acceptable substitute source of payment. In addition, certificates of
participation are less liquid than other bonds because there is a limited
secondary trading market for such obligations.
WHEN-ISSUED SECURITIES
- ----------------------
The International Equity, Small Cap Value, Small Cap Growth,
Equity Growth, Tax Managed Equity, Core Equity, Equity Income, Balanced
Allocation, Total Return Advantage, Bond, Intermediate Bond, GNMA, Enhanced
Income, Ohio Municipal Money Market, Pennsylvania Tax Exempt Money Market, Tax
Exempt Money Market, Mid Cap Growth and U.S. Government Income Funds may
purchase securities (Municipal Securities in the case of the Ohio Tax Exempt
Bond, Pennsylvania Municipal Bond, National Tax Exempt Bond and Michigan
Municipal Funds) on a "when-issued" basis (i.e., for delivery beyond the normal
settlement date at a stated price and yield). The Funds do not intend to
purchase when-issued securities for speculative purposes but only for the
purpose of acquiring portfolio securities. In when-issued and delayed delivery
transactions, a Fund relies on the seller to complete the transaction; its
failure to do so may cause the Fund to miss a price or yield considered to be
attractive. One form of when-issued or delayed delivery security that the GNMA
and Bond Funds may purchase is a "to be announced" (TBA) mortgage-backed
security. A TBA transaction arises when a mortgage-backed security, such as a
GNMA pass-through security, is purchased or sold with the specific pools that
will constitute that GNMA pass-through security to be announced on a future
settlement date.
When a Fund agrees to purchase when-issued securities, the
custodian sets aside cash or liquid portfolio securities equal to the amount of
the commitment in a separate account. Normally, the custodian will set aside
portfolio securities to satisfy a purchase commitment, and in such a case a Fund
may be required subsequently to place additional assets in the separate account
in order to ensure that the value of the account remains equal to the amount of
the Fund's commitment, marked to market daily. It is likely that a Fund's net
assets will fluctuate to a greater degree when it sets aside portfolio
securities to cover such purchase commitments than when it sets aside cash.
Because a Fund will set aside cash or liquid assets to satisfy its purchase
commitments in the manner described, the Fund's liquidity and ability to manage
its portfolio might be affected in the event its commitments to purchase
when-issued securities ever exceeded 25% of the value of its total assets.
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<PAGE> 45
When a Fund engages in when-issued transactions, it relies on
the seller to consummate the trade. Failure of the seller to do so may result in
the Fund's incurring a loss or missing an opportunity to obtain a price
considered to be advantageous. A Fund receives no income from when-issued or
delayed settlement securities prior to delivery of such securities.
SHORT-TERM OBLIGATIONS
- ----------------------
The International Equity, Small Cap Value, Small Cap Growth,
Equity Growth, Tax Managed Equity, Core Equity, Equity Index, Equity Income,
Balanced Allocation, Total Return Advantage, Bond, Intermediate Bond, GNMA,
Enhanced Income, and U.S. Government Income Funds may hold temporary cash
balances which may be invested in various short-term obligations (with
maturities of 18 months or less, 12 months in the case of the U.S. Government
Income Fund) such as domestic and foreign commercial paper, bankers'
acceptances, certificates of deposit and demand and time deposits of domestic
and foreign branches of U.S. banks and foreign banks, U.S. government
securities, repurchase agreements, reverse repurchase agreements and (GICs). The
Equity Index Fund cannot invest in foreign commercial paper and GICs. A Fund may
invest no more than 5% of its net assets in variable and floating rate
obligations. During temporary defensive periods, each Fund may hold up to 100%
of its total assets in these types of obligations.
In the case of repurchase agreements, default or bankruptcy of
the seller may expose a Fund to possible loss because of adverse market action
or delays connected with the disposition of the underlying obligations. Further,
it is uncertain whether a Fund would be entitled, as against a claim by such
seller or its receiver or trustee in bankruptcy, to retain the underlying
securities. Reverse repurchase agreements involve the risk that the market value
of the securities held by a Fund may decline below the price of the securities
it is obligated to repurchase.
Investments include commercial paper and other short-term
promissory notes issued by corporations (including variable and floating rate
instruments) must be rated at the time of purchase "A-2" or better by S&P,
"Prime-2" or better by Moody's, "F-2" or better by Fitch, "Duff 2" or better by
Duff or, determined by the adviser to be of comparable quality pursuant to
guidelines approved by the Trust's Board of Trustees. In addition, the
International Equity, Small Cap Growth, Tax Managed Equity, Core Equity,
Balanced Allocation, Total Return Advantage, Intermediate Bond and Enhanced
Income Funds may invest in Canadian Commercial Paper (CCP), which is commercial
paper issued by a Canadian corporation or a Canadian counterpart of a U.S.
corporation, and in Europaper, which is U.S. dollar denominated commercial paper
of a foreign issuer. Each Fund may also acquire zero coupon obligations, which
have greater price volatility than coupon obligations and which will not result
in the payment of interest until maturity.
Bank obligations include bankers' acceptances and negotiable
certificates of deposit, and non-negotiable demand and time deposits issued for
a definite period of time and earning a specified return by a U.S. bank which is
a member of the Federal Reserve System. Bank obligations also include U.S.
dollar denominated bankers' acceptances and certificates of deposit and time
deposits issued by foreign branches of U.S. banks or foreign banks. Investment
in bank
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<PAGE> 46
obligations is limited to the obligations of financial institutions
having more than $1 billion in total assets at the time of purchase. The
International Equity, Small Cap Growth, Tax Managed Equity, Core Equity,
Balanced Allocation, Total Return Advantage, Intermediate Bond and Enhanced
Income Funds may also make interest bearing savings deposits in commercial and
savings banks not in excess of 5% of its total assets. Investment in
non-negotiable time deposits is limited to no more than 5% of the Fund's total
assets at the time of purchase.
The Balanced Allocation, Total Return Advantage, Intermediate
Bond and Enhanced Income Funds may also make limited investments in (GIC) issued
by U.S. insurance companies. When investing in GICs, a Fund makes cash
contributions to a deposit fund or an insurance company's general account. The
insurance company then credits to that Fund monthly a guaranteed minimum
interest which is based on an index. The insurance company may assess periodic
charges against a GIC for expense and service costs allocable to it, and the
charges will be deducted from the value of the deposit fund. A Fund will
purchase a GIC only when its Adviser or Sub-adviser has determined, under
guidelines established by the Board of Trustees, that the GIC presents minimal
credit risks to the Fund and is of comparable quality to instruments that are
rated high quality by one or more rating agencies. In the case of the Balanced
Allocation Fund, because the Fund may not receive the principal amount of a GIC
from the insurance company on sixty days' notice or less, the GIC is considered
an illiquid investment, and, together with other instruments in the Fund which
are not readily marketable will not exceed 15% of the Fund's net assets.
The Mid Cap Growth Fund may hold temporary cash balances which
may be invested in various short-term obligations (with maturities of 12 months
or less) such as domestic and foreign commercial paper, bankers' acceptances,
certificates of deposit and demand and time deposits of domestic and foreign
branches of U.S. banks and foreign banks, U.S. government securities, repurchase
agreements, reverse repurchase agreements and GICs.
The Balanced Allocation and U.S. Government Income Funds may
engage in short-term trading and may sell securities which have been held for
periods ranging from several months to less than a day. The object of such
short-term trading is to increase the potential for capital appreciation and/or
income by making portfolio changes in anticipation of expected movements in
interest rates or security prices or in order to take advantage of what the
Fund's Adviser believes is a temporary disparity in the normal yield
relationship between two securities. Any such trading would increase the Fund's
turnover rate and its transaction costs. Higher portfolio turnover may result in
increased taxable gains to shareholders (see "Additional Information Concerning
Taxes" below) and increased expenses paid by the Fund due to transaction costs.
Under normal market conditions, the Balanced Allocation and U.S.
Government Income's portfolio turnover are not expected to exceed 200%.
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<PAGE> 47
MONEY MARKET INSTRUMENTS
- ------------------------
The Money Market Fund may invest in "money market"
instruments, including bank obligations and commercial paper. The Ohio Municipal
Money Market and Pennsylvania Tax Exempt Money Market Funds may also invest,
from time to time, a portion of their assets for temporary defensive or other
purposes in such taxable money market instruments.
Bank obligations include bankers' acceptances, negotiable
certificates of deposit, and non-negotiable time deposits issued for a definite
period of time and earning a specified return by a U.S. bank which is a member
of the Federal Reserve System. Bank obligations also include U.S. dollar
denominated bankers' acceptances, certificates of deposit and time deposits
issued by foreign branches of U.S. banks or foreign banks. Investment in bank
obligations is limited to the obligations of financial institutions having more
than $1 billion in total assets at the time of purchase. The Money Market Fund
may also make interest bearing savings deposits in commercial and savings banks
not in excess of 5% of its total assets. Investment in non-negotiable time
deposits is limited to no more than 5% of the Fund's total assets at the time of
purchase.
Investments in commercial paper and other short-term
promissory notes issued by corporations (including variable and floating rate
instruments) must be rated at the time of purchase "A-2" or better by S&P,
"Prime-2" or better by Moody's, "F-2" or better by Fitch, "Duff 2" or better by
Duff or, if not rated, determined by the Adviser to be of comparable quality
pursuant to guidelines approved by the Trust's Board of Trustees. Investments
may also include corporate notes. In addition, the Money Market Fund may invest
in Canadian Commercial Paper ("CCP"), which is U.S. dollar denominated
commercial paper issued by a Canadian corporation or a Canadian counterpart of a
U.S. corporation, and in Europaper, which is U.S. dollar denominated commercial
paper of a foreign issuer. The Money Market Fund may acquire zero coupon
obligations, which have greater price volatility than coupon obligations and
which will not result in the payment of interest until maturity.
Investments in the obligations of foreign branches of U.S.
banks, foreign banks and other foreign issuers may subject the Money Market Fund
to additional investment risks, including future political and economic
developments, the possible imposition of withholding taxes on interest income,
possible seizure or nationalization of foreign deposits, the possible
establishment of exchange controls, or the adoption of other foreign
governmental restrictions which might adversely affect the payment of principal
and interest on such obligations. In addition, foreign branches of U.S. banks
and foreign banks may be subject to less stringent reserve requirements and to
different accounting, auditing, reporting, and recordkeeping standards than
those applicable to domestic branches of U.S. banks. The Money Market Fund will
invest in the obligations of foreign banks or foreign branches of U.S. banks
only when the Adviser believes that the credit risk with respect to the
instrument is minimal.
The Money Market Fund may also make limited investments in
GICs issued by U.S. insurance companies. The Fund will purchase a GIC only when
the Adviser has determined, under guidelines established by the Board of
Trustees, that the GIC presents minimal
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<PAGE> 48
credit risks to the Fund and is of comparable quality to instruments that are
rated high quality by certain nationally recognized statistical rating
organizations.
GOVERNMENT SECURITIES
- ---------------------
The Treasury Money Market and Treasury Plus Money Market Funds
may only invest in direct obligations of the U.S. Treasury and investment
companies that invest only in such obligations. Examples of the types of U.S.
government obligations that may be held by the Balanced Allocation, Total Return
Advantage, Bond, Intermediate Bond, GNMA, Enhanced Income, Ohio Municipal Money
Market, Pennsylvania Tax Exempt Money Market, Tax Exempt Money Market, Money
Market, Government Money Market, Mid Cap Growth, U.S. Government Income, and
Michigan Municipal Bond Funds include, in addition to Treasury Bills, the
obligations of Federal Home Loan Banks, Federal Farm Credit Banks, Federal Land
Banks, the Federal Housing Administration, Farmers Home Administration,
Export-Import Bank of the United States, Small Business Administration,
Government National Mortgage Association, General Services Administration,
Student Loan Marketing Association, Central Bank for Cooperatives, Federal Home
Loan Mortgage Corporation, Federal Intermediate Credit Banks and Maritime
Administration. Some of these obligations are supported by the full faith and
credit of the U.S. Treasury, such as obligations issued by the Government
National Mortgage Association. Others, such as those of the Export-Import Bank
of the United States, are supported by the right of the issuer to borrow from
the U.S. Treasury; others, such as those of the Federal National Mortgage
Association, are supported by the discretionary authority of the U.S. Government
to purchase the agency's obligations; and still others, such as those of the
Student Loan Marketing Association, are supported only by the credit of the
agency or instrumentality issuing the obligation. No assurance can be given that
the U.S. Government would provide financial support to U.S. Government-sponsored
agencies or instrumentalities if it is not obligated to do so by law. Some of
these investments may be variable or floating rate instruments. See "Variable
and Floating Rate Obligations." The Ohio Municipal Money Market, Pennsylvania
Tax Exempt Money Market, Tax Exempt Money Market, Money Market and Government
Money Market Funds will invest in the obligations of such agencies or
instrumentalities only when the Adviser believes that their credit risk with
respect thereto is minimal.
U.S. TREASURY OBLIGATIONS AND RECEIPTS
- --------------------------------------
The Balanced Allocation, Total Return Advantage, Bond,
Intermediate Bond, GNMA, Enhanced Income, Money Market, Mid Cap Growth, U.S.
Government Income and Michigan Municipal Bond Funds may invest in obligations
issued or guaranteed by the U.S. government or its agencies. The Fund may invest
in U.S. Treasury obligations consisting of bills, notes and bonds issued by the
U.S. Treasury, and separately traded interest and principal component parts of
such obligations that are transferable through the Federal book-entry system
known as STRIPS (Separately Traded Registered Interest and Principal
Securities).
The Fund may invest in separately traded interest and
principal component parts of the U.S. Treasury obligations that are issued by
banks or brokerage firms and are created by depositing U.S. Treasury obligations
into a special account at a custodian bank. The custodian
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holds the interest and principal payments for the benefit of the registered
owners of the certificates of receipts. The custodian arranges for the issuance
of the certificates or receipts evidencing ownership and maintains the register.
Receipts include Treasury Receipts (TRs), Treasury Investment Growth Receipts
(TIGRs), Liquid Yield Option Notes (LYONs), and Certificates of Accrual on
Treasury Securities (CATS). TIGRs, LYONs and CATS are interests in private
proprietary accounts while TR's are interests in accounts sponsored by the U.S.
Treasury.
Securities denominated as TRs, TIGRs, LYONs and CATS are sold
as zero coupon securities which means that they are sold at a substantial
discount and redeemed at face value at their maturity date without interim cash
payments of interest or principal. This discount is accreted over the life of
the security, and such accretion will constitute the income earned on the
security for both accounting and tax purposes. Because of these features, such
securities may be subject to greater interest rate volatility than interest
paying investments.
STAND-BY COMMITMENTS
- --------------------
The Tax-Exempt Funds, Ohio Municipal Money Market,
Pennsylvania Tax Exempt Money Market, and Tax Exempt Money Market Funds may
acquire stand-by commitments. Under a stand-by commitment, a dealer agrees to
purchase at a Fund's option specified Michigan Municipal Securities at a
specified price. Stand-by commitments acquired by the Fund must be of high
quality as determined by any Rating Agency, or, if not rated, must be of
comparable quality as determined by the Adviser. The Fund acquires stand-by
commitments solely to facilitate portfolio liquidity and does not intend to
exercise its rights thereunder for trading purposes.
DERIVATIVE INSTRUMENTS
- ----------------------
The International Equity, Small Cap Value, Small Cap Growth,
Equity Growth, Tax Managed Equity, Core Equity, Equity Index, Equity Income,
Balanced Allocation, Total Return Advantage, Bond, Intermediate Bond, GNMA,
Enhanced Income, Money Market, Mid Cap Growth, and U.S. Government Income Funds
may purchase certain "derivative" instruments. Derivative instruments are
instruments that derive value from the performance of underlying securities,
interest or currency exchange rates, or indices, and include (but are not
limited to) futures contracts, options, forward currency contracts and
structured debt obligations (including collateralized mortgage obligations
("CMOs"), various floating rate instruments and other types of securities).
Like all investments, derivative instruments involve several
basic types of risks which must be managed in order to meet investment
objectives. The specific risks presented by derivatives include, to varying
degrees, market risk in the form of underperformance of the underlying
securities, exchange rates or indices; credit risk that the dealer or other
counterparty to the transaction will fail to pay its obligations; volatility and
leveraging risk that, if interest or exchange rates change adversely, the value
of the derivative instrument will decline more than the securities, rates or
indices on which it is based; liquidity risk that the Fund will be unable to
sell a derivative instrument when it wants because of lack of market depth or
market disruption;
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pricing risk that the value of a derivative instrument (such as an option) will
not correlate exactly to the value of the underlying securities, rates or
indices on which it is based; extension risk that the expected duration of an
instrument may increase or decrease; and operations risk that loss will occur as
a result of inadequate systems and controls, human error or otherwise. Some
derivative instruments are more complex than others, and for those instruments
that have been developed recently, data are lacking regarding their actual
performance over complete market cycles.
The risk to the International Equity, Small Cap Value, Small
Cap Growth, Equity Growth, Tax Managed Equity, Core Equity, Equity Index, Equity
Income, Mid Cap Growth and U.S. Government Income Funds due to the use of
derivatives in the equity portion of the Fund's portfolio of investments will be
limited to 33 1/3% of such investments at the time of the derivative
transaction.
With respect to the fixed income portion of the Fund's
investments, the Fund's Adviser has determined that the risk features that 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 cash equivalent portion of the Fund's portfolio of
investments is managed with an emphasis on safety and high credit quality. This
requires that liquidity risk and market risk or interest rate risk, as well as
credit risk, be held to minimal levels. The Adviser has determined that many
types of floating rate and variable rate instruments, commonly referred to as
"derivatives," are considered to be potentially volatile. These derivative
instruments are structured in a way that may not allow them to reset to par at
an interest rate adjustment date. Accordingly, the Adviser has adopted the
following policies with respect to this portion of the Fund's assets.
The following types of derivative instruments ARE NOT
permitted investments for the cash equivalent portion of the Fund's portfolio of
investments:
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- leveraged or deleveraged floaters (whose interest rate reset
provisions are based on a formula that magnifies the effect of changes in
interest rates);
- range floaters (which do not pay interest if market interest
rates move outside of a specified range);
- dual index floaters (whose interest rate reset provisions
are tied to more than one index so that a change in the relationship between
these indices may result in the value of the instrument falling below face
value);
- inverse floaters (which reset in the opposite direction of
their index); and
- any other structured instruments having cash flow
characteristics that can create potential market volatility similar to the
instruments listed above.
Additionally, the cash equivalent portion of the Fund's portfolio will not be
invested in instruments indexed to longer than one-year rates, or in instruments
whose interest rate reset provisions are tied to an index that materially lags
short-term interest rates, such as "COFI floaters."
At the present time, the only derivative investments that have
been determined to be suitable for the cash equivalent portion of the Fund's
portfolio are:
- securities based on short-term, fixed-rate contracts; and
- floating-rate or variable-rate securities whose interest
rates reset based on changes in standard money market rate indices such as U.S.
government Treasury bills, London Interbank Offered Rate, published commercial
paper rates, or federal funds rates.
The risk to the Fund due to the use of derivatives in the cash
equivalent portion of its assets will be limited to the principal invested in
such instruments.
The Adviser will evaluate the risks presented by the
derivative instruments purchased by the Fund, and will determine, in connection
with day-to-day management of the Fund, how they will be used in furtherance of
the Fund's investment objective.
The Intermediate Bond Fund may invest in moderate structural
risk derivatives containing features which can modestly or moderately alter the
timing and/or amount of principal return and/or amount of income return. This
would include, for example, investments that are subject to normal prepayment
variances experienced in mortgage pass-through securities. Periodic occurrence
of this degree of structural risk would not be expected to materially impact
overall Fund returns relative to its investment objective.
The Intermediate Bond Fund will NOT invest in high structural
risk derivatives whose duration (and hence return) can vary widely depending on
moves in interest rates or other
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<PAGE> 52
contractual variables. Generally, these are instruments which are deemed to have
a high sensitivity to changes in interest rates, which could materially alter
the effective duration or coupon and return of the instruments.
The Intermediate Bond Fund may invest in mortgage-backed
derivative securities, including CMOs, provided that they are not identified by
the advisers as "high risk securities" by certain quantitative tests that are
generally accepted standards in the investment industry.
Other derivative instruments that are suitable for investment
include: asset-backed securities such as those backed by automobile loans or
credit card receivables. All such securities, however, must conform to the
structural risk standards stated above (i.e. not present high structural risk).
The Adviser does NOT presently intend to invest in the
following types of derivatives on behalf of the Fund:
- - exchange rate-related securities
- - forward currency exchange contracts
- - interest rate swaps
- - futures contracts and related options
- - structured instruments, such as range notes, dual index notes,
leveraged or deleveraged bonds, inverse floaters, index amortizing
notes and other structured instruments having similar cash flow
characteristics
The Total Return Advantage and Enhanced Income Funds may invest in
derivative instruments having either moderate structural risk or high structural
risk characteristics (as described above in the section pertaining to the
Intermediate Bond Fund). There are no policy restrictions on specific types of
derivative instruments in which the Funds are permitted to invest. However,
structural risk is controlled by adherence to specific overall Fund parameters.
The Funds are managed in accordance with a policy goal that constrains the
potential variability of overall Fund duration and total return in relation to
specified investment performance benchmarks. Fund exposure to derivative
instruments having high structural risk characteristics is targeted at a maximum
of 5.0% of each Fund's net assets with no individual position greater than 1.0%
of each Fund. Variability in total Fund duration caused by these securities is
targeted not to exceed 0.1 years in any one calendar year.
The Adviser of the Bond Fund does NOT presently intend to
invest in the following types of derivatives which are structured instruments,
such as range notes, dual index notes, leveraged or deleveraged bonds, inverse
floaters, index amortizing notes and other structured instruments having similar
cash flow characteristics.
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The Adviser has adopted the following internal policy concerning
management of the structural risk inherent in derivative instruments on behalf
of the GNMA Fund:
The Adviser does not presently intend to invest in the
following types of derivatives on behalf of the GNMA Fund:
- - exchange rate-related securities
- - forward currency exchange contracts
- - structured instruments, such as range notes, dual index notes,
leveraged or deleveraged bonds, inverse floaters, index amortizing
notes and other structured instruments having similar cash flow
characteristics
TAX-EXEMPT DERIVATIVES AND OTHER MUNICIPAL SECURITIES
- -----------------------------------------------------
The Ohio Municipal Money Market, Pennsylvania Tax Exempt Money
Market and Tax Exempt Money Market Funds may invest in tax-exempt derivative
securities relating to Municipal Securities, including tender option bonds,
participations, beneficial interests in trusts and partnership interests. (See
generally "Derivative Instruments" above.)
Opinions relating to the validity of Municipal Securities and
to the exemption of interest thereon from federal income tax are rendered by
bond counsel to the respective issuers at the time of issuance, and opinions
relating to the validity of and the tax-exempt status of payments received by
the Ohio Municipal Money Market, Pennsylvania Tax Exempt Money Market and Tax
Exempt Money Market Funds from tax-exempt derivative securities are rendered by
counsel to the respective sponsors of such securities. The Funds and the Adviser
will rely on such opinions and will not review independently the underlying
proceedings relating to the issuance of Municipal Securities, the creation of
any tax-exempt derivative securities, or the bases for such opinions.
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<PAGE> 54
SECURITIES OF OTHER INVESTMENT COMPANIES
- ----------------------------------------
Subject to 1940 Act limitations and pursuant to applicable SEC
requirements, the Funds may invest in securities issued by other investment
companies which invest in high quality, short-term debt securities and which
determine their net asset value per share based on the amortized cost or
penny-rounding method. As a shareholder of another investment company, the Fund
would bear, along with other shareholders, its pro rata portion of that
company's expenses, including advisory fees. These expenses would be in addition
to the advisory and other expenses that the Fund bears directly in connection
with its own operations. Investment companies in which the Fund may invest may
also impose a sales or distribution charge in connection with the purchase or
redemption of their shares and other types of commissions or charges. Such
charges will be payable by a Fund and, therefore, will be borne indirectly by
its shareholders.
Each Fund may invest in securities issued by other investment
companies as described in the Prospectus. Each Fund currently intends to limit
its investments in securities issued by other investment companies so that, as
determined immediately after a purchase of such securities is made: (i) not more
than 5% of the value of the Fund's total assets will be invested in the
securities of any one investment company; (ii) not more than 10% of the value of
its total assets will be invested in the aggregate in securities of investment
companies as a group; and (iii) not more than 3% of the outstanding voting stock
of any one investment company will be owned by the Fund or by the Trust as a
whole.
With regard to the Tax-Exempt Funds and the Money Market
Funds, not more than 10% of the outstanding voting stock of any one investment
company will be owned in the aggregate by the Fund and other investment
companies advised by the Adviser.
In addition, the International Equity Fund may purchase shares
of investment companies investing primarily in foreign securities, including
"country funds" which have portfolios consisting exclusively of securities of
issuers located in one foreign country. Such "country funds" may be either
open-end or closed-end investment companies, and may include a portfolio or
portfolios of The CountryBaskets Index Fund, Inc. (CountryBaskets), a
registered, open-end management investment company that, through its portfolios,
seeks to provide investment results that substantially correspond to the price
and yield performance of a broad-based index of publicly traded equity
securities in a particular country, geographic region or industry sector.
The International Equity Fund may also purchase World Equity
Benchmark Shares issued by The Foreign Fund, Inc. (WEBS) and similar securities
of other issuers. WEBS are shares of an investment company that invests
substantially all of its assets in securities included in the Morgan Stanley
Capital International indices for specific countries. Because the expense
associated with an investment in WEBS can be substantially lower than the
expense of small investments directly in the securities comprising the indices
it seeks to track, the Adviser believes that investments in WEBS of countries
that are included in the EAFE Index can provide a cost-effective means of
diversifying the Fund's assets across a broader range of equity securities.
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<PAGE> 55
WEBS are listed on the American Stock Exchange (AMEX), and
were initially offered to the public in 1996. The market prices of WEBS are
expected to fluctuate in accordance with both changes in the net asset values of
their underlying indices and supply and demand of WEBS on the AMEX. To date,
WEBS have traded at relatively modest discounts and premiums to their net asset
values. However, WEBS have a limited operating history, and information is
lacking regarding the actual performance and trading liquidity of WEBS for
extended periods or over complete market cycles. In addition, there is no
assurance that the requirements of the AMEX necessary to maintain the listing of
WEBS will continue to be met or will remain unchanged.
In the event substantial market or other disruptions affecting
WEBS or CountryBaskets should occur in the future, the liquidity and value of
the International Equity Fund's shares could also be substantially and adversely
affected, and the Fund's ability to provide investment results approximating the
performance of securities in the EAFE could be impaired. If such disruptions
were to occur, the Fund could be required to reconsider the use of WEBS,
CountryBaskets or other "country funds" as part of its investment strategy.
MUNICIPAL SECURITIES
- --------------------
The Ohio Tax Exempt Bond, Pennsylvania Municipal Bond and
National Tax Exempt Bond and Michigan Municipal Bond Funds may invest in
Municipal Securities. The two principal classifications of Municipal Securities
consist of "general obligation" and "revenue" issues. Municipal Bonds include
debt obligations issued by governmental entities to obtain funds for various
public purposes, including the construction of a wide range of public
facilities, the refunding of outstanding obligations, and the extension of loans
to public institutions and facilities.
Municipal Securities that are payable only from the revenues
derived from a particular facility may be adversely affected by federal or state
laws, regulations or court decisions which make it more difficult for the
particular facility to generate revenues sufficient to pay such interest and
principal, including, among others, laws, decisions and regulations which limit
the amount of fees, rates or other charges which may be imposed for use of the
facility or which increase competition among facilities of that type or which
limit or otherwise have the effect of reducing the use of such facilities
generally, thereby reducing the revenues generated by the particular facility.
Municipal Securities, the payment of interest and principal on which is insured
in whole or in part by a governmentally created fund, may be adversely affected
by laws or regulations which restrict the aggregate proceeds available for
payment of principal and interest in the event of a default on such municipal
securities. Similarly, the payment of interest and principal on Municipal
Securities may be adversely affected by respective state laws which limit the
availability of remedies or the scope of remedies available in the event of a
default on such municipal securities. Because of the diverse nature of such laws
and regulations and the impossibility of either predicting in which specific
Municipal Securities the Funds will invest from time to time or predicting the
nature or extent of future judicial interpretations or changes in existing laws
or regulations or the future enactment or adoption of additional laws or
regulations, it
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<PAGE> 56
is not presently possible to determine the impact of such laws, regulations and
judicial interpretations on the securities in which the Funds may invest and,
therefore, on the shares of the Fund.
There are, of course, variations in the quality of Municipal
Securities both within a particular classification and between classifications,
and the yields on Municipal Securities depend upon a variety of factors,
including the financial condition of the issuer, the general conditions of the
municipal bond market, the size of a particular offering, the maturity of the
obligation and the rating of the issue. The ratings of rating agencies represent
their opinions as to the quality of Municipal Securities. It should be
emphasized, however, that ratings are general and are not absolute standards of
quality, and Municipal Securities with the same maturity, interest rate and
rating may have different yields while Municipal Securities of the same maturity
and interest rate with different ratings may have the same yield. Subsequent to
its purchase by a Fund, an issue of Municipal Securities may cease to be rated
or its rating may be reduced below the minimum rating required for purchase by
the Funds. The Funds' adviser will consider such an event in determining whether
they should continue to hold the obligation.
The payment of principal and interest on most Municipal
Securities purchased by the Funds will depend upon the ability of the issuers to
meet their obligations. An issuer's obligations under its Municipal Securities
are subject to the provisions of bankruptcy, insolvency and other laws affecting
the rights and remedies of creditors, such as the Federal Bankruptcy Code, and
laws, if any, which may be enacted by federal or state legislatures extending
the time for payment of principal or interest, or both, or imposing other
constraints upon enforcement of such obligations or upon the ability of
municipalities to levy taxes. The power or ability of an issuer to meet its
obligations for the payment of interest or the principal of its Municipal
Securities may be materially adversely affected by litigation or other
conditions.
Certain Municipal Securities held by the Funds may be insured
at the time of issuance as to the timely payment of principal and interest. The
insurance policies will usually be obtained by the issuer or original purchaser
of the Municipal Securities at the time of their original issuance. In the event
that the issuer defaults on interest or principal payments, the insurer of the
obligation is required to make payment to the bondholders upon proper
notification. There is, however, no guarantee that the insurer will meet its
obligations. In addition, such insurance will not protect against market
fluctuations caused by changes in interest rates and other factors.
Municipal notes in which the Funds may invest include, but are
not limited to, general obligation notes, tax anticipation notes (notes sold to
finance working capital or capital facilities needs of the issuer in
anticipation of receiving taxes on a future date), revenue anticipation notes
(notes sold to provide needed cash prior to receipt of expected non-tax revenues
from a specific source), bond anticipation notes, certificates of indebtedness,
demand notes and construction loan notes.
The Funds invest in Municipal Securities which at the time of
purchase are rated in one of the four highest rating categories by an NRSRO for
bonds and in one of the two highest rating categories by an NRSRO for money
market securities.
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<PAGE> 57
Securities that are unrated at the time of purchase will be
determined to be of comparable quality by the Funds' adviser pursuant to
guidelines approved by the Trust's Board of Trustees. If the rating of an
obligation held by a Fund is reduced below its rating requirements, the Fund
will sell the obligation when the adviser believes that it is in the best
interests of the Fund to do so. The applicable ratings are more fully described
in the Appendix.
Special Considerations Regarding Investment in Ohio Municipal Securities
As described in the Prospectus, the Ohio Tax Exempt Bond Fund
and the Ohio Municipal Money Market Fund will invest most of its net assets in
securities issued by or on behalf of (or in certificates of participation in
lease-purchase obligations of) the State of Ohio, political subdivisions of the
State, or agencies or instrumentalities of the State or its political
subdivisions (Ohio Obligations). The Ohio Tax Exempt Bond Fund is therefore
susceptible to general or particular economic, political or regulatory factors
that may affect issuers of Ohio Obligations. The following information
constitutes only a brief summary of some of the many complex factors that may
have an effect. The information does not apply to "conduit" obligations on which
the public issuer itself has no financial responsibility. This information is
derived from official statements of certain Ohio issuers published in connection
with their issuance of securities and from other publicly available information,
and is believed to be accurate. No independent verification has been made of any
of the following information.
Generally, the creditworthiness of Ohio Obligations of local
issuers is unrelated to that of obligations of the State itself, and the State
has no responsibility to make payments on those local obligations.
There may be specific factors that at particular times apply
in connection with investment in particular Ohio Obligations or in those
obligations of particular Ohio issuers. It is possible that the investment may
be in particular Ohio Obligations, or in those of particular issuers, as to
which those factors apply. However, the information below is intended only as a
general summary, and is not intended as a discussion of any specific factors
that may affect any particular obligation or issuer.
While diversifying more into the service and other
non-manufacturing areas, the Ohio economy continues to rely in part on durable
goods manufacturing largely concentrated in motor vehicles and equipment, steel,
rubber products and household appliances. As a result, general economic
activity, as in many other industrially-developed states, tends to be more
cyclical than in some other states and in the nation as a whole. Agriculture is
an important segment of the economy, with over half the State's area devoted to
farming and approximately 16% of total employment in agribusiness.
In prior years, the State's overall unemployment rate was
commonly somewhat higher than the national figure. For example, the reported
1990 average monthly State rate was 5.7%, compared to the 5.5% national figure.
However, in recent years the State rates were below
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<PAGE> 58
the national rates (4.3% versus 4.5% in 1998). The unemployment rate and its
effects vary among geographic areas of the State.
There can be no assurance that future national, regional or
state-wide economic difficulties, and the resulting impact on State or local
government finances generally, will not adversely affect the market value of
Ohio Obligations held in the Ohio Tax Exempt Bond Fund or the ability of
particular obligors to make timely payments of debt service on (or lease
payments relating to) those Obligations.
The State operates on the basis of a fiscal biennium for its
appropriations and expenditures, and is precluded by law from ending its July 1
to June 30 fiscal year (FY) or fiscal biennium in a deficit position. Most State
operations are financed through the General Revenue Fund (GRF), for which the
personal income and sales-use taxes are the major sources. Growth and depletion
of GRF ending fund balances show a consistent pattern related to national
economic conditions, with the ending FY balance reduced during less favorable
and increased during more favorable economic periods. The State has
well-established procedures for, and has timely taken, necessary actions to
ensure resource/expenditure balances during less favorable economic periods.
Those procedures included general and selected reductions in appropriations
spending.
The 1992-93 biennium presented significant challenges to State
finances, successfully addressed. To allow time to resolve certain budget
differences an interim appropriations act was enacted effective July 1, 1991; it
included GRF debt service and lease rental appropriations for the entire
biennium, while continuing most other appropriations for a month. Pursuant to
the general appropriations act for the entire biennium, passed on July 11, 1991,
$200 million was transferred from the Budget Stabilization Fund (BSF, a cash and
budgetary management fund) to the GRF in FY 1992.
Based on updated results and forecasts in the course of that
FY, both in light of a continuing uncertain nationwide economic situation, there
was projected, and then timely addressed, an FY 1992 imbalance in GRF resources
and expenditures. In response, the Governor ordered most State agencies to
reduce GRF spending in the last six months of FY 1992 by a total of
approximately $184 million; the $100.4 million BSF balance and additional
amounts from certain other funds were transferred late in the FY to the GRF, and
adjustments were made in the timing of certain tax payments.
A significant GRF shortfall (approximately $520 million) was
then projected for FY 1993. It was addressed by appropriate legislative and
administrative actions, including the Governor's ordering $300 million in
selected GRF spending reductions and subsequent executive and legislative action
(a combination of tax revisions and additional spending reductions). The June
30, 1993 ending GRF fund balance was approximately $111 million, of which, as a
first step to replenishment, $21 million was deposited in the BSF.
None of the spending reductions were applied to appropriations
needed for debt service on or lease rentals relating to any State obligations.
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The 1994-95 biennium presented a more affirmative financial
picture. Based on June 30, 1994 balances, an additional $260 million was
deposited in the BSF. The biennium ended June 30, 1995 with a GRF ending fund
balance of $928 million, of which $535.2 million was transferred into the BSF.
The significant GRF fund balance, after leaving in the GRF an unreserved and
undesignated balance of $70 million, was transferred to the BSF and other funds
including school assistance funds and, in anticipation of possible federal
program changes, a human services stabilization fund.
From a higher than forecast 1996-97 mid-biennium GRF fund
balance, $100 million was transferred for elementary and secondary school
computer network purposes and $30 million to a new State transportation
infrastructure fund. Approximately $400.8 million served as a basis for
temporary 1996 personal income tax reductions aggregating that amount. The
1996-97 biennium-ending GRF fund balance was $834.9 million. Of that, $250
million went to school building construction and renovation, $94 million to the
school computer network, $44.2 million for school textbooks and instructional
materials and a distance learning program, and $34 million to the BSF and the
$263 million balance to a State income tax reduction fund.
The GRF appropriations act for the 1998-99 biennium was passed
on June 25, 1997 and promptly signed (after selective vetoes) by the Governor.
All necessary GRF appropriations for State debt service and lease rental
payments then projected for the biennium were included in that act (and are
included in the pending House and Senate-passed appropriation bills for FY
2000-01). Subsequent legislation increased the FY 1999 GRF appropriation level
for elementary and secondary education, with the increase funded in part by
mandated small percentage reductions in State appropriations for various State
agencies and institutions. Expressly exempt from those reductions are all
appropriations for debt service, including lease rental payments.
The BSF had a June 8, 1999 balance of more than $906 million.
The State's incurrence or assumption of debt without a vote of
the people is, with limited exceptions, prohibited by current State
constitutional provisions. The State may incur debt, limited in amount to
$750,000, to cover casual deficits or failures in revenues or to meet expenses
not otherwise provided for. The Constitution expressly precludes the State from
assuming the debts of any local government or corporation. (An exception is made
in both cases for any debt incurred to repel invasion, suppress insurrection or
defend the State in war.)
By 15 constitutional amendments approved from 1921 to date
(the latest adopted in 1995) Ohio voters authorized the incurrence of State debt
and the pledge of taxes or excises to its payment. At June 8, 1999, almost $1.14
billion (excluding certain highway bonds payable primarily from highway use
receipts) of this debt was outstanding or awaiting delivery. The only such State
debt at that date still authorized to be incurred were portions of the highway
bonds, and the following: (a) up to $100 million of obligations for coal
research and development may be outstanding at any one time ($23.9 million
outstanding); (b) $240 million of obligations previously authorized for local
infrastructure improvements, no more than $120 million of which may be issued in
any calendar year (over $1 billion outstanding) and (c) up to $200 million in
general obligation bonds for parks, recreation and natural resources purposes
which may be outstanding at
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any one time ($112.7 million outstanding or awaiting delivery, with no more than
$50 million to be issued in any one year).
The electors in 1995 approved a constitutional amendment
extending the local infrastructure bond program (authorizing an additional $1.2
billion of State full faith and credit obligations to be issued over 10 years
for the purpose), and authorizing additional highway bonds (expected to be
payable primarily from highway use receipts). The latter supersedes the prior
$500 million outstanding authorization, and authorizes not more than $1.2
billion to be outstanding at any time and not more than $220 million to be
issued in a fiscal year.
The Constitution also authorizes the issuance of State
obligations for certain purposes, the owners of which do not have the right to
have excises or taxes levied to pay debt service. Those special obligations
include obligations issued by the Ohio Public Facilities Commission and the Ohio
Building Authority, and certain obligations issued by the State Treasurer, over
$5.2 billion of which were outstanding at June 8, 1999.
The General Assembly has placed on the November 1999 general
election ballot a proposed constitutional amendment relating to State debt. If
approved by the voters, it will authorize State general obligation debt to pay
costs of facilities for a system of common schools throughout the State and
facilities for state supported and assisted institutions of higher education.
That, and other debt represented by direct obligations of the State (such as
that authorized by the Ohio Public Facilities Commission and Ohio Building
Authority, and some authorized by the Treasurer), may not be issued if future FY
total debt service on those direct obligations to be paid from the GRF or net
lottery proceeds exceeds 5% of total estimated revenues of the State for the GRF
and from net State lottery proceeds during the FY of issuance.
Aggregate FY 1998 rental payments under various capital lease
and lease purchase agreements were approximately $9.1 million. In recent years,
State agencies have also participated in transportation and office building
projects that may have some local as well as State use and benefit, in
connection with which the State enters into lease purchase agreements with terms
ranging from 7 to 20 years. Certificates of participation, or special obligation
bonds of the State or a local agency, are issued that represent fractionalized
interests in or are payable from the State's anticipated payments. The State
estimates highest future FY payments under those agreements (as of June 8, 1999)
to be approximately $25.8 million (of which $22 million is payable from sources
other than the GRF, such as federal highway money distributions). State payments
under all those agreements are subject to biennial appropriations, with the
lease terms being two years subject to renewal if appropriations are made.
A 1990 constitutional amendment authorizes greater State and
political subdivision participation (including financing) in the provision of
housing. The General Assembly may for that purpose authorize the issuance of
State obligations secured by a pledge of all or such portion as it authorizes of
State revenues or receipts (but not by a pledge of the State's full faith and
credit).
A 1994 constitutional amendment pledges the full faith and
credit and taxing power of the State to meeting certain guarantees under the
State's tuition credit program which provides
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for purchase of tuition credits, for the benefit of State residents, guaranteed
to cover a specified amount when applied to the cost of higher education
tuition. (A 1965 constitutional provision that authorized student loan
guarantees payable from available State moneys has never been implemented, apart
from a "guarantee fund" approach funded essentially from program revenues.)
State and local agencies issue obligations that are payable
from revenues from or relating to certain facilities (but not from taxes). By
judicial interpretation, these obligations are not "debt" within constitutional
provisions. In general, payment obligations under lease-purchase agreements of
Ohio public agencies (in which certificates of participation may be issued) are
limited in duration to the agency's fiscal period, and are renewable only upon
appropriations being made available for the subsequent fiscal period.
Local school districts in Ohio receive a major portion
(state-wide aggregate approximately 46% in recent years) of their operating
moneys from State subsidies, but are dependent on local property taxes, and in
123 districts (as of June 8, 1999) from voter-authorized income taxes, for
significant portions of their budgets. Litigation, similar to that in other
states, has been pending questioning the constitutionality of Ohio's system of
school funding. The Ohio Supreme Court has concluded that aspects of the system
(including basic operating assistance and the loan program referred to below)
are unconstitutional, and ordered the State to provide for and fund a system
complying with the Ohio Constitution, staying its order to permit time for
responsive corrective actions. After a further hearing, the trial court has
decided that steps taken to date by the State to enhance school funding have not
met the requirements of the Supreme Court decision; the State has filed a notice
of appeal with the Supreme Court, and that Court has issued a stay, pending
appeal, of the implementation of the trial court's order. A small number of the
State's 612 local school districts have in any year required special assistance
to avoid year-end deficits. A program has provided for school district cash need
borrowing directly from commercial lenders, with diversion of State subsidy
distributions to repayment if needed. Recent borrowings under this program
totaled $71.1 million for 29 districts in FY 1995 (including $29.5 million for
one), $87.2 million for 20 districts in FY 1996 (including $42.1 million for
one), $113.2 million for 12 districts in FY 1997 (including $90 million to one
for restructuring its prior loans), and $23.4 million for 10 districts in FY
1998.
Ohio's 943 incorporated cities and villages rely primarily on
property and municipal income taxes for their operations. With other
subdivisions, they also receive local government support and property tax relief
moneys distributed by the State.
For those few municipalities and school districts that on
occasion have faced significant financial problems, there are statutory
procedures for a joint State/local commission to monitor the fiscal affairs and
for development of a financial plan to eliminate deficits and cure any defaults.
(Similar procedures have recently been extended to counties and townships.)
Since inception for municipalities in 1979, these "fiscal emergency" procedures
have been applied to 26 cities and villages; for 20 of them the fiscal situation
was resolved and the procedures terminated (one city is in preliminary "fiscal
watch" status). As of June 8, 1999, a school district "fiscal emergency"
provision was applied to nine districts, and ten were on preliminary "fiscal
watch" status.
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At present the State itself does not levy ad valorem taxes on
real or tangible personal property. Those taxes are levied by political
subdivisions and other local taxing districts. The Constitution has since 1934
limited to 1% of true value in money the amount of the aggregate levy (including
a levy for unvoted general obligations) of property taxes by all overlapping
subdivisions, without a vote of the electors or a municipal charter provision,
and statutes limit the amount of that aggregate levy to 10 mills per $1 of
assessed valuation (commonly referred to as the "ten-mill limitation"). Voted
general obligations of subdivisions are payable from property taxes that are
unlimited as to amount or rate.
Special Risk Considerations Regarding Investment in Pennsylvania Securities
Potential shareholders should consider the fact that the
Pennsylvania Municipal Bond Fund's portfolio consists primarily of securities
issued by the Commonwealth of Pennsylvania (the "Commonwealth"), its
municipalities and authorities and should realize that the Fund's performance is
closely tied to general economic conditions within the Commonwealth as a whole
and to economic conditions within particular industries and geographic areas
located within the Commonwealth.
Although the General Fund of the Commonwealth (the principal
operating fund of the Commonwealth) experienced deficits in fiscal 1990 and
1991, tax increases and spending decreases have resulted in surpluses the last
six years; as of June 30, 1998, the General Fund had a surplus of $1,364.9
million.
Pennsylvania's economy historically has been dependent upon
heavy industry, but has diversified recently into various services, particularly
into medical and health services, education and financial services. Agricultural
industries continue to be an important part of the economy, including not only
the production of diversified food and livestock products, but substantial
economic activity in agribusiness and food-related industries. Service
industries currently employ the greatest share of non-agricultural workers,
followed by the categories of trade and manufacturing. Future economic
difficulties in any of these industries could have an adverse impact on the
finances of the Commonwealth or its municipalities, and could adversely affect
the market value of the Bonds in the Pennsylvania Trust or the ability of the
respective obligors to make payments of interest and principal due on such
Bonds.
Certain litigation is pending against the Commonwealth that
could adversely affect the ability of the Commonwealth to pay debt service on
its obligations including as of June 1, 1999, suits relating to the following
matters: (i) In February 1999, a taxpayer filed a petition for review in the
Commonwealth Court of Pennsylvania asking the court to declare that Chapter 5
(relating to Sports Facilities Financing) of the Capital Facilities Debt
Enabling Act is in violation of the Pennsylvania Constitution. Commonwealth
Court denied the taxpayer's motion for a preliminary injunction and the Supreme
Court denied an appeal of such denial. The respondents have filed preliminary
objections in the nature of a demurrer, requesting the Court dismiss the case
with prejudice. Oral arguments before the Commonwealth Court regarding the
preliminary objections were scheduled for May 19, 1999, (ii) The American Civil
Liberties Union ("ACLU") filed suit in
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federal court demanding additional funding for child welfare services; the
Commonwealth settled a similar suit in the Commonwealth Court of Pennsylvania
and is seeking the dismissal of the federal suit, among other things, because of
that settlement. After its earlier denial of class certification was reversed by
the Third Circuit Court of Appeals, the district court granted class
certification to the ACLU, and the parties are proceeding with discovery. In
July 1998, a settlement agreement was reached with the City of Philadelphia. The
Commonwealth has agreed to pay $100,000 to settle plaintiffs' $1.4 million claim
for attorney's fees and to take other actions in exchange for a full and final
release and dismissal of the case against the Commonwealth parties. The
settlement was approved by the district court on February 1, 1999, and the case
was dismissed; (iii) In 1987, the Supreme Court of Pennsylvania held the
statutory scheme for county funding of the judicial system to be in conflict
with the constitution of the Commonwealth, but it stayed judgment pending
enactment by the legislature of funding consistent with the opinion, and the
legislature has yet to consider legislation implementing the judgment. In 1992,
a new action in mandamus was filed seeking to compel the Commonwealth to comply
with the original decision. The Court issued a writ in mandamus and appointed a
special master in 1996 to submit a plan for implementation, which it intended to
require by January 1, 1998. In January 1997, the Court established a committee,
consisting of the special master and representatives of the Executive and
Legislative branches, to develop an implementation plan; an implementation plan
was filed in July 1997. In April 1998 the General Assembly appropriated
approximately $12 million for the funding of county court administrator, under
the implementation plan. However, no legislation has been approved for the
payment of Commonwealth compensation county court administrators. In May 1998,
an action was filed by the Administrative Governing Board of the First Judicial
District claiming the city government has failed to provide adequate Funds for
the Operation of the courts of the First Judicial District. In November 1998,
the First Judicial District Governing Board filed with the Supreme Court a
renewed motion for entry of an order providing emergency relief, which requests
the City of Philadelphia to provide funds to the First Judicial District Courts,
in order to maintain necessary judicial operations throughout the end of the
fiscal year. Although the Supreme Court issued no order, the City is apparently
continuing its funding of the courts; (iv) Litigation was filed in both state
and federal court by an association of rural and small schools and several
individual school districts and parents challenging the constitutionality of the
Commonwealth's system for funding local school districts -- the federal case has
been stayed pending the resolution of the state case; a trial in the state case
commenced in January 1997 and has recessed; no briefing schedule or date for
oral argument has yet been set; On July 9, 1998 the state court issued an
opinion dismissing the petitioners' claim in its entirety. On July 20, 1998 the
petitioner filed a timely motion for post-trial relief, taking exception to the
state court's findings of fact and conclusions of law. The Supreme Court, after
assuming jurisdiction in the case directed that all parties submit briefs on all
issues presented in the petitioners' motion for post-trial relief; and (v) In
1995, the Commonwealth, the Governor of Pennsylvania, the City of Philadelphia
and the Mayor of Philadelphia were joined as additional respondents in an
enforcement action commenced in Commonwealth Court in 1973 by the Pennsylvania
Human Relations Commission against the School District of Philadelphia pursuant
to the Pennsylvania Human Relations Act. The Commonwealth and the City were
joined to determine their liability, if any, to pay additional costs necessary
to remedy segregation-related conditions found to exist in Philadelphia public
schools. In January 1997, the Pennsylvania Supreme Court ordered the parties to
brief certain issues. The Supreme Court heard oral argument on the issues in
February 1998 but no decision has been issued,
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(vi) In February 1997, five residents of the City of Philadelphia, joined by the
City, the School District and others, filed a civil action in the Commonwealth
Court for declaratory judgment against the Commonwealth and certain Commonwealth
officers and officials that the defendants had failed to provide an adequate
quality of education in Philadelphia, as required by the Pennsylvania
Constitution. In March 1998, the Commonwealth Court dismissed the case on the
grounds that the issues prescribed are not justifiable. An appeal to the Supreme
Court of Pennsylvania is pending, (vii) In April 1995, the Commonwealth reached
a settlement agreement with Fidelity Bank and certain other banks with respect
to the constitutional validity of the Amended Bank Shares Act and related
legislation; although this settlement agreement did not require expenditure of
Commonwealth funds, the petitions of other banks are currently pending with the
Commonwealth Court; In January 1998 a panel of the Commonwealth Court ruled in
favor of the Commonwealth, finding no constitutional violation. Royal Bank filed
exceptions, which the Commonwealth Court en banc denied. Royal Bank appealed to
the Supreme Court and briefing has been completed. The Court has not yet
scheduled oral arguments. (viii) Suit has been filed in state court against the
State Employees' Retirement Board claiming that the use of gender district
actuarial factors to compute benefits received before August 1, 1983 violates
the Pennsylvania Constitution (gender-neutral factors have been used since
August 1, 1983, the date on which the U.S. Supreme Court held in Arizona
Governing Committee v. Norris that the use of such factors violated the Federal
Constitution); in 1996, the Commonwealth Court heard oral argument en blanc, and
in 1997 denied the plaintiff's motion for judgement on the pleading. The case is
currently in discovery. (ix) In March 1997, Rite Aid of Pennsylvania, Inc. filed
in the United States District Court for the Eastern District of Pennsylvania, a
civil action against the Secretary of Public Welfare alleging that regulations
promulgated in October 1995 governing payment rates for prescription drugs and
related services provided to recipients of benefits under the Pennsylvania
Medical Assistance Program violated provisions of Title XIX of the Social
Security Act and regulations of the U.S. Department of Health and Human
Services, as well as provisions of State law and Federal constitutional due
process. In August 1998, the court declared that certain pharmacy reimbursement
rates were in violation of the Medicaid Act and enjoined the Secretary from
using these rates to reimburse for any prescription drugs and related services
provided to Medicaid recipients on and after October 1, 1998. The Secretary
filed motions for appeal and in March 1999, the U.S. Court of Appeals for the
Third Circuit reversed the district court's order and remanded the case for
further proceedings. The plaintiffs on April 5, 1999 filed an application for
rehearing. (x) On March 9, 1998 several residents of the City of Philadelphia
along with the School District of Philadelphia and others brought suit in the
United States District Court for the Eastern District of Pennsylvania against
the Governor, the Secretary of Education and others alleging that the defendants
are violating a regulation of the U.S. Department of Education promulgated under
Title VI of the Civil Rights Act of 1964 in that the Commonwealth's system for
funding public schools has the effect of discrimination on the basis of race. On
November 18, 1998, the district court dismissed the action with prejudice. An
appeal by the plaintiffs was filed and the parties are awaiting the scheduling
of oral argument.
Although there can be no assurance that such conditions will
continue, the Commonwealth's general obligation bonds are currently rated AA by
S&P and A3 and A1 by Moody's and Philadelphia's and Pittsburgh's general
obligation bonds are currently rated BBB and BBB, respectively, by S&P and Baa2
and Baa1, respectively, by Moody's.
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The City of Philadelphia (the "City") experienced a series of
General Fund deficits for fiscal years 1988 through 1992 and, while its general
financial situation has improved, the City is still seeking a long-term solution
for its economic difficulties. The audited balance of the City's General Fund as
of June 30, 1998 was a surplus of $169.2 million.
In recent years an authority of the Commonwealth, the
Pennsylvania Intergovernmental Cooperation Authority ("PICA"), has issued
approximately $1.76 billion of special revenue bonds on behalf of the City to
cover budget shortfalls, to eliminate projected deficits and to fund capital
spending. As one of the conditions of issuing bonds on behalf of the City, PICA
exercises oversight of the City's finances. The City is currently operating
under a five year plan approved by PICA in 1996. PICA's power to issue further
bonds to finance capital projects expired on December 31, 1994. PICA's authority
to issue bonds to finance cash flow deficits expired on December 31, 1996, but
its authority to refund existing debt will not expire. PICA had approximately
$1.1 billion in special revenue bonds outstanding as of April 15, 1999.
SPECIAL CONSIDERATIONS REGARDING INVESTMENT IN MICHIGAN
MUNICIPAL SECURITIES. The following information is drawn from various Michigan
governmental publications, particularly the Governor's Executive Budget for
fiscal year 1999-2000, and from official statements relating to securities
offerings of the State and its political subdivisions. While the Trust has not
independently verified such information, it has no reason to believe that it is
not correct in all material respects.
The State of Michigan's economy is principally dependent on
manufacturing (particularly automobiles, office equipment and other durable
goods), tourism and agriculture, and historically has been highly cyclical.
Total State wage and salary employment is estimated to have
grown by 1.9% in 1998. The rate of unemployment is estimated to have been 3.8%
in 1998, below the national average for the fifth consecutive year. Personal
income grew at an estimated 5.1% annual rate in 1998, up from the 4.6% growth
reported for 1997.
During the past five years, improvements in the Michigan
economy have resulted in increased revenue collections which, together with
restraints on the expenditure side of the budget, have resulted in State General
Fund budget surpluses, most of which were transferred to the State's
Counter-Cyclical Budget and Economic Stabilization Fund. The balance of that
Fund as of September 30, 1998 is estimated to have been in excess of $1.1
billion.
The Michigan Constitution limits the amount of total State
revenues that can be raised from taxes and certain other sources. State revenues
(excluding federal aid and revenues for payment of principal and interest on
general obligation bonds) in any fiscal year are limited to a fixed percentage
of State personal income in the prior calendar year or the average of the prior
three calendar years, whichever is greater, and this fixed percentage equals the
percentage of the 1978-79 fiscal year state government revenues to total
calendar year 1977 State personal income (which was 9.49%).
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The Michigan Constitution also provides that the proportion of
State spending paid to all units of local government to total State spending may
not be reduced below the proportion in effect in the 1978-79 fiscal year. The
State originally determined that portion to be 41.6%. If such spending does not
meet the required level in a given year, an additional appropriation for local
governmental units is required by the following fiscal year; which means the
year following the determinations of the shortfall, according to an opinion
issued by the State's Attorney General. Spending for local units met this
requirement for fiscal years 1986-87 through 1991-92. As the result of
litigation, the State agreed to reclassify certain expenditures, beginning with
fiscal year 1992-93, and has recalculated the required percentage of spending
paid to local government units to be 48.97%.
The State has issued and has outstanding general obligation
full faith and credit bonds for Water Resources, Environmental Protection
Program, Recreation Program and School Loan purposes. As of September 30, 1998,
the State had approximately $874 million of general obligation bonds
outstanding.
The State may issue notes or bonds without voter approval for
the purposes of making loans to school districts. The proceeds of such notes or
bonds are deposited in the School Bond Loan Fund maintained by the State
Treasurer and used to make loans to school districts for payment of debt on
qualified general obligation bonds issued by local school districts.
The State is a party to various legal proceedings seeking
damages or injunctive or other relief. In addition to routine litigation,
certain of these proceedings could, if unfavorably resolved from the point of
view of the State, substantially affect State programs or finances. As of early
1998, these lawsuits involved programs generally in the areas of corrections,
tax collection, commerce, and proceedings involving budgetary reductions to
school districts and governmental units, and court funding. Notable among these
legal proceedings are lawsuits brought by a number of school districts
challenging the constitutionality of certain state-mandated special education
services without corresponding state funding.
The State Constitution limits the extent to which
municipalities or political subdivisions may levy taxes upon real and personal
property through a process that regulates assessments.
On March 15, 1994, Michigan voters approved a property tax and
school finance reform measure commonly known as Proposal A. Under Proposal A, as
approved, effective May 1, 1994, the State sales and use tax increased from 4%
to 6%, the State income tax decreased from 4.6% to 4.4%, the cigarette tax
increased from $.25 to $.75 per pack and an additional tax of 16% of the
wholesale price began to be imposed on certain other tobacco products. A .75%
real estate transfer tax became effective January 1, 1995. Beginning in 1994, a
state property tax of 6 mills began to be imposed on all real and personal
property currently subject to the general property tax. All local school boards
are authorized, with voter approval, to levy up to the lesser of 18 mills or the
number of mills levied in 1993 for school operating purposes on nonhomestead
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property and nonqualified agricultural property. Proposal A contains additional
provisions regarding the ability of local school districts to levy taxes, as
well as a limit on assessment increases for each parcel of property, beginning
in 1995. Such increases for each parcel of property are limited to the lesser of
5% or the rate of inflation. When property is subsequently sold, its assessed
value will revert to the current assessment level of 50% of true cash value.
Under Proposal A, much of the additional revenue generated by the new taxes will
be dedicated to the State School Aid Fund.
Proposal A and its implementing legislation shifted
significant portions of the cost of local school operations from local school
districts to the State and raised additional State revenues to fund these
additional State expenses. These additional revenues will be included within the
State's constitutional revenue limitations and may impact the State's ability to
raise additional revenues in the future.
A state economy during a recessionary cycle would also, as a separate
matter, adversely affect the capacity of users of facilities constructed or
acquired through the proceeds of private activity bonds or other "revenue"
securities to make periodic payments for the use of those facilities.
OTHER TAX-EXEMPT INSTRUMENTS
- ----------------------------
Investments by the Ohio Tax Exempt Bond, Pennsylvania
Municipal Bond, National Tax Exempt Bond, Ohio Municipal Money Market,
Pennsylvania Tax Exempt Money Market and Tax Exempt Money Market Funds in
tax-exempt commercial paper will be limited to investments in obligations which
are rated at least A-2 or SP-2 by S&P, F-2 by Fitch or Prime-2, MIG-2 or VMIG-2
by Moody's at the time of investment or which are of equivalent quality as
determined by the Adviser. Investments in floating rate instruments will
normally involve industrial development or revenue bonds which provide that the
investing Fund can demand payment of the obligation at all times or at
stipulated dates on short notice (not to exceed 30 days) at par plus accrued
interest. A Fund must use the shorter of the period required before it is
entitled to prepayment under such obligations or the period remaining until the
next interest rate adjustment date for purposes of determining the maturity.
Such obligations are frequently secured by letters of credit or other credit
support arrangements provided by banks. The quality of the underlying credit or
of the bank, as the case may be, must, in the opinion of the Adviser be
equivalent to the commercial paper ratings stated above. The Adviser will
monitor the earning power, cash flow and liquidity ratios of the issuers of such
instruments and the ability of an issuer of a demand instrument to pay principal
and interest on demand. Other types of tax-exempt instruments may also be
purchased as long as they are of a quality equivalent to the bond or commercial
paper ratings stated above.
PORTFOLIO TURNOVER
- ------------------
The portfolio turnover rate for each Fund is calculated by
dividing the lesser of purchases or sales of portfolio securities for the year
by the monthly average value of the portfolio
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securities. The calculation excludes U.S. Government securities and all
securities whose maturities at the time of acquisition were one year or less.
Portfolio turnover may vary greatly from year to year as well as within a
particular year, and may also be affected by cash requirements for redemptions
of shares and by requirements which enable the Trust to receive certain
favorable tax treatment. Portfolio turnover will not be a limiting factor in
making decisions.
The annual portfolio turnover rate for the International
Equity, Small Cap Value, Small Cap Growth, Equity Growth, Core Equity and Equity
Income Funds is not expected to exceed 100% under normal market conditions.
Portfolio turnover for the Tax Managed Equity and Equity Index Funds is not
expected to exceed 25% and 10%, respectively, under normal market conditions.
The annual portfolio turnover rate is not expected to exceed 100%, 200% and 100%
for the Mid Cap Growth, U.S. Government Income and Michigan Municipal Bond
Funds, respectively, under normal market conditions. The annual rate for the
Total Return Advantage, Intermediate Term Bond, GNMA, and Enhanced Income Funds
is not expected to exceed 100% under normal market conditions. Annual portfolio
turnover for the Treasury Plus Money Market Fund is expected to be zero percent
for regulatory purposes.
INVESTMENT LIMITATIONS
----------------------
Each Fund is subject to a number of investment limitations.
The following investment limitations are matters of fundamental policy and may
not be changed with respect to a particular Fund without the affirmative vote of
the holders of a majority of the Fund's outstanding shares.
No Fund may:
1. Purchase any securities which would cause 25% or more of
the value of its total assets at the time of purchase to be invested in the
securities of one or more issuers conducting their principal business activities
in the same industry, provided that:
(a) there is no limitation with respect to obligations
issued or guaranteed by the U.S. government, any
state, territory or possession of the United States,
the District of Columbia or any of their authorities,
agencies, instrumentalities or political subdivisions,
and repurchase agreements secured by such instruments;
(b) wholly-owned finance companies will be considered to
be in the industries of their parents if their
activities are primarily related to financing the
activities of the parents;
(c) utilities will be divided according to their services,
for example, gas, gas transmission, electric and gas,
electric, and telephone will each be considered a
separate industry;
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(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.
With respect to investment limitation No. 1 above, the
National Tax Exempt Bond Fund may not purchase securities of any one issuer,
other than securities issued or guaranteed by the U.S. government or its
agencies or instrumentalities if, immediately after such purchase, more than 5%
of the value of the Fund's total assets would be invested in such issuer or the
Fund would hold more than 10% of any class of securities of the issuer or more
than 10% of the outstanding voting securities of the issuer, except that up to
25% of the value of the Fund's total assets may be invested without regard to
such limitations.
With respect to investment limitation No. 1 above, the Equity,
Balanced Allocation and Fixed Income Funds may not purchase securities of any
one issuer, other than securities issued or guaranteed by the U.S. government or
its agencies or instrumentalities or, in the case of the International Equity
Fund, securities issued or guaranteed by any foreign government, if, immediately
after such purchase, more than 5% of the value of the Fund's total assets would
be invested in such issuer or the Fund would hold more than 10% of any class of
securities of the issuer or more than 10% of the outstanding voting securities
of the issuer, except that up to 25% of the value of the Fund's total assets may
be invested without regard to such limitations.
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For purposes of the above investment limitations, a security
is considered to be issued by the governmental entity (or entities) whose assets
and revenues back the security, or, with respect to a private activity bond that
is backed only by the assets and revenues of a nongovernmental user, a security
is considered to be issued by such nongovernmental user.
Except for the Funds' policy on illiquid securities and
borrowing, if a percentage limitation is satisfied at the time of investment, a
later increase or decrease in such percentage resulting from a change in the
value of a Fund's portfolio securities will not constitute a violation of such
limitation for purposes of the 1940 Act.
Opinions relating to the validity of Municipal Securities and
to the exemption of interest thereon from federal and state income taxes are
rendered by qualified legal counsel to the respective issuers at the time of
issuance. Neither the Funds nor their adviser will review the proceedings
relating to the issuance of Municipal Securities or the basis for such opinions.
In addition, the Funds are subject to the following
non-fundamental limitations, which may be changed without the vote of
shareholders:
No Fund may:
1. Acquire any other investment company or investment company
security except in connection with a merger, consolidation, reorganization or
acquisition of assets or where otherwise permitted under the 1940 Act.
2. Write or sell put options, call options, straddles,
spreads, or any combination thereof, except as consistent with the Fund's
investment objective and policies for transactions in options on securities or
indices of securities, futures contracts and options on futures contracts and in
similar investments.
3. Purchase securities on margin, make short sales of
securities or maintain a short position, except that, as consistent with a
Fund's investment objective and policies, (a) this investment limitation shall
not apply to the Fund's transactions in futures contracts and related options,
options on securities or indices of securities and similar instruments, and (b)
it may obtain short-term credit as may be necessary for the clearance of
purchases and sales of portfolio securities.
4. Purchase securities of companies for the purpose of
exercising control.
5. Invest more than 15% (10% in the case of the Money Market
Funds) of its net assets in illiquid securities.
6. Purchase securities while its outstanding borrowings
(including reverse repurchase agreements) are in excess of 5% of its total
assets. Securities held in escrow or in separate accounts in connection with a
Fund's investment practices described in its Prospectus or Statement of
Additional Information are not deemed to be pledged for purposes of this
limitation.
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<PAGE> 71
With respect to each of the Ohio Tax Exempt and Pennsylvania
Municipal Bond Funds, at the end of each quarter of its taxable year, (i) at
least 50% of the market value of its total assets will be invested in cash, U.S.
Government securities, securities of other regulated investment companies and
other securities, with such other securities of any one issuer limited for the
purposes of this calculation to an amount not greater than 5% of the value of
its total assets and 10% of the outstanding voting securities of such issuer,
and (ii) not more than 25% of the value of its total assets will be invested in
the securities of any one issuer (other than U.S. Government securities or the
securities of other regulated investment companies).
As per the 1940 Act, the Funds do not intend to acquire
securities issued by the Adviser, Sub-Adviser, Distributor and their affiliates.
NET ASSET VALUE
---------------
The Trust uses the amortized cost method to value shares in
the Money Market Funds. Pursuant to this method, a security is valued at its
cost initially and thereafter a constant amortization to maturity of any
discount or premium is assumed, regardless of the impact of fluctuating interest
rates on the market value of the security. Where it is not appropriate to value
a security by the amortized cost method, the security will be valued either by
market quotations, or by fair value as determined by the Board of Trustees.
While this method provides certainty in valuation, it may result in periods
during which value, as determined by amortized cost, is higher or lower than the
price each respective Fund would receive if it sold the security. The value of
the portfolio securities held by each respective Fund will vary inversely to
changes in prevailing interest rates. Thus, if interest rates have increased
from the time a security was purchased, such security, if sold, might be sold at
a price less than its cost. Similarly, if interest rates have declined from the
time a security was purchased, such security, if sold, might be sold at a price
greater than its purchase cost. In either instance, if the security is held to
maturity, no gain or loss will be realized.
The Money Market Funds invest only in high-quality instruments
and maintains a dollar-weighted average portfolio maturity appropriate to its
objective of maintaining a stable net asset value per share, provided that a
Fund will neither purchase any security deemed to have a remaining maturity of
more than 397 calendar days within the meaning of the 1940 Act nor maintain a
dollar-weighted average portfolio maturity which exceeds 90 days. The Trust's
Board of Trustees has established procedures pursuant to rules promulgated by
the SEC, that are intended to help stabilize the net asset value per share of
each Fund for purposes of sales and redemptions at $1.00. These procedures
include review by the Board of Trustees, at such intervals as it deems
appropriate, to determine the extent, if any, to which the net asset value per
share of each Fund calculated by using available market quotations deviates from
$1.00 per share. In the event such deviation exceeds one-half of one percent,
the Board of Trustees will promptly consider what action, if any, should be
initiated. If the Board of Trustees believes that the extent of any deviation
from a Fund's $1.00 amortized cost price per share may result in material
dilution or other unfair results to investors or existing shareholders, it has
agreed to take such steps as it considers appropriate to eliminate or reduce, to
the extent reasonably practicable, any such dilution or unfair
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results. These steps may include selling portfolio instruments prior to
maturity; shortening the average portfolio maturity; withholding or reducing
dividends; redeeming shares in kind; reducing the number of a Fund's outstanding
shares without monetary consideration; or utilizing a net asset value per share
determined by using available market quotations.
DIVIDENDS
---------
As stated, the Trust uses its best efforts to maintain the net
asset value per share of Money Market Funds at $1.00. As a result of a
significant expense or realized or unrealized loss incurred by the Funds, it is
possible that a Fund's net asset value per share may fall below $1.00. Should
the Trust incur or anticipate any unusual or unexpected significant expense or
loss which would affect disproportionately the income of a Fund for a particular
period, the Board of Trustees would at that time consider whether to adhere to
the present dividend policy with respect to the Funds or to revise it in order
to ameliorate to the extent possible the disproportionate effect of such expense
or loss on the income of the Fund experiencing such effect. Such expense or loss
may result in a shareholder's receiving no dividends for the period in which he
or she holds shares of a Fund and/or in his or her receiving upon redemption a
price per share lower than the price he or she paid.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
----------------------------------------------
Shares in the Trust are sold on a continuous basis by SEI
Investments Distribution Co. (the "Distributor"), which has agreed to use
appropriate efforts to solicit all purchase orders. The issuance of shares is
recorded on the books of the Trust. To change the commercial bank or account
designated to receive redemption proceeds, a written request must be sent to an
investor's financial institution at its principal office 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 weekend and holiday
closings; (c) the SEC has by order permitted such suspension; or (d) an
emergency exists as determined by the SEC.
As described in the applicable Prospectuses, Class I
(formerly, Institutional) Shares of the Funds are sold to certain qualified
investors at their net asset value without a sales charge.
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Class A (formerly, Retail) Shares of the Fund are sold to public investors at
the public offering price based on a Fund's net asset value plus a front-end
load or sales charge as described in the Prospectus for Class A, Class B and
Class C Shares. Class B Shares of the Money Market Fund and Tax Exempt Money
Market Fund are available only to the holders of Class B Shares of another Fund
who wish to exchange their Class B Shares of such other Fund for Class B Shares
of the Money Market Fund and/or the Tax Exempt Money Market Fund. Class B Shares
of the Funds are sold to public investors at net asset value but are subject to
a contingent deferred sales charge which is payable upon redemption of such
shares as described in the Prospectus for Class A, Class B and Class C Shares.
Class C Shares of the Money Market Fund are available only to the holders of
Class C Shares of another Fund who wish to exchange their Class C Shares of
another Fund for Class C Shares of the Money Market Fund. Class C Shares of the
Funds are sold to public investors at net asset value but are subject to a 1.00%
contingent deferred sales charge which is payable upon redemption of such shares
within the first eighteen months after purchase, as described in the Prospectus
for Class A, Class B and Class C Shares. There is no sales load or contingent
deferred sales charge imposed for shares acquired through the reinvestment of
dividends or distributions on such shares.
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<PAGE> 74
For the fiscal year ended May 31, 1999, sales loads paid by shareholders of
Class A Shares were as follows:
PORTFOLIO SALES LOADS FOR FISCAL YEAR ENDED 1999
Armada International Equity Fund $ 11,506
Armada Small Cap Value Fund $ 51,484
Armada Small Cap Growth Fund $ 30,753
Armada Equity Growth Fund $102,093
Armada Tax Managed Equity Fund $193,147
Armada Core Equity Fund $ 25,206
Armada Equity Index Fund* $ 44,677
Armada Equity Income Fund $ 87,943
Armada Balanced Allocation Fund $ 29,030
Armada Total Return Advantage Fund $ 50,583
Armada Bond Fund $ 21,248
Armada Intermediate Bond Fund $ 12,524
Armada GNMA Fund $ 19,732
Armada Enhanced Income Fund $ 965
Armada Ohio Tax Exempt Bond Fund $ 8,032
Armada Pennsylvania Municipal Bond Fund $ 3,797
Armada National Tax Exempt Bond Fund $ 3,898
Armada Money Market Fund $ 246
*The Class A Shares of the Equity Index Fund commenced
operations on October 15, 1998. The figure shown represents sales loads paid
since this date.
As of May 31, 1999 the Mid Cap Growth, Large Cap Ultra, U.S.
Government Income, Michigan Municipal Bond and Treasury Plus Money Market Funds
have not commenced operations.
Automatic investment programs such as the Planned Investment
Program ("Program") described in the Prospectus offered by the Funds permit an
investor to use "dollar cost averaging" in making investments. Under this
Program, an agreed upon fixed dollar amount is invested in Fund shares at
predetermined intervals. This may help investors to reduce their average cost
per share because the Program results in more shares being purchased during
periods of lower share prices and fewer shares during periods of higher share
prices. In order to be effective, dollar cost averaging should usually be
followed on a sustained, consistent basis. Investors should be aware, however,
that dollar cost averaging results in purchases of shares regardless of their
price on the day of investment or market trends and does not ensure a profit,
protect against losses in a declining market, or prevent a loss if an investor
ultimately redeems his or her shares at a price which is lower than their
purchase price. An investor may want to consider his or her financial ability to
continue purchases through periods of low price levels. From time to time, in
advertisements, sales literature, communications to shareholders and other
materials ("Materials"),
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<PAGE> 75
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 A SHARE OF THE FUND
- --------------------------------------
An illustration of the computation of the offering price per A
share of the Funds, based on the estimated value of the Fund's net assets and
number of outstanding shares on May 31, 1999, are as follows:
INTERNATIONAL EQUITY FUND
-------------------------
Net Assets of A Shares............................................. $1,127,079
Outstanding A Shares............................................... 103,716
Net Asset Value Per Share.......................................... $10.87
($10.87 / 94.5%)
Sales Charge, 5.50% of
offering price (5.80% of
net asset value per share)......................................... $.63
Offering to Public................................................. $11.50
SMALL CAP VALUE FUND
--------------------
Net Assets of A Shares............................................. $11,542,378
Outstanding A Shares............................................... 866,968
Net Asset Value Per Share
($13.31 / 94.5%)................................................... $13.31
Sales Charge, 5.50% of
offering price (5.79% of
net asset value per share)......................................... $.77
Offering to Public................................................. $14.08
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SMALL CAP GROWTH FUND
---------------------
Net Assets of A Shares............................................. $1,089,036
Outstanding A Shares............................................... $107,770
Net Asset Value Per Share
($10.11 / 94.5%)................................................... $10.11
Sales Charge, 5.50% of
offering price (5.84% of
net asset value per share)......................................... $.59
Offering to Public................................................. $10.70
EQUITY GROWTH FUND
------------------
Net Assets of A Shares............................................. $156,356,127
Outstanding A Shares............................................... 6,369,718
Net Asset Value Per Share
($24.55 / 94.5%)................................................... $24.55
Sales Charge, 5.50% of
offering price (5.82% of
net asset value per share)......................................... $1.43
Offering to Public................................................. $25.98
TAX MANAGED EQUITY FUND
-----------------------
Net Assets of A Shares............................................. $7,348,911
Outstanding A Shares............................................... 604,299
Net Asset Value Per Share
($12.16 / 94.5%)................................................... $12.16
Sales Charge, 5.50% of
offering price (5.84% of
net asset value per share)......................................... $.71
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Offering to Public................................................. $12.87
CORE EQUITY FUND
----------------
Net Assets of A Shares............................................. $1,731,499
Outstanding A Shares............................................... 126,332
Net Asset Value Per Share
($13.71 / 94.5%)................................................... $13.71
Sales Charge, 5.50% of
offering price (5.84% of
net asset value per share)......................................... $.80
Offering to Public................................................. $14.51
EQUITY INDEX FUND
-----------------
Net Assets of A Shares............................................. $3,892,113
Outstanding A Shares............................................... 344,718
Net Asset Value Per Share
($11.29 / 96.25%).................................................. $11.29
Sales Charge, 3.75% of
offering price (3.90% of
net asset value per share)......................................... $.44
Offering to Public................................................. $11.73
EQUITY INCOME FUND
------------------
Net Assets of A Shares............................................. $11,075,278
Outstanding A Shares............................................... 589,557
Net Asset Value Per Share
($18.79 / 94.5%)................................................... $18.79
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Sales Charge, 5.50% of
offering price (5.80% of
net asset value per share)......................................... $1.09
Offering to Public................................................. $19.88
BALANCED ALLOCATION FUND
------------------------
Net Assets of A Shares............................................. $1,465,755
Outstanding A Shares............................................... 142,171
Net Asset Value Per Share
($10.31 / 95.25%).................................................. $10.31
Sales Charge, 4.75% of
offering price (4.75% of
net asset value per share)......................................... $.51
Offering to Public................................................. $10.82
TOTAL RETURN ADVANTAGE FUND
---------------------------
Net Assets of A Shares............................................. $4,685,910
Outstanding A Shares............................................... 469,625
Net Asset Value Per Share
($9.98 / 95.25%)................................................... $9.98
Sales Charge, 4.75% of
offering price (5.01% of
net asset value per share)......................................... $.50
Offering to Public................................................. $10.48
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<PAGE> 79
BOND FUND
---------
Net Assets of A Shares............................................. $2,803,943
Outstanding A Shares............................................... 280,950
Net Asset Value Per Share
($9.98 / 95.25%)................................................... $9.98
Sales Charge, 4.75% of
offering price (5.01% of
net asset value per share)......................................... $.50
Offering to Public................................................. $10.48
INTERMEDIATE BOND FUND
----------------------
Net Assets of A Shares............................................. $5,129,418
Outstanding A Shares............................................... 492,519
Net Asset Value Per Share
($10.41 / 95.25%).................................................. $10.41
Sales Charge, 4.75% of
offering price (5.00% of
net asset value per share)......................................... $.52
Offering to Public................................................. $10.93
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GNMA FUND
---------
Net Assets of A Shares............................................. $1,497,415
Outstanding A Shares............................................... $148,223
Net Asset Value Per Share
($10.10 / 95.25%).................................................. $10.10
Sales Charge, 4.75% of
offering price (4.95% of
net asset value per share)*........................................ $.50
Offering to Public................................................. $10.60
ENHANCED INCOME FUND
--------------------
Net Assets of A Shares............................................. $550,430
Outstanding A Shares............................................... 55,120
Net Asset Value Per Share
($9.99 / 97.25%)................................................... $9.99
Sales Charge, 2.75% of
offering price (2.80% of
net asset value per share)......................................... $.28
Offering to Public................................................. $10.27
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<PAGE> 81
OHIO TAX EXEMPT BOND FUND
-------------------------
Net Assets of A shares............................................. $4,807,991
Outstanding A shares............................................... 437,155
Net Asset Value Per Share
($11.00 / 97.0%)................................................... $11.00
Sales Charge, 3.00% of
offering price (3.09% of
net asset value per share)......................................... $.34
Offering to Public................................................. $11.34
PENNSYLVANIA MUNICIPAL BOND FUND
--------------------------------
Net Assets of A shares............................................. $217,980
Outstanding A shares............................................... 20,958
Net Asset Value Per Share
($10.40 / 97.0%)................................................... $10.40
Sales Charge, 3.00% of
offering price (3.08% of
net asset value per share)......................................... $.32
Offering to Public................................................. $10.72
NATIONAL TAX EXEMPT BOND FUND
-----------------------------
Net Assets of A shares............................................. $4,205,129
Outstanding A shares............................................... 421,712
Net Asset Value Per Share
($9.97 / 95.25%)................................................... $9.97
Sales Charge, 4.75% of
offering price (5.02% of
net asset value per share)......................................... $.50
Offering to Public................................................. $10.47
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EXCHANGE PRIVILEGE
- ------------------
Investors may exchange all or part of their Class A Shares,
Class B Shares or Class C Shares as described in the applicable Prospectus. Any
rights an Investor may have (or have waived) to reduce the sales load applicable
to an exchange, as may be provided in such Fund Prospectus, will apply in
connection with any such exchange. The exchange privilege may be modified or
terminated at any time upon 60 days' notice to shareholders.
By use of the exchange privilege, the Investor authorizes the
Transfer Agent's financial institution or his or her financial institution to
act on telephonic, website or written instructions from any person representing
himself or herself to be the shareholder and believed by the Transfer Agent or
the financial institution to be genuine. The Investor or his or her financial
institution must notify the Transfer Agent of his or her prior ownership of
Class A Shares, Class B Shares or Class C Shares and the account number. The
Transfer Agent's records of such instructions are binding.
DESCRIPTION OF SHARES
---------------------
The Trust is a Massachusetts business trust. The Trust's
Declaration of Trust authorizes the Board of Trustees to issue an unlimited
number of shares of beneficial interest and to classify or reclassify any
unissued shares of the Trust into one or more additional classes or series by
setting or changing in any one or more respects their respective preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption. Pursuant to
such authority, the Board of Trustees has authorized the issuance of the classes
or series of shares set forth in the Prospectuses, including classes or series,
which represent interests in the Funds as follows, and as further described in
this Statement of Additional Information and the related Prospectuses:
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
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
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<PAGE> 83
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
Enhanced Income Fund
Class O Class I Shares
Class O - Special Series 1 Class A Shares
Class O - Special Series 2 Class B Shares
Class O - Special Series 3 Class C Shares
Total Return Advantage Fund
Class P Class I Shares
Class P - Special Series 1 Class A Shares
Class P - Special Series 2 Class B Shares
Class P - Special Series 3 Class C Shares
Pennsylvania Tax Exempt Money Market Fund
Class Q Class I Shares
Class Q - Special Series 1 Class A Shares
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<PAGE> 84
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 Tax Exempt Bond Fund
Class T Class I Shares
Class T - Special Series 1 Class A Shares
Class T - Special Series 2 Class B Shares
Class T - Special Series 3 Class C Shares
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
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
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<PAGE> 85
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
Shares have no preemptive rights and only such conversion or
exchange rights as the Board of Trustees may grant in its discretion. When
issued for payment as described in the Prospectus, the Trust's shares will be
fully paid and non-assessable. In the event of a liquidation or dissolution of
the Trust or an individual Fund, shareholders of a Fund are entitled to receive
the assets available for distribution belonging to the particular Fund, and a
proportionate distribution, based upon the relative asset values of the
respective Funds, of any general assets of the Trust not belonging to any
particular Fund which are available for distribution.
Rule 18f-2 under the 1940 Act provides that any matter
required by the 1940 Act, applicable state law, or otherwise, to be submitted to
the holders of the outstanding voting securities of an investment company such
as the Trust shall not be deemed to have been effectively acted upon unless
approved by the holders of a majority of the outstanding shares of each
investment fund affected by such matter. Rule 18f-2 further provides that an
investment fund is affected by a matter unless the interests of each fund in the
matter are substantially identical or the matter does not affect any interest of
the fund. Under the Rule, the approval of an investment advisory agreement or
any change in a fundamental investment policy would be effectively acted upon
with respect to an investment fund only if approved by a majority of the
outstanding shares of such fund. However, the Rule also provides that the
ratification of the appointment of independent public accountants, the approval
of principal underwriting contracts, and the election of trustees may be
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<PAGE> 86
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.
ADDITIONAL INFORMATION CONCERNING TAXES
---------------------------------------
The following summarizes certain additional tax considerations
generally affecting the Trust and its shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Trust or its shareholders or possible legislative changes, and
the discussion here and in the Prospectus is not intended as a substitute for
careful tax planning. Potential investors should consult their tax advisers with
specific reference to their own tax situation.
Each Fund of the Trust will be treated as a separate corporate
entity under the Code and intends to qualify as a regulated investment company.
In order to qualify for tax treatment as a regulated investment company under
the Code, the Fund must satisfy, in addition to the distribution requirement
described in the Prospectus, certain requirements with respect to the source of
its income during a taxable year. At least 90% of the gross income of the Fund
must be derived from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of stocks, securities or foreign
currencies, and other income (including but not limited to
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<PAGE> 87
gains from options, futures, or forward contracts) derived with respect to the
Fund's business of investing in such stock, securities or currencies. The
Treasury Department may by regulation exclude from qualifying income foreign
currency gains which are not directly related to the Fund's principal business
of investing in stock or securities, or options and futures with respect to
stock or securities. Any income derived by the Fund from a partnership or trust
is treated as derived with respect to the Fund's business of investing in stock,
securities or currencies only to the extent that such income is attributable to
items of income which would have been qualifying income if realized by the Fund
in the same manner as by the partnership or trust.
A 4% non-deductible excise tax is imposed on regulated
investment companies that fail to currently distribute an amount equal to
specified percentages of their ordinary taxable income and capital gain net
income (excess of capital gains over capital losses). Each Fund intends to make
sufficient distributions or deemed distributions of its ordinary taxable income
and capital gain net income each calendar year to avoid liability for this
excise tax.
If for any taxable year the Fund does not qualify for federal
tax treatment as a regulated investment company, all of the Fund's taxable
income will be subject to federal income tax at regular corporate rates without
any deduction for distributions to its shareholders. In such event, dividend
distributions (including amounts derived from interest on Municipal Securities)
would be taxable as ordinary income to the Fund's shareholders to the extent of
the Fund's current and accumulated earnings and profits, and would be eligible
for the dividends received deduction for corporations.
A Fund may be required in certain cases to withhold and remit
to the U.S. Treasury 31% of taxable dividends or gross proceeds realized upon
sale paid to shareholders who have failed to provide a correct tax
identification number in the manner required, or who are subject to withholding
by the Internal Revenue Service for failure to properly include on their return
payments of taxable interest or dividends, or who have failed to certify to the
Fund that they are not subject to backup withholding when required to do so or
that they are "exempt recipients."
The tax principles applicable to transactions in financial
instruments and futures contacts and options that may be engaged in by a Fund,
and investments in passive foreign investment companies ("PFICs"), are complex
and, in some cases, uncertain. Such transactions and investments may cause a
Fund to recognize taxable income prior to the receipt of cash, thereby requiring
the Fund to liquidate other positions, or to borrow money, so as to make
sufficient distributions to shareholders to avoid corporate-level tax. Moreover,
some or all of the taxable income recognized may be ordinary income or
short-term capital gain, so that the distributions may be taxable to
shareholders as ordinary income.
In addition, in the case of any shares of a PFIC in which a
Fund invests, the Fund may be liable for corporate-level tax on any ultimate
gain or distributions on the shares if the Fund fails to make an election to
recognize income annually during the period of its ownership of the shares.
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<PAGE> 88
ADDITIONAL TAX INFORMATION CONCERNING THE OHIO TAX EXEMPT BOND, PENNSYLVANIA
- ----------------------------------------------------------------------------
MUNICIPAL BOND, NATIONAL TAX EXEMPT BOND AND TAX EXEMPT MONEY MARKET FUNDS.
- ---------------------------------------------------------------------------
As described above and in the Prospectus, the Ohio Tax Exempt
Bond, Pennsylvania Municipal Bond, National Tax Exempt Bond, Ohio Municipal
Money Market, Pennsylvania Tax Exempt Money Market and Tax Exempt Money Market
Funds are designed to provide investors with tax-exempt interest income. The
Funds are not intended to constitute a balanced investment program and are not
designed for investors seeking capital appreciation or maximum tax-exempt income
irrespective of fluctuations in principal. Shares of the Funds would not be
suitable for tax-exempt institutions and may not be suitable for retirement
plans qualified under Section 401 of the Code, H.R. 10 plans and IRAs since such
plans and accounts are generally tax-exempt and, therefore, would not gain any
additional benefit from the Funds' dividends being tax-exempt.
The policy of the Funds is to pay each year as federal
exempt-interest dividends substantially all the Funds' Municipal Securities
interest income net of certain deductions. In order for the Funds to pay federal
exempt-interest dividends with respect to any taxable year, at the close of each
taxable quarter at least 50% of the aggregate value of their respective
portfolios must consist of tax-exempt obligations. An exempt-interest dividend
is any dividend or part thereof (other than a capital gain dividend) paid by a
Fund and designated as an exempt-interest dividend in a written notice mailed to
shareholders not later than 60 days after the close of the Fund's taxable year.
However, the aggregate amount of dividends so designated by the Funds cannot
exceed the excess of the amount of interest exempt from tax under Section 103 of
the Code received by the Funds during the taxable year over any amounts
disallowed as deductions under Sections 265 and 171(a)(2) of the Code. The
percentage of total dividends paid by the Funds with respect to any taxable year
which qualifies as federal exempt-interest dividends will be the same for all
shareholders receiving dividends from the Funds with respect to such year.
Shareholders are advised to consult their tax advisers with
respect to whether exempt-interest dividends would retain the exclusion under
Section 103(a) if the shareholder would be treated as a "substantial user" or a
"related person" to such user with respect to facilities financed through any of
the tax-exempt obligations held by the Funds. A "substantial user" is defined
under U.S. Treasury Regulations to include a non-exempt person who regularly
uses a part of such facilities in his or her trade or business and whose gross
revenues derived with respect to the facilities financed by the issuance of
bonds are more than 5% of the total revenues derived by all users of such
facilities, or who occupies more than 5% of the usable area of such facilities
or for whom such facilities or a part thereof were specifically constructed,
reconstructed or acquired. A "related person" includes certain related natural
persons, affiliated corporations, partners and partnerships, and S corporations
and their shareholders.
ADDITIONAL TAX INFORMATION CONCERNING THE MICHIGAN MUNICIPAL BOND FUND
- ----------------------------------------------------------------------
As indicated in the Prospectus, the Michigan Municipal Bond
Fund is designed to provide shareholders with current tax-exempt interest
income. The Fund is not intended to constitute a balanced investment program and
is not designed for investors seeking capital
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<PAGE> 89
appreciation or maximum tax-exempt income irrespective of fluctuations in
principal. Shares of the Fund would not be suitable for tax-exempt institutions
and may not be suitable for retirement plans qualified under Section 401 of the
Code, H.R. 10 plans and individual retirement accounts, since such plans and
accounts are generally tax-exempt and, therefore, would not gain any additional
benefit from the Fund's dividends being tax-exempt; furthermore, such dividends
would be ultimately taxable to the beneficiaries when distributed to them. In
addition, the Fund may not be appropriate investments for entities which are
"substantial users," or "related persons" thereof, of facilities financed by
private activity bonds held by the Fund. "Substantial user" is defined under
U.S. Treasury Regulations to include a non-exempt person who regularly uses a
part of such facilities in his or her trade or business and whose gross revenues
derived with respect to the facilities financed by the issuance of bonds
represent more than 50% of the total revenues derived by any users of such
facilities, or who occupies more than 5% of the usable area of such facilities
or for whom such facilities or a part thereof were specifically constructed,
reconstructed or acquired. "Related persons" include certain related natural
persons, affiliated corporations, a partnership and its partners and an S
Corporation and its shareholders.
The percentage of total dividends paid by the Michigan
Municipal Bond Fund with respect to any taxable year which qualifies as federal
exempt interest dividends will be the same for all shareholders receiving
dividends during such year. In order for the Fund to pay exempt-interest
dividends during any taxable year, at the close of each fiscal quarter, at least
50% of the aggregate value of the Fund must consist of exempt-interest
obligations. In addition, the Fund must distribute 90% of the aggregate
exempt-interest income and 90% of the investment company taxable income earned
by it during the taxable year. After the close of the Fund's taxable year, the
Fund will notify each shareholder of the portion of the dividends paid by the
Fund to the shareholder with respect to such taxable year which constitutes an
exempt-interest dividend. However, the aggregate amount of dividends as
designated cannot exceed the excess of the amount of interest exempt from tax
under Section 103 of the Code received by the Fund during the taxable year over
any amounts disallowed as deductions under Section 265 and 171(a)(2) of the
Code.
Although the Michigan Municipal Bond Fund expects to qualify
as a regulated investment company and to be relieved of all or substantially all
federal income taxes, depending upon the extent of its activities in states and
localities in which its offices are maintained, in which its agents or
independent contractors are located, or in which it is otherwise deemed to be
conducting business, the Michigan Municipal Bond Fund may be subject to the tax
laws of such states or localities. In addition, if for any taxable year the Fund
does not qualify for the special tax treatment afforded a regulated investment
company, all of its taxable income will be subject to federal tax at regular
corporate rates (without any deduction for distributions to its shareholders).
In such event, dividend distributions would be taxable to shareholders to the
extent of earnings and profits, and would be eligible for the dividends received
deduction for corporations.
The foregoing is only a summary of some of the important
federal tax considerations generally affecting purchasers of shares of the
Michigan Municipal Bond Fund. No attempt has been made to present a detailed
explanation of the federal income tax treatment
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<PAGE> 90
of the Fund or its shareholders or of Michigan state income tax treatment of the
Fund or its shareholders, and this discussion is not intended as a substitute
for careful tax planning. Accordingly potential purchasers of shares of the Fund
are urged to consult their own tax advisers with specific reference to their own
tax situation. In addition, the foregoing discussion is based on tax laws and
regulations which are in effect on the date of this Statement of Additional
Information; such laws and regulations may be changed by legislative or
administrative action.
ADDITIONAL TAX INFORMATION CONCERNING THE OHIO TAX EXEMPT BOND FUND
- -------------------------------------------------------------------
The Ohio Tax Exempt Bond Fund is not subject to the Ohio
personal income or school district or municipal income taxes in Ohio. The Ohio
Tax Exempt Bond Fund is not subject to the Ohio corporation franchise tax or the
Ohio dealers in intangibles tax, provided that, if there is a sufficient nexus
between the State of Ohio and such entity that would enable the State to tax
such entity, the Fund timely files the annual report required by Section 5733.09
of the Ohio Revised Code. The Ohio Tax Commissioner has waived the annual filing
requirement for every tax year since 1990, the first year to which such
requirement applied.
Shareholders of the Fund otherwise subject to Ohio personal
income tax or municipal or school district income taxes in Ohio imposed on
individuals and estates will not be subject to such taxes on distributions with
respect to shares of the Fund ("Distributions") to the extent that such
Distributions are properly attributable to interest on or gain from the sale of
obligations issued by or an behalf of Ohio, political subdivisions thereof or
agencies or instrumentalities of Ohio or its political subdivisions (Ohio
Obligations).
Shareholders otherwise subject to the Ohio corporation
franchise tax will not be required to include Distributions in their tax base
for purposes of calculating the Ohio corporation franchise tax on the net income
basis to the extent that such distributions either (a) are properly attributable
to interest on or gain from the sale of Ohio Obligations, (b) represent
"exempt-interest dividends" for federal income tax purposes, or (c) are
described in both (a) and (b). Shares of the Fund will be included in a
Shareholder's tax base for purposes of computing the Ohio corporation franchise
tax on the net worth basis.
Distributions that consist of interest on obligations of the
United States or its territories or possessions or of any authority, commission,
or instrumentality of the United States that is exempt from state income taxes
under the laws of the United States (including obligations issued by the
governments of Puerto Rico, the Virgin Islands or Guam and their authorities or
municipalities) ("Territorial Obligations") are exempt from the Ohio personal
income tax, and municipal and school district income taxes in Ohio, and,
provided, in the case of Territorial Obligations, such interest is excluded from
gross income for federal income tax purposes, are excluded from the net income
base of the Ohio corporation franchise tax.
It is assumed for purposes of this discussion of State and
Local Taxes that the Fund will continue to qualify as a regulated investment
company under the Internal Revenue Code of
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<PAGE> 91
1986, as amended, and that at all times at least 50% of the value of the total
assets of the Fund consists of Ohio Obligations or similar obligations of other
states or their subdivisions.
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<PAGE> 92
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 Retired Co-Chairman of Ernst & Young,
32980 Creekside Drive Trustee April 1984 to September 1993; Director,
Pepper Pike, OH 44124 Cold Metal Products, Inc., since March
Age 66 1994; Director, Strategic Distribution,
Inc., since January 1999. Trustee,
Parkstone Group of Funds and Parkstone
Advantage Fund, since 1998.
Herbert R. Martens, Jr.* President and Trustee Executive Vice President, National City
c/o NatCity Investments, Inc. Corporation (bank holding company),
1965 East Sixth Street since July 1997; Chairman, President and
Cleveland, OH 44114 Chief Executive Officer, NatCity
Age 47 Investments, Inc. (investment banking),
since July 1995; President and Chief
Executive Officer, Raffensberger, Hughes
& Co. (broker-dealer) from 1993 until
1995; President, Reserve Capital Group,
from 1990 until 1993. Trustee,
Parkstone Group of Funds and Parkstone
Advantage Fund, since 1998
Leigh Carter* Trustee Retired President and Chief Operating
13901 Shaker Blvd., #6B Officer, B.F. Goodrich Company, August
Cleveland, OH 44120 1986 to September 1990; Director, Adams
Age 74 Express Company (closed-end investment
company), April 1982 to December 1997;
Director, Acromed Corporation;
(producer of spinal implants), June
1992 to March 1998; Director,
Petroleum & Resources Corp., April
1987 to December 1997; Director,
Morrison Products (manufacturer of
blower fans and air moving equipment),
since April 1983; Director, Kirtland
Capital Corp. (privately funded
investment group), since January 1992;
Director, Truseal Technologies
(manufacturer of insulated glass
sealants), since April 1997. Trustee,
Parkstone Group of Funds and Parkstone
Advantage Fund, since 1998
</TABLE>
-90-
<PAGE> 93
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
POSITION WITH DURING PAST 5 YEARS
NAME AND ADDRESS THE TRUST AND OTHER AFFILIATIONS
- ---------------- ------------ ----------------------
<S> <C> <C>
John F. Durkott Trustee President and Chief Operating Officer,
8600 Allisonville Road Kittle's Home Furnishings Center, Inc.,
Indianapolis, IN 46250 since January 1982; partner, Kittle's
Age 55 Bloomington Properties LLC, since
January 1981; partner, KK&D LLC, since
January 1989; partner, KK&D II LLC,
since February 1998; (affiliated real
estate companies of Kittle's Home
Furnishings Center, Inc.). Trustee,
Parkstone Group of Funds and Parkstone
Advantage Fund, since 1998
Robert J. Farling Trustee Retired Chairman, President and Chief
1608 Balmoral Way Executive Officer, Centerior Energy
Westlake, OH 44145 (electric utility), March 1992 to
Age 63 October 1997; Director, National City
Bank until October 1997; Director,
Republic Engineered Steels, October 1997
to September 1998. Trustee, Parkstone
Group of Funds and Parkstone Advantage
Fund, since 1998
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,
Parkstone Group of Funds and Parkstone
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, Parkstone Group
of Funds and Parkstone Advantage Fund,
since 1998
</TABLE>
-91-
<PAGE> 94
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
POSITION WITH DURING PAST 5 YEARS
NAME AND ADDRESS THE TRUST AND OTHER AFFILIATIONS
- ---------------- ------------ ----------------------
<S> <C> <C>
J. William Pullen Trustee President and Chief Executive Officer,
Whayne Supply Company Whayne Supply Co. (engine and heavy
1400 Cecil Avenue equipment distribution), since 1986;
P.O. Box 35900 President and Chief Executive Officer,
Louisville, KY 40232-5900 American Contractors Rentals & Sales
Age 60 (rental subsidiary of Whayne Supply
Co.), since 1988. Trustee, Parkstone
Group of Funds and Parkstone 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.
Edward T. Searle Assistant Treasurer Vice President and Assistant Secretary
One Freedom Valley Drive of SEI Investments Mutual Funds Services
Oaks, PA 19456 and SEI Investments Distribution Co.
Age 45 since August 1999; Associate, Drinker
Biddle & Reath LLP (law firm) from
June 1998 to August 1999; Associate,
Ballard Spahr Andrews & Ingersoll LLP
(law firm) from September 1995 to June
1998; Student, Temple University
School of Law, from 1992 to 1995.
</TABLE>
- --------------------
*Messrs. Carter and Martens are considered by the Trust to be
"interested persons" of the Trust as defined in the 1940 Act.
As of the date of this Statement of Additional Information,
the trustees of the Trust as a group owned beneficially less than 1% of the
outstanding shares of each of the Funds of the Trust, and less than 1% of the
outstanding shares of all of the Funds of the Trust in the aggregate.
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
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<PAGE> 95
investment adviser to the Trust, (2) he owns shares of common stock and options
to purchase common stock of National City Corporation, and (3) he is the Chief
Executive Officer of NatCity Investments, Inc., a broker-dealer affiliated with
National City Investment Management Company.
Mr. Carter is an "interested person" of the Trust, as defined
in the 1940 Act, due to his ownership of 7,200 shares of stock of National City
Corporation, an affiliate of National City Investment Management Company, the
Fund's investment adviser.
Mr. Leven and Mr. Searle are employed by SEI Investments
Mutual Funds Services, which receives fees as Administrator to the Trust. Mr.
Searle is also employed by SEI Investments Distribution Co., which receives fees
as Distributor to the Trust. Mr. McConnel is a partner of the law firm, Drinker
Biddle & Reath LLP, which receives fees as counsel to the Trust.
With respect to the Trust, Parkstone and Parkstone Advantage,
each trustee receives an annual fee of $15,000 plus $3,000 for each Board
meeting attended and reimbursement of expenses incurred in attending meetings.
The three fund companies generally hold concurrent Board meetings. The Chairman
of the Board is entitled to receive an additional $5,000 per annum for services
in such capacity. The trustees and officers of the Trust own less than 1% of the
shares of the Trust.
The following table summarizes the compensation for each of
the Trustees of the Trust for the fiscal year ended May 31, 1999:
<TABLE>
<CAPTION>
Pension or Estimated
Aggregate Retirement Benefits Approval Total Compensation
Name of Compensation Accrued as Part of Benefits Upon from the Trust and
Person, Position from the Trust the Trust's Expense Retirement Fund Complex*
- ---------------- -------------- ------------------- ---------- -------------
<S> <C> <C> <C> <C>
Robert D. Neary, $26,198.80 $0 $0 $35,000
Chairman and Trustee
Leigh Carter, Trustee $22,394.43 $0 $0 $30,000
John F. Durkott, Trustee $22,394.43 $0 $0 $30,000
Robert J. Farling, Trustee $22,394.43 $0 $0 $30,000
Richard W. Furst, Trustee $22,394.43 $0 $0 $30,000
Gerald L. Gherlein, Trustee $22,394.43 $0 $0 $30,000
Herbert R. Martens, Jr., $ 0 $0 $0 $ 0
President and Trustee
J. William Pullen, Trustee $22,394.43 $0 $0 $30,000
</TABLE>
- ---------------------
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<PAGE> 96
* The "Fund Complex" consists of Armada Funds, The Parkstone Group of
Funds and The Parkstone Advantage Funds. Each of the Trustees serves as
Trustee to all three investment companies. The Trustees became trustees
of The Parkstone Group of Funds and the Parkstone Advantage Fund
effective August 14, 1998.
The Trustees may elect to defer payment of 25% to 100% of the
fees they receive in accordance with a Trustee Deferred Compensation Plan (the
"Plan"). Under the Plan, a Trustee may elect to have his or her deferred fees
treated as if they had been invested by the Trust in the shares of one or more
portfolios of the Trust and the amount paid to the Trustee under the Plan will
be determined based on the performance of such investments. Distributions are
generally of equal installments over a period of 2 to 15 years. The Plan will
remain unfunded for federal income tax purposes under the Internal Revenue Code
of 1986, as amended (the "Code"). Deferral of Trustee fees in accordance with
the Plan will have a negligible impact on portfolio assets and liabilities and
will not obligate the Trust to retain any trustee or pay any particular level of
compensation.
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.
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<PAGE> 97
ADVISORY, ADMINISTRATION, DISTRIBUTION, CUSTODIAN
SERVICES AND TRANSFER AGENCY AGREEMENTS
---------------------------------------
ADVISORY AGREEMENTS
- -------------------
IMC serves as investment adviser to the: (a) International
Equity, Small Cap Value and Small Cap Growth Funds under an Advisory Agreement
dated August 13, 1998; (b) Equity Growth and Equity Income Funds under an
Advisory Agreement dated November 19, 1997; (c) Core Equity Fund under an
Advisory Agreement dated June 29, 1998; (d) Equity Index and Tax Managed Equity
Funds under an Advisory Agreement dated April 9, 1998; (e) Balanced Allocation
Fund under an Advisory Agreement Dated April 9, 1998; (f) Total Return Advantage
Fund and Enhanced Income Fund under an Advisory Agreement dated March 6, 1998;
(g) Bond Fund, Intermediate Bond Fund and GNMA Funds under an Advisory Agreement
dated November 21, 1997; (h) Pennsylvania Tax Exempt, Tax Exempt, Money Market,
Government and Treasury Funds under an Advisory Agreement dated November 19,
1997; (i) Ohio Municipal Fund pursuant to an Advisory Agreement dated April 9,
1998; (j) Ohio Tax Exempt and Pennsylvania Tax Exempt Bond Funds under an
Advisory Agreement dated November 19, 1997; (k) National Tax Exempt Bond Fund
under an Advisory Agreement dated April 9, 1998 and (l) Mid Cap Growth, U.S.
Government Income, Michigan Municipal Bond and the Treasury Plus Money Market
Funds under an Advisory Agreement dated August 5, 1998. Prior to such dates,
National City Bank or an affiliate served as adviser to the Funds other than the
Core Equity Fund.
National Asset Management Corporation ("NAM") serves as
investment sub-adviser to the Core Equity Fund (the "sub-adviser"). Prior to
June 29, 1998, NAM served as adviser to the Core Equity Fund. NAM serves as
sub-investment adviser to the Total Return Advantage Fund under a Sub-Advisory
Agreement with IMC dated March 6, 1998 and until June 29, 1998 served as
investment adviser to the Total Return Advantage and Enhanced Income Funds. IMC,
National City Bank and its affiliates (including NAM until March 6, 1998) are
affiliates of National City Corporation, a bank holding company with $85 billion
in assets, and headquarters in Cleveland, Ohio and over 1,300 branch offices in
six states. From time to time, the adviser may voluntarily waive fees or
reimburse the Trust for expenses.
Pursuant to the advisory agreements in effect for the
following periods, the Trust incurred advisory fees in the following amounts for
the fiscal years ended May 31, 1999, 1998 and 1997: (i) $2,360,071 (after
waivers of $0), $1,989,606 (after waivers of $0) and $982,053 with respect to
the Small Cap Value Fund; (ii) $8,840,432 (after waivers of $0), $2,395,579
(after waivers of $0), and $1,612,194 with respect to the Equity Growth Fund;
and (iii) $3,169,439 (after waivers of $0), $1,237,195 (after waivers of $0),
and $669,107 with respect to the Equity Income Fund. For the fiscal year ended
1999, and the period from August 1, 1997 (commencement of operations) to May 31,
1998, the International Equity, Small Cap Growth and Core Equity Funds incurred
advisory fees in the amount of $1,723,308, $611,655, $947,557, (after fee
waivers of $0, $0 and $0) and $570,684, $208,833, and $608,222, (after fee
waivers of $50,784, $18,000, and $64,683 respectively. For the fiscal year ended
1999, and the period from May 31, 1998 to May 31,
-95-
<PAGE> 98
1999, the Tax Managed Equity Fund incurred advisory fees in the amount of
$1,302,931 (after fee waivers of $308,130) and $0 (after fee waivers of
$173,851). The Equity Index Fund commenced operations on July 10, 1998, and as
of May 31, 1999 paid advisory fees of $0 (after fee waivers of $503,834). The
Mid Cap Growth and Large Cap Ultra Funds have not yet commenced operations. The
Balanced Allocation Fund commenced operations on July 10, 1998. Advisory fees
were $422,278 (after fee waivers of $0) for the period from commencement of
operations until May 31, 1999.
Pursuant to the advisory agreements relating to the Total
Return Advantage, Intermediate Bond and Enhanced Income Funds then in effect,
the Trust incurred advisory fees in the following respective amounts for the
fiscal years ended May 31, 1999, 1998 and 1997: (i) $1,105,774 (after waivers of
$634,144), $404,823 (after waivers of $1,133,101), and $0 (after waivers of
$1,530,963) for the Total Return Advantage Fund; (ii) $1,057,813 (after waivers
of $396,680), $593,301 (after waivers of $222,488), and $550,261 (after waivers
of $118,288) for the Intermediate Bond Fund; and (iii) $172,808 (after waivers
of $173,823) $65,970, (after waivers of $264,973) and $0 (after waivers of
$296,129) for the Enhanced Income Fund. The Michigan Municipal Bond Fund has not
yet commenced operations.
Pursuant to the advisory agreements relating to the Bond and
GNMA Funds then in effect, the Trust incurred advisory fees in the following
amounts for the fiscal years ended May 31, 1999 and 1998 and 1997: (i)
$3,589,348 (after waivers of $0), $574,688 (after waivers of $0) and $485,145
(after fee waivers of $54,417) for the Bond Fund and (ii) $491,789 (after
waivers of $0), $395,769 (after waivers of $0) and $323,854 (after fee waivers
of $50,450) for the GNMA Fund.
For the period from September 9, 1996 (date of reorganization
of the Predecessor Funds) until May 31, 1997, IMC earned advisory fees of
$866,399, and $256,168 and waived fees in the amounts of $0 and $0 for the Bond
and GNMA Funds, respectively. Integra Trust Company ("Integra"), the investment
adviser to the Predecessor Bond and GNMA Funds, earned the following advisory
fees with respect to such funds for the stated periods: (i) $173,163 and
$118,136 for the period from June 1, 1996 until September 9, 1996; (ii) $53,654
and $36,971 for the one-month period ended May 31, 1996 Integra waived advisory
fees during the same periods in the amounts of: (i) $54,417 and $50,450 and (ii)
$11,464 and $9,583, respectively.
Pursuant to the advisory agreements in effect for the
following periods, the Trust incurred advisory fees in the following amounts for
the fiscal years ended May 31, 1999, 1998 and 1997: (i) $924,937 (after waivers
of $1,233,250), $742,324 (after waivers of $989,768) and $573,529 (after waivers
of $764,704), respectively, for the Tax Exempt Money Market Fund; (ii)
$8,013,996 (after waivers of $3,205,598), 6,126,877 (after waivers of
$2,451,233) and $5,067,456 (after waivers of $2,026,982) and respectively, for
the Money Market Fund; and (iii) $3,699,448 (after waivers of $1,479,779),
$2,815,875 (after waivers of $1,126,349) and $2,415,282 (after waivers of
$966,112), respectively, for the Government Money Market Fund. Advisory fees in
the amounts of $980,380 (after waivers of $196,076), $766,895 (after waivers of
$153,379) and $794,834 (after waivers of $158,966) were incurred for the fiscal
year ended May 31, 1999, 1998 and 1997 with respect to the Treasury Money Market
Fund.
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Pursuant to the Advisory Agreement, the Trust incurred
advisory fees in the amount of $203,004 (after waivers of $338,340) and $142,220
(after waivers of $237,029) for the fiscal years ended May 31, 1999 and 1998 for
the Pennsylvania Tax Exempt Money Market Fund. For the period from September 9,
1996 (date of reorganization of the Predecessor Fund) until May 31, 1997, IMC,
the Adviser of the Pennsylvania Tax Exempt Money Market Fund, earned advisory
fees of $224,379 and waived fees in the amount of $140,237 with respect to that
Fund. For the period from June 1, 1996 until September 9, 1996 and for the
one-month period ended May 31, 1996, the Integra Trust Company ("Integra"), the
investment adviser to the Predecessor Fund, earned advisory fees of $85,768 and
$26,907, respectively. Integra waived fees in the amount of $51,068 and $9,868.
The Ohio Municipal Money Market Fund commenced operations on September 15, 1998.
Advisory fees were $103,978 (after waivers of $157,160) for the period from
commencement of operations until May 31, 1999.
Pursuant to the advisory agreements in effect for the
following periods, the Trust incurred with respect to the Ohio Tax Exempt Bond
Fund advisory fees of $71,985 for the fiscal year ended May 31, 1999 (after
waivers of $1,060,233) $0 for the fiscal year ended May 31, 1998 (after waivers
of $649,247) and $0 for the period from commencement of operations (January 5,
1990) to May 31, 1997 (after waivers of $490,179).
Pursuant to the advisory agreements in effect for the fiscal
years ended May 31, 1999 and 1998, the Trust incurred with respect to the
Pennsylvania Municipal Bond Fund advisory fees of $78,742 (after waivers of
$137,798) and $150,120 (after waivers of $56,245). For the period from September
9, 1996 (date of reorganization of the predecessor fund to the Pennsylvania
Municipal Bond Fund) until May 31, 1997, National City Bank, the then adviser of
the Pennsylvania Municipal Bond Fund, earned advisory fees of $147,646 and
waived fees in the amount of $2,684 with respect to that Fund. For the period
from June 1, 1996 until September 9, 1996, and for the one-month period ended
May 31, 1996, Integra Trust Company ("Integra"), the investment adviser to the
Predecessor fund to the Pennsylvania Municipal Bond Fund, earned advisory fees
of $73,107 and $23,057. Integra waived fees in the amounts of $26,413 and
$6,792.
For the fiscal year ended May 31, 1999 and the fiscal period
April 9, 1998 (commencement of operations) through May 31, 1998, the Trust
incurred with respect to the National Tax Exempt Bond Fund advisory fees of
$36,100 (after waivers of $492,594) and $0 (after waivers of $62,113).
Each Advisory and Sub-Advisory Agreement provides that the
Adviser and sub-adviser shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Trust in connection with the performance
of the Advisory or Sub-Advisory Agreements, except a loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation for
services or a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Adviser or Sub-adviser in the performance of their
duties or from reckless disregard by them of their duties and obligations
thereunder.
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The Advisory Agreement relating to the Money Market,
Government, Treasury, Tax Exempt and Pennsylvania Tax Exempt Funds was approved
by the shareholders of each Fund on November 19, 1997. The Advisory Agreement
with IMC relating to the Ohio Municipal Fund Funds was approved by the sole
shareholder of the Fund as of the day prior to the day it commenced operations.
The Advisory Agreement relating to the International Equity,
Small Cap Value and Small Cap Growth Funds was approved by the shareholders of
these Funds on August 13, 1998. The Advisory Agreement relating to the Equity
Growth and Equity Income Funds was approved by the shareholders of each of these
Funds on November 19, 1997. With respect to the Core Equity Fund, the Advisory
Agreement with National City and the Sub-Advisory Agreement with NAM was
approved by the Fund's shareholders on June 29, 1998. The Advisory Agreement
relating to the Tax Managed Equity and Equity Index Funds was approved by their
sole shareholders prior to the Funds' commencement of operations. The current
Advisory Agreement with respect to the Total Return Advantage Fund and Enhanced
Income Fund was approved by a majority of shareholders of each such Fund at a
Special Meeting of Shareholders held on June 29, 1998 in order to approve such
Advisory Agreement. The Advisory Agreement relating to the Ohio Tax Exempt Bond
and Pennsylvania Municipal Bond Funds was approved by the shareholders of the
Funds on November 19, 1997 and by the sole shareholder of the National Tax
Exempt Bond Fund as of the day prior to the day it commenced operations. The
current Advisory Agreement with respect to the other Funds was approved by a
majority of shareholders of each such Fund at a Special Meeting of Shareholders
held on November 19, 1997 in order to approve such Advisory Agreement. The
current Sub-Advisory Agreement with respect to the Total Return Advantage Fund
was approved by a majority of shareholders of the Fund at a Special Meeting of
Shareholders held on June 29, 1998 in order to approve such Sub-Advisory
Agreement. The Advisory Agreement with respect to the Mid Cap Growth, U.S.
Government Income, Michigan Municipal Bond and Treasury Plus Money Market Funds
was approved by the sole shareholder of each Fund on the date it commenced
operations.
Unless sooner terminated, the Advisory Agreements will
continue in effect with respect to the Funds to which they relate until
September 30, 1999 and from year to year thereafter, subject to annual approval
by the Trust's Board of Trustees, or by a vote of a majority of the outstanding
shares of such Funds (as defined in the Funds' Prospectus) and a majority of the
trustees who are not parties to the Agreement or interested persons (as defined
in the 1940 Act) of any party by votes cast in person at a meeting called for
such purpose. The Advisory Agreements and Sub-Advisory Agreement may be
terminated by the Trust or the Adviser or sub-advisers on 60 days written
notice, and will terminate immediately in the event of its assignment.
AUTHORITY TO ACT AS INVESTMENT ADVISER
- --------------------------------------
Banking laws and regulations, including the Glass-Steagall Act
as presently interpreted by the Board of Governors of the Federal Reserve
System, (a) prohibit a bank holding company registered under the Federal Bank
Holding Company Act of 1956 or any affiliate thereof from sponsoring,
organizing, or controlling a registered, open-end investment company
continuously engaged in the issuance of its shares, but (b) do not prohibit such
a bank holding
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company or affiliate from acting as investment adviser, transfer agent, or
custodian to such an investment company. The Adviser believes that it may
perform the services for the Fund contemplated by its Advisory Agreement with
the Trust as described in such agreement without violation of applicable banking
laws or regulations. However, there are no controlling judicial precedents and
future changes in legal requirements relating to the permissible activities of
banks and their affiliates, as well as future interpretations of present
requirements, could prevent the Adviser from continuing to perform services for
the Trust. If the Adviser were prohibited from providing services to the Fund,
the Board of Trustees would consider selecting another qualified firm. Any new
investment advisory agreement would be subject to shareholder approval.
Should future legislative, judicial, or administrative action
prohibit or restrict the proposed activities of the Adviser, or its affiliated
and correspondent banks in connection with shareholder purchases of Fund shares,
the Adviser and its affiliated and correspondent banks might be required to
alter materially or discontinue the services offered by them to shareholders. It
is not anticipated, however, that any resulting change in the Trust's method of
operations would affect its net asset value per share or result in financial
losses to any shareholder.
If current restrictions preventing a bank or its affiliates
from legally sponsoring, organizing, controlling, or distributing shares of an
investment company were relaxed, the Adviser, or an affiliate of the Adviser,
would consider the possibility of offering to perform additional services of the
Trust. Legislation modifying such restrictions has been proposed in past
sessions in Congress. It is not possible, of course, to predict whether or in
what form such legislation might be enacted or the terms upon which the Adviser,
or such an affiliate, might offer to provide such services.
ADMINISTRATION AGREEMENT AND SUB-ADMINISTRATION AGREEMENT
- ---------------------------------------------------------
The Trust and SEI Investments Mutual Funds Services (the
"Administrator") have entered into an administration agreement (the
"Administration Agreement") effective May 1, 1998.
The Administration Agreement provides that the Administrator
shall not be liable for any error of judgment or mistake of law or for any loss
suffered by the Trust in connection with the matters to which the Administration
Agreement relates, except a loss resulting from willful misfeasance, bad faith
or negligence on the part of the Administrator in the performance of its duties
or from reckless disregard by it of its duties and obligations thereunder.
The Administrator, a Delaware business trust, has its
principal business offices at One Freedom Valley Drive, Oaks, Pennsylvania
19456. SEI Investments Management Corporation ("SIMC"), a wholly-owned
subsidiary of SEI Investments Company ("SEI Investments"), is the owner of all
beneficial interests in the Administrator. SEI Investments and its affiliates,
including the Administrator, are leading providers of funds evaluation services,
trust accounting systems, and brokerage and information services to financial
institutions, institutional investors, and money managers. The Administrator and
its affiliates also serve as administrator or sub-administrator to the following
other mutual funds: The Achievement Funds Trust, The Advisors' Inner Circle
Fund, Alpha Select Funds, The Arbor Fund, ARK Funds, Armada Funds, Parkstone
Advantage Fund,
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Bishop Street Funds, Boston 1784 Funds(R), CNI Charter Funds, CrestFunds, Inc.,
CUFUND, The Expedition Funds, First American Funds, Inc., First American
Investment Funds, Inc., First American Strategy Funds, Inc., HighMark Funds,
Huntington Funds, The Nevis Fund, Oak Associates Funds, The PBHG Funds, Inc.,
PBHG Insurance Series Fund, Inc., SEI Asset Allocation Trust, SEI Daily Income
Trust, SEI Index Funds, SEI Institutional Investments Trust, SEI Institutional
Managed Trust, SEI Institutional International Trust, SEI Liquid Asset Trust,
SEI Tax Exempt Trust, STI Classic Funds, STI Classic Variable Trust, TIP Funds
and UAM Funds, Inc. II.
The Administrator is entitled to receive with respect to the
Funds, an administrative fee, computed daily and paid monthly, at an annual rate
of .07% of the aggregate average daily net assets of all of the investment funds
of Armada up to the first eighteen (18) billion dollars in assets, and .06% of
the aggregate average daily net assets over eighteen (18) billion dollars in
assets, and is entitled to be reimbursed for its out-of-pocket expenses incurred
on behalf of the Funds.
IMC serves as sub-administrator for each of the Funds and
provides certain services as may be requested by the Administrator from time to
time. For its services as Sub-Administrator, IMC receives, from the
Administrator, pursuant to its Sub-Administration Agreement with the
Administrator, a fee, computed daily and paid monthly, at the annual rate of
.01% of the aggregate average daily net assets of all of the investment funds of
Armada up to the first $15 billion, and .015% of the aggregate average daily net
assets over $15 billion.
The Trust incurred the following fees to SEI for the fiscal
year ended May 31, 1999 and the period from May 1, 1998 (April 9, 1998 in the
case of the Tax Managed Equity Fund pursuant to an agreement substantially
identical to the Administration Agreement) through May 31, 1998: $116,269 (after
waivers of $0) and $8,857 (after waivers of $0) with respect to the
International Equity Fund; $180,236 (after waivers of $0) and $16,100 (after
waivers of $0) with respect to the Small Cap Value Fund; $45,999 (after waivers
of $0) and $4,252 (after waivers of $0) with respect to the Small Cap Growth
Fund; $830,212 (after waivers of $0) and $19,814 with respect to the Equity
Growth Fund (after waivers of $0); $150,366 (after waivers of $0) and $15,886
(after waivers of $0) with respect to the Tax Managed Equity Fund; $89,073
(after waivers of $0) and $6,096 (after waivers of $0) with respect to the Core
Equity Fund; and $295,814 (after waivers of $0) and $10,576 (after waivers of
$0) with respect to the Equity Income Fund.
The Equity Index Fund commenced operations on July 10, 1998,
and as of May 31, 1999 paid Administration fees of $100,767.
Prior to May 1, 1998, PFPC served as the administrator and
accounting agent to the Funds other than the Tax Managed Equity Fund and
National Tax Exempt Bond Funds. Pursuant to the former Administration and
Accounting Services Agreement, the Trust incurred the following fees to PFPC for
the period from June 1, 1997 to April 30, 1998 and the fiscal year ended May 31,
1997: $227,796 and $130,930 (after waivers of $0 and $0) with respect to the
Small Cap Value Fund; $264,998 and $208,810 (after waivers of $0 and $0) with
respect to the Equity Growth Fund; and $148,763 and $89,214 (after waivers of $0
and $0) with respect to the Equity Income Fund. For the period from August 1,
1997 (commencement of operations) to April 30, 1998, the Small Cap Growth,
International Equity and Core Equity Funds incurred the following fees to
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PFPC pursuant to the former Administration and Accounting Services Agreement:
$7,970 (after waivers of $17,879) with respect to the Small Cap Growth Fund; $0
(after waivers of $71,716) with respect to the International Equity Fund; and $0
(after waivers of $80,647) with respect to the Core Equity Fund.
For the fiscal year ended May 31, 1999, the Administrator
earned administration fees of $41,193, $223,081, $457,444, $185,117, $62,591 and
$54,342, (after waivers $0, $0, $0, $0, $0 and $0) with respect to the Balanced
Allocation, Total Return Advantage, Bond, Intermediate Bond, GNMA and Enhanced
Income Funds. For the period from May 1, 1998 through May 31, 1998, the
Administrator earned administration fees of $13,648, $6,901, $8,873, $4,405 and
$4,081 with respect to the Total Return Advantage, Bond, Intermediate Bond, GNMA
and Enhanced Income Funds.
Prior to May 1, 1998, PFPC served as the administrator and
accounting agent to the Trust. The services provided as administrator and
accounting agent and current fees are described in the Prospectus. Pursuant to
the former Administration and Accounting Services Agreement, the Trust incurred
the following respective fees to PFPC for the fiscal period ended April 30, 1998
and for the fiscal year ended May 31, 1997: (i) $241,258 and $258,768 for the
Total Return Advantage Fund; (ii) $135,648 and $121,554 for the Intermediate
Bond Fund; and (iii) $67,984 and $65,807 for the Enhanced Income Fund and the
Trust incurred $94,631 and $65,665 and in respective fees to PFPC for the fiscal
period ended April 30, 1998 with respect to Bond and GNMA Funds.
For the period from September 9, 1996 (date of reorganization
of the Predecessor Funds) until May 31, 1997, PFPC earned administration fees of
$66,618 and $46,576 for the Bond and GNMA Funds, respectively. SEI Financial
Management Corporation, a wholly-owned subsidiary of SEI Corporation, served as
administrator to the Predecessor Bond and GNMA Funds and earned the following
fees with respect to such funds for the stated periods: (i) $44,528 and $30,378
for the period from June 1, 1996 until September 9, 1996 and (ii) $13,797 and
$9,507 for the one-month period ended May 31, 1996.
For the fiscal year ended May 31, 1999, the Administrator
earned administration fees of $144,100, $27,560 and $67,288 with respect to the
Ohio Tax Exempt, Pennsylvania Municipal and National Tax Exempt Bond Funds
(after waivers of $0, $0 and $0). For the period from May 1, 1998 (April 9, 1998
in the case of the National Tax Exempt Bond Fund pursuant to an agreement
substantially identical to the Administration Agreement), the Administrator
earned administration fees of $9,113, $2,069 and $8,247 with respect to the Ohio
Tax Exempt, Pennsylvania Municipal and National Tax Exempt Bond Funds (after
waivers of $0, $0 and $0), respectively.
Prior to May 1, 1998, PFPC served as the administrator and
accounting agent to the Ohio Tax Exempt and Pennsylvania Tax Exempt Bond Funds.
Pursuant to the Administration and Accounting Services Agreement, the Trust
incurred the following fees to PFPC for the period ended April 30, 1998, and
fiscal year ended May 31 1997 with respect to the Ohio Tax Exempt Bond Fund (i)
$105,026 and $89,124, respectively, for the Ohio Tax Exempt Bond Fund; and (ii)
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$36,010, for the fiscal period ended April 30, 1998 with respect to the
Pennsylvania Tax Exempt Bond Fund. For the period from September 9, 1996 (date
or reorganization of the Predecessor Fund) until May 31, 1997, PFPC earned
administration fees of $26,845 with respect to the Pennsylvania Tax Exempt Bond
Fund. For the period from June 1, 1996 until September 9, 1996 and for the
one-month period ended May 31, 1996 SEI Financial Management Corporation, a
wholly-owned subsidiary of SEI Corporation, served as administrator to the
Predecessor Fund and earned the following fees: $18,799 and $68,101,
respectively, and waived fees of $0 and $9,681, respectively.
For the period from June 1, 1997 to April 30, 1998, PFPC
earned administration fees of $36,010 with respect to the Pennsylvania Tax
Exempt Fund. For the period from September 9, 1996 (date of reorganization of
the Predecessor Fund) until May 31, 1997, PFPC earned administration fees of
$24,530 with respect to the Pennsylvania Tax Exempt Fund. For the period from
June 1, 1996 until September 9, 1996, and for the one-month period ended May 31,
1996, SEI Financial Management Corporation, a wholly-owned subsidiary of SEI
Corporation, served as administrator to the Predecessor Fund and earned the
following fees: $28,589 and $8,969; respectively.
Prior to May 1, 1998, PFPC served as the administrator and
accounting agent to the Funds. Pursuant to the former Administration and
Accounting Services Agreement, the Trust incurred the following fees to PFPC for
the period from June 1, 1997 to April 30, 1998 and the fiscal year ended 1997:
(i) $187,219 and $170,489, respectively, for the Tax Exempt Fund; (ii) $523,266
and $502,464, respectively, for the Money Market Fund; (iii) $239,017 and
$239,708, respectively, for the Government Fund; and (iv) $65,115, $79,005 and
$37,703 respectively for the Treasury Fund.
For the fiscal year ending May 31, 1999, 1998 and 1997, the
Administrator earned administration fees of $74,228, $94,553, $431,637,
$2,261,919, $1,035,845 and $274,506, (after waivers of $0, $0, $0, $0, $0 and
$0) with respect to the Ohio Municipal Money Market, Pennsylvania Tax Exempt,
Tax Exempt, Money Market, Government, and Treasury Funds. For the period from
May 1, 1998 through May 31, 1998, the Administrator earned administration fees
of $5,562, $29,782, $138,647, $68,244, and $18,670 with respect to the
Pennsylvania Tax Exempt, Tax Exempt, Money Market, Government, and Treasury
Funds.
DISTRIBUTION PLANS AND RELATED AGREEMENT
- ----------------------------------------
The Distributor acts as distributor of the Fund's shares
pursuant to its Distribution Agreement with the Trust as described in the
Prospectus. Shares are sold on a continuous basis.
Pursuant to Rule 12b-1 of the 1940 Act, the Trust has adopted
a Service and Distribution Plan for Class A Shares and Class I Shares (the "A
and I Shares Plan"), a Class B Shares Distribution and Servicing Plan ("B Shares
Plan"), and a Class C Shares Plan (the "C Shares Plan," and, collectively, the
"Distribution Plans") which permit the Trust to bear certain expenses in
connection with the distribution of Class I Shares and Class A Shares, Class B
Shares, or Class C Shares, respectively. As required by Rule 12b-1, the Trust's
Distribution Plans and related
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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. Distribution expenses
reimbursable by the Distributor pursuant to each Distribution Plan include
direct and indirect costs and expenses incurred in connection with advertising
and marketing a fund's shares, and direct and indirect costs and expenses of
preparing, printing and distribution of its prospectuses to other than current
shareholders.
Under the former A and I Shares Plan and related distribution
agreement (effective for the period from June 1, 1997 to May 1, 1998) each fund
compensated the Distributor for distribution expenses related to the
distribution of Class A Shares and Class I Shares in an amount not to exceed
.10% per annum of the average aggregate net assets of such shares. This former
Plan provided that the Trust pay the Distributor an annual base fee of
$1,250,000 plus incentive fees based upon asset growth payable monthly and
accrued daily by all of the Trusts' investment funds with respect to the Class I
Shares and Class A Shares.
The Distribution Plans have been approved by the Board of
Trustees, and will continue in effect for successive one year periods provided
that such continuance is specifically
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approved by (1) the vote of a majority of the trustees who are not parties to
either Plan or interested persons of any such party and who have no direct or
indirect financial interest in either Plan and (2) the vote of a majority of the
entire Board of Trustees.
For the fiscal year ended May 31, 1999, no Class C Shares were
issued or outstanding. During this same period, the Trust paid the Distributor
the following approximate amounts under the A and I Shares Plan and B Shares
Plan for its distribution services and shareholder service assistance:
FISCAL YEAR 1999 DISTRIBUTION FEES
PORTFOLIO DISTRIBUTION MARKETING/ TOTAL FEES
SERVICES CONSULTATION
International Equity Fund $ 14,752 $ 34,422 $ 49,174
Small Cap Value Fund $ 22,615 $ 52,768 $ 75,384
Small Cap Growth $ 5,934 $ 13,846 $ 19,779
Equity Growth Fund $116,102 $270,905 $387,008
Tax Managed Equity Fund $ 22,924 $ 53,490 $ 76,414
Core Equity Fund $ 11,995 $ 27,989 $ 39,985
Equity Index Fund* $ 9,917 $ 23,140 $ 33,058
Equity Income Fund $ 39,215 $ 91,501 $130,716
Balanced Allocation Fund $ 5,415 $ 12,635 $ 18,050
Total Return Advantage Fund $ 0
Bond Fund $ 61,780 $144,153 $205,933
Intermediate Bond Fund $ 24,457 $ 57,066 $ 81,523
GNMA Fund $ 7,736 $ 18,050 $ 25,786
Enhanced Income Fund $ 0
Ohio Tax Exempt Bond Fund $ 18,062 $ 42,145 $ 60,207
Pennsylvania Tax Exempt Bond Fund $ 0
National Tax Exempt Bond Fund $ 8,586 $ 20,034 $ 28,620
Ohio Municipal Money Market Fund $ 7,689 $ 17,942 $ 25,631
Pennsylvania Tax Exempt Money Market $ 12,011 $ 28,025 $ 40,035
Fund
Tax Exempt Money Market Fund $ 54,340 $126,793 $181,133
Money Market Fund $285,026 $665,060 $950,086
Government Money Market Fund $130,635 $304,814 $435,449
Treasury Money Market Fund $ 34,243 $ 79,901 $114,144
Mid Cap Growth Fund N/A
Large Cap Ultra Fund N/A
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PORTFOLIO DISTRIBUTION MARKETING/ TOTAL FEES
SERVICES CONSULTATION
U.S. Government Income Fund N/A
Michigan Municipal Bond Fund N/A
Treasury Plus Money Market Fund N/A
*The Equity Index Fund commenced operations on July 10, 1998.
The figure listed represents distribution fees for the period since that date.
As of May 31, 1999, the Mid Cap Growth, Large Cap Ultra, U.S.
Government Income, Michigan Municipal Bond and Treasury Plus Money Market Funds
had not commenced operations.
Distribution services include broker/dealer and investor
support, voice response development, wholesaling services, legal review and NASD
filings and transfer agency management. Marketing/Consultation includes planning
and development, market and industry research and analysis and marketing
strategy and planning.
CUSTODIAN SERVICES AND TRANSFER AGENCY AGREEMENTS
- -------------------------------------------------
National City Bank, 1900 East Ninth St., Cleveland, Ohio 44114
serves as the Trust's custodian with respect to the Funds. Under its Custodian
Services Agreement, National City Bank has agreed to:
(i) maintain a separate account or accounts in the name of
the Fund;
(ii) hold and disburse portfolio securities on account of the
Fund;
(iii) collect and make disbursements of money on behalf of the
Fund;
(iv) collect and receive all income and other payments and
distributions on account of the Fund's portfolio
securities;
(v) respond to correspondence by security brokers and others
relating to its duties;
(vi) make periodic reports to the Board of Trustees
concerning the Fund's operations.
National City Bank is authorized to select one or more banks
or trust companies to serve as sub-custodian on behalf of the Funds, provided
that it shall remain responsible for the performance of all of its duties under
the Custodian Services Agreement and shall hold the Funds harmless from the acts
and omissions of any bank or trust company serving as sub-custodian. Each Fund
reimburses National City Bank for its direct and indirect costs and expenses
incurred in rendering custodial services.
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State Street Bank and Trust Company (the "Transfer Agent"),
P.O. Box 8421 Boston, Massachusetts 02266-8421 serves as the Trust's transfer
agent and dividend disbursing agent with respect to the Fund. Under its Transfer
Agency Agreement, it has agreed to:
(i) issue and redeem shares of the Fund;
(ii) transmit all communications by the Fund to its
shareholders of record, including reports to
shareholders, dividend and distribution notices and
proxy materials for meetings of shareholders;
(iii) respond to correspondence by security brokers and others
relating to its duties;
(iv) maintain shareholder accounts;
(v) make periodic reports to the Board of Trustees
concerning the Fund's operations.
The Transfer Agent sends each shareholder of record periodic
statements showing the total number of shares owned as of the last business day
of the period (as well as the dividends paid during the current period and
year), and provides each shareholder of record with a daily transaction report
for each day on which a transaction occurs in the shareholder's account with
each Fund.
SHAREHOLDER SERVICES PLANS
--------------------------
The Trust has implemented the Shareholder Services Plan for
each Fund's Class A Shares, the B Shares Plan for each Fund's Class B Shares and
the C Shares Plan for each Fund's Class C Shares. Pursuant to the Shareholder
Services Plan and B Shares Plan, the Trust may enter into agreements with
financial institutions pertaining to the provision of administrative services to
their customers who are the beneficial owners of Class A Shares or Class B
Shares in consideration for the payment of up to .25% (on an annualized basis)
for the International Equity, Small Cap Value, Small Cap Growth, Equity Growth,
Tax Managed Equity, Core Equity, Equity Index, Equity Income, Balanced
Allocation, Total Return Advantage, Bond, Intermediate Bond, GNMA, Mid Cap
Growth, U.S. Government Income and Large Cap Ultra Funds, of the net asset value
of such shares.
Pursuant to the Shareholder Services Plan and B Shares Plan,
the Trust may enter into agreements with financial institutions pertaining to
the provision of administrative services to their customers who are the
beneficial owners of Class A Shares or Class B Shares in consideration for the
payment of up to .15% (on an annualized basis) for the Ohio Municipal Money
Market, Pennsylvania Tax Exempt Money Market, Tax Exempt Money Market, Money
Market, Government Money Market, Treasury Money Market and Treasury Plus Money
Market Funds, and the Enhanced Income Fund (B Shares only), of the net asset
value of such shares.
Pursuant to the Shareholder Services Plan and B Shares Plan,
the Trust may enter into agreements with financial institutions pertaining to
the provision of administrative services
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to their customers who are the beneficial owners of Class A Shares or Class B
Shares in consideration for the payment of up to .10% (on an annualized basis),
in the case of the Ohio Tax Exempt Bond, Pennsylvania Municipal Bond, National
Tax Exempt Bond and Michigan Municipal Bond Funds, and the Enhanced Income Fund
(A Shares only), of the net asset value of such shares.
Pursuant to the C Shares Plan, the Trust may enter into
agreements with financial institutions pertaining to the provision of
administrative services to their customers who are the beneficial owners of
Class C Shares in consideration for the payment of up to .25% (on an annualized
basis), of the net asset value of such shares. Such services may include:
(i) aggregating and processing purchase and redemption
requests from customers;
(ii) providing customers with a service that invests the
assets of their accounts in Class A Shares, Class B
Shares or Class C Shares;
(iii) processing dividend payments from the Funds;
(iv) providing information periodically to customers showing
their position in Class A Shares, Class B Shares or
Class C Shares;
(v) arranging for bank wires;
(vi) responding to customer inquiries relating to the
services performed with respect to Class A Shares, Class
B Shares or Class C Shares beneficially owned by
customers;
(vii) forwarding shareholder communications; and (viii) other
similar services requested by the Trust.
Agreements between the Trust and financial institutions will
be terminable at any time by the Trust without penalty.
PORTFOLIO TRANSACTIONS
----------------------
Pursuant to its Advisory Agreement with the Trust, IMC is
responsible for making decisions with respect to and placing orders for all
purchases and sales of portfolio securities for the Fund. The Adviser or
Sub-Adviser purchases portfolio securities either directly from the issuer or
from an underwriter or dealer making a market in the securities involved.
Purchases from an underwriter of portfolio securities include a commission or
concession paid by the issuer to the underwriter and purchases from dealers
serving as market makers may include the spread between the bid and asked price.
Transactions on stock exchanges involve the payment of negotiated brokerage
commissions. There is generally no stated commission in the case of securities
traded in the over-the-counter market, but the price includes an undisclosed
commission or mark-up.
For the fiscal years ended May 31, 1999, 1998 and 1997, the
Small Cap Value, Equity Growth, Equity Income and Total Return Advantage Funds
paid $1,102,442, $780,933 and $421,322; $1,271,614, $1,398,444, and $803,733;
$249,890, $86,349 and $102,856; $0, $0 and $0 in brokerage commissions,
respectively. For the same periods, the Intermediate Bond and
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Enhanced Income Funds did not pay any brokerage commissions. For the fiscal year
ending May 31, 1999 and the period from August 1, 1997 (commencement of
operations) to May 31, 1998, the International Equity, Small Cap Growth and Core
Equity Funds paid $726,464 and $290,141; $503,450 and $51,366; and $0 and $0, in
brokerage commissions, respectively. For the fiscal year ending May 31, 1999 and
the period from April 9, 1998 (commencement of operations) to May 31, 1998, the
Tax Managed Equity Fund paid $26,801 and $0 in brokerage commissions. For the
period from commencement of operations (July 10, 1998) to May 31, 1999, the
Equity Index Fund paid brokerage commissions of $93,484. For the period from
commencement of operations (July 10, 1998) to May 31, 1999, the Balanced
Allocation Fund paid brokerage commissions of $33,019. As of May 31, 1999, the
Mid Cap Growth, Large Cap Ultra, U.S. Government Income, Michigan Municipal Bond
and Treasury Plus Money Market Funds had not yet commenced operations.
For the fiscal years ended May 31, 1999, 1998, and the period
from September 9, 1996 (date of reorganization of the Predecessor Funds) until
May 31, 1997, the Bond and GNMA Funds paid no brokerage commissions. For the
period from June 1, 1996 until September 9, 1996, the one-month fiscal period
ended May 31, 1996, the Predecessor Bond and GNMA Funds did not pay any
brokerage commissions.
For the fiscal years ended May 31, 1999, 1998, 1997, the Ohio
Tax Exempt Bond Fund did not pay any brokerage commissions.
For the fiscal years ended May 31, 1999 and 1998, the
Pennsylvania Municipal Bond Fund paid $0 and $0 in brokerage commission. For the
period from September 9, 1996 (date of reorganization of the Predecessor fund to
the Pennsylvania Municipal Bond Fund) until May 31, 1997, the Pennsylvania
Municipal Bond Fund paid brokerage commissions of $0. For the period from June
1, 1996 until September 9, 1996, for the one-month period ended May 31, 1996,
the Pennsylvania Municipal Bond Fund paid no brokerage commissions. For the
fiscal year 1999 and the period from April 9, 1998 (date of commencement of
operations) until May 31, 1998, the National Tax Exempt Bond Fund paid brokerage
commissions of $0 and $0.
While the Adviser (including the Sub-Adviser) generally seeks
competitive spreads or commissions, it may not necessarily allocate each
transaction to the underwriter or dealer charging the lowest spread or
commission available on the transaction. Allocation of transactions, including
their frequency, to various dealers is determined by the Adviser in its best
judgment and in a manner deemed fair and reasonable to shareholders. Under the
Advisory Agreement, pursuant to Section 28(e) of the Securities Exchange Act of
1934, as amended, the Adviser is authorized to negotiate and pay higher
brokerage commissions in exchange for research services rendered by
broker-dealers. Subject to this consideration, broker-dealers who provide
supplemental investment research to the Adviser may receive orders for
transactions by the Fund. Information so received is in addition to and not in
lieu of services required to be performed by the Adviser and does not reduce the
fees payable to the Adviser by the Fund. Such information may be useful to the
Adviser in serving both the Trust and other clients, and, similarly,
supplemental information obtained by the placement of business of other clients
may be useful to the Adviser in carrying out its obligations to the Trust.
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<PAGE> 111
Portfolio securities will not be purchased from or sold to the
Trust's Adviser, Distributor, or any "affiliated person" (as such term is
defined under the 1940 Act) of any of them acting as principal, except to the
extent permitted by the SEC. In addition, the Fund will not give preference to
its Adviser's correspondents with respect to such transactions, securities,
savings deposits, repurchase agreements and reverse repurchase agreements.
The Trust is required to identify any securities of its
"regular brokers or dealers" that it has acquired during its most recent fiscal
year. At May 31, 1999, (a) the International Equity Fund had entered into
repurchase transactions with: Goldman Sachs; (b) the Small Cap Growth Fund had
entered into repurchase transactions with: Goldman Sachs; (c) the Tax Managed
Equity Fund had entered into repurchase transactions with: Goldman Sachs; (d)
the Core Equity Fund had entered into repurchase transactions with: Goldman
Sachs; (e) the Bond Fund had entered into repurchase transactions with Goldman
Sachs; (f) the GNMA Fund had entered into repurchase transactions with: Goldman
Sachs; (g) the Tax Exempt Fund had entered into repurchase transactions with
Goldman Sachs; (h) the Money Market Fund had entered into repurchase
transactions with: Prudential Bache Securities; (i) the Government Fund had
entered into repurchase transactions with: Prudential Bache Securities and
Goldman Sachs; and (j) the Treasury Fund had entered into repurchase
transactions with Goldman Sachs.
The Adviser to the Fund has agreed to maintain a policy and
practice of conducting its investment management activities independently of its
respective commercial departments all of the Adviser's affiliates. In making
investment recommendations for the Trust, the Adviser's personnel will not
inquire or take into consideration whether the issuer of securities proposed for
purchase or sale for the Trusts' accounts are customers of the commercial
departments of all of the Adviser's affiliates.
Investment decisions for the Fund are made independently from
those for the other Funds and for other investment companies and accounts
advised or managed by the Adviser. Such other Funds, investment companies and
accounts may also invest in the same securities as the Fund. When a purchase or
sale of the same security is made at substantially the same time on behalf of
the Fund and another investment company or account, the transaction will be
averaged as to price, and available investments allocated as to amount, in a
manner which the Adviser believes to be equitable to the Fund and such other
investment company or account. In some instances, this investment procedure may
adversely affect the price paid or received by the Fund or the size of the
position obtained or sold by the Fund. In connection therewith, and to the
extent permitted by law, and by the Advisory Agreement, the Adviser may
aggregate the securities to be sold or purchased for the Fund with those to be
sold or purchased for other investment companies or advisory clients.
During the last fiscal year, the following Funds engaged in
the directed brokerage transactions in the following amounts and for the
following commissions: the Equity Growth Fund, $304,941,120 in transactions and
$253,608 in commissions; the Small Cap Value Fund, $18,044,068 in transactions
and $76,449 in commissions; the Equity Income Fund, $34,973,766 in transactions
and $45,834 in commissions; the Small Cap Growth Fund, $5,745,685 in
transactions and $24,515 in commissions; the Core Equity Fund, $61,561,884 in
transactions and $33,610 in commissions; the Tax Managed Equity Fund, $7,098,518
in transactions and $9,917 in
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<PAGE> 112
commissions; the Equity Index Fund, $86,663,189 in transactions and $28,093 in
commissions; the Balanced Allocation Fund, $31,999,895 in transactions and
$15,515 in commissions; the International Fund, $3,554,917 in transactions and
$7,698 in commissions.
AUDITORS
--------
Ernst & Young LLP, independent auditors, with offices at Two
Commerce Square, 2001 Market Street, Suite 4000, Philadelphia, Pennsylvania
19103, serve as independent auditors of the Trust. The statements of net assets
for each of the Funds, except for the Armada Balanced Allocation Fund, the
statement of asset and liabilities, including portfolio of investments, of the
Armada Balanced Allocation Fund as of May 31, 1999, and the related statement of
operations, statements of changes in net assets, and financial highlights for
each of the Funds for each of the periods indicated therein except for the
financial highlights of the Armada Bond Fund, Armada GNMA Fund, Armada
Pennsylvania Municipal Bond Fund, and Armada Pennsylvania Tax Exempt Money
Market Fund from April 30, 1995 through May 31, 1996, which are incorporated by
reference in this Statement of Additional Information, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report referred
to under "Financial Statements," and are incorporated by reference in reliance
upon the report given on the authority of such firm as experts in accounting and
auditing.
The financial highlights for the Armada Bond Fund, Armada GNMA
Fund, Armada Pennsylvania Municipal Bond Fund, and Armada Pennsylvania Tax
Exempt Money Market Fund from April 30, 1995 through May 31, 1996, which are
incorporated by reference in this Statement of Additional Information, were
audited by PricewaterhouseCoopers LLP, independent accountants, whose report
dated July 26, 1996 expressed an unqualified opinion on such financial
highlights, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
COUNSEL
-------
Drinker Biddle & Reath LLP (of which Mr. McConnel, Secretary
of the Trust, is a partner), with offices at One Logan Square, 18th and Cherry
Streets, Philadelphia, Pennsylvania 19103-6996, are counsel to the Trust and
will pass upon the legality of the shares offered hereby. Squire, Sanders &
Dempsey, LLP with offices at 4900 Key Center, 127 Public Square, Cleveland, Ohio
44114-1304 act as special Ohio tax counsel for the Trust and have reviewed the
sections of this Statement of Additional Information entitled "Special Risk
Considerations Regarding Investment in Ohio Municipal Securities."
YIELD AND PERFORMANCE INFORMATION
---------------------------------
Each Fund's "yield" described in the Prospectus is calculated
by dividing the Fund's net investment income per share earned during a 30-day
period (or another period permitted by the
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<PAGE> 113
rules of the SEC) by the net asset value per share on the last day of the period
and annualizing the result on a semi-annual basis by adding one to the quotient,
raising the sum to the power of six, subtracting one from the result and then
doubling the difference. The Fund's net investment income per share earned
during the period is based on the average daily number of shares outstanding
during the period entitled to receive dividends and includes dividends and
interest earned during the period minus expenses accrued for the period, net of
reimbursements. This calculation can be expressed as follows:
a-b to the 6th power
Yield = 2 [(------) - 1]
cd + 1
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends.
d = maximum offering price per share on the last day
of the period.
The Equity Income, Balanced Allocation, Total Return
Advantage, Bond, Intermediate Bond, GNMA, Enhanced Income, the Tax-Exempt Funds,
Mid Cap Growth and U.S. Government Income calculate interest earned on debt
obligations held in their portfolios by computing the yield to maturity of each
obligation held by it based on the market value of the obligation (including
actual accrued interest) at the close of business on the last business day of
each 30-day period, or, with respect to obligations purchased during the 30-day
period, the purchase price (plus actual accrued interest) and dividing the
result by 360 and multiplying the quotient by the market value of the obligation
(including actual accrued interest) in order to determine the interest income on
the obligation for each day of the subsequent 30-day period that the obligation
is in the Fund. The maturity of an obligation with a call provision is the next
call date on which the obligation reasonably may be expected to be called or, if
none, the maturity date. With respect to debt obligations purchased by the Fund
at a discount or premium, the formula generally calls for amortization of the
discount or premium. The amortization schedule will be adjusted monthly to
reflect changes in the market values of such debt obligations.
Interest earned on tax-exempt obligations that are issued
without original issue discount and have a current market discount is calculated
by using the coupon rate of interest instead of the yield to maturity. In the
case of tax-exempt obligations that are issued with original issue discount but
which have discounts based on current market value that exceed the
then-remaining portion of the original issue discount (market discount), the
yield to maturity is the imputed rate based on the original issue discount
calculation. On the other hand, in the case of tax-exempt obligations that are
issued with original issue discount but which have discounts based on current
market value that are less than the then-remaining portion of the original issue
discount (market premium), the yield to maturity is based on the market value.
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<PAGE> 114
Expenses accrued for the period (variable "b" in the formula)
include all recurring fees charged by the Fund to all shareholder accounts in
proportion to the length of the base period and the Fund's mean (or median)
account size. Undeclared earned income will be subtracted from the net asset
value per share (variable "d" in the formula). Undeclared earned income is the
net investment income which, at the end of the 30-day base period, has not been
declared as a dividend, but is reasonably expected to be and is declared as a
dividend shortly thereafter. For applicable sales charges, see "How to Purchase
and Redeem Shares -- Sales Charges Applicable to Purchases of A Shares" and
"Sales Charges Applicable to Purchases of B Shares" in the Prospectus.
The "tax-equivalent yield" is computed by dividing the portion
of a Fund's yield (calculated as above) that is exempt from federal income tax
by one minus a stated federal income tax rate and adding that figure to that
portion, if any, of the Fund's yield that is not exempt from federal income tax.
For the period ended May 31, 1999, no Class B Shares for the
Equity Index Fund were issued or outstanding. Accordingly, no performance
information is available for Class B Shares of the Equity Index Fund.
For the period ended May 31, 1999, no Class C Shares were
issued or outstanding. Accordingly, no performance information is available for
Class C Shares.
For the 30-day period ended May 31, 1999, the respective
yields of the Class A Shares and Class I Shares of the Ohio Tax Exempt Bond,
Pennsylvania Municipal Bond and National Tax Exempt Bond Funds were: 3.73% and
3.94%; 3.76% and 3.98%; and 3.56% and 3.85%, respectively. The tax equivalent
yields (assuming a 39.6% federal tax rate and 6.799% Ohio tax rate for 1998) for
the Ohio Tax Exempt Bond Fund's Class A Shares and Class I Shares for the same
period were 6.99% and 7.38%, respectively. The tax equivalent yields (assuming a
39.6% federal tax rate and a 2.8% Pennsylvania tax rate) for the Pennsylvania
Tax Exempt Bond Fund's Class A and Class I shares for the same period were 6.53%
and 6.91%, respectively. The tax equivalent yield (assuming a 39.6% federal tax
rate) for the National Tax Exempt Bond Fund's Class I Shares for the same period
was 6.37%.
For the 30-day period ended May 31, 1999, the yield of the
Class B Shares of the National Tax Exempt Bond Fund was 3.00%.
For the 30-day period ended May 31, 1999, the yields of the
Class A and Shares Class I Shares of the International Equity, Small Cap Value,
Small Cap Growth, Equity Growth, Tax Managed Equity, Core Equity and Equity
Income Funds were N/A and N/A, 2.86% and 3.27%, .33% and .63%, N/A and N/A,
.03%, and .67%, N/A and N/A, 1.48% and 1.77%, respectively.
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For the 30-day period ended May 31, 1999, the yields of the
Class A Shares and Class I Shares of the Total Return Advantage Fund, Bond,
Intermediate Bond Fund, GNMA Fund and Enhanced Income Fund were 5.66% and 6.20%;
5.25% and 5.69%; 5.20%, and 5.73%; 5.49%, and 6.03%; and 5.18% and 5.44%,
respectively.
For the 30-day period ended May 31, 1999, the yields of the
Class B Shares of the Bond Fund and Intermediate Bond Fund were 4.73% and 4.78%,
respectively.
Each Fund computes its "average annual total return" by
determining the average annual compounded rate of return during specified
periods that would equate the initial amount invested to the ending redeemable
value of such investment by dividing the ending redeemable value of a
hypothetical $1,000 initial payment by $1,000 and raising the quotient to a
power equal to one divided by the number of years (or fractional portion
thereof) covered by the computation and subtracting one from the result. This
calculation can be expressed as follows:
ERV 1/n
T = [(-----) - 1]
P
Where: T = average annual total return
ERV = ending redeemable value at the end of the
period covered by the computation of a
hypothetical $1,000 payment made at the
beginning of the period
P = hypothetical initial payment of $1,000
n = period covered by the computation, expressed in
terms of years
Each Fund computes its aggregate total returns by determining
the aggregate rates of return during specified periods that likewise equate the
initial amount invested to the ending redeemable value of such investment.
The formula for calculating aggregate total return is as follows:
ERV
T = (---) - 1
P
The calculations of average annual total return and aggregate
total return assume the reinvestment of all dividends and capital gain
distributions on the reinvestment dates during the period and include all
recurring fees charged to all shareholder accounts, assuming an account size
equal to the Fund's mean (or median) account size for any fees that vary with
the size of the account. The maximum sales load and other charges deducted from
payments are deducted from the initial $1,000 payment (variable "P" in the
formula). The ending redeemable value (variable "ERV" in the formula) is
determined by assuming complete redemption of the hypothetical investment and
the deduction of all contingent deferred sales charges and other nonrecurring
charges at the end of the measuring period covered by the computation.
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<PAGE> 116
For the period ended May 31, 1999, no Class C Shares were
issued or outstanding. Accordingly, no performance information is available for
Class C Shares.
The average annual total returns for the one year period ended
May 31, 1999 were (9.64)% (after taking the sales load into account) and (4.38)%
(without taking into account any sales load), for the Small Cap Value Fund's
Class A Shares, (9.40)% (after taking the sales load into account) and (5.13)%
(without taking into account any sales load) for its Class B Shares and (3.67)%
for the Small Cap Value Fund's Class I Shares. The average annual total returns
since the Small Cap Value Fund's commencement of operations through May 31, 1999
were 13.23% (after taking into account the sales load) and 14.57% (without
taking into account any sales load), for its Class A Shares, (6.21)% (after
taking the sales load into account) and (3.06)% (without taking into account any
sales load) for its Class B Shares, and 15.43% for the Class I Shares. The Fund
commenced operations December 20, 1989.
The average annual total returns for the one year period
ending May 31, 1999 were 13.30% (after taking the sales load into account) and
19.88% (without taking into account any sales load), for the Equity Growth
Fund's Class A Shares, 14.22% (after taking the sales load into account) and
19.22% (without taking into account any sales load) for its Class B Shares and
20.16% for the Equity Growth Fund's Class I Shares. The average annual total
returns since the Equity Growth Fund's commencement of operations through May
31, 1999 were 14.97% (after taking into account the sales load) and 15.78%
(without taking into account any sales load), for its Class A Shares, 17.66%
(after taking the sales load into account) and 20.99% (without taking into
account any sales load) for its Class B shares, and 16.36% for the Class I
Shares. The Fund commenced operations December 20, 1989.
The average annual total returns for the one year period ended
May 31, 1999 were 16.24% (after taking the sales load into account) and 23.03%
(without taking into account any sales load), for the Tax Managed Equity Fund's
Class A Shares, 17.31% (after taking the sales load into account) and 22.31%
(without taking into account any sales load) for its Class B Shares and 22.82%
for its Class I Shares. The average annual total returns since the Tax Managed
Equity Fund's commencement of operations through May 31, 1999 were 17.22% (after
taking into account the sales load) and 17.66% (without taking into account any
sales load), for its Class A Shares, 17.63% (after taking the sales load into
account) and 17.63% (without taking into account any sales load) for its Class B
Shares, and 17.65% for the Class I shares.
The average annual total returns for the one year period ended
May 31, 1999 were 18.86% (after taking the sales load into account) and 25.76%
(without taking into account any sales load), for the Core Equity Fund's Class A
Shares, 20.17% (after taking the sales load into account) and 25.17% (without
taking into account any sales load) for its Class B Shares and 26.08% for its
Class I Shares. The average annual total returns since the Core Equity Fund's
shares. The average annual total returns since the Core Equity Fund's
commencement of operations through May 31, 1999 were 17.98% (after taking into
account the sales load) and 21.68% (without taking into account the sales load),
for its Class A Shares, 22.88% (after taking the sales load into account) and
26.16% (without taking into account any sales load) for its Class B Shares, and
21.94% for the Class I Shares.
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<PAGE> 117
The average annual total returns since the Equity Index Fund's
commencement of operations through May 31, 1999 were 32.33% (after taking into
account the sales load) and 39.76% (without taking into account any sales load),
for its Class A Shares, and 15.20% for the Class I Shares. As of May 31, 1999,
the Equity Index Fund had been operating for less than one year.
The average annual total returns for the one year period ended
May 31, 1999 were 4.32% (after taking the sales load into account) and 10.40%
(without taking into account any sales load), for the Equity Income Fund's Class
A Shares, 4.14% (after taking the sales load into account) and 9.14% (without
taking into account any sales load) for its Class B Shares and 10.62% for the
Equity Income Fund's Class I Shares. The average annual total returns since the
Equity Income Fund's commencement of operations through May 31, 1999 were 17.24%
(after taking into account the sales load) and 18.64% (without taking into
account any sales load), for its Class A Shares, 10.10% (after taking the sales
load into account) and 13.52% (without taking into account any sales load) for
its Class B Shares, and 18.93% for the Class I Shares. The Fund commenced
operations December 20, 1989.
The average annual total returns since the Balance Allocation
Fund's commencement of operations through May 31, 1999 were 2.55% (after taking
into account the sales load) and 8.71% (without taking into account any sales
load), for its Class A Shares, 1.94% (after taking the sales load into account)
and 11.02% (without taking into account any sales load) for its Class B Shares,
and 5.13% for the Class I Shares. As of May 31, 1999, the Equity Index Fund had
been operating for less than one year.
The average annual total returns for the Total Return
Advantage Fund's fiscal year ended May 31, 1999 were (1.71)% (after taking the
sales load into account) and 3.18% (without taking into account any sales load)
for its Class A Shares, and 3.54% for its Class I Shares. The average annual
total returns since the Total Return Advantage Fund's commencement of May 31,
1999 were 6.15% (after taking into account the sales load), and 7.25% (without
taking into account any sales load) for its Class A Shares and 7.65% for its
Class I Shares. The Class A Share class of the Total Return Advantage Fund
commenced operations on September 6, 1994 and the Class I Share class of the
Total Return Advantage Fund commenced operations on July 7, 1994.
The average annual total returns for the Bond Fund's fiscal
year ended May 31, 1999 were (1.14)% (after taking the sales load into account)
and 3.77% (without taking into account any sales load) for its Class A Shares
and, (1.80)% (after taking the sales load into account) and 3.06% (without
taking into account any sales load) for its Class B Shares and 3.82% for its
Class I Shares. The average annual total returns since the Bond Fund's
commencement of operations through May 31, 1999 were 4.55% (after taking into
account the sales load) and 6.45% (without taking into account any sales load)
for its Class A Shares, (0.15)% (after taking the sales load into account) and
3.28% (without taking into account any sales load) for its Class B Shares and
6.52% for its Class I Shares. The Bond Fund commenced operations on August 10,
1994. The Class A Share class of the Bond Fund commenced operations on September
11, 1996,
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<PAGE> 118
the Class B Share class of the Bond Fund commenced operations on January 6,
1998, and the Class I Share class of the Bond Fund commenced operations on
August 10, 1998.
The average annual total returns for the Intermediate Bond
Fund's fiscal year ended May 31, 1999 were (1.38)% (after taking the sales load
into account) and 3.54% (without taking into account any sales load) for its
Class A Shares, (2.07)% (after taking the sales load into account) and 2.83%
(without taking into account any sales load) for its Class B Shares and 3.98%
for its Class I Shares. The average annual total returns since the Intermediate
Bond Fund's commencement of operations through May 31, 1999 were 5.95% (after
taking into account the sales load) and 6.59% (without taking into account any
sales load) for its Class A shares, (0.55)% (after taking the sales load into
account) and 2.92% (without taking into account any sales load) for its Class B
Shares, and 7.24% for its Class I Shares. The Class A Share class of the
Intermediate Bond Fund commenced operations on April 15, 1991, the Class B Share
class of the Intermediate Bond Fund commenced operations on January 8, 1998 and
the Class I Share class of the Intermediate Bond Fund commenced operations on
December 20, 1989.
The average annual total returns for the GNMA Fund's ended May
31, 1999 were (1.19)% (after taking the sales load into account) and 3.77%
(without taking into account any sales load) for its Class A Shares and 4.02%
for its Class I Shares. The average annual total returns since the GNMA Fund's
commencement of operations through May 31, 1999 were 5.35% (after taking into
account the sales load) and 7.25% (without taking into account any sales load)
for its Class A Shares and 7.58% for its Class I Shares. The Class A Share class
of the GNMA Fund commenced operations on September 9, 1998 and the Class I Share
class of the GNMA Fund commenced operations on August 10, 1994.
The average annual total returns for the Enhanced Income
Fund's fiscal year ended May 31, 1999 were 2.01% (after taking the sales load
into account) and 4.94% (without taking into account any sales load) for its
Class A Shares and 5.14% for its Class I Shares. The average annual total
returns since the Enhanced Income Fund's commencement of operations through May
31, 1999 were 5.21% (after taking into account the sales load) and 5.84%
(without taking into account any sales load) for its Class A Shares and 5.91%
for its Class I Shares. The Class A Share class of the Enhanced Income Fund
commenced operations on September 9, 1994 and the Class I Share class of the
Enhanced Income Fund commenced operations on July 7, 1994.
The average annual total returns for the Ohio Tax Exempt Bond
Fund for the one year period ending May 31, 1999 were .84% (after taking into
account the sales load) and 3.93% (without taking into account any sales load)
for the Class A Shares and 3.94% for the Class I Shares. The average annual
total returns since the Fund's commencement of operations through May 31, 1999
were 5.51% (after taking into account the sales load) and 5.90% (without taking
into account any sales load) for the Class A Shares and 5.83% for the Class I
Shares. The Ohio Tax Exempt Bond Fund commenced investment operations on January
5, 1990.
The average annual total returns for the fiscal year ending
May 31, 1999 for the Pennsylvania Municipal Bond Fund were 1.11% (after taking
into account the sales load) and 4.21% (without taking into account any sales
load), for the Class A Shares and 4.21% for the Class
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<PAGE> 119
I Shares. The average annual total returns since the predecessor fund to the
Pennsylvania Municipal Bond Fund's commencement of operations through May 31,
1999 were 4.53% (after taking into account the sales load) and 5.70% (without
taking into account any sales load) for the Class A Shares and 5.36% for the
Class I Shares. The predecessor fund to the Pennsylvania Municipal Bond Fund
commenced investment operations on August 10, 1994.
The average annual total return since the predecessor fund to
the National Tax Exempt Bond Funds commencement of operations through May 31,
1999 was 7.05% for the Class I Shares. The predecessor fund to the National Tax
Exempt Bond commenced investment operations on July 31, 1984.
The average annual total returns for the International Equity
Fund for the one year period ending May 31, 1999 were (4.70)% (after taking into
account the sales load) and .84% (without taking into account any sales load)
for the Class A Shares, (4.90)% (after taking the sales load into account) and
.10% (without taking into account any sales load) for its Class B Shares and
.95% for the Class I Shares. The average annual total returns since the Fund's
commencement of operations through May 31, 1999 were 1.74% (after taking the
sales load into account) and 4.92% (without taking into account any sales load),
for the Class A shares, 8.15% (after taking the sales load into account) and
11.60% (without taking into account any sales load) for its Class B Shares and
5.24% for the International Equity Fund's Class I Shares. The Class A and Class
I Share classes of the International Equity Fund commenced operations on August
1, 1997 and the Class B Share class of the International Equity Fund commenced
operations on January 6, 1998.
The average annual total returns for the Small Cap Growth Fund
for the one year period ending May 31, 1999 were (17.36)% (after taking into
account the sales load) and (12.54)% (without taking into account any sales
load) for the Class A Shares, (17.55)% (after taking the sales load into
account) and (13.26)% (without taking into account any sales load) for its Class
B Shares and (12.36)% for the Class I Shares. The average annual total returns
since the Fund's commencement of operations through May 31, 1999 were (1.73)%
(after taking the sales load into account) and 1.35% (without taking into
account any sales load), for the Class A shares, (7.00)% (after taking the sales
load into account) and (3.56)% (without taking into account any sales load) for
its Class B Shares and 1.54% for the Class I Shares. The Class A Shares and
Class I Shares of the Small Cap Growth Fund commenced operations on August 1,
1997 and the Class B Share class of the Small Cap Growth Fund commenced
operations on January 6, 1998.
The average annual total returns for the Core Equity Fund for
the one year period ending May 31, 1999 were 18.86% (after taking into account
the sales load) and 25.78% (without taking into account any sales load) for the
Class A Shares, 20.17% (after taking the sales load into account) and 25.17%
(without taking into account any sales load) for its Class B Shares and 26.08%
for the Class I Shares. The average annual total returns since the Fund's
commencement of operations through May 31, 1999 were 17.98% (after taking the
sales load into account), and 21.68% (without taking into account any sales
load) for the Core Equity Fund's Class A Shares, 22.88% (after taking the sales
load into account) and 26.16% (without taking into account any sales load) for
its Class B Shares and 21.94% for the Core Equity Fund's Class I Shares. The
Class A
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<PAGE> 120
Shares and Class I Shares of the Core Equity Fund commenced operations
on August 1, 1997 and the Class B Share class of the Core Equity Fund commenced
operations on January 6, 1998.
Each Fund may also advertise the "aggregate total return" for
its shares which is computed by determining the aggregate compounded rates of
return during specified periods that likewise equate the initial amount invested
to the ending redeemable value of such investment. The formula for calculating
aggregate total return is as follows:
ERV
Aggregate Total Return = [(------)] - 1
P
The above calculations are made assuming that (1) all
dividends and capital gain distributions are reinvested on the reinvestment
dates at the price per Share existing on the reinvestment date, (2) all
recurring fees charged to all shareholder accounts are included, and (3) for any
account fees that vary with the size of the account, a mean (or median) account
size in a Fund during the periods is reflected. The ending redeemable value
(variable "ERV" in the formula) is determined by assuming complete redemption of
the hypothetical investment after deduction of all nonrecurring charges at the
end of the measuring period.
The Funds may also from time to time include discussions or
illustrations of the effects of compounding in Materials. "Compounding" refers
to the fact that, if dividends or other distributions on a Fund's investments
are reinvested by being paid in additional Fund shares, any future income or
capital appreciation of a Fund would increase the value, not only of the
original Fund investment, but also of the additional Fund shares received
through reinvestment. As a result, the value of a Fund's investments would
increase more quickly than if dividends or other distributions had been paid in
cash.
In addition, a Fund may also include in Materials discussions
and/or illustrations of the potential investment goals of a prospective
investor, investment management strategies, techniques, policies or investment
suitability of the Fund, high-quality investments, economic conditions, the
relationship between sectors of the economy and the economy as a whole, various
securities markets, the effects of inflation and historical performance of
various asset classes, including but not limited to, stocks, bonds and Treasury
securities. From time to time, Materials may summarize the substance of
information contained in shareholder reports (including the investment
composition of a Fund), as well as the views of the Adviser as to current
market, economic, trade and interest rate trends, legislative, regulatory and
monetary developments, investment strategies and related matters believed to be
of relevance to a Fund. Each Fund may also include in Materials charts, graphs
or drawings 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
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<PAGE> 121
disadvantages of investing in tax-deferred and taxable investments), shareholder
profiles and hypothetical investor scenarios, timely information on financial
management, tax and retirement planning and investment alternatives to
certificates of deposit and other financial instruments. Such Materials may
include symbols, headlines or other material which highlight or summarize the
information discussed in more detail therein.
STANDARDIZED YIELD QUOTATIONS
-----------------------------
"Yields," as described in the Prospectus, are calculated
according to formulas prescribed by the SEC. The standardized seven-day yield
for a class of Fund shares is computed by determining the net change, exclusive
of capital changes, in the value of a hypothetical pre-existing account in the
class having a balance of one share at the beginning of the period, subtracting
a hypothetical charge reflecting deductions from shareholder accounts, dividing
the difference by the value of the account at the beginning of the base period
to obtain the base period return, and then multiplying the base period return by
(365/7). The net change in the value of an account in a class includes the value
of additional shares purchased with dividends from the original share, and
dividends declared on both the original share and any such additional shares,
net of all fees, other than nonrecurring account or sales charges, that are
charged to all shareholder accounts in proportion to the length of the base
period and the class' mean or median account size. The capital changes to be
excluded from the calculation of the net change in account value are realized
gains and losses from the sale of securities and unrealized appreciation and
depreciation. The "effective yield" for a class of Fund shares is computed by
compounding the unannualized base period return (calculated as above) by adding
1 to the base period return, raising the sum to a power equal to 365 divided by
7, and subtracting 1 from the result.
The Ohio Municipal, Pennsylvania Tax Exempt and Tax Exempt
Funds' "tax-equivalent yields" are computed by dividing the portion of those
Funds' yields (calculated as above) that is exempt from federal income tax by
one minus a stated federal income tax rate (using 39.6% tax bracket) and adding
that figure to that portion, if any, of the respective Fund's yield that is not
exempt from federal income tax.
For the seven-day period ended May 31, 1999, the yields of the
Class A Shares and Class I Shares of the Pennsylvania Tax Exempt Fund, Tax
Exempt Fund, Money Market Fund, Government Fund and Treasury Fund were 2.78% and
2.93%, 2.73% and 2.87%, 4.42% and 4.57%, 4.33% and 4.48%, and 3.96% and 4.11%,
respectively, and their respective effective yields were 2.82% and 2.97%, 2.76%
and 2.91%, 4.52% and 4.68%, 4.43% and 4.58%, and 4.03% and 4.19%, respectively.
For the seven-day period ended May 31, 1999, the yield of the Class B Shares of
the Money Market Fund was 3.70%.
For the Pennsylvania Tax Exempt and Tax Exempt Funds, the
tax-equivalent effective yields (assuming a 39.6% federal tax rate in the case
of both Funds and a 2.8% Pennsylvania tax rate in the case of the Pennsylvania
Tax Exempt Fund) for their Class A Shares and Class I Shares for the seven-day
period ended May 31, 1999 were 4.90% and 5.16%, and 4.57% and 4.82%,
respectively.
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<PAGE> 122
The current yield for each class of shares in a Fund may be
obtained by calling the Trust at the telephone number provided on the cover
page. Quoted yields are not indicative of future yields. Yields will depend upon
factors such as fund maturity, the Fund's expenses and the types of instruments
held by the Fund.
The Funds may also from time to time include discussions or
illustrations of the effects of compounding in Materials. "Compounding" refers
to the fact that, if dividends or other distributions on a Fund investment are
reinvested by being paid in additional Fund shares, any future income or capital
appreciation of a Fund would increase the value, not only of the original Fund
investment, but also of the additional Fund shares received through
reinvestment. As a result, the value of the Fund investment would increase more
quickly than if dividends or other distributions had been paid in cash.
In addition, the Funds may also include in Materials
discussions and/or illustrations of the potential investment goals of a
prospective investor, investment management strategies, techniques, policies or
investment suitability of a Fund, high-quality investments, economic conditions,
the relationship between sectors of the economy and the economy as a whole,
various securities markets, the effects of inflation and historical performance
of various asset classes, including but not limited to, stocks, bonds and
Treasury securities. From time to time, Materials may summarize the substance of
information contained in shareholder reports (including the investment
composition of a Fund), as well as the views of the Adviser as to current
market, economic, trade and interest rate trends, legislative, regulatory and
monetary developments, investment strategies and related matters believed to be
of relevance to a Fund. The Funds may also include in Materials charts, graphs
or drawings which compare the investment objective, return potential, relative
stability and/or growth possibilities of the Funds and/or other mutual funds, or
illustrate the potential risks and rewards of investment in various investment
vehicles, including but not limited to, stocks, bonds, Treasury securities and
shares of a Fund and/or other mutual funds. Materials may include a discussion
of certain attributes or benefits to be derived by an investment in a Fund
and/or other mutual funds (such as value investing, market timing, dollar cost
averaging, asset allocation, constant ratio transfer, automatic accounting
rebalancing, the advantages and disadvantages of investing in tax-deferred and
taxable investments), shareholder profiles and hypothetical investor scenarios,
timely information on financial management, tax and retirement planning and
investment alternatives to certificates of deposit and other financial
instruments. Such Materials may include symbols, headlines or other material
which highlight or summarize the information discussed in more detail therein.
-120-
<PAGE> 123
<TABLE>
<CAPTION>
Aggregate Total Return
Aggregate Total Return From From Inception Through
Inception Through 5/31/99 5/31/99 (without
(with Deduction of Maximum Deduction for
Sales Charge) Any Sales Charge) Inception Date
------------- ----------------- --------------
<S> <C> <C> <C>
Armada International Equity Fund
Class A 3.21% 9.19% 08/01/97
Class I N/A 9.80% 08/01/97
Class B 11.57% 16.57% 01/06/98
Armada Small Cap Value Fund
Class A 81.47% 92.00% 08/15/94
Class I N/A 100.58% 07/26/94
Class B -8.57% -4.26% 01/06/98
Armada Small Cap Growth Fund
Class A -3.14% 2.48% 08/01/97
Class I N/A 2.85% 08/01/97
Class B -9.64% 4.94% 01/06/98
Armada Equity Growth Fund
Class A 210.04% 228.06% 04/15/91
Class I N/A 318.50% 12/20/89
Class B 25.51% 30.51% 01/06/98
Armada Tax Managed Equity Fund*
Class A 971.75% 1033.58% 05/11/98
Class I 1031.70% N/A 04/09/98
Class B 1027.03% 1027.03% 05/04/98
Armada Core Equity Fund
Class A 35.35% 43.20% 08/01/97
Class I N/A 43.77% 08/01/97
Class B 33.36% 38.36% 01/06/98
Armada Equity Index Fund
Class A 20.20% 24.83%
Class I 14.16% N/A 10/15/99
Class B N/A N/A 07/10/98
Armada Equity Income Fund
Class A 113.69% 126.18% 08/22/94
Class I N/A 134.59% 07/01/94
Class B 14.39% 19.39% 01/06/98
Armada Balanced Allocation Fund
Class A 2.12% 7.26% 07/31/98
Class I N/A 4.57% 07/10/98
Class B 1.07% 6.07% 11/11/98
Armada Total Return Advantage Fund
Class A 32.63% 39.29% 09/06/94
Class I N/A 43.53% 07/07/94
Class B N/A N/A 08/16/99
</TABLE>
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<PAGE> 124
<TABLE>
<CAPTION>
Aggregate Total Return
Aggregate Total Return From From Inception Through
Inception Through 5/31/99 5/31/99 (without
(with Deduction of Maximum Deduction for
Sales Charge) Any Sales Charge) Inception Date
------------- ----------------- --------------
<S> <C> <C> <C>
Armada Bond Fund
Class A 12.87% 18.53% 09/11/96
Class I N/A 35.50% 08/10/94
Class B -0.20% 4.61% 01/06/98
Armada Intermediate Bond Fund
Class A 59.79% 67.83% 04/15/91
Class I N/A 93.55% 12/20/89
Class B -0.76% 4.10% 01/06/98
Armada GNMA Fund
Class A 15.21% 20.96% 09/11/96
Class I N/A 42.12% 08/10/94
Class B N/A N/A 08/16/99
Armada Enhanced Income Fund
Class A 27.12% 30.77% 09/09/94
Class I N/A 32.48% 07/07/94
Class B N/A N/A 08/16/99
Armada Ohio Tax Exempt Bond Fund
Class A 54.48% 59.21% 04/15/91
Class I N/A 70.37% 01/05/90
Class B N/A N/A
Armada Pennsylvania Municipal Bond Fund
Class A
Class I 12.80% 16.26% 09/11/96
Class B N/A 28.52% 08/10/94
N/A N/A
Armada National Tax Exempt Bond
Fund*
Class A 161.72% 174.72% 06/22/98
Class I 174.82% N/A 04/09/98
Class B 174.23% 174.23% 01/28/99
Armada Balanced Allocation Fund
Class A 2.12% 7.26% 07/31/98
Class I 4.57% N/A 07/10/98
Class B 1.07% 6.07% 11/11/98
</TABLE>
* Includes the history of a predecessor common trust fund which commenced
operations July 31, 1994.
The Funds may also from time to time include in Materials a
total return figure that is not calculated according to the formulas set forth
above in order to compare more accurately a
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<PAGE> 125
Fund's performance with other measures of investment return. For example, in
comparing the Fund's total return with data published by Lipper Analytical
Services, Inc., CDA Investment Technologies, Inc. or Weisenberger Investment
Company Service, or with the performance of an index, the Fund may calculate its
aggregate total return for the period of time specified in the advertisement or
communication by assuming the investment of $10,000 in shares and assuming the
reinvestment of each dividend or other distribution at net asset value on the
reinvestment date. Percentage increases are determined by subtracting the
initial value of the investment from the ending value and by dividing the
remainder by the beginning value. The Fund does not, for these purposes, deduct
from the initial value invested or the ending value redeemed any amount
representing sales charges. The Fund will, however, disclose the maximum sales
charge and will also disclose that the performance data do not reflect sales
charges and that inclusion of sale charges would reduce the performance quoted.
The Funds may also from time to time include discussions or
illustrations of the effects of compounding in Materials. "Compounding" refers
to the fact that, if dividends or other distributions on the Fund investment are
reinvested by being paid in additional Fund shares, any future income or capital
appreciation of the Fund would increase the value, not only of the original Fund
investment, but also of the additional Fund shares received through
reinvestment. As a result, the value of the Fund investment would increase more
quickly than if dividends or other distributions had been paid in cash.
In addition, the Funds may also include in Materials
discussions and/or illustrations of the potential investment goals of a
prospective investor, investment management strategies, techniques, policies or
investment suitability of the Fund, high-quality investments, economic
conditions, the relationship between sectors of the economy and the economy as a
whole, various securities markets, the effects of inflation and historical
performance of various asset classes, including but not limited to, stocks,
bonds and Treasury securities. From time to time, Materials may summarize the
substance of information contained in shareholder reports (including the
investment composition of the Fund), as well as the views of the adviser as to
current market, economic, trade and interest rate trends, legislative,
regulatory and monetary developments, investment strategies and related matters
believed to be of relevance to the Fund. The Fund may also include in Materials
charts, graphs or drawings which compare the investment objective, return
potential, relative stability and/or growth possibilities of the Fund and/or
other mutual funds, or illustrate the potential risks and rewards of investment
in various investment vehicles, including but not limited to, stocks, bonds,
Treasury securities and shares of the Fund and/or other mutual funds. Materials
may include a discussion of certain attributes or benefits to be derived by an
investment in the Fund and/or other mutual funds (such as value investing,
market timing, dollar cost averaging, asset allocation, constant ratio transfer,
automatic accounting rebalancing, the advantages and disadvantages of investing
in tax-deferred and taxable investments), shareholder profiles and hypothetical
investor scenarios, timely information on financial management, tax and
retirement planning and investment alternatives to certificates of deposit and
other financial instruments. Such Materials may include symbols, headlines or
other material which highlight or summarize the information discussed in more
detail therein.
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<PAGE> 126
MISCELLANEOUS
-------------
The Trust bears all costs in connection with its organization,
including the fees and expenses of registering and qualifying its shares for
distribution under federal and state securities regulations. All organization
expenses are being amortized on the straight-line method over a period of five
years from the date of commencement of operations. With respect to the Money
Market, Government, Treasury, Tax Exempt and Pennsylvania Tax Exempt Funds, all
organization expenses are or were being amortized on the straight-line method
over a period of five years from the date of commencement of operations.
As used in the Prospectus, "assets belonging to the Fund"
means the consideration received by the Trust upon the issuance of shares in
that Fund, together with all income, earnings, profits, and proceeds derived
from the investment thereof, including any proceeds from the sale of such
investments, any funds or payments derived from any reinvestment of such
proceeds, and a portion of any general assets of the Trust not belonging to the
Fund. In determining the Fund's net asset value, assets belonging to a Fund are
charged with the liabilities in respect of that Fund.
-124-
<PAGE> 127
As of October 20, 1999, the following persons owned of record 5 percent
or more of the shares of the Funds of the Trust:
International Equity Fund
- -------------------------
(Class A Shares)
- ----------------
<TABLE>
<CAPTION>
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Second National Bank TTEE 7,415.4260 5.67%
FBO Thomas Crago
Keogh Profit Sharing Plan
108 Main Ave. SW
Warren, OH 44481-1058
International Equity Fund
- -------------------------
(Class B Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
Shore West Construction 401(k) Plan 391.7150 5.71%
Kenneth M. Sokol
Attn: Barbara Beyer
Personal and Confidential
23826 Lorain Road
North Olmsted, OH 44070-2226
Shore West Construction 401(k) Plan 432.5180 6.31%
Mark A. Giel
Attn: Barbara Beyer
Personal and Confidential
23826 Lorain Road
North Olmsted, OH 44070-2226
Shore West Construction 401(k) Plan 420.1730 6.13%
Audrey M. Sokol
Attn: Barbara Beyer
Personal and Confidential
23826 Lorain Road
North Olmsted, OH 44070-2226
First Clearing Corporation 1,498.5200 21.86%
A/C 4499-9888
Dale I. Isenberg IRA
WFS as Custodian
1190 Parkside Dr.
Limestone, NY 14753-9704
</TABLE>
-125-
<PAGE> 128
<TABLE>
<CAPTION>
<S> <C> <C>
First Clearing Corporation 1,101.3470 16.06%
A/C 2124-6203
Paul C. Carver IRA
WFS as Custodian
314 Concord Circle Rd
Beaver Falls, PA 15010-8516
First Clearing Corporation 442.8700 6.46%
A/C 7062-5091
Mary C. Roberts IRA
WFS as Custodian
12107 Southeastern Ave.
Acton, IN 46259-1140
First Clearing Corporation 645.6820 9.42%
A/C 2919-9357
Nathaniel Dungy IRA R/O
WFS as Custodian 14490 Washington Blvd.
University Hts., OH 44118-4665
International Equity Fund
- -------------------------
(Class I Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
KeyTrust Co. TTEE FBO 1,168,102.7200 5.62%
Foundation Balanced Fund
A/C 04 66 300
P.O. Box 94871
Cleveland, OH 44101-4871
Sheldon & Co. TTEE 6,742,845.4630 32.42%
c/o National City Bank
Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
National City Bank 10,877,414.8650 52.30%
c/o Sheldon & Co.
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
</TABLE>
-126-
<PAGE> 129
<TABLE>
<CAPTION>
Small Cap Value Fund
- --------------------
(Class A Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Corelink Financial, Inc. 107,798.4690 12.99%
P.O. Box 4054
Concord, CA 94524-4054
Small Cap Value Fund
- --------------------
(Class B Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
First Clearing Corporation 2,891.8160 6.28%
A/C 5072-0540
Judith E. Lewis IRA R/O
WFS as Custodian
1800 W. Wallings Rd.
Broadview Hts., OH 44147-1137
Small Cap Value Fund
- --------------------
(Class I Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
National City Bank 1,257,040.3890 6.31%
Attn: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
National City Bank, Whitelaw & Co. 2,351,009.7230 11.81%
Daily Valuation Account
P.O. Box 94777
Attn: Trust Mutual Funds
Cleveland, OH 44101-4777
Sheldon & Co. (Reinv) 5,788,642.6210 29.08%
Attn: Trust Mutual Funds
A/C 10023342
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. 6,366,522.3020 31.98%
P.O. Box 94984
Attn: Trust Mutual Funds
Cleveland, OH 44101-4984
</TABLE>
-127-
<PAGE> 130
<TABLE>
<CAPTION>
<S> <C> <C>
Sheldon & Co. (Cash/Reinv) 2,289,281.3500 11.50%
C/O National City Bank
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Small Cap Growth Fund
- ---------------------
(Class A Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
Second National Bank TTEE 7,627.9540 5.70%
FBO Thomas Crago
Keogh Profit Sharing Plan
108 Main Ave. SW
Warren, OH 44481-1058
Small Cap Growth Fund
- ---------------------
(Class B Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
First Clearing Corporation 3,234.7500 19.27%
A/C 3226-1441
Catherine E. Fisher DCDNT IRA
FBO John Clarence Fisher
527 Beecher St.
Louisville, KY 40215-2803
First Clearing Corporation 1,157.2660 6.89%
A/C 4421-4137
William S. Irwin and
Joan A. Irwin
4008 Kurtz Ave.
Louisville, KY 40229-1136
First Clearing Corporation 5,235.6020 31.19%
A/C 5732-8021
Keith A. Monnett IRA
WFS as Custodian 716 Castleton Dr.
Greencastle, IN 46135-1104
First Clearing Corporation 1,158.9220 6.00%
A/C 3957-2081
Nick Hardie &
Shirley Hardie JT Ten
1333 West 32nd SE
Holland, MI 49423-6780
</TABLE>
-128-
<PAGE> 131
<TABLE>
<CAPTION>
<S> <C> <C>
First Clearing Corporation 1,782.5310 10.62%
A/C 8349-0905
Virgil C. Thorson and
Marlys M. Thorson
6125 Waterside Dr.
Fort Wayne, IN 46814-3267
Small Cap Growth Fund
- ---------------------
(Class I Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
Sheldon & Co. (Reinv) 558,203.4700 6.63%
Attn: Trust Mutual Funds
Account #10023342
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. TTEE 3,446,118.7630 40.94%
c/o National City Bank
Trust Mutual FDS
P.O. Box 94984
Cleveland, OH 44101-4984
National City Bank 3,502,161.0840 41.60%
c/o Sheldon & Co
Trust Mutual FDS
P.O. Box 94777
Cleveland, OH 44101-4777
Equity Growth Fund
- ------------------
(Class A Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
State Street Bank & Trust TTEE 4,867,027.2710 77.28%
FBO First Energy Corp.
Savings Plan
DTD 7/1/98
105 Rosemont Ave. WES/IN
Westwood, MA 02090-2318
</TABLE>
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<PAGE> 132
<TABLE>
<CAPTION>
Equity Growth Fund
- ------------------
(Class B Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
First Clearing Corporation 6,925.7410 9.03%
A/C 4815-5374
Ernest Kline IRA
WFS as Custodian
12 Deerfield Lane
Beechwood, OH 44122-7502
Equity Growth Fund
- ------------------
(Class I Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
Whitelaw & Co. 13,506,124.4460 27.99%
Daily Valuation Acct.
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. 12,514,626.1290 25.93%
c/o National City Bank
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. 6,495,090.9460 13.46%
Attn: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
Sheldon & Co. (Cash/Reinv) 12,734,750.5760 26.39%
c/o National City Bank
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
</TABLE>
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<TABLE>
<CAPTION>
Tax Managed Equity Fund
- -----------------------
(Class A Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
First Clearing Corporation 52,528.0920 5.77%
A/C 7100-2062
Ann Ruhlin-Levine Rev. Trust
Ann Ruhlin-Levine TTEE
22 Hemlock Dr.
Grand Island, NY 14072-3315
National Financial Services Corp. 79,845.8760 8.77%
FBO Allison Vanharesveldt
A/C #241-257923
200 Liberty Street, Floor 5
New York, NY 10281-5500
Tax Managed Equity Fund
- -----------------------
(Class I Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
Sheldon & Co., TTEE 9,315,467.1090 49.08%
c/o National City Bank
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co., TTEE 9,330,928.1780 49.17%
c/o National City Bank
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Core Equity Fund
- ----------------
Class (A) Shares
- ----------------
OUTSTANDING SHARES PERCENTAGE
Harrel Builders Supply Co., Inc. PS PL 11,187.6850 6.08%
George W. Harrel
Attn: Tracey Harrel, Jr.
Personal and Confidential
100 E. LaFayette Street
Winfield, LA 71483-3280
</TABLE>
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<TABLE>
<CAPTION>
Core Equity Fund
- ----------------
(Class I Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Sheldon & Co. 10,033,903.7160 93.98%
c/o National City Bank
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Equity Index Fund
- -----------------
(Class I Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
National City Bank 6,746,868.0010 25.14%
Attn: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
National City Bank 2,469,860.9220 9.20%
Attn: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
Whitelaw & Co. 9,458,258.7570 35.24%
Daily Valuation Account
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. (Reinv) 5,614,143.5470 20.92%
Attn: Trust Mutual Funds
Account # 10023342
P.O. Box 94777
Cleveland, OH 44101-4777
Whitelaw & Co. - Voyage 1,398,551.5180 5.21%
P.O. Box 94777
Attn: Trust Mutual Funds
Cleveland, OH 44101-4777
First Clearing Corporation 26,642.9840 5.79%
A/C 5343-7901
Robert I. Martin MD IRA
WFS as Custodian
708 Conn Road
Hanna City, IL 61536-9609
</TABLE>
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<TABLE>
<CAPTION>
Equity Income Fund
- ------------------
(Class A Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
National Financial Services Corp. 61,338.8190 8.82%
For the Exclus. Ben. of our Customer
P.O. Box 3908
Church Street Station
New York, NY 10008-3908
Equity Income Fund
- ------------------
(Class B Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
First Clearing Corporation 3,871.5300 5.80%
A/C 5072-0540
Judith E. Lewis IRA R/O
WFS as Custodian
1800 W. Wallings Rd.
Broadview Hts., OH 44147-1137
First Clearing Corporation 4,035.4370 6.05%
A/C 1182-2774
Walter S. Archer IRA R/O
WFS as Custodian
69 E. Schaaf Road
Brooklyn Hts., OH 44131-1201
Equity Income Fund
- ------------------
(Class I Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
Whitelaw & Co. 1,501,892.9070 5.08%
Daily Valuation Account
P.O. Box 94777
Attn: Trust Mutual Funds
Cleveland, OH 44101-4777
Sheldon & Co. (Reinv) 8,028,084.1510 27.17%
Attn: Trust Mutual Funds
Account #1023342
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. 4,489,974.6330 15.19%
Attn: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
</TABLE>
-133-
<PAGE> 136
<TABLE>
<CAPTION>
<S> <C> <C>
Sheldon & Co. (Cash/Reinv) 13,646,573.0850 46.18%
c/o National City Bank
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Balanced Allocation Fund
- ------------------------
(Class A Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
Janitor Supplies Inc. P/S Plan 43,642.0710 17.58%
Conversion Holding Account
1612 S. Neil St
Champaign, IL 61820-7212
First Clearing Corporation 26,635.2160 10.73%
A/C 6995-3098
Steven R. Schlater
Marlene L. Schlater
9900 Klipstine Road
Versailles, OH 45380-9584
Balanced Allocation Fund
- ------------------------
(Class B Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
First Clearing Corporation 5,750.6240 14.48%
A/C 4892-6313
Willy P. Kutschke
RR 3 Box 140
Sugar Grove, PA 16350-9113
First Clearing Corporation 3,231.1740 8.14%
A/C 5159-5306
Wayne W. Loomis & Lois S. Loomis
4 Pleasant Drive
Youngsville, PA 16371-9643
First Clearing Corporation 3,280.3130 8.26%
A/C 7477-1439
Barbara A. Stanford &
Herbert L. Stanford
104 Main Street
North Warren, PA 16365-4618
</TABLE>
-134-
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<TABLE>
<CAPTION>
<S> <C> <C>
First Clearing Corporation 3,358.9250 8.46%
A/C 2135-7612
Wanda Cassell IRA
WFS AS Custodian
3310 Teakwood Circle
Louisville, KY 40216-3107
First Clearing Corporation 2,346.7860 5.91%
A/C 5095-4553
Judy L. Limbrick IRA
WFS AS Custodian
2315 Fluhrs Lane
Louisville, KY 40216-1419
First Clearing Corporation 3,468.6580 8.74%
A/C 3607-7352
Mary M. Goodman
710 West Washington Street
Bradford, PA 16701-2631
Balanced Allocation Fund
- ------------------------
(Class I Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
National City Bank 1,341,814.2120 19.66%
Attn: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
Whitelaw & Co. 2,441,748.4000 35.77%
Daily Valuation Acct.
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. (Reinv) 2,933,909.9690 42.98%
Attn: Trust Mutual Funds
Account #10023342
P.O. Box 94777
Cleveland, OH 44101-4777
</TABLE>
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<PAGE> 138
<TABLE>
<CAPTION>
Total Return Advantage Fund
- ---------------------------
(Class A Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Capinco 123,416.2030 19.73%
c/o Firstar East
P.O. Box 1787
Milwaukee, WI 53201-1787
Fifth Third Bank 187,944.2540 30.04%
TTEE IBEW 688 RET SA
P.O. Box 630074
Cincinnati, OH 45263-0001
Fifth Third Bank TTEE 193,674.5400 30.96%
FBO IBEW 688 Pension
52-2-7034515
P.O. Box 630074
Cincinnati, OH 45263-0001
Total Return Advantage Fund
- ---------------------------
(Class B Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
SEI Investments Co. 10.3350 45.07%
Attn: Rob Silverstri
One Freedom Valley Drive
Oaks, PA 19456
Audit National City 12.5960 54.93%
National City Participant
P.O. Box 8431
Boston, MA 02266-8431
Total Return Advantage Fund
- ---------------------------
(Class I Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
Sheldon & Co. (Reinv) 18,683,073.0480 57.42%
Attn: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
</TABLE>
-136-
<PAGE> 139
<TABLE>
<CAPTION>
<S> <C> <C>
Sheldon & Co. 7,057,420.3030 21.69%
P.O. Box 94777
Attn: Trust Mutual Funds
Cleveland, OH 44101-4777
Sheldon & Co. TTEE 4,925,097.3860 15.14%
c/o National City Bank
P.O. Box 94777
Attn: Trust Mutual Funds
Cleveland, OH 44101-4777
Bond Fund
- ---------
(Class A Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
AAL Trust Company FSB 23,759.4720 6.40%
FBO Harold W. Braun Irrev. Tr.
U/A DTD 8/31/79
Attn: Cheryl Klein
P.O. Box 2977
Milwaukee, WI 53202-2977
First Clearing Corporation 46,561.9830 12.53%
A/C 1302-8189
Baldwin & Sours PSP & TR
Thomas Sours TTEE
5263 Trabue Road
Columbus, OH 43228-9564
Bond Fund
- ---------
(Class B Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
First Clearing Corporation 4,088.0800 5.54%
A/C 4499-9888
Dale I. Isenberg IRA
WFS as Custodian
1190 Parkside Drive
Limestone, NY 14753-9704
First Clearing Corporation 3,762.1010 5.09%
A/C 7786-3557
Charles D. Thompson IRA
WFS as Custodian
4604 Dannywood Road
Louisville, KY 40220-1053
</TABLE>
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<PAGE> 140
<TABLE>
<CAPTION>
<S> <C> <C>
First Clearing Corporation 4,759.8530 6.45%
A/C 6242-7306
James M. Pearl IRA
WFS as Custodian
3130 Kaye Lawn Drive
Louisville, KY 40220-2713
First Clearing Corporation 14,942.0540 20.23%
A/C 2065-0386
Carborundum Grinding Wheel Co.
Savings Plan
1011 E. Front Street
P.O. Box 759
First Clearing Corporation 4,072.6200 5.51%
A/C 5610-2760
Judy A. Messett
1855 Farrell Terrace
Farrell, PA 16121-1332
First Clearing Corporation 3,878.8560 5.25%
A/C 5717-0934
Joseph D. Masso
4155 West 144th
Cleveland, OH 44135-2053
</TABLE>
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<PAGE> 141
<TABLE>
<CAPTION>
Bond Fund
- ---------
(Class I Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Whitelaw & Co. 10,429,057.0610 14.22%
Daily Valuation Acct
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Shelden & Co
c/o National City Bank 8,269,828.3420 11.27%
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co 11,511,463.3980 15.69%
Attn: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
Sheldon & Co. (Cash/Reinv) 41,414,557.2910 56.46%
c/o National City Bank
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Intermediate Bond Fund
- ----------------------
(Class A Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
Mertru & Co. 30,637.8570 5.89%
c/o American National Trust and Investment
Management Co.
320 S. High Street
Muncie, IN 47305-2325
National Financial Services Corp. 88,343.6210 16.99%
For the Exclus Ben of our Customer
P.O. Box 3908
Church Street Station
New York, NY 10008-3908
</TABLE>
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<PAGE> 142
<TABLE>
<CAPTION>
Intermediate Bond Fund
- ----------------------
(Class B Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
First Clearing Corporation 4,808,8850 8.84%
A/C 7786-3557
Charles D. Thompson IRA
WFS as Custodian
4604 Dannywood Road
Louisville, KY 40220-1053
First Clearing Corporation 2,906.7030 5.34%
A/C 7822-5634
Janet Sadecky IRA
WFS as Custodian
145 Illinois Drive
Lower Burrell, PA 15068-3022
First Clearing Corporation 4,128.4830 7.59%
A/C 3167-9506
Robert Fello Sr. IRA
WFS as Custodian
216 Holmes Street
Vandergrift, PA 15690-1621
First Clearing Corporation 3,385.1560 6.22%
A/C 7005-7606
Robert L. Robinson IRA
WFS as Custodian
6107 Diablo Ct.
Louisville, KY 40219-5236
First Clearing Corporation 3,198.6500 5.88%
A/C 2124-6203
Paul C. Carver IRA
WFS as Custodian
314 Concord Circle Road
Beaver Falls, PA 15010-8516
First Clearing Corporation 5,853.5620 10.76%
A/C 6581-8618
Marie A. Pace IRA
WFS as Custodian
305 Irvine Road
Lexington, KY 40502-1817
</TABLE>
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<PAGE> 143
<TABLE>
<CAPTION>
Intermediate Bond Fund
- ----------------------
(Class I Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Sheldon & Co. (Reinv) 3,901,984.2650 13.21%
Attn: Trust Mutual Funds
Account #10023342
P.O. Box 94984
Cleveland, OH 44101-4984
Sheldon & Co. 7,474,150.7630 25.31%
P.O. Box 94984
Attn: Trust Mutual Funds
Cleveland, OH 44101-4984
Sheldon & Co. 12,638,543.9510 42.79%
Attn: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
SEI Trust Company 3,979,371.7850 13.47%
Attn: Mutual Fund Administrator
One Freedom Valley Drive
Oaks, PA 19456
GNMA Fund
- ---------
(Class B Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
Shore West Construction 401(k) Plan 1,886.5620 51.01%
Kenneth M. Sokol
Attn: Barbara Beyer
Personal and Confidential
23826 Lorain Rd
North Olmsted, OH 44070-2226
Shore West Construction 401(k) Plan 1,517.0960 41.02%
Audrey M. Sokol
Attn: Barbara Byer
Personal and Confidential
23826 Lorain Rd
North Olmsted, OH 44070-2226
</TABLE>
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<PAGE> 144
<TABLE>
<CAPTION>
<S> <C> <C>
Shore West Construction 401(k) Plan
Carol A. Van Blarcom
Attn: Barbara Beyer
Personal and Confidential
23826 Lorain Rd
North Olmsted, OH 44070-2226 213.3950 5.77%
GNMA Fund
- ---------
(Class I Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
Sheldon & Co. 830,180.8200 7.98%
c/o National City Bank
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. TTEE 7,533,077.0330 72.39%
c/o National City Bank
Trust Mutual FDS
P.O. Box 94984
Cleveland, OH 44101-4984
National City Bank 1,608,279.5780 15.46%
c/o Sheldon & Co.
Trust Mutual FDS
P.O. Box 94777
Cleveland, OH 44101-4777
Enhanced Income Fund
- --------------------
(Class A Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
Radco Industries Inc 401(k) Plan 2,621.5080 5.07%
Randy Orner
Attn: Jim Paul
Personal and Confidential
3226 Frenchmen's Road
Toledo, OH 43607-2919
First Clearing Corporation 19,371.5730 37.48%
A/C 1882-1036
Harvey M. Brunner, Jr. IRA
WFS as Custodian
700 Brick Mill Run, Apt. 106
Westlake, OH 44145-1655
</TABLE>
-142-
<PAGE> 145
<TABLE>
<CAPTION>
<S> <C> <C>
First Clearing Corporation 4,247.8560 8.22%
A/C 8506-3444
Arthur A. Winkel IRA R/O
WFS as Custodian
47935 Hanford
Canton, MI 48187-5421
Enhanced Income Fund
- --------------------
(Class B Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
Shore West Construction 401(k) Plan 4,058.9020 50.65%
Gary Scothon
Attn: Barbara Beyer
Personal and Confidential
23826 Lorain Rd
North Olmsted, OH 44070-2226
Shore West Construction 401(k) Plan 1,891.9030 23.61%
Kenneth M. Sokol
Attn: Barbara Beyer
Personal and Confidential
23826 Lorain Rd
North Olmsted, OH 44070-2226
Shore West Construction 401(k) Plan 1,521.5610 18.99%
Audrey M. Sokol
Attn: Barbara Beyer
Personal and Confidential
23826 Lorain Rd
North Olmsted, OH 44070-2226
Enhanced Income Fund
- --------------------
(Class I Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
Sheldon & Co. (Reinv) 3,724,536.9080 45.44%
Future Quest
c/o National City Bank
Attn: Trust Mutual Funds/01-999999774
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. 3,038,938.0590 35.07%
Future Quest
c/o National City Bank
Attn: Trust Mutual Funds/01-999999774
P.O. Box 94984
Cleveland, OH 44101-4984
</TABLE>
-143-
<PAGE> 146
<TABLE>
<CAPTION>
<S> <C> <C>
Sheldon & Co. TTEE 551,609.0260 6.73%
Future Quest - c/o National City Bank
Trust Mutual Funds/01-999999774
P.O. Box 94777
Cleveland, OH 44101-4777
Ohio Municipal Money Market Fund (Class A
- -----------------------------------------
Shares)
- -------
OUTSTANDING SHARES PERCENTAGE
National City Bank 17,491,789.1400 71.27%
FBO PCG/Retail Sweep Customer
770 W. Broad Street LOC 16-0347
Columbus, OH 43222-1419
First Clearing Corporation 2,091,977.1200 8.52%
A/C 7655-6279
Stephen Sweetnich
Christine Sweetnich
10114 Highland Drive
Brecksville, OH 44141-3327
First Clearing Corporation 1,813,489.2600 7.39%
A/C 2144-7718
Timothy Scott Couch
c/o IAI
1360 East 9th Street #100
Cleveland, OH 44114-1730
Ohio Municipal Money Market
- ---------------------------
(Class I Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
National City Bank 27,812,706.0900 21.98%
Trust Operations
Operations Center
3rd Floor North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 11,778,018.3200 9.31%
Trust Operations
Operations Center
3rd Floor North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
</TABLE>
-144-
<PAGE> 147
<TABLE>
<CAPTION>
<S> <C> <C>
National City Bank 53,399,778.9300 42.20%
Operations Center
3rd Floor North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 19,754,300.3600 15.61%
Trust Operations
Operations Center
3rd Floor North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
Natcity Investments 7,925,519.8700 6.26%
Attn: Jo Bredt
1965 East Sixth Street Loc #3090
Cleveland, OH 44114-2214
Ohio Tax Exempt Bond Fund
- -------------------------
(Class A Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
Bank of America 55,539.4240 9.32%
Successor TTEE Harriet F. Urschel TR
01-01-001-8457048
Trust Securities Processing
555 South Flower St Level C
Los Angeles, CA 90071-2300
Bank of America Successor TTEE 59,101.3900 9.95%
George C. Urschel TR
01-01-001-8457049
Trust Securities Processing
555 South Flower St Level C
Los Angeles, CA 90071-2300
First Clearing Corporation 94,818,6560 15.96%
A/C 1528-5380
David J. Beverly &
Pamela C. Beverly
1128 Laguna Drive
Huron, OH 44839-2605
First Clearing Corporation 49,882.9780 8.40%
A/C 1750-2503
Edward B. Brandon &
Phyllis P. Brandon JTWROS
Lakepoint Office Park Ste. 470
3201 Enterprise Pkwy.
</TABLE>
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<PAGE> 148
<TABLE>
<CAPTION>
Ohio Tax Exempt Bond Fund
- -------------------------
(Class I Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Sheldon and Co. (Cash) 15,969,910.1230 88.57%
National City Bank
Trust Mutual Funds - 5312
P.O. Box 94984
Cleveland, OH 44101-4984
Sheldon and Co. (Cash/Reinv) 1,551,280.7770 8.60%
National City Bank
Trust Mutual Funds-5312
P.O. Box 94777
Cleveland, OH 44101-4777
Pennsylvania Municipal Bond Fund
- --------------------------------
(Class A Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
Robert H. Rhone 1,205.7980 6.47%
c/o Michael Rhone
P.O. Box 175
Rew, PA 16744-0175
Helen M. Weyer 5,921.1750 31.79%
James N. Weyer, Jr. JTTEN
2600 Mohawk Drive
White Oak, PA 15131-3121
First Clearing Corporation 8,573.7280 46.04%
A/C 7618-3716
Helga A. Suhr
304 Michigan Avenue
Lower Burrell, PA 15068-2936
First Clearing Corporation 2,287.2830 12.28%
A/C 4267-7452
John M. Hankey
2430 Renton Road
Pittsburgh, PA 15239-1227
</TABLE>
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<PAGE> 149
<TABLE>
<CAPTION>
Pennsylvania Municipal Bond Fund
- --------------------------------
(Class I Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Sheldon & Co. 3,762,032.4100 96.40%
P.O. Box 94984
Attn: Trust Mutual Funds
Cleveland, OH 44101-4984
National Tax Exempt Bond Fund
- -----------------------------
(Class A Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
First Clearing Corporation 341,697.4350 72.94%
A/C 1143-7442
Bill Anest
400 S. Curran
Grayslake, IL 60030-9784
National Tax Exempt Bond Fund
- -----------------------------
(Class B Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
Wheat, First Securities, Inc. 4,503.6230 14.75%
A/C 2099-9089
James E. Chenault &
Judith E. Chenault
8609 Cool Brook Ct.
Louisville, KY 40291-1501
First Clearing Corporation 5,254.2290 17.21%
A/C 7220-3519
Emory G. Simmons
717 Thornwood Road
Crawfordsville, IN 47933-2760
First Clearing Corporation 5,116.0880 16.76%
A/C 6708-7889
Dorothy K. Riley TTEE
Dorothy and Lester Riley Trust
5 Locust HL
Crawfordsville, IN 47933-3347
First Clearing Corporation 5,048.1930 16.53%
A/C 5482-0768
Theodore R. McDonald &
Rose Ann McDonald
7712 St. Bernard Ct.
Louisville, KY 40291-2462
</TABLE>
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<PAGE> 150
<TABLE>
<CAPTION>
<S> <C> <C>
First Clearing Corporation 7,099.4470 23.25%
A/C 7309-7317
Howard B. Smith, Jr.
545 Country Manor Lane
Shepherdsville, KY 40165-9543
First Clearing Corporation 1,632.7060 5.35%
A/C 3132-5861
Anne B. Farkas and Robert S. Farkas
279 S. Oakland Avenue
Sharon, PA 16146-4049
National Tax Exempt Bond Fund
- -----------------------------
(Class I Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
Sheldon & Co. TTEE 6,895,842.7870 70.56%
c/o National City Bank
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
National City Bank 2,575,902.4840 26.36%
c/o Sheldon & Co.
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Pennsylvania Tax Exempt Money Market Fund
- -----------------------------------------
Class (A Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
Pennsylvania FBO Corporate Autosweep Customers 21,103,000.0000 44.19%
c/o National City Bank of PA
300 Fourth Street 2-191
Pittsburgh, PA 15222-2003
Pennsylvania National City Bank of Pennsylvania 23,556,954.3400 49.32%
FBO PCG/Retail Sweep Customers
Cash Management Operations
770 W. Broad Street 16-0347
Columbus, OH 43222-1419
</TABLE>
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<PAGE> 151
<TABLE>
<CAPTION>
Pennsylvania Tax Exempt Money Market Fund
- -----------------------------------------
(Class I Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
National City Bank 82,766,234.6700 98.08%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
Tax Exempt Money Market Fund
- ----------------------------
(Class A Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
National City MI/IL 11,473,398.2200 6.08%
FBO Corporate PCG/Retail Sweep Cust
Cash Management Operations
770 W. Broad Street LOC 16-0347
Columbus, OH 43222-1419
National City MI/IL 16,015,000.0000 8.48%
FBO Corporate Sweep Customer
Cash Management Operations
770 W. Broad Street LOC 16-0347
Columbus, OH 43222-1419
Wheat First Securities 89,347,333.0900 47.33%
P.O. Box 6629
Glen Allen, VA 23058-6629
Indiana 16,231,555.2100 8.60%
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 39,991,289.1700 21.18%
FBO PCG/Retail Sweep Customers
770 W. Broad Street, Location 16-0347
Columbus, OH 43222-1419
</TABLE>
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<PAGE> 152
<TABLE>
<CAPTION>
Tax Exempt Money Market Fund
- ----------------------------
(Class I Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
National City Bank 62,781,973.5100 15.51%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 116,111,329.2400 28.69%
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 31,976,481.4200 7.90%
Operations Center
Attn: Trust Operations Funds
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 95,186,170.6900 23.52%
Operations Center
Attn: Trust Operations Funds
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 46,148,092.0800 11.40%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
Money Market Fund
- -----------------
(Class A Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
Pennsylvania 320,050,000.0000 21.00%
FBO Corporate Autoswwep customers
C/o National Bank of PA
300 Fourth Street 2-191
Pittsburgh, PA 15222-2003
</TABLE>
-150-
<PAGE> 153
<TABLE>
<CAPTION>
<S> <C> <C>
Wheat First Securities 709.285,760.8000 46.54%
P.O. Box 6629
Glen Allen, VA 23058-6629
National City Bank 230,983,000.0000 15.16%
FBO PCG/Retail Sweep Customer
770 W. Broad St. Location 16-0347
Columbus, OH 43222-1419
National City Bank 82,775,566.6500 5.43%
FBO PCG/Retail Sweep Customer
770 W. Broad Street LOC 16-0347
Columbus, OH 43222-1419
Money Market Fund
- -----------------
(Class B Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
First Clearing Corporation 54,574.2200 5.26%
A/C 7335-5550
Roger L. Schafer IRA
WFS as Custodian
3945 7th Street
New Kensington, PA 15068-7205
The Marting Bros. Co. 401(k) 629,550.5400 60.72%
Conversion Holding Account
P.O. Box 8705
Boston, MA 02266-8705
McMullen Travel & Tours Inc. 254,722.3400 24.57%
Conversion Holding Account
224 S. Broad St.
Grove City, PA 16127-1504
First Clearing Corporation 60,331.1100 5.82%
A/C 4505-9511
John M. Jervis
301 W. Beardsley
Champaign, IL 61820-2927
</TABLE>
-151-
<PAGE> 154
<TABLE>
<CAPTION>
Money Market Fund
- -----------------
(Class I Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
National City Bank 877,743,193.2100 38.65%
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 183,036,781.5800 8.06%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 246,728,554.3100 10.87%
Operations Center
Attn: Trust Operations Funds
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
Whitelaw & Co. 133,805,456.5280 5.89%
Daily Valuation Account - Disc.
Attn: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
National City Bank 246,928,975.8400 10.87%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
Government Money Market Fund
- ----------------------------
(Class A Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
National City MI/IL 257,911,000.0000 41.84%
FBO Corporate Sweep Customer
Cash Management Operations
770 W. Broad Street Loc. 16-0347
Columbus, OH 43222-1419
</TABLE>
-152-
<PAGE> 155
<TABLE>
<CAPTION>
<S> <C> <C>
Pennsylvania FBO Corporate Autosweep Customers 237,953,000.0000 38.61%
c/o National City Bank of PA
300 Fourth Street 2-191
Pittsburgh, PA 15222-2003
Wheat First Securities 67,555,831.7700 10.96%
P.O. Box 6629
Glen Allen, VA 23058-6629
Government Money Market Fund
- ----------------------------
(Class I Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
National City Bank 88,240,340.9500 8.60%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 West 150th Street
Cleveland, OH 44135-1389
National City Bank 249,499,187.2400 24.31%
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 351,410,992.1900 34.23%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 127,196,914.4200 12.39%
Operations Center
Attn: Trust Operations Funds
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 83,228,874.9200 8.11%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
</TABLE>
-153-
<PAGE> 156
<TABLE>
<CAPTION>
Treasury Money Market Fund
- --------------------------
(Class A Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
National City Bank MI/IL 62,351,000.0000 85.64%
FBO Corporate Sweep Customer
Cash Management Operations
770 W. Broad St. Location 16-0347
Columbus, OH 43222-1419
Wheat First Securities 5,115,965.0700 7.03%
P.O. Box 6629
Glen Allen, VA 23058-6629
Treasury Money Market Fund
- --------------------------
(Class I Shares)
- ----------------
OUTSTANDING SHARES PERCENTAGE
National City Bank 51,616,613.7900 15.00%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 66,551,628.7000 19.34%
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 41,283,443.5800 11.99%
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 17,322,521.4200 5.03%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
</TABLE>
-154-
<PAGE> 157
<TABLE>
<CAPTION>
<S> <C> <C>
National City Bank 83,465,764.6000 24.25%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 43,078,919.3400 12.52%
Trust Operations
Operations Center
3rd Floor North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
</TABLE>
FINANCIAL STATEMENTS
--------------------
The audited financial statements contained in the annual
report to shareholders for the fiscal year ended May 31, 1999 are hereby
incorporated herein by reference. Copies of the Funds' annual report may be
obtained by calling the Trust at 1-800-622-FUND (3863) or by writing to the
Trust, One Freedom Valley Drive, Oaks, Pennsylvania 19456.
-155-
<PAGE> 158
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> 159
"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:
"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.
A-2
<PAGE> 160
"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.
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.
A-3
<PAGE> 161
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 forceable 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.
"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", "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.
A-4
<PAGE> 162
"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 or 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.
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.
A-5
<PAGE> 163
Thomson Financial BankWatch assesses the likelihood of an
untimely repayment of principal or interest over the term to maturity of long
term debt and preferred stock which are issued by United States commercial
banks, thrifts and non-bank banks; non-United States banks; and broker-dealers.
The following summarizes the rating categories used by Thomson BankWatch for
long-term debt ratings:
"AAA" - This designation indicates that the ability to repay
principal and interest on a timely basis is extremely high.
"AA" - This designation indicates a very strong ability to
repay principal and interest on a timely basis, with limited incremental risk
compared to issues rated in the highest category.
"A" - This designation indicates that the ability to repay
principal and interest is strong. Issues rated "A" could be more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.
"BBB" - This designation represents Thomson BankWatch's lowest
investment-grade category and indicates an acceptable capacity to repay
principal and interest. Issues rated "BBB" are, however, more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.
"BB," "B," "CCC," and "CC," - These designations are assigned
by Thomson Financial BankWatch to non-investment grade long-term debt. Such
issues are regarded as having speculative characteristics regarding the
likelihood of timely payment of principal and interest. "BB" indicates the
lowest degree of speculation and "CC" the highest degree of speculation.
"D" - This designation indicates that the long-term debt is in
default.
PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC"
may include a plus or minus sign designation which indicates where within the
respective category the issue is placed.
COMMERCIAL PAPER RATINGS
- ------------------------
A Standard & Poor's ("S&P") commercial paper rating is a
current opinion of the creditworthiness of an obligor with respect to financial
obligations having an original maturity of no 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-6
<PAGE> 164
"A-2" - Obligations are somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to meet
its financial commitment on the obligation is satisfactory.
"A-3" - Obligations exhibit adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.
"B" - Obligations are regarded as having significant
speculative characteristics. The obligor currently has the capacity to meet its
financial commitment on the obligation; however, it faces major ongoing
uncertainties which could lead to the obligor's inadequate capacity to meet its
financial commitment on the obligation.
"C" - Obligations are currently vulnerable to nonpayment and
are dependent upon favorable business, financial, and economic conditions for
the obligor to meet its financial commitment on the obligation.
"D" - Obligations are in payment default. The "D" rating
category is used when payments on an obligation are not made on the date due
even if the applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grace period. The "D"
rating will be used upon the filing of a bankruptcy petition or the taking of a
similar action if payments on an obligation are jeopardized.
Moody's commercial paper ratings are opinions of the ability
of issuers to repay punctually senior debt obligations not having an original
maturity in excess of one year, unless explicitly noted. The following
summarizes the rating categories used by Moody's for commercial paper:
"Prime-1" - Issuers (or supporting institutions) have a
superior ability for repayment of senior short-term debt obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structure with
moderate reliance on debt and ample asset protection; broad margins in earnings
coverage of fixed financial charges and high internal cash generation; and
well-established access to a range of financial markets and assured sources of
alternate liquidity.
"Prime-2" - Issuers (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
A-7
<PAGE> 165
"Prime-3" - Issuers (or supporting institutions) have an
acceptable ability for repayment of senior short-term debt obligations. The
effects of industry characteristics and market compositions may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and may require relatively high
financial leverage. Adequate alternate liquidity is maintained.
"Not Prime" - Issuers do not fall within any of the Prime
rating categories.
The three rating categories of Duff & Phelps for investment
grade commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff &
Phelps employs three designations, "D-1+," "D-1" and "D-1-," within the highest
rating category. The following summarizes the rating categories used by Duff &
Phelps for commercial paper:
"D-1+" - Debt possesses the highest certainty of timely
payment. Short-term liquidity, including internal operating factors and/or
access to alternative sources of funds, is outstanding, and safety is just below
risk-free U.S. Treasury short-term obligations.
"D-1" - Debt possesses very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor.
"D-1-" - Debt possesses high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental protection
factors. Risk factors are very small.
"D-2" - Debt possesses good certainty of timely payment.
Liquidity factors and company fundamentals are sound. Although ongoing funding
needs may enlarge total financing requirements, access to capital markets is
good. Risk factors are small.
"D-3" - Debt possesses satisfactory liquidity and other
protection factors qualify issues as investment grade. Risk factors are larger
and subject to more variation. Nevertheless, timely payment is expected.
"D-4" - Debt possesses speculative investment characteristics.
Liquidity is not sufficient to ensure against disruption in debt service.
Operating factors and market access may be subject to a high degree of
variation.
"D-5" - Issuer has failed to meet scheduled principal and/or
interest payments.
Fitch IBCA short-term ratings apply to debt obligations that
have time horizons of less than 12 months for most obligations, or up to three
years for U.S. public finance securities. The following summarizes the rating
categories used by Fitch IBCA for short-term obligations:
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"F1" - Securities possess the highest credit quality. This
designation indicates the best capacity for timely payment of financial
commitments and may have an added "+" to denote any exceptionally strong credit
feature.
"F2" - Securities possess good credit quality. This
designation indicates a satisfactory capacity for timely payment of financial
commitments, but the margin of safety is not as great as in the case of the
higher ratings.
"F3" - Securities possess fair credit quality. This
designation indicates that the capacity for timely payment of financial
commitments is adequate; however, near-term adverse changes could result in a
reduction to non-investment grade.
"B" - Securities possess speculative credit quality. This
designation indicates minimal capacity for timely payment of financial
commitments, plus vulnerability to near-term adverse changes in financial and
economic conditions.
"C" - Securities possess high default risk. This designation
indicates that default is a real possibility and that the capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.
"D" - Securities are in actual or imminent payment default.
Thomson Financial BankWatch short-term ratings assess the
likelihood of an untimely payment of principal and interest of debt instruments
with original maturities of one year or less. The following summarizes the
ratings used by Thomson Financial BankWatch:
"TBW-1" - This designation represents Thomson Financial
BankWatch's highest category and indicates a very high likelihood that principal
and interest will be paid on a timely basis.
"TBW-2" - This designation represents Thomson Financial
BankWatch's second-highest category and indicates that while the degree of
safety regarding timely repayment of principal and interest is strong, the
relative degree of safety is not as high as for issues rated "TBW-1."
"TBW-3" - This designation represents Thomson Financial
BankWatch's lowest investment-grade category and indicates that while the
obligation is more susceptible to adverse developments (both internal and
external) than those with higher ratings, the capacity to service principal and
interest in a timely fashion is considered adequate.
"TBW-4" - This designation represents Thomson Financial
BankWatch's lowest rating category and indicates that the obligation is regarded
as non-investment grade and therefore speculative.
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MUNICIPAL NOTE RATINGS
- ----------------------
A Standard and Poor's rating reflects the liquidity concerns
and market access risks unique to notes due in three years or less. The
following summarizes the ratings used by Standard & Poor's for municipal notes:
"SP-1" - The issuers of these municipal notes exhibit a strong
capacity to pay principal and interest. Those issues determined to possess very
strong characteristics are given a plus (+) designation.
"SP-2" - The issuers of these municipal notes exhibit
satisfactory capacity to pay principal and interest, with some vulnerability to
adverse financial and economic changes over the term of the notes.
"SP-3" - The issuers of these municipal notes exhibit
speculative capacity to pay principal and interest.
Moody's ratings for state and municipal notes and other
short-term loans are designated Moody's Investment Grade ("MIG") and variable
rate demand obligations are designated Variable Moody's Investment Grade
("VMIG"). Such ratings recognize the differences between short-term credit risk
and long-term risk. The following summarizes the ratings by Moody's Investors
Service, Inc. for short-term notes:
"MIG-1"/"VMIG-1" - This designation denotes best quality.
There is present strong protection by established cash flows, superior liquidity
support or demonstrated broad-based access to the market for refinancing.
"MIG-2"/"VMIG-2" - This designation denotes high quality.
Margins of protection ample although not so large as in the preceding group.
"MIG-3"/"VMIG-3" - This designation denotes favorable quality,
with all security elements accounted for but lacking the undeniable strength of
the preceding grades. Liquidity and cash flow protection may be narrow and
market access for refinancing is likely to be less well established.
"MIG-4"/"VMIG-4" - This designation denotes adequate quality.
Protection commonly regarded as required of an investment security is present
and although not distinctly or predominantly speculative, there is specific
risk.
"SG" - This designation denotes speculative quality. Debt
instruments in this category lack of margins of protection.
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Fitch IBCA and Duff & Phelps use the short-term ratings
described under Commercial Paper Ratings for municipal notes.
TAX-EXEMPT COMMERCIAL PAPER RATINGS
- -----------------------------------
A Standard & Poor's 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 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
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cited above but to a lesser degree. Earnings trends and coverage ratios, while
sound, may be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
"Prime-3" - Issuers (or supporting institutions) have an
acceptable ability for repayment of senior short-term debt obligations. The
effects of industry characteristics and market compositions may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and may require relatively high
financial leverage. Adequate alternate liquidity is maintained.
"Not Prime" - Issuers do not fall within any of the Prime
rating categories.
The three rating categories of Duff & Phelps for investment
grade commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff &
Phelps employs three designations, "D-1+," "D-1" and "D-1-," within the highest
rating category. The following summarizes the rating categories used by Duff &
Phelps for commercial paper:
"D-1+" - Debt possesses highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just below risk-free
U.S. Treasury short-term obligations.
"D-1" - Debt possesses very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor.
"D-1-" - Debt possesses high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental protection
factors. Risk factors are very small.
"D-2" - Debt possesses good certainty of timely payment.
Liquidity factors and company fundamentals are sound. Although ongoing funding
needs may enlarge total financing requirements, access to capital markets is
good. Risk factors are small.
"D-3" - Debt possesses satisfactory liquidity and other
protection factors qualify issues as investment grade. Risk factors are larger
and subject to more variation. Nevertheless, timely payment is expected.
"D-4" - Debt possesses speculative investment characteristics.
Liquidity is not sufficient to ensure against disruption in debt service.
Operating factors and market access may be subject to a high degree of
variation.
"D-5" - Issuer has failed to meet scheduled principal and/or
interest payments.
Fitch IBCA short-term ratings apply to debt obligations that
have time horizons of less than 12 months for most obligations, or up to three
years for U.S. public finance securities. The following summarizes the rating
categories used by Fitch IBCA for short-term obligations:
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"F1" - Securities possess the highest credit quality. This
designation indicates the 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 BankWatch:
"TBW-1" - This designation represents Thomson Financial
BankWatch's highest category and indicates a very high likelihood that principal
and interest will be paid on a timely basis.
"TBW-2" - This designation represents Thomson Financial
BankWatch's second-highest category and indicates that while the degree of
safety regarding timely repayment of principal and interest is strong, the
relative degree of safety is not as high as for issues rated "TBW-1."
"TBW-3" - This designation represents Thomson Financial
BankWatch's lowest investment-grade category and indicates that while the
obligation is more susceptible to adverse developments (both internal and
external) than those with higher ratings, the capacity to service principal and
interest in a timely fashion is considered adequate.
"TBW-4" - This designation represents Thomson Financial
BankWatch's lowest rating category and indicates that the obligation is regarded
as non-investment grade and therefore speculative.
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MUNICIPAL NOTE RATINGS
- ----------------------
A Standard and Poor's rating reflects the liquidity factors
and market access risks unique to notes due in three years or less. The
following summarizes the ratings used by Standard & Poor's for municipal notes:
"SP-1" - The issuers of these municipal notes exhibit a strong
capacity to pay principal and interest. Those issues determined to possess very
strong characteristics are given a plus (+) designation.
"SP-2" - The issuers of these municipal notes exhibit
satisfactory capacity to pay principal and interest, with some vulnerability to
adverse financial and economic changes over the term of the notes.
"SP-3" - The issuers of these municipal notes exhibit
speculative capacity to pay principal and interest.
Moody's ratings for state and municipal notes and other
short-term loans are designated Moody's Investment Grade ("MIG") and variable
rate demand obligations are designated Variable Moody's Investment Grade
("VMIG"). Such ratings recognize the differences between short-term credit risk
and long-term risk. The following summarizes the ratings by Moody's Investors
Service, Inc. for short-term notes:
"MIG-1"/"VMIG-1" - This designation denotes best quality.
There is present strong protection by established cash flows, superior liquidity
support or demonstrated broad-based access to the market for refinancing.
"MIG-2"/"VMIG-2" - This designation denotes high quality.
Margins of protection ample although not so large as in the preceding group.
"MIG-3"/"VMIG-3" - This designation denotes favorable quality,
with all security elements accounted for but lacking the undeniable strength of
the preceding grades. Liquidity and cash flow protection may be narrow and
market access for refinancing is likely to be less well established.
"MIG-4"/"VMIG-4" - This designation denotes adequate quality.
Protection commonly regarded as required of an investment security is present
and although not distinctly or predominantly speculative, there is specific
risk.
"SG" - This designation denotes speculative quality. Debt
instruments in this category lack of margins of protection.
Fitch IBCA and Duff & Phelps use the short-term ratings
described under Commercial Paper Ratings for municipal notes.
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APPENDIX B
----------
As stated in the Prospectus, the Small Cap Value, Equity
Growth, Equity Income, Small Cap Growth, International Equity, Equity Index, Tax
Managed Equity and Balanced Allocation Funds (the "Funds") may enter into
certain futures transactions and options for hedging purposes. Such transactions
are described in this Appendix.
INTEREST RATE FUTURES CONTRACTS
USE OF INTEREST RATE FUTURES CONTRACTS. Bond prices are
established in both the cash market and the futures market. In the cash market,
bonds are purchased and sold with payment for the full purchase price of the
bond being made in cash, generally within five business days after the trade. In
the futures market, only a contract is made to purchase or sell a bond in the
future for a set price on a certain date. Historically, the prices for bonds
established in the futures markets have tended to move generally in the
aggregate in concert with the cash market prices and have maintained fairly
predictable relationships. Accordingly, the Fund may use interest rate futures
contracts as a defense, or hedge, against anticipated interest rate changes and
not for speculation. As described below, this would include the use of futures
contract sales to protect against expected increases in interest rates and
futures contract purchases to offset the impact of interest rate declines.
The Fund presently could accomplish a similar result to that
which it hopes to achieve through the use of futures contracts by selling bonds
with long maturities and investing in bonds with short maturities when interest
rates are expected to increase, or conversely, selling short-term bonds and
investing in long-term bonds when interest rates are expected to decline.
However, because of the liquidity that is often available in the futures market,
the protection is more likely to be achieved, perhaps at a lower cost and
without changing the rate of interest being earned by the Fund, through using
futures contracts.
DESCRIPTION OF INTEREST RATE FUTURES CONTRACTS. An interest
rate futures contract sale would create an obligation by the Fund, as seller, to
deliver the specific type of financial instrument called for in the contract at
a specific future time for a specified price. A futures contract purchase would
create an obligation by the Fund, as purchaser, to take delivery of the specific
type of financial instrument at a specific future time at a specific price. The
specific securities delivered or taken, respectively, at settlement date, would
not be determined until at or near that date. The determination would be in
accordance with the rules of the exchange on which the futures contract sale or
purchase was made.
Although interest rate futures contracts by their terms call
for actual delivery or acceptance of securities, in most cases the contracts are
closed out before the settlement date without the making or taking of delivery
of securities. Closing out a futures contract sale is effected by the Fund's
entering into a futures contract purchase for the same aggregate amount of the
specific type of financial instrument and the same delivery date. If the price
of the sale exceeds the price of the offsetting purchase, the Fund is
immediately paid the difference and thus realizes a gain. If the offsetting
purchase price exceeds the sale price, the Fund pays the difference and realizes
a loss.
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Similarly, the closing out of a futures contract purchase is effected by
the Fund entering into a futures contract sale. If the offsetting sale price
exceeds the purchase price, the Fund realizes a gain, and if the purchase price
exceeds the offsetting sale price, the Fund realizes a loss.
Interest rate futures contracts are traded in an auction
environment on the floors of several exchanges -- principally, the Chicago Board
of Trade, the Chicago Mercantile Exchange and the New York Futures Exchange. The
Fund would deal only in standardized contracts on recognized exchanges. Each
exchange guarantees performance under contract provisions through a clearing
corporation, a nonprofit organization managed by the exchange membership.
A public market now exists in futures contracts covering
various financial instruments including long-term United States Treasury Bonds
and Notes; Government National Mortgage Association (GNMA) modified pass-through
mortgage backed securities; three-month United States Treasury Bills; and
ninety-day commercial paper. The Fund may trade in any interest rate futures
contracts for which there exists a public market, including, without limitation,
the foregoing instruments.
EXAMPLE OF FUTURES CONTRACT SALE. The Fund may engage in an
interest rate futures contract sale to maintain the income advantage from
continued holding of a long-term bond while endeavoring to avoid part or all of
the loss in market value that would otherwise accompany a decline in long-term
securities prices. Assume that the market value of a certain security held by
the Fund tends to move in concert with the futures market prices of long-term
United States Treasury bonds ("Treasury bonds"). The adviser wants to fix the
current market value of this fund security until some point in the future.
Assume the fund security has a market value of 100, and the adviser believes
that because of an anticipated rise in interest rates, the value will decline to
95. The Fund might enter into futures contract sales of Treasury bonds for a
equivalent of 98. If the market value of the fund security does indeed decline
from 100 to 95, the equivalent futures market price for the Treasury bonds might
also decline from 98 to 93.
In that case, the five point loss in the market value of the
fund security would be offset by the five point gain realized by closing out the
futures contract sale. Of course, the futures market price of Treasury bonds
might well decline to more than 93 or to less than 93 because of the imperfect
correlation between cash and futures prices mentioned below.
The adviser could be wrong in its forecast of interest rates
and the equivalent futures market price could rise above 98. In this case, the
market value of the fund securities, including the fund security being
protected, would increase. The benefit of this increase would be reduced by the
loss realized on closing out the futures contract sale.
If interest rate levels did not change, the Fund in the above
example might incur a loss (which might be reduced by a offsetting transaction
prior to the settlement date). In each transaction, transaction expenses would
also be incurred.
EXAMPLE OF FUTURES CONTRACT PURCHASE. The Fund may engage in
an interest rate futures contract purchase when it is not fully invested in
long-term bonds but wishes to defer for a
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time the purchase of long-term bonds in light of the availability of
advantageous interim investments, e.g., shorter term securities whose yields are
greater than those available on long-term bonds. The Fund's basic motivation
would be to maintain for a time the income advantage from investing in the
short-term securities; the Fund would be endeavoring at the same time to
eliminate the effect of all or part of a expected increase in market price of
the long-term bonds that the Fund may purchase.
For example, assume that the market price of a long-term bond
that the Fund may purchase, currently yielding 10%, tends to move in concert
with futures market prices of Treasury bonds. The adviser wishes to fix the
current market price (and thus 10% yield) of the long-term bond until the time
(four months away in this example) when it may purchase the bond. Assume the
long-term bond has a market price of 100, and the adviser believes that, because
of an anticipated fall in interest rates, the price will have risen to 105 (and
the yield will have dropped to about 9 1/2%) in four months. The Fund might
enter into futures contracts purchases of Treasury bonds for an equivalent price
of 98. At the same time, the Fund would assign a pool of investments in
short-term securities that are either maturing in four months or earmarked for
sale in four months, for purchase of the long-term bond at an assumed market
price of 100. Assume these short-term securities are yielding 15%. If the market
price of the long-term bond does indeed rise from 100 to 105, the equivalent
futures market price for Treasury bonds might also rise from 98 to 103. In that
case, the 5 point increase in the price that the Fund pays for the long-term
bond would be offset by the 5 point gain realized by closing out the futures
contract purchase.
The adviser could be wrong in its forecast of interest rates;
long-term interest rates might rise to above 10%; and the equivalent futures
market price could fall below 98. If short-term rates at the same time fall to
10% or below, it is possible that the Fund would continue with its purchase
program for long-term bonds. The market price of available long-term bonds would
have decreased. The benefit of this price decrease, and thus yield increase,
will be reduced by the loss realized on closing out the futures contract
purchase.
If, however, short-term rates remained above available
long-term rates, it is possible that the Fund would discontinue its purchase
program for long-term bonds. The yield on short-term securities in the Fund,
including those originally in the pool assigned to the particular long-term
bond, would remain higher than yields on long-term bonds. The benefit of this
continued incremental income will be reduced by the loss realized on closing out
the futures contract purchase. In each transaction, expenses would also be
incurred.
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INDEX FUTURES CONTRACTS
- -----------------------
GENERAL. A bond or stock index assigns relative values to the
bonds or stocks included in the index which fluctuates with changes in the
market values of the bonds or stocks included. Some stock index futures
contracts are based on broad market indexes, such as the Standard & Poor's
Ratings Group 500 or the New York Stock Exchange Composite Index. In contrast,
certain exchanges offer futures contracts on narrower market indexes or indexes
based on an industry or market segment, such as oil and gas stocks.
Futures contracts are traded on organized exchanges regulated
by the Commodity Futures Trading Commission. Transactions on such exchanges are
cleared through a clearing corporation, which guarantees the performance of the
parties to each contract.
The Fund may sell index futures contracts in order to offset a
decrease in market value of its fund securities that might otherwise result from
a market decline. The Fund may do so either to hedge the value of its fund as a
whole, or to protect against declines, occurring prior to sales of securities,
in the value of the securities to be sold. Conversely, the Fund may purchase
index futures contracts in anticipation of purchases of securities. A long
futures position may be terminated without a corresponding purchase of
securities.
In addition, the Fund may utilize index futures contracts in
anticipation of changes in the composition of its fund holdings. For example, in
the event that the Fund expects to narrow the range of industry groups
represented in its holdings it may, prior to making purchases of the actual
securities, establish a long futures position based on a more restricted index,
such as an index comprised of securities of a particular industry group. The
Fund may also sell futures contracts in connection with this strategy, in order
to protect against the possibility that the value of the securities to be sold
as part of the restructuring of the fund will decline prior to the time of sale.
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MARGIN PAYMENTS
Unlike purchase or sales of fund securities, no price is paid
or received by the Fund upon the purchase or sale of a futures contract.
Initially, the Fund will be required to deposit with the broker or in a
segregated account with the Custodian or a subcustodian an amount of cash or
cash equivalents, known as initial margin, based on the value of the contract.
The nature of initial margin in futures transactions is different from that of
margin in security transactions in that futures contract margin does not involve
the borrowing of funds by the customer to finance the transactions. Rather, the
initial margin is in the nature of a performance bond or good faith deposit on
the contract which is returned to the Fund upon termination of the futures
contract assuming all contractual obligations have been satisfied. Subsequent
payments, called variation margin, to and from the broker, will be made on a
daily basis as the price of the underlying instruments fluctuates making the
long and short positions in the futures contract more or less valuable, a
process known as marking-to-the-market. For example, when the Fund has purchased
a futures contract and the price of the contract has risen in response to a rise
in the underlying instruments, that position will have increased in value and
the Fund will be entitled to receive from the broker a variation margin payment
equal to that increase in value. Conversely, where the Fund has purchased a
futures contract and the price of the future contract has declined in response
to a decrease in the underlying instruments, the position would be less valuable
and the Fund would be required to make a variation margin payment to the broker.
At any time prior to expiration of the futures contract, the adviser may elect
to close the position by taking an opposite position, subject to the
availability of a secondary market, which will operate to terminate the Fund's
position in the futures contract. A final determination of variation margin is
then made, additional cash is required to be paid by or released to the Fund,
and the Fund realizes a loss or gain.
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RISKS OF TRANSACTIONS IN FUTURES CONTRACTS
There are several risks in connection with the use of futures
by the Fund as hedging devices. One risk arises because of the imperfect
correlation between movements in the price of the futures and movements in the
price of the instruments which are the subject of the hedge. The price of the
future may move more than or less than the price of the instruments being
hedged. If the price of the futures moves less than the price of the instruments
which are the subject of the hedge, the hedge will not be fully effective but,
if the price of the instruments being hedged has moved in an unfavorable
direction, the Fund would be in a better position than if it had not hedged at
all. If the price of the instruments being hedged has moved in a favorable
direction, this advantage will be partially offset by the loss on the futures.
If the price of the futures moves more than the price of the hedged instruments,
the Fund will experience either a loss or gain on the futures which will not be
completely offset by movements in the price of the instruments which are the
subject of the hedge. To compensate for the imperfect correlation of movements
in the price of instruments being hedged and movements in the price of futures
contracts, the Fund may buy or sell futures contracts in a greater dollar amount
than the dollar amount of instruments being hedged if the volatility over a
particular time period of the prices of such instruments has been greater than
the volatility over such time period of the futures, or if otherwise deemed to
be appropriate by the advisers. Conversely, the Fund may buy or sell fewer
futures contracts if the volatility over a particular time period of the prices
of the instruments being hedged is less than the volatility over such time
period of the futures contract being used, or if otherwise deemed to be
appropriate by the adviser.
Where futures are purchased to hedge against a possible
increase in the price of securities before the Fund is able to invest its cash
(or cash equivalents) in an orderly fashion, it is possible that the market may
decline instead; if the Fund then concludes not to invest its cash at that time
because of concern as to possible further market decline or for other reasons,
the Fund will realize a loss on the futures contract that is not offset by a
reduction in the price of the instruments that were to be purchased.
In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in the futures and the
instruments being hedged, the price of futures may not correlate perfectly with
movement in the cash market due to certain market distortions. Rather than
meeting additional margin deposit requirements, investors may close futures
contracts through off-setting transactions which could distort the normal
relationship between the cash and futures markets. Second, with respect to
financial futures contracts, the liquidity of the futures market depends on
participants entering into off-setting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced thus producing distortions. Third, from
the point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities market. Therefore,
increased participation by speculators in the futures market may also cause
temporary price distortions. Due to the possibility of price distortion in the
futures market, and because of the imperfect correlation between the movements
in the cash market and movements in the price of futures, a correct forecast of
general market trends or interest
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rate movements by the advisers may still not result in a successful hedging
transaction over a short time frame.
Positions in futures may be closed out only on an exchange or
board of trade which provides a secondary market for such futures. Although the
Fund intends to purchase or sell futures only on exchanges or boards of trade
where there appear to be active secondary markets, there is no assurance that a
liquid secondary market on any exchange or board of trade will exist for any
particular contract or at any particular time. In such event, it may not be
possible to close a futures investment position, and in the event of adverse
price movements, the Fund would continue to be required to make daily cash
payments of variation margin. However, in the event futures contracts have been
used to hedge fund securities, such securities will not be sold until the
futures contract can be terminated. In such circumstances, an increase in the
price of the securities, if any, may partially or completely offset losses on
the futures contract. However, as described above, there is no guarantee that
the price of the securities will in fact correlate with the price movements in
the futures contract and thus provide an offset on a futures contract.
Further, it should be noted that the liquidity of a secondary
market in a futures contract may be adversely affected by "daily price
fluctuation limits" established by commodity exchanges which limit the amount of
fluctuation in a futures contract price during a single trading day. Once the
daily limit has been reached in the contract, no trades may be entered into at a
price beyond the limit, thus preventing the liquidation of open futures
positions. The trading of futures contracts is also subject to the risk of
trading halts, suspensions, exchange or clearing house equipment failures,
government intervention, insolvency of a brokerage firm or clearing house or
other disruptions of normal activity, which could at times make it difficult or
impossible to liquidate existing positions or to recover excess variation margin
payments.
Successful use of futures by the Fund is also subject to the
adviser's ability to predict correctly movements in the direction of the market.
For example, if the Fund has hedged against the possibility of a decline in the
market adversely affecting securities held by it and securities prices increase
instead, the Fund will lose part or all of the benefit to the increased value of
its securities which it has hedged because it will have offsetting losses in its
futures positions. In addition, in such situations, if the Fund has insufficient
cash, it may have to sell securities to meet daily variation margin
requirements. Such sales of securities may be, but will not necessarily be, at
increased prices which reflect the rising market. The Fund may have to sell
securities at a time when it may be disadvantageous to do so.
B-7
<PAGE> 179
OPTIONS ON FUTURES CONTRACTS
The Fund may purchase and write options on the futures
contracts described above. A futures option gives the holder, in return for the
premium paid, the right to buy (call) from or sell (put) to the writer of the
option a futures contract at a specified price at any time during the period of
the option. Upon exercise, the writer of the option is obligated to pay the
difference between the cash value of the futures contract and the exercise
price. Like the buyer or seller of a futures contract, the holder, or writer, of
an option has the right to terminate its position prior to the scheduled
expiration of the option by selling, or purchasing an option of the same series,
at which time the person entering into the closing transaction will realize a
gain or loss. The Fund will be required to deposit initial margin and variation
margin with respect to put and call options on futures contracts written by it
pursuant to brokers' requirements similar to those described above. Net option
premiums received will be included as initial margin deposits.
Investments in futures options involve some of the same
considerations that are involved in connection with investments in futures
contracts (for example, the existence of a liquid secondary market). In
addition, the purchase or sale of an option also entails the risk that changes
in the value of the underlying futures contract will not correspond to changes
in the value of the option purchased. Depending on the pricing of the option
compared to either the futures contract upon which it is based, or upon the
price of the securities being hedged, an option may or may not be less risky
than ownership of the futures contract or such securities. In general, the
market prices of options can be expected to be more volatile than the market
prices on the underlying futures contract. Compared to the purchase or sale of
futures contracts, however, the purchase of call or put options on futures
contracts may frequently involve less potential risk to the Fund because the
maximum amount at risk is the premium paid for the options (plus transaction
costs). The writing of an option on a futures contract involves risks similar to
those risks relating to the sale of futures contracts.
OTHER MATTERS
Accounting for futures contracts will be in accordance with
generally accepted accounting principles.
B-8
<PAGE> 1
EXHIBIT (17)(g)
THE PARKSTONE GROUP OF FUNDS
Statement of Additional Information
September 17, 1999
GROWTH FUNDS
Parkstone International Discovery Fund
Parkstone Small Capitalization Fund
Parkstone Mid Capitalization Fund
Parkstone Large Capitalization Fund
GROWTH AND INCOME FUNDS
Parkstone Equity Income Fund
Parkstone Balanced Allocation Fund
INCOME FUNDS
Parkstone Bond Fund
Parkstone Intermediate Government Obligations Fund
Parkstone U.S. Government Income Fund
Parkstone Limited Maturity Bond Fund
TAX-FREE INCOME FUNDS
Parkstone National Tax Exempt Bond Fund
Parkstone Michigan Municipal Bond Fund
MONEY MARKET FUNDS
Parkstone Tax-Free Fund
Parkstone Prime Obligations Fund
Parkstone U.S. Government Obligations Fund
Parkstone Treasury Fund
This Statement of Additional information is not a Prospectus, but
should be read in conjunction with the following Prospectuses (the
"Prospectuses") of the Funds: Each of the Investor A Shares and Investor B
Shares Prospectus and Institutional Shares Prospectus dated September 13,
1999. This Statement of Additional information is incorporated by reference in
its entirety into the Prospectuses. Copies of each of the Prospectuses may be
obtained by writing the Group at One Freedom Valley Drive, Oaks, Pennsylvania
19456, or by telephoning toll free (800) 451-8377.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
INVESTMENTS AND RISKS....................................................................2
Additional Information About The Funds...................................................2
Additional Information On Portfolio Instruments..........................................8
Investment Restrictions.................................................................34
Additional Investment Limitations.......................................................36
Portfolio Turnover.....................................................................40
NET ASSET VALUE.........................................................................42
Valuation Of The Money Market Funds.....................................................43
Valuation Of The Non-Money Market Funds.................................................44
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION..........................................44
ADDITIONAL INFORMATION ABOUT HOW TO BUY INSTITUTIONAL SHARES............................45
ADDITIONAL INFORMATION ABOUT REDEMPTION OF INSTITUTIONAL SHARES.........................46
MANAGEMENT OF THE GROUP.................................................................46
Trustees And Officers..................................................................46
Trustee Deferred Compensation Plan......................................................50
Investment Adviser......................................................................50
Portfolio Transactions..................................................................53
Authority To Act As Investment Adviser..................................................55
Glass-Steagall Act......................................................................55
Administrator And Sub-Administrator.....................................................56
Expenses................................................................................58
Distributor.............................................................................59
Custodian, Transfer Agent And Fund Accounting Services..................................62
Independent Auditors....................................................................63
Legal Counsel...........................................................................63
ADDITIONAL INFORMATION..................................................................63
Description Of Shares...................................................................63
Vote Of A Majority Of The Outstanding Shares............................................65
Shareholder And Trustee Liability.......................................................65
Additional Tax Information..............................................................66
Additional Tax Information Concerning The Exempt Funds..................................67
Additional Tax Information Concerning The International Discovery Fund..................68
Performance Information.................................................................69
Yields Of The Money Market Funds........................................................69
Yields Of The Non-Money Market Funds....................................................71
Calculation Of Total Return.............................................................72
Distribution Rates......................................................................74
Performance Comparisons.................................................................75
Miscellaneous...........................................................................76
PRINCIPAL HOLDERS OF VOTING SECURITIES..................................................78
FINANCIAL STATEMENTS....................................................................87
APPENDIX A..............................................................................A-1
</TABLE>
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<PAGE> 3
STATEMENT OF ADDITIONAL INFORMATION
THE PARKSTONE GROUP OF FUNDS
The Parkstone Group of Funds, which was organized in the
Commonwealth of Massachusetts on March 25, 1987 (the "Group"), is an open-end
management investment company composed of sixteen separate investment
portfolios, fifteen of which are diversified portfolios and one of which is a
non-diversified portfolio, each with different investment objectives. The
separate investment portfolios of the Group enable the Group to meet a wide
range of investment needs. This Statement of Additional Information contains
information about each of the sixteen portfolios (collectively, the "Funds" and
singly, a "Fund").
The Group includes four money market Funds: the Tax-Free Fund,
the Prime obligations Fund, the U.S. Government obligations Fund, the Treasury
Fund (collectively, the "Money Market Funds"), each of which, except the
Tax-Free Fund, seeks current income consistent with liquidity and stability of
principal by investing in high quality money market instruments. The Tax-Free
Fund seeks to provide current income free from federal income taxes,
preservation of capital and relative stability of principal. The U.S. Government
Obligations Fund invests primarily in short-term U.S. Treasury bills, notes and
other obligations issued or guaranteed by the U.S. government, its agencies and
instrumentalities. The Prime Obligations Fund invests in high quality money
market instruments. The Tax-Free Fund invests in high-quality tax-exempt
obligations and seeks to produce a high level of income which is exempt from
federal income taxes. The Treasury Fund invests exclusively in obligations
issued or guaranteed by the U.S. Treasury and in repurchase agreements backed by
such obligations.
In addition, the Group has twelve variable net asset value
Funds: the International Discovery Fund, the Small Capitalization Fund, the Mid
Capitalization Fund, the Large Capitalization Fund, the Equity Income Fund, the
Balanced Allocation Fund, the Bond Fund, the Intermediate Government Obligations
Fund, the U.S. Government Income Fund, the Limited Maturity Bond Fund, the
Michigan Municipal Bond Fund and the National Tax Exempt Bond (collectively, the
"Non-Money Market Funds"). The International Discovery Fund provides capital
appreciation by investing in equity securities of foreign issuers. The Small
Capitalization Fund provides capital appreciation with a diversified portfolio
of publicly traded smaller cap equity securities. The Mid Capitalization Fund
provides capital appreciation with a diversified portfolio of publicly traded
mid cap equity securities. The Large Capitalization Fund provides capital
appreciation with a diversified portfolio of publicly traded larger cap equity
securities. The Equity Income Fund provides capital appreciation with a
diversified portfolio of publicly traded larger cap equity securities which, in
the aggregate, provide an above-average current yield. The Balanced Allocation
Fund provides long-term capital appreciation and current income. The Bond Fund
seeks current income with preservation of capital by investing in a portfolio of
high- and medium-grade fixed-income securities. The Intermediate Government
Obligations Fund provides current income as well as preservation of capital by
investing primarily in U.S. government securities. The U.S. Government Income
Fund provides current
<PAGE> 4
income as well as preservation of capital by investing primarily in U.S.
government securities. The Limited Maturity Bond Fund provides current income as
well as preservation of capital by investing in a portfolio of high- and medium
grade fixed income securities. The Michigan Municipal Bond Fund provides current
income exempt from federal income taxes and, to the extent possible, from
Michigan personal income taxes, as is consistent with conservation of capital.
The National Tax Exempt Bond Fund provides current income exempt from federal
income taxes as is consistent with conservation of capital.
The International Discovery Fund, Small Capitalization Fund,
Mid Capitalization Fund and Large Capitalization Fund are sometimes referred to
as the Growth Funds. The Equity Income Fund and Balanced Allocation Fund are
sometimes referred to as the Growth and Income Funds. The Bond Fund,
Intermediate Government Obligations Fund, U.S. Government Income Fund and
Limited Maturity Bond Fund are sometimes referred to as the Income Funds. The
Michigan Municipal Bond Fund and National Tax Exempt Bond Fund are sometimes
referred to as the Tax-Free Income Funds.
The Trustees of the Group have divided beneficial ownership of
each of the Funds into an unlimited number of transferable units called shares.
Each Fund of the Group offers multiple classes of shares. Interested persons who
wish to obtain a copy of any of the Group's other Prospectuses or a copy of the
Group's most recent Annual Report may contact the Group at the telephone number
shown above.
Much of the information contained in this Statement of
Additional Information expands upon subjects discussed in the Prospectuses of
the sixteen Funds described above. Capitalized terms not defined herein are
defined in the Prospectuses. No investment in shares of a Fund should be made
without first reading the Fund's Prospectus.
INVESTMENTS AND RISKS
ADDITIONAL INFORMATION ABOUT THE FUNDS
The following information supplements and should be read in
conjunction with the principal strategies and risk disclosures in the
Prospectus.
The investment objective of each Fund, with the exception of
the U.S. Government Obligations Fund and the Treasury Fund, may be changed
without a vote of the holders of a majority of the outstanding shares of that
Fund although the Board of Trustees would only change a Fund's objective upon 30
days' notice to shareholders.
The investment objectives of the U.S. Government Obligations
Fund and the Treasury Fund are fundamental and may not be changed without a vote
of the holders of a majority of the outstanding shares of that Fund.
For both the Mid Capitalization Fund and Large Capitalization
Fund, investments will be in companies that have typically exhibited consistent,
above-average growth in revenues
-2-
<PAGE> 5
and earnings, strong management, and sound and improving financial fundamentals.
Often, these companies are market or industry leaders, have excellent products
and/or services, and exhibit the potential for growth. Core holdings of the Mid
Capitalization Fund and Large Capitalization Fund are in companies that
participate in long-term growth industries, although these will be supplemented
by holdings in non-growth industries that exhibit the desired characteristics.
The Small Capitalization Fund anticipates investing in dynamic
small-sized companies that exhibit outstanding potential for superior growth.
Companies that participate in sectors that are identified as having long-term
growth potential generally make up a substantial portion of such Fund's
holdings. These companies often have established a market niche or have
developed unique products or technologies that are expected to produce superior
growth in revenues and earnings. As smaller capitalization stocks are quite
volatile and subject to wide fluctuations in both the short and medium term, the
Small Capitalization Fund may be fairly characterized as more aggressive than a
general equity fund.
The International Discovery Fund will seek to achieve its
investment objective by investing, under normal market conditions, at least 80%
of its total assets in equity securities of foreign issuers. The Fund's assets
normally will be invested in the securities of issuers located in at least three
foreign countries. Foreign investments also may include debt obligations issued
or guaranteed by foreign governments or their agencies, authorities,
instrumentalities or political subdivisions, including a foreign state, province
or municipality.
The Fund will invest primarily in equity securities, including
common and preferred stocks, rights, warrants, securities convertible into
common stocks and American Depository Receipts ("ADR's") of companies included
in the Morgan Stanley Capital International Europe, Australaisia, Far East
("EAFE") Index, a broadly diversified international index consisting of more
than 1,000 equity securities of companies located in Australia, Austria,
Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan,
Malaysia, the Netherlands, New Zealand, Norway, Singapore, Spain, Sweden,
Switzerland, and the United Kingdom. The Fund, however, will not be an "index"
fund, and is neither sponsored by nor affiliated with Morgan Stanley Capital
International. The Fund will not presently make investments in markets where,
in the judgement of the adviser, property rights are not defined and supported
by adequate legal infrastructure. More than 25% of the Fund's assets may be
invested in the securities of issuers located in the same country.
The Balanced Allocation Fund may vary from time to time the
amount it invests in stocks, bonds and cash reserves, depending upon the
investment Adviser's assessment of business, economic and market conditions,
including any advantage of price shifts between the stock market and the bond
market. Like any investment program, investment in the Balanced Allocation Fund
entails certain risks. As a Fund investing in common stocks the Balanced
Allocation Fund is subject to stock market risk, i.e., the possibility that
stock prices in general will decline over short or even extended periods. Since
the Balanced Allocation Fund also invests in bonds, investors in the Balanced
Allocation Fund are also exposed to bond market risk, i.e., fluctuations in the
market value of bonds. Bond prices are influenced primarily by changes in
interest rate levels. When interest rates rise, the prices of bonds generally
fall; conversely,
-3-
<PAGE> 6
when interest rates fall, bond prices generally rise. While bonds normally
fluctuate less in price than stock, there have been extended periods of cyclical
increases in interest rates that have caused significant declines in bond
prices. From time to time, the stock and bond markets may fluctuate
independently of one another. In other words, a decline in the stock market may
in certain instances be offset by a rise in the bond market, or vice versa. As a
result, the Balanced Allocation Fund, with its balance of common stock and bond
investments, is expected to entail less investment risk (and a potentially
smaller investment return) than a mutual fund investing exclusively in common
stocks.
The Equity Income Fund anticipates investing in securities
that currently have a high dividend yield, with the anticipation that the
dividend will remain constant or be increased in the future. These securities
generally represent the core holdings of this Fund. However, these holdings are
balanced with lower yielding but higher growth-oriented securities to achieve
portfolio balance. All securities must provide current income. Given its bias
towards income, the Equity Income Fund may be considered more conservative than
growth-oriented equity funds such as the Group's Small Capitalization Fund and
Mid Capitalization Fund.
Some of the securities in which the Limited Maturity Bond Fund
invests may have warrants or options attached. Furthermore, certain debt
securities including, but not limited to, mortgage-related securities,
collateralized mortgage obligations ("CMOs") and asset-backed securities, as
well as securities subject to prepayment of principal prior to the stated
maturity date, may be repaid prior to their maturity dates. As a result,
effective maturity of these securities may be deemed to be shorter than the
stated maturity. For purposes of calculating the weighted average maturity of
the Limited Maturity Bond Fund, the effective maturity of such securities, as
determined by the Investment Adviser, will be used.
The Bond Fund and Limited Maturity Bond Fund may invest in
bonds, notes and debentures of a wide range of U.S. corporate issuers. Such
obligations, in the case of debentures will represent unsecured promises to pay,
and in the case of notes and bonds may be secured by mortgages on real property
or security interests in personal property and will in most cases differ in
their interest rates, maturities and times of issuance. An increase in interest
rates will generally reduce the value of the investments in the Bond Fund and
the Limited Maturity Bond Fund and a decline in interest rates will generally
increase the value of those investments. Depending upon the prevailing market
conditions, the Investment Adviser may purchase debt securities at a discount
from face value, which produces a yield greater than the coupon rate.
Conversely, if debt securities are purchased at a premium over face value, the
yield will be lower than the coupon rate. In making investment decisions for the
Bond Fund, the Investment Adviser will consider many factors other than current
yield, including the preservation of capital, the potential for realizing
capital appreciation, maturity, and yield to maturity. In making investment
decisions for the Limited Maturity Bond Fund, the Investment Adviser will
consider many factors other than current yield, including the preservation of
capital, maturity, and yield to maturity.
Under normal market conditions, the Intermediate Government
Obligations Fund expects to maintain a dollar-weighted average portfolio
maturity of its debt securities of
-4-
<PAGE> 7
three to ten years. By seeking to maintain such dollar-weighted average
portfolio maturity, the Intermediate Government Obligations Fund attempts to
minimize the fluctuation in its share's net asset value relative to funds which
invest in longer-term obligations. Certain debt securities including, but not
limited to, mortgage-related securities, CMOs and asset-backed securities, as
well as securities subject to prepayment of principal prior to the stated
maturity date, may be repaid prior to their maturity dates. As a result,
effective maturity of these securities may be deemed to be shorter than the
stated maturity. For purposes of calculating the weighted average maturity of
the Intermediate Government Obligations Fund, the effective maturity of such
securities, as determined by the Investment Adviser, will be used. The types of
U.S. government obligations invested in by the Intermediate Government
Obligations Fund will include obligations issued or guaranteed as to payment of
principal and interest by the full faith and credit of the U.S. Treasury, such
as Treasury bills, notes, bonds and certificates of indebtedness, and government
securities, as described below. The Fund may also invest in mortgage-related
securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities, as more fully described below.
To the extent the National Tax Exempt Bond Fund's assets are
concentrated in Municipal Securities that are payable from the revenues of
similar projects or are issued by issuers located in the same state, or are
concentrated in private activity bonds, the Municipal Bond Fund will be subject
to the peculiar risks presented by the laws and economic conditions relating to
such states, projects and bonds to a greater extent than it would be if its
assets were not so concentrated.
The Michigan Municipal Bond Fund is classified as a
"non-diversified" investment company, which means that the amount of assets of
the Michigan Municipal Bond Fund that may be invested in the securities of a
single issuer is not limited by the Investment Company Act of 1940, as amended
(the "1940 Act"). Nevertheless, the Michigan Municipal Bond Fund intends to
conduct its operations so as to qualify as a "regulated investment company" for
purposes of the Internal Revenue Code of 1986, as amended (the "Code"). The Code
requires that, at the end of each quarter of a fund's taxable year, (i) at least
50% of the market value of its total assets be invested in cash, U.S. government
securities, securities of other regulated investment companies and other
securities, with such other securities of any one issuer limited for the
purposes of this calculation to an amount not greater than 5% of the value of
the fund's total assets and 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its total assets be invested
in the securities of any one issuer (other than U.S. government securities or
the securities of other regulated investment companies). Since a relatively high
percentage of the Michigan Municipal Bond Fund's assets may be invested in the
obligations of a limited number of issuers, some of which may be within the same
economic sector, the Michigan Municipal Bond Fund's portfolio securities may be
more susceptible to any single economic, political or regulatory occurrence than
the portfolio securities of a diversified investment company. However, the
Michigan Municipal Bond Fund attempts to diversify, to the extent the Investment
Adviser deems appropriate, among issuers and geographic areas in the State of
Michigan.
-5-
<PAGE> 8
The types of U.S. government obligations, including
mortgage-related securities, invested in by the U.S. Government Income Fund will
include obligations issued or guaranteed as to payment of principal and interest
by the full faith and credit of the U.S. Treasury, such as Treasury bills, notes
and bonds, Stripped Treasury Obligations and government securities, as described
below.
The Prime Obligations Fund and, within certain limits, the
U.S. Government Obligations Fund may invest in commercial paper and other
short-term promissory notes issued by corporations (including variable amount
master demand notes) rated at the time of purchase within the two highest rating
categories assigned by at least two NRSROs or by the only NRSRO providing a
rating or, if not rated, which the Investment Adviser deems to be of comparable
quality. For a description of the rating categories of the NRSROs, see the
Appendix to the Statement of Additional Information. The Prime Obligations Fund
may also invest in Canadian Commercial Paper ("CCP"), which is commercial paper
issued by a Canadian corporation or counterpart of a U.S. corporation,
Europaper, bankers' acceptances, certificates of deposit and time deposits, as
described below.
The U.S. Government Obligations Fund, the Prime Obligations
Fund and certain other Funds may invest in variable amount master demand notes
which are unsecured demand notes that permit the indebtedness thereunder to
vary, and that provide for periodic adjustments in the interest rate according
to the terms of the instrument. Because master demand notes are direct lending
arrangements between a Fund and the issuer, they are not normally traded.
Although there is no secondary market in the notes, a Fund may demand payment of
principal and accrued interest at any time. While the notes are not typically
rated by credit rating agencies, issuers of variable amount master demand notes
(which are normally manufacturing, retail, financial, and other business
concerns) must satisfy the same criteria as set forth above for commercial
paper. The Investment Adviser will consider the earning power, cash flow, and
other liquidity ratios of the issuers of such notes and will continuously
monitor their financial status and ability to meet payment on demand.
Each Money Market Fund invests exclusively in United States
dollar-denominated instruments which the Board of Trustees of the Group and the
Investment Adviser determine present minimal credit risks and which at the time
of acquisition are (a) U.S. government securities, (b) money market fund shares,
or (c) rated by at least two NRSROs or by obligations or, if unrated, which the
Investment Adviser deems to be of comparable quality. In addition, each of the
U.S. Government Obligations Fund, the Prime Obligations Fund and the Treasury
Fund diversifies its investments so that, except for United States government
Securities and certain other exceptions, not more than 5% of its total assets is
invested in the securities of any one issuer, not more than 5% of its total
assets is invested in securities of all issuers rated by an NRSRO or NRSROs (in
accordance with SEC regulations) at the time of investment in the second highest
rating category for short-term debt obligations or deemed to be of comparable
quality to securities rated in the second highest rating category for
short-term-debt obligations (either referred to as "Second Tier Securities") and
not more than the greater of 1% of total assets or $1 million is invested in the
Second Tier Securities of one issuer.
-6-
<PAGE> 9
Each of the Money Market Funds may acquire securities that are
subject to demand features (generally, a feature permitting the holder of the
security at specified intervals to sell the security at an exercise price equal
to the approximate market cost plus accrued interest). The demand feature may be
issued by the issuer of the underlying security or a dealer in the securities or
by another third party. The Money Market Funds use these arrangements to provide
liquidity and not to protect against changes in the market value of the
underlying securities. The bankruptcy, receivership, or default by the issuer of
the demand feature, or a default on the underlying security or other event that
terminates the demand feature before its exercise, will adversely affect the
liquidity of the underlying security. Demand features that are exercisable after
a payment default on the underlying security may be treated as a form of credit
enhancement.
Certain of the Money Market Funds' permitted investments may
have received credit enhancement by a guaranty, letter of credit, or insurance.
The Money Market Funds may evaluate the credit quality and ratings of
credit-enhanced securities based upon the financial condition and ratings of the
entity providing the credit enhancement, rather than the issuer. The bankruptcy,
receivership, or default of an entity providing credit enhancement may adversely
affect the quality and marketability of the underlying security.
Consistent with the requirements of Rule 2a-7 adopted under
the 1940 Act, each of the Money Market Funds will limit its investment, with
respect to 75% of its assets, to no more than 10% of its total assets in
securities issued by or subject to demand features or guarantees of a single
issuer. With respect to the remaining 25% of a Money Market Fund's assets, the
Fund may invest in securities subject to demand features or guarantees from, or
directly issued by, one or more institutions, provided they are rated in the
highest rating category assigned by an NRSRO and are issued by a "Non-Controlled
Person," as defined in the Rule. In addition, a demand feature or guarantee may
be acquired by a Money Market Fund only if not more than 5% of the Fund's total
assets are invested in demand features, guarantees or securities issued by the
provider of the demand feature or guarantee that are rated in the second highest
short-term rating category assigned by an NRSRO or NRSROs (in accordance with
Rule 2a-7).
Each of the Money Market Funds intends to follow the
operational policies described above, as well as other non-fundamental policies
that will enable the Fund to comply with the laws and regulations applicable to
money market mutual funds, particularly Rule 2a-7 under the 1940 Act. Each of
the Money Market Funds shall determine the effective maturity of its
investments, the applicable credit rating of securities, and adequate
diversification by reference to Rule 2a-7. Each of the Money Market Funds may
change its operational policies to reflect changes in the laws and regulations
applicable to money market mutual funds without shareholder approval.
The Tax-Free Fund may acquire zero-coupon obligations, which
have greater price volatility than coupon obligations and which will not result
in the payment of interest until maturity. Additionally, the Tax-Free Fund,
within certain limitations and subject to the quality standards for tax-exempt
commercial paper described below, may invest in commercial paper.
-7-
<PAGE> 10
Each of the Funds, with the exception of the Money Market
Funds and the Tax-Free Income Funds may utilize foreign currency transactions in
its portfolio. A Fund will conduct its foreign currency exchange transactions
either on a spot (i.e. cash) basis at the spot rate prevailing in the foreign
currency exchange market, or through forward contracts to purchase or sell
foreign currencies. See "ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS
- --FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS and -- FOREIGN CURRENCY FUTURES
TRANSACTIONS." These forward currency contracts are traded directly between
currency traders (usually large commercial banks). The Funds will have to
convert their holdings of foreign currencies into United States dollars from
time to time. Although foreign exchange dealers do not charge a fee or
commission, they do realize a profit based on the difference (the "spread") the
prices at which they are buying and selling various currencies.
ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS
Like any investment program, an investment in a Fund entails
certain risks. The Funds will not acquire portfolio securities issued by, make
savings deposits in, or enter into repurchase, reverse repurchase or dollar roll
agreements with the Investment Adviser, BISYS, SEI or their affiliates, and will
not give preference to the correspondents of their bank affiliates with respect
to such transactions, securities, savings deposits, repurchase agreements,
reverse repurchase agreements and dollar roll agreements.
Some of the investment techniques utilized by the Investment
Adviser in the management of each of the Funds (with the exception of the
Treasury Fund) involve complex securities sometimes referred to as
"derivatives." Among such securities are put and call options, foreign currency
transactions and futures contracts, all of which are described below. The
Investment Adviser believes that such complex securities may, in some
circumstances, play a valuable role in successfully implementing each Fund's
investment strategy and achieving its goals. However, because complex securities
and the strategies for which they are used, are by their nature complicated,
they represent substantial opportunities for misunderstanding and misuse. To
guard against these risks, the Investment Adviser will utilize complex
securities primarily for hedging, not speculative purposes and only after
careful review of the unique risk factors associated with each such security.
The following descriptions of portfolio instruments are
intended to supplement and should be read in conjunction with the investment
objectives, principal investment strategies and related risks of each Fund of
the Group as set forth in the Prospectus for that Fund.
Bank Obligations. Each of the U.S. Government Obligations
Fund, Prime Obligations Fund, Tax-Free Fund, Small Capitalization Fund, Mid
Capitalization Fund, Large Capitalization Fund, Balanced Allocation Fund, Equity
Income Fund, Bond Fund, Limited Maturity Bond Fund, U.S. Government Income Fund,
National Tax Exempt Bond Fund and Michigan Municipal Bond Fund may invest in
bank obligations consisting of bankers' acceptances, certificates of deposit,
and time deposits.
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Bankers' acceptances are negotiable drafts or bills of
exchange typically drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank, meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Bankers' acceptances invested in by the Funds will be those guaranteed by
domestic and foreign banks having, at the time of investment, capital, surplus,
and undivided profits in excess of $100,000,000 (as of the date of their most
recently published financial statements).
Certificates of deposit are negotiable certificates issued
against funds deposited in a commercial bank or a savings and loan association
for a definite period of time and earning a specified return. Certificates of
deposit and time deposits will be those of domestic and foreign banks and
savings and loan associations if (a) at the time of investment, the depository
or institution has capital, surplus and undivided profits in excess of
$100,000,000 (as of the date of its most recently published financial
statements), or (b) the principal amount of the instrument is insured in full by
the Federal Deposit Insurance Corporation.
Each of the Prime Obligations Fund, U.S. Government
Obligations Fund, Tax-Free Fund, Small Capitalization Fund, Mid Capitalization
Fund, Large Capitalization Fund, International Discovery Fund, Balanced
Allocation Fund, Equity Income Fund, Bond Fund, Limited Maturity Bond Fund and
U.S. Government Income Fund may also invest in Eurodollar certificates of
deposit ("Euro CDs'), which are U.S. dollar-denominated certificates of deposit
issued by offices of foreign and domestic banks located outside the United
States; Yankee certificates of deposit ("Yankee CDs"), which are certificates of
deposit issued by a U.S. branch of a foreign bank denominated in U.S. dollars
and held in the United States; Eurodollar time deposits ("ETDs"), which are U.S.
dollar-denominated deposits in a foreign branch of a U.S. bank or a foreign
bank; and Canadian time deposits, which are basically the same as ETDs except
they are issued by Canadian-offices of major Canadian banks.
Commercial Paper. Commercial paper consists of unsecured
promissory notes issued by corporations. Except as noted below with respect to
variable amount master demand notes, issues of commercial paper normally have
maturities of less than nine months and fixed rates of return.
Subject to the limitations described in the Prospectus, the
Prime Obligations Fund, the U.S. Government Obligations Fund, the Tax-Free Fund,
the U.S. Government Income Fund and the Michigan Municipal Bond Fund will
purchase commercial paper consisting of issues rated at the time of purchase
within the two highest rating categories assigned by a nationally recognized
statistical rating organization ("NRSRO"). The Tax-Free Fund may purchase
commercial paper rated in the highest rating category assigned by an NRSRO.
These Funds may also invest in commercial paper that is not rated but that is
determined by National City Investment Management Company ("IMC" or the
"Investment Adviser"), under guidelines established by the Group's Board of
Trustees, to be of comparable quality to instruments that are so rated by an
NRSRO that is neither controlling, controlled by, or under common control with
the issuer of, or any issuer, guarantor, or provider of credit support for, the
instruments. The Small Capitalization Fund, Mid Capitalization Fund, Large
Capitalization Fund, Balanced
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Allocation Fund, Equity Income Fund, Bond Fund, Limited Maturity Bond Fund and
National Tax Exempt Bond Fund may invest in commercial paper rated in any rating
category or not rated by an NRSRO. In general, investment in lower-rated
instruments is more risky than investment in instruments in higher-rated
categories. For a description of the rating symbols of each NRSRO, see the
Appendix. The U.S. Government Obligations Fund, Prime Obligations Fund, Tax-Free
Fund, Small Capitalization Fund, Mid Capitalization Fund, Large Capitalization
Fund, International Discovery Fund, Balanced Allocation Fund, Equity Income
Fund, Bond Fund, Limited Maturity Bond Fund and U.S. Government Income Fund may
also invest in CCP and in Europaper, which is U.S. dollar-denominated commercial
paper of a foreign issuer.
Equity Securities. Include common and preferred stock,
securities (bonds and preferred stock) convertible into common stock, warrants
and in the case of the International Discovery Fund, securities representing
underlying international securities such as American Depository Receipts
("ADRs") and European Depository Receipts ("EDRs"), as described below.
Variable Amount Master Demand Notes. Variable amount master
demand notes, in which the Prime Obligations Fund, U.S. Government Obligations
Fund, Tax-Free Fund, Small Capitalization Fund, Mid Capitalization Fund, Large
Capitalization Fund, Balanced Allocation Fund, Equity Income Fund, Bond Fund,
Limited Maturity Bond Fund, U.S. Government Income Fund, National Tax Exempt
Bond Fund and Michigan Municipal Bond Fund may invest, are unsecured demand
notes that permit the indebtedness thereunder to vary and provide for periodic
adjustments in the interest rate according to the terms of the instrument.
Because master demand notes are direct lending arrangements between a Fund and
the issuer, they are not normally traded. Although there is no secondary market
in the notes, a Fund may demand payment of principal and accrued interest at any
time. While the notes are not typically rated by credit rating agencies, issuers
of variable amount master demand notes (which are normally manufacturing,
retail, financial, and other business concerns) must satisfy the same criteria
as set forth above for commercial paper. The Investment Adviser will consider
the earning power, cash flow, and other liquidity ratios of such notes and will
continuously monitor the financial status and ability to make payment on demand.
In determining weighted average maturity, a variable amount master demand note
will be deemed to have a maturity equal to the longer of the period of time
remaining until the next interest rate adjustment or the period of time
remaining until the principal amount can be recovered from the issuer through
demand.
Foreign Securities. The International Discovery Fund invests
primarily in the securities of foreign issuers. The Balanced Allocation Fund may
invest up to 20% of its total assets in foreign securities. The Small
Capitalization Fund, Mid Capitalization Fund, Large Capitalization Fund and
Equity Income Fund may invest in foreign securities as permitted by their
respective investment policies. Each of the Bond Fund and Limited Maturity Bond
Fund may invest up to 25% of its net assets in foreign securities either
directly or through the purchase of ADRs and may also invest in securities
issued by foreign branches of U.S. banks and foreign banks, in CCP, and in
Europaper. The U.S. Government Income Fund, the U.S. Government Obligations
Fund, the Prime Obligations Fund and the Tax-Free Fund may invest in foreign
securities by purchasing: Eurodollar certificates of deposit ("ECDs"), which are
U.S. dollar-
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denominated certificates of deposit issued by offices of foreign and domestic
banks outside the U.S.; Eurodollar time deposits ("ETD"), which are U.S.
dollar-denominated deposits in a foreign branch of a U.S. or foreign bank;
Canadian time deposits ("CDs"), which are essentially the same as ETDs, except
that they are issued by Canadian offices of major Canadian banks; Yankee
certificates of deposit ("Yankee CDs"), which are U.S. dollar-denominated
certificates of deposit issued by a U.S. branch of a foreign bank but held in
the U.S.; CCP, and Europaper.
Investment in foreign securities is subject to special
investment risks that differ in some respects from those related to investments
in securities of U.S. domestic issuers. Such risks include political, social or
economic instability in the country of the issuer, the difficulty of predicting
international trade patterns, the possibility of the imposition of exchange
controls, expropriation, limits on removal of currency or other assets,
nationalization of assets, foreign withholding and income taxation, and foreign
trading practices (including higher trading commissions, custodial charges and
delayed settlements). Such securities may be subject to greater fluctuations in
price than securities issued by U.S. corporations or issued or guaranteed by
U.S. Government, its agencies or instrumentalities. The markets on which such
securities trade may have less volume and liquidity, and may be more volatile
than securities markets in the United States. In addition, there may be less
publicly available information about a foreign company than about a U.S.
domiciled company. Foreign companies generally are not subject to uniform
accounting, auditing and financial reporting standards comparable to those
applicable to U.S. domestic companies. There is generally less stringent
government regulation of securities exchanges, brokers and listed companies
abroad than in the United States. Confiscatory taxation or diplomatic
developments could also affect investment in those countries. In addition,
foreign branches of U.S. banks, foreign banks and foreign issuers may be subject
to less stringent reserve requirements and to different accounting, auditing,
reporting, and record keeping standards than those applicable to domestic
branches of U.S. banks and U.S. domestic issuers.
In many instances, foreign debt securities may provide higher
yields than securities of domestic issuers which have similar maturities and
quality. Under certain market conditions these investments may be less liquid
than the securities of U.S. corporations and are certainly less liquid than
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. Finally, in the event of a default of any such foreign debt
obligations, it may be more difficult for a Fund to obtain or to enforce a
judgment against the issuers of such securities. If a security is denominated in
foreign currency, the value of the security to the Fund will be affected by
changes in currency exchange rates and in exchange control regulations, and
costs will be incurred in connection with conversions between currencies. A
change in the value of any foreign currency against the U.S. dollar will result
in a corresponding change in the U.S. dollar value of a Fund's securities
denominated in that currency. Such changes will also affect a Fund's income and
distributions to shareholders. In addition, although a Fund will receive income
on foreign securities in such currencies, such Fund will be required to compute
and distribute its income in U.S. dollars. Therefore, if the exchange rate for
any such currency declines materially after such Fund's income has been accrued
and translated into U.S. dollars, the Fund could be required to liquidate
portfolio securities to make required distributions. Similarly, if an exchange
rate declines between the time a Fund incurs expenses in U.S. dollars
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<PAGE> 14
and the time such expenses are paid, the amount of such currency required to be
converted into U.S. dollars in order to pay such expenses in U.S. dollars will
be greater.
The introduction of a single currency, the euro, on January 1,
1999 for participating nations in the European Economic and Monetary Union
presents unique uncertainties, including 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, 2001 and beyond; whether the interest rate, tax and labor
regimes of European countries participating in the euro will converge over time;
and whether the conversion of the currencies of other countries in the European
Union ("EU"), such as the United Kingdom and Denmark, into the euro and the
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, and
could adversely affect the value of securities held by the Funds.
U.S. dollar-denominated ADRs, which are traded in the United
States on exchanges or over-the-counter, are issued by domestic banks. ADRs
represent the right to receive securities of foreign issuers deposited in a
domestic bank or a correspondent bank. ADRs do not eliminate all of the risk
inherent in investing in the securities of foreign issuers. However, by
investing in ADRs rather than directly in foreign issuer's stock, a Fund can
avoid currency risks during the settlement period for either purchases or sales.
In general, there is a large, liquid market in the United States for many ADRs.
The information available for ADRs is subject to the accounting, auditing and
financial reporting standards of the domestic market or exchange on which they
are traded, standards which are more uniform and more exacting than those to
which many foreign issuers may be subject. The ADR is sometimes referred to as a
Global Depository Receipt, or GDR. In the United States, the GDR is, after
issuance, not unlike any other ADR. The difference is found in the purpose of
the issue. GDRs are used for global offerings, by the simultaneous issuance of a
single security in multiple world markets. The International Discovery Fund and
Balanced Allocation Fund may also invest in EDRs, which are receipts evidencing
an arrangement with a European bank similar to that for ADRs and assigned for
use in the European securities markets. EDRs are not necessarily denominated in
the currency of the underlying security.
Certain of the ADRs and EDRs, typically those categorized as
unsponsored, require their holders to bear most of the costs of such facilities
while issuers of sponsored facilities normally pay more of the costs. The
depository of an unsponsored facility frequently is under no obligation to
distribute shareholder communications received from the issuer of the deposited
securities or to pass through the voting rights to facility holders with respect
to the deposited securities, whereas the depository of a sponsored facility
typically distributes shareholder communications and passes through the voting
rights.
Subject to its applicable investment policies, each of the
Growth Funds and Growth and Income Funds may invest in debt securities
denominated in the European Currency
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<PAGE> 15
Unit ("ECU"), which is a "basket" unit of currency consisting of specified
amounts of the currencies of certain of the twelve member states of the European
Community. The specific amounts of currencies comprising the ECU may be adjusted
by the Council of Ministers of the European Community to reflect changes in
relative values of the underlying currencies. Such adjustments may adversely
affect holders of ECU-denominated obligations or the marketability of such
securities. European governments and supranationals, in particular, issue
ECU-denominated obligations.
Each of the Prime Obligations Fund, U.S. Government
Obligations Fund, Tax-Free Fund, Small Capitalization Fund, Mid Capitalization
Fund, Large Capitalization Fund, Equity Income Fund, Bond Fund, International
Discovery Fund, Balanced Allocation Fund and Limited Maturity Bond Fund will
acquire foreign securities only when the Investment Adviser believes that the
risks associated with such investments are minimal.
Variable and Floating Rate Notes. The Prime Obligations Fund,
U.S. Government Obligations Fund, Tax-Free Fund, Bond Fund, Limited Maturity
Bond Fund, U.S. Government Income Fund, National Tax Exempt Bond Fund and
Michigan Municipal Bond Fund may acquire variable and floating rate notes
subject to each such Fund's investment objective, policies and restrictions. A
variable rate note is one whose terms provide for the adjustment of its interest
rate on set dates and which, upon such adjustment, can reasonably be expected to
have a market value that approximates its par value. A floating rate note is one
whose terms provide for the adjustment of its interest rate whenever a specified
interest rate changes and which, at any time, can reasonably be expected to have
a market value that approximates its par value. Such notes are frequently not
rated by credit rating agencies; however, unrated variable and floating rate
notes purchased by a Fund will be determined by the Investment Adviser, under
guidelines established by the Group's Board of Trustees, to be of comparable
quality at the time of purchase to rated instruments eligible for purchase under
the Fund's investment policies. In making such determinations, the Investment
Adviser will consider the earning power, cash flow and liquidity ratios of the
issuers of such notes (such issuers include financial, merchandising, bank
holding and other companies) and will continuously monitor their financial
condition. Although there may be no active secondary market with respect to a
particular variable or floating rate note purchased by a Fund, the Fund may
resell the note at any time to a third party. The absence of an active secondary
market, however, could make it difficult for the Fund to dispose of a variable
or floating rate note in the event the issuer of the note defaulted on its
payment obligations and the Fund could, as a result, or for other reasons,
suffer a loss to the extent of the default. To the extent that the Fund is not
entitled to receive the principal amount of a note within 7 days, such note will
be treated as an illiquid security for purposes of the calculation of the
limitation on the Fund's investment in illiquid securities as set forth in that
Fund's investment restrictions. Variable or floating rate notes may be secured
by bank letters of credit.
Variable or floating rate notes invested in by the Prime
Obligations Fund, U.S. Government Obligations Fund and the Tax-Free Fund may
have maturities of more than 397 days, as follows:
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An instrument that is issued or guaranteed by the
United States government or any agency thereof which has a variable rate of
interest adjusted no less frequently than every 397 days will be deemed by a
Fund to have a maturity equal to the period remaining until the maturity date or
the next readjustment of the interest rate, whichever is less. A floating rate
instrument issued or guaranteed by the U.S. government or an agency thereof or a
floating rate instrument the principal amount of which must conditionally be
paid in 397 days or less is deemed to mature in one day.
A variable rate note, the principal amount of which
is scheduled to be paid in 397 days or less, will be deemed by a Fund to have a
maturity equal to the period remaining until the maturity date or the next
readjustment of the interest rate, whichever is less.
A variable rate note the principal amount of which is
scheduled to be paid in more than 397 days that is subject to a demand feature
will be deemed by a Fund to have a maturity equal to the longer of the period
remaining until the next readjustment of the interest rate or the period
remaining until the principal amount can be recovered through demand.
A floating rate note the principal amount of which is
scheduled to be paid in more than 397 days that is subject to a demand feature
will be deemed by Fund to have a maturity equal to the period remaining until
the principal amount can be recovered through demand.
As used above, a note is "subject to a demand feature" where
the Fund is entitled to receive the approximate amortized cost plus accrued
interest at any time on no more than 30 days' notice or at specified intervals
not exceeding 397 days.
Money Market Mutual Funds. Each of the Non-Money Market Funds
may invest up to 5% of the value of its total assets in the securities of any
one money market mutual fund, provided that no more than 10% of a Non-Money
Market Fund's total assets may be invested in the securities of money market
mutual funds in the aggregate. Each Non-Money Market Fund will incur additional
expenses due to the duplication of expenses as a result of investing in
securities of money market mutual funds.
Municipal Securities. The Tax-Free Fund and National Tax
Exempt Bond Fund, the assets of such Funds will be primarily invested in bonds
and notes issued by or on behalf of states (including the District of Columbia),
territories, and possessions of the United States and their respective
authorities, agencies, instrumentalities and political subdivisions, the
interest on which is both exempt from federal income tax and not treated as a
preference item for purposes of the federal alternative minimum tax ("Municipal
Securities"). With respect to the Tax-Free Fund, Municipal Securities are
expected to have remaining maturities of 397 days or less. Under normal market
conditions, at least 80% of the total assets of each such Fund will be invested
in Municipal Securities. The U.S. Government Obligations Fund may invest up to
35% of the value of its total assets in Municipal Securities. In addition, the
Bond Fund, Limited Maturity Bond Fund and Prime Obligations Fund may invest in
Municipal Securities but shall limit such investment to the extent necessary to
preclude them from paying "exempt-interest dividends" as that term is defined in
the Internal Revenue Code of 1986, as amended (the "Code").
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<PAGE> 17
Municipal Securities include debt obligations issued by
governmental entities to obtain funds for various public purposes, such as the
construction of a wide range of public facilities, the refunding of outstanding
obligations, the payment of general operating expenses, and the extension of
loans to other public institutions and facilities. Private activity bonds that
are issued by or on behalf of public authorities to finance various
privately-operated facilities are included within the term Municipal Securities
if the interest paid thereon is exempt from both federal income tax and not
treated as a preference item for purposes of the federal alternative minimum
tax. The Michigan Municipal Bond Fund may invest up to 100% of its total assets
in private activity bonds which may be treated as a specific tax preference item
under the federal alternative minimum tax.
Among other types of Municipal Securities, the Tax-Free Fund
and National Tax Exempt Bond Fund may purchase short-term general obligation
notes, tax anticipation notes, bond anticipation notes, revenue anticipation
notes, project notes, tax-exempt commercial paper, construction loan notes and
other forms of short-term tax-exempt loans. Such instruments are issued with a
short-term maturity in anticipation of the receipt of tax funds, the proceeds of
bond placements or other revenues. In addition, these Funds may invest in other
types of tax-exempt instruments, such as municipal bonds, private activity
bonds, and pollution control bonds.
Project notes are issued by a state or local housing agency
and are sold by the Department of Housing and Urban Development. While the
issuing agency has the primary obligation with respect to its project notes, the
notes are also secured by the full faith and credit of the United States through
agreements with the issuing authority which provide that, if required, the
federal government will lend the issuer an amount equal to the principal of and
interest on the project notes.
The assets of the Michigan Municipal Bond Fund will be
invested in obligations consisting of bonds, notes, commercial paper, and
certificates of indebtedness, issued by or on behalf of the State of Michigan,
its political subdivisions, municipalities and public authorities, the interest
on which is exempt from federal income tax and Michigan state income taxes (but
may be treated as a preference item for purposes of the federal alternative
minimum tax) and in debt obligations issued by the government of Puerto Rico,
the U.S. territories and possessions of Guam, the U.S. Virgin Islands or such
other governmental entities whose debt obligations, either by law or treaty,
generate interest income which is exempt from federal and Michigan state income
taxes ("Michigan Municipal Securities"). Under normal market conditions, at
least 80% of the net assets of the Michigan Municipal Bond Fund will be invested
in Michigan Municipal Securities, and at least 65% of the net assets of the
Michigan Municipal Bond Fund will be invested in Michigan Municipal Securities
issued by or on behalf of the State of Michigan, its political subdivisions,
municipalities and public authorities.
Michigan Municipal Securities include debt obligations issued
by governmental entities to obtain funds for various public purposes, such as
the construction of a wide range of public facilities, the refunding of
outstanding obligations, the payment of general operating expenses, and the
extension of loans to other public institutions and facilities. Private activity
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<PAGE> 18
bonds that are issued by or on behalf of public authorities to finance various
privately-operated facilities are included within the term Michigan Municipal
Securities if the interest paid thereon is exempt from both federal and Michigan
state income taxes although such interest may be treated as a preference item
for purposes of the federal alternative minimum tax.
Other types of Michigan Municipal Securities which the
Michigan Municipal Bond Fund may purchase are short-term general obligation
notes, tax anticipation notes, bond anticipation notes, revenue anticipation
notes, tax-exempt commercial paper, construction loan notes and other forms of
short-term tax-exempt loans. Such instruments are issued with a short-term
maturity in anticipation of the receipt of tax funds, the proceeds of bond
placements or other revenues.
The two principal classifications of Municipal Securities and
Michigan Municipal Securities (collectively, "Exempt Securities") consist of
"general obligation" and "revenue" issues. The Tax-Free Fund, National Tax
Exempt Bond Fund and Michigan Municipal Bond Fund (collectively the "Exempt
Funds" and singly, an "Exempt Fund') may also acquire "moral obligation" issues,
which are normally issued by special purpose authorities. There are, of course,
variations in the quality of Exempt Securities, both within a particular
classification and between classifications, and the yields on Exempt Securities
depend upon a variety of factors, including general money market conditions, the
financial condition of the issuer, general conditions of the municipal bond
market, the size of a particular offering, the maturity of the obligation and
the rating of the issue. The ratings of an NRSRO represent their opinions as to
the quality of Exempt Securities. It should be emphasized, however, that ratings
are general and are not absolute standards of quality, and Exempt Securities
with the same maturity, interest rate and rating may have different yields,
while Exempt Securities of the same maturity and interest rate with different
ratings may have the same yield. Subsequent to purchase, an issue of Exempt
Securities may cease to be rated or its rating may be reduced below the minimum
rating required for purchase. The Investment Adviser will consider such an event
in determining whether a Fund should continue to hold the obligation.
An issuer's obligations under Exempt Securities are subject to
the provisions of bankruptcy, insolvency, and other laws affecting the rights
and remedies of creditors, such as the federal bankruptcy code, and laws, if
any, which may be enacted by Congress or state legislatures extending the time
for payment of principal or interest, or both, or imposing other constraints
upon the enforcement of such obligations or upon the ability of municipalities
to levy taxes. The power or ability of an issuer to meet its obligations for the
payment of interest on and principal of Exempt Securities may be materially
adversely affected by litigation or other conditions.
Opinions relating to the validity of Municipal Securities and
to the exemption of interest thereon from federal income tax are rendered by
bond counsel to the respective issuers at the time of issuance. Neither the
Funds nor the Investment Adviser will review the proceedings relating to the
issuance of Municipal Securities or the basis for such opinions.
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Interest income from certain municipal securities may be
subject to federal alternative minimum tax. The Tax-Free Income Funds will not
treat these bonds as Municipal Securities or Michigan Municipal Securities for
purposes of measuring compliance with the 80% tests described above. To the
extent that the Tax-Free Income Funds invest in these bonds, individual
shareholders, depending on their own tax status, may be subject to alternative
minimum tax on that part of the Tax-Free Income Funds' distributions derived
from these bonds. Investment of the Tax-Free Income Funds may be made in taxable
obligations if, for example, suitable tax-exempt obligations are unavailable or
if acquisition of U.S. government or other taxable securities is deemed
appropriate for temporary defensive purposes as determined by the Investment
Adviser to be warranted due to market conditions. Such taxable obligations
consist of government securities, certificates of deposit, time deposits and
bankers' acceptances of selected banks, commercial paper meeting the Tax-Free
Income Funds' quality standards for tax-exempt commercial paper (as described
above), and such taxable obligations as may be subject to repurchase agreements.
These obligations are described further in the Statement of Additional
Information. Under such circumstances and during the period of such investment,
the affected Tax-Free Income Fund may not achieve its stated investment
objectives.
Special Investment Considerations Relating To Investing In The
Michigan Municipal Bond Fund. The following information is drawn from various
Michigan governmental publications, particularly the Governor's Executive Budget
for Fiscal year 1999-2000, and from official statements relating to securities
offerings of the State and its political subdivisions. While the Trust has not
independently verified such information, it has no reason to believe that it is
not correct in all material respects.
The State of Michigan's economy is principally dependent on
manufacturing (particularly automobiles, office equipment and other durable
goods), tourism and agriculture, and historically has been highly cyclical.
Total State wage and salary employment is estimated to have
grown by 1.9% in 1998. The rate of unemployment is estimated to have been 3.8%
in 1998, below the national average for the fifth consecutive year. Personal
income grew at an estimated 5.1% annual rate in 1998, up from the 4.6% growth
reported for 1997.
During the past five years, improvements in the Michigan
economy have resulted in increased revenue collections which, together with
restraints on the expenditure side of the budget, have resulted in State General
Fund budget surpluses, most of which were transferred to the State's
Counter-Cyclical Budget and Economic Stabilization Fund. The balance of that
Fund as of September 30, 1998 is estimated to have been in excess of $1.1
billion.
The Michigan Constitution limits the amount of total State
revenues that can be raised from taxes and certain other sources. State revenues
(excluding federal aid and revenues for payment of principal and interest on
general obligation bonds) in any fiscal year are limited to a fixed percentage
of State personal income in the prior calendar year or the average of the prior
three calendar years, whichever is greater, and this fixed percentage equals the
percentage
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of the 1978-79 fiscal year state government revenues to total calendar 1977
State personal income (which was 9.49%).
The Michigan Constitution also provides that the proportion of
State spending paid to all units of local government to total State spending may
not be reduced below the proportion in effect in the 1978-79 fiscal year. The
State originally determined that portion to be 41.6%. If such spending does not
meet the required level in a given year, an additional appropriation for local
governmental units is required by the following fiscal year; which means the
year following the determinations of the shortfall, according to an opinion
issued by the State's Attorney General. Spending for local units met this
requirement for fiscal years 1986-87 through 1991-92. As the result of
litigation, the State agreed to reclassify certain expenditures, beginning with
fiscal year 1992-93, and has recalculated the required percentage of spending
paid to local government units to be 48.97%.
The State has issued and has outstanding general obligation
full faith and credit bonds for Water Resources, Environmental Protection
Program, Recreation Program and School Loan purposes. As of September 30, 1998,
the State had approximately $874 million of general obligation bonds
outstanding.
The State may issue notes or bonds without voter approval for
the purposes of making loans to school districts. The proceeds of such notes or
bonds are deposited in the School Bond Loan Fund maintained by the State
Treasurer and used to make loans to school districts for payment of debt on
qualified general obligations bonds issued by local school districts.
The State is a party to various legal proceedings seeking
damages or injunctive or other relief. In addition to routine litigation,
certain of these proceedings could, if unfavorably resolved from the point of
view of the State, substantially affect State programs or finances. As of early
1999, these lawsuits involved programs generally in the areas of corrections,
tax collection, commerce, and proceedings involving budgetary reductions to
school districts and governmental units, and court funding. Notable among these
legal proceedings are lawsuits brought by a number of school districts
challenging the constitutionality of certain state-mandated special education
services without corresponding State Funding.
The State Constitution limits the extent to which
municipalities or political subdivisions may levy taxes upon real and personal
property through a process that regulates assessments.
On March 15, 1994, Michigan voters approved a property tax and
school finance reform measure commonly known as Proposal A. Under Proposal A, as
approved, effective May 1, 1994, the State sales and use tax increased from 4%
to 6%, the State income tax decreased from 4.6% to 4.4%, the cigarette tax
increased from $.25 to $.75 per pack and an additional tax of 16% of the
wholesale price began to be imposed on certain other tobacco products. A .75%
real estate transfer tax became effective January 1, 1995. Beginning in 1994, a
state property tax of 6 mills began to be imposed on all real and personal
property currently subject to the general
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<PAGE> 21
property tax. All local school boards are authorized, with voter approval, to
levy up to the lesser of 18 mills or the number of mills levied in 1993 for
school operating purposes on nonhomestead property and nonqualified agricultural
property. Proposal A contains additional provisions regarding the ability of
local school districts to levy taxes, as well as a limit on assessment increases
for each parcel of property, beginning in 1995. Such increases for each parcel
of property are limited to the lesser of 5% or the rate of inflation. When
property is subsequently sold, its assessed value will revert to the current
assessment level of 50% of true cash value. Under Proposal A, much of the
additional revenue generated by the new taxes will be dedicated to the State
School Aid Fund.
Proposal A and its implementing legislation shifted
significant portions of the cost of local school operations from local school
districts to the State and raised additional State revenues to fund these
additional State expenses. These additional revenues will be included within the
State's constitutional revenue limitations and may impact the State's ability to
raise additional revenues in the future.
A state economy during a recessionary cycle would also, as a
separate matter, adversely affect the capacity of users of facilities
constructed or acquired through the proceeds of private activity bonds or other
"revenue" securities to make periodic payments for the use of those facilities.
Government Obligations. The U.S. Government Obligations Fund
will invest primarily in obligations issued or guaranteed by the U.S. government
or its agencies or instrumentalities. Subject to the investment parameters
described above, each of the remaining Funds may also invest in such
obligations. The Treasury Fund, however, will invest exclusively in obligations
issued or guaranteed by the U.S. Treasury and in repurchase agreements backed by
such securities. Each of the Funds may invest in obligations issued or
guaranteed by the U.S. government or its agencies or instrumentalities,
including bills, notes and bonds issued by the U.S. Treasury, as well as
"stripped" U.S. Treasury obligations ("Stripped Treasury Obligations") such as
Treasury receipts issued by the U.S. Treasury representing either future
interest or principal payments. Stripped securities are issued at a discount to
their "face value," and may exhibit greater price volatility than ordinary debt
securities because of the manner in which their principal and interest are
returned to investors. The Stripped Treasury obligations in which the Money
Market Funds may invest do not include certificates of accrual on Treasury
securities ("CATS") or Treasury income growth receipts ("TIGRs").
Obligations of certain agencies and instrumentalities of the
U.S. government, such as the Government National Mortgage Association ("GNMA"),
are supported by the full faith and credit of the U.S. Treasury; others, such as
those of the Federal National Mortgage Association ("FNMA"), are supported by
the right of the issuer to borrow from the Treasury; others, such as those of
the Student Loan Marketing Association ("SLMA), are supported by the
discretionary authority of the U.S. government to purchase the agency's
obligations; still others, such as those of the Federal Farm Credit Banks or the
Federal Home Loan Mortgage Corporation ("FHLMC"), are supported only by the
credit of the instrumentality. No assurance can be given that the U.S.
Government would provide financial support to U.S. Government-sponsored
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<PAGE> 22
agencies or instrumentalities, such as FNMA, SLMA or FHLMC, since it is not
obligated to do so by law. The Funds which may invest in these government
obligations will invest in the obligations of such agencies or instrumentalities
only when the Investment Adviser believes that the credit risk with respect
thereto is minimal.
Guaranteed Investment Contracts ("GIC"). The Bond Fund, the
Limited Maturity Bond Fund and the Prime Obligations Fund may invest in GICs.
When investing in GICs, the Bond Fund, the Limited Maturity Bond Fund and the
Prime Obligations Fund make cash contributions to a deposit fund of an insurance
company's general account. The insurance company then credits guaranteed
interest to the deposit fund on a monthly basis. The GICs provide that this
guaranteed interest will not be less than a certain minimum rate. The insurance
company may assess periodic charges against a GIC for expenses and service costs
allocable to it, and the charges will be deducted from the value of the deposit
fund. The Bond Fund and the Limited Maturity Bond Fund may invest in GICs of
insurance companies without regard to the ratings, if any, assigned to such
insurance companies' outstanding debt securities. The Prime Obligations Fund may
only invest in GICs that have received the requisite ratings by one or more
NRSROs. Because a 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. For each of the Bond Fund and Limited Maturity Bond Fund,
no more than 15% of its total assets will be invested in instruments which are
considered to be illiquid. For the Prime Obligations Fund, no more than 10% of
its total assets may be invested in instruments which are considered to be
illiquid. In determining average portfolio maturity, GICs will be deemed to have
a maturity equal to the period of time remaining until the next readjustment of
the guaranteed interest rate.
Taxable obligations. under normal market conditions, each of
the Exempt Funds may invest up to 20% of its total assets in Taxable
Obligations. Taxable Obligations may include: (1) obligations of the United
States Treasury; (2) obligations of agencies and instrumentalities of the United
States government; (3) money market instruments, such as certificates of deposit
issued by domestic banks, corporate commercial paper, and bankers' acceptances;
and (4) taxable instruments subject to repurchase agreements (agreements under
which the seller agrees at the time of sale to repurchase the securities it is
selling at an agreed time and price). Certificates of deposit will be those of
domestic branches of U.S. banks which are members of the Federal Reserve System
or the Federal Deposit Insurance Corporation and which have total assets at the
time of purchase in excess of $100,000,000, or of savings and loan associations
which are members of the Federal Deposit Insurance Corporation and which have
total assets at the time of purchase in excess of $100,000,000. Bankers'
acceptances will be guaranteed by U.S. commercial banks having total assets at
the time of purchase in excess of $100,000,000. Obligations of the U.S. Treasury
and U.S. government agencies and instrumentalities, bankers' acceptances, and
certificates of deposit are described in this Statement of Additional
Information.
Put and Call options. Each of the Growth Funds, the Growth and
Income Funds, the Income Funds and the Tax-Free Income Funds may purchase put
and call options on securities and on foreign currencies, subject to its
applicable investment policies, for the purposes of hedging against market risks
related to its portfolio securities and adverse
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<PAGE> 23
movements in exchange rates between currencies, respectively. Purchasing options
is a specialized investment technique that entails a substantial risk of a
complete loss of the amounts paid as premiums to writers of options. Each Fund
may so engage in writing call options from time to time as the Investment
Adviser be with respect to the Balanced Allocation Fund or International Fund,
deems appropriate. The Funds will write only covered call options (options on
securities or currencies owned by the particular Fund). In order to close out a
call option it has written, the Fund will enter into a "closing purchase
transaction" (the purchase of a call option on the same security or currency
with the same exercise price and expiration date as the call option which such
Fund previously has rewritten). When a portfolio security or currency subject to
a call option is sold, the Fund will effect a closing purchase transaction to
close out any existing call option on that security or currency. If such Fund is
unable to affect a closing purchase transaction, it will not be able to sell the
underlying security or currency until the option expires or that Fund delivers
the underlying security or currency upon exercise. In addition, upon the
exercise of a call option by the optionholder, the Fund will forego the
potential benefit represented by market appreciation over the exercise price.
under normal conditions, it is not expected that a Fund will cause the
underlying value of portfolio securities and currencies subject to such options
to exceed 50% of its net assets, and with respect to each of the Balanced
Allocation Fund and International Discovery Fund, 20% of its net assets.
Each of the Growth Funds, the Growth and Income Funds and the
U.S. Government Income Fund, as part of its options transactions, also may
purchase index put and call options and write index options. As with options on
individual securities, a Fund will write only covered index call options.
Through the writing or purchase of index options a Fund can achieve many of the
same objectives as through the use of options on individual securities. Options
on securities indices are similar to options on a security except that, rather
than the right to take or make delivery of a security at specified price, an
option on a securities index gives the holder the right to receive, upon
exercise of the option, an amount of cash if the closing level of the securities
index upon which the option is based is greater than, in the case of a call, or
less than, in the case of a put, the exercise price of the option.
Price movements in securities which a Fund owns or intends to
purchase probably will not correlate perfectly with movements in the level of an
index and, therefore, a Fund bears the risk of a loss on an index option that is
not completely offset by improvements in the price of such securities. Because
index options are settled in cash, a call writer cannot determine the amount of
its settlement obligations in advance and, unlike call writing on specific
securities, cannot provide in advance for, or cover, its potential settlement
obligations by acquiring and holding the underlying securities. A Fund may be
required to segregate assets or provide an initial margin to cover index options
that would require it to pay cash upon exercise.
In addition, each of the Tax-Free Fund and the Tax-Free Income
Funds may acquire "puts" with respect to Municipal Securities (or Michigan
Municipal Securities, as the case may be), held in its portfolio. Under a put,
such Fund would have the right to sell a specified Municipal Security (or
Michigan Municipal Security, as the case may be) within a specified period of
time at a specified price. A put would be sold, transferred, or assigned only
with the underlying security. Each of the Tax-Free Fund and the Tax-Free Income
Funds will
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<PAGE> 24
acquire puts solely either to facilitate portfolio liquidity, shorten the
maturity of the underlying securities, or permit the investment of its funds at
a more favorable rate of return. Each of the Tax-Free Fund and the Tax-Free
Income Funds expects that it will generally acquire puts only where the puts are
available without the payment of any direct or indirect consideration. However,
if necessary or advisable, such Fund may pay for a put either separately in cash
or by paying a higher price for portfolio securities which are acquired subject
to the puts (thus reducing the yield to maturity otherwise available for the
same securities).
The amount payable to an Exempt Fund upon its exercise of a
put is normally: (i) the Exempt Fund's acquisition cost of the Exempt Securities
(excluding any accrued interest which the Exempt Fund paid on the acquisition),
less any amortized market premium or plus any amortized market or original issue
discount during the period the Exempt Fund owned the securities, plus (ii) all
interest accrued on the Exempt Securities since the last interest payment date
during that period.
The Exempt Funds intend to enter into puts only with dealers,
banks, and broker-dealers which, in the Investment Adviser's opinion, present
minimal credit risks.
When-Issued and Delayed-Delivery Securities. Each Fund may
purchase securities on a "when-issued" or "delayed-delivery" basis (i.e., for
delivery beyond the normal settlement date at a stated price and yield). The
Funds will engage in when-issued and delayed- delivery transactions only for the
purpose of acquiring portfolio securities consistent with its investment
objectives and policies, not for investment leverage although such transactions
represent a form of leveraging. When-issued securities are securities purchased
for delivery beyond the normal settlement date at a stated price and yield and
thereby involve a risk that the yield obtained in the transaction will be less
than those available in the market when delivery takes place. A Fund will not
pay for such securities or start earning interest on them until they are
received. When the Fund agrees to purchase securities on a "when-issued" or
"delayed-delivery" basis, the Fund's Custodian will set aside cash or liquid
securities equal to the amount of the commitment in a separate account.
Normally, the Custodian will set aside portfolio securities to satisfy the
purchase commitment, and in such a case, the Fund may be required subsequently
to place additional assets in the separate account in order to assure that the
value of the account remains equal to the amount of the Fund's commitment. It
may be expected 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. In addition, because the Fund will set aside cash or
liquid securities to satisfy its purchase commitments in the manner described
above, the Fund's liquidity and the ability of the Investment Adviser, as the
case may be, to manage it might be affected in the event its commitments to
purchase "when-issued" or "delayed-delivery" securities ever exceeded 25% of the
value of its assets. Under normal market conditions, however, a Fund's
commitments to purchase "when-issued" or "delayed-delivery" securities will not
exceed 25% of the value of its assets.
If the Fund sells a "when-issued" or "delayed-delivery"
security before a delivery, any gain would not be tax-exempt. When the Fund
engages in "when-issued" or "delayed-delivery" transactions, it relies on the
seller to consummate the trade. Failure of the seller to do
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<PAGE> 25
so may result in the Fund incurring a loss or missing the opportunity to obtain
a price considered to be advantageous. The Funds will engage in "when-issued" or
"delayed-delivery" transactions only for the purpose of acquiring securities
consistent with the Funds' investment objectives and policies and not for
investment leverage, although such transactions represent a form of leveraging.
Mortgage-Related Securities. The U.S. Government Income Fund
normally invests at least 80% of its total assets in obligations issued or
guaranteed by the U.S. government or its agencies or instrumentalities. However,
the U.S. Government Income Fund may invest greater amounts as conditions
warrant. Each of the remaining Funds, except the International Discovery Fund,
may also invest in mortgage-related securities issued or guaranteed by the U.S.
government or its agencies or instrumentalities. Such agencies or
instrumentalities include GNMA, FNMA and FHLMC. Each of the Balanced Allocation
Fund, Bond Fund, Limited Maturity Bond Fund, Intermediate Government Obligations
Fund, U.S. Government Income Fund, Prime Obligations Fund and U.S. Government
Obligations Fund may also invest in mortgage-related securities issued by
non-governmental entities which are rated, at the time of purchase, within the
three highest bond rating categories assigned by an NRSRO or, if unrated, which
the Investment Adviser deems present attractive opportunities and are of
comparable quality.
The mortgage-related securities in which these Funds may
invest have mortgage obligations backing such securities, consisting of
conventional thirty-year fixed-rate mortgage obligations, graduated payment
mortgage obligations, fifteen-year mortgage obligations and adjusted-rate
mortgage obligations. All of these mortgage obligations can be used to create
pass-through securities. A pass-through security is created when mortgage
obligations are pooled together and undivided interests in the pool or pools are
sold. The cash flow from the mortgage obligations is passed through to the
holders of the securities in the form of periodic payments of interest,
principal and prepayments (net of a service fee). Prepayments occur when the
holder of an individual mortgage obligation prepays the remaining principal
before the mortgage obligation's scheduled maturity date. As a result of the
pass-through of prepayments of principal on the underlying securities,
mortgage-backed securities are often subject to more rapid prepayment of
principal than their stated maturity would indicate. Because the prepayment
characteristics of the underlying mortgage obligations vary, it is not possible
to predict accurately the realized yield or average life of a particular issue
of pass-through certificates.
Prepayment rates are important because of their effect on the
yield and price of the securities. Accelerated prepayments have an adverse
impact on yields for pass-throughs purchased at a premium (i.e., a price in
excess of principal amount) and may involve additional risk of loss of principal
because the premium may not have been fully amortized at the time the litigation
is repaid. The opposite is true for pass-throughs purchased at a discount. The
Funds may purchase mortgage-related securities at a premium or at a discount.
If a Fund purchases a mortgage-related security at a premium,
that portion may be lost if there is a decline in the market value of the
security, whether resulting from changes in interest rates or prepayments in the
underlying mortgage collateral. As with other interest-
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<PAGE> 26
bearing securities, the prices of such securities are inversely affected by
changes in interest rates. However, though the value of a mortgage-related
security may decline when interest rates rise, the converse is not necessarily
true, since in periods of declining interest rates the mortgages underlying the
securities are prone to prepayment, thereby shortening the average life of the
security and shortening the period of time over which income at the higher rate
is received. When interest rates are rising, though, the rate of prepayment
tends to decrease, thereby lengthening the period of time over which income at
the lower rate is received. For these and other reasons, a mortgage-related
security's average maturity may be shortened or lengthened as a result of
interest rate fluctuations and, therefore, it is not possible to predict
accurately the security's return to the Fund. In addition, regular payments
received with respect to mortgage-related securities include both interest and
principal. No assurance can be given as to the return a Fund will receive when
these amounts are reinvested.
The principal governmental (i.e., backed by the full faith and
credit of the United States government) guarantor of mortgage-related securities
is GNMA. GNMA is a wholly-owned United States government corporation within the
Department of Housing and Urban Development. GNMA is authorized to guarantee,
with the full faith and credit of the United States government, the timely
payment of principal and interest on securities issued by institutions approved
by GNMA (such as savings and loan institutions, commercial banks and mortgage
bankers) and backed by pools of mortgages insured by the Federal Housing
Administration or guaranteed by the Veterans Administration.
Government-related (i.e., not backed by the full faith and
credit of the United States government) guarantors include FNMA and FHLMC. FNMA
is a government-sponsored corporation owned entirely by private stockholders.
Pass-through securities issued by FNMA are guaranteed as to timely payment of
principal and interest by FNMA but are not backed by the full faith and credit
of the United States government. FHLMC is a corporate instrumentality of the
United States government whose stock is owned by the twelve Federal Home Loan
Banks. Participation certificates issued by FHLMC are guaranteed as to the
timely payment of interest and ultimate collection of principal but are not
backed by the full faith and credit of the United States government.
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
issued by 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 are also
supported by the authority of GNMA to borrow funds from the U.S. Treasury to
make payments under its guarantee. Mortgage-related securities issued by FNMA
include FNMA Guaranteed Mortgage Pass-Through Certificates (also known as
"Fannie Maes") which are solely the obligations of FNMA and are not backed by or
entitled to the full faith and credit of the United States. FNMA is a
government-sponsored organization owned entirely by private stockholders. Fannie
Maes are guaranteed as to the timely payment of the principal and interest by
FNMA.
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<PAGE> 27
Mortgage-related securities issued by FHLMC include FHLMC Mortgage Participation
Certificates (also known as "Freddie Macs" or "PCs"). FHLMC is a corporate
instrumentality of the United States, created pursuant to an Act of Congress and
owned entirely by the 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 the timely payment of interest, which is
guaranteed by FHLMC. FHLMC guarantees either ultimate collection or the 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.
The U.S. Government Income Fund also may invest up to 20% of
its total assets in mortgage-related securities issued by non-governmental
entities and in other securities described below. Commercial banks, savings and
loan institutions, private mortgage insurance companies, mortgage bankers and
other secondary market issues also create pass-through pools of conventional
residential mortgage loans. Such issuers may also be the originators of the
underlying mortgage loans as well as the guarantors of the mortgage-related
securities. Pools created by such non-governmental issuers generally offer a
higher rate of interest than government and government-related pools because
there are not direct or indirect government guarantees of payments in the former
pools. However, timely payment of interest and principal of these pools is
supported by various forms of insurance or guarantees, including individual
loan, title, pool and hazard insurance. The insurance and guarantees are issued
by government entities, private insurers and the mortgage poolers. Such
insurance and guarantees and the creditworthiness of the issuers will be
considered in determining whether a mortgage-related security meets a Fund's
Investment quality standards. There can be no assurance that the private
insurers can meet their obligations under the policies. The U.S. Government
Income Fund may buy mortgage-related securities without insurance or guarantees
if, through an examination of the loan experience and practices of the poolers,
the Investment Adviser determines that the securities meet the U.S. Government
Income Fund's quality standards. Although the market for such securities is
becoming increasingly liquid, securities issued by certain private organizations
may not be readily marketable. The U.S. Government Income Fund will not purchase
mortgage-related securities or any other assets which in the Investment
Adviser's opinion are illiquid if, as a result, more than 15% of the value of
the U.S. Government Income Fund's total assets will be illiquid.
Mortgage-related securities in which the above-named Funds may
invest may also include CMOs. CMOs are debt obligations issued generally by
finance subsidiaries or trusts that are secured by mortgage-backed certificates,
including, in many cases, certificates issued by government-related guarantors,
including GNMA, FNMA and FHLMC, together with certain funds and other
collateral. Although payment of the principal of and interest on the
mortgage-backed certificates pledged to secure the CMOs may be guaranteed by
GNMA, FNMA or FHLMC, the CMOs represent obligations solely of the issuer and are
not insured or guaranteed by GNMA, FHLMC, FNMA or any other governmental agency,
or by any other person or entity.
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<PAGE> 28
The issuers of the CMOs typically have no significant assets other than those
pledged as collateral for the obligations.
CMOs are issued in multiple classes. Each class of CMOs, often
referred to as a "tranche," is issued at a specific adjustable or fixed interest
rate and must be fully retired no later than its final distribution date.
Principal prepayments on the mortgage loans or the mortgage assets underlying
the CMOs may cause some or all of the classes of CMOs to be retired
substantially earlier than their final distribution dates. Generally, interest
is paid or accrues on all classes of CMOs on a monthly basis.
The principal of and interest on the mortgage assets may be
allocated among the several classes of CMOs in various ways. In certain
structures (known as sequential pay" CMOs), payments of principal, including any
principal prepayments, on the mortgage assets generally are applied to the
classes of CMOs in the order of their respective final distribution dates. Thus,
no payment of principal will be made on any class of sequential pay CMOs until
all other classes having an earlier final distribution date have been paid in
full.
Additional structures of CMOs include, among others, "parallel
pay" CMOs. Parallel pay CMOs are those which are structured to apply principal
payments and prepayments of the mortgage assets to two or more classes
concurrently on a proportionate or disproportionate basis. These simultaneous
payments are taken into account in calculating the final distribution date of
each class.
The U.S. Government Income Fund expects that governmental,
government-related or private entities may create mortgage loan pools offering
pass-through investments in addition to those described above. The mortgages
underlying these securities may be alternative mortgage instruments; that is
mortgage instruments whose principal or interest payments may vary or whose
terms to maturity may differ from customary long-term fixed-rate mortgages. As
new types of mortgage-related securities are developed and offered to investors,
the Investment Adviser will, consistent with the U.S. Government Income Fund's
investment objective, policies and quality standards, consider making
investments in such new types of securities.
Medium-Grade Securities. The Balanced Allocation Fund, Bond
Fund, Limited Maturity Bond Fund, National Tax Exempt Bond Fund and Michigan
Municipal Bond Fund may each invest in securities which are rated within the
four highest rating categories assigned by an NRSRO (including, for example,
securities rated BBB by S&P or Baa by Moody's, respectively) or, if not rated,
are of comparable quality as determined by the Investment Adviser.
("Medium-Grade Securities"). These types of fixed-income securities are
considered by the NRSROs to have some speculative characteristics, and are more
vulnerable to changes in economic conditions, higher interest rates or adverse
issuer-specific developments which are more likely to lead to a weaker capacity
to make principal and interest payments than comparable higher rated debt
securities.
Should subsequent events cause the rating of a fixed-income
security purchased by any of the Funds listed above to fall below the fourth
highest rating, the Investment Adviser
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<PAGE> 29
will consider such an event in determining whether the Fund should continue to
hold that security. In no event, however, would the Fund be required to
liquidate any such portfolio security where the Fund would suffer a loss on the
sale of such security.
As with other fixed-income securities, Medium-Grade Securities
are subject to credit risk and market risk. Market risk relates to changes in a
security's value as a result of changes in interest rates. Credit risk relates
to the ability of an issuer to make payments of principal and interest.
Medium-Grade Securities are considered by Moody's to have speculative
characteristics.
Medium-Grade Securities are generally subject to greater
credit risk than comparable higher-rated securities because issuers are more
vulnerable to economic downturns, higher interest rates or adverse
issuer-specific developments. In addition, the prices of Medium-Grade Securities
are generally subject to greater market risk and therefore react more sharply to
changes in interest rates. The value and liquidity of Medium-Grade Securities
may be diminished by adverse publicity and investor perceptions.
Because certain Medium-Grade Securities are traded only in
markets where the number of potential purchasers and sellers, if any, is
limited, the ability of a Fund to sell such securities at their fair market
value either to meet redemption requests or to respond to changes in the
financial markets may be limited.
Particular types of Medium-Grade Securities may present
special concerns. The prices of payment-in-kind or zero-coupon securities may
react more strongly to changes in interest rates than the prices of other
Medium-Grade Securities. Some Medium-Grade Securities in which a Fund may invest
may be subject to redemption or call provisions that may limit increases in
market value that might otherwise result from lower interest rates while
increasing the risk that a Fund may be required to reinvest redemption or call
proceeds during a period of relatively low interest rates.
The credit ratings issued by Moody's and S&P are subject to
various limitations. For example, while such ratings evaluate credit risk, they
ordinarily do not evaluate the market risk of Medium-Grade Securities. In
certain circumstances, the ratings may not reflect in a timely fashion adverse
developments affecting an issuer. For these reasons, the Investment Adviser
conducts its own independent credit analysis of Medium-Grade Securities.
Restricted Securities. Securities in which each of the Funds,
with the exception of the Treasury Fund, may invest include securities issued by
corporations without registration under the Securities Act of 1933, as amended
(the "1933 Act"), in reliance on the exemption from such registration afforded
by Section 3(a)(3) thereof, and securities issued in reliance on the so-called
"private placement" exemption from registration which is afforded by Section
4(2) of the 1933 Act ("Section 4(2) securities"). Section 4(2) securities are
restricted as to disposition under the federal securities laws, and generally
are sold to institutional investors such as the Funds who agree that they are
purchasing the securities for investment and not with a view to public
distribution. Any resale must also generally be made in an exempt transaction.
Section
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4(2) securities are normally resold to other institutional investors through or
with the assistance of the issuer or investment dealers who make a market in
such Section 4(2) securities, thus providing liquidity. Pursuant to procedures
adopted by the Board of Trustees of the Group, the Investment Adviser may
determine Section 4(2) securities to be liquid if such securities are eligible
for resale under Rule 144A under the 1933 Act and are readily saleable.
Subject to the limitations described above, the Funds may
acquire investments that are illiquid or of limited liquidity, such as private
placements or investments that are not registered under the 1933 Act. An
illiquid investment is any investment that cannot be disposed of within seven
days in the normal course of business at approximately the amount at which it is
valued by a Fund. The price a Fund pays for illiquid securities or receives upon
resale may be lower than the price paid or received for similar securities with
a more liquid market. Accordingly, the valuation of these securities will
reflect any limitations on their liquidity. For each of the Non-Money Market
Funds, a Fund may not invest in additional illiquid securities if, as a result,
more than 15% of the market value of its net assets would be invested in
illiquid securities. For each of the Money Market Funds, a Fund may not invest
in additional illiquid securities if, as a result, more than 10% of the market
value of its net assets would be invested in illiquid securities. The Group's
Board of Trustees has delegated to the Investment Adviser the day-to-day
authority to determine whether a particular issue of Section 4(2) Securities
that are eligible for resale under Rule 144A under the 1933 Act should be
treated as liquid. Rule 144A provides a safe-harbor exemption from the
registration requirements of the 1933 Act for resales to "qualified
institutional buyers" as defined in the Rule. With the exception of registered
broker-dealers, a qualified institutional buyer must generally own and invest on
a discretionary basis at least $100 million in securities.
The Investment Adviser may deem Section 4(2) Securities liquid
if it believes that, based on the trading markets for such security, such
security can be disposed of within seven days in the ordinary course of business
at approximately the amount at which the Fund has valued the security. In making
such determination, the Investment Adviser generally considers any and all
factors that it deems relevant, which may include: (i) the credit quality of the
issuer; (ii) the frequency of trades and quotes for the security; (iii) the
number of dealers willing to purchase or sell the security and the number of
other potential purchasers; (iv) dealer undertakings to make a market in the
security; and (v) the nature of the security and the nature of market-place
trades.
Treatment of Section 4(2) Securities as liquid could have the
effect of decreasing the level of a Fund's liquidity to the extent that
qualified institutional buyers become, for a time, uninterested in purchasing
these securities.
Repurchase Agreements. Securities held by each of the Group's
Funds may be subject to repurchase agreements. Under the terms of a repurchase
agreement, a Fund would acquire securities from member banks of the Federal
Deposit Insurance Corporation and registered broker-dealers which the Investment
Adviser deems creditworthy under the guidelines approved by the Group's Board of
Trustees, subject to the seller's agreement to repurchase such securities at a
mutually agreed upon date and price. The repurchase price would generally equal
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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 at all times the value of collateral held pursuant to the agreement
at not less than the repurchase price (including accrued resale premium). 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 the 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. Additionally,
there is no controlling legal precedent confirming that a Fund would be
entitled, as against a claim by such seller or its receiver or trustee in
bankruptcy, to retain the underlying securities, although management of the
Group believes that, under the regular procedures normally in effect for custody
of a Fund's securities subject to repurchase agreements, and under federal laws,
a court of competent jurisdiction would rule in favor of the Group if presented
with the question. Securities subject to repurchase agreements will be held by
the Group'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 and Dollar Roll Agreements. Each
of the Funds except the Treasury Fund may borrow money by entering into reverse
repurchase agreements and, in the case of the Income Funds and the Tax-Free
Income Funds, dollar roll agreements in accordance with the investment
restrictions described below. Pursuant to reverse repurchase agreements, a Fund
would sell certain of its securities to financial institutions such as banks and
broker-dealers, and agree to repurchase the securities at a mutually agreed upon
date and price. Dollar roll agreements utilized by the Income Funds and Tax-Free
Income Funds are identical to reverse repurchase agreements except for the fact
that substantially similar securities may be repurchased. At the time a Fund
enters into a reverse repurchase agreement or a dollar roll 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 its
investment restrictions having a value equal to the repurchase price (including
accrued interest), and will subsequently continually monitor the account to
ensure that such equivalent value is maintained at all times. Reverse repurchase
agreements and dollar roll agreements involve the risk that the market value of
securities sold by a Fund may decline below the price at which it is obligated
to repurchase the securities. Reverse repurchase agreements and dollar roll
agreements are considered to be borrowings by an investment company under the
1940 Act and therefore a form of leverage. A Fund may experience a negative
impact on its net asset value if interest rates rise during the term of a
reverse repurchase agreement or dollar roll agreement. A Fund generally will
invest the proceeds of such borrowings only when such borrowings will enhance a
Fund's liquidity or when the Fund reasonably expects that the interest income to
be earned from the investment of the proceeds is greater than the interest
expense of the transaction.
Futures Contracts. The Growth Funds, the Growth and Income
Funds, the Income Funds and the National Tax Exempt Bond Fund may also enter
into contracts for the future delivery of securities or foreign currencies and
futures contracts based on a specific security, class of securities, foreign
currency or an index, purchase or sell options on any such futures contracts and
engage in related closing transactions. A futures contract on a securities
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index is an agreement obligating either party to pay, and entitling the other
party to receive, while the contract is outstanding, cash payments based on the
level of a specified securities index. A Fund may engage in such futures
contracts in an effort to hedge against market risks. For example, when interest
rates are expected to rise or market values of portfolio securities are expected
to fall, a Fund can seek through the sale of futures contracts to offset a
decline in the value of its portfolio securities. When interest rates are
expected to fall or market values are expected to rise, a Fund, through the
purchase of such contracts, can attempt to secure better rates or prices for the
Fund than might later be available in the market when it effects anticipated
purchases.
The acquisition of put and call options on futures contracts
will, respectively, give a Fund the right (but not the obligation), for a
specified price, to sell or to purchase the underlying futures contract, upon
exercising the option at any time during the option period.
Aggregate initial margin deposits for futures contracts, and
premiums paid for related options, may not exceed 5% of a Fund's total assets,
and the value of securities that are the subject of such futures and options
(both for receipt and delivery) may not exceed one-third of the market value of
a Fund's total assets. Futures transactions will be limited to the extent
necessary to maintain each Fund's qualification as a regulated investment
company.
Futures transactions involve brokerage costs and require a
Fund to segregate liquid assets, such as cash, U.S. government securities or
other liquid high-grade debt obligations, to cover its performance under such
contracts. A Fund may lose the expected benefit of futures transactions if
interest rates, securities prices or foreign exchange rates move in an
unanticipated manner. Such unanticipated changes may also result in poorer
overall performance than if the Fund had not entered into any futures
transactions. In addition, the value of a Fund's futures positions may not prove
to be perfectly or even highly correlated with its portfolio securities and
foreign currencies, limiting the Fund's ability to hedge effectively against
interest rate, foreign exchange rate and/or market risk and giving rise to
additional risks. There is no assurance of liquidity in the secondary market for
purposes of closing out futures positions.
Foreign Currency Transactions. Each of the Funds, with the
exception of the Money Market Funds and the Tax-Free Income Funds, may utilize
foreign currency transactions in its portfolio. The value of the assets of a
Fund as measured in United States dollars may be affected favorably or
unfavorably by changes in foreign currency exchange rates and exchange control
regulations, and a Fund may incur costs in connection with conversions between
various currencies. A Fund will conduct its foreign currency exchange
transactions either on a spot (i.e., cash) basis at the spot rate prevailing in
the foreign currency exchange market, or through forward contracts to purchase
or sell foreign currencies. A forward foreign currency exchange contract
("forward currency contracts") involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. These forward currency contracts are traded directly between
currency traders (usually large commercial banks) and their customers. The Funds
may enter into forward currency contracts in order to hedge against adverse
movements in exchange rates between currencies.
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For example, when a Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, it may want to
establish the United States dollar cost or proceeds, as the case may be. By
entering into a forward currency contract in United States dollars for the
purchase or sale of the amount of foreign currency involved in an underlying
security transaction, such Fund is able to protect itself against a possible
loss between trade and settlement dates resulting from an adverse change in the
relationship between the United States dollar and such foreign currency.
Additionally, for example, when a Fund believes that a foreign currency may
suffer a substantial decline against the U.S. dollar, it may enter into a
forward currency sale contract to sell an amount of that foreign currency
approximating the value of some or all of that Fund's portfolio securities or
other assets denominated in such foreign currency. Alternatively, when a Fund
believes it will increase, it may enter into a forward currency purchase
contract to buy that foreign currency for a fixed U.S. dollar amount; however,
this tends to limit potential gains which might result from a positive change in
such currency relationships. A Fund may also hedge its foreign currency exchange
rate risk by engaging in currency financial futures and options transactions.
The forecasting of short-term currency market movement is
extremely difficult and whether such a short-term hedging strategy will be
successful is highly uncertain. It is impossible to forecast with precision the
market value of portfolio securities at the expiration of a forward currency
contract. Accordingly, it may be necessary for a Fund to purchase additional
currency on the spot market (and bear the expense of such purchase) if the
market value of the security is less than the amount of foreign currency such
Fund is obligated to deliver when a decision is made to buy the security and
make delivery of the foreign currency in settlement of a forward contract.
Conversely, it may be necessary to sell on the spot market some of the foreign
currency received upon the sale of the portfolio security if its market value
exceeds the amount of foreign currency such Fund is obligated to deliver.
If a Fund retains the portfolio security and engages in an
offsetting transaction, such Fund will incur a gain or a loss (as described
below) to the extent that there has been movement in forward currency contract
prices. If the Fund engages in an offsetting transaction, it may subsequently
enter into a new forward currency contract to sell the foreign currency. If
forward prices decline during the period between which a Fund enters into a
forward currency contract for the sale of foreign currency and the date it
enters into an offsetting contract for the purchase of the foreign currency,
such Fund would realize a gain to the extent the price of the currency it has
agreed to sell exceeds the price of the currency it has agreed to purchase. If
forward prices increase, such Fund would suffer a loss to the extent the price
of the currency it has agreed to purchase exceeds the price of the currency it
has agreed to sell. Although such contracts tend to minimize the risk of loss
due to a decline in the value of the hedged currency, they also tend to limit
any potential gain which might result if the value of such currency increases.
The Funds will have to convert their holdings of foreign currencies into United
States dollars from time to time. Although foreign exchange dealers do not
charge a fee for conversion, they do realize a profit based on the difference
(the "spread") between the prices at which they are buying and selling various
currencies.
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No Fund intends to enter into forward currency contracts if
more than 15% of the value of its total assets would be committed to such
contracts on a regular or continuous basis. A Fund also will not enter into
forward currency contracts or maintain a net exposure on such contracts where
such Fund would be obligated to deliver an amount of foreign currency in excess
of the value of the Fund's portfolio securities or other assets denominated in
that currency.
Foreign Currency Options. Each of the Funds, except the Money
Market Funds and the Tax-Free Income Funds, may invest in foreign currency
options. A foreign currency option provides the option buyer with the right to
buy or sell a stated amount of foreign currency at the exercise price at a
specified date or during the option period. A call option gives its owner the
right, but not the obligation, to buy the currency, while a put option gives its
owner the right, but not the obligation, to sell the currency. The option seller
(writer) is obligated to fulfill the terms of the option sold if it is
exercised. However, either seller or buyer may close its position during the
option period in the secondary market for such options any time prior to
expiration.
A call rises in value if the underlying currency appreciates.
Conversely, a put rises in value if the underlying currency depreciates. While
purchasing a foreign currency option can protect a Fund against an adverse
movement in the value of a foreign currency, it does not limit the gain which
might result from a favorable movement in the value of such currency. For
example, if a Fund were holding securities denominated in an appreciating
foreign currency and had purchased a foreign currency put to hedge against a
decline in the value of the currency, it would not have to exercise its put.
Similarly, if a Fund has entered into a contract to purchase a security
denominated in a foreign currency and had purchased a foreign currency call to
hedge against a rise in the value of the currency but instead the currency had
depreciated in value between the date of purchase and the settlement date, such
Fund would not have to exercise its call, but could acquire in the spot market
the amount of foreign currency needed for settlement.
Foreign Currency Futures Transactions. Each of the Funds,
except the Money Market Funds and the Tax-Free Income Funds, may invest in
foreign currency futures transactions. As part of its financial futures
transactions, the Funds may use foreign currency futures contracts and options
on such futures contracts. Through the purchase or sale of such contracts, a
Fund may be able to achieve many of the same objectives as through forward
foreign currency exchange contracts more effectively and possibly at a lower
cost.
Unlike forward foreign currency exchange contracts, foreign
currency futures contracts and options on foreign currency futures contracts are
standardized as to amount and delivery period and may be traded on boards of
trade and commodities exchanges or directly with a dealer which makes a market
in such contracts and options. It is anticipated that such contracts may provide
greater liquidity and lower cost than forward foreign currency exchange
contracts.
Regulatory Restrictions. To the extent required to comply with
Securities and Exchange Commission (the "SEC") Release No. IC-10666, when
purchasing a futures contract or writing a put option or entering into a forward
foreign currency exchange purchase, a Fund
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will maintain in a segregated account cash or liquid high-grade debt securities
equal to the value of such contracts.
To the extent required to comply with Commodity Futures
Trading Commission Regulation 4.5 and thereby avoid being classified as a
"commodity pool operator," a Fund will not enter into a futures contract or
purchase an option thereon if immediately thereafter the initial margin deposits
for futures contracts held by such Fund plus premiums paid by it for open
options on futures would exceed 5% of such Fund's total assets. Such Fund will
not engage in transactions in financial futures contracts or options thereon for
speculation, but only to attempt to hedge against changes in market conditions
affecting the values of securities which such Fund holds or intends to purchase.
When futures contracts or options thereon are purchased to protect against a
price increase on securities intended to be purchased later, it is anticipated
that at least 25% of such intended purchases will be completed. When other
futures contracts or options thereon are purchased, the underlying value of such
contracts will at all times not exceed the sum of: (1) accrued profit on such
contracts held by the broker; (2) cash or high quality money market instruments
set aside in an identifiable manner; and (3) cash proceeds from investments due
in 30 days.
Lending of Portfolio Securities. In order to generate
additional income, each of the Funds may, from time to time, lend its portfolio
securities to broker-dealers, banks or institutional borrowers of securities. A
Fund must receive 100% collateral in the form of cash or U.S. government
securities. This collateral must be valued daily by the Custodian and, should
the market value of the loaned securities increase, the borrower must furnish
additional collateral to the Fund. During the time portfolio securities are on
loan, the borrower pays the Fund any dividends or interest paid on such
securities. Loans are subject to termination on 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 that is considered
important with respect to the investment. In the event the borrower defaults in
its obligation to a Fund, the Fund bears the risk of delay in the recover of its
portfolio securities and the risk of loss of rights in the collateral. A Fund
will only enter into loan arrangements with broker-dealers, banks or other
institutions which the Investment Adviser has determined are creditworthy under
guidelines established by the Group's Board of Trustees.
Private Activity Bonds. The Tax-Free Income Funds and the
Tax-Free Fund may invest in private activity bonds. It should be noted that the
Tax Reform Act of 1986 substantially revised provisions of prior federal law
affecting the issuance and use of proceeds of certain tax-exempt obligations. A
new definition of private activity bonds applies to many types of bonds,
including those which were industrial development bonds under prior law. Any
reference herein to private activity bonds includes industrial development
bonds. Interest on private activity bonds is tax-exempt (and such bonds will be
considered Municipal Securities for purposes of this Statement of Additional
Information) only if the bonds fall within certain defined categories of
qualified private activity bonds and meet the requirements specified in those
respective categories. If a Fund invests in private activity bonds which fall
outside these categories, shareholders may become subject to the federal
alternative minimum tax on that part of the Fund's distributions derived from
interest on such bonds. The Tax Reform Act generally did not
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change the federal tax treatment of bonds issued to finance government
operations. For further information relating to the types of private activity
bonds which will be included in income subject to the federal alternative
minimum tax, see "ADDITIONAL INFORMATION -- Additional Tax Information
Concerning the Tax-Free Fund, the National Tax Exempt Bond Fund and the Michigan
Bond Fund" in the Statement of Additional Information.
INVESTMENT RESTRICTIONS
Each Fund is subject to a number of investment restrictions
that may be changed only by a vote of a majority of the outstanding shares of
that Fund (as defined in this Statement of Additional Information).
THE FOLLOWING INVESTMENT RESTRICTIONS APPLY TO ALL FUNDS EXCEPT THE U.S.
GOVERNMENT OBLIGATIONS FUND AND THE TREASURY FUND:
No Non-Money Market Fund, with the exception of the Michigan
Municipal Bond Fund, may:
Purchase securities of any one issuer, other than securities issued or
guaranteed by the U.S. government or its agencies or instrumentalities, if,
immediately after such purchase, more than 5% of the value of the Fund's total
assets would be invested in such issuer or the Fund would hold more than 10% of
any class of securities of the issuer or more than 10% of the outstanding voting
securities of the issuer, except that up to 25% of the value of the Fund's total
assets may be invested without regard to such limitations.
No Fund may:
1. Purchase any securities which would cause 25% or more of
the value of its total assets at the time of purchase to be invested in the
securities of one or more issuers conducting their principal business activities
in the same industry, provided that:
(a) there is no limitation with respect to
obligations issued or guaranteed by the U.S. government, any state, territory or
possession of the United States, the District of Columbia or any of their
authorities, agencies, instrumentalities or political subdivisions, and
repurchase agreements secured by such instruments, or in the case of the Prime
Obligations or Tax-Free Funds, domestic bank obligations and repurchase
agreements secured by such obligations;
(b) wholly-owned finance companies will be
considered to be in the industries of the their parents if their activities are
primarily related to financing the activities of the parents;
(c) utilities will be divided according to
their services, for example, gas, gas transmission, electric and gas, electric,
and telephone will each be considered a separate industry; and
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(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.
The following investment restrictions apply to the U.S. Government Obligations
Fund and the Treasury Fund:
Neither of the Funds may:
Purchase securities of any one issuer, other than obligations
issued or guaranteed by the U.S. government or its agencies or
instrumentalities, if, immediately after such purchase, more than 5% of the
value of the Fund's total assets would be invested in such issuer, or the Fund
would hold more than 10% of the outstanding voting securities of the issuer,
except that 25% or less of the value of such Fund's total assets may be invested
without regard to such limitations. There is no limit to the percentage of
assets that may be invested in U.S. Treasury bills, notes, or other obligations
issued or guaranteed by the U.S. government or its agencies or
instrumentalities.
Irrespective of the investment restriction above, and pursuant
to Rule 2a-7 under the 1940 Act, the U.S. Government Obligations Fund and the
Treasury Fund each will, with respect to 100% of its total assets, limit its
investment in the securities of any one issuer in the manner provided by such
Rule.
For purposes of the investment limitations above, a security
is considered to be issued by the governmental entity (or entities) whose assets
and revenues back the security and, with respect to a private activity bond that
is backed only by the assets and revenues of a non-governmental user, a security
is considered to be issued by such non-governmental user.
Neither of the Funds will:
1. Purchase any securities which would cause more than 25% of
the value of the Fund's total assets at the time of purchase to be invested in
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 or its agencies or
instrumentalities and repurchase agreements secured by obligations of the U.S.
government or its agencies or instrumentalities;
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(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 their parents;
(c) and 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.
2. Borrow money (not including reverse repurchase agreements
or dollar roll agreements), except that each Fund may borrow from banks for
temporary or emergency purposes and then only in amounts up to 10% of its total
assets at the time of borrowing (and provided that such bank borrowings, reverse
repurchase agreements and dollar roll agreements do not exceed in the aggregate
one-third of the Fund's total assets less liabilities other than the obligations
represented by the bank borrowings, reverse repurchase agreements and dollar
roll agreements), or mortgage, pledge or hypothecate any assets except in
connection with a bank borrowing, in amounts not to exceed 30% of the Fund's net
assets at the time of borrowing;
(a) enter into reverse repurchase agreements,
dollar roll agreements and other permitted borrowings in amounts exceeding in
the aggregate one-third of the Fund's total assets less liabilities other than
the obligations represented by such reverse repurchase and dollar roll
agreements; and
(b) issue senior securities except as permitted by
the 1940 Act or any rule, order or interpretation thereunder.
3. Make loans, except that a Fund may Purchase or hold debt
instruments and lend portfolio securities in accordance with its investment
objective and policies, make time deposits with financial institutions and enter
into repurchase agreements.
For purposes of investment limitation number 1 above only,
such limitation shall not apply to Municipal Securities or governmental
guarantees of Municipal Securities, and industrial development bonds or private
activity bonds that are backed only by the assets and revenues of a
non-governmental user shall not be deemed to be Municipal Securities.
For purposes of the above investment limitations, the Funds
treat all supranational organizations as a single industry and each foreign
government (and all of its agencies) as a separate industry. In addition, a
security is considered to be issued by the government entity (or entities) whose
assets and revenues back the security.
Generally, if a percentage limitation is satisfied at the time
of investment, a later increase or decrease in such percentage resulting from a
change in the value of a Fund's portfolio securities will not constitute a
violation of such limitation for purposes of the 1940 Act.
ADDITIONAL INVESTMENT LIMITATIONS
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Each Fund's investment objective may be changed without a vote
of the holders of a majority of the Fund's outstanding shares, with the
exception of the U.S. Government obligations and Treasury Funds. The investment
objectives of the U.S. Government Obligations and Treasury Funds are fundamental
and may not be changed without a vote of the holders of a majority of
outstanding shares of that Fund. In addition to the investment restrictions
disclosed above, the Funds are subject to the following investment limitations
which may be changed with respect to a particular Fund only by a vote of the
holders of a majority of such Fund's outstanding shares (as defined under
"ADDITIONAL INFORMATION - Vote of a Majority of the Outstanding Shares" in this
Statement of Additional Information).
The following investment restrictions apply to all Funds
except the U.S. Government Obligations Fund and the Treasury Fund:
No Fund may:
1. Purchase or sell real estate, except that the Fund may
purchase securities of issuers which deal in real estate and may purchase
securities which are secured by interests in real estate.
2. Invest in commodities, except that as is consistent with
its investment objective and policies a Fund may: (a) purchase and sell options,
forward contracts, futures contracts, including without limitation those
relating to indices; (b) purchase and sell options on futures contracts or
indices; and (c) purchase publicly traded securities of companies engaging in
whole or in part in such activities. For purposes of this investment limitation,
"commodities" includes commodity contracts.
(a) Act as an underwriter of securities within
the meaning of the Securities Act of 1933, except insofar as the Fund might be
deemed to be an underwriter upon the disposition of portfolio securities
acquired within the limitation on purchases of illiquid securities and except to
the extent that the purchase of obligations directly from the issuer thereof in
accordance with its investment objective, policies and limitations may be deemed
to be underwriting.
In addition, the Funds are subject to the following
non-fundamental limitations, which may be changed without the vote of
shareholders.
No Fund may:
1. Acquire any other investment company or investment company
security except in connection with a merger, consolidation, reorganization or
acquisition of assets or where otherwise permitted under the 1940 Act.
2. Write or sell put options, call options, straddles,
spreads, or any combination thereof, except, as consistent with the Fund's
investment objective and policies for
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transactions in options on securities or indices of securities, future contracts
and options on futures contracts and in similar investments.
3. Purchase securities on margin, make short sales of securities or
maintain a short position, except that, as consistent with a Fund's investment
objective and policies, (a) this investment limitation shall not apply to the
Fund's transactions in futures contracts and related options, options on
securities or indices of securities and similar instruments, and (b) it may
obtain short-term credit as may be necessary for the clearance of purchases and
sales of portfolio securities.
4. Purchase securities of companies for the purpose of exercising
control.
5. Invest more than 15% (10% in the case of a Money Market Fund) of its
net assets in illiquid securities.
The following investment restriction applies to the U.S. Government
Obligations Fund and the Treasury Fund:
No Fund may:
Purchase securities on margin, except for use of short-term credit
necessary for clearance of purchases of portfolio securities.
None of the Funds will:
1. Underwrite the securities issued by other persons, except to the
extent that a Fund may be deemed to be an underwriter under certain securities
laws in the disposition of "restricted securities";
2. Purchase or sell commodities or commodities contracts, except to the
extent disclosed in the current Prospectus of the Fund;
3. Purchase or sell real estate (although investments in marketable
securities of companies engaged in such activities and securities secured by
real estate or interests therein are not prohibited by this restriction);
4. Purchase any securities which would cause more than 25% of the value
of the Fund's total assets at the time of purchase to be invested in 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 or its agencies or
instrumentalities and repurchase agreements secured by obligations of the U.S.
government or its agencies or instrumentalities; (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 their parents,
and (c) utilities will provide according to their services. For example, gas,
gas transmission, electric and gas, electric, and telephone will each be
considered a separate industry;
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<PAGE> 41
5. Borrow money (not including reverse repurchase agreements
or dollar roll agreements), except that each Fund may borrow from banks for
temporary or emergency purposes and then only in amounts up to 30% of its total
assets at the time of borrowing (and provided that such bank borrowings and
reverse repurchase agreements and dollar roll agreements do not exceed in the
aggregate one-third of the Fund's total assets (10% in the case of the Money
Market Funds) less liabilities other than the obligations represented by the
bank borrowings, reverse repurchase agreements and dollar roll agreements), or
mortgages, pledge or hypothecate any assets except in connection with a bank
borrowing in amounts not to exceed 30% of the Fund's net assets at the time of
borrowing;
6. Enter into reverse repurchase agreements, dollar roll
agreements and other permitted borrowings in amounts exceeding in the aggregate
one-third of the Fund's total assets (10% in the case of the Money Market Funds)
less liabilities other than the obligations represented by such reverse
repurchase and dollar roll agreements;
7. Issue senior securities except as permitted by 1940 Act or
any rule, order or interpretation thereunder;
8. Make loans, except that a Fund may purchase or hold debt
instruments and lend portfolio securities in accordance with its investment
objective and policies, make time deposits with financial institutions and enter
into repurchase agreements; or
9. Write any call options on securities unless the securities
are held by the Fund or unless the Fund is entitled to such securities in
deliverable form in exchange for cash in an amount which has been segregated for
payment or without further payment. In no event will a Fund write call options
in excess of 5% of its total assets.
For purposes of investment limitation number 4 above only,
such limitation shall not apply to Municipal Securities or governmental
guarantees of Municipal Securities, and industrial development bonds or private
activity bonds that are backed only by the assets and revenues of a
non-governmental user shall not be deemed to be Municipal Securities.
The following additional investment restrictions may be
changed without the vote of a majority of the outstanding shares of a Fund. No
Fund may:
1. Engage in any short sales;
2. Invest more than 10% of the Fund's total assets in the
securities of issuers which, together with any predecessors, have a record of
less than three years of continuous operation;
3. Purchase securities of other investment companies, except
(a) in connection with a merger, consolidation, acquisition or reorganization,
and (b) to the extent permitted by the 1940 Act or pursuant to any exemptions
therefrom;
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4. Purchase or retain securities of any issuer if the officers
or Trustees of the Group and the officers or directors of its Investment Adviser
and of its Administrator, who each owns beneficially more than one-half of 1% of
the outstanding securities of such issuer, together own beneficially more than
5% of such securities;
5. Purchase participations or direct interests in oil, gas or
other mineral exploration or development programs (although investments by the
Fund in marketable securities of companies engaged in such activities are not
prohibited by this restriction); or
6. Purchase or otherwise acquire any securities if, as a
result, more than 15% (10% in the case of the Money Market Funds) of the Fund's
net assets would be invested in securities that are illiquid.
PORTFOLIO TURNOVER
The portfolio turnover rate for each of the Group's Funds is
calculated by dividing the lesser of a Fund's purchases or sales of portfolio
securities for the year by the monthly average value of the securities. The SEC
requires that the calculation exclude all securities whose remaining maturities
at the time of acquisition are one year or less.
Because each Money Market Fund intends to invest entirely in
securities with maturities of less than one year and because the SEC requires
such securities to be excluded from the calculation of portfolio turnover rate,
the portfolio turnover rate with respect to each of the Money Market Funds is
expected to be zero for regulatory purposes. The Balanced Allocation Fund does
not expect that its turnover rate with respect to that portion of its portfolio
invested in (i) common stocks and securities convertible into common stocks and
(ii) other investments will exceed 200%.
The portfolio turnover rates for the Funds of the Group 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, in the case of
the National Tax Exempt Bond Fund and the Michigan Municipal Bond Fund, by
requirements which enable those Funds to receive certain favorable tax
treatments. High portfolio turnover rates will generally result in higher
transaction costs to a Fund, including brokerage commissions, and may result in
additional tax consequences to a Fund's shareholders. Portfolio turnover will
not be a limiting factor in making investment decisions.
-40-
<PAGE> 43
For the Group's Income Funds, changes in portfolio turnover
rates occurred in connection with changes in opportunities perceived by the
Investment Adviser to be profitable to the Funds and their shareholders.
PARKSTONE INTERMEDIATE GOVERNMENT OBLIGATIONS FUND
During the fiscal year ended May 31, 1999, portfolio turnover was 53.07% as
compared to 774.28% for the previous fiscal year. The style of investment
management employed by the investment advisor sought to enhance shareholders'
total return through the active trading of portfolio holdings. The adviser's
style involves the monitoring of market values of securities held by the fund
relative to securities available in the marketplace. When the adviser believes
the relationships to be out of line with historically normal relationships, the
securities held would be traded for those in the marketplace. The adviser
believes that these "swaps" produce profits which benefit shareholders.
The adviser believes that opportunities for profits from the above described
activity are related to market conditions such as volatility. As market
volatility varies from period to period, so too may the opportunities to profit
from those market conditions. The management team determined that it was
appropriate to trade less actively in the volatile market environment present
during the fiscal year ended May 31, 1999, and therefore turnover was less than
during the previous period.
PARKSTONE U.S. GOVERNMENT INCOME FUND
During the fiscal year ended May 31, 1999, portfolio turnover was 52.60% as
compared to 278.94% for the previous fiscal year. The style of investment
management employed by the investment adviser sought to enhance shareholders'
total return through the active trading of portfolio holdings. The adviser's
style involves the monitoring of market values of securities held by the fund
relative to securities available in the marketplace. When the adviser believes
the relationships to be out of line with historically normal relationships, the
securities held would be traded for those in the marketplace. The adviser
believes that these "swaps" produce profits which benefit shareholders.
The adviser believes that opportunities for profits from the above described
activity are related to market conditions such as volatility. As market
volatility varies from period to period, so too may the opportunities to profit
from those market conditions. The management team determined that it was
appropriate to trade less actively in the volatile market environment present
during the fiscal year ended May 31, 1999, and therefore turnover was less than
during the previous period.
-41-
<PAGE> 44
PARKSTONE NATIONAL TAX EXEMPT BOND FUND
During the fiscal year ended May 31, 1999, portfolio turnover
was 6.67% as compared to 85.56% for the previous fiscal year. During fiscal year
ended May 31, 1999, the Fund experienced increased shareholder redemptions and a
net withdrawal of assets. As a result, the Fund engaged in fewer investment
purchase transactions, producing lower portfolio turnover figures than the
previous fiscal period.
PARKSTONE MID CAPITALIZATION FUND
During the fiscal year ended May 31, 1999, portfolio turnover
was 100.19% as compared to 38.41% for the previous fiscal year. The adviser
attributes increased portfolio turnover in fiscal year ended May 31, 1999 to a
portfolio restructuring beginning in early 1998 which continued into the
following fiscal year.
The adviser believes that opportunities for profits are
related to market conditions such as volatility. As market volatility varies
from period to period, so too may the opportunities to profit from those market
conditions. In the adviser's estimation, the fiscal year ended May 31, 1999
presented more opportunity for such profitable trades than did the previous
fiscal period and therefore trade activity was less than during the previous
period.
An additional factor which reduced turnover is the result of
the change in fiscal year. The fiscal period ended May 31, 1998 covers eleven
months as compared to twelve for the following fiscal year.
PARKSTONE EQUITY INCOME FUND
During the fiscal year ended May 31, 1999, portfolio turnover
was 51.09% as compared to 18.62% for the previous fiscal year. The adviser
attributes increased portfolio turnover in fiscal year ended May 31, 1999 to a
portfolio restructuring beginning in early 1998 which continued into the
following fiscal year.
The adviser believes that opportunities for profits are
related to market conditions such as volatility. As market volatility varies
form period to period, so too may the opportunities to profit from those market
conditions. In the adviser's estimation, the fiscal year ended May 31, 1998
presented less opportunity for such profitable trades than did the previous
fiscal year and therefore trade activity was less than during the previous
period.
An additional factor which increased turnover is the result
of the change in the fiscal year. The fiscal period ended May 31, 1998 covers
eleven months as compared to twelve for the following fiscal year.
NET ASSET VALUE
As indicated in the Prospectuses, the net asset value of each
Fund is determined and the shares of each Fund are priced as of the Valuation
Times defined in the Prospectuses on each Business Day of the Group. A business
day for the Funds is generally a day that the New York Stock Exchange is open
for business. The Funds will not be open in observance of the following
holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Columbus Day (Money Market
Funds only), Veterans Day (Money Market Funds only), Thanksgiving and Christmas
Day.
The offering prices for Investor A Shares of the Non-Money
Market Funds as of May 31, 1999 were calculated as illustrated in this example
using the Small Capitalization Fund:
Net Assets $ 57,813,023.36
=============
Outstanding Shares 3,127,013.544
=============
Net Asset Value Per Share $18.49
======
Sales Charge, 4.50% of the offering price
(4.71 of NAV) per share $0.87
=====
Offering Price $19.36
=====
The offering prices for Investor B Shares of the Funds as of
May 31, 1999 were calculated as illustrated in this example using the Small
Capitalization Fund:
Net Assets $18,735,578.45
==============
Outstanding Shares 1,053,724.266
=============
Net Asset Value Per Share $17.78
======
Sales Charge $0
==
Offering Price $17.78
======
The offering prices for Institutional Shares of the Non-Money
market Funds as of May 31, 1999 were calculated as illustrated in this example
using the Small Capitalization Fund:
Net Assets $226,139,332.69
===============
Outstanding Shares 11,972,740.594
==============
Net Asset Value Per Share $18.89
======
Sales Charge $0
==
Offering Price $18.89
======
-42-
<PAGE> 45
The net asset value per share will fluctuate as the value of the investment
portfolio of a Fund changes. However, the assets in each Money Market Fund are
valued based upon the amortized cost method.
VALUATION OF THE MONEY MARKET FUNDS
The Money Market Funds have elected to use the amortized cost
method of valuation pursuant to Rule 2a-7 under the 1940 Act. This involves
valuing an instrument at its cost initially and thereafter assuming a constant
amortization to maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument. This method
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price a Fund would receive if it sold the instrument.
The value of securities in the Money Market Funds can be expected to vary
inversely with changes in prevailing interest rates.
Pursuant to Rule 2a-7, the Money Market Funds will maintain a
dollar-weighted average maturity appropriate to each Fund's objective of
maintaining a stable net asset value per share, provided that no Fund will
purchase any security with a remaining maturity (calculated under the Rule) of
more than 397 days (thirteen months) (securities subject to repurchase
agreements may bear longer maturities) nor will it maintain a dollar-weighted
average maturity which exceeds 90 days. The Group's Board of Trustees has also
undertaken to establish procedures reasonably designed, taking into account
current market conditions and the investment objective of each of these Funds,
to stabilize the net asset value per share of each Fund for purposes of sales
and redemptions at $1.00. These procedures include review by the Trustees, at
such intervals as they deem appropriate, to determine the extent, if any, to
which the net asset value per share of each Fund calculated by using available
market quotations deviates from $1.00 per share. In the event such deviation
exceeds 0.5%, Rule 2a-7 requires that the Board of Trustees promptly consider
what action, if any, should be initiated. If the Trustees believe that the
extent of any deviation from a Fund's $1.00 amortized cost price per share may
result in material dilution or other unfair results to new or existing
investors, they will take such steps as they consider appropriate to eliminate
or reduce, to the extent reasonably practicable, any such dilution or unfair
results. These steps may include selling portfolio instruments prior to
maturity, shortening the dollar-weighted average maturity, withholding or
reducing dividends, reducing the number of the Fund's outstanding shares without
monetary consideration, or utilizing a net asset value per share determined by
using available market quotations. As permitted by Rule 2a-7 and the procedures
adopted by the Board, certain of the Board's responsibilities under the Rule may
be delegated to the Investment Adviser.
Foreign securities are valued based on quotations from the
primary market in which they are traded and are translated from the local
currency into U.S. dollars using current exchange rates.
-43-
<PAGE> 46
VALUATION OF THE NON-MONEY MARKET FUNDS
Portfolio securities, the principal market for which is a
securities exchange, will be valued at the closing sales price on that exchange
on the day of computation. With respect to the Fixed Income Funds, Tax-Free
Income Fund and the fixed income securities of the Balanced Allocation Fund, if
there have been no sales during such day, portfolio securities will be valued at
the mean between the most recent quoted bid and asked prices. Portfolio
securities, the principal market for which is not a securities exchange, will be
valued at the mean between the most recent quoted bid and asked prices in such
principal market. With respect to the Growth Funds, Equity Income Fund, and the
equity securities of the Balanced Allocation Fund, if there have been no sales
during such day, portfolio securities will be valued at the latest bid
quotation. In either case, if no such price is available, then such securities
will be valued in good faith at their respective fair market values using
methods determined by or under the supervision of the Board of Trustees of the
Group. Portfolio securities with a remaining maturity of 60 days or less will be
valued either at amortized cost or original cost plus accrued interest, which
approximates current value.
All other assets and securities including securities for which
market quotations are not readily available will be valued at their fair market
value as determined in good faith under the general supervision of the Board of
Trustees of the Group.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Each of the classes of shares of the Group's Funds is sold on
a continuous basis by the Group's distributor, SEI Investments Distribution Co.
("SEI" or the "Distributor"), and SEI has agreed to use appropriate efforts to
solicit all purchase orders. The Group's Funds offer two or more of the
following classes of shares: Investor A Shares, Investor B Shares and
Institutional Shares. In addition to purchasing shares directly from SEI,
Institutional Shares may be purchased at net asset value through procedures
established by SEI in connection with the requirements of financial
institutions, including the Trust Department of National City Bank, an affiliate
of the Funds' Investment Adviser, other affiliated entities acting on behalf of
customers for investment of funds that are held by such Trust Department in a
fiduciary, agency, custodial or similar capacity, although currently
Institutional Shares are only being offered to the trust departments of National
City Bank and its affiliates.
As stated in the relevant Prospectuses , the public offering
price of Investor A Shares of the Money Market Funds is their net asset value
per share which they will seek to maintain at $1.00. The public offering price
of Investor A Shares of each of the other Funds is its net asset value per share
next computed after the sale plus a sales charge which varies based upon the
quantity purchased. The public offering price of such Investor A Shares of a
Fund is calculated by dividing net asset value by the difference (expressed as a
decimal) between 100% and the sales charge percentage of offering price
applicable to the purchase. The offering price is rounded to two decimal places
each time a computation is made.
-44-
<PAGE> 47
The public offering price of Investor B Shares of each Fund is
its net asset value per share. Investor B Shares redeemed prior to five years
from the date of purchase may be subject to a contingent deferred sales charge
of 2.00% to 5.00%. Investor B Shares purchased prior to January 1, 1997 may be
subject to a contingent deferred sales charge of 2.00% to 4.00%, if redeemed
prior to four years from the date of purchase.
Investor A Shares and Investor B Shares of all Funds, except
the Money Market Funds, are eligible to earn dividends on the first business day
following the settlement of the purchase. Investor A Shares and Investor B
Shares of the Treasury and Tax-Free Funds purchased before 1 p.m., Eastern Time
begin earning dividends on the same business day. Investor A Shares and
Investor B Shares of the Prime Obligations Fund and the U.S. Government
Obligations Fund purchased before 3:00 p.m. Eastern Time begin earning dividends
on the same business day. Investor A Shares and Investor B Shares of the Funds
continue to be eligible to earn dividends through the day before their
redemption.
The Group may suspend the right of redemption or postpone the
date of payment for shares during any period when: (a) trading on the NYSE is
restricted by applicable rules and regulations of the SEC; (b) the NYSE is
closed for other than customary weekend and holiday closings; (c) the SEC has by
order permitted such suspension; or (d) an emergency exists as a result of
which: (i) disposal by the Group of securities owned by it is not reasonably
practicable, or (ii) it is not reasonably practicable for the Group to determine
the fair market value of its net assets. When redeeming shares, the signature
guarantee requirement will be waived if all of the following conditions apply:
(1) the redemption check is payable to the shareholder(s) of record, and (2) the
redemption check is mailed to the shareholder(s) at the address of record, and
(3) the amount of the redemption check is less than $10,000.
When purchases are made by check, redemption proceeds will not
be released until the investment being redeemed has been in the account 15 days.
The Money Market Funds may redeem shares involuntarily if
redemption appears appropriate in light of the Group's responsibilities under
the 1940 Act. See "NET ASSET VALUE - Valuation of the Money Market Funds" in
this Statement of Additional Information.
Institutional Shares of the Michigan Municipal Bond Fund may
only be sold in those states where the Fund has filed the required notification
documents, at the time of filing this registration statement only Colorado,
District of Columbia, Florida, Georgia, Hawaii, Illinois, Indiana, Michigan,
Mississippi, New Jersey, Ohio and Virginia.
Purchases of Shares of any of the Funds will be effected only
on a Business Day (as defined in "PRICING OF FUND SHARES" in the prospectus) of
the applicable Fund. An order received prior to a Valuation Time on any
Business Day will be executed at the net asset value determined as of the next
Valuation Time on the date of receipt. An order received after the last
Valuation Time on any Business Day will be executed at the net asset value
determined as of the next Valuation Time on the next Business Day of that Fund.
Institutional Shares of all Funds, except the Money Market Funds, are eligible
to earn dividends on the first Business Day following the settlement of the
purchase. Institutional Shares of the Treasury and Tax-Free Funds purchased
before 1 p.m., Eastern Time, will begin earning dividends on the same Business
Day. Institutional Shares of the Prime Obligations Fund and the U.S. Government
Obligations Fund purchased before 3:00 p.m. Eastern Standard Time begin earning
dividends on the same Business Day. Institutional Shares of the Funds continue
to be eligible to earn dividends through the day before their redemption.
-45-
<PAGE> 48
An order to purchase Institutional Shares will be deemed to
have been received by the Distributor only when federal funds are available to
the Group's Custodian for investment. Federal funds are monies credited to a
bank's account within a Federal Reserve Bank. Payment for an order to purchase
Institutional Shares which is transmitted by federal funds wire will be
available the same day for investment by the Group's Custodian if received prior
to the last Valuation Time. Purchases made by check or other means are made at
the price next determined upon receipt of the purchase instrument. However,
proceeds from redeemed shares purchased by check will not be sent until the
method of payment has cleared. The Group strongly recommends that investors of
substantial amounts use federal funds to purchase Institutional Shares.
The Group reserves the right to reject any order for the
purchase of Institutional Shares in whole or in part.
Confirmations of purchases and redemptions of Institutional
Shares of the Group by financial institutions on behalf of their customers may
be obtained from the financial institutions. Shareholders may rely on these
statements in lieu of certificates. Certificates representing Institutional
shares of the Funds will not be issued.
ADDITIONAL INFORMATION ABOUT REDEMPTION OF INSTITUTIONAL SHARES
Redemption orders are effected at the net asset value per
share next determined after the Institutional Shares are properly tendered for
redemption, as described above. The proceeds paid upon redemption of such
Institutional Shares of the Funds may be more or less than the amount invested.
Payment to shareholders for Institutional Shares redeemed will be made within
seven days after receipt by the Transfer Agent of the request for redemption.
However, to the greatest extent possible, receipts from financial institutions
for next day payments upon redemption of Institutional Shares except the Money
Market Funds will be honored if the request for redemption is received by the
Transfer Agent before 4:00 p.m., (Eastern Time), on a Business Day or, if
received after 4:00 p.m., (Eastern Time), within two Business Days, unless it
would be disadvantageous to the Group or the shareholders of a Fund to sell or
liquidate portfolio securities in an amount sufficient to satisfy requests for
payments in that manner.
MANAGEMENT OF THE GROUP
TRUSTEES AND OFFICERS
Overall responsibility for management of the Group rests with
its Board of Trustees, who are elected by the shareholders of the Group's Funds.
The Trustees elect the officers of the Group to supervise actively its
day-to-day operations. One officer of the Trust, Herbert R. Martens, Jr., also
serves as a Trustee.
The Trustees of the Group, their addresses, ages and principal
occupations during the past five years are as follows:
-46-
<PAGE> 49
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation
Names, Addresses and Ages with the Group During Past 5 Years
- ------------------------- ---------------- ---------------------
<S> <C> <C>
Robert D. Neary Chairman of the Retired Co-Chairman of Ernst & Young, April 1984
32980 Creekside Drive Board and Trustee to September 1993; Director, Cold Metal Products,
Pepper Pike, OH 44124 Inc., since March 1994; Director, Strategic Distribution, Inc., since
Age 65 January 1999; Trustee of Armada Funds and Parkstone Advantage Funds
since November 1997.
Herbert R. Martens, Jr.* President and Executive Vice President, National City Corporation (bank holding
c/o NatCity Investments, Inc. Trustee company), since July 1997; Chairman, President and Chief Executive
1965 East Sixth Street Officer, NatCity Investments, Inc. (investment banking), since July
Cleveland, OH 44114 1995; President and Chief Executive Officer, Raffensberger, Hughes &
Age 47 Co., (broker-dealer) from 1993 until 1995; President, Reserve Capital
Group, from 1990 until 1993; Trustee of Armada Funds and Parkstone
Advantage Funds since November 1997.
Leigh Carter* Trustee Retired President and Chief Operating Officer, B.F. Goodrich Company,
13901 Shaker Blvd., #6B August 1986 to September 1990; Director, Adams Express Company
Cleveland, OH 44120 (closed-end investment company), April 1982 to December 1997;
Age 74 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
blowers 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 of Armada Funds
and Parkstone Advantage Funds since November 1997.
John F. Durkott Trustee President and Chief Operating Officer, Kittle's Home Furnishings
8600 Allisonville Road Center, Inc., since January 1982; partner, Kittles Bloomington
Indianapolis, IN 46250 Properties LLC, since January 1981; partner, KK&D LLC, since January
Age 55 1989; partner, KKGD II LLC, since February 1998 (affiliated real
estate companies of Kittles Home Furnishings Center); Trustee of
Armada Funds and Parkstone Advantage Funds since November 1997.
Robert J. Farling Trustee Retired Chairman, President and Chief Executive Officer, Centerior
1608 Balmoral Way Energy (electric utility), March 1992 to October 1997; Director,
Westlake, OH 44145 National City Bank until October 1997; Director, Republic Engineered
Age 62 Steels, October 1997 to September 1998; Trustee of Armada Funds and
Parkstone Advantage Funds since November 1997.
Richard W. Furst, Dean Trustee Garvice D. Kincaid Professor of Finance and Dean, Carol Martin Gatton
2133 Rothbury Road College of Business and Economics; University of Kentucky, since
Lexington, KY 40515 1981; Director, The Seed Corporation (restaurant group), since 1990;
Age 61 Director, Foam Design, Inc., (manufacturer of industrial and
commercial foam products), since 1993; Trustee of Armada Funds and
Parkstone Advantage Funds since November 1997.
Gerald L. Gherlein Trustee Executive Vice-President and General Counsel, Eaton Corporation,
3679 Greenwood Drive since 1991 (global manufacturing); Trustee, WVIZ Educational
Pepper Pike, OH 44124 Television (public television); Trustee of Armada Funds and
Age 61 Parkstone Advantage Funds since November 1997.
</TABLE>
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<PAGE> 50
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation
Names, Addresses and Ages with the Group During Past 5 Years
- ------------------------- ---------------- ---------------------
<S> <C> <C>
J. William Pullen Trustee President and Chief Executive Officer, Whayne Supply Co. (engine and
Whayne Supply Company heavy equipment distribution), since 1986; President and Chief
1400 Cecil Avenue Executive Officer, American Contractors Rentals & Sales (rental
P.O. Box 25900 subsidiary of Whayne Supply Co.), since 1988.
Louisville, KY 40232-5900
Age 60
</TABLE>
*Mr. Carter and Mr. Martens are each an "interested person"
of the Trust, as defined in the 1940 Act.
Mr. Martens is an "interested person" because (1) he is an
Executive Vice President of National City Corporation, (2) he owns shares of
common stock and options to purchase common stock of National City Corporation,
and (3) he is the Chief Executive Officer of NatCity Investments, Inc., a
broker-dealer affiliated with National City Investment Management Company.
Mr. Carter is an "interested person" of the Trust, as defined
in the 1940 Act, due to his ownership of 7,200 shares of stock of National City
Corporation, an affiliate of National City Investment Management Company, the
Fund's investment adviser.
The Group paid an aggregate of $78,688 in Trustees' fees
and expenses for the fiscal year ended May 31, 1999, to all Trustees of the
Group. All of the Trustees also serve as Trustees of The Parkstone Advantage
Fund, an open-end investment company managed by the Group's Investment Adviser
as an investment vehicle for insurance company separate accounts, and as
Trustees for Armada Funds. The following table depicts, for the fiscal period
ended May 31, 1999, the compensation received by each of the Trustees from the
Group and in total from all investment companies managed by the Investment
Adviser to the Group.
COMPENSATION TABLE
<TABLE>
<CAPTION>
PENSION OR TOTAL COMPENSATION
RETIREMENT ESTIMATED FROM GROUP THE PARKSTONE
AGGREGATE BENEFITS ACCRUED ANNUAL ADVANTAGE FUND AND THE
COMPENSATION AS PART OF FUND BENEFITS UPON FUND COMPLEX (ARMADA
NAME OF TRUSTEE FROM THE GROUP EXPENSES RETIREMENT FUNDS) PAID TO TRUSTEES*
--------------- ------------- ---------------- ------------- ------------------------
<S> <C> <C> <C> <C>
Robert D. Neary $7,546 -0- 35,000
Leigh Carter 6,367 -0- 30,000
John F. Durkott 6,367 -0- 30,000
Robert J. Farling 6,367 -0- 30,000
Richard W. Furst 6,367 -0- 30,000
Gerald L. Gherlein 6,367 -0- 30,000
Herbert R. Martens, Jr. 6,367 -0- 30,000
</TABLE>
-48-
<PAGE> 51
<TABLE>
<CAPTION>
PENSION OR TOTAL COMPENSATION
RETIREMENT ESTIMATED FROM GROUP THE PARKSTONE
AGGREGATE BENEFITS ACCRUED ANNUAL ADVANTAGE FUND AND THE
COMPENSATION AS PART OF FUND BENEFITS UPON FUND COMPLEX (ARMADA
NAME OF TRUSTEE FROM THE GROUP EXPENSES RETIREMENT FUNDS) PAID TO TRUSTEES*
--------------- ------------- ---------------- ------------- ------------------------
<S> <C> <C> <C> <C>
J. William Pullen $6,367 -0- $30,000
John B. Rapp 6,588 -0- 6,588
George R Landreth 6,588 -0- 6,588
Robert M. Beam 6,588 -0- 6,588
Lawrence D. Bryan 6,588 -0- 6,588
Adrian Charles Edwards 6,588 -0- 6,588
James F. Jones, Jr. 6,588 -0- 6,588
</TABLE>
Each Trustee who is not an affiliated person of BISYS or National City
Corporation, the ultimate parent of IMC, receives an annual fee of $15,000 plus
$3,000 for each Board meeting attended and reimbursement of expenses incurred in
attending meetings for services as a Trustee to the Fund Complex. The Chairman
of the Board is entitled to receive an additional $5,000 per annum for services
in such capacity. Mr. Martens is an employee of National City Corporation. He
receives no compensation from the Group for acting as Trustee. On February 12,
1997, Mr. Rapp became a Trustee. Dr. Jones began serving as a Trustee on August
21, 1997. Messrs. Rapp, Beam, Bryan, Edwards and Jones served as Trustees until
their resignations on August 14, 1998.
* Reflects total compensation paid to Trustees for the fiscal year
June 1, 1998 through May 31, 1999.
The officers of the Group, their addresses, and principal
occupations during the past five years are as follows:
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation
Name With the Group During Past 5 Years
- ---- -------------- -------------------
<S> <C> <C>
Herbert R. Martens, Jr. President Executive Vice President, National City Corporation
c/o NatCity Investments (bank holding company), since July 1997; Chairman,
1965 East Sixth Street President and Chief Executive Officer, NatCity
Cleveland, OH 44114 Investments, Inc. (investment banking), since July
1995; President and Chief Executive Officer,
Raffensperger, Hughes & Co., (broker-dealer), from
1993 until 1995; President, Reserve Capital Group,
from 1990 until 1993; President, since July 1997 and
Trustee, since November 1997 of Armada Funds.
W. Bruce McConnel, III Secretary Partner of the law firm Drinker Biddle & Reath LLP,
One Logan Square Philadelphia.
18th and Cherry Streets
Philadelphia, PA 19103-6996
</TABLE>
-49-
<PAGE> 52
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation
Name With the Group During Past 5 Years
- ---- -------------- -------------------
<S> <C> <C>
Gary Tenkman Treasurer Director of Financial Services, BISYS Fund Services
3435 Stelzer Road since April 1998; formerly, Audit Manager, Ernst &
Columbus, OH 43219 Young LLP.
R. Jeffrey Young Assistant Treasurer Vice President, Client Services; BISYS Fund Services
3435 Stelzer Road
Columbus, OH 43219
</TABLE>
The officers of the Group receive no compensation directly
from the Group for performing the duties of their offices. As Administrator,
BISYS receives fees from the Group. As Distributor, SEI may retain all or a
portion of any sales charge on the shares sold and may receive fees under the
Distribution and Shareholder Service Plans described below. BISYS Fund Services
Ohio, Inc. ("BISYS Ohio," or the "Fund Accountant") receives fees from the Group
for providing certain fund accounting services. Mr. Tenkman, the Treasurer of
the Group, and Mr. Young, the Assistant Treasurer of the Group, are employees of
BISYS.
TRUSTEE DEFERRED COMPENSATION PLAN
The Trustees may elect to defer payment of 25% to 100% of the
fees the Trustee receives 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 Armada Funds, 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 two 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 to a Trustee.
INVESTMENT ADVISER
Subject to the general supervision of the Group's Board of
Trustees and in accordance with the Funds' investment objectives and
restrictions, investment advisory services are provided to the Funds of the
Group by IMC (formerly "First of America"), 1900 East Ninth Street, Cleveland,
Ohio 44114, pursuant to the Investment Advisory Agreement dated July 9, 1987, as
amended (with respect to the Money Market Funds) and the Investment Advisory
Agreement dated September 8, 1988, as amended (with respect to the Small
Capitalization Fund, Mid Capitalization Fund, Large Capitalization Fund, Equity
Income Fund, Bond Fund, Limited Maturity Bond Fund, Intermediate Government
Obligations Fund, National Tax Exempt Bond Fund, Michigan Municipal Bond Fund,
Balanced Allocation Fund and Government Income Fund) (the "First Investment
Advisory Agreements") and the Investment Advisory Agreement
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<PAGE> 53
dated as of December 22, 1992 (with respect to the International Discovery Fund
(the "Second Investment Advisory Agreement") (together called the "Investment
Advisory Agreements").
IMC is a registered investment adviser and an indirect
wholly-owned subsidiary of National City Corporation ("NCC"). As of August 5,
1998, NCC consolidated the asset management responsibilities of its various bank
affiliates including FOA. Prior to such time, the investment adviser of the
Funds was First of America Investment Corporation ("First of America"), a
wholly-owned subsidiary of FOA.
Under the Investment Advisory Agreements, the Investment
Adviser has agreed to provide, either directly or through one or more
subadvisers, investment advisory services for each of the Group's Funds as
described in their Prospectuses. For the services provided and expenses assumed
pursuant to the Investment Advisory Agreements, each of the Group's Funds pays
IMC a fee, computed daily and paid monthly, at an annual rate calculated as a
percentage of the average daily net assets of that Fund. The annual rates for
the Funds are as follows: 0.35% for the Prime Obligations, U.S. Government
Obligations and Tax-Free Funds; 0.30% for the Treasury Fund; 0.55% for the Bond
Fund, Intermediate Government Obligations Fund, National Tax Exempt Bond Fund,
Michigan Municipal Bond Fund and U.S. Government Income Fund; 0.45% for the
Limited Maturity Bond Fund; 1.00% for the Small Capitalization Fund and Mid
Capitalization Fund; 0.75% for the Equity Income Fund, Balanced Allocation
Fund and the Large Capitalization Fund; and 1.15% for the International
Discovery Fund. The Investment Adviser may periodically voluntarily reduce all
or a portion of its advisory fee with respect to any Fund to increase the net
income of one or more of the Funds available for distribution as dividends.
Pursuant to each of the Investment Advisory Agreements, the
Investment Adviser will pay all expenses, including, as applicable, the
compensation of any subadvisers directly appointed by it, incurred by it in
connection with its activities under the Investment Advisory Agreements other
than the cost of securities (including brokerage commissions, if any) purchased
for the Group.
For the fiscal year ended May 31, 1999, the fiscal period
ended May 31, 1998 and the fiscal year ended June 30, 1997, IMC collected and
voluntarily reduced the amounts indicated below which were payable to it with
respect to its investment advisory services to the indicated Funds under the
Investment Advisory Agreements:
<TABLE>
<CAPTION>
------------------------------------- ---------------------------- ----------------------------- ------------------------------
Fiscal Year Ended Fiscal Period Ended Fiscal Year Ended
May 31 May 31 June 20
Fund 1999 1998 1997
------------------------------------- -------------- ------------- -------------- -------------- -------------- ---------------
Gross Fees Gross Fees Gross Fees
Fees Voluntarily Fees Voluntarily Fees Voluntarily
Collected Reduced Collected Reduced Collected Reduced
------------------------------------- -------------- ------------- -------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
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<PAGE> 54
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Prime Obligations Fund 2,999,418 -- 3,212,525 -- 3,441,611 --
========= ==
U.S. Government Obligations Fund 985,798 -- 1,390,243 -- 1,712,370 --
======= ==
Tax-Free Fund 508,087 -- 631,554 -- 651,531 --
======= ==
Treasury Fund 1,656,809 -- 1,905,446 -- 1,618,910 --
========= ==
Small Capitalization Fund 4,620,482 -- 7,988,486 -- 7,049,924 --
========= ==
Mid Capitalization Fund 4,989,834 -- 6,103,574 -- 6,531,413 --
========= ==
Large Capitalization Fund(1) 3,460,325 -- 2,681,620 -- 2,725,217 --
========= ==
International Discovery Fund 4,475,280 -- 4,978,744 -- 4,981,112 --
========= ==
Equity Income Fund 3,577,042 -- 3,390,234 -- 4,335,969 --
========= ==
Balanced Allocation Fund 2,522,347 630,584 2,599,865 649,964 1,946,812 484,709
========= =======
Bond Fund 3,501,772 189,286 3,554,009 192,110 4,027,206 207,298
========= =======
Limited Maturity Bond Fund 1,300,423 333,893 1,263,800 324,490 1,134,805 289,664
========= =======
Intermediate Government Obligations 1,266,774 68,475 1,334,336 72,116 1,692,438 86,957
Fund ========= ========
U.S. Government Income Fund 1,630,666 639,043 1,649,105 646,269 1,587,392 620,579
========= =======
National Tax Exempt Bond Fund 909,411 233,498 954,911 245,181 1,058,852 270,292
======= =======
Michigan Municipal Bond Fund 1,762,680 452,581 1,705,361 437,864 1,715,085 437,841
========= =======
------------------------------------- -------------- ------------- -------------- -------------- -------------- ---------------
</TABLE>
(1) Commenced operations December 27, 1995.
Unless sooner terminated, each of the Investment Advisory
Agreements continues in effect as to a particular Fund for successive one-year
periods ending December 31 of each year if such continuance is approved at least
annually by the Group's Board of Trustees or by vote of a majority of the
outstanding shares of such Fund, and a majority of the Trustees who are not
parties to the Investment Advisory Agreements or interested persons (as defined
in the 1940 Act) of any party to the Investment Advisory Agreements by votes
cast in person at a meeting called for such purpose.
The Investment Advisory Agreements is terminable as to a particular Fund at any
time on 60 days' written notice without penalty by the Trustees, by vote of a
majority of the outstanding shares of that Fund, or by the Investment Adviser.
Such Agreements also terminate automatically in the event of any assignment, as
defined in the 1940 Act.
The Investment Advisory Agreements provide that the Investment
Adviser shall not be liable for any error of judgment or mistake of law or for
any loss suffered by the Group in connection with the performance of their
duties, except a loss suffered by a Fund 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 respective investment adviser or subadviser in the performance of their
duties, or from reckless disregard of their duties and obligations thereunder.
From time to time, advertisements, supplemental sales
literature and information furnished to present or prospective shareholders of
the Funds may include descriptions of the Investment Adviser including, but not
limited to, (i) descriptions of the Investment Adviser's operations; (ii)
descriptions of certain personnel and their functions; and (iii) statistics and
rankings related to the Investment Adviser's operations.
PORTFOLIO TRANSACTIONS
-52-
<PAGE> 55
With respect to all Funds of the Group pursuant to the
Investment Advisory Agreements, the Investment Adviser determines, subject to
the general supervision of the Board of Trustees of the Group and in accordance
with each Fund's investment objective and restrictions, which securities are to
be purchased and sold by a Fund, and which brokers are to be eligible to execute
such Fund's portfolio transactions.
Purchases and sales of portfolio securities which are debt
securities usually are principal transactions in which portfolio securities are
normally purchased directly from the issuer or from an underwriter or market
maker for the securities. Purchases from underwriters of portfolio securities
generally 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 prices. Transactions on stock exchanges involve
the payment of negotiated brokerage commissions. Transactions in the
over-the-counter market are generally principal transactions with dealers. With
respect to the over-the-counter market, the Group, where possible, will deal
directly with dealers who make a market in the securities involved except in
those circumstances where better price and execution are available elsewhere.
Allocation of transactions, including their frequency, to
various brokers and dealers is determined by the Investment Adviser in their
best judgment and in a manner deemed fair and reasonable to shareholders. The
primary consideration is prompt execution of orders in an effective manner at
the most favorable price. Subject to this consideration, brokers and dealers who
provide supplemental investment research to the Investment Adviser may receive
orders for transactions on behalf of the Group. Information so received is in
addition to and not in lieu of services required to be performed by the
Investment Adviser and does not reduce the fees payable to such advisers by the
Group or the Investment Adviser, as the case may be. Such information may be
useful to the Investment Adviser in serving both the Group and other clients
and, conversely, supplemental information obtained by the placement of business
of other clients may be useful to such advisers in carrying out their
obligations to the Group.
While the Investment Adviser generally seek competitive
commissions, the Group may not necessarily pay the lowest commission available
on each brokerage transaction for reasons discussed above. For the fiscal year
ended May 31, 1999, the fiscal period ended May 31, 1998 and the fiscal year
ended June 30, 1997, the Group paid an aggregate of approximately $4,823,984,
$2,930,315 and $3,118,633, respectively, as brokerage commissions on behalf of
the Funds.
For the fiscal year ended May 31, 1999, the Group paid the
following amounts in brokerage commissions:
Large Capitalization Fund $414,931
Mid Capitalization Fund $1,208,884
Small Capitalization Fund $820,444
Equity Income Fund $447,314
Balanced Allocation Fund $305,194
International Discovery Fund $1,627,217
Total $4,823,984
For the fiscal period ended May 31, 1998, the Group paid the
following amounts in broker commissions:
Large Capitalization Fund $279,187
Mid Capitalization Fund $599,906
Small Capitalization Fund $518,158
Equity Income Fund $292,869
Balanced Allocation Fund $168,030
International Discovery Fund $1,024,637
Aggressive Allocation Fund $39,287
Conservative Allocation Fund $8,241
Total $2,930,315
For the fiscal year ended June 30, 1997, the Group paid the
following amounts in brokerage commissions:
Large Capitalization Fund $435,624
Mid Capitalization Fund $823,397
Small Capitalization Fund $222,770
Equity Income Fund $269,746
Balanced Allocation Fund $218,542
International Discovery Fund $1,117,150
Aggressive Allocation Fund $29,100
Conservative Allocation Fund $2,304
Total $3,118,633
The Group will not acquire portfolio securities issued by,
make savings deposits in, or enter into repurchase or reverse repurchase
agreements with National City Corporation (the parent corporation of IMC), SEI,
BISYS, or their affiliates, and will not give preference to National City
Corporation's correspondents with respect to such transactions, securities,
savings deposits, repurchase agreements, and reverse repurchase agreements.
Investment decisions for each Fund of the Group are made
independently from those for the other Funds or any other portfolio, investment
company or account managed by the Investment Adviser. Any such other portfolio,
investment company or account may also invest
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<PAGE> 56
in the same securities as the Group. When a purchase or sale of the same
security is made at substantially the same time on behalf of a Fund and another
Fund, portfolio, investment company or account, the transaction will be averaged
as to price and available investments will be allocated as to amount in a manner
which the Investment Adviser believes to be equitable to the Fund(s) and such
other portfolio, investment company or account. In some instances, this
investment procedure may adversely affect the price paid or received by a Fund
or the size of the position obtained by a Fund. To the extent permitted by law,
the Investment Adviser may aggregate the securities to be sold or purchased for
a Fund with those to be sold or purchased for other Funds or for other
portfolios, investment companies or accounts in order to obtain best execution.
As provided by the Investment Advisory Agreements, in making investment
recommendations for the Group, the Investment Adviser will not inquire or take
into consideration whether an issuer of securities proposed for purchase or sale
by the Group is a customer of the Investment Adviser, its parent or its
subsidiaries or affiliates, and, in dealing with its customers, the Investment
Adviser, its parent, subsidiaries, and affiliates will not inquire or take into
consideration whether securities of such customers are held by the Group.
Each of the Prime Obligations Fund, Mid Capitalization Fund, Equity Income
Fund, Small Capitalization Fund, Bond Fund, Limited Maturity Bond Fund,
Balanced Allocation Fund, U.S. Government Income Fund and Large Capitalization
Fund held, from time to time during the fiscal period ended May 31, 1999,
securities of its regular brokers or dealers, as defined in Rule 10b-1 under
the 1940 Act, or their parent companies, including: with respect to the Prime
Obligations Fund, those of Morgan Stanley, Goldman Sachs and Merrill Lynch;
with respect to the Mid Capitalization Fund, those of Merrill Lynch; with
respect to the Equity Income Fund, those of Merrill Lynch and J.P. Morgan; with
respect to the Small Capitalization Fund, those of Merrill Lynch; with respect
to the Bond Fund, those of Merrill Lynch and J.P. Morgan; with respect to the
Limited Maturity Bond Fund, those of Lehman Brothers and Merrill Lynch; with
respect to the Balanced Allocation Fund, those of Merrill Lynch and J.P.
Morgan; with respect to the U.S. Government Income Fund, those of Prudential,
Merrill Lynch and Morgan Stanley; and with respect to the Large Capitalization
Fund, those of Merrill Lynch and J.P. Morgan.
As of May 31, 1999, the Prime Obligations Fund held the following amounts of
the securities of Merrill Lynch: $9,998,000. The Mid Capitalization Fund held
the following amounts of the securities of Merrill Lynch:$20,000,000. The
Equity Income Fund held the following amounts of securities of Merrill
Lynch:$10,000,000. The Bond Fund held the following amounts of securities of
Merrill Lynch:$20,000,000. The Limited Maturity Fund held the following amounts
of the securities of Lehman Brothers and Merrill Lynch, respectively:
$5,036,000 and $2,463,000. The Balanced Allocation Fund held the following
amounts of the securities of Merrill Lynch and J.P. Morgan, respectively:
$10,000,000 and $794,000. The U.S. Government Income Fund held the following
amounts of the securities of Prudential: $900,000. The Large Capitalization
Fund held the following amounts of the securities of Merrill Lynch and J.P.
Morgan, respectively: $20,000,000 and $4,597,000.
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<PAGE> 57
AUTHORITY TO ACT AS INVESTMENT ADVISER
Banking laws and regulations currently prohibit a bank holding
company registered under the Bank Holding Company Act of 1956, as amended, or
any bank or non-bank affiliate thereof from sponsoring, organizing, controlling
or distributing the shares of a registered, open-end investment company
continuously engaged in the issuance of its shares, and prohibits banks
generally from issuing, underwriting, selling, or distributing securities such
as shares of the Funds, but do not prohibit such a bank holding company or its
affiliates or banks generally from acting as investment adviser, transfer agent,
or custodian to such an investment company or from purchasing shares of such a
company as agent for and upon the order of customers. The investment adviser and
custodians are subject to such banking laws and regulations. Should legislative,
judicial, or administrative action prohibit or restrict the activities of such
companies in connection with their services to the Funds, the Group might be
required to alter materially or discontinue its arrangements with such companies
and change its method of operation. It is anticipated, however, that any
resulting change in the Group's method of operation would not affect a Fund's
net asset value per share or result in financial losses to any shareholder.
State securities laws on this issue may differ from federal law and banks and
financial institutions may be required to register as dealers pursuant to state
law.
GLASS-STEAGALL ACT
In 1971, the United States Supreme Court held in Investment
Company Institute v. Camp that the Federal statute commonly referred to as the
Glass-Steagall Act prohibits a national bank from operating a mutual fund for
the collective investment of managing agency accounts. Subsequently, the Board
of Governors of the Federal Reserve System (the "Board") issued a regulation and
interpretation to the effect that the Glass-Steagall Act and such decision: (a)
forbid a bank holding company registered under the Federal Bank Holding Company
Act of 1956 (the "Holding Company Act") or any non-bank affiliate thereof from
sponsoring, organizing, or controlling a registered, open-end investment company
continuously engaged in the issuance of its shares, but (b) do not prohibit such
a holding company or affiliate from acting as investment adviser, transfer
agent, and custodian to such an investment company. In 1981, the United States
Supreme Court held in Board of Governors of The Federal Reserve System v.
Investment Company Institute that the Board did not exceed its authority under
the Holding Company Act when it adopted its regulation and interpretation
authorizing bank-companies and their non-bank affiliates to act as investment
advisers to registered closed-end investment companies. In the Board of
Governors case, the Supreme Court also stated that if a national bank complied
with the restrictions imposed by the Board in its regulation and interpretation
authorizing bank holding companies and their non-bank affiliates to act as
investment advisers to investment companies, a national bank performing
investment advisory services for an investment company would not violate the
Glass-Steagall Act. The Office of the Comptroller of the Currency, which has
jurisdiction over national banks and their subsidiaries, has specifically
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<PAGE> 58
permitted national banks and their subsidiaries to act as investment advisers to
investment companies.
The Investment Adviser believes that it possesses the legal
authority to perform the services for the Funds contemplated by the
Prospectuses, this Statement of Additional Information and the Investment
Advisory Agreements without violation of applicable statutes and regulations.
Future changes in either federal or state statutes and regulations relating to
the permissible activities of banks or bank holding companies and the
subsidiaries or affiliates of those entities, as well as further judicial or
administrative decisions or interpretations of present and future statutes and
regulations, could prevent or restrict the Investment Adviser from continuing to
perform such services for the Group. Depending upon the nature of any changes in
the services which could be provided by the Investment Adviser, the Board of
Trustees of the Group would review the Group's relationship with the Investment
Adviser and consider taking all action necessary in the circumstances.
Should future legislative, judicial, or administrative action
prohibit or restrict the proposed activities of the Investment Adviser and/or
National City Corporation's affiliated and correspondent banks in connection
with customer purchases of shares of the Group, those banks might be required to
alter materially or discontinue the services offered by them to customers. It is
not anticipated, however, that any change in the Group's method of operations
would affect its daily net asset value per share or result in financial losses
to any shareholder.
ADMINISTRATOR AND SUB-ADMINISTRATOR
BISYS, 3435 Stelzer Road, Columbus, Ohio 43219, formerly the
Winsbury Company Limited Partnership, serves as administrator (the
"Administrator") to the Group pursuant to the Administration Agreement dated
January 1, 1995, as amended (the "Administration Agreement"). BISYS and its
affiliated companies, including BISYS Ohio, are wholly-owned by The BISYS Group,
Inc., a publicly-held company which is a provider of information processing,
loan servicing and 401(k) administrative and recordkeeping securities to and
through banking and other financial organizations. The Administrator assists in
supervising all operations of each Fund (other than those performed by the
Investment Adviser under the Investment Advisory Agreements, by National City
Bank and Union Bank (the "Custodians") under the Custody Agreement and by BISYS
Ohio under the Fund Accounting Agreement). The Administrator is a broker-dealer
registered with the SEC, and is a member of the National Association of
Securities Dealers, Inc.
Under the Administration Agreement, the Administrator has
agreed to maintain office facilities for the Group; furnish statistical and
research data, clerical and certain bookkeeping services and stationery and
office supplies; prepare the periodic reports to the SEC on Form N-SAR or any
replacement forms therefor; compile data for, prepare for execution by the Funds
and file certain federal and state tax returns and required tax filings; prepare
compliance filings pursuant to state securities laws with the advice or the
Group's counsel; keep and maintain the financial accounts and records of the
Funds, including calculation of daily expense accruals; in the case of the Money
Market Funds, determine the actual variance from
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<PAGE> 59
$1.00 of the Fund's net asset value per share; and generally assist in all
aspects of the Group's operations other than those performed by the Investment
Adviser under the Investment Advisory Agreements, by State Street Bank and Trust
Company under the Custody Agreements and by BISYS Ohio under the Fund Accounting
Agreement. Under the Administration Agreement, the Administrator may delegate
all or any part of its responsibilities thereunder.
Pursuant to its authority to delegate its responsibilities under the
Administration Agreement, the Administrator has engaged IMC to provide certain
services as Sub- Administrator to the Funds of the Group. IMC serves as
Sub-Administrator to the Group pursuant to a Sub-Administration Agreement dated
as of January 1, 1995, and receives a fee from the Administrator for its
services. Under the Sub-Administration Agreement, IMC will assist the
Administrator by providing, upon the request of the Administrator, services
which are incidental to, but not included among, its duties as Investment
Adviser to the Group. These services include preparation of reports and
documents necessary to calculate daily expense accruals, to update the financial
accounts and records of the Funds and to prepare certain federal and state tax
returns.
The Administrator receives a fee from each Fund for its services as
Administrator and expenses assumed pursuant to the Administration Agreement,
calculated daily and paid periodically, equal to the lesser of (a) the fee
calculated at the annual rate of 0.20% of that Fund's average daily net assets,
or (b) such other fee as may from time to time be agreed upon in writing by the
Group and the Administrator. As Sub-Administrator, IMC is entitled to receive a
fee from the Administrator of not more than 0.05% of each Fund's average daily
net assets. The Administrator may voluntarily reduce all or a portion of its fee
with respect to any Fund in order to increase the net income of one or more of
the Funds available for distribution as dividends.
For the fiscal year ended May 31, 1999, the fiscal period
ended May 31, 1998 and the fiscal year ended June 30, 1997, the Administrator
collected and voluntarily reduced the amounts indicated below which were payable
to it with respect to its administrative services to the indicated Funds:
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<PAGE> 60
<TABLE>
<CAPTION>
------------------------------------- ---------------------------- ----------------------------- ------------------------------
Fiscal Year Ended Fiscal Period Ended Fiscal Year Ended
May 31 May 31 June 20
Fund 1999 1998 1997
------------------------------------- -------------- ------------- -------------- -------------- -------------- ---------------
Gross Fees Gross Fees Gross Fees
Fees Voluntarily Fees Voluntarily Fees Voluntarily
Collected Reduced Collected Reduced Collected Reduced
------------------------------------- -------------- ------------- -------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Prime Obligations Fund 1,499,723 134,776 1,606,277 160,613 1,717,665 168,939
========= =======
U.S. Government Obligations Fund 492,903 46,317 695,128 69,506 854,229 83,726
======= ========
Tax-Free Fund 254,046 22,864 315,780 31,575 325,122 31,933
======= ========
Treasury Fund 828,412 405,054 952,742 476,362 808,404 403,676
======= =======
Small Capitalization Fund 924,103 -- 1,597,709 -- 1,410,121 --
======= ==
Mid Capitalization Fund 997,974 -- 1,220,724 -- 1,306,285 --
======= ==
Large Capitalization Fund 865,089 -- 670,411 -- 681,310 --
======= ==
International Discovery Fund 768,074 -- 865,301 -- 858,253 --
======= ==
Equity Income Fund 715,413 -- 76,053 -- 867,179 --
======= ==
Balanced Allocation Fund 504,473 -- 519,977 -- 389,895 --
======= ==
Bond Fund 946,432 223,053 960,550 240,142 1,089,049 270,497
======= =======
Limited Maturity Bond Fund 351,468 82,614 341,570 85,394 306,698 76,205
======= ========
Intermediate Government Obligations 342,374 80,466 360,580 90,147 457,683 113,651
======= ========
Fund
U.S. Government Income Fund 440,724 103,020 445,707 111,428 428,868 106,625
======= =======
National Tax Exempt Bond Fund 245,789 119,170 258,086 129,041 286,364 142,990
======= =======
Michigan Municipal Bond Fund 476,403 230,331 460,912 230,452 463,836 231,610
======= =======
------------------------------------- -------------- ------------- -------------- -------------- -------------- ---------------
</TABLE>
Unless sooner terminated as provided therein, the
Administration Agreement and the Sub-Administration Agreement will continue in
effect until December 31, 1999. The Administration Agreement and the
Sub-Administration Agreement thereafter shall be renewed automatically for
successive five-year terms, unless written notice not to renew is given by the
non-renewing party to the other Party at least 60 days prior to the examination
of the then-current term. The Administration Agreement and the
Sub-Administration Agreement are each terminable with respect to a particular
Fund only upon mutual agreement of the parties to the Administration Agreement
(or Sub-Administration Agreement, as the case may be) and for cause (as defined
in the Administration Agreement) by the party alleging cause, an no less than 60
days' written notice by the Group's Board of Trustees or by the Administrator
(or Sub-Administrator, in the case of the Sub-Administration Agreement).
The Administration Agreement and the Sub-Administration
Agreement provide that the Administrator and the Sub-Administrator shall not be
liable for any error of judgment or mistake of law or any loss suffered by the
Group in connection with the matters to which the Administration Agreement or
the Sub-Administration Agreement relate, except a loss resulting from willful
misfeasance, bad faith, or gross negligence in the performance of its duties, or
from the reckless disregard by the Administrator or the Sub-Administrator of its
obligations and duties thereunder.
EXPENSES
The Investment Adviser and BISYS each bear all expenses in
connection with the performance of their services as Investment Adviser and
Administrator, respectively, other than the cost of securities (including
brokerage commissions) purchased for the Group. Each Fund will bear the
following expenses relating to its operation: organizational expenses, taxes,
interest,
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<PAGE> 61
brokerage fees and commissions, fees of the Trustees of the Group, SEC fees,
state securities qualification fees, costs of preparing and printing
prospectuses for regulatory purposes and for distribution to current
shareholders, outside auditing and legal administration fees, legal expenses,
advisory fees and out-of-pocket expenses of the Custodian, Transfer Agent and
Fund Accountant, certain insurance premiums, costs of maintenance of the Group's
existence, costs of shareholders' reports and meetings, and any extraordinary
expenses incurred in each Fund's operation. As a general matter, expenses are
allocated to the Institutional Shares and the other classes of shares of the
Funds on the basis of the relative net asset value of each class. The various
classes may bear certain additional retail transfer agency expenses and may also
bear certain additional shareholder service and distribution costs incurred
pursuant to a Distribution and Shareholder Service Plan.
The Trustees reserve the right, subject to the receipt of
relevant regulatory approvals or rulings, if needed, to allocate certain other
expenses to the shareholders of a particular class, including the Institutional
Shares class, on a basis other than relative net asset value, as they deem
appropriate ("Class Expenses"). In such event, Class Expenses would be limited
to: transfer agency fees identified by the Transfer Agent as attributable to a
specific class; printing and postage expenses related to preparing and
distribution of materials such as shareholder reports, prospectuses and proxies
to current shareholders, Blue Sky registration fees incurred by a class of
shares; SEC registration fees incurred by a class of shares; expenses related to
administrative personnel and services as required to support the shareholders of
a specific class; litigation or other legal expenses relating solely to one
class of shares; and Trustees' fees incurred as a result of issues relating
solely to one class of shares.
DISTRIBUTOR
SEI Investments Distribution Co. ("SEI" or the "Distributor"),
a registered broker/dealer, serves as Distributor to the Group pursuant to the
Distribution Agreement dated September 14, 1998 (the "Distribution Agreement").
SEI is located at One Freedom Valley Drive, Oaks, Pennsylvania 19456. BISYS
served as the principal underwriter and distributor for the Group prior to
September 14, 1998. Unless otherwise terminated, the Distribution Agreement
remains in effect for successive one-year periods ending September 14 of each
year if approved at least annually (i) by the Group's Board of Trustees or by
the vote of a majority of the outstanding shares of the Group, and (ii) by the
vote of a majority of the Trustees of the Group who are not parties to the
Distribution Agreement or interested persons (as defined in the 1940 Act) of any
party to the Distribution Agreement, cast in person at a meeting called for the
purpose of voting on such approval. The Distribution Agreement may be terminated
in the event of any assignment, as defined in the 1940 Act. Under the
Distribution Agreement, SEI acts as agent for the Funds in the distribution of
their shares and, in such capacity, solicits orders for the sale of shares,
advertisers, and pays the cost of advertising, office space and its personnel
involved in such activities. The Distributor receives no compensation under its
Distribution Agreement with the Group, but may retain some or all of any sales
change imposed upon Investor A or Investor B Shares and may receive compensation
under the Distribution and Shareholder Service Plans described below.
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<PAGE> 62
For the Group's fiscal year ended May 31, 1999, total
commissions paid in connection with sales of the Group's shares were $277,171.
Of that amount SEI retained $89,040. For the period from June 1, 1998 to
September 14, 1998, the fiscal period ended May 31, 1998 and the fiscal year
ended June 30, 1997, total commissions paid in connection with sales of the
Group's shares were $142,333, $1,259,061 and $3,523,450, respectively. Of that
amount BISYS retained $106,172, $10,863 and $3,241,396 respectively,
As described in the Prospectuses, the Group has adopted an
Investor A Distribution and Shareholder Service Plan with respect to Investor A
Shares (the "Investor A Plan") and an Investor B Distribution and Shareholder
Service Plan with respect to Investor B Shares (the "Investor B Plan") (the
Investor A Plan and Investor B Plan together are hereinafter referred to as the
"Plans") pursuant to Rule 12b-1 of the 1940 Act. Pursuant to these Plans, the
Funds are authorized to pay or reimburse SEI, as Distributor, for certain
expenses that are incurred in connection with the provision of shareholder and
distribution services. Pursuant to the Investor A Plan, a Fund is authorized to
pay SEI, as Distributor of Investor A Shares, a distribution and shareholder
service fee in an amount not to exceed on an annual basis 0.25% of the average
daily net assets of Investor A Shares of a Fund for: (a) payments the
Distributor makes to banks and other institutions and broker/dealers (a
"Participating Organization") for distribution assistance and/or Shareholder
service pursuant to an agreement with the Participating Organization or for
distribution assistance and/or Shareholder service provided by the Distributor
pursuant to an agreement between the Distributor and the Trust; or (b)
reimbursement of expenses incurred by a Participating Organization pursuant to
an agreement in connection with distribution assistance and/or Shareholder
service including, but not limited to, the reimbursement of expenses relating
to printing and distributing prospectuses to persons other than Shareholders of
Investor A Shares, printing and distributing advertising and sales literature
and reports to Shareholders used in connection with the sale of Investor A
Shares, and personnel and communication equipment used in servicing Shareholder
accounts and prospective shareholder inquiries. For purposes of the Investor A
Plan, a Participating Organization may include the Distributor or any of its
affiliates or subsidiaries.
Pursuant to the Investor B Plan, each Fund is authorized to
pay SEI, as Distributor of Investor B Shares, a distribution fee in an amount
not to exceed on an annual basis 0.75% of the average daily net asset value of
Investor B Shares of a Fund for: (a) payments the Distributor makes to banks
and other institutions and broker/dealers (a "Participating Organization") for
distribution assistance pursuant to an agreement with the Participating
Organization or for distribution assistance provided by the Distributor
pursuant to an agreement between the Distributor and the Trust; or (b)
reimbursement of expenses incurred by a Participating Organization pursuant to
an agreement in connection with distribution assistance including, but not
limited to, the reimbursement of expenses relating to printing and distributing
prospectuses to persons other than Shareholders of Investor B Shares, printing
and distributing advertising and sales literature and reports to Shareholders
for use in connection with the sale of Investor B Shares, processing purchase,
exchange and redemption request from customers and placing orders with the
Distributor or the Trust's transfer agent, and personnel and communication
equipment used in servicing Shareholder accounts and prospective shareholder
inquiries; and (c) a service fee in an amount not to exceed on an annual basis
.25% of the average daily net asset value of the Investor B Shares of a Fund
(the "Service Fee") for (i) payment the Distributor makes to a Participating
Organization for Shareholder services pursuant to an agreement with the
Participating Organization or for Shareholder services provided by the
Distributor pursuant to an agreement between the Distributor and the Trust; or
(ii) reimbursement of expenses incurred by a Participating Organization
pursuant to an agreement in connection with Shareholder service including, but
not limited to, personal, continuing services to investors in the Investor B
Shares of a Fund, providing sub-accounting with respect to Investor B Shares
beneficially owned by customers or the information necessary for
sub-accounting, arranging for bank wires, and providing office space,
equipment, telephone facilities and various personnel including clerical,
supervisory and computer.
As required by Rule 12b-1, the Investor A Plan was approved by
the holders of the Investor A Shares and by the Board of Trustees, including a
majority of the Trustees who are not interested persons of the Fund and who have
no direct or indirect financial interest in the operation of that Plan (the
"Independent Trustees"). The Investor B Plan has been approved by the Board of
Trustees, including a majority of the Independent Trustees, and by the initial
Investor B Shareholders of each Fund.
For the fiscal period from September 14, 1998 to May 31, 1999,
SEI received $845,227 pursuant to the Investor A Plan to compensate dealers for
their distribution and shareholder service assistance. For the fiscal period
from June 1, 1998 to September 20, 1998, BISYS received $612,647 pursuant to the
Investor A Plan to compensate dealers for their distribution and shareholder
service assistance.
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For the fiscal period from September 21, 1998 to May 31, 1999,
SEI received $226,863 pursuant to the Investor B Plan to compensate dealers for
their distribution and shareholder service assistance. For the fiscal period
from June 1, 1998 to September 20, 1998, BISYS received $469,426 pursuant to the
Investor B Plan to compensate dealers for their distribution and shareholder
service assistance.
The Plans may be terminated as to a Fund by vote of a majority
of the Independent Trustees, or by vote of a majority of the outstanding shares
of the applicable class of the Fund. Any change in a Plan that would materially
increase the distribution cost to the Fund requires shareholder approval. The
Trustees review quarterly a written report of such costs and the purposes for
which such costs have been incurred. The Plan may be amended by vote of the
Trustees including a majority of the Independent Trustees, cast in person at a
meeting called for that purpose. For so long as the Plans are in effect,
selection and nomination of those Trustees who are not interested persons of the
Group shall be committed to the discretion of such Independent Trustees. All
agreements with any person relating to the implementation of a Plan may be
terminated at any time on 60 days' written notice without payment of any
penalty, by vote of a majority of the Independent Trustees or by a vote of the
majority of the outstanding shares of the applicable class of the Fund. The
Plans will continue in effect for successive one-year periods, provided that
each such continuance is specifically approved (i) by the vote of a majority of
the Independent Trustees, and (ii) by a vote of a majority of the entire Board
of Trustees cast in person at a meeting called for that purpose. The Board of
Trustees has a duty to request and evaluate such information as may be
reasonably necessary for them to make an informed determination of whether the
Plans should be implemented or continued. In addition the Trustees in approving
the Plans must determine that there is a reasonable likelihood that the Plans
will benefit the Funds and their shareholders.
The Board of Trustees of the Group believes that the Plans are
in the best interests of the Funds since they encourage Fund growth. As the
Funds grow in size, certain expenses, and therefore total expenses per share,
may be reduced and overall performance per share may be improved.
As authorized by the Investor B Plan, SEI has entered into a
Service and Commission Agreement with Security Distributors, Inc. ("SDI"),
Security Benefit Group, Inc. ("SBG") and First of America Brokerage Service,
Inc. ("FOA Brokerage") which relates to purchases of Investor B Shares made
prior to January 1, 1995. Pursuant to the Service and Commission Agreement, FOA
Brokerage performs certain brokerage and related services in connection with the
purchase of Investor B Shares by its customers and maintains shareholder
accounts for such customers. Also pursuant to the Service and Commission
Agreement, SBG provides financing assistance, consistent with the Investor B
Plan, in connection with the services performed by FOA-Brokerage. Services
provided by FOA-Brokerage include placing orders to purchase Investor B Shares,
as agent for its customers, pursuant to the terms of its Dealer Agreement;
providing shareholder liaison services; responding to inquiries; providing such
information as FOA-Brokerage and SDI mutually determine to be appropriate in
order to properly (maintain shareholder accounts; and providing at its own
expense such office space
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equipment, facilities and personnel as may be reasonably necessary or beneficial
in order to provide such services to customers. In consideration for such
services, FOA-Brokerage receives from SBG a commission rate of 4.00% of the net
asset value of Investor B Shares purchased by FOA-Brokerage as agent for its
customers. SDI, either directly or through an affiliate, receives amounts
specified in the Shareholder Services and Financing Agreement dated February 1,
1994 between SEI and SDI. Under that Agreement, SDI receives compensation for
financing assistance at the annual rate of up to 0.75% of the average daily net
assets of Investor B Shares of each Fund and compensation for shareholder
support services at an annual rate of up to 0.25% of the average daily net
assets of the Investor B Shares of each Fund.
CUSTODIAN, TRANSFER AGENT AND FUND ACCOUNTING SERVICES
National City Bank, 1900 East Ninth Street, Cleveland, Ohio
44114, an affiliate of IMC serves as Custodian to the Group pursuant to the
Custodian Services Agreement dated as of July 24, 1998. Union Bank of California
serves as Custodian for the International Discovery Fund pursuant to an
Agreement dated July 31, 1995. The Custodians' responsibilities include
safeguarding and controlling the Funds, cash and securities, handling the
receipt and delivery of securities, and collecting interest and dividends on the
Funds' investments.
State Street Bank and Trust Company, P.O. Box 8590, Boston, MA
02266, serves as transfer agent and dividend disbursing agent (the "Transfer
Agent") for all Funds of the Group pursuant to the Transfer Agency Agreement
dated as of September 14, 1998, as amended. Pursuant to such Agreement, the
Transfer Agent, among other things, performs the following services: maintenance
of shareholder records for each of the Group's shareholders of record;
processing shareholder purchase and redemption orders; processing transfers and
exchanges of shares of the Group on the shareholder files and records;
processing dividend payments and reinvestments; and assistance in the mailing of
shareholder reports and proxy solicitation materials. For such services, the
Transfer Agent receives a fee based on the number of shareholders of record.
Prior to September 14, 1998, BISYS served as the Fund's transfer agent and
disbursing agent. For the fiscal period from September 14, 1998 to May 31, 1999,
State Street received $1,710,000 from the Group for services as Transfer Agent
for all portfolios of the Group. For the fiscal period from June 1, 1998 to
September 14, 1998, the fiscal period ended May 31, 1998 and the fiscal year
ended June 30, 1997 , BISYS received $680,000, $2,576,000, and $2,091,000,
respectively, from the Group for services as transfer agent for all portfolios
of the Group.
In addition, BISYS Ohio, 3435 Stelzer Road, Columbus, Ohio
43219 provides certain fund accounting services to the Group pursuant to a Fund
Accounting Agreement dated January 26, 1993, as amended. BISYS Ohio receives a
fee for such services, computed daily and paid periodically at an annual rate of
0.016% of the average daily net assets of each Money Market Fund and 0.022% of
the average daily net assets of each of the other Funds. Under such Agreement,
BISYS Ohio maintains the accounting books and records for the Funds, including
journals containing an itemized daily record of all purchases and sales of
portfolio securities, all receipts and disbursements of cash and all other
debits and credits, general and auxiliary ledgers reflecting all asset,
liability, reserve, capital, income and expense accounts, including interest
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accrued and interest received, and other required separate ledger accounts;
maintains a monthly trial, balance of all ledger accounts; performs certain
accounting services for the Funds, including calculation of the daily net asset
value per share, calculation of the dividend and capital gain distributions, if
any, and of yield, reconciliation of cash movements with the Funds' Custodian,
affirmation to the Funds' Custodian of all portfolio trades and cash
settlements, verification and reconciliation with the Funds, Custodian of all
daily trade activity; provides certain reports; obtains dealer quotations,
prices from a pricing service or matrix prices on all portfolio securities in
order to mark the portfolio to the market; and prepares an interim balance
sheet, statement of income and expense, and statement of changes in net assets
for the Funds. The Funds reimburse National City Bank for its direct and
indirect costs and expenses incurred in rendering custodial services, except
that the costs and expenses borne by each Fund in any year may not exceed .020%
of each portfolios first $100 million of average daily net assets, .010% of each
portfolios next $650 million of average daily net assets and .008% of the
average daily net assets of each portfolio which exceed $750 million.
For such services, for fiscal year ended May 31, 1999, the
fiscal period ended May 31, 1998 and the fiscal year ended June 30, 1997, BISYS
Ohio received $1,596,000, $1,746,000 and $1,722,000, respectively, from the
Group.
INDEPENDENT AUDITORS
The Financial Statements of the Group as of May 31, 1999,
which appear in the Group's Annual Report dated May 31, 1999, have been audited
by PricewaterhouseCoopers LLP, 100 East Broad Street, Columbus, Ohio 43215,
independent auditors. The Financial Statements are incorporated herein by
reference to the Annual Report in reliance upon such report and on the authority
of PricewaterhouseCoopers LLP as experts in auditing and accounting.
LEGAL COUNSEL
Drinker Biddle & Reath LLP, One Logan Square, 18th and Cherry Streets,
Philadelphia, PA 19103-6996 is counsel to the Group and will pass upon certain
legal matters pertaining to the shares offered hereby.
ADDITIONAL INFORMATION
DESCRIPTION OF SHARES
The Parkstone Group of Funds is a Massachusetts business
trust. The Group was organized on March 25, 1987, and the Group's Declaration of
Trust was filed with the Secretary of State of the Commonwealth of Massachusetts
on March 27, 1987. The Declaration of Trust authorizes the Board of Trustees to
issue an unlimited number of shares, which are units of beneficial interest,
without par value. The Group presently has sixteen series of shares,
representing interests in each series of the Group. The shares of each of the
Funds of the Group, other than the Money Market Funds are offered in three
separate classes: Investor A Shares, Investor B Shares and Institutional Shares.
Shares of the Money Market Funds are offered in
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two separate classes: Investor A Shares and Institutional Shares, except for the
Prime Obligations Fund which offers Investor A Shares, Investor B Shares and
Institutional Shares. The Group's Declaration of Trust authorizes the Board of
Trustees to classify or re-classify any unissued shares of the Group into one or
more additional 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.
Shares of each of the Group's Funds have no subscription or
pre-emptive 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 Prospectuses and this Statement of Additional Information, shares of the
Group's Funds will be fully paid and non-assessable. In the event of a
liquidation or dissolution of the Group or an individual Fund, shareholders of a
Fund are entitled to receive the assets available for distribution belonging to
that Fund at a proportionate distribution, based upon the relative asset values
of the respective Funds, of any general assets not belonging to any particular
Fund which are available for distribution.
Rule 18f-2 under the 1940 Act provides that any matter
required to be submitted to the shareholders of the outstanding voting
securities of an investment company such as the Group shall not be deemed to
have been effectively acted upon unless approved by the holders of a majority of
the outstanding shares of each Fund affected by the matter. For purposes of
determining whether the approval of a majority of the outstanding shares of a
Fund will be required in connection with a matter, a Fund will be deemed to be
affected by a matter unless it is clear that the interests of each Fund in the
matter are identical or that the matter does not affect any interest of the
Fund. Under Rule 18f-2, the approval of an investment advisory agreement or any
change in fundamental investment policy submitted to shareholders would be
effectively acted upon with respect to a Fund only if approved by majority of
the outstanding shares of such Fund. However, Rule 18f-2 also provides that the
ratification of independent accountants, the approval of principal underwriting
contracts, and the election of Trustees may be effectively acted upon by
shareholders of the Group voting without regard to a Fund.
Shareholders are entitled to one vote for each dollar value
invested and fractional votes for any fraction of a dollar invested and will
vote in the aggregate, and not by class except as otherwise required by the 1940
Act or other applicable law, or when the matter to be voted upon affects only
interests of the shareholders of a particular class. Voting rights are not
cumulative, and, accordingly, the holders of more than 50% of the Group's
outstanding shares may elect all of the Trustees, irrespective of the votes of
other shareholders.
The Group does not intend to hold annual shareholder meetings
except as may be required by the 1940 Act. The Group's Declaration of Trust
provides that a meeting of shareholders shall be called by the Board of Trustees
upon written request of shareholders owning at least 10% of the outstanding
shares of the Group entitled to vote.
The Group's Declaration of Trust authorizes the Board of
Trustees, without shareholder approval (unless otherwise required by applicable
law) to (a) sell and convey the assets of a class of shares to another
management investment company for consideration which
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may include securities issued by the purchaser and, in connection therewith, to
cause all outstanding shares of such class to be redeemed at a price which is
equal to their net asset value and which may be cash or by distribution of the
securities or other consideration received from the sale and conveyance; (b)
sell and convert the assets belonging to a class of shares into money and, in
connection therewith, to cause all outstanding shares of such class to be
redeemed at their net asset value; or (c) combine the assets belonging to a
class of shares with the assets belonging to one or more other classes of shares
of the Group if the Board of Trustees reasonably determines that such
combination will not have a material adverse effect on the shareholders of a
class participating in such combination and, in connection therewith, to cause
all outstanding shares of any class to be redeemed at their net asset value or
converted into shares of another class of the Group's shares at their net asset
value. However, the exercise of such authority by the Board of Trustees may be
subject to certain restrictions under the 1940 Act. The Board of Trustees may
authorize the termination of any class of shares after the assets belonging to
such class have been distributed to its shareholders.
VOTE OF A MAJORITY OF THE OUTSTANDING SHARES
As used in the Prospectuses and the Statement of Additional
Information, a "vote of a majority of the outstanding shares" of the Group or
the Fund, means the affirmative vote, at an annual or special meeting of
shareholders duly called, of the lesser of: (a) 67% or more of the votes of
shareholders of the Group or the Fund present at such meeting at which the
holders of more than 50% of the votes attributable to the shareholders of record
of the Group or the Fund are represented in person or by proxy, or (b) the
holders of more than 50% of the outstanding votes of shareholders of the Group
or the Fund.
SHAREHOLDER AND TRUSTEE LIABILITY
Under Massachusetts law, holders of units of interest in a
business trust may, under certain circumstances, be held personally liable as
partners for the obligations of the trust. However, the Group's Declaration of
Trust provides that shareholders shall not be subject to any personal liability
for the obligations of the Group, and that every written agreement, obligation,
instrument, or undertaking made by the Group 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. The Declaration of Trust also provides that the Group
shall, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of the Group, 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 Group
itself would be unable to meet its obligations.
The Declaration of Trust states further that no Trustee,
officer, or agent of the Group shall be personally liable in connection with the
administration or preservation of the assets of the trust or the conduct of the
Group's business; nor shall any Trustee, officer, or agent be personally liable
to any person for any action or failure to act except on his own bad faith,
willful-misfeasance, gross negligence, or reckless disregard of his duties. The
Declaration of
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Trust also provides that all persons having any claim against the Trustees or
the Group shall look solely to the assets of the trust for payment.
ADDITIONAL TAX INFORMATION
Each Fund intends to qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code, and to distribute out its
income to shareholders each year, so that the Fund itself generally will be
relieved of federal income and excise taxes. If a Fund were to fail to so
qualify: (1) the Fund would be taxed at regular corporate rates without any
deduction for distributions to shareholders; and (2) shareholders would be taxed
as if they received ordinary dividends, although corporate shareholders could be
eligible for the dividends received deduction.
A non-deductible excise tax is also imposed on regulated
investment companies that do not distribute in each calendar year (regardless of
whether they otherwise have a non-calendar taxable year) an amount equal to 98%
of their ordinary income for the calendar year plus 98% of their capital gain
net income for the one-year period ending on October 31 of such calendar year.
The balance of such income must be distributed during the next calendar year.
For the foregoing purposes, a Fund is treated as having distributed any amount
on which it is subject to income tax for any taxable year ending in such
calendar year. If distributions during a calendar year were less than the
required amount, a particular Fund would be subject to a non-deductible excise
tax equal to 4% of the deficiency.
Each of the Funds will be required in certain cases to
withhold and remit to the United States Treasury 31% of taxable dividends paid
to a shareholder who has provided either an incorrect tax identification number
or no number at all, or who is subject to withholding by the Internal Revenue
Service for failure to report properly payments of interest or dividends.
The tax principles applicable to transactions in financial
instruments and futures contacts and options that may be engaged in by a Fund,
and Investments in passive foreign investment companies ("PFICs"), are complex
and, in some cases, uncertain. Such transactions and investments may cause a
Fund to recognize taxable income prior to the receipt of cash, thereby requiring
the Fund to liquidate other positions, or to borrow money, so as to make
sufficient distributions to shareholders to avoid corporate-level tax. Moreover,
some or all of the taxable income recognized may be ordinary income or
short-term capital gain, so that the distributions may be taxable to
shareholders as ordinary income.
In addition, in the case of any shares of a PFIC in which a
Fund invests, the Fund may be liable for corporate-level tax on any ultimate
gain or distributions on the shares if the Fund fails to make an election to
recognize income annually during the period of its ownership of the shares.
Information set forth in the Prospectuses and this Statement
of Additional Information which relates to federal taxation is only a summary of
some of the important federal tax considerations generally affecting purchasers
of shares of the Funds. No attempt has been
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made to present a detailed explanation of the federal income tax treatment of a
Fund or its shareholders and this discussion is not intended as a substitute for
careful tax planning. Accordingly, potential purchasers of shares of a Fund are
urged to consult their tax advisers with specific reference to their own tax
situation. In addition, the tax discussion in the Prospectuses and this
Statement of Additional Information is based on tax laws and regulations which
are in effect on the date of the Prospectuses and this Statement of Additional
Information; such laws and regulations may be changed by legislative or
administrative action.
ADDITIONAL TAX INFORMATION CONCERNING THE EXEMPT FUNDS
As indicated in the Prospectuses, the Exempt Funds are
designed to provide shareholders with current tax-exempt interest income. The
Exempt Funds are not intended to constitute balanced investment programs and are
not designed for investors seeking capital appreciation or maximum tax-exempt
income irrespective of fluctuations in principal. Shares of the Exempt Funds
would not be suitable for tax-exempt institutions and may not be suitable for
retirement plans qualified under Section 401 of the Code, H.R. 10 plans and
individual retirement accounts, since such plans and accounts are generally
tax-exempt and, therefore, would not gain any additional benefit from the Exempt
Funds, dividends being tax-exempt; furthermore, such dividends would be
ultimately taxable to the beneficiaries when distributed to them. In addition,
the Exempt Funds may not be appropriate investments for entities which are
"substantial users," or "related persons" thereof, of facilities financed by
private activity bonds held by an Exempt Fund. "Substantial user" is defined
under U.S. Treasury Relations to include a non-exempt person who regularly uses
a part of such facilities in his or her trade or business and whose gross
revenues derived with respect to the facilities financed by the issuance of
bonds represent more than 50% of the total revenues derived by any users of such
facilities, or who occupies more than 5% of the usable area of such facilities
or for whom such facilities or a part thereof were specifically constructed,
reconstructed or acquired. "Related persons" include certain related natural
persons, affiliated corporations, a partnership and its partners and an S
Corporation and its shareholders.
The percentage of total dividends paid by an Exempt Fund with
respect to any taxable year which qualifies as federal exempt interest dividends
will be the same for all shareholders receiving dividends during such year. In
order for an Exempt Fund to pay exempt-interest dividends during any taxable
year, at the close of each fiscal quarter, at least 50% of the aggregate value
of the Exempt Fund must consist of exempt-interest obligations. In addition, the
Exempt Fund must distribute 90% of the aggregate exempt-interest income and 90%
of the investment company taxable income earned by it during the taxable year.
After the close of an Exempt Fund's taxable year, the Exempt Fund will notify
each shareholder of the portion of the dividends paid by the Exempt Fund to the
shareholder with respect to such taxable year which constitutes an
exempt-interest dividend. However, the aggregate amount of dividends as
designated cannot exceed the excess of the amount of interest exempt from tax
under Section 103 of the Code received by the Exempt Fund during the taxable
year over any amounts disallowed as deductions under Section 265 and 171(a)(2)
of the Code.
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As indicated in the Prospectuses, each Exempt Fund may acquire
rights regarding specified portfolio securities under puts. See "INVESTMENTS AND
RISKS Additional Information on Portfolio Instruments-Puts" in this Statement of
Additional Information. The policy of each Exempt Fund is to limit its
acquisition of puts to those under which it will be treated for federal income
tax purposes as the owner of the Exempt Securities acquired subject to the put
and the interest on the Exempt Securities will be tax-exempt to it. Although the
Internal Revenue Service has issued a published ruling that provides some
guidance regarding the tax consequences of the purchase of puts that each Exempt
Fund could acquire under the 1940 Act. Therefore, although each Exempt Fund will
only acquire a put after concluding that it will have the tax consequences
described above, the Internal Revenue Service could reach a different
conclusion.
The foregoing is only a summary of some of the important
federal tax considerations generally affecting purchasers of shares of the
Exempt Funds. No attempt has been made to present a detailed explanation of the
federal income tax treatment of each Exempt Fund or its shareholders or of
Michigan state income tax treatment of the Michigan Municipal Bond Fund or its
shareholders, and this discussion is not intended as a substitute for careful
tax planning. Accordingly potential purchasers of shares of these Funds are
urged to consult their own tax advisers with specific reference to their own tax
situation. In addition, the foregoing discussion is based on tax laws and
regulations which are in effect on the date of this Statement of Additional
Information; such laws and regulations may be changed by legislative or
administrative action.
ADDITIONAL TAX INFORMATION CONCERNING THE INTERNATIONAL DISCOVERY FUND
If, for any reason, the International Discovery Fund were
treated as a United Kingdom ("UK") resident, the worldwide income and capital
gains of the International Discovery Fund would be subject to UK tax. If, for
any reason, the International Discovery Fund were treated as having a permanent
establishment in the UK, the Fund's UK source income (although not its capital
gains), if any, would become subject to UK tax and certain other advantages
otherwise available to the International Discovery Fund under the double tax
treaty between the UK and the U.S. would not be available. Provided that the
International Discovery Fund is not treated as being resident or having a
permanent establishment in the UK, such Funds will not incur any UK tax
liability with respect to the types of income or gains that they are likely to
receive, except with respect to income on UK securities held in the portfolios
of the International Discovery Fund. The Group believes, based on the advice of
special counsel, that it would be highly unlikely for the Fund to be deemed or
treated as being UK residents for UK tax purposes or having a permanent
establishment in the UK pursuant to the double tax treaty between the U.S. and
the UK as a result of the activities of both Funds' Investment Adviser.
PERFORMANCE INFORMATION
From time to time, performance information for the Funds
showing their average annual total return, aggregate total return and/or yield
may be presented in advertisements, sales
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literature and shareholder reports. Such performance figures are based on
historical earnings and are not intended to indicate future performance. Average
annual total return of a class of shares in a Fund will be calculated for the
period since the establishment of the Funds and will reflect the imposition of
the maximum sales charge, if any. Average annual total return is measured by
comparing the value of an investment in a class of shares in a Fund at the
beginning by the relevant period to the redemption value of the investment at
the end of the period (assuming immediate reinvestment of any dividends or
capital gain distributions) and annualizing the result. Aggregate total return
is calculated similarly to average annual total return except that the return
figure is aggregated over the relevant period instead of annualized. Yield of a
class of shares will be computed by dividing a class of shares, net investment
income per share earned during a recent one-month period by that class of
shares' per share maximum offering price (reduced by any undeclared earned
income expected to be paid shortly as a dividend) on the last day of the period
and annualizing the result. Each Fund may also present its average annual total
return, aggregate total return and yield, as the case may be, excluding the
effect of a sales charge, if any.
In addition, from time to time the Funds may present their
respective distribution rates for a class of shares in shareholder reports and
in supplemental sales literature which is accompanied or preceded by a
prospectus. Distribution rates will be computed by dividing the distribution per
share of a class made by a Fund over a twelve-month period by the maximum
offering price per share. The calculation of income in the distribution rate
includes both income and capital gain dividends and does not reflect unrealized
gains or losses, although a Fund may also present a distribution rate excluding
the effect of capital gains. The distribution rate differs from the yield,
because it includes capital gains which are often non-recurring in nature,
whereas yield does not include such items. Distribution rates may also be
presented excluding the effect of a sales charge, if any.
Standardized yield and total return quotations will be
computed separately for Investor A Shares and the other classes of the Funds.
Because of differences in the fees and/or expenses borne by different classes of
shares of the Funds, the net yield and total return on Investor A Shares may be
different from that for another class of the same Fund. For example, net yield
and total return on Investor A Shares is expected, at any given time, to be
lower than the net yield and total return on Institutional Shares of the same
period.
YIELDS OF THE MONEY MARKET FUNDS
For the seven-day period ended May 31, 1999, the yield and
compounded effective yield for the Investor A Shares of the Prime Obligations
Fund, U.S. Government Obligations Fund, the Treasury Fund and the Tax-Free Fund
were, respectively: 4.26% and 4.35%; 4.21% and 4.30%; 4.16% and 4.25%; and
2.74% and 2.78%. For the thirty-day period ended May 31, 1999, the yield and
compounded effective yield for the Investor A Shares of the Prime Obligations
Fund, U.S. Government Obligations Fund, the Treasury Fund and the Tax-Free Fund
were, respectively: 4.22% and 4.31%; 4.13% and 4.21%; 4.05% and 4.13%; and
2.71% and 2.74%.
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<PAGE> 72
For the seven-day period ended may 31, 1999, the yield and
compounded effective yield for the Institutional Shares of the Prime Obligations
Funds, U.S. Government Obligations Fund, the Treasury Fund and the Tax-Free Fund
were, respectively: 4.36% and 4.45%; 4.31% and 4.40%; 4.15% and 4.23%; and
2.84% and 2.88%. For the thirty-day period ended May 31, 1999, the yield and
compounded effective yield for the Institutional Shares of the Prime Obligations
Fund, the U.S. Government Obligations Fund, the Treasury Fund and the Tax-Free
Fund were, respectively: 4.32% and 4.41%; 4.23% and 4.31%; 4.15% and 4.23%;
and 2.81% and 2.84%.
The standardized seven-day yield for each of the Money Market
Funds is computed: (1) by determining the net change, exclusive of capital
changes and income other than investment income, in the value of a hypothetical
pre-existing account in that Fund having a balance of one share at the beginning
of the seven-day base period, subtracting a hypothetical charge reflecting
deductions from shareholder accounts; (2) dividing the difference by the value
of the account at the beginning of the base period to obtain the base period
return; and (3) annualizing the results (i.e., multiplying the base period
return by (365/7)). The net change in the account value of each of the Money
Market Funds includes the value of additional shares purchased with dividends
from the original share, dividends declared on both the original share and any
additional shares, and all fees, other than non-recurring account or sales
charges charged to all shareholder accounts in proportion to the length of the
base period and assuming that Fund's average account size. The capital changes
to be excluded from the calculation of the net change in account value are net
realized gains and losses from the sale of securities and unrealized
appreciation and depreciation.
The effective yield for each of the Money Market Funds is
computed by compounding the base period return, as calculated above by adding
one to the base period return, raising the sum to a power equal to 365 divided
by seven and subtracting one from the result. Each of the thirty-day yields and
effective yields is calculated as described above except that the base period is
30 days rather than 7 days.
For the seven-day period ended May 31, 1999, the
tax-equivalent yield (using a federal income tax rate of 39.6%) of the Investor
A Shares of the Tax-Free Fund was 4.54% and its tax-equivalent effective yield
(using a federal income tax rate of 39.6%) for the same period was 4.60%. For
the thirty-day period ended May 31, 1999, the tax-equivalent yield of the
Investor A Shares of the Tax-Free Fund (using a federal income tax rate of
39.6%) was 4.49% and its tax-equivalent effective yield (using a federal
income tax rate of 39.6%) for the same period was 4.54%.
For the seven-day period ended May 31, 1999, the
tax-equivalent yield (using a federal income tax rate of 39.6%) of the
Institutional Shares of the Tax-Free Fund was 4.70% and its tax-equivalent
effective yield (using a federal income tax rate of 39.6%) for the same period
was 4.77%. For the thirty-day period ended May 31, 1999, the tax-equivalent
yield of the Institutional Shares of the Tax-Free Fund (using a federal income
tax rate of 39.6%) was 4.65% and its tax-equivalent effective yield (using a
federal income tax rate of 39.6%) for the same period was 4.70%.
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<PAGE> 73
The Tax-Free Fund's tax-equivalent yields were computed by
dividing that portion of the Tax-Free Fund's yield which is tax-exempt by one
minus the stated income tax rate and adding the result to that portion, if any,
of the Tax-Free Fund's yield that is not tax-exempt. The Tax-Free Fund's
tax-equivalent effective yields were computed by dividing that portion of the
effective yield which is tax-exempt by one minus the stated income tax rate and
adding to that result the portion, if any, of the Tax-Free Fund's effective
yield that is not tax-exempt.
At any time in the future, yields may be higher or lower than
past yields and there can be no assurance that any historical results will
continue.
YIELDS OF THE NON-MONEY MARKET FUNDS
As summarized in the Prospectuses under the heading
"PERFORMANCE INFORMATION," yields of each of the Non-Money Market Funds will be
computed by analyzing net investment income per share for a recent thirty-day
period and dividing that amount by a Fund share's maximum offering price
(reduced by any undeclared earned income expected to be paid shortly as a
dividend) on the last trading day of that period. Net investment income will
reflect amortization of any market value premium or discount of fixed income
securities (except for obligations backed mortgages or other assets) and may
include recognition of a pro rata portion of the stated dividend rate of
dividend paying portfolio securities. The yield of each of the Non-Money Market
Funds will vary from time depending upon market conditions, the composition of a
Fund's portfolio and operating expenses of the Group allocated to each Fund.
These factors and possible differences in the methods used in calculating yield
should be considered when comparing a Fund's yield to yields published for other
investment companies and other investment vehicles. Yield should also be
considered relative to changes in the value of the Fund's shares and to the
relative risks associated with the investment objectives and policies of each of
the Funds.
In addition, for the Municipal Bond Fund and the Michigan
Municipal Bond Fund, tax-equivalent yields will be computed by dividing that
portion of a Fund's yield (as computed above) which is tax-exempt by one minus a
stated income tax rate and adding that result to that portion, if any, of the
yield of that Fund which is not tax exempt.
For the 30-day period ended May 31, 1999, the yields,
calculated as set forth above, for the Funds were as follows:
<TABLE>
<CAPTION>
Investor A Shares With Investor B Investor I
Sales Load Shares Shares
<S> <C> <C> <C>
Parkstone Small Capitalization Fund 0.00% 0.00% 0.00%
===== ===== =====
Parkstone Mid Capitalization Fund 0.00% 0.00% 0.00%
===== ===== =====
Parkstone Large Capitalization Fund 0.00% 0.00% 0.00%
===== ===== =====
Parkstone International Discovery Fund 0.00% 0.00% 0.00%
===== ===== =====
Parkstone Equity Income Fund 0.71% 0.00% 1.01%
===== ===== =====
Parkstone Balanced Allocation Fund 3.06% 2.46% 3.46%
===== ===== =====
Parkstone Bond Fund 4.99% 4.49% 5.50%
===== ===== =====
</TABLE>
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<PAGE> 74
<TABLE>
<CAPTION>
Investor A Shares With Investor B Investor I
Sales Load Shares Shares
<S> <C> <C> <C>
Parkstone Limited Maturity Fund 5.12% 4.50% 5.52%
===== ===== =====
Parkstone Intermediate Government Obligations Fund 4.24% 3.70% 4.71%
===== ===== =====
Parkstone U.S. Government Income Fund 4.89% 4.38% 5.40%
===== ===== =====
</TABLE>
The tax-equivalent yields for the Municipal Bond Funds for the
30-day period ended May 31, 1999 (assuming a 39.6% federal tax rate for the
Municipal Bond Fund and a 4.4% Michigan income tax rate for the Michigan
Municipal Bond Fund) were as follows:
<TABLE>
<CAPTION>
Investor A Shares Investor Institutional
With Sales Load B Shares Shares
<S> <C> <C> <C>
Parkstone National Tax Exempt Bond Fund 4.72% 3.69% 5.36%
===== ===== =====
Parkstone Michigan Municipal Bond Fund 4.95% 4.00% 5.58%
===== ===== =====
</TABLE>
CALCULATION OF TOTAL RETURN
As summarized in the Prospectuses under the heading
"PERFORMANCE INFORMATION," average annual total return is a measure of the
change in value of an investment in a Fund over the period covered, which
assumes any dividends or capital gains distributions are reinvested in the Fund
immediately rather than paid to the investor in cash. Average annual total
return will be calculated by: (1) adding to the total number of shares purchased
by a hypothetical $1,000 investment in the Fund and (less the maximum sales
charge, if any) all additional shares which would have been purchased if all
dividends and distributions paid or distributed during the period had been
immediately reinvested; (2) calculating the value of the hypothetical initial
investment of $1,000 as of the end of the period by multiplying the total number
of shares owned at the end of the period by the net asset value per share on the
last trading day of the period; (3) assuming redemption at the end of the
period; and (4) dividing this account value for the hypothetical investor by the
initial $1,000 investment and annualizing the result for periods of less than
one year.
For the one-year period ended May 31, 1999, the five-year
period ended June 30, 1999, and the period from commencement of operations to
May 31, 1999, the average annual total returns for the Investor A Shares of the
following Funds, assuming the imposition of the maximum sales load, were: Small
Capitalization Fund, (23.38)%, 7.86% and 11.00%; Mid Capitalization Fund,
2.14%, 13.73% and 12.52%; Equity Income Fund, 5.98%, 15.23% and 12.95%;
Balanced Allocation Fund, (2.40)%, 10.51% and 9.41%; Bond Fund, (2.34)%, 5.74%
and 6.99%; Limited Maturity Bond Fund, 1.94%, 5.04% and 6.12%; Intermediate
Government Obligations Fund, (1.08)%, 4.76% and 6.11%; National Tax
Exempt Bond Fund, (1.57)%, 3.97% and 5.27%; and Michigan Municipal Bond Fund,
(1.53)%, 4.29% and 5.43%. For the one-year period ended May 31, 1999, and the
period from commencement of operations to May 31, 1999, the average annual
total returns for the Investor A Shares of the following Funds, assuming the
imposition of the maximum sales load, were: Large Capitalization Fund, 16.64%
and 24.50%; Government Income Fund, (0.48)% and 5.26%; and International
Discovery Fund, (10.41)% and 7.83%.
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<PAGE> 75
For the one-year period ended May 31, 1999, the five-year
period ended June 30, 1999 and the period from the commencement of operations to
May 31, 1999 the average annual total returns for the Investor A Shares of the
following Funds, excluding the effect of any sales charges, were: Small
Capitalization Fund, (18.92)%, 9.09% and 11.63%; Mid Capitalization Fund,
8.08%, 15.03% and 13.16%; Equity Income Fund, 12.12%, 16.54% and 13.59%;
Balanced Allocation Fund, 2.47%, 11.59% and 10.14%; Bond Fund, 2.55%, 6.78% and
7.51%; Limited Maturity Bond Fund, 4.84%, 5.63% and 6.42%; Intermediate
Government Obligations Fund, 3.83%, 5.78% and 6.64%; National Tax Exempt Bond
Fund, 3.29%, 4.99% and 5.78%; and Michigan Municipal Bond Fund, 3.38%, 5.31%
and 6.00%. For the one-year period ended May 31, 1999, and the period from
commencement of operations to May 31, 1999, the average annual total returns for
the Investor A Shares of the following Funds, excluding the effect of any sales
charges, were: Large Capitalization Fund, 23.42% and 26.63%; Government Income
Fund, 4.46% and 6.04%; and International Discovery Fund, (5.20)% and 8.79%.
For the one-year period ended May 31, 1999 and the period from
the commencement of operations to May 31, 1999, the average annual total
returns for the Investor B Shares of the following Funds, assuming the
imposition of the maximum contingent deferred sales charges, were: Small
Capitalization Fund, (23.07)% and 6.41%; Mid Capitalization Fund, 2.57% and
12.03%; Large Capitalization Fund, 17.38% and 25.19%; Equity Income Fund,
6.36% and 13.60%; Balanced Allocation Fund, (3.17)% and 9.02%; Bond Fund,
(3.18)% and 4.78%; Limited Maturity Bond Fund, (0.93)% and 4.08%; Intermediate
Government Obligations Fund, (1.99)% and 3.99%; Government Income Fund,
(1.17)% and 5.10%; National Tax Exempt Bond Fund, (2.40)% and 3.34%;
International Discovery Fund, (10.33)% and 2.90%; and Michigan Municipal Bond
Fund, (2.42)% and 3.62%.
For the one-year period ended May 31, 1999, and the period
from commencement of operations to May 31, 1999, the average annual total
returns for the Investor B Shares of the following Funds, excluding the effect
of any contingent deferred sales charges, were: Small Capitalization Fund,
(19.02)% and 6.41%; Mid Capitalization Fund, 7.19% and 12.03%; Large
Capitalization Fund, 22.38% and 25.72%; International Discovery Fund, (5.89)%
and 2.90%; Equity Income Fund, 11.22% and 13.60%; Balanced Allocation Fund,
1.72% and 9.02%; Government Income Fund, 3.76% and 5.10%; Bond Fund, 1.66% and
4.78%; Limited Maturity Bond Fund, 4.03% and 4.08%; Intermediate Government
Obligations Fund, 2.96% and 3.99%; National Tax Exempt Bond Fund, 2.53% and
3.34%; and Michigan Municipal Bond Fund, 2.52% and 3.62%.
For the one-year period ended May 31, 1999, the five-year
period ended May 31, 1999, and the period from commencement of operations to May
31, 1999, the average annual total returns for the Institutional Shares of the
following Funds were: Small Capitalization Fund, (18.71)%, 9.32% and 11.79%; Mid
Capitalization Fund, 8.20%, 15.15% and 13.23%; Equity Income Fund, 12.40%,
16.73% and 13.70%; Balanced Allocation Fund, 2.73%, 11.84% and 10.32%; Bond
Fund, 2.70%, 7.15% and 7.70%; Limited Maturity Bond
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<PAGE> 76
Fund, 5.12%, 5.88% and 6.57%; Intermediate Government Obligations Fund, 4.01%,
6.00% and 6.77%; National Tax Exempt Bond Fund, 3.56%, 5.26% and 5.93%; Michigan
Municipal Bond Fund, 3.54%, 5.57% and 6.16%; Government Income Fund, 4.73%,
6.92% and 6.24%; and International Discovery Fund, (4.94)%, 5.66% and 9.06%. For
the one-year period ended May 31, 1999, and the period from commencement of
operations to May 31, 1999, the average annual total returns for Institutional
Shares of the Large Capitalization Fund were 23.67% and 27.30%.
DISTRIBUTION RATES
Each of the Funds may from time to time advertise current
distribution rates which are calculated in accordance with the method disclosed
in the Prospectuses. For the fiscal period ended May 31, 1999, the distribution
rates for the Investor A Shares of the Funds, including the effect of sales
loads and capital gains, were as follows: Small Capitalization Fund, 12.91%;
Mid Capitalization Fund, 12.33%; Large Capitalization Fund, 1.44%;
International Discovery Fund, 5.59%; Equity Income Fund, 12.72%; Balanced
Allocation Fund, 4.51%; Bond Fund, 5.50%; Limited Maturity Bond Fund,
5.49%; Intermediate Government Obligations Fund, 4.65%; Government Income
Fund, 5.71%; National Tax Exempt Bond Fund, 4.45%; and Michigan Municipal
Bond Fund, 4.46%. For the fiscal period ended May 31, 1999, the distribution
rates, including the effect of sales loads but excluding the effect of capital
gains, for the Investor A Shares of the Funds were as follows: Small
Capitalization Fund, 0.00%; Mid Capitalization Fund, 0.00%; Large
Capitalization Fund, 0.00%; International Discovery Fund, 0.00%; Equity
Income Fund, 1.15%; Balanced Allocation Fund, 1.94%; Bond Fund, 5.25%;
Limited Maturity Bond Fund, 5.49%; Intermediate Government Obligations Fund,
4.65%; Government Income Fund, 5.71%; National Tax Exempt Bond Fund, 3.39%;
and Michigan Municipal Bond Fund, 3.83%.
Excluding the effect of sales loads but including the effect
of capital gains, for the fiscal period ended May 31, 1999, the distribution
rates for the Investor A Shares of the Funds were as follows: Small
Capitalization Fund, 13.66%; Mid Capitalization Fund, 13.04%; Large
Capitalization Fund, 1.52%; International Discovery Fund, 5.91%; Equity
Income Fund, 13.46%; Balanced Allocation Fund, 4.73%; Bond Fund, 5.77%;
Limited Maturity Bond Fund, 5.65%; Intermediate Government Obligations Fund,
4.89%; Government Income Fund, 6.00%; Municipal Bond Fund, 4.68%; and
Michigan Municipal Bond Fund, 4.68%. For the fiscal period ended May 31, 1999,
the distribution rates, excluding the effect of capital gains and sales loads
for the Investor A Shares of the Funds were as follows: Small Capitalization
Fund, 0.00%; Mid Capitalization Fund, 0.00%; Large Capitalization Fund,
0.00%; International Discovery Fund, 0.00%; Equity Income Fund, 1.22%;
Balanced Allocation Fund, 2.03%; Bond Fund, 5.52%; Limited Maturity Bond
Fund, 5.65%; Intermediate Government Obligations Fund, 4.89%; Government
Income Fund, 6.00%; National Tax Exempt Bond Fund, 3.56%; and Michigan
Municipal Bond Fund, 4.02%.
Distribution rates for the Investor B Shares of the Funds,
including the effect of sales loads are not calculated by the Group, nor are
they advertised. Distribution rates for the
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<PAGE> 77
Investor B Shares of the Funds, excluding the effect of sales loads but
including the effect of capital gains, for the fiscal period ended May 31, 1999,
were as follows: Small Capitalization Fund, 14.20%; Mid Capitalization Fund,
14.00%; Large Capitalization Fund, 1.56%; International Discovery Fund,
6.16%; Equity Income Fund,13.03%; Balanced Allocation Fund, 3.92%; Bond
Fund, 4.98%; Limited Maturity Bond Fund, 4.86%; Intermediate Government
Obligations Fund, 4.13%; Government Income Fund, 5.21%; Municipal Bond Fund,
3.92%; and Michigan Municipal Bond Fund, 3.92%. For the fiscal period ended
May 31, 1999, the distribution rates, excluding the effect of capital gains and
sales loads for the Investor B Shares of the Funds were as follows: Small
Capitalization Fund, 0.00%; Mid Capitalization Fund, 0.00%; Large
Capitalization Fund, 0.00%; International Discovery Fund, 0.00%; Equity
Income Fund, 0.69%; Balanced Allocation Fund, 1.22%; Bond Fund, 4.72%;
Limited Maturity Bond Fund, 4.86%; Intermediate Government Obligations Fund,
4.13%; Government Income Fund, 5.21%; National Tax Exempt Bond Fund, 2.80%;
and Michigan Municipal Bond Fund, 3.26%.
For the fiscal period ended May 31, 1999, the distribution
rates, including the effect of capital gains, for the Institutional Shares of
the Funds were as follows: Prime Obligations Fund, 4.66%; Small Capitalization
Fund, 13.37%; Mid Capitalization Fund, 12.89%; Large Capitalization Fund,
1.51%; International Discovery Fund, 5.84%; Equity Income Fund, 13.77%;
Balanced Allocation Fund, 4.99%; Bond Fund, 6.02%; Limited Maturity Bond
Fund, 5.93%; Intermediate Government Obligations Fund, 5.16%; Government
Income Fund, 4.94%; Municipal Bond Fund, 4.93%; and Michigan Municipal Bond
Fund, 4.94%. For the fiscal period ended May 31, 1999, the distribution rates,
excluding the effect of capital gains, for the Institutional Shares of the Funds
were as follows: Prime Obligations Fund, 4.66%; Small Capitalization Fund,
0.00%; Mid Capitalization Fund, 0.00%; Large Capitalization Fund, 0.00%;
International Discovery Fund, 0.02%; Equity Income Fund, 1.46%; Balanced
Allocation Fund, 2.29%; Bond Fund, 5.76%; Limited Maturity Bond Fund,
5.93%; Intermediate Government Obligations Fund, 5.16%; Government Income
Fund, 6.27%; National Tax Exempt Bond Fund, 3.82% and Michigan Municipal
Bond Fund, 4.28%.
PERFORMANCE COMPARISONS
Investors may judge the performance of the Funds by comparing
their performance to the performance of other mutual funds or mutual fund
portfolios with comparable investment objectives and policies through various
mutual fund or market indices such as the Morgan Stanley Capital International
EAFE Index and those prepared by Dow Jones & Co., Inc., Standard & Poor's
Corporation, Shearson Lehman Brothers, Inc. and The Russell 2000 Index and to
data prepared by Lipper, Inc., a widely recognized independent service which
monitors the performance of mutual funds, Morningstar, Inc. and the Consumer
Price Index. Comparisons may also be made to indices or data published in
Donoghue's MONEY FUND REPORT of Holliston, Massachusetts 01746, a nationally
recognized money market fund reporting service, Money Magazine, Forbes,
Barron's, The Wall Street Journal, The Bond Buyer's Weekly 20-Bond Index, The
Bond Buyer's Index, The Bond Buyer, The New York Times, Business Week, Pensions
and Investments and U.S.A. Today. In addition to performance
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<PAGE> 78
information, general information about these Funds that appears in a publication
such as those mentioned above may be included in advertisements and in reports
to shareholders.
From time to time, the Funds may include the following types
of information in advertisements, supplemental sales literature and reports to
shareholders: (1) discussions of general economic or financial principles (such
as the effects of compounding and the benefits of dollar-cost averaging); (2)
discussions of general economic trends; (3) presentations of statistical data to
supplement such discussions; (4) descriptions past or anticipated portfolio
holdings for one or more of the funds within the Group; (5) descriptions of
investment strategies for one or more of the Funds; (6) descriptions or
comparisons of various savings and investment products (including, but not
limited to, insured bank products, annuities, qualified retirement plans and
individual stocks and bonds), which may or may not include the Funds; (7)
comparisons of investment products (including the Funds) with relevant market or
industry indices or other appropriate benchmarks; and (8) discussions of fund
rankings or ratings by recognized rating organizations. The Funds may also
include calculations, such as hypothetical compounding examples, which describe
hypothetical investment results in such communications. Such performance
examples will be based on an express set of assumptions and are not indicative
of the performance of any of the Funds.
Morningstar, Inc., Chicago, Illinois, rates mutual funds on a
one- to five-star rating scale with five stars representing the highest rating.
Such ratings are based upon a fund's historical risk/reward ratio as determined
by Morningstar relative to other funds in that fund's class. Funds are divided
into classes based upon their respective investment objectives. The one- to
five-star ratings represent the following ratings by Morningstar, respectively:
Lowest, Below Average, Neutral, Above Average and Highest.
Current yields or performance will fluctuate from time to time
and are not necessarily representative of future results. Accordingly, a Fund's
yield or performance may not provide for comparison with bank deposits or other
investments which provide fixed returns for a stated period of time. Yield and
performance are functions of a Fund's quality, composition, and maturity, as
well as expenses allocated to the Fund. Fees imposed upon customer accounts by
the Investment Adviser or its affiliated or correspondent banks for cash
management services will reduce a Fund's effective yield to customers.
MISCELLANEOUS
Individual Trustees are elected by the shareholders and,
subject to removal by the vote of two-thirds of the Board of Trustees, serve for
a term lasting until the next meeting of shareholders at which Trustees are
elected. Such meetings are not required to be held at any specific intervals.
Individual Trustees may be removed by vote of the shareholders voting not less
than a majority of the shares then outstanding, cast in person or by proxy at
any meeting called for that purpose, or by a written declaration signed by
shareholders voting not less than two thirds of the shares then outstanding.
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<PAGE> 79
The Group is registered with the SEC as a management
investment company. Such registration does not involve supervision by the SEC of
the management or policies of the Group. The 1999 Annual Report and, when
available, the November 30, 1999 Semi-Annual Report to shareholders of the Group
are incorporated herein by reference. These reports include the financial
statements for the fiscal period ended May 31, 1999. In addition, the Annual
Report includes management's discussion of Fund performance for each of the
Non-Money Market Funds, as well as line graph comparisons to appropriate
broad-based securities indices.
The Prospectuses and this Statement of Additional Information
omit certain of the information contained in the Registration Statement filed
with the SEC. Copies of such information may be obtained from the SEC upon
payment of the prescribed fee.
The Prospectuses and this Statement of Additional Information
are not an offering of the securities herein described in any state in which
such offering may not lawfully be made. No salesman, dealer, or other person is
authorized to give any information or make any representation other than those
contained in the Prospectuses and this Statement of Additional Information.
As of May 31, 1999, the Trustees and officers of the Group, as
a group, owned less than one percent of the shares of any Fund of the Group.
As of August 20, 1999, the following persons were the record
owners of more than 5% of the Investor A Shares, Investor B Shares and
Institutional Shares of each of the Group's Funds:
<TABLE>
<CAPTION>
SHARES PERCENT
FUND OWNER OWNED OWNED
<S> <C> <C> <C>
Prime Obligations A Shares BISYS Fund Services 2,030,916.3900 11.02
FBO Commercial Bank of Everett
Attn: Mike Bryan
3435 Stelzer Road
Columbus, OH 43219-6004
BISYS Fund Services 6,934,348.7400 37.62
FBO Heritage Savings Bank
Attn: Mike Bryan
3435 Stelzer Road
Columbus, OH 43219-6004
Corelink Financial Inc. 3,822,653.4300 20.74
P.O. Box 4054
Concord, CA 94524-4054
U.S. Gov't Obligations A BISYS Fund Services 228,500.00 7.27
Shares FBO First National Bank of Leesport
Attn: Mike Bryan
3435 Stelzer Road
Columbus, OH 43219-6004
</TABLE>
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<PAGE> 80
<TABLE>
<CAPTION>
SHARES PERCENT
FUND OWNER OWNED OWNED
<S> <C> <C> <C>
BISYS Fund Services 2,255,000.0000 71.76
FBO Bank Rhode Island
Attn: Mike Bryan
3435 Stelzer Road
Columbus, OH 43219-6004
Coventry Place LLC TIRF 160,606.5800 5.11
31100 Telegraph Road
Suite 200
Bingham Farmss, MI 48025
Tax Free Obligations A Frank K. Zinn and Ruth A. Zinn, JT TEN 60,021.4700 5.78
Shares c/o Dykema Gossett
400 Renaissance Center
35th Floor
Detroit, MI 48243-1502
Corelink Financial Inc. 829,154.4650 79.91
P.O. Box 4054
Concord, CA 94524-4054
Mid Capitalization A Corelink Financial Inc. 386,396.2800 12.37
Shares P.O. Box 4054
Concord, CA 94524-4054
Small Capitalization A Wilmington Trust Co., 201,876.4980 7.79
Shares Trust Zeneca Holdings DCP
DTD 4-1-93 A/C 29510-0
c/o Mutual Funds
P.O. Box 8882
Wilmington, DE 19899-8882
Corelink Financial Inc. 221,292.8260 8.54
P.O. Box 4054
Concord, CA 94524-4054
Equity Income A Shares Corelink Financial Inc. 229,020.0840 5.47
P.O. Box 4054
Concord, CA 94524-4054
Limited Maturity Bond A Corelink Financial Inc. 1,337,476.6680 65.61
Shares P.O. Box 4054
Concord, CA 94524-4054
Municipal Bond A Shares Corelink Financial Inc. 260,294.7970 43.37
P.O. Box 4054
Concord, CA 94524-4054
Caren M. Peterson 30,248.5900 5.04
1813 Kings Highway
Rockford, IL 61107-1354
</TABLE>
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<PAGE> 81
<TABLE>
<CAPTION>
SHARES PERCENT
FUND OWNER OWNED OWNED
<S> <C> <C> <C>
Michigan Municipal Bond Corelink Financial Inc. 306,727.2690 12.68
A Shares P.O. Box 4054
Concord, CA 94524-4054
Balanced Allocation A Shares Corelink Financial Inc. 62,226.9390 5.75
P.O. Box 4054
Concord, CA 94524-4054
U.S. Government Income A Corelink Financial Inc. 1,012,876.4960 28.93
Shares P.O. Box 4054
Concord, CA 94524-4054
International Discovery A Corelink Financial Inc. 159,710.3670 10.62
Shares P.O. Box 4054
Concord, CA 94524-4054
Treasury Fund A Shares BISYS Fund Services 3,562,484.3900 36.60
FBO Heritage Savings Bank
Attn: Mike Bryan
3435 Stelzer Road
Columbus, OH 43219-6004
Bear Stearns Securities Corp. 900,000.000 9.25
FBO 220-57870-19
1 Metrotech Center North
Brooklyn, NY 11201-3870
The Bank of New York 2,512,805.9000 25.81
TRST FOA CCMT Series 1995-2
Attn: Joyce Maccou
101 Barclay Street 12E
New York, NY 10286-0099
BISYS Fund Services 1,749,863.5400 17.98
FBO First Federal of Spartanburg
Attn: Mike Bryan
3435 Stelzer Road
Columbus, OH 43219-6004
BISYS Fund Services 671,434.3700 6.90
FBO Commercial Bank of Everett
Attn: Mike Bryan
3435 Stelzer Road
Columbus, OH 43219-6004
Large Capitalization Fund Corelink Financial Inc. 392,132.6870 31.62
A Shares P.O. Box 4054
Concord, CA 94524-4054
</TABLE>
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<PAGE> 82
<TABLE>
<CAPTION>
SHARES PERCENT
FUND OWNER OWNED OWNED
<S> <C> <C> <C>
Prime Obligations B Shares First Clearing Corporation 35,297.4900 5.10
A/C 8672-4507
Honghong Zhang & Yuxian NIU
1201 Brighton Drive
Urbana, IL 61801-6414
Richard C. Sloan 75,894.3100 10.98
287 Twin Lakes Drive
Moultrie, GA 31768-7942
Donald L. Edwards 150,626.7500 21.78
P.O. Box 1766
Moultrie, GA 31776-1766
SEI Trust Co. Custodian 39,878.9200 5.77
Michael D. Laughhunn
SEP IRA
6884 3 Mile
White Cloud, MI 49349-9657
Limited Maturity First Clearing Corporation 10,081.8070 10.55
Bond B Shares A/C 4422-0525
Isaac Walker Company
5727 Sheridan Road
Peoria, IL 60614-4269
Intermediate First Clearing Corporation 24,070.4450 19.04
Government B Shares A/C 3549-0227
Horace B. & Joyce L. Gemmill TTE
2360 McComb Drive
Clio, MI 48420-1055
National Tax Exempt Bond B Shares Donaldson Lufkin Jenrette 5,577.4930 11.74
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
Wayne Hummer Investments LLC 12,878.0180 27.11
910-33414-19
Attn: Mutual Funds
P.O. Box 750
Chicago, IL 60690-0750
Theodore H. Stein and Dolores A. Stein 2,407.0680 5.07
JTWROS
153 Kingsbridge
Bristol, TN 37620-2957
</TABLE>
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<PAGE> 83
<TABLE>
<CAPTION>
SHARES PERCENT
FUND OWNER OWNED OWNED
<S> <C> <C> <C>
First Clearing Corporation 12,117.4210 25.51
A/C 1684-5440
Betty J. Bowen
2400 Country Club Drive
Springfield, IL 62704-3262
First Clearing Corporation 2,550.1730 5.37
A/C 8999-5047
First of America TTEE
FBO Neil Grossberger
2309 Vassar
Lansing, MI 48912-5135
Michigan Municipal Bond B First Clearing Corporation 15,411.0640 5.62
A/C 1474-8811
Marion E. Belloni
27715 Alger Lane
Madison Heights, MI 48071-4523
Prime Obligations National City Bank of 536,259,664.0700 85.77
Institutional Shares Michigan/Illinois
Trust Operations
Trust I
P.O. Box 4042
Kalamazoo, MI 49003-4042
National City Bank of 71,058,911.0700 11.36
Michigan/Illinois
Trust Operations
Trust 2
P.O. Box 4042
Kalamazoo, MI 49003-4042
U.S. Gov't Obligations National City Bank of 83,348,573.1900 71.92
Institutional Shares Michigan/Illinois
Trust Operations
Trust I
P.O. Box 4042
Kalamazoo, MI 49003-4042
National City Bank of 29,699,399.0300 25.63
Michigan/Illinois
Trust Operations
Trust 2
P.O. Box 4042
Kalamazoo, MI 49003-4042
</TABLE>
-81-
<PAGE> 84
<TABLE>
<CAPTION>
SHARES PERCENT
FUND OWNER OWNED OWNED
<S> <C> <C> <C>
Tax Free Obligations National City Bank of 90,012,040.6500 96.29
Institutional Shares Michigan/Illinois
Trust Operations
Trust I
P.O. Box 4042
Kalamazoo, MI 49003-4042
Mid Capitalization National City Bank of 8,192,536.9570 39.43
Institutional Shares Michigan/Illinois
Trust Operations
Cash
P.O. Box 4042
Kalamazoo, MI 49003-4042
National City Bank of 5,449,610.5360 26.23
Michigan/Illinois
Trust Operations
Reinvest
P.O. Box 4042
Kalamazoo, MI 49003-4042
Sheldon & Co. 6,569,839.1110 31.62
Attn: Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
Small Capitalization National City Bank of 4,834,442.6780 46.40
Institutional Shares Michigan/Illinois
Trust Operations
Cash
P.O. Box 4042
Kalamazoo, MI 49003-4042
National City Bank of 3,072,508.4590 29.49
Michigan/Illinois
Trust Operations
Reinvest
P.O. Box 4042
Kalamazoo, MI 49003-4042
Sheldon & Co. 2,289,267.3310 21.97
Attn: Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
Equity Income National City Bank of 2,199,971.1520 18.97
Institutional Shares Michigan/Illinois
Trust Operations
Cash
P.O. Box 4042
Kalamazoo, MI 49003-4042
</TABLE>
-82-
<PAGE> 85
<TABLE>
<CAPTION>
SHARES PERCENT
FUND OWNER OWNED OWNED
<S> <C> <C> <C>
National City Bank of 8,766,506.8060 75.59
Michigan/Illinois
Trust Operations
Reinvest
P.O. Box 4042
Kalamazoo, MI 49003-4042
Bond Institutional Shares National City Bank of 11,203,826.7030 30.79
Michigan/Illinois
Trust Operations
Cash
P.O. Box 4042
Kalamazoo, MI 49003-4042
National City Bank of 13,406,035.9790 36.84
Michigan/Illinois
Trust Operations
Reinvest
P.O. Box 4042
Kalamazoo, MI 49003-4042
Sheldon & Co. 11,001,783.8580 30.23
Attn: Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
Limited Maturity Bond National City Bank of 3,585,650.3320 29.32
Institutional Shares Michigan/Illinois
Trust Operations
Cash
P.O. Box 4042
Kalamazoo, MI 49003-4042
National City Bank of 8,173,093.5430 66.83
Michigan/Illinois
Trust Operations
Reinvest
P.O. Box 4042
Kalamazoo, MI 49003-4042
Intermediate Government National City Bank of 3,351,842.5630 26.21
Obligations Institutional Shares Michigan/Illinois
Trust Operations
Cash
P.O. Box 4042
Kalamazoo, MI 49003-4042
</TABLE>
-83-
<PAGE> 86
<TABLE>
<CAPTION>
SHARES PERCENT
FUND OWNER OWNED OWNED
<S> <C> <C> <C>
National City Bank of 8,868,981.9910 69.34
Michigan/Illinois
Trust Operations
Reinvest
P.O. Box 4042
Kalamazoo, MI 49003-4042
National Tax Exempt Bond National City Bank of 7,509,647.6630 83.39
Institutional Shares Michigan/Illinois
Trust Operations
Reinvest
P.O. Box 4042
Kalamazoo, MI 49003-4042
Sheldon & Co. 555,065.4670 6.16
Attn: Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
Michigan Municipal Bond National City Bank of 1,805,453.4940 10.60
Institutional Shares Michigan/Illinois
Trust Operations
Cash
P.O. Box 4042
Kalamazoo, MI 49003-4042
National City Bank of 14,811,332.4940 86.96
Michigan/Illinois
Trust Operations
Reinvest
P.O. Box 4042
Kalamazoo, MI 49003-4042
Balanced Allocation National City Bank of 10,402,900.3000 92.01
Institutional Shares Michigan/Illinois
Trust Operations
Cash
P.O. Box 4042
Kalamazoo, MI 49003-4042
National City Bank of 858,148.0520 7.59
Michigan/Illinois
Trust Operations
Reinvest
P.O. Box 4042
Kalamazoo, MI 49003-4042
</TABLE>
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<PAGE> 87
<TABLE>
<CAPTION>
SHARES PERCENT
FUND OWNER OWNED OWNED
<S> <C> <C> <C>
U.S. Government Income National City Bank of 1,812,869.2300 11.04
Institutional Shares Michigan/Illinois
Trust Operations
Cash
P.O. Box 4042
Kalamazoo, MI 49003-4042
National City Bank of 13,729,447.7960 83.60
Michigan/Illinois
Trust Operations
Reinvest
P.O. Box 4042
Kalamazoo, MI 49003-4042
International Discovery National City Bank of 4,196,808.1700 24.98
Institutional Shares Michigan/Illinois
Trust Operations
Cash
P.O. Box 4042
Kalamazoo, MI 49003-4042
National City Bank of 7,183,715.0640 42.76
Michigan/Illinois
Trust Operations
Reinvest
P.O. Box 4042
Kalamazoo, MI 49003-4042
Sheldon & Co. 5,081,305.3250 30.25
Attn: Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
Treasury Fund National City Bank of 279,537,746.9100 98.17
Institutional Shares Michigan/Illinois
Trust Operations
Trust 1
P.O. Box 4042
Kalamazoo, MI 49003-4042
Large Capitalization Fund National City Bank of 4,044,430.1940 20.43
Institutional Fund Shares Michigan/Illinois
Trust Operations
Cash
P.O. Box 4042
Kalamazoo, MI 49003-4042
</TABLE>
-85-
<PAGE> 88
<TABLE>
<CAPTION>
SHARES PERCENT
FUND OWNER OWNED OWNED
<S> <C> <C> <C>
National City Bank of 7,381,556.2710 37.28
Michigan/Illinois
Trust Operations
Reinvest
P.O. Box 4042
Kalamazoo, MI 49003-4042
Sheldon & Co. 7,885,038.6260 39.83
Attn: Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
</TABLE>
As of August 20, 1999, as a result of its possession of voting
or investment power with respect to such shares, through accounts for which
National City Bank and other affiliates of NCC act in a fiduciary capacity,
National City Bank and other affiliates were deemed to be the record and
beneficial owners of approximately 95.1% of the Institutional Shares of the
Group as follows:
Institutional Shares Beneficially Owned
<TABLE>
<CAPTION>
Percentage
Name Portfolio Beneficially Owned
- ---- --------- ------------------
<S> <C> <C>
Cookson America Inc 401K Parkstone Balanced Allocation 5.68%
Planworks 2 Parkstone Balanced Allocation 5.76%
Planworks 3 Parkstone Balanced Allocation 9.51%
Planworks 4 Parkstone Balanced Allocation 6.26%
Planworks 8 Parkstone Balanced Allocation 9.79%
Planworks Class Parkstone Balanced Allocation 14.00%
Planworks Class II Parkstone Balanced Allocation 10.50%
NCC Non Contrib Mutual Funds Parkstone Bond 28.70%
NCC Non Contrib - Mutual Funds Parkstone International Discovery 29.50%
NCC Non Contrib - Mutual Funds Parkstone Large Capitalization 38.70%
Cookson America Inc 401K Parkstone Intermediate Govt Obligations 10.40%
NCC Non Contrib - Mutual Funds Parkstone Mid Capitalization 30.70%
Planworks 2 Parkstone Mid Capitalization 5.74%
St Francis TSP - Contribution Parkstone Mid Capitalization 8.36%
Cookson America Inc 401K Parkstone Small Capitalization 5.13%
NCC Non Contrib - Mutual Funds Parkstone Small Capitalization 21.40%
Planworks 2 Parkstone Small Capitalization 6.19%
MI SBA CP NTS SER 2 ACQN Parkstone Treasury 9.52%
</TABLE>
NCC may be presumed to control both the Group and each of the
Funds because it possesses or shares investment or voting power with respect to
more than 25% of the total outstanding shares of the Group and of each of the
Funds. As a result, NCC may have the ability to elect the Trustees of the Group,
approve the Investment Advisory
-86-
<PAGE> 89
Agreements and Distribution Agreement for each of the Funds and to control any
other matters submitted to the shareholders of the Funds for their approval or
ratification.
With respect to all of the Funds, the Group's officers and
directors collectively owned less than 1% of the Funds' outstanding securities.
FINANCIAL STATEMENTS
Financial Statements describing audited financial information
for each Fund's operations since inception appear in the Group's Annual Report
dated May 31, 1999, and on file with the SEC (File Nos. 33-13283 and 811-5105)
are incorporated herein by reference. The report of PricewaterhouseCoopers LLP,
independent auditors of the Group, appears therein.
-87-
<PAGE> 90
APPENDIX A
COMMERCIAL PAPER RATINGS
A Standard & Poor's commercial paper rating is a current
opinion of the creditworthiness of an obligor with respect to financial
obligations having an original maturity of no more than 365 days. The following
summarizes the rating categories used by Standard and Poor's for commercial
paper:
"A-1" - Obligations are rated in the highest category
indicating that the obligor's capacity to meet its financial commitment on the
obligation is strong. Within this category, certain obligations are designated
with a plus sign (+). This indicates that the obligor's capacity to meet its
financial commitment on these obligations is extremely strong.
"A-2" - Obligations are somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to
meet its financial commitment on the obligation is satisfactory.
"A-3" - Obligations exhibit adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.
"B" - Obligations are regarded as having significant
speculative characteristics. The obligor currently has the capacity to meet its
financial commitment on the obligation; however, it faces major ongoing
uncertainties which could lead to the obligor's inadequate capacity to meet
its financial commitment on the obligation.
"C" - Obligations are currently vulnerable to nonpayment and
are dependent upon favorable business, financial, and economic conditions for
the obligor to meet its financial commitment on the obligation.
"D" - Obligations are in payment default. The "D" rating
category is used when payments on an obligation are not made on the date due
even if the applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grace period. The "D"
rating will be used upon the filing of a bankruptcy petition or the taking of a
similar action if payments on an obligation are jeopardized.
Moody's commercial paper ratings are opinions of the ability
of issuers to repay punctually senior debt obligations not having an original
maturity in excess of one year, unless explicitly noted. The following
summarizes the rating categories used by Moody's for commercial paper:
A-1
<PAGE> 91
"Prime-1" - Issuers (or supporting institutions) have a
superior ability for repayment of senior short-term debt obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structure with
moderate reliance on debt and ample asset protection; broad margins in earnings
coverage of fixed financial charges and high internal cash generation; and
well-established access to a range of financial markets and assured sources of
alternate liquidity.
"Prime-2" - Issuers (or supporting institutions) have a
strong ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
"Prime-3" - Issuers (or supporting institutions) have an
acceptable ability for repayment of senior short-term debt obligations. The
effect of industry characteristics and market compositions may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and may require relatively high
financial leverage. Adequate alternate liquidity is maintained.
"Not Prime" - Issuers do not fall within any of the Prime
rating categories.
The three rating categories of Duff & Phelps for investment
grade commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff &
Phelps employs three designations, "D-1+," "D-1" and "D-1-," within the
highest rating category. The following summarizes the rating categories used by
Duff & Phelps for commercial paper:
"D-1+" - Debt possesses the highest certainty of timely
payment. Short-term liquidity, including internal operating factors and/or
access to alternative sources of funds, is outstanding, and safety is just below
risk-free U.S. Treasury short-term obligations.
"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.
A-2
<PAGE> 92
"D-3" - Debt possesses satisfactory liquidity and other
protection factors qualify issues as to investment grade. Risk factors are
larger and subject to more variation. Nevertheless, timely payment is expected.
"D-4" - Debt possesses speculative investment
characteristics. Liquidity is not sufficient to insure against disruption in
debt service. Operating factors and market access may be subject to a high
degree of variation.
"D-5" - Issuer 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.
A-3
<PAGE> 93
"TBW-2" - This designation represents Thomson Financial
BankWatch's second-highest category and indicates that while the degree of
safety regarding timely repayment of principal and interest is strong, the
relative degree of safety is not as high as for issues rated "TBW-1."
"TBW-3" - This designation represents Thomson Financial
BankWatch's lowest investment-grade category and indicates that while the
obligation is more susceptible to adverse developments (both internal and
external) than those with higher ratings, the capacity to service principal and
interest in a timely fashion is considered adequate.
"TBW-4" - This designation represents Thomson Financial
BankWatch's lowest rating category and indicates that the obligation is regarded
as non-investment grade and therefore speculative.
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
A-4
<PAGE> 94
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" - An obligation rated "CCC" 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 "CC" is currently highly
vulnerable to nonpayment.
"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.
"r" - This symbol is attached to the ratings of instruments
with significant noncredit risks. It highlights risks to principal or volatility
of expected returns which are not addressed in the credit rating. Examples
include: obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk - such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.
The following summarizes the ratings used by Moody's for corporate
and municipal long-term debt:
"Aaa" - Bonds are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the
A-5
<PAGE> 95
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 operating 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.
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.
A-6
<PAGE> 96
"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 in periods of greater 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
adversely affected by foreseeable events.
"AA" - Bonds considered to be investment grade and of very
high credit quality. These ratings denote a very low expectation of 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.
"BBB" - Bonds considered to be investment grade and of good
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.
A-7
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"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.
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.
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"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 the lowest
investment-grade category and indicates an acceptable capacity to repay
principal and interest. Issues rated "BBB" are 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 repayment of principal and interest. "BB" indicates the
lowest degree of speculation and "CC" the highest degree of speculation.
"D" - This designation indicates that the long-term debt is in
default.
PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC"
may include a plus or minus sign designation which indicates where within the
respective category the issue is placed.
MUNICIPAL NOTE RATINGS
A Standard and Poor's note rating reflects the liquidity
factors and market access risks unique to notes due in three years or less. The
following summarizes the ratings used by Standard & Poor's for municipal
notes:
"SP-1" - The issuers of these municipal notes exhibit a
strong capacity to pay principal and interest. Those issues determined to
possess a very strong capacity to pay debt service are given a plus (+)
designation.
"SP-2" - The issuers of these municipal notes exhibit
satisfactory capacity to pay principal and interest, with some vulnerability to
adverse financial and economic changes over the term of the notes.
"SP-3" - The issuers of these municipal notes exhibit
speculative capacity to pay principal and interest.
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Moody's ratings for state and municipal notes and other
short-term loans are designated Moody's Investment Grade ("MIG") and variable
rate demand obligations are designated Variable Moody's Investment Grade
("VMIG"). Such ratings recognize the differences between short-term credit risk
and long-term risk. The following summarizes the ratings by Moody's Investors
Service, Inc. for short-term notes:
"MIG-1"/"VMIG-1" - This designation denotes best quality.
There is present strong protection by established cash flows, superior liquidity
support or demonstrated broad-based access to the market for refinancing.
"MIG-2"/"VMIG-2" - This designation denotes high quality.
Margins of protection are ample although not so large as in the preceding
group.
"MIG-3"/"VMIG-3" - This designation denotes favorable
quality, with all security elements accounted for but lacking the undeniable
strength of the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well established.
"MIG-4"/"VMIG-4" - This designation denotes adequate quality.
Protection commonly regarded as required of an investment security is present
and although not distinctly or predominantly speculative, there is specific
risk.
"SG" - This designation denotes speculative quality. Debt
instruments in this category lack margins of protection.
Fitch IBCA and Duff & Phelps use the short-term ratings
described under Commercial Paper Ratings for municipal notes.
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APPENDIX B
As stated in the Prospectus, the Equity and Bond Funds, other
than the Colorado Tax-Exempt Fund may enter into futures contracts and options
for hedging purposes. Such transactions are described in this Appendix.
I. 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 Funds may use interest rate futures
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 Funds 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 Funds, through using
futures contracts.
Description of Interest Rate Futures Contracts. An interest
rate futures contract sale would create an obligation by a 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 a 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 a Fund
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, a Fund is immediately
paid the difference and thus realizes a gain. If the offsetting purchase price
exceeds the sale
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price, a Fund pays the difference and realizes a loss. Similarly, the closing
out of a futures contract purchase is effected by the Fund entering into a
futures contract sale. If the offsetting sale price exceeds the purchase price,
a Fund realizes a gain, and if the purchase price exceeds the offsetting sale
price, a 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 and the Chicago Mercantile Exchange and the New York Futures Exchange.
The Fund would deal only in standardized contract's 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 Treasury Bonds and Notes;
Government National Mortgage Association (GNMA) modified pass-through
mortgage-backed securities; three-month Treasury Bills; and ninety-day
commercial paper. A Fund may trade in any futures contract for which there
exists a public market, including, without limitation, the foregoing
instruments.
II. Stock Index Futures Contracts.
General. A stock index assigns relative values to the stocks
included in the index and the index fluctuates with changes in the market values
of the stocks included. Some stock index futures contracts are based on broad
market indexes, such as the Standard & Poor's 500 or the New York Stock Exchange
Composite Index. In contrast, certain exchanges offer futures contracts on
narrower market indexes, such as the Standard & Poor's 100 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.
A Fund will sell index futures contracts in order to offset a
decrease in market value of its securities that might otherwise result from a
market decline. A Fund may do so either to hedge the value of its portfolio as a
whole, or to protect against declines, occurring prior to sales of securities,
in the value of the securities to be sold. Conversely, a Fund will purchase
index futures contracts in anticipation of purchases of securities. In a
substantial majority of these transactions, a Fund will purchase such securities
upon termination of the long futures position, but a long futures position may
be terminated without a corresponding purchase of securities.
In addition, a Fund may utilize stock index futures contracts
in anticipation of changes in the composition of its holdings. For example, in
the event that a 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
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restricted index, such as an index comprised of securities of a particular
industry group. A 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 its portfolio will decline
prior to the time of sale.
III. Futures Contracts on Foreign Currencies.
A futures contract on foreign currency creates a binding
obligation on one party to deliver, and a corresponding obligation on another
party to accept delivery of, a stated quantity of a foreign currency, for an
amount fixed in U.S. dollars. Foreign currency futures may be used by a Fund to
hedge against exposure to fluctuations in exchange rates between the U.S. dollar
and other currencies arising from multinational transactions.
IV. Margin Payments.
Unlike when a Fund purchases or sells a security, no price is
paid or received by a Fund upon the purchase or sale of a futures contract.
Initially, a Fund will be required to deposit with the broker or in a segregated
account with a Fund's custodian an amount of cash or cash equivalents, the value
of which may vary but is generally equal to 10% or less of the value of the
contract. This amount is known as initial margin. 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 a 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 instrument fluctuates making the long and short
positions in the futures contract more or less valuable, a process known as
"marking-to-market." For example, when a 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 a Fund will be
entitled to receive from the broker a variation margin payment equal to that
increase in value. Conversely, where a Fund has purchased a futures contract and
the price of the futures contract has declined in response to a decrease in the
underlying instruments, the position would be less valuable and a Fund would be
required to make a variation margin payment to the broker. At any time prior to
expiration of the futures contract, Denver Investment Advisors may elect to
close the position by taking an opposite position, subject to the availability
of a secondary market, which will operate to terminate a 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 a Fund, and a Fund
realizes a loss or gain.
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V. Risks of Transactions in Futures Contracts.
There are several risks in connection with the use of futures
by a Fund as a hedging device. One risk arises because of the imperfect
correlation between movements in the price of the future and movements in the
price of the securities which are the subject of the hedge. The price of the
future may move more than or less than the price of the securities being hedged.
If the price of the future moves less than the price of the securities which are
the subject of the hedge, the hedge will not be fully effective but, if the
price of the securities being hedged has moved in an unfavorable direction, a
Fund would be in a better position than if it had not hedged at all. If the
price of the securities being hedged has moved in a favorable direction, this
advantage will be partially offset by the loss on the future. If the price of
the future moves more than the price of the hedged securities, a Fund involved
will experience either a loss or gain on the future which will not be completely
offset by movements in the price of the securities which are the subject of the
hedge. To compensate for the imperfect correlation of movements in the price of
securities being hedged and movements in the price of futures contracts, a Fund
may buy or sell futures contracts in a greater dollar amount than the dollar
amount of securities being hedged if the volatility over a particular time
period of the prices of such securities has been greater than the volatility
over such time period of the future, or if otherwise deemed to be appropriate by
Denver Investment Advisors. Conversely, a Fund may buy or sell fewer futures
contracts if the volatility over a particular time period of the prices of the
securities 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 Denver
Investment Advisors. It is also possible that, where a Fund has sold futures to
hedge its portfolio against a decline in the market, the market may advance and
the value of securities held by a Fund may decline. If this occurred, a Fund
would lose money on the future and also experience a decline in value in its
portfolio securities.
Where futures are purchased to hedge against a possible
increase in the price of securities or a currency before a Fund is able to
invest its cash (or cash equivalents) in securities (or options) in an orderly
fashion, it is possible that the market may decline instead; if a Fund then
concludes not to invest in securities or options at that time because of concern
as to possible further market decline or for other reasons, a Fund will realize
a loss on the futures contract that is not offset by a reduction in the price of
securities 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
securities being hedged, the price of futures may not correlate perfectly with
movement in the cash market due to certain market distortions. Rather than
meeting additional margin deposit requirements, investors may close futures
contracts through off-setting transactions which could distort the normal
relationship between the cash and futures markets. Second, with respect to
financial futures contracts, the liquidity of the futures market depends on
participants entering into off-setting transactions rather than making or taking
delivery. To the extent
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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 Denver Investment Advisors 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
Funds intend 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 Funds would continue to be required to make daily cash
payments of variation margin. However, in the event futures contracts have been
used to hedge portfolio 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 trading 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 Funds is also subject to
Denver Investment Advisor's ability to predict correctly movements in the
direction of the market. For example, if a Fund has hedged against the
possibility of a decline in the market adversely affecting securities held in
its portfolio and securities prices increase instead, a 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 a 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. A Fund may have to sell securities at a time when it may be
disadvantageous to do so.
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VI. Options on Futures Contracts.
The Funds may purchase 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.
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 be fully reflected 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 Funds 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. Although permitted by
their fundamental investment policies, the Funds do not currently intend to
write futures options during the current fiscal year, and will not do so in the
future absent any necessary regulatory approvals.
VII. Accounting and Tax Treatment.
Accounting for futures contracts and options will be in
accordance with generally accepted accounting principles.
Generally, futures contracts held by the Funds at the close of
the Funds' taxable year will be treated for federal income tax purposes as sold
for their fair market value on the last business day of such year, a process
known as "mark-to-market." Forty percent of any gain or loss resulting from such
constructive sale will be treated as short-term capital gain or loss and sixty
percent of such gain or loss will be treated as long-term capital gain or loss
without regard to the length of time a Fund holds the futures contract ("the
40-60 rule"). The amount of any capital gain or loss actually realized by a Fund
in a subsequent sale or other disposition of those futures contracts will be
adjusted to reflect any capital gain or loss taken into account by a Fund in a
prior year as a result of the constructive sale of the contracts. With respect
to futures contracts to sell, which will be
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regarded as parts of a "mixed straddle" because their values fluctuate inversely
to the values of specific securities held by a Fund, losses as to such contracts
to sell will be subject to certain loss deferral rules which limit the amount of
loss currently deductible on either part of the straddle to the amount thereof
which exceeds the unrecognized gain (if any) with respect to the other part of
the straddle, and to certain wash sales regulations. Under short sales rules,
which will also be applicable, the holding period of the securities forming part
of the straddle will (if they have not been held for the long-term holding
period) be deemed not to begin prior to termination of the straddle. With
respect to certain futures contracts, deductions for interest and carrying
charges will not be allowed. Notwithstanding the rules described above, with
respect to futures contracts to sell which are properly identified as such, a
Fund may make an election which will exempt (in whole or in part) those
identified futures contracts from being treated for federal income tax purposes
as sold on the last business day of a Fund's taxable year, but gains and losses
will be subject to such short sales, wash sales, loss deferral rules and the
requirement to capitalize interest and carrying charges. Under temporary
regulations, a Fund would be allowed (in lieu of the foregoing) to elect either
(1) to offset gains or losses from portions which are part of a mixed straddle
by separately identifying each mixed straddle to which such treatment applies,
or (2) to establish a mixed straddle account for which gains and losses would be
recognized and offset on a periodic basis during the taxable year. Under either
election, the 40-60 rule will apply to the net gain or loss attributable to the
futures contracts, but in the case of a mixed straddle account election, no more
than 50% of any net gain may be treated as long-term and no more than 40% of any
net loss may be treated as short-term. Options on futures contracts generally
receive federal tax treatment similar to that described above.
Certain foreign currency contracts entered into by the Funds
may be subject to the "mark-to-market" process. If the Fund makes a Capital
Asset Election with respect to such contracts, the contracts will be subject to
the 40-60 rule, described above. Otherwise, such gain or loss will be treated as
100% ordinary gain or loss. To receive such federal income tax treatment, a
foreign currency contract must meet the following conditions: (1) the contract
must require delivery of a foreign currency of a type in which regulated futures
contracts are traded or upon which the settlement value of the contract depends;
(2) the contract must be entered into at arm's length at a price determined by
reference to the price in the interbank market; and (3) the contract must be
traded in the interbank market. The Treasury Department has broad authority to
issue regulations under the provisions respecting foreign currency contracts. As
of the date of this Statement of Additional Information, the Treasury has not
issued any such regulations. Foreign currency contracts entered into by a Fund
may result in the creation of one or more straddles for federal income tax
purposes, in which case certain loss deferral, short sales, and wash sales rules
and the requirement to capitalize interest and carrying charges may apply.
Some investments may be subject to special rules which govern
the federal income tax treatment of certain transactions denominated in terms of
a currency other than the U.S. dollar or determined by reference to the value of
one or more currencies
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other than the U.S. dollar. The types of transactions covered by the special
rules include the following: (i) the acquisition of, or becoming the obligor
under, a bond or other debt instrument (including, to the extent provided in
Treasury regulations, preferred stock); (ii) the accruing of certain trade
receivables and payables; and (iii) the entering into or acquisition of any
forward contract, futures contract, option and similar financial instrument.
However, regulated futures contracts and non-equity options are generally not
subject to the special currency rules if they are or would be treated as sold
for their fair market value at year-end under the "mark-to-market" rules, unless
an election is made to have such currency rules apply. The disposition of a
currency other than the U.S. dollar by a U.S. taxpayer is also treated as a
transaction subject to the special currency rules. With respect to transactions
covered by the special rules, foreign currency gain or loss is calculated
separately from any gain or loss on the underlying transaction and is normally
taxable as ordinary gain or loss. A taxpayer may elect to treat as capital gain
or loss foreign currency gain or loss arising from certain identified forward
contracts, futures contracts and options that are capital assets in the hands of
the taxpayer and which are not part of a straddle. In accordance with Treasury
regulations, certain transactions subject to the special currency rules that are
part of a "section 988 hedging transaction" (as defined in the Code and the
Treasury regulations) will be integrated and treated as a single transaction or
otherwise treated consistently for purposes of the Code. "Section 988 hedging
transactions" are not subject to the mark-to-market or loss deferral rules under
the Code. It is anticipated that some of the non-U.S. dollar denominated
investments and foreign currency contracts that a Fund may make or may enter
into will be subject to the special currency rules described above. Gain or loss
attributable to the foreign currency component of transactions engaged in by the
Funds which are not subject to special currency rules (such as foreign equity
investments other than certain preferred stocks) will be treated as capital gain
or loss and will not be segregated from the gain or loss on the underlying
transaction.
Under the federal income tax provisions applicable to
regulated investment companies, less than 30% of a company's gross income must
be derived from gains realized on the sale or other disposition of securities
held for less than three months. With respect to futures contracts and other
financial instruments subject to the "mark-to-market" rules, the Internal
Revenue Service has ruled in private letter rulings that a gain realized from
such a futures contract or financial instrument will be treated as being derived
from a security held for three months or more (regardless of the actual period
for which the contract or instrument is held) if the gain arises as a result of
a constructive sale under the "mark-to-market" rules, and will be treated as
being derived from a security held for less than three months only if the
contract or instrument is terminated (or transferred) during the taxable year
(other than by reason of the mark-to-market rules) and less than three months
have elapsed between the date the contract or instrument is acquired and the
termination date. In determining whether the 30% test is met for a taxable year,
increases and decreases in the value of the Funds' futures contracts and other
investments that qualify as part of a "designated hedge," as defined in the
Code, may be netted.
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THE PARKSTONE GROUP OF FUNDS
FORM N-1A
PART C. OTHER INFORMATION
ITEM NO.
- --------------------------------------------------------------------------------
ITEM 23. EXHIBITS
Exhibits*:
(a) Declaration of Trust dated March 25, 1987 (incorporated by
reference to Registrant's Post-Effective Amendment No. 31,
filed October 9, 1996).
(i) Amendment dated April 7, 1987 to Declaration
of Trust (incorporated by reference to
Registrant's Post-Effective Amendment No.
31, filed October 9, 1996).
(ii) Amendment dated July 1, 1987 to Declaration
of Trust (incorporated by reference to
Registrant's Post-Effective Amendment No.
31, filed October 9, 1996).
(b) Code of Regulations as approved and adopted by Registrant's
Board of Trustees (incorporated by reference to Registrant's
Post-Effective Amendment No. 31, filed October 9, 1996).
(i) Amendment dated May 11, 1989 to Code of
Regulations (incorporated by reference to
Registrant's Post-Effective Amendment No.
31, filed October 9, 1996).
(ii) Amendment dated August 26, 1993 to Code of
Regulations (incorporated by reference to
Registrant's Post-Effective Amendment No.
31, filed October 9, 1996).
(c) Not applicable.
(d) Investment Advisory Agreement between Registrant and
Securities Counsel, Inc., dated July 9, 1987, relating to the
U.S. Government Obligations Fund, the Prime Obligations Fund
and the Tax-Free Fund (incorporated by reference to
Registrant's Post-Effective Amendment No.
31, filed October 9, l996).
* The file number for all exhibits incorporated by reference is 33-13283.
<PAGE> 109
(i) Amendment dated August 26, 1993 to Schedule
A adding the Treasury Fund and Municipal
Investor Fund (incorporated by reference to
Registrant's Post-Effective Amendment No.
31, filed October 9, 1996).
2. Investment Advisory Agreement between Registrant and
Securities Counsel, Inc. dated September 8, 1988, relating to
the Bond Fund, the Limited Maturity Bond Fund, the
Intermediate Government Obligations Fund, the Municipal Bond
Fund, the Equity Fund, the Small Capitalization Fund and the
High Income Equity Fund (incorporated by reference to
Registrant's Post-Effective Amendment No. 31, filed October 9,
1996).
(i) First Amendment dated March 1, 1995
authorizing the use of subadvisers with
respect to the Balanced Fund (incorporated
by reference to Registrant's Post-Effective
Amendment No. 31, filed October 9, 1996).
(ii) Amendment to Schedule A dated December 16,
1996 adding the Conservative Allocation Fund
and the Aggressive Allocation Fund and
incorporating previous amendments adding the
Large Capitalization Fund, the Michigan
Municipal Bond Fund, the Balanced Allocation
Fund and the U.S. Government Income Fund
(incorporated by reference to Registrant's
Post-Effective Amendment No. 35, filed July
30 1997).
(iii) Second Amendment dated December 16, 1996
authorizing the use of subadvisers with
respect to the Conservative Allocation Fund
and the Aggressive Allocation Fund
(incorporated by reference to Registrant's
Post-Effective Amendment No. 35, filed July
30, 1997).
3. Investment Advisory Agreement between the Registrant and First
of America Investment Corporation dated December 22, 1992,
relating to the International Discovery Fund (incorporated by
reference to Registrant's Post-Effective Amendment No. 31,
filed October 9, 1996).
(i) Amendment dated February 10, 1995 to
Schedule A adding the Emerging Markets Fund
(incorporated by reference to Registrant's
Post-Effective Amendment No. 31, filed
October 9, 1996).
4. Sub-Investment Advisory Agreement between First of America
Investment Corporation and Gulfstream Global Investors, Ltd.
dated March 1, 1995, relating to the International Discovery
Fund, the Balanced Fund and the Emerging Markets Fund
(incorporated by reference to Registrant's Post-Effective
Amendment No. 31, filed October 9, 1996).
-2-
<PAGE> 110
(i) Amendment to Schedule A dated December 16,
1996 adding the Conservative Allocation Fund
and the Aggressive Allocation Fund
(incorporated by reference to Registrant's
Post-Effective Amendment No. 35, filed July
30, 1997).
(e) Form of Distribution Agreement between Registrant and SEI
Investments Distribution Co. dated September 14, 1998
(incorporated by reference to Registrant's Post-Effective
Amendment No. 40, filed September 16, 1998).
1. Specimen Dealer Agreement between SEI Investments Distribution
Co. and dealers (incorporated by reference to Registrant's
Post-Effective Amendment No. 40, filed September 16, 1998).
(f) Not applicable.
(g) Custody Services Agreement between Registrant and National
City Bank dated July 24, 1998 (incorporated by reference to
Registrant's Post-Effective Amendment No. 40, filed September
16, 1998).
1. Custody Agreement between Registrant and the Bank of
California, N.A., dated October 18, 1991, relating to the U.S.
Government Obligations Fund, the Prime Obligations Fund, the
Tax-Free Fund, the Bond Fund, the Limited Maturity Bond Fund,
the Intermediate Government Obligations Fund, the Municipal
Bond Fund, the Equity Fund, the Small Capitalization Fund, the
High Income Equity Fund and the Michigan Municipal Bond Fund
(incorporated by reference to Registrant's Post-Effective
Amendment No. 31, filed October 9, 1996).
(i) Amendment to Schedule A dated December 16,
1996 adding the Conservative Allocation Fund
and the Aggressive Allocation Fund and
incorporating previous amendments adding the
Large Capitalization Fund, the Balanced
Allocation Fund, the U.S. Government Income
Fund, the International Discovery Fund, the
Treasury Fund and the Municipal Investor
Fund (incorporated by reference to
Registrant's Post-Effective Amendment No.
35, filed July 30, 1997).
(ii) Amendment dated November 20, 1992, to
Schedule B of the Custody Agreement
(incorporated by reference to Registrant's
Post-Effective Amendment No. 31 filed
October 9, 1996).
(iii) Securities Lending and Reverse Repurchase
Agreement Addendum dated June 8, 1995,
relating to the Bond Fund, the Balanced Fund
and the Limited Maturity Bond Fund
(incorporated by reference to Registrant's
Post-Effective Amendment No. 31, filed
October 9, 1996).
-3-
<PAGE> 111
2. Exhibit D dated March 18, 1996, adding the Intermediate
Government Obligations Fund's reinvestment policy
(incorporated by reference to Registrant's Post-Effective
Amendment No. 35, filed July 30, 1997).
3. Exhibit D dated March 18, 1996 adding the U.S. Government
Income Fund's reinvestment policy (incorporated by reference
to Registrant's Post-Effective Amendment No. 35, filed July
30, 1997).
4. Amendment to Exhibit D dated May 22, 1997 adding the Small
Capitalization Fund, the Mid Capitalization Fund, the Large
Capitalization Fund and the Equity Income Fund and
incorporating previous Exhibits D relating to the Bond Fund,
the Limited Maturity Bond Fund, the Balanced Allocation Fund,
the Conservative Allocation Fund and the Aggressive Allocation
Fund (incorporated by reference to Registrant's Post-Effective
Amendment No. 40, filed September 16, 1998).
5. Amendment to Exhibit E dated May 22, 1997 revising the fee
schedule (incorporated by reference to Registrant's
Post-Effective Amendment No. 40, filed September 16, 1998).
6. Amendment to Schedule I dated May 22, 1997 adding the Small
Capitalization Fund, the Mid Capitalization Fund, the Large
Capitalization Fund and the Equity Income Fund and
incorporating previous amendments adding the Conservative
Allocation Fund, the Aggressive Allocation Fund, the
Intermediate Government Obligations Fund and the Government
Income Fund (incorporated by reference to Registrant's
Post-Effective Amendment No. 40, filed September 16, 1998).
(i) International Custodian Agreement between
Registrar and the Bank of California, N.A.,
dated July 30, 1995 (incorporated by
reference to Registrant's Post-Effective
Amendment No. 31, filed October 9, 1996).
(h) Administration Agreement between Registrant and The Winsbury
Company Limited Partnership dated January 1, 1995, relating to
the U.S. Government Obligations Fund, the Prime Obligations
Fund, the Tax-Free Fund, the Treasury Fund, the Municipal
Investor Fund, the Equity Fund, the Small Capitalization Fund,
the International Discovery Fund, the Balanced Fund, the High
Income Equity Fund, the Bond Fund, the Limited Maturity Bond
Fund, the Intermediate Government Obligations Fund, the U.S.
Government Income Fund, the Municipal Bond Fund and the
Michigan Municipal Bond Fund (incorporated by reference to
Registrant's Post-Effective Amendment No. 31, filed October 9,
1996).
(i) Amendment to Exhibit A dated December 16,
1996 adding the Conservative Allocation Fund
and the Aggressive Allocation Fund and
incorporating a previous amendment adding
the Large Capitalization Fund (incorporated
by reference to Registrant's Post-Effective
Amendment No. 35, filed July 30. 1997).
-4-
<PAGE> 112
2. Fund Accounting Agreement between Registrant and The
WinsburyService Corporation dated as of February 1, 1993,
relating to the U.S. Government Obligations Funds, the Prime
Obligations Fund, the Tax-Free Fund, the Equity Fund, the
Small Capitalization Fund, the International Discovery Fund,
the Balanced Fund, the High Income Equity Fund, the Bond Fund,
the Limited Maturity Bond Fund, the Intermediate Government
Obligations Fund, the U.S. Government Income Fund, the
Municipal Bond Fund and the Michigan Municipal Bond Fund
(incorporated by reference to Registrant's Post-Effective
Amendment No. 31, filed October 9, 1996).
(i) Amendment to Schedule A dated December 16,
1996 adding the Conservative Allocation Fund
and the Aggressive Allocation Fund and
Incorporating previous amendments adding the
Large Capitalization Fund, the Treasure Fund
and the Municipal Investor Fund
(incorporated by reference to Registrant's
Post-Effective Amendment No. 35, filed July
30, 1997).
(ii) Amendment dated April 1, 1993 to Schedule B
revising the fee schedule (incorporated by
reference to Registrant's Post-Effective
Amendment No. 31, filed on October 9, 1996).
3. Transfer Agency Agreement (incorporated by reference to
Registrant's Post-Effective Amendment No. 40, filed September
16, 1998).
4. Sub-Administration Agreement between First of America
Investment Corporation and The Winsbury Company Limited
Partnership dated January 1, 1995, relating to the U.S.
Government Obligations Fund, the Prime Obligations Fund, the
Tax-Free Fund, the Treasury Fund, the Municipal Investor Fund,
the Equity Fund, the Small Capitalization Fund, the
International Discovery Fund, the Balanced Fund, the High
Income Equity Fund, the Bond Fund, the Limited Maturity Bond
Fund, the Intermediate Government Obligations Fund, the U.S.
Government Income Fund, the Municipal Bond Fund and the
Michigan Municipal Bond Fund (incorporated by reference
Registrant's Post-Effective Amendment No. 31, filed October 9,
1996).
(i) Amendment to Schedule A dated December 16,
1996 adding the Conservative Allocation Fund
and the Aggressive Allocation Fund and
incorporating a previous amendment adding
the Large Capitalization Fund (incorporated
by reference to Registrant's Post-Effective
Amendment No. 5, filed July 30, 1997).
5. Amended and Restated Securities Lending Record Administration
Agreement between Union Bank of California, N.A and BISYS Fund
Services Limited Partnership dated May, 22 1997 incorporated
by reference to Registrant's Post-Effective Amendment No. 35,
Filed July 30, 1997.
-5-
<PAGE> 113
6. Amended and Restated Securities Lending Record Administration
Agreement between Union Bank of California, N.A and BISYS Fund
Services Limited Partnership (incorporated by reference to
Registrant's Post-Effective Amendment No. 40, filed September
16, 1998).
(i) Consent of PricewaterhouseCoopers LLP.**
(j) 1. Consent of Drinker Biddle & Reath LLP.**
2. Opinion of Drinker Biddle & Reath LLP is incorporated by
Reference To Registrant's Post-Effective Amendment No. 41,
filed July 15, 1999.
(k) Not applicable.
(l) Purchase agreement dated July 2, 1987, between Registrant and
The Winsbury Corporation (incorporated by reference to
Registrant's Post-Effective Amendment No. 31 filed October 9,
1996).
1. Specimen Agreement for the Parkstone Individual Retirement
Account (incorporated by reference to Registrant's
Post-Effective Amendment No. 31 filed October 9, 1996).
2. Specimen Agreement for the National Financial Services
Corporation Individual Retirement Account offered through
First of America Securities, Inc. for investment in the
Parkstone Group of Funds (incorporated by reference to
Registrant's Post-Effective Amendment No. 31 filed October 9,
1996).
(m) Investor A Distribution and Shareholder Service Plan
(incorporated by reference to Registrant's Post-Effective
Amendment No. 40, filed September 16, 1998).
1. Investor B Distribution and Shareholder Service Plan
(incorporated by reference to Registrant's Post-Effective
Amendment No. 40, filed September 16, 1998).
(n) None.
(o) Specimen Amended and Restated Rule 18f-3 Multiple Class Plan
(incorporated by reference to Registrant's Post-Effective
Amendment No. 40, filed September 16, 1998).
** Filed herewith.
-6-
<PAGE> 114
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Registrant is controlled by its Board of Trustees.
ITEM 25. INDEMNIFICATION
Article IX Section 9.2 of the Registrant's Declaration of Trust, as
amended, provides for the indemnification of Registrant's Trustees and
officers. Indemnification of the Group's principal underwriter,
custodian, investment adviser, manager and administrator, transfer
agent and fund accountant is provided for, respectively, in Section
1.13 of the Distribution Agreement incorporated by reference as Exhibit
(e)1. hereto, Sections 12 and 10.1 of the Custody Agreements
incorporated by reference as Exhibits (g)1. and 2., respectively,
hereto and in Section 16 of the Custodian Agreement incorporated by
reference as Exhibit (g)2. hereto, Section 8 of the Investment Advisory
and Sub-Investment Advisory Agreements incorporated by reference as
Exhibits (d)1., 2., 3. and 4. hereto, Section 6 of the Administration
Agreement incorporated by reference as Exhibit (h)1. hereto, Section 9
of the Transfer Agency Agreement, incorporated by reference as Exhibit
(h)3. hereto, and Section 6 of the Fund Accounting Agreement
incorporated by reference as Exhibit (h)2. hereto. As of the date of
this Registration Statement, the Group has obtained from a major
insurance carrier a Trustees' 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 otherwise be subject by reason of
his willful misfeasance, bad faith, or gross negligence in the
performance of its duties, or by reason of his reckless disregard of
the duties involved in the conduct of his office or under his agreement
with Registrant Registration will comply with Rule 484 under the
Securities Act of 1933 and Release 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, as amended (the "Act"), may be permitted to trustees,
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
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 of whether such indemnification by it is against policy as
expressed in the Act and will be governed by the final adjudication of
such issues.
-7-
<PAGE> 115
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
(a) National City Investment Management Company ("IMC") Cleveland, Ohio
is an investment adviser registered under the Investment Advisers' Act
of 1940, as amended (the "Advisers Act"). IMC is an indirect,
wholly-owned subsidiary of National City Corporation. IMC currently
manages over $12 billion on behalf of both taxable and tax-exempt
clients, including pensions, endowments, corporations, individual
portfolios, The Parkstone Advantage Fund and Armada Funds.
To the knowledge of Registrant, none of the directors or officers of
IMC is or has been at any time during the past two fiscal years engaged
in any other business, profession, vocation or employment of a
substantial nature, except that certain directors and officers of IMC
may also hold positions with National City's parent, or National City
Corporation or other subsidiaries. Information relating to any
business, profession, or employment of a substantial nature engaged in
by officers and directors of First of America during the past two years
is presented below as derived from Schedules A and D of Form ADV filed
by National City pursuant to the Advisers Act (SEC file No. 801-446).
To the knowledge of Registrant, none of the directors or officers of
IMC, except those set forth below, is or has been, at any time during
the past two calendar years, engaged in any other business, profession,
vocation or employment of a substantial nature, except that certain
directors and officers also hold various positions with, and engage in
business for, the Corporation, which owns all the outstanding stock of
First America Bank, N.A., which in turn owns all the outstanding stock
of IMC, or other subsidiaries of the Corporation. Set forth below are
the names and principal businesses of the directors and certain of the
senior executive officers of IMC who are engaged in any other business,
profession, vocation or employment of a substantial nature.
NATIONAL CITY INVESTMENT MANAGEMENT COMPANY
<TABLE>
<CAPTION>
Position with National
City Investment
Management Other Business Type of
Name Company Connections Business
---- ------- ----------- --------
<S> <C> <C> <C>
Kathleen T. Barr Managing Director, National City Bank Bank
Sales and Marketing
Susan E. Kentosh Vice President and National City Bank Bank
Chief Compliance
Officer
</TABLE>
-8-
<PAGE> 116
<TABLE>
<CAPTION>
Position with National
City Investment
Management Other Business Type of
Name Company Connections Business
---- ------- ----------- --------
<S> <C> <C> <C>
Robert M. Leggett Vice Chairman of the National City Bank Bank
Board, President and
Managing Director
Michael Minnaugh Chairman of the Board National City Bank Bank
and Managing Director
Joseph C. Penko Vice President and National City Bank Bank
Director, Legal
Affairs
Donald L. Ross Chief Investment National City Bank Bank
Officer and Managing
Director
</TABLE>
ITEM 27. PRINCIPAL UNDERWRITER
(a) SEI Investments Distribution Co. ("SEI") acts as distributor
and administrator for Registrant. SEI also distributes the
securities of SEI Daily Income Trust, SEI Liquid Asset Trust,
SEI Tax Exempt Trust, SEI Index Funds, SEI Institutional
Managed Trust, SEI Institutional International Trust, The
Pillar Funds, The Advisors' Inner Circle Fund, CUFUND, STI
Classic Funds, STI Classic Variable Trust, PBHG Insurance
Series Fund, Inc., Alpha Select Funds, Oak Associates Funds,
The Nevis Funds, Inc., The Parkstone Group of Funds, First
American Funds, Inc., First American Investment Funds, Inc.,
The Arbor Fund, Boston 1784 Funds(R), The PBHG Funds, Inc.,
Morgan Grenfell Investment Trust, The Achievement Funds Trust,
Bishop Street Funds, CrestFunds, Inc., STI Classic Variable
Trust, ARK Funds, Huntington Funds, SEI Asset Allocation
Trust, TIP Funds, SEI Institutional Investments Trust, First
American Strategy Funds, Inc., HighMark Funds, Armada Funds,
Expedition Funds, CNI Charter Funds, each of which is an
investment management company.
(b) Directors, officers and partners of SEI, as of April 15, 1999,
were as follows:
-9-
<PAGE> 117
<TABLE>
<CAPTION>
Position and Office Positions and Offices
Name with Underwriter with Registrant
- ---- ---------------- ---------------
<S> <C> <C>
Alfred P. West, Jr. Director, Chairman of the Board of --
Directors
Henry H. Greer Director --
Carmen V. Romeo Director --
Mark J. Held President & Chief Operating Officer --
Gilbert L. Beebower Executive Vice President --
Richard B. Lieb Executive Vice President --
Dennis J. McGonigle Executive Vice President --
Robert M. Silvestri Chief Financial Officer & Treasurer --
Carl A. Guarino Senior Vice President --
Larry Hutchison Senior Vice President --
Jack May Senior Vice President --
Hartland J. McKeown Senior Vice President --
Barbara J. Moore Senior Vice President --
Kevin P. Robins Senior Vice President & General Counsel --
& Secretary
Patrick K. Walsh Senior Vice President --
Robert Aller Vice President --
Gordon W. Carpenter Vice President --
Todd Cipperman Vice President & Assistant Secretary --
S. Courtney E. Collier Vice President & Assistant Secretary --
Robert Crudup Vice President & Managing Director --
Barbara Doyne Vice President --
Jeff Drennen Vice President --
Vic Galef Vice President & Managing Director --
Lydia A. Gavalis Vice President & Assistant Secretary --
Greg Gettinger Vice President & Assistant Secretary --
Kathy Heilig Vice President & Treasurer --
Jeff Jacobs Vice President --
Samuel King Vice President --
</TABLE>
-10-
<PAGE> 118
<TABLE>
<CAPTION>
Position and Office Positions and Offices
Name with Underwriter with Registrant
- ---- ---------------- ---------------
<S> <C> <C>
Kim Kirk Vice President & Managing Director --
John Krzeminski Vice President & Managing Director --
Carolyn McLaurin Vice President & Managing Director --
W. Kelso Morrill Vice President & Managing Director --
Mark Nagle Vice President --
Joanne Nelson Vice President --
Joseph M. O'Donnell Vice President --
Cynthia M. Parrish Vice President & Assistant Secretary
Kim Rainey Vice President --
Rob Redican Vice President --
Maria Rinehart Vice President --
Mark Samuels Vice President & Managing Director --
Steve Smith Vice President --
Daniel Spaventa Vice President --
Kathryn L. Stanton Vice President & Assistant Secretary Assistant Treasurer
Lynda J. Striegel Vice President & Assistant Secretary --
Lori L. White Vice President & Assistant Secretary --
Wayne M. Withrow Vice President & Managing Director --
</TABLE>
Compensation to BISYS, the Trust's former distributor, during the fiscal year
ended May 31, 1999 was as follows:
<TABLE>
<CAPTION>
Net Underwriting Compensation on
Discounts and Redemption and Brokerage Other
Commissions Repurchase Commissions Compensation
- ----------- ---------- ----------- ------------
<S> <C> <C> <C>
$106,172 $0 $0 $11,481,735
</TABLE>
-11-
<PAGE> 119
Compensation to SEI, the Trust's distributor, during the fiscal year ended
May 31, 1999 was as follows:
<TABLE>
<CAPTION>
Net Underwriting Compensation on
Discounts and Redemption and Brokerage Other
Commissions Repurchase Commissions Compensation
- ----------- ---------- ----------- ------------
<S> <C> <C> <C>
$ 9,336.42 $ 0 $ 0 $ 0
</TABLE>
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
(a) National City Investment Management Company, 1900 East
Ninth Street, Cleveland, Ohio 44114-3484 (records relating to
its functions as investment adviser);
(b) Gulfstream Global Investors, Ltd., 100 Crescent Court,
Suite 550, Dallas, Texas 75201 (records relating to certain
functions as the former subadviser for the International
Discovery Fund, Conservative Allocation Fund, Balanced
Allocation Fund and Aggressive Allocation Fund);
(c) SEI Investments Distribution Co., One Freedom Valley
Drive, Oaks, Pennsylvania, 19456 (records relating to its
functions as distributor);
(d) BISYS Fund Services, L.P., 3435 Stelzer Road, Columbus,
Ohio 43219 (records relating to its functions as administrator
and fund accountant);
(e) Drinker Biddle & Reath LLP, One Logan Square, 18TH and
Cherry Streets, Philadelphia, Pennsylvania 19103-6996
(Declaration of Trust, Code of Regulations, and Minute Books);
(f) National City Bank, 4100 West 150th Street, Cleveland,
Ohio 44135 (records relating to its function as custodian);
(g) State Street Bank and Trust Company, P.O. Box 8590,
Boston, Massachusetts 02266 (records relating to its function
as transfer agent and dividend disbursing agent).
ITEM 29. MANAGEMENT SERVICES
-12-
<PAGE> 120
Not applicable.
ITEM 30. UNDERTAKINGS
Registrant hereby undertakes to furnish to each person to whom a
prospectus is delivered a copy of Registrant's latest Semi-Annual
Report to Shareholders upon request and without charge.
-13-
<PAGE> 121
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, Registrant certifies that it
meets all of the requirements for effectiveness of this registration statement
under Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the city of Philadelphia and the Commonwealth of
Pennsylvania on the 13th day of September, 1999.
THE PARKSTONE GROUP OF FUNDS
By Herbert R. Martens, Jr. *
----------------------------------
Herbert R. Martens, Jr., President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Herbert R. Martens, Jr.* President and Trustee September 13, 1999
Robert D. Neary* Trustee September 13, 1999
Leigh Carter* Trustee September 13, 1999
John F. Durkott* Trustee September 13, 1999
Robert J. Farling* Trustee September 13, 1999
Richard W. Furst* Trustee September 13, 1999
Gerald L. Gherlein* Trustee September 13, 1999
J. William Pullen* Trustee September 13, 1999
Gary Tenkman* Treasurer September 13, 1999
*By: /s/ W. Bruce McConnel, III September 13, 1999
---------------------------------------------
Name: W. Bruce McConnel, III
Attorney-in-Fact
</TABLE>
-14-
<PAGE> 122
THE PARKSTONE GROUP OF 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 The Parkstone Group of
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 15, 1998
/s/ Robert D. Neary
- -------------------
Robert D. Neary
<PAGE> 123
THE PARKSTONE GROUP OF 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 The Parkstone Group of
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 15, 1998
/s/ Leigh Carter
- ----------------
Leigh Carter
<PAGE> 124
THE PARKSTONE GROUP OF 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 The Parkstone Group of
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 15, 1998
/s/ John F. Durkott
- -------------------
John F. Durkott
<PAGE> 125
THE PARKSTONE GROUP OF 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 The Parkstone Group of
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 15, 1998
/s/ Robert J. Farling
- ---------------------
Robert J. Farling
<PAGE> 126
THE PARKSTONE GROUP OF FUNDS
POWER OF ATTORNEY
-----------------
Know All Men by These Presents, that the undersigned, Richard
W. Furst, Dean, hereby constitutes and appoints Herbert R. Martens, Jr. and W.
Bruce McConnel, III, is true and lawful attorneys, to execute in his name,
place, and stead, in his capacity as Trustee or officer, or both, of The
Parkstone Group of 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 15, 1998
/s/ Richard W. Furst, Dean
- --------------------------
Richard W. Furst, Dean
<PAGE> 127
THE PARKSTONE GROUP OF 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 The Parkstone Group of 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 15, 1998
/s/ Herbert R. Martens, Jr.
- ---------------------------
Herbert R. Martens, Jr.
<PAGE> 128
THE PARKSTONE GROUP OF 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 The
Parkstone Group of 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 15, 1998
/s/ Gerald L. Gherlein
- ----------------------
Gerald L. Gherlein
<PAGE> 129
THE PARKSTONE GROUP OF 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 The
Parkstone Group of 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 15, 1998
/s/ J. William Pullen
- ---------------------
J. William Pullen
<PAGE> 130
THE PARKSTONE GROUP OF FUNDS
POWER OF ATTORNEY
-----------------
Know All Men by These Presents, that the undersigned, Gary
Tenkman, 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 The Parkstone Group of
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 15, 1998
/s/ Gary Tenkman
- ----------------
Gary Tenkman
<PAGE> 131
EXHIBIT INDEX - THE PARKSTONE GROUP OF FUNDS
- --------------------------------------------
EXHIBIT NO. EXHIBIT
- ----------- -------
(i) Consent of PricewaterhouseCoopers LLP
(j) (1) Consent of Drinker Biddle & Reath LLP
<PAGE> 1
Exhibit (17)(h)
[GRAPHIC ARROW OMITTED]
ARMADA FUNDS
ANNUAL REPORT -- MAY 31, 1999
ARMADA INTERNATIONAL EQUITY FUND
ARMADA SMALL CAP VALUE FUND
ARMADA SMALL CAP GROWTH FUND
ARMADA EQUITY GROWTH FUND
ARMADA TAX MANAGED EQUITY FUND
ARMADA CORE EQUITY FUND
ARMADA EQUITY INDEX FUND
ARMADA EQUITY INCOME FUND
ARMADA BALANCED ALLOCATION FUND
ARMADA TOTAL RETURN
ADVANTAGE FUND
ARMADA BOND FUND
ARMADA INTERMEDIATE BOND FUND
ARMADA GNMA FUND
ARMADA ENHANCED INCOME FUND
ARMADA OHIO TAX EXEMPT FUND
ARMADA PENNSYLVANIA MUNICIPAL FUND
ARMADA NATIONAL TAX EXEMPT FUND
ARMADA OHIO MUNICIPAL
MONEY MARKET FUND
ARMADA PENNSYLVANIA TAX
EXEMPT MONEY MARKET FUND
ARMADA TAX EXEMPT
MONEY MARKET FUND
ARMADA MONEY MARKET FUND
ARMADA GOVERNMENT
MONEY MARKET FUND
ARMADA TREASURY MONEY
MARKET FUND
TABLE OF CONTENTS
Chairman's Message ..................................................... 1
Economic Overview ...................................................... 2
Fund Overview .......................................................... 4
Report of Independent Auditors ......................................... 22
Notice to Shareholders ................................................. 24
FINANCIAL STATEMENTS
Statement of Net Assets and Financial Highlights .................... 26
Statement of Assets and Liabilities ................................. 135
Statements of Operations ............................................ 136
Statements of Changes in Net Assets ................................. 140
NOTES TO FINANCIAL STATEMENTS .......................................... 148
[BOUNDING BOX]
[SECONDARY BOUNDING BOX]
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
[END SECONDARY BOUNDING BOX]
AN INVESTMENT IN MONEY MARKET FUNDS IS NOT INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
ALTHOUGH THE MONEY MARKET FUND(S) SEEKS TO PRESERVE THE VALUE OF YOUR
INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN
THE FUND(S).
National City Investment Management Company serves as investment adviser to
Armada Funds for which it receives an investment advisory fee. For more
complete information about Armada Funds, including charges and expenses,
please contact your investment specialist or call 1-800-622-FUND (3863) for a
prospectus. Read it carefully before you invest or send money. Armada Funds
are distributed by SEI Investments Distribution Co. (SIDC), Oaks, PA 19456.
SIDC is not affiliated with National City Bank and is not a bank.
[END BOUNDING BOX]
<PAGE> 2
[ARROW GRAPHIC OMITTED]
ARMADA FUNDS
BOARD OF TRUSTEES
ROBERT D. NEARY
CHAIRMAN
Retired Co-Chairman, Ernst & Young LLP
Director:
Cold Metal Products, Inc.
Strategic Distribution, Inc.
HERBERT R. MARTENS, JR.
PRESIDENT
Executive Vice President,
National City Corporation
Chairman, President and Chief Executive
Officer, NatCity Investments, Inc.
LEIGH CARTER
Retired President and Chief Operating
Officer, B.F. Goodrich Company
Director:
Kirtland Capital Corporation
Morrison Products
TruSeal Technologies
JOHN F. DURKOTT
President and Chief Operating Officer,
Kittle's Home Furnishings Center, Inc.
ROBERT J. FARLING
Retired Chairman, President and Chief
Executive Officer, Centerior Energy
RICHARD W. FURST, DEAN
Garvice D. Kincaid Professor of Finance
and Dean, Carol Martin Gatton College
of Business and Economics, University
of Kentucky
Director:
Foam Design, Inc.
The Seed Corporation
GERALD L. GHERLEIN
Executive Vice President and General
Counsel, Eaton Corporation
Trustee:
WVIZ Educational Television
J. WILLIAM PULLEN
President and Chief Executive Officer,
Whayne Supply Company
The Armada Trustees also serve as the Trustees of the Parkstone Mutual Funds.
[LOGO OMITTED]
<PAGE> 3
[ARROW GRAPHIC OMITTED]
CHAIRMAN'S MESSAGE
DEAR SHAREHOLDERS:
It is a pleasure to report to you that total assets in Armada Funds increased
58% to $11.7 billion as of May 31, 1999, from the $7.4 billion on May 31, 1998.
This growth resulted from additional investments, market appreciation, strong
sales, and the transfer of assets from accounts of the Parkstone Mutual Funds
and the pooled trust funds.
INVESTMENT PERFORMANCE LEADERSHIP
Given the volatility of all capital markets, we are pleased that our
performance has been very satisfactory. Especially noteworthy has been the
recognition given to the following Armada Funds by industry rating services:
[bullet] ARMADA EQUITY GROWTH FUND CLASS I and CLASS A were awarded an OVERALL
FOUR STAR rating by MORNINGSTAR for the a period ended May 31, 1999.
Additionally, Equity Growth Class I received a FIVE STAR rating for the
three-year period ended May 31, 1999.
[bullet] ARMADA ENHANCED INCOME FUND and EQUITY INCOME FUND (CLASS I and
CLASS A) were awarded an OVERALL FOUR STAR rating by MORNINGSTAR for
the period ended May 31, 1999.
[bullet] ARMADA GNMA FUND and OHIO TAX EXEMPT FUND (CLASS I) were awarded an
OVERALL FOUR STAR rating by MORNINGSTAR for the period ended May 31,
1999.
[bullet] ARMADA TOTAL RETURN ADVANTAGE FUND CLASS I was listed as a top 15
performer in the WALL STREET JOURNAL'S Mutual Fund Scorecard on
April 16, 1999.
[bullet] Both the ARMADA INTERNATIONAL EQUITY FUND and the SMALL CAP GROWTH FUND
demonstrated strong performance in particularly turbulent international
and small cap markets by ranking in the top quartile of similarly
managed funds in the Lipper database.
WWW.ARMADAFUNDS.COM
Continuing to improve our service to you, our shareholders, is a crucial
commitment of our business. To provide you with easy and timely access to
information about your investments we introduced our web site in February of
1999. I hope you find our website useful and encourage you to send us your
comments at [email protected].
For those of you who haven't visited the site - try it at
www.armadafunds.com! We believe it will answer most of your questions and
provide clear, concise and timely information on your investment in Armada
Funds.
IN CLOSING . . .
The accompanying report contains each Fund's audited financial statements,
its specific portfolio of investments, and a detailed discussion of its
performance during the fiscal year ended May 31, 1999. Also, you will find a
commentary from our investment adviser, National City Investment Management
Company, which includes an economic outlook for the coming months and a
discussion of why it believes they will be strong for the financial markets.
As always, if you have questions please contact your account representative
or our Investor Services line at 1-800-622-FUND (3863) which is available from
8:00 a.m. to 8:00 p.m. Eastern Standard Time for your convenience.
Finally, I would like to thank you for your continued confidence in us. We
look forward to providing you with consistent management and service to meet
your investment needs now and in the future.
Sincerely,
/s/ Signature omitted
Robert D. Neary
Chairman
Armada Funds
[LOGO OMITTED]
1
<PAGE> 4
[ARROW GRAPHIC OMITTED]
ECONOMIC OVERVIEW
DEAR SHAREHOLDER:
As the past fiscal year came to a close, the U.S. economy continued to act as
if it were in the early stages of an economic recovery rather than completing
the 98th consecutive month of an expansion. After posting a 4.3 percent gain for
calendar year 1998, the highest rate since 1984, gross domestic product (GDP)
grew by another 4.3 percent (annualized) in the first quarter of 1999.
Encouraged by low unemployment and large gains in real wages, consumer spending
was brisk throughout the past 12 months, with housing and auto sales
particularly strong. By the end of May, even the moribund manufacturing sector
reversed its decline, as increasing demand, coupled with a relative lack of
inventory, pushed manufacturing output to its fastest growth in over two years.
Large cap growth stocks continued to enjoy tremendous gains throughout the
year. Their march was interrupted only briefly though dramatically -- during the
third quarter of 1998 by global economic woes that took their toll on all but
the Treasury markets.
The rest of the equity markets did not fare nearly as well. The quest for
liquidity and predictable earnings growth led investors to treat smaller
domestic stocks, as well as international equities, with caution. How wide was
the disparity in returns? The S&P 500 Composite Index, a leading large cap
indicator, returned a total of 21.05 percent over the past 12 months. Meanwhile,
the Russell 2000 Index of small cap stocks lost 2.69 percent of its value. Even
within the large cap segment of the market, gains were heavily concentrated in
the technology-heavy growth sector. The S&P 500/BARRA Growth Index returned
28.15 percent, more than double the S&P 500/BARRA Value Index.
These inequalities began to reverse themselves only near the end of the
reporting period, as attractive valuations and signs of a genuine recovery in
Asia and Latin America led to renewed interest in small cap and value stocks.
Huge price gains, especially in energy, basic materials, and other cyclical
sectors, helped the BARRA Value Index easily outperform BARRA Growth Index
during April and May. In April alone, BARRA Value Index returned 8.62 percent
versus (0.19) percent for BARRA Growth Index. The broadening of the market
helped the Russell 2000 Index leap 12.28 percent for the three months ended
May 31.
International stocks posted less than stellar gains in U.S. dollars over the
past 12 months, although results could have been much worse given the economic
and monetary problems that plagued many Asian and Latin American countries. The
Morgan Stanley EAFE (Europe, Australasia, Far East) Equity Index, a leading
international benchmark, returned 4.36 percent for the period. The European
markets as a whole posted a gain of 2.5 percent in local currencies, but the
strong showing of the dollar versus the euro sent returns after conversion into
negative territory. Asia performed better, with the Morgan Stanley Asia-Pacific
All-Country Index up 13.45 percent in local currencies. That return translated
to 26.73 percent in dollars, thanks largely to the recovery of the Japanese yen.
The fixed income markets faced a difficult 12 months. The Lehman Aggregate
Bond Index returned a disappointing 4.34 percent, yet this figure belied a
period of extreme volatility. During the third quarter of 1998, the global
"flight to quality" sent Treasury prices soaring and yields (which move in the
opposite direction) plummeting. At the same time, the "spread" sectors of the
bond market -- corporate bonds, asset-backed securities, and mortgage-backed
securities -- suffered a liquidity crisis. This situation continued into the
fourth quarter. Long Treasury yields reached their lows of a generation, with
10-year notes yielding 4.15 percent and 30-year bonds at 4.70 percent.
As we entered 1999, the scenario began to reverse itself. The spread sectors
staged a dramatic recovery, due in no small part to an unexpectedly rapid easing
of Brazil's economic crisis. Brazil's recovery is, in many respects, the arch
example of how the developing markets have rebounded so quickly. Recognizing an
attractive risk/return tradeoff, private capital swiftly returned to these
countries, stabilizing their markets and contributing to liquidity. These
events, in turn, led to falling interest rates and a subsequent improvement in
their economies.
Continued evidence of extremely strong domestic growth and the consequent
rekindling of inflation fears sent Treasury yields rising throughout the first
five months of 1999, firmly establishing a bear market for bonds. Interest rates
rose across the yield curve, hitting shorter-term maturities the hardest.
2
<PAGE> 5
[ARROW GRAPHIC OMITTED]
ECONOMIC OVERVIEW
Looking ahead, our outlook for U.S. economic growth remains sanguine.
Consumer demand will likely continue to provide a solid, though lesser, boost to
economic activity. However, future GDP growth may be closer to 3 percent rather
than the 4 percent to which we've become accustomed. Incremental gains in
manufacturing rely largely on a continuing global recovery, but we are confident
that many recent trouble spots in Asia and Latin America are taking the painful,
but necessary, steps to enhance their economic prospects.
The major issues facing Asia today are the sustainability of exports and the
viability of Japan's economy after its upcoming national election. Asia is still
relying on exports to build economic momentum and adequate reserve balances.
Japan is making a lot of the right promises but needs to make painful job cuts
to follow through on them. We are mindful of these risks but remain constructive
on Asia. Likewise, Latin America has made great progress in the wake of Brazil's
flotation of their currency, the Real, and the recovery in commodity prices. In
sum, global recovery is on more solid footing today, propelled by emerging
market recoveries after two difficult years.
At home, higher than expected growth data will likely translate into a
tightening of short-term interest rates by the Fed, but we believe that a series
of successive rate hikes is still highly unlikely and that the federal funds
rate won't increase by more than a total of 50 basis points. The combination of
strong growth, higher headline inflation, and a less friendly Fed likely means
that Treasury yields will continue to rise in the short-term. However, assuming
growth, and especially inflation, do not accelerate greatly, we still believe
that yields above 6 1/4 percent on 30-Year Treasury Bonds offer investors
long-term value. On the margin, we're more convinced than the Fed is that the
current pace of growth is non-inflationary. Rather, it is the result of
tremendous leaps in productivity, thanks to technology enhancements and
Corporate America's strict cost-control measures.
As for the equity markets, the resurgence in small cap and large cap value
stocks is likely to continue. Valuations remain attractive, and investors
finally appear ready to let growth-stock earnings catch up a bit with their
current prices. As long as we see a continuation of global growth, and the
markets indicate that we will, earnings in the cyclical sectors are likely to
follow suit.
Sincerely,
/s/ signature omitted
Donald L. Ross
Chief Investment Officer
National City Investment Management Co.
3
<PAGE> 6
[ARROW GRAPHIC OMITTED]
ARMADA INTERNATIONAL EQUITY FUND OVERVIEW
COMMENTS FROM THE INTERNATIONAL EQUITY TEAM
Our portfolio benefited from our country allocation decisions and
risk-control disciplines, although our bias toward companies with strong and
stable competitive advantages was not rewarded as we had hoped. For the fiscal
year ended May 31, 1999, the Armada International Equity Fund produced a total
return of 0.84 percent (before sales charges) for Class A investors, 0.10
percent (before sales charges) for Class B investors and 0.95 percent for Class
I investors. Over the same period, the Fund's benchmark, the Morgan Stanley EAFE
Index, produced a total return of 4.36 percent.
As the world economy began showing signs of recovery, investors balked at
paying a premium for high-quality stocks. We believe that investors will return
in increasing numbers to the best-managed, most profitable companies as the year
progresses. For example, we're optimistic about the portfolio's weighting in
systems integration companies. Our holdings in this sector include Tieto in
Finland, Nihon Unisys in Japan, and Logica in the United Kingdom. All are
well-run companies, and they stand to benefit from the growing trend in their
respective countries toward retooling information technology to improve
corporate productivity.
We find the Hong Kong and Singapore markets attractively valued even after
impressive returns year to date. Economic conditions are improving as current
account balances have turned positive. These surpluses have allowed central
banks to ease interest rates without causing currency devaluations and permitted
governments to finance fiscal stimulus programs. We believe that the improvement
in economic conditions needs to be followed up by reforms for wealth creation to
continue, and we are cautiously optimistic that such reforms will take place.
Likewise, certain European markets are attractive. The accession rates for
adopting the euro have left some countries with a competitive advantage over
others. Likewise, some countries are simply more sound fiscally. We believe that
these imbalances will have a persistent effect on the differences in economic
growth rates within the region. In particular, we believe that markets such as
France and Ireland are poised to enjoy stronger growth while Germany and Italy
are likely to suffer.
Japan is in the early stages of structural reform. However, the pace and
timing of reform may lead to episodes of disappointment as earnings struggle to
emerge from the doldrums. Therefore, we limited our holdings in Japan as of May
31 to 16.2 percent of the portfolio, a weighting 6.9 percent below the
benchmark's.
GROWTH OF A $10,000 INVESTMENT3
[GRAPHIC OMITTED]
PLOT POINTS ARE AS FOLLOWS:
CLASS I CLASS A CLASS B MSCI EAFE
8/1/97 10,000 9,450 10,000 10,000
May 98 10,875 10,232 10,839 10,361
May 99 10,978 10,318 10,349 10,813
Armada International Equity Fund (Class I Shares)1
Armada International Equity Fund (Class A Shares with sales charge)4
Armada International Equity Fund (Class B Shares) 5,6
Morgan Stanley EAFE Index
ARMADA INTERNATIONAL EQUITY FUND
- - ------------------------------------
Aggregate Total Return as of 5/31/99
Annualized Cumulative
Since Since
1 Year Inception2 Inception2
Class I Shares1 0.95% 5.24% 9.80%
Class A Shares 0.84% 4.92% 9.19%
Class A Shares,
with Sales Charge4 (4.70)% 1.74% 3.21%
Class B Shares 0.10% 11.60% 16.57%
Class B Shares,
with Sales Charge5 (4.90)% 8.15% 11.57%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
1 CLASS I SHARES ARE SOLD PRIMARILY TO BANKS AND TRUST COMPANIES WHICH ARE
AFFILIATED WITH NATIONAL CITY CORPORATION AND CLIENTS OF NATIONAL ASSET
MANAGEMENT CORPORATION ("NAM"). CERTAIN ACCOUNT LEVEL CHARGES MAY APPLY.
2 THE ARMADA INTERNATIONAL EQUITY FUND'S DATE OF INCEPTION WAS AUGUST 1, 1997
FOR BOTH CLASS I SHARES AND CLASS A SHARES AND JANUARY 6, 1998 FOR CLASS B
SHARES.
3 THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE. WHEN REDEEMED,
SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
4 PERFORMANCE CALCULATED BASED ON THE MAXIMUM FRONT-END SALES CHARGE IN EFFECT
AT MAY 31, 1999, OF 5.50%.
5 PERFORMANCE CALCULATED BASED ON THE MAXIMUM DEFERRED SALES CHARGE IN EFFECT AT
MAY 31, 1999, OF 5.00%. THIS CHARGE DECLINES FROM 5.00% IN THE FIRST YEAR TO
0.00% AFTER FIVE YEARS, AS OUTLINED IN THE PROSPECTUS.
6 THE PERFORMANCE CHART FOR THE CLASS B SHARES INCLUDES PERFORMANCE OF THE
CLASS A SHARES FROM DATE OF INCEPTION.
4
<PAGE> 7
[ARROW GRAPHIC OMITTED]
ARMADA SMALL CAP VALUE FUND OVERVIEW
COMMENTS FROM THE EQUITY VALUE TEAM
The past year proved to be a difficult period in both the small cap and value
segments of the market. Still, in an environment that favored large cap growth
and Internet stocks, our results lagged the Russell 2000 Index only slightly.
For the fiscal year ended May 31, 1999, the Armada Small Cap Value Fund produced
a total return of (4.38) percent (before sales charges) for Class A investors,
(5.13) percent (before sales charges) for Class B investors and (3.67) percent
for Class I investors. During the same period, the Russell 2000 Index returned
(2.69) percent while the Russell 2000 Value Index returned (9.53) percent. The
management team adopted the latter benchmark at the end of the reporting period
to reflect the Fund's value-oriented investing style.
Specifically, we benefited from well-timed purchases of technology companies
as well as a large overweighting in basic materials. Such technology holdings as
Autodesk and Adobe Systems -- purchased when Asia's economic woes had trimmed
their valuations -- subsequently proved to be strong performers. In basic
materials, Ryerson Tull and Geon are just two companies that posted excellent
results as this and other undervalued sectors rallied in April and May.
We believe that the continuing recovery of the world economy and renewed
investor confidence should translate into solid performance for value investors
and the small cap segment of the market. At year-end we took some profits in
basic materials and scaled its weighting back to a still healthy 19 percent of
the portfolio. We invested some of that money in Real Estate Investment Trusts
(REITs), which are attractively priced and showing signs of improving investor
sentiment -- two of our key purchase criteria. In addition, dividends and
earnings are increasing, and REITs no longer appear to be diluting shareholders
by relying too heavily on the equity markets. New holdings in this sector
include Developers Diversified and Arden Realty.
The management team also likes the prospects for the utilities sector, where
we are evaluating a variety of potential purchases. Valuations in the group seem
reasonable, and several smaller players appear likely acquisition candidates.
GROWTH OF A $10,000 INVESTMENT3
[GRAPHIC OMITTED]
PLOT POINTS ARE AS FOLLOWS:
CLASS I CLASS A CLASS B RUSSELL RUSSELL
VALUE INDEX
7/26/94 10,000 10,000 10,000 10,000 10,000
8/15/94 10,000 9,450 10,000 10,000 10,000
May 95 11,464 10,535 11,149 11,415 11,084
May 96 14,059 12,883 13,632 15,512 14,049
May 97 17,378 15,879 16,803 16,594 16,946
May 98 20,823 18,977 20,016 20,118 21,465
May 99 20,058 18,146 18,789 19,577 19,420
Armada Small Cap Value Fund (Class I Shares)1
Armada Small Cap Value Fund (Class A Shares with sales charge)4
Armada Small Cap Value Fund (Class B Shares) 5,6
Russell 2000 Value Index
Russell 2000 Index
ARMADA SMALL CAP VALUE FUND
- - ------------------------------------
Aggregate Total Return as of 5/31/99
Annualized Cumulative
Annualized Since Since
1 Year 3 Year Inception2 Inception2
Class I Shares1 (3.67)% 12.58% 15.43% 100.58%
Class A Shares (4.38)% 12.10% 14.57% 92.00%
Class A Shares,
with Sales Charge4 (9.64)% 10.01% 13.23% 81.47%
Class B Shares (5.13)% 11.68% (3.06)% (4.26)%
Class B Shares,
with Sales Charge5 (9.40)% 10.60% (6.21)% (8.57)%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
1 CLASS I SHARES ARE SOLD PRIMARILY TO BANKS AND TRUST COMPANIES WHICH ARE
AFFILIATED WITH NATIONAL CITY CORPORATION AND CLIENTS OF NATIONAL ASSET
MANAGEMENT CORPORATION ("NAM"). CERTAIN ACCOUNT LEVEL CHARGES MAY APPLY.
2 THE ARMADA SMALL CAP VALUE FUND'S DATE OF INCEPTION WAS JULY 26, 1994 FOR
CLASS I SHARES, AUGUST 15, 1994 FOR CLASS A SHARES AND JANUARY 6, 1998 FOR
CLASS B SHARES. THE ANNUALIZED 3-YEAR RETURN OF THE CLASS B SHARES INCLUDES
INFORMATION FROM COMMENCEMENT OF OPERATIONS OF THE CLASS A SHARES, RATHER THAN
THE DATE CLASS B SHARES WERE INTRODUCED.
3 THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE. WHEN REDEEMED,
SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
4 PERFORMANCE CALCULATED BASED ON THE MAXIMUM FRONT-END SALES CHARGE IN EFFECT
AT MAY 31, 1999, OF 5.50%.
5 PERFORMANCE CALCULATED BASED ON THE MAXIMUM DEFERRED SALES CHARGE IN EFFECT AT
MAY 31, 1999, OF 5.00%. THIS CHARGE DECLINES FROM 5.00% IN THE FIRST YEAR TO
0.00% AFTER FIVE YEARS, AS OUTLINED IN THE PROSPECTUS.
6 THE PERFORMANCE CHART FOR THE CLASS B SHARES INCLUDES PERFORMANCE OF THE
CLASS A SHARES FROM DATE OF INCEPTION.
5
<PAGE> 8
[ARROW GRAPHIC OMITTED]
ARMADA SMALL CAP GROWTH FUND OVERVIEW
COMMENTS FROM THE EQUITY GROWTH TEAM
The past year proved to be a difficult one for the Fund and for small cap
investors in general. For the fiscal year ended May 31, 1999, the Armada Small
Cap Growth Fund produced a total return of (12.54) percent (before sales
charges) for Class A investors, (13.26) percent (before sales charges) for Class
B investors, and (12.36) for Class I investors. During the same period, the
Russell 2000 Index returned (2.69) percent and the Russell 2000 Growth Index
returned 3.93 percent. The Fund assumed the latter benchmark on January 1 to
reflect the portfolio's bias toward growth stocks.
The discrepancy between large cap and small cap performance was the widest we
had seen in some time, with the S&P 500 outperforming the Russell 2000 Index by
23.74 percentage points. The economic crisis that rippled through Asia and other
emerging markets from late 1997 through 1998 sent investors fleeing from small
cap and mid cap stocks to the highly liquid large cap and U.S. Treasury markets.
Internet-related companies, led by names like CMGI, E-Trade, and DoubleClick,
accounted for what good news the small cap sector offered. Unfortunately, our
purchasing criteria -- limiting us to stocks with market caps not exceeding $750
million -- effectively prohibited us from including these companies in the
portfolio for most of the year. Given the tremendous expansion of market values
in every sector of the market, our ceiling left us at the low end of the small
cap market where stocks were hit hardest.
We remedied this situation in January by raising the Fund's market cap
ceiling to $3 billion. The Fund can own stocks with even greater market caps as
long as they remain in the benchmark. After assuming the Fund's management from
former sub-advisor Wellington Management in August 1998, we instituted some
other changes. For example, in keeping with National City's overall investment
philosophy, we added some additional risk controls that should reduce the
portfolio's overall volatility. We've set new minimum and maximum sector
weightings, and by May 31 had more than doubled the number of stocks in the
portfolio year-over-year.
With the easing of the global financial crisis, we believe that the Fund and
the small cap market in general are poised for a rebound. Indeed, the market
already showed signs of broadening during April and May. Investors seemed
willing to assume some additional risk rather than continue paying a premium for
a handful of large cap stocks. Small cap prices should also benefit from
improved earnings-per-share growth expectations for the asset class as a whole.
GROWTH OF A $10,000 INVESTMENT3
[GRAPHIC OMITTED]
PLOT POINTS ARE AS FOLLOWS:
GROWTH
CLASS I CLASS A CLASS B INDEX INDEX
8/1/97 10,000 9,450 10,000 10,000 10,000
May 98 11,735 11,073 11,697 11,108 10,659
May 99 10,285 9,685 9,655 10,809 11,078
Armada Small Cap Growth Fund (Class I Shares)1
Armada Small Cap Growth Fund (Class A Shares with sales charge)4
Armada Small Cap Growth Fund (Class B Shares)5,6
Russell Growth Index
Russell 200 Index
ARMADA SMALL CAP GROWTH FUND
- - ----------------------------
Aggregate Total Return as of 5/31/99
Annualized Cumulative
Since Since
1 Year Inception2 Inception2
Class I Shares1 (12.36)% 1.54% 2.85%
Class A Shares (12.54)% 1.35% 2.48%
Class A Shares, with Sales Charge4 (17.36)% (1.73)% (3.14)%
Class B Shares (13.26)% (3.56)% (4.94)%
Class B Shares, with Sales Charge5 (17.55)% (7.00)% (9.64)%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
1 CLASS I SHARES ARE SOLD PRIMARILY TO BANKS AND TRUST COMPANIES WHICH ARE
AFFILIATED WITH NATIONAL CITY CORPORATION AND CLIENTS OF NATIONAL ASSET
MANAGEMENT CORPORATION ("NAM"). CERTAIN ACCOUNT LEVEL CHARGES MAY APPLY.
2 THE ARMADA SMALL CAP GROWTH FUND'S DATE OF INCEPTION WAS AUGUST 1, 1997 FOR
BOTH CLASS I SHARES AND CLASS A SHARES AND JANUARY 6, 1998 FOR CLASS B
SHARES.
3 THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE. WHEN REDEEMED,
SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
4 PERFORMANCE CALCULATED BASED ON THE MAXIMUM FRONT-END SALES CHARGE IN EFFECT
AT MAY 31, 1999, OF 5.50%.
5 PERFORMANCE CALCULATED BASED ON THE MAXIMUM DEFERRED SALES CHARGE IN EFFECT
AT MAY 31, 1999, OF 5.00%. THIS CHARGE DECLINES FROM 5.00% IN THE FIRST YEAR
TO 0.00% AFTER FIVE YEARS, AS OUTLINED IN THE PROSPECTUS.
6 THE PERFORMANCE CHART FOR THE CLASS B SHARES INCLUDES PERFORMANCE OF THE
CLASS A SHARES FROM DATE OF INCEPTION.
6
<PAGE> 9
[ARROW GRAPHIC OMITTED]
ARMADA EQUITY GROWTH FUND OVERVIEW
COMMENTS FROM THE EQUITY GROWTH TEAM
For the fiscal year ended May 31, 1999, the Armada Equity Growth Fund
produced a total return of 19.88 percent (before sales charges) for Class A
investors, 19.22 percent (before sales charges) for Class B investors, and 20.16
percent for Class I investors. During the same period, the S&P 500/ Barra Growth
Index returned 28.15 percent and the S&P 500 Composite Index returned 21.05
percent. We adopted the latter benchmark in May to reflect more accurately the
Fund's investment objectives. Given that we made this change late in the fiscal
year, all benchmark comparisons below relate to the Barra Growth Index.
Large cap stocks again reaped most of the stock market's gains over the past
12 months, and the Fund performed strongly over this period. In particular, we
profited from an overweighting in the consumer cyclical and consumer services
sectors and from our near benchmark weighting in technology, the portfolio's
largest sector holding. Such stocks as AirTouch, Cisco Systems, and EMC Corp.
more than doubled in value, while The Gap, IBM, Lexmark, MCI/WorldCom, Tandy,
Time-Warner, and Wal-Mart posted excellent returns.
An underweighting in basic materials served us well for most of the year, but
we gave back some gains when that sector rebounded in April. A similar story
unfolded in the energy sector, where we were underweighted or market neutral
through April. We increased our energy exposure in May.
Our underperformance relative to the Barra Growth Index can be attributed to
the outstanding performance of a handful of companies at the high end of its
market cap range. The market-weighted nature of the benchmark means that such
companies had the most impact on its returns. Microsoft and General Electric by
themselves account for a combined 13 percent of Barra Growth's market cap. The
Fund owns both stocks, but we held our percentage weighting in these companies
to less than the benchmark's due, in part, to our commitment to managing risk.
As long as inflation remains in check, we believe that the Fund will continue
to benefit from the strong earnings growth of our holdings. For example, Cisco,
as well as Lucent Technologies, another holding, should thrive as the Internet's
infrastructure demands increase. In addition, improving supply and demand
balances in paper and energy are likely to translate into improved earnings.
That belief prompted us to overweight the portfolio in these sectors at
year-end, adding such companies as Burlington Resources, Chevron, Exxon,
International Paper, and Schlumberger. Relative to the Fund's benchmark change,
shareholders can expect to see a slight reduction in our technology and
healthcare holdings as well as an increase in the portfolio's financial
weighting.
GROWTH OF A $10,000 INVESTMENT3
[Graphic Omitted]
Plot points are as follows:
COMPOSITE GROWTH
CLASS I CLASS A CLASS B INDEX INDEX
12/20/89 10,000 9,450 10,000 10,000 10,000
5/90 10,847 10,250 10,845 10,629 10,852
5/91 12,805 12,101 12,808 11,879 12,377
5/92 13,943 13,124 13,895 13,052 13,708
5/93 14,942 14,040 14,867 14,565 14,660
5/94 15,154 14,199 15,034 15,181 14,813
5/95 16,765 15,670 16,590 18,240 18,252
5/96 20,893 19,484 20,628 23,424 23,821
5/97 27,071 25,181 26,659 30,310 31,754
5/98 34,827 32,313 34,097 39,607 42,007
5/99 41,848 38,736 40,651 47,944 53,832
Armada Equity Growth Fund (Class I Shares)1
Armada Equity Growth Fund (Class A Shares with sales charge)4, 6
Armada Equity Growth Fund (Class B Shares)5, 6
S&P 500 Composite Index
S&P 500/BARRA Growth Index
ARMADA EQUITY GROWTH FUND
- - ------------------------------------
Aggregate Total Return as of 5/31/99
Annualized Cumulative
Annualized Annualized Since Since
1 Year 3 Year 5 Year Inception2 Inception2
Class I Shares1 20.16% 26.05% 22.53% 16.36% 318.50%
Class A Shares 19.88% 25.74% 22.23% 15.78% 228.06%
Class A Shares,
with Sales Charge4 13.30% 23.39% 20.85% 14.97% 210.04%
Class B Shares 19.22% 25.37% 22.01% 20.99% 30.51%
Class B Shares,
with Sales Charge5 14.22% 24.52% 21.83% 17.66% 25.51%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
1 CLASS I SHARES ARE SOLD PRIMARILY TO BANKS AND TRUST COMPANIES WHICH ARE
AFFILIATED WITH NATIONAL CITY CORPORATION AND CLIENTS OF NATIONAL ASSET
MANAGEMENT CORPORATION ("NAM"). CERTAIN ACCOUNT LEVEL CHARGES MAY APPLY.
2 THE ARMADA EQUITY GROWTH FUND'S DATE OF INCEPTION WAS DECEMBER 20, 1989, FOR
CLASS I SHARES, APRIL 15, 1991 FOR CLASS A SHARES AND JANUARY 6, 1998 FOR
CLASS B SHARES. THE ANNUALIZED 3-YEAR AND ANNUALIZED 5-YEAR RETURNS OF THE
CLASS B SHARES INCLUDE INFORMATION FROM COMMENCEMENT OF OPERATIONS OF THE
CLASS I SHARES, RATHER THAN THE DATE CLASS B SHARES WERE INTRODUCED.
3 THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE. WHEN REDEEMED,
SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
4 PERFORMANCE CALCULATED BASED ON THE MAXIMUM FRONT-END SALES CHARGE IN EFFECT
AT MAY 31, 1999, OF 5.50%.
5 PERFORMANCE CALCULATED BASED ON THE MAXIMUM DEFERRED SALES CHARGE IN EFFECT
AT MAY 31, 1999, OF 5.00%. THIS CHARGE DECLINES FROM 5.00% IN THE FIRST
YEAR TO 0.00% AFTER FIVE YEARS, AS OUTLINED IN THE PROSPECTUS.
6 THE PERFORMANCE CHART FOR THE CLASS A AND CLASS B SHARES INCLUDES PERFORMANCE
OF THE CLASS I SHARES FROM DATE OF INCEPTION.
7
<PAGE> 10
[ARROW GRAPHIC OMITTED]
ARMADA TAX MANAGED EQUITY FUND OVERVIEW
COMMENTS FROM THE EQUITY GROWTH TEAM
For the fiscal year ended May 31, 1999, the Armada Tax-Managed Equity Fund
produced a total return of 23.03 percent (before sales charges) for Class A
investors, 22.31 percent (before sales changes) for Class B investors, and 22.82
percent for Class I investors. During the same period, the S&P 500 Composite
Index returned 21.05 percent.
Measured on an after-tax basis, the Fund's performance was even more
impressive. Although it is too early to comment on the calendar year ended 1999,
investors received a modest penny per share in December for capital gains
incurred from the Fund's inception (April 1998 for institutional shareholders
and May 1998 for retail investors) through November. We accomplished this feat
through our strategy of favoring capital appreciation (with its lower tax rate)
over dividends, selling depreciated securities to offset some of our gains, and
keeping portfolio turnover under 25 percent. The Fund's emphasis on low turnover
orients the portfolio toward stocks that offer consistent, long-term growth.
In the Fund's first full year, a benchmark weighting in the technology
sector, a large exposure to health care stocks, and a modest overweighting in
capital goods were most responsible for our excellent results. America Online,
Cisco Systems, Sun Microsystems, Texas Instruments, Microsoft, MCI/WorldCom, and
Vodafone all posted outstanding returns. Our health care holdings -- led by
Medtronic and Johnson & Johnson -- contributed throughout most of the reporting
period, although we gave back some gains in this sector when the market rotated
to value stocks in April and May.
In total, the Fund's assets grew in value by 60 percent year-over-year to
approximately 254 million. This increase can be attributed to a combination of
capital appreciation and the addition of assets in October resulting from a
merger with two other National City common funds.
Looking ahead, we intend to maintain a large exposure to healthcare -- 12.5
percent of assets at year-end -because we believe in the sector's long-term
potential for growth. Moreover, in keeping with our shareholders' sensitivity to
taxes, we expect to hold a large portion of the portfolio for the next three to
five years.
GROWTH OF A $10,000 INVESTMENT3
[Graphic Omitted]
Plot points are as follows:
COMPOSITE
CLASS I CLASS A CLASS B INDEX
5/31/89 10,000 9,450 10,000 10,000
May 90 11,540 10,905 11,540 11,712
May 91 13,262 12,532 13,262 13,089
May 92 14,459 13,664 14,459 14,383
May 93 15,681 14,819 15,681 16,049
May 94 15,890 15,016 15,890 16,728
May 95 17,798 16,819 17,798 20,099
May 96 22,402 21,170 22,402 25,811
May 97 28,825 27,240 28,825 33,400
May 98 38,603 36,479 38,603 43,644
May 99 47,412 44,881 47,215 52,831
Armada Tax Managed Equity Fund (Class Shares)1,6
Armada Tax Managed Equity Fund (Class Shares with sales charge)1,6
Armada Tax Managed Equity Fund (Class Shares)5,6
S&P 500 Composite Index
ARMADA TAX MANAGED EQUITY FUND
- - ------------------------------------
Aggregate Total Return as of 5/31/99
Annualized Cumulative
Annualized Annualized Annualized Since Since
1 Year 3 Year 5 Year 10 Year Inception2 Inception2
Class I Shares1 22.82% 28.39% 24.44% 16.84% 17.65% 1031.70%
Class A Shares 23.03% 28.46% 24.48% 16.86% 17.66% 1033.58%
Class A Shares,
with Sales
Charge4 16.24% 26.03% 23.06% 16.18% 17.22% 971.75%
Class B Shares 19.12% 19.12% 19.12% 19.12% 17.62% 1027.03%
Class B Shares,
with Sales
Charge5 14.12% 14.12% 14.12% 14.12% 17.62% 1027.03%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
1 CLASS I SHARES IS SOLD PRIMARILY TO BANKS AND TRUST COMPANIES WHICH ARE
AFFILIATED WITH NATIONAL CITY CORPORATION AND CLIENTS OF NATIONAL ASSET
MANAGEMENT CORPORATION ("NAM"). CERTAIN ACCOUNT LEVEL CHARGES MAY APPLY.
2 THE ARMADA TAX MANAGED EQUITY FUND'S DATE OF INCEPTION WAS APRIL 9, 1998,
FOR CLASS I SHARES, MAY 11 1998, FOR CLASS A SHARES AND MAY 4, 1998, FOR
CLASS B SHARES. THE ANNUALIZED 3, 5 AND 10-YEAR PERFORMANCE OF CLASS I SHARES,
CLASS A SHARES AND CLASS B SHARES INCLUDES PERFORMANCE OF A PREDECESSOR
COMMON TRUST FUND WHICH COMMENCED OPERATIONS ON JUNE 30, 1984.
3 THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE. WHEN REDEEMED,
SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
4 PERFORMANCE CALCULATED BASED ON THE MAXIMUM FRONT-END SALES CHARGE IN EFFECT
AT MAY 31, 1999, OF 5.50%.
5 PERFORMANCE CALCULATED BASED ON THE MAXIMUM DEFERRED SALES CHARGE IN EFFECT
AT MAY 31, 1999, OF 5.00%. THIS CHARGE DECLINES FROM 5.00% IN THE FIRST YEAR
TO 0.00% AFTER FIVE YEARS, AS OUTLINED IN THE PROSPECTUS.
6 THE PERFORMANCE CHART FOR ALL CLASSES INCLUDES PERFORMANCE OF A PREDECESSOR
COMMON TRUST FUND.
8
<PAGE> 11
[ARROW GRAPHIC OMITTED]
ARMADA CORE EQUITY FUND OVERVIEW
COMMENTS FROM THE NATIONAL ASSET MANAGEMENT CORPORATION
For the fiscal year ended May 31, 1999, the Armada Core Equity Fund produced
a total return of 25.78 percent (before sales charges) for Class A investors,
25.17 percent (before sales charges) for Class B investors and 26.08 percent for
Class I investors. Over the same period, the S&P 500 Composite Index returned a
total of 21.05 percent.
Our decision to increase the portfolio's technology overweighting during the
third quarter of 1998 accounted for much of the Fund's outperformance versus the
benchmark. As Asia's economic woes took their toll on U.S. equity markets, we
were able to take advantage of some excellent valuation opportunities within
this sector. In particular, we filled out our positions in such companies as
Applied Materials and Teradyne while adding chip manufacturer Xilinx to the
portfolio. This move paid off during the fourth quarter of 1998 and the first
quarter of 1999 as technology stocks rallied. Other technology holdings --
Microsoft, Cisco Systems, and IBM among them -- performed strongly during this
period as well.
After technology's huge fourth-quarter run, we began to pare its
overweighting in January while increasing our holdings in the value-oriented
financial and basic materials sectors. Our position in the latter served us well
when cyclical stocks staged a major turnaround in April and May. Holdings in
paper companies Champion, Georgia-Pacific, and Willamette, in particular,
boosted results.
In sum, the Fund's growth and value allocations served shareholders well
throughout the reporting period. Furthermore, we anticipate maintaining the
portfolio's year-end growth and value parity for the foreseeable future. Given
the lack of clear direction in the economy, we believe that neither group is
likely to dominate the other over the near-term. A cloudy market environment
also means that we will continue to maintain some exposure to high-quality
stocks such as Merck, Schering-Plough, and Home Depot, which tend to stand up
better in volatile markets.
GROWTH OF A $10,000 INVESTMENT3
[Graphic omitted]
Plot points are as follows:
CLASS I CLASS A CLASS B INDEX
8/1/97 10,000 9,450 10,000 10,000
MAY 98 11,404 10,758 11,364 11,585
MAY 99 14,378 13,532 13,724 14,024
Armada Core Equity Fund (Class I Shares)1
Armada Core Equity Fund (Class A Shares with sales charge)4
Armada Core Equity Fund (Class B Shares)5,6
S&P 500 Composite Index
ARMADA CORE EQUITY FUND
- - ------------------------------------
Aggregate Total Return as of 5/31/99
Annualized Cumulative
Since Since
1 Year Inception2 Inception2
Class I Shares1 26.08% 21.94% 43.77%
Class A Shares 25.78% 21.68% 43.20%
Class A Shares,
with Sales Charge4 18.86% 17.98% 35.35%
Class B Shares 25.17% 26.16% 38.36%
Class B Shares,
with Sales Charge5 20.17% 22.88% 33.36%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
1 CLASS I SHARES ARE SOLD PRIMARILY TO BANKS AND TRUST COMPANIES WHICH ARE
AFFILIATED WITH NATIONAL CITY CORPORATION AND CLIENTS OF NATIONAL ASSET
MANAGEMENT CORPORATION ("NAM"). CERTAIN ACCOUNT LEVEL CHARGES MAY APPLY.
2 THE ARMADA CORE EQUITY FUND'S DATE OF INCEPTION WAS AUGUST 1, 1997 FOR BOTH
CLASS I SHARES AND CLASS A SHARES AND JANUARY 6, 1998 FOR CLASS B SHARES.
3 THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE. WHEN REDEEMED,
SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
4 PERFORMANCE CALCULATED BASED ON THE MAXIMUM FRONT-END SALES CHARGE IN EFFECT
AT MAY 31, 1999 OF 5.50%.
5 PERFORMANCE CALCULATED BASED ON THE MAXIMUM DEFERRED SALES CHARGE IN
EFFECT AT MAY 31, 1999 OF 5.00%. THIS CHARGE DECLINES FROM 5.00% IN THE FIRST
YEAR TO 0.00% AFTER FIVE YEARS, AS OUTLINED IN THE PROSPECTUS.
6 THE PERFORMANCE CHART FOR THE CLASS B SHARES INCLUDES PERFORMANCE OF THE
CLASS A SHARES FROM DATE OF INCEPTION.
9
<PAGE> 12
[ARROW GRAPHIC OMITTED]
ARMADA EQUITY INDEX FUND OVERVIEW
COMMENTS FROM THE EQUITY TEAM
From its inception for Class A investors on October 15, 1998, through May 31,
1999, the Armada Equity Index Fund produced a total return of 24.83 percent
(before sales charges). By comparison, the S&P 500 Composite Index returned
19.43 percent from October 15, 1998, through May 31, 1999. From its inception
for Class I investors on July 10, 1998, the Fund's return totaled 14.16 percent.
By comparison, the S&P 500 Composite Index produced a total return of 17.58
percent from July 10, 1998, through May 31, 1999.
By owning all 500 component companies in their exact proportions, we were
able to track the performance of this leading large cap stock index very closely
since the Fund opened to investors. The portfolio benefited from the strong
showing by large cap stocks -- a handful of technology stocks in particular --
which again held sway over all other segments of the equity markets. Although
the Index suffered a temporary setback in August through October due to global
uncertainty, it had fully recovered by the end of 1998.
Looking ahead, large cap stocks are likely to continue posting solid earnings
results. However, given the rich valuations of many Index components and the
year-end improvement in other areas of the market, investors may not see another
consecutive year of 20-plus percent returns.
[Graphic omitted]
Plot points are as follows:
GROWTH OF $10,000 INVESTMENT3
CLASS I CLASS A INDEX
7/10/98 10,000
10/15/98 10,000 9,625 10,000
May 99 11,414 12,013 11,632
Armada Equity Index Fund (Class I Shares)1
Armada Equity Index Fund (Class A Shares with sales charge)4
S&P 500 Composite Index
ARMADA EQUITY INDEX FUND
- - ------------------------------------
Aggregate Total Return as of 5/31/99
Annualized Cumulative
Inception to Since
Date2 Inception2
Class I Shares1 15.90% 14.16%
Class A Shares 39.74% 24.83%
Class A Shares,
with Sales Charge4 38.27% 20.20%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
1 CLASS I SHARES ARE SOLD PRIMARILY TO BANKS AND TRUST COMPANIES WHICH ARE
AFFILIATED WITH NATIONAL CITY CORPORATION AND CLIENTS OF NATIONAL ASSET
MANAGEMENT CORPORATION ("NAM"). CERTAIN ACCOUNT LEVEL CHARGES MAY APPLY.
2 THE ARMADA EQUITY INDEX FUND'S DATE OF INCEPTION WAS JULY 10, 1998 FOR CLASS
I SHARES AND OCTOBER 15, 1998 FOR CLASS A SHARES.
3 THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE. WHEN REDEEMED,
SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
4 PERFORMANCE CALCULATED BASED ON THE MAXIMUM FRONT-END SALES CHARGE IN EFFECT
AT MAY 31, 1999 OF 3.75%.
10
<PAGE> 13
[ARROW GRAPHIC OMITTED]
ARMADA EQUITY INCOME FUND OVERVIEW
COMMENTS FROM THE EQUITY VALUE TEAM
During the latter half of 1998 and the first three months of 1999, the market
continued to reward large cap growth managers far more richly than their value
counterparts. In fact, the S&P/Barra Growth Index outperformed the S&P/Barra
Value Index by 15.06 percentage points for the entire fiscal year. Despite this
somewhat hostile environment, the management team remained true to the Fund's
value discipline. As a result, we were eventually rewarded for our patience. The
easing of the global economic crisis led to a broadening of the market in April,
and the Fund was strategically positioned to benefit as investors began moving
money into such undervalued sectors as industrial, energy, and basic materials.
For the fiscal year ended May 31, 1999, the Armada Equity Income Fund
produced a total return of 10.40 percent (before sales charges) for Class A
investors, 9.14 percent (before sales charges) for Class B investors, and 10.62
percent for Class I investors. Over the same period, the S&P 500/Barra Value
Index returned 13.09 percent.
We were pleased with the Fund's performance, which trailed its benchmark's
slightly. Superior stock selection served us well as many long-time holdings
showed substantial gains. Strong performers included Alcoa, Caterpillar, Enron,
Frontier Corp., General Dynamics, General Mills, Intimate Brands, and United
Technologies. From a sector standpoint, our underweighting in financials versus
the benchmark helped us the most as did our overweighting in healthcare. In
turn, our underweighting in technology and overweighting in consumer cyclicals
detracted. Given the large cap market's strong performance, our low risk profile
(i.e., low beta) also contributed to the Fund's slight underperformance.
Looking ahead, we believe that the continuing recovery of the world economy
bodes well for value investors in general and for our portfolio in particular.
For example, our overweighting in the U.S. industrial and basic commodities
sector should prove advantageous if a reduction in pricing pressure leads to
profit margin improvements. In addition, the Fund has significant holdings in
utilities and telecommunications, two traditional value sectors that still
appear overlooked by the market. In sum, we believe that the Fund is
well-positioned if the market takes a more defensive posture and shifts its
focus to undervalued stocks with cyclical earnings.
GROWTH OF A $10,000 INVESTMENT3
[Graphic Omitted]
Plot points are as follows:
VALUE
CLASS I CLASS A CLASS B INDEX INDEX
7/1/94 10,000
8/22/94 9,450 10,000
May 95 11,309 10,403 11,008 12,316 12,041
May 96 13,540 12,417 13,140 15,816 15,213
May 97 16,872 15,438 16,337 20,466 19,087
May 98 21,206 19,361 20,516 26,744 24,607
May 99 23,458 21,374 22,191 32,373 27,828
Armada Equity Income Fund (Class I Shares)1
Armada Equity Income Fund (Class A Shares with sales charge)4
Armada Equity Income Fund (Class B Shares)5, 6
S&P 500/BARRA Value Index
ARMADA EQUITY INCOME FUND
- - ------------------------------------
Aggregate Total Return as of 5/31/99
Annualized Cumulative
Annualized Since Since
1 Year 3 Year Inception2 Inception2
Class I Shares1 10.62% 20.11% 18.93% 134.59%
Class A Shares 10.40% 19.85% 18.64% 126.18%
Class A Shares,
with Sales
Charge4 4.32% 17.60% 17.24% 113.69%
Class B Shares 9.14% 19.44% 13.52% 19.39%
Class B Shares,
with Sales
Charge5 4.14% 18.50% 10.10% 14.39%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
1 CLASS I SHARES ARE SOLD PRIMARILY TO BANKS AND TRUST COMPANIES WHICH ARE
AFFILIATED WITH NATIONAL CITY CORPORATION AND CLIENTS OF NATIONAL ASSET
MANAGEMENT CORPORATION ("NAM"). CERTAIN ACCOUNT LEVEL CHARGES MAY APPLY.
2 THE ARMADA EQUITY INCOME FUND'S DATE OF INCEPTION WAS JULY 1, 1994 FOR CLASS I
SHARES, AUGUST 22, 1994 FOR CLASS A SHARES AND JANUARY 6, 1998 FOR CLASS B
SHARES. THE ANNUALIZED 3-YEAR RETURN OF THE CLASS B SHARES INCLUDES
INFORMATION FROM COMMENCEMENT OF OPERATIONS OF THE CLASS A SHARES, RATHER
THAN THE DATE CLASS B SHARES WERE INTRODUCED.
3 THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE. WHEN REDEEMED,
SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
4 PERFORMANCE CALCULATED BASED ON THE MAXIMUM FRONT-END SALES CHARGE IN EFFECT
AT MAY 31, 1999, OF 5.50%.
5 PERFORMANCE CALCULATED BASED ON THE MAXIMUM DEFERRED SALES CHARGE IN EFFECT
AT MAY 31, 1999, OF 5.00%. THIS CHARGE DECLINES FROM 5.00% IN THE FIRST YEAR
TO 0.00% AFTER FIVE YEARS, AS OUTLINED IN THE PROSPECTUS.
6 THE PERFORMANCE CHART FOR CLASS B SHARES INCLUDES PERFORMANCE OF THE CLASS A
SHARES FROM DATE OF INCEPTION.
11
<PAGE> 14
[ARROW GRAPHIC OMITTED]
ARMADA BALANCED ALLOCATION FUND OVERVIEW
COMMENTS FROM EQUITY AND FIXED INCOME TEAMS
From its inception for Class I investors on July 10, 1998, through May 31,
1999, the Armada Balanced Allocation Fund produced a total return of 4.57
percent. Since the Fund was opened to Class A investors on July 31, 1998, the
Fund returned a total of 7.26 percent (before sales charges). Since the Fund was
opened to Class B investors on November 11, 1998, the Fund returned a total of
6.07 percent (before sales charges). By comparison, the Balanced Allocation
Hybrid Benchmark returned 11.20 percent, the S&P 500 Composite Index returned
12.61 percent, and the Lehman Aggregate Bond Index returned (0.77) percent from
November 30, 1998 to May 31, 1999. By comparison, the S&P 500 Composite Index
returned 17.58 percent from July 31, 1998, through May 31, 1999, while the
Lehman Aggregate Bond Index returned 3.24 percent over the same period. During
the same period the Balanced Allocation Hybrid Benchmark returned 11.65 percent.
This benchmark reflects a blending of the S&P 500 Composite Index and the Lehman
Aggregate Bond Index.
The management team's decision to keep the portfolio's equity holdings near
the low end of their permitted allocation range initially served us well as
global economic woes sent stock prices tumbling during the third quarter of
1998. However, better-than-expected corporate earnings and the beginnings of a
turnaround in Asia during the fourth quarter helped the market rebound faster
than we had anticipated. As these events unfolded, the Fund's underexposure to
equities was mitigated somewhat by our exposure to exclusively large cap growth
holdings. These stocks again easily outperformed every other segment of the
equity market over the past 12 months.
In fixed income, the portfolio's heavy weighting in Treasuries benefited the
Fund during the "flight to quality" that occurred in late 1998. Although we
began adding back high-quality spread (non-Treasury) securities incrementally in
January, this sector staged a rapid comeback that cost us some of our earlier
gains. By February, we had tilted our fixed-income allocation firmly toward
spread sectors, which we are convinced offer the best risk/return profile for
our investors.
At fiscal year-end, approximately 60 percent of the Fund was invested in
large cap stocks, placing our equity holdings near the high end of their
allocation range. In particular, we increased our exposure to traditional value
sectors such as basic materials, energy, and consumer cyclicals. These sectors
began to perform strongly in April and May, and we believe that their attractive
valuations and a bright earnings outlook bode well for the future. Bonds --
heavily weighted to mortgage-backed securities -- accounted for the remaining
40 percent of holdings.
GROWTH OF A $10,000 INVESTMENT3
[Graphic omitted]
Plot points are as follows:
CLASS I CLASS A CLASS B BENCHMARK
7/10/98 10,000 10,100
7/31/98 10,100 9,525 10,200
11/11/98 10,200 10,100 10,000 10,400
May 99 10,457 10,214 10,107 11,165
ARMADA BALANCED ALLOCATION FUND
- - ------------------------------------
Aggregate Total Return as of 5/31/99
Annualized Cumulative
Inception to Since
Date Inception2
Class I Shares1 5.13% 4.57%
Class A Shares 8.71% 7.26%
Class A Shares, with Sales Charge4 8.30% 2.12%
Class B Shares 11.02% 6.07%
Class B Shares, with Sales Charge5 1.94% 1.07%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
1 CLASS I SHARES ARE SOLD PRIMARILY TO BANKS AND TRUST COMPANIES WHICH ARE
AFFILIATED WITH NATIONAL CITY CORPORATION AND CLIENTS OF NATIONAL ASSET
MANAGEMENT CORPORATION ("NAM"). CERTAIN ACCOUNT LEVEL CHARGES MAY APPLY.
2 THE ARMADA BALANCED ALLOCATION FUND'S DATE OF INCEPTION WAS JULY 10, 1998
FOR CLASS I SHARES, JULY 31, 1998 FOR CLASS A SHARES AND NOVEMBER 11, 1998
FOR CLASS B SHARES.
3 THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE. WHEN REDEEMED,
SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
4 PERFORMANCE CALCULATED BASED ON THE MAXIMUM FRONT-END SALES CHARGE IN EFFECT
AT MAY 31, 1999 OF 4.75%.
5 PERFORMANCE CALCULATED BASED ON THE MAXIMUM DEFERRED SALES CHARGE IN EFFECT
AT MAY 31, 1999 OF 5.00%. THIS CHARGE DECLINES FROM 5.00% IN THE FIRST YEAR
TO 0.00% AFTER FIVE YEARS, AS OUTLINED IN THE PROSPECTUS.
6 THE PERFORMANCE CHART FOR CLASS B SHARES INCLUDES PERFORMANCE OF THE CLASS A
SHARES FROM DATE OF INCEPTION.
12
<PAGE> 15
[ARROW GRAPHIC OMITTED]
ARMADA TOTAL RETURN ADVANTAGE FUND OVERVIEW
COMMENTS FROM NATIONAL ASSET MANAGEMENT CORPORATION
Given the unusual volatility in the bond markets over the past 12 months, the
management team was modestly pleased with the Fund's performance. For the fiscal
year ended May 31, 1999, the Armada Total Return Advantage Fund produced a total
return of 3.18 percent (before sales charges) for Class A investors and 3.54
percent for Class I investors. During the same period, the Lehman
Government/Corporate Bond Index returned 4.06 percent.
During the first half of the reporting period, our portfolio's longer
duration proved beneficial to performance. Unfortunately, any gains were offset
by an overweighting in non-Treasury sectors (corporate, mortgage-backed, and
asset-backed securities). As Treasury prices soared during the flight to
quality, the remainder of the bond market suffered a liquidity crisis.
We increased our holdings in non-Treasury sectors throughout the first
quarter of 1999, a strategy that contributed to the Fund's results as these
sectors rebounded to outperform Treasuries through April. However, our gains
were slightly outweighed by our longer duration and the Fed's bias toward
tightening short-term interest rates.
At year-end, 42 percent of the Fund's net assets were invested in corporate
bonds, 26 percent in asset-backed securities, 22 percent in Treasuries and
agency securities, 9 percent in mortgage-backed securities, and 1 percent in
cash. As of the same date, the weighted average maturity of the portfolio's
holdings was 9.77 years, with an average credit quality of double-A. We
anticipate maintaining our current posture for the next three to six months
because we believe that it offers our shareholders the best combination of risk
versus reward.
GROWTH OF A $10,000 INVESTMENT3
[Graphic Omitted]
Plot points are as follows:
CLASS A CLASS I INDEX
7/7/94 10,000 10,000
9/6/94 10,000 9,525 10,000
May 95 11,113 10,396 11,187
May 96 11,579 10,782 11,645
May 97 12,564 11,682 12,565
May 98 13,864 12,859 14,008
May 99 14,355 13,268 14,577
Armada Total Return Advantage Fund (Class I Shares)1
Armada Total Return Advantage Fund (Class A Shares with sales charge)4
Lehman Government/Corporate Bond Index
ARMADA TOTAL RETURN ADVANTAGE FUND
- - ------------------------------------
Aggregate Total Return as of 5/31/99
Annualized Cumulative
Annualized Since Since
1 Year 3 Year Inception2 Inception2
Class I Shares1 3.54% 7.42% 7.65% 43.53%
Class A Shares 3.18% 7.16% 7.25% 39.29%
Class A Shares,
with Sales
Charge4 (1.71)% 5.44% 6.15% 32.63%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
1 CLASS I SHARES ARE SOLD PRIMARILY TO BANKS AND TRUST COMPANIES WHICH ARE
AFFILIATED WITH NATIONAL CITY CORPORATION AND CLIENTS OF NATIONAL ASSET
MANAGEMENT CORPORATION ("NAM"). CERTAIN ACCOUNT LEVEL CHARGES MAY APPLY.
2 THE ARMADA TOTAL RETURN ADVANTAGE FUND'S DATE OF INCEPTION WAS JULY 7, 1994
FOR CLASS I SHARES AND SEPTEMBER 6, 1994 FOR CLASS A SHARES.
3 THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE. WHEN REDEEMED,
SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
4 PERFORMANCE CALCULATED BASED ON THE MAXIMUM FRONT-END SALES CHARGE IN EFFECT
AT MAY 31, 1999 OF 4.75%.
13
<PAGE> 16
[ARROW GRAPHIC OMITTED]
ARMADA BOND FUND OVERVIEW
COMMENTS FROM THE TAXABLE FIXED INCOME TEAM
The past 12 months were a period of extreme volatility in the fixed income
markets. Overall, the management team was pleased with the performance of the
Fund through the end of 1998 although our results for the first five months of
1999 were less than expected.
For the fiscal year ended May 31, 1999, the Armada Bond Fund produced a total
return of 3.77 percent (before sales charges) for Class A investors, 3.06
percent (before sales charges) for Class B investors, and 3.82 percent for Class
I investors. During the same period, the Lehman Aggregate Bond Index returned
4.34 percent and the Lehman Intermediate Government Bond Index returned 4.98
percent. Going forward, performance of the Fund will be measured against the
Lehman Aggregate Bond Index instead of the Lehman Intermediate Government Bond
Index. We adopted the Lehman Aggregate Bond Index to reflect more accurately the
Fund's investment objectives
Our strategy was correct in anticipating that we would benefit from an
overweight in Treasuries going into the third quarter of 1998. A long duration
position also contributed to our strong performance, at least through the end of
October.
The management team began increasing holdings in corporate and mortgage-
backed issues in January, but we approached these moves cautiously. With Brazil
facing economic difficulties and Asia and Russia fresh in our minds, we did not
anticipate that the markets would take the latest crisis in stride. We continued
to increase holdings in these sectors through February, a position the Fund
retained to the end of the reporting period.
The Fund currently remains overweighted in spread sectors, slightly favoring
mortgages to corporate bonds. Yields in the corporate market are attractive, but
we prefer to remain defensive in this sector given the current fever for mergers
and acquisitions. AT&T's recent bid to acquire MediaOne, and the amount of debt
it was willing to assume to clinch the deal, points to the event risk that is
part of today's corporate debt market.
As of May 31, 1999, 17 percent of the fund's net assets were invested in U.S.
Treasury and Agency securities, 46 percent in mortgage-backed securities, 25
percent in corporate bonds, and 12 percent in asset-backed securities. As of the
same date, the average maturity of the portfolio's holdings was 9.05 years, with
an average credit quality of triple-A.
GROWTH OF A $10,000 INVESTMENT3
[Graphic Omitted]
Plot points are as follows:
AGGREGATE
GOV'T BOND
CLASS I CLASS A CLASS B INDEX INDEX
8/10/94 10,000 9,525 10,000 10,000 10,000
MAY 95 10,772 10,260 10,775 10,765 10,955
MAY 96 11,194 10,662 11,198 11,253 11,435
MAY 97 12,022 11,432 12,009 12,053 12,387
MAY 98 13,050 12,380 13,026 13,087 13,739
MAY 99 13,549 12,846 13,226 13,739 14,336
Armada Bond Fund (Class I Shares)1
Armada Bond Fund (Class A Shares with sales charge)4,6
Armada Bond Fund (Class B Shares)5,6
Lehman Intermediate Government Bond Index
Lehman Aggregate Bond Index
Armada Bond Fund
Aggregate Total Return as of 5/31/99
Annualized Cumulative
Annualized Since Since
1 Year 3 Year Inception2 Inception2
Class I Shares1 3.82% 6.57% 6.52% 35.50%
Class A Shares 3.77% 6.41% 6.45% 18.53%
Class A Shares,
with Sales
Charge4 (1.14)% 4.69% 4.55% 12.87%
Class B Shares 3.06% 6.23% 3.28% 4.61%
Class B Shares,
with Sales
Charge5 (1.80)% 5.04% (0.15)% (0.20)%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
1 CLASS I SHARES ARE SOLD PRIMARILY TO BANKS AND TRUST COMPANIES WHICH ARE
AFFILIATED WITH NATIONAL CITY CORPORATION AND CLIENTS OF NATIONAL ASSET
MANAGEMENT CORPORATION ("NAM"). CERTAIN ACCOUNT LEVEL CHARGES MAY APPLY.
2 ACTIVITY FOR THE PERIOD PRESENTED INCLUDES THAT OF A PREDECESSOR FUND THROUGH
SEPTEMBER 6, 1996. THE ARMADA BOND FUND'S DATE OF INCEPTION FOR PERFORMANCE
WAS AUGUST 10, 1994 FOR CLASS I SHARES, SEPTEMBER 11, 1996 FOR CLASS A SHARES
AND JANUARY 6, 1998 FOR CLASS B SHARES. THE ANNUALIZED 3-YEAR RETURN OF THE
CLASS A AND CLASS B SHARES INCLUDES INFORMATION FROM THE COMMENCEMENT OF
OPERATIONS OF THE CLASS I SHARES, RATHER THAN THE DATE CLASS A SHARES OR
CLASS B SHARES WERE INTRODUCED. THE PERFORMANCE OF THE CLASS A SHARES OR
CLASS B SHARES PRIOR TO THEIR INTRODUCTION DATE DOES NOT REFLECT SHAREHOLDER
SERVICING FEES, WHICH, IF REFLECTED, WOULD REDUCE THE PERFORMANCE QUOTED
FOR SUCH PERIODS.
3 THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE. WHEN REDEEMED,
SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
4 PERFORMANCE CALCULATED BASED ON THE MAXIMUM FRONT-END SALES CHARGE IN EFFECT
AT MAY 31, 1999 OF 4.75%.
5 PERFORMANCE CALCULATED BASED ON THE MAXIMUM DEFERRED SALES CHARGE IN EFFECT AT
MAY 31, 1999 OF 5.00%. THIS CHARGE DECLINES FROM 5.00% IN THE FIRST YEAR TO
0.00% AFTER FIVE YEARS, AS OUTLINED IN THE PROSPECTUS.
6 THE PERFORMANCE CHART FOR THE CLASS A AND CLASS B SHARES INCLUDES PERFORMANCE
OF THE CLASS I SHARES FROM DATE OF INCEPTION.
14
<PAGE> 17
[ARROW GRAPHIC OMITTED]
ARMADA INTERMEDIATE BOND FUND OVERVIEW
COMMENTS FROM THE TAXABLE FIXED INCOME TEAM
During the second half of 1998, the economic meltdown in Asia and Russia led
investors to flee domestic and international equity markets for the safety of
U.S. Treasuries. This flight to quality caused U.S. Treasury prices to
skyrocket, but it led to a lack of liquidity in virtually every other sector of
the bond market.
The Fund initially benefited from this environment due to its heavy weighting
in Treasuries. The shorter maturities of its holdings also subjected the Fund to
less of the credit curve. Our portfolio was still overweighted in Treasuries as
the global crisis eased in early 1999, erasing some of our gains as Treasury
prices began their descent from stratospheric heights. At the same time,
liquidity returned to the spread sectors. Year-over-year, the portfolio produced
an acceptable return that belied one of the most difficult fixed income markets
of the past 20 years.
For the fiscal year ended May 31, 1999, the Armada Intermediate Bond Fund
produced a total return of 3.54 percent (before sales charges) for Class A
investors, 2.83 percent (before sales charges) for Class B investors, and 3.98
percent for Class I investors. During the same period, the Lehman Intermediate
Government/Corporate Bond Index returned
4.78 percent.
Looking ahead, the management team faces an environment of strong domestic
growth and tight labor markets characterized by the Fed's decision to change its
policy bias toward tightening interest rates. We still believe that long bond
yields will stay in a range between 5.5 and 6.5 percent and have moved the
portfolio to a neutral duration position.
As of May 31, 1999, 25 percent of the Fund's net assets were invested in U.S.
Treasury and Agency securities, 14 percent in mortgage-backed securities, 39
percent in corporate bonds, and 18 percent in asset-backed securities. As of the
same date, the average maturity of the portfolio's holdings was 4.63 years, with
an average credit quality of double-A.
[Graphic omitted]
Plot points are as follows:
GROWTH OF A $10,000 INVESTMENT3
CLASS I CLASS A CLASS B LEHMAN
12/20/89 10,000 9,525 10,000 10,000
May 90 10,098 9,619 10,097 10,197
May 91 11,332 10,791 11,329 11,414
May 92 12,761 12,154 12,760 12,737
May 93 14,205 13,425 14,166 14,061
May 94 14,205 13,396 14,134 14,442
May 95 15,561 14,636 15,442 15,617
May 96 16,151 15,140 15,974 16,334
May 97 17,222 16,103 16,989 17,539
May 98 18,615 17,344 18,243 19,086
May 99 19,356 17,958 18,760 19,999
Armada Intermediate Bond Fund (Class I Shares)1
Armada Intermediate Bond Fund (Class A Shares with sales charge)4, 6
Armada Intermediate Bond Fund (Class B Shares)5, 6
Lehman Intermediate Government/Corporate Bond Index
ARMADA INTERMEDIATE BOND FUND
- - ------------------------------------
Aggregate Total Return as of 5/31/99
Annualized Cumulative
Annualized Annualized Since Since
1 Year 3 Year 5 Year Inception2 Inception2
Class I Shares1 3.98% 6.22% 6.38% 7.24% 93.55%
Class A Shares 3.54% 5.85% 6.04% 6.59% 67.83%
Class A Shares,
with Sales
Charge4 (1.38)% 4.14% 5.02% 5.95% 59.79%
Class B Shares 2.83% 5.51% 5.83% 2.92% 4.10%
Class B Shares,
with Sales
Charge5 (2.07)% 4.29% 5.51% (0.55)% (0.76)%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
1 CLASS I SHARES ARE SOLD PRIMARILY TO BANKS AND TRUST COMPANIES WHICH ARE
AFFILIATED WITH NATIONAL CITY CORPORATION AND CLIENTS OF NATIONAL ASSET
MANAGEMENT CORPORATION ("NAM"). CERTAIN ACCOUNT LEVEL CHARGES MAY APPLY.
2 THE ARMADA INTERMEDIATE BOND FUND'S DATE OF INCEPTION WAS DECEMBER 20, 1989
FOR CLASS I SHARES, APRIL 15, 1991 FOR CLASS A SHARES AND JANUARY 6, 1998
FOR CLASS B SHARES. THE 3-YEAR AND 5-YEAR RETURNS OF THE CLASS B SHARES
INCLUDE INFORMATION FROM THE COMMENCEMENT OF OPERATIONS OF THE CLASS I
SHARES, RATHER THAN THE DATE CLASS B SHARES WERE INTRODUCED. THE PERFORMANCE
OF THE CLASS B SHARES PRIOR TO THEIR INTRODUCTION DATE DOES NOT REFLECT
SHAREHOLDER SERVICING FEES, WHICH, IF REFLECTED, WOULD REDUCE THE PERFORMANCE
QUOTED FOR SUCH PERIODS.
3 THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE. WHEN REDEEMED,
SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
4 PERFORMANCE CALCULATED BASED ON THE MAXIMUM FRONT-END SALES CHARGE IN EFFECT
AT MAY 31, 1999 OF 4.75%.
5 PERFORMANCE CALCULATED BASED ON THE MAXIMUM DEFERRED SALES CHARGE IN EFFECT
AT MAY 31, 1999 OF 5.00%. THIS CHARGE DECLINES FROM 5.00% IN THE FIRST
YEAR TO 0.00% AFTER FIVE YEARS, AS OUTLINED IN THE PROSPECTUS.
6 THE PERFORMANCE CHART FOR THE CLASS A AND CLASS B SHARES INCLUDES PERFORMANCE
OF THE CLASS I SHARES FROM DATE OF INCEPTION.
15
<PAGE> 18
[ARROW GRAPHIC OMITTED]
ARMADA GNMA FUND OVERVIEW
COMMENTS FROM THE TAXABLE FIXED INCOME TEAM
Going into the third quarter of 1998, the Fund's overweighting in U.S.
Treasury securities helped performance when every other sector of the bond
market was hurt by the global flight to quality. At the time, Treasuries
accounted for approximately 25 percent of the Fund's allocation. We were slow to
scale back our Treasury holdings due to our ongoing concerns about economic
problems in Asia, Russia, and, in particular, Brazil. This decision diminished
some of our first half gains as a flood of private capital stabilized Brazil
more quickly than we had anticipated, triggering a rebound in the spread
sectors. On balance, though, we gained more from the Fund's underweighting in
Ginnie Maes versus the benchmark than we lost by delaying our entry back into
that market.
For the fiscal year ended May 31, 1999, the Armada GNMA Fund produced a total
return of 3.77 percent (before sales charges) for Class A investors and 4.02
percent for Class I investors. During the same period, the Lehman GNMA Index
returned 4.91 percent.
With no liquidity issues on the horizon, the Fund currently retains only a
moderate exposure to Treasuries. In addition, we anticipate keeping the
portfolio's duration neutral relative to its benchmark, based on our belief that
long bond yields are unlikely to exceed 6.5 percent.
As of May 31, 1999, 80 percent of the Fund's net assets were invested in U.S.
Agency securities, 4 percent in Treasuries, 5 percent in mortgage-backed
securities and 7 percent in asset-backed securities. As of the same date, the
average maturity of the portfolio's holdings was 7.16 years.
GROWTH OF A $10,000 INVESTMENT3
[Graphic omitted]
Plot points are as follows:
CLASS I CLASS A LEHMAN
8/10/94 10,000 9,525 10,000
MAY 95 10,961 10,440 10,960
MAY 96 11,466 10,922 11,547
MAY 97 12,513 11,898 12,643
MAY 98 13,661 12,957 13,857
MAY 99 14,210 13,446 14,538
Armada GNMA Fund (Class I Shares)1
Armada GNMA Fund (Class A Shares with sales charge)4,5
Lehman GNMA Index
ARMADA GNMA FUND
- - ------------------------------------
Aggregate Total Return as of 5/31/99
Annualized Cumulative
Annualized Since Since
1 Year 3 Year Inception2 Inception2
Class I Shares1 4.02% 7.41% 7.58% 42.12%
Class A Shares 3.77% 7.17% 7.25% 20.96%
Class A Shares,
with Sales
Charge4 (1.19)% 5.45% 5.35% 15.21%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
1 CLASS I SHARES ARE SOLD PRIMARILY TO BANKS AND TRUST COMPANIES WHICH ARE
AFFILIATED WITH NATIONAL CITY CORPORATION AND CLIENTS OF NATIONAL ASSET
MANAGEMENT CORPORATION ("NAM"). CERTAIN ACCOUNT LEVEL CHARGES MAY APPLY.
2 THE ARMADA GNMA FUND'S DATE OF INCEPTION WAS AUGUST 10, 1994 FOR CLASS I
SHARES AND SEPTEMBER 11, 1996 FOR CLASS A SHARES. THE ANNUALIZED 3-YEAR
RETURN OF THE CLASS A SHARES INCLUDES INFORMATION FROM THE COMMENCEMENT OF
OPERATIONS OF THE CLASS I SHARES, RATHER THAN THE DATE CLASS A SHARES WERE
INTRODUCED. THE PERFORMANCE OF THE CLASS A SHARES PRIOR TO THEIR INTRODUCTION
DATE DOES NOT REFLECT SHAREHOLDER SERVICING FEES, WHICH, IF REFLECTED, WOULD
REDUCE THE PERFORMANCE QUOTED FOR SUCH PERIODS.
3 THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE. WHEN REDEEMED,
SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
4 PERFORMANCE CALCULATED BASED ON THE MAXIMUM FRONT-END SALES CHARGE IN EFFECT
AT MAY 31, 1999 OF 4.75%.
5 THE PERFORMANCE CHART FOR CLASS A SHARES INCLUDES PERFORMANCE OF THE CLASS I
SHARES FROM DATE OF INCEPTION.
16
<PAGE> 19
[ARROW GRAPHIC OMITTED]
ARMADA ENHANCED INCOME FUND OVERVIEW
COMMENTS FROM THE TAXABLE FIXED INCOME TEAM
Despite a difficult first half, the past fiscal year proved to be one of
strong performance for the Fund. For the fiscal year ended May 31, 1999, the
Armada Enhanced Income Fund produced a total return of 4.94 percent (before
sales charges) for Class A investors and 5.14 percent for Class I investors.
During the same period, the Merrill Lynch 1-3 Year Treasury Index returned 5.3
percent.
In late 1998, a global economic crisis triggered the "flight to quality" that
sent Treasury prices soaring and led to a lack of liquidity in every other
sector of the bond market. The subsequent collapse of some highly leveraged
global hedge funds, most notably Long Term Capital Management, only exacerbated
the situation. As a result, the prices of corporate bonds and other "spread"
products, which normally trade somewhat in tandem with the Treasury market,
moved in the opposite direction. Despite this chain of events, the management
team remained committed to the Fund's traditionally aggressive overweighting in
spread sectors throughout the reporting period. The portfolio was dominated, in
particular, by corporate bonds and asset-backed securities.
Inevitable underperformance during the latter half of 1998 was short-lived
and, as expected, never approached the lows that characterized the intermediate
segment of the spread market. During this period, the Fund's short duration also
helped cushion the blows felt by the corporate and asset-backed sectors. We
continued to increase the portfolio's weighting in spread sectors, pushing it up
to approximately 90 percent by early January. As a result, investors were
rewarded when the Fund benefited from the subsequent rally in these markets.
As of May 31, 1999, 33 percent of the Fund's net assets were invested in
asset-backed securities, 34 percent in corporate bonds, 23 percent in
mortgage-backed securities, and 9 percent in U.S. Treasury securities. As of the
same date, the average maturity of the portfolio's holdings was 2.06 years with
an average credit quality of double-A.
GROWTH OF A $10,000 INVESTMENT3
[Graphic omitted]
Plot points are as follows:
CLASS I CLASS A MERRILL
7/7/94 10,000 10,000
9/9/94 10,000 9,725 10,000
MAY 95 10,577 10,205 10,714
MAY 96 11,142 10,727 11,276
MAY 97 11,812 11,361 12,020
MAY 98 12,601 12,120 12,859
MAY 99 13,248 12,719 13,541
Armada Enhanced Income Fund (Class I Shares)1
Armada Enhanced Income Fund (Class A Shares with sales charge)4
Merrill Lynch 1-3 Year Treasury Index
ARMADA ENHANCED INCOME FUND
- - ------------------------------------
Aggregate Total Return as of 5/31/99
Annualized Cumulative
Annualized Since Since
1 Year 3 Year Inception2 Inception2
Class I Shares1 5.14% 5.94% 5.91% 32.48%
Class A Shares 4.94% 5.84% 5.84% 30.77%
Class A Shares,
with Sales
Charge4 2.01% 4.87% 5.21% 27.12%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
1 CLASS I SHARES ARE SOLD PRIMARILY TO BANKS AND TRUST COMPANIES WHICH ARE
AFFILIATED WITH NATIONAL CITY CORPORATION AND CLIENTS OF NATIONAL ASSET
MANAGEMENT CORPORATION ("NAM"). CERTAIN ACCOUNT LEVEL CHARGES MAY APPLY.
2 THE ARMADA ENHANCED INCOME FUND'S DATE OF INCEPTION WAS JULY 7, 1994 FOR
CLASS I SHARES AND SEPTEMBER 9, 1994 FOR CLASS A SHARES.
3 THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE. WHEN REDEEMED,
SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
4 PERFORMANCE CALCULATED BASED ON THE MAXIMUM FRONT-END SALES CHARGE IN EFFECT
AT MAY 31, 1999 OF 2.75%.
17
<PAGE> 20
[ARROW GRAPHIC OMITTED]
ARMADA OHIO TAX EXEMPT FUND OVERVIEW
COMMENTS FROM THE TAX EXEMPT FIXED INCOME TEAM
For the fiscal year ended May 31, 1999, the Armada Ohio Tax Exempt Fund
returned 3.93 percent (before sales charges) to Class A investors and 3.94
percent to Class I investors. Over the same period, the Lehman 7 Year Municipal
Bond Index returned 4.73 percent.
In measuring our results, keep in mind that the benchmark tracks municipal
bonds of varying degrees of quality. Throughout the year, at least 95 percent of
the Fund was invested in high-quality, triple-A or double-A issues. The small
spread between credit grades that characterized the past 12 months did not
warrant adding any additional risk to the portfolio.
At year-end, 57.5 percent of the Armada Ohio Tax Exempt Fund was invested in
general obligation, pre-refunded, and escrowed-to-maturity securities. Of the
Fund's revenue bond holdings, agencies accounted for 21 percent, hospitals 9
percent, and utilities 13 percent. No more than 5 percent of assets were
invested in any single issue. The average maturity of the securities in the Fund
was 7.33 years as of May 31, 1999.
The ongoing litigation brought against the state on behalf of more than 80
percent of its school districts provided the dominant theme in the Ohio
municipal market throughout the year. In brief, the courts maintain that the
state has not done enough to close the funding gap between its poorest and most
affluent districts. The case is heading to the State Supreme Court for a second
time, and a decision is expected to be handed down during the fall.
This issue caused uncertainty in the Ohio municipal market last year --
primarily among out-of-state buyers -sending bond prices down. We remain
convinced that the schools can only benefit from the outcome of the lawsuit and
have positioned the Fund accordingly. Taking advantage of their excellent value,
we increased our weighting in school district general obligation securities to
20 percent of the portfolio.
The state may or may not be weakened by the Supreme Court's decision. If it
loses, the legislature may simply raise taxes, a move most lawmakers wouldn't
have considered during last year's elections. Following our historical emphasis
on caution, we lowered our holdings in state-issued debt from 15 percent down to
only 4.6 percent of the portfolio.
GROWTH OF A $10,000 INVESTMENT3
[Graphic omitted]
Plot points are as follows:
CLASS I CLASS A LEHMAN
1/5/90 10,000 9,700 10,000
MAY 90 10,054 9,752 10,188
MAY 91 10,795 10,430 11,207
MAY 92 11,463 11,080 12,215
MAY 93 12,604 12,217 13,495
MAY 94 12,892 12,496 13,939
MAY 95 13,744 13,326 15,076
MAY 96 14,343 13,906 15,776
MAY 97 15,257 14,793 16,857
MAY 98 16,390 15,886 18,217
MAY 99 17,036 16,510 19,079
Armada Ohio Tax Exempt Fund (Class I Shares)1
Armada Ohio Tax Exempt Fund (Class A Shares with sales charge)4, 5
Lehman 7 Year Municipal Bond Index
ARMADA OHIO TAX EXEMPT FUND6
- - ------------------------------------
Aggregate Total Return as of 5/31/99
Annualized Cumulative
Annualized Annualized Since Since
1 Year 3 Year 5 Year Inception2 Inception2
Class I Shares1 3.94% 5.90% 5.73% 5.83% 70.37%
Class A Shares 3.93% 5.89% 5.73% 5.90% 59.21%
Class A Shares,
with Sales
Charge4 0.84% 4.82% 5.08% 5.51% 54.48%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
1 CLASS I SHARES ARE SOLD PRIMARILY TO BANKS AND TRUST COMPANIES WHICH ARE
AFFILIATED WITH NATIONAL CITY CORPORATION AND CLIENTS OF NATIONAL ASSET
MANAGEMENT CORPORATION ("NAM"). CERTAIN ACCOUNT LEVEL CHARGES MAY APPLY.
2 THE ARMADA OHIO TAX EXEMPT FUND'S DATE OF INCEPTION WAS JANUARY 5, 1990 FOR
CLASS I SHARES AND APRIL 15, 1991 FOR CLASS A SHARES.
3 THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE. WHEN REDEEMED,
SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
4 PERFORMANCE CALCULATED BASED ON THE MAXIMUM FRONT-END SALES CHARGE IN EFFECT
AT MAY 31, 1999 OF 3.00%.
5 THE PERFORMANCE CHART FOR CLASS A SHARES INCLUDES PERFORMANCE OF THE
CLASS I SHARES FROM DATE OF INCEPTION.
6 THIS FUND IS NOT MANAGED FOR TOTAL RETURN. ITS INVESTMENT OBJECTIVE IS TO
PROVIDE AS HIGH A LEVEL OF INTEREST INCOME EXEMPT FROM FEDERAL INCOME TAX AND,
TO THE EXTENT POSSIBLE, FROM OHIO PERSONAL INCOME TAX, AS IS CONSISTENT WITH
CONSERVATION OF CAPITAL.
18
<PAGE> 21
[ARROW GRAPHIC OMITTED]
ARMADA PENNSYLVANIA MUNICIPAL FUND OVERVIEW
COMMENTS FROM THE TAX EXEMPT FIXED INCOME TEAM
For the fiscal year ended May 31, 1999, the Armada Pennsylvania Municipal
Fund returned 4.21 percent (before sales charges) to Class A investors and 4.21
percent to Class I investors. Over the same period, the Lehman 7 Year Municipal
Bond Index returned 4.73 percent.
At year-end, 52 percent of the Armada Pennsylvania Municipal Fund was
invested in general obligation, pre-refunded, and escrowed-to-maturity
securities. Of the Fund's revenue bond holdings, agencies accounted for 36
percent and utilities 11 percent. No more than 5 percent of assets were invested
in any single issue. The average maturity of the securities in the Fund was 6.84
years as of May 31, 1999.
The Fund's emphasis on high-quality securities largely insulated us this past
year from the effects of the Allegheny Health Education & Research Foundation
(AHERF) bond default. Our decision to avoid any AHERF paper was correct. At the
time, we felt that the slightly higher yield it offered didn't warrant the
additional risk we would have been forced to assume.
Unfortunately, all Pennsylvania hospital issues, even those of the highest
quality, felt the AHERF backlash in the marketplace. Out-of-state buyers simply
chose to avoid these bonds rather than sort through them for the hospitals that
remain on solid ground. Consequently, we made the decision not to include any
new hospital bonds in the portfolio until spreads between credit grades widen
substantially.
GROWTH OF A $10,000 INVESTMENT3
[Graphic omitted]
Plot points are as follows:
CLASS I CLASS A LEHMAN
8/10/94 10,000 9,700 10,000
MAY 95 10,518 10,203 10,685
MAY 96 10,858 10,532 11,181
MAY 97 11,532 11,178 11,946
MAY 98 12,334 11,942 12,910
MAY 99 12,853 12,445 13,521
Armada Pennsylvania Municipal Fund (Class I Shares)1
Armada Pennsylvania Municipal Fund (Class A Shares with sales charge)4,5
Lehman 7-Year Municipal Bond Index
ARMADA PENNSYLVANIA MUNICIPAL FUND6
- - ------------------------------------
Aggregate Total Return as of 5/31/99
Annualized Cumulative
Annualized Since Since
1 Year 3 Year Inception2 Inception2
Class I Shares1 4.21% 5.78% 5.36% 28.52%
Class A Shares 4.21% 5.72% 5.70% 16.26%
Class A Shares,
with Sales
Charge4 1.11% 4.66% 4.53% 12.80%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
1 CLASS I SHARES ARE SOLD PRIMARILY TO BANKS AND TRUST COMPANIES WHICH ARE
AFFILIATED WITH NATIONAL CITY CORPORATION AND CLIENTS OF NATIONAL ASSET
MANAGEMENT CORPORATION ("NAM"). CERTAIN ACCOUNT LEVEL CHARGES MAY APPLY.
2 ACTIVITY FOR THE PERIOD PRESENTED INCLUDES THAT OF A PREDECESSOR FUND THROUGH
SEPTEMBER 6, 1996. THE ARMADA PENNSYLVANIA MUNICIPAL FUND'S DATE OF INCEPTION
FOR PERFORMANCE WAS AUGUST 10, 1994 FOR CLASS I SHARES AND SEPTEMBER 11, 1996
FOR CLASS A SHARES. THE ANNUALIZED 3-YEAR RETURN OF THE CLASS A SHARES
INCLUDES INFORMATION FROM THE COMMENCEMENT OF OPERATIONS OF THE CLASS I
SHARES, RATHER THAN THE DATE CLASS A SHARES WERE INTRODUCED. THE PERFORMANCE
OF THE CLASS A SHARES PRIOR TO THEIR INTRODUCTION DATE DOES NOT REFLECT
SHAREHOLDER SERVICING FEES, WHICH, IF REFLECTED, WOULD REDUCE THE PERFORMANCE
QUOTED FOR SUCH PERIODS.
3 THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE. WHEN REDEEMED,
SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
4 PERFORMANCE CALCULATED BASED ON THE MAXIMUM FRONT-END SALES CHARGE IN EFFECT
AT MAY 31, 1999 OF 3.00%.
5 THE PERFORMANCE OF CLASS A SHARES INCLUDES THE PERFORMANCE OF CLASS
I SHARES FROM DATE OF INCEPTION.
6 THIS FUND IS NOT MANAGED FOR TOTAL RETURN. ITS INVESTMENT OBJECTIVE IS TO
PROVIDE CURRENT INCOME EXEMPT FROM BOTH REGULAR
FEDERAL INCOME AND PENNSYLVANIA PERSONAL INCOME TAX, AS IS CONSISTENT WITH
CONSERVATION OF CAPITAL.
19
<PAGE> 22
[ARRROW GRAPHIC OMITTED]
ARMADA NATIONAL TAX EXEMPT FUND OVERVIEW
COMMENTS FROM THE TAX EXEMPT FIXED INCOME TEAM
For the fiscal year ended May 31, 1999, the Armada National Tax Exempt Fund
returned 4.04 percent (before sales charges) to Class A investors and 4.07
percent to Class I investors. Over the same period, the Lehman 10 Year Municipal
Bond Index returned 4.62 percent.
In measuring our results, it is important to keep in mind that both
benchmarks track municipal bonds of varying degrees of quality. Throughout the
year, at least 95 percent of the Fund was invested in high-quality, triple-A or
double-A issues. Frankly, we didn't feel that the small spread between credit
grades that characterized the past 12 months warranted adding any extra risk to
the portfolio.
At year-end, 50 percent of the Fund was invested in general obligation,
pre-refunded, and escrowed-to-maturity securities, with the remainder in revenue
issues. The Fund retained its historic emphasis on diversification, with
holdings in 25 states. At the same time, we limited our exposure to New York,
California, and other states of lesser credit quality to less than 5 percent of
the portfolio. We do have an unusually high weighting in Indiana and Illinois,
approximately 19 percent combined, due to the addition of assets from the Fort
Wayne National Common Trust Fund conversion earlier in the year. The average
maturity of the securities in the Fund was 7.38 years as of May 31, 1999.
Because of our concerns about the potential effect of deregulation on
electric utility companies, the Fund holds only a handful of these issues. All
are from dominant players in strong markets. Looking ahead, we do expect to see
some upward movement in interest rates during the coming year, but the portfolio
is well-positioned to withstand any negative impact this may have. For example,
near record highs in supply over the past 12 months allowed us to negotiate
advantageous terms with a number of underwriters, increasing our holdings in
premium coupon and non-callable bonds. These will help stabilize the portfolio
in adverse market conditions, as will our high concentration of triple-A
securities.
We continue to keep a close watch on the political environment as well.
Robust state and local balance sheets have prompted a wave of proposed
election-year tax breaks. Since the economy is unlikely to get much stronger
than it is now, we are wary of the long-term effects such tax breaks might have
on municipal revenues.
GROWTH OF A $10,000 INVESTMENT3
[Graphic omitted]
Plot points are as follows:
CLASS I CLASS A CLASS B LEHMAN
5/31/89 10,000 9,525 10,000 10,000
May 90 10,506 10,007 10,506 10,735
May 91 11,183 10,651 11,183 11,850
May 92 12,140 11,563 12,140 12,951
May 93 13,830 13,173 13,830 14,546
May 94 13,960 13,297 13,960 15,042
May 95 15,099 14,382 15,099 16,392
May 96 15,029 14,315 15,029 17,168
May 97 15,838 15,086 15,838 18,570
May 98 17,059 16,246 17,056 20,292
May 99 17,753 16,902 17,712 21,229
Armada National Tax Exempt Fund (Class I Shares)1,6
Armada National Tax Exempt Fund (Class A Shares with sales charge)4,6
Armada National Tax Exempt Fund (Class B Shares)5,6
Lehman 10 Year Municipal Bond Index
ARMADA NATIONAL TAX EXEMPT FUND7
- - ------------------------------------
Aggregate Total Return as of 5/31/99
Annualized Cumulative
Annualized Annualized Annualized Since Since
1 Year 3 Year 5 Year 10 Year Inception2 Inception2
Class I Shares1 4.07% 5.71% 4.92% 5.91% 7.05% 174.82%
Class A Shares 4.04% 5.69% 4.92% 5.90% 7.05% 174.72%
Class A Shares,
with Sales
Charge4 (0.90)% 4.01% 3.90% 5.39% 6.70% 161.72%
Class B Shares 3.85% 5.63% 4.88% 5.88% 7.03% 174.23%
Class B Shares,
with Sales
Charge5 (1.11)% 4.42% 4.56% 5.88% 7.03% 174.23%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
1 CLASS I SHARES ARE SOLD PRIMARILY TO BANKS AND TRUST COMPANIES WHICH ARE
AFFILIATED WITH NATIONAL CITY CORPORATION AND CLIENTS OF NATIONAL ASSET
MANAGEMENT CORPORATION ("NAM"). CERTAIN ACCOUNT LEVEL CHARGES MAY APPLY.
2 THE ARMADA NATIONAL TAX EXEMPT FUND'S DATE OF INCEPTION WAS APRIL 9, 1998 FOR
CLASS I SHARES, JUNE 22, 1998 FOR CLASS A SHARES, AND JANUARY 28, 1999 FOR
CLASS B SHARES. THE PERFORMANCE OF THE CLASS I SHARES, CLASS A SHARES, AND
CLASS B SHARES INCLUDES PERFORMANCE OF A PREDECESSOR COMMON TRUST FUND WHICH
COMMENCED OPERATIONS ON JULY 31, 1984.
3 THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE. WHEN REDEEMED,
SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
4 PERFORMANCE CALCULATED BASED ON THE MAXIMUM FRONT-END SALES CHARGE IN EFFECT
AT MAY 31, 1999 OF 4.75%.
5 PERFORMANCE CALCULATED BASED ON THE MAXIMUM DEFERRED SALES CHARGE IN EFFECT
AT MAY 31, 1999 OF 5.00%. THIS CHARGE DECLINES FROM 5.00% IN THE FIRST YEAR
TO 0.00% AFTER FIVE YEARS, AS OUTLINED IN THE PROSPECTUS.
6 THE PERFORMANCE CHART FOR ALL CLASSES INCLUDES PERFORMANCE OF A PREDECESSOR
COMMON TRUST FUND.
7 THIS FUND IS NOT MANAGED FOR TOTAL RETURN. ITS INVESTMENT OBJECTIVE IS TO
PROVIDE AS HIGH A LEVEL OF CURRENT INTEREST INCOME EXEMPT FROM FEDERAL INCOME
TAX, AS IS CONSISTENT WITH CONSERVATION OF CAPITAL.
20
<PAGE> 23
[ARRROW GRAPHIC OMITTED]
ARMADA MONEY MARKET OUTLOOK
MONEY MARKET OVERVIEW
The Armada money market funds posted solid results during the year while
offering investors a high degree of safety and liquidity. Fund management does
not predict interest rates. Instead, we continually make purchases throughout
the yield curve, which is positively sloped most of the time, while maintaining
necessary liquidity.
For the fiscal year ended May 31, 1999, the Armada Money Market Fund produced
a total return of 4.82 percent for Class A investors and 4.96 percent for Class
I investors. At year-end, 84 percent of the Fund was allocated to commercial
paper, 8 percent to repurchase agreements, 4 percent to floating rate notes, 3
percent to certificates of deposit, and 1 percent to agencies. The average
weighted maturity of the Fund was 65 days.
For the fiscal year ended May 31, 1999, the Armada Government Money Market
Fund produced a total return of 4.70 percent for Class A investors and 4.86
percent for Class I investors. At year-end, 74 percent of the Fund was allocated
to discount notes, 19 percent to repurchase agreements, 6 percent to floating
rate notes, and 1 percent to medium term notes. The average weighted maturity of
the Fund was 49 days.
For the fiscal year ended May 31, 1999, the Armada Treasury Money Market Fund
produced a total return of 4.23 percent for Class A investors and 4.39 percent
for Class I investors. At year-end, 75 percent of the Fund was allocated to
Treasury bills, 17 percent to Treasury notes, and 8 percent to other money
market funds. The average weighted maturity of the Fund was 45 days.
Over the past year, the tax-exempt money markets were characterized by two
factors: a sharp decrease in the supply of new issues, and unprecedented inflows
of cash (i.e., not much supply and a lot of demand). In this difficult
environment, all of the Armada Tax Exempt Money Market Funds performed well
against their peers. Despite the dearth of new issues in the Ohio and
Pennsylvania markets, both state-specific Funds succeeded in remaining 100
percent invested in in-state paper. This meant that investors were able to reap
the full potential of the Funds' federal and state tax savings benefits.
For the fiscal year ended May 31, 1999, the Armada Tax Exempt Money Market
Fund produced a total return of 2.85 percent for Class A investors and 3.00
percent for Class I investors. At year-end, the average maturity of the Fund's
holdings was 47 days.
For the fiscal year ended May 31, 1999, the Armada Pennsylvania Tax Exempt
Money Market Fund produced a total return of 2.76 percent for Class A investors
and 2.92 percent for Class I investors. At year-end, the average maturity of the
Fund's holdings was 44 days.
Due to the fact that the Armada Ohio Municipal Money Market Fund was
introduced in September 1998, no full-year performance figures are available.
However, since the Fund's inception, it has produced a return of 1.50 percent
for Class A investors and 2.01 percent for Class I investors. At year-end, the
average maturity of the Fund's holdings was 57 days. Since its introduction, the
Fund's assets nearly tripled to $129 million.
21
<PAGE> 24
[ARROW GRAPHIC OMITTED]
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Trustees
Armada Funds
We have audited the accompanying statements of net assets of the Armada
International Equity Fund, Armada Small Cap Value Fund, Armada Small Cap Growth
Fund, Armada Equity Growth Fund, Armada Tax Managed Equity Fund, Armada Core
Equity Fund, Armada Equity Index Fund, Armada Equity Income Fund, Armada Total
Return Advantage Fund, Armada Bond Fund, Armada Intermediate Bond Fund, Armada
GNMA Fund, Armada Enhanced Income Fund, Armada Ohio Tax Exempt Fund, Armada
Pennsylvania Municipal Fund, Armada National Tax Exempt Fund, Armada Ohio
Municipal Money Market Fund, Armada Pennsylvania Tax Exempt Money Market Fund,
Armada Tax Exempt Money Market Fund, Armada Money Market Fund, Armada Government
Money Market Fund, and Armada Treasury Money Market Fund, and the statement of
assets and liabilities, including the portfolio of investments, of the Armada
Balanced Allocation Fund (the "Funds") as of May 31, 1999, and the related
statements of operations and statements of changes in net assets for each of the
periods indicated therein. We have also audited the financial highlights for
each of the periods indicated therein for the Armada International Equity Fund,
Armada Small Cap Value Fund, Armada Small Cap Growth Fund, Armada Equity Growth
Fund, Armada Tax Managed Equity Fund, Armada Core Equity Fund, Armada Equity
Index Fund, Armada Equity Income Fund, Armada Balanced Allocation Fund, Armada
Total Return Advantage Fund, Armada Intermediate Bond Fund, Armada Enhanced
Income Fund, Armada Ohio Tax Exempt Fund, Armada National Tax Exempt Fund,
Armada Ohio Municipal Money Market Fund, Armada Tax Exempt Money Market Fund,
Armada Money Market Fund, Armada Government Money Market Fund, and Armada
Treasury Money Market Fund and for the three years in the period ended May 31,
1999 for the Armada Bond Fund, Armada GNMA Fund, Armada Pennsylvania Municipal
Fund, and Armada Pennsylvania Tax Exempt Money Market Fund. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits. The financial
highlights for the periods presented through May 31, 1996 for the Armada Bond
Fund, Armada GNMA Fund, Armada Pennsylvania Municipal Fund, and Armada
Pennsylvania Tax Exempt Money Market Fund were audited by other auditors whose
report dated July 26, 1996 expressed an unqualified opinion on those financial
highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of May 31, 1999, by correspondence with the Funds' custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
22
<PAGE> 25
[ARROW GRAPHIC OMITTED]
REPORT OF INDEPENDENT AUDITORS
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective Funds at May 31, 1999, and the results of their operations and
changes in their nets assets for the periods indicated therein, and for the
Armada International Equity Fund, Armada Small Cap Value Fund, Armada Small Cap
Growth Fund, Armada Equity Growth Fund, Armada Tax Managed Equity Fund, Armada
Core Equity Fund, Armada Equity Index Fund, Armada Equity Income Fund, Armada
Balanced Allocation Fund, Armada Total Return Advantage Fund, Armada
Intermediate Bond Fund, Armada Enhanced Income Fund, Armada Ohio Tax Exempt
Fund, Armada National Tax Exempt Fund, Armada Ohio Municipal Money Market Fund,
Armada Tax Exempt Money Market Fund, Armada Money Market Fund, Armada Government
Money Market Fund, and Armada Treasury Money Market Fund, the financial
highlights for each of the periods presented therein, and for the Armada Bond
Fund, Armada GNMA Fund, Armada Pennsylvania Municipal Fund, and Armada
Pennsylvania Tax Exempt Money Market Fund, the financial highlights for the
three years in the period ended May 31, 1999, in conformity with generally
accepted accounting principles.
/s/ signature omitted
Philadelphia, Pennsylvania
July 9, 1999
23
<PAGE> 26
[ARROW GRAPHIC OMITTED]
NOTICE TO SHAREHOLDERS (UNAUDITED)
MAY 31, 1999
The information set forth below is for each Fund's fiscal year as required
by federal laws. Shareholders, however, must report distributions on a
calendar year basis for income tax purposes, which may include
distributions for portions of two fiscal years of a Fund. Accordingly, the
information needed by shareholders for income tax purposes will be sent to
them in early 2000. Please consult your tax advisor for proper treatment
of this information.
Dear Armada Shareholders:
For the fiscal year ended May 31, 1999, each Fund designated long term capital
gains and exempt income with regard to distributions paid during the year as
follows:
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)
Long Term Ordinary Tax
Capital Gains Income Exempt Total Qualifying
Distributions Distributions Distributions Distribution Dividends
Fund (Tax Basis) (Tax Basis) (Tax Basis) (Tax Basis) (1)
------------- ------------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
International Equity (2) 0.00% 100.00% 0.00% 100.00% 0.00%
Small Cap Value 55.62% 44.38% 0.00% 100.00% 100.00%
Small Cap Growth 0.00% 100.00% 0.00% 100.00% 0.00%
Equity Growth 45.58% 54.42% 0.00% 100.00% 0.00%
Tax Managed Equity 16.84% 83.16% 0.00% 100.00% 100.00%
Core Equity 0.00% 100.00% 0.00% 100.00% 0.00%
Equity Index 0.00% 100.00% 0.00% 100.00% 73.88%
Equity Income 37.80% 62.20% 0.00% 100.00% 100.00%
Balanced Allocation 0.00% 100.00% 0.00% 100.00% 21.30%
Total Return Advantage 1.90% 98.10% 0.00% 100.00% 0.00%
Bond 3.23% 96.77% 0.00% 100.00% 0.00%
Intermediate Bond 3.54% 96.46% 0.00% 100.00% 0.00%
GNMA 1.65% 98.35% 0.00% 100.00% 0.00%
Enhanced Income 1.53% 98.47% 0.00% 100.00% 0.00%
Ohio Tax Exempt 1.22% 0.29% 98.49% 100.00% 0.00%
Pennsylvania Municipal 1.43% 0.88% 97.69% 100.00% 0.00%
National Tax Exempt 5.81% 0.02% 94.17% 100.00% 0.00%
Ohio Municipal Money Market 0.00% 0.00% 100.00% 100.00% 0.00%
Pennsylvania Tax Exempt Money Market 0.00% 0.00% 100.00% 100.00% 0.00%
Tax Exempt Money Market 0.00% 0.00% 100.00% 100.00% 0.00%
Money Market 0.00% 100.00% 0.00% 100.00% 0.00%
Government Money Market 0.00% 100.00% 0.00% 100.00% 0.00%
Treasury Money Market 0.00% 100.00% 0.00% 100.00% 0.00%
</TABLE>
Items (A), (B), (C) and (D) are based on a percentage of the fund's total
distribution.
Item (E) is based on a percentage of ordinary income distributions
of the fund.
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.
(2) Ordinary income distributions consisted of 22.1% of qualified foreign tax
credit.
24
<PAGE> 27
[LOGO OMITTED]
Financial Statements
FOR THE PERIOD ENDED MAY 31, 1999
25
<PAGE> 28
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA INTERNATIONAL EQUITY FUND
MAY 31, 1999
NUMBER VALUE
OF SHARES (000)
--------- --------
COMMON STOCK -- 97.0%
AUSTRALIA -- 1.2%
National Australia Bank ............ 6,803 $ 110
National Australia Bank ADR ........ 27,700 2,237
--------
2,347
--------
AUSTRIA -- 0.7%
Mayr Melnhof Karton ................ 27,900 1,308
--------
BELGIUM -- 2.1%
Colruyt ............................ 2,454 1,596
Fortis, Series B ................... 82,000 2,630
--------
4,226
--------
BRAZIL -- 0.0%
Telebras ADR* ...................... 11,800 1
--------
FINLAND -- 3.9%
Nokia ADR .......................... 29,400 2,087
Nokia Oyj .......................... 35,200 2,504
Tieto, Cl B ........................ 67,420 2,356
UPM-Kymmene ........................ 32,650 957
--------
7,904
--------
FRANCE -- 10.3%
Altran Technologies ................ 8,271 1,873
Axa ................................ 23,545 2,714
Compagnie de Saint Gobain .......... 6,305 990
France Telecom ..................... 21,087 1,617
L'Oreal ............................ 4,490 2,705
Lyonnaise des Eaux ................. 13,600 2,254
Rhone Poulenc ADR .................. 15,000 703
Sidel .............................. 23,646 3,281
Total ADR .......................... 24,100 1,466
Total, Cl B* ....................... 12,377 1,504
Vivendi ............................ 20,242 1,499
Vivendi Rights* .................... 19,200 20
--------
20,626
--------
GERMANY -- 7.1%
Allianz ............................ 6,757 1,847
BHF Bank ........................... 41,481 1,346
DaimlerChrysler .................... 6,030 521
DaimlerChrysler ADR ................ 7,482 654
Mannesmann ......................... 41,469 5,667
Siemens ............................ 30,405 2,046
Veba ............................... 36,300 2,071
--------
14,152
--------
NUMBER VALUE
OF SHARES (000)
--------- --------
COMMON STOCK -- CONTINUED
HONG KONG -- 4.0%
Hong Kong & China Gas .............. 830,818 $ 1,173
HSBC Holdings ...................... 69,200 2,267
Hutchison Whampoa Limited .......... 167,800 1,401
Johnson Electric Holdings .......... 516,180 1,904
Li & Fung .......................... 530,000 1,251
--------
7,996
--------
IRELAND -- 0.7%
Bank of Ireland .................... 71,363 1,323
--------
ITALY -- 3.4%
Assicurazioni Generali ............. 58,000 2,063
Bulgari* ........................... 115,381 697
Telecom Italia ..................... 30,000 309
Telecom Italia ADR ................. 27,600 2,841
Telecom Italia Mobile* ............. 160,318 943
--------
6,853
--------
JAPAN -- 16.2%
Advantest .......................... 27,400 2,161
Bank of Tokyo-Mitsubishi ........... 147,000 1,959
Canon .............................. 98,285 2,465
Fanuc .............................. 61,535 2,637
Fuji Heavy Industries .............. 200,000 1,299
Fuji Photo Film .................... 47,098 1,673
Ito Yokado ......................... 22,000 1,305
Kao ................................ 77,000 2,102
Nihon Unisys ....................... 141,000 2,609
Nippon Telegraph & Telephone ....... 200 1,941
Nomura Securities .................. 96,500 957
Seven-Eleven ....................... 14,000 1,208
SMC ................................ 11,600 1,051
Softbank ........................... 2,000 229
Sony ............................... 25,354 2,369
Takeda Chemical Industries ......... 104,800 4,628
TDK Corporation .................... 1,049 90
Yahoo Japan ........................ 9 1,836
--------
32,519
--------
MEXICO -- 1.7%
Coca Cola Femsa ADR ................ 53,000 957
Grupo Televisa GDR* ................ 30,000 1,254
Telefonos de Mexico ADR ............ 14,600 1,167
--------
3,378
--------
NETHERLANDS -- 7.8%
Aegon .............................. 584 47
Aegon ADR .......................... 15,400 1,249
ING Groep .......................... 19,575 1,047
Koninklijke Ahold .................. 3,076 107
Koninklijke Ahold ADR .............. 59,700 2,097
See Accompanying Notes
26
<PAGE> 29
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA INTERNATIONAL EQUITY FUND
MAY 31, 1999
NUMBER VALUE
OF SHARES (000)
--------- --------
COMMON STOCK -- CONTINUED
NETHERLANDS -- CONTINUED
Nutreco Holdings ................... 42,900 $ 1,589
Royal Dutch Petroleum .............. 65,370 3,642
Royal Dutch Petroleum,
NY Shares ......................... 24,400 1,380
Unilever ........................... 1,040 69
Unilever ADR ....................... 13,571 886
Wolters Kluwer ..................... 85,200 3,426
--------
15,539
--------
PORTUGAL -- 0.9%
Portugal Telecom ADR ............... 40,745 1,844
--------
SINGAPORE -- 3.9%
City Developments .................. 306,000 1,827
Development Bank of Singapore `F' .. 208,000 2,146
Natsteel Electronics ............... 389,000 1,296
Singapore International Airlines `F' 276,000 2,463
--------
7,732
--------
SOUTH KOREA -- 0.9%
Pohang Iron & Steel ADR ............ 73,600 1,863
--------
SPAIN -- 2.7%
Banco Bilbao Vizcaya ADR ........... 31,700 462
Endesa ............................. 3,541 75
Endesa ADR ......................... 87,100 1,878
Telefonica ......................... 14,825 711
Telefonica ADR ..................... 16,014 2,310
--------
5,436
--------
SWEDEN -- 1.5%
Assa Abloy, Series B ............... 836 37
Pharmacia & Upjohn ................. 35,839 1,987
Svenska Cellulosa, Series A ........ 27,400 644
Svenska Cellulosa, Series B ........ 13,000 303
--------
2,971
--------
SWITZERLAND -- 6.7%
Credit Suisse Group ................ 11,800 2,048
Nestle ............................. 876 1,575
Novartis ........................... 1,275 1,850
Roche Holding ...................... 352 3,725
Swiss Re ........................... 1,311 2,487
UBS, Registered .................... 6,300 1,823
--------
13,508
--------
UNITED KINGDOM -- 20.2%
Abbey National ..................... 135,573 2,805
Allied Zurich ...................... 145,440 1,857
NUMBER VALUE
OF SHARES (000)
--------- --------
COMMON STOCK -- CONTINUED
UNITED KINGDOM -- CONTINUED
Bass ............................... 146,500 $ 2,164
BOC Group .......................... 96,852 1,659
BP Amoco ........................... 50,017 896
BP Amoco ADR ....................... 25,357 2,716
British Aerospace .................. 209,305 1,382
Cable & Wireless ................... 88,456 1,092
Compass Group ...................... 96,761 981
General Electric ................... 211,000 2,003
Glaxo Wellcome ..................... 27,636 776
Glaxo Wellcome ADR ................. 41,100 2,312
Granada Group ...................... 100,000 2,049
Imperial Chemical .................. 193,700 2,137
Invensys ........................... 447,999 2,044
Logica ............................. 115,532 1,073
National Grid Holdings ............. 303,586 2,064
Pearson ............................ 144,037 2,749
SmithKline Beecham ADR ............. 33,100 2,172
Standard Chartered ................. 164,500 2,492
Tesco .............................. 504,400 1,470
Vodafone Group ..................... 87,685 1,672
--------
40,565
--------
UNITED STATES -- 1.1%
Airtouch Communications* ........... 12,450 1,251
Frontier ........................... 20,000 1,053
--------
2,304
--------
TOTAL COMMON STOCK
(Cost $176,300) 194,395
--------
PREFERRED STOCK -- 0.8%
BRAZIL -- 0.5%
Telebras ADR ....................... 11,800 985
--------
GERMANY -- 0.3%
SAP ................................ 1,324 530
--------
TOTAL PREFERRED STOCK
(Cost $1,455) 1,515
--------
CASH EQUIVALENT -- 1.8%
Goldman Sachs Financial Square .....
Premium Money Market Fund ........ 3,555,000 3,555
--------
TOTAL CASH EQUIVALENT
(Cost $3,555) 3,555
--------
TOTAL INVESTMENTS -- 99.6%
(Cost $181,310) $199,465
========
See Accompanying Notes
27
<PAGE> 30
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA INTERNATIONAL EQUITY FUND
MAY 31, 1999
VALUE
(000)
--------
OTHER ASSETS AND LIABILITIES,
NET -- 0.4% $ 909
--------
NET ASSETS:
Portfolio shares of Class I
(unlimited authorization -- no par value)
based on 18,257,270 outstanding
shares of beneficial interest ................. 187,170
Porfolio shares of Class A
(unlimited authorization --
no par value) based on 103,716
outstanding shares of beneficial interest ..... 1,096
Portfolio shares of Class B (unlimited
authorization -- no par value) based on
3,837 outstanding shares of
beneficial interest ........................... 41
Accumulated net realized loss
on investments ................................ (6,733)
Net unrealized appreciation on investments ..... 18,155
Net unrealized appreciation of foreign
currency and translation of other assets
and liabilities in foreign
currency investments .......................... 610
Undistributed net investment income ............ 35
--------
TOTAL NET ASSETS -- 100.0% $200,374
========
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SHARE -- CLASS I ............................ $10.91
========
NET ASSET VALUE AND
REDEMPTION PRICE
PER SHARE -- CLASS A ......................... $10.87
========
MAXIMUM OFFERING PRICE PER
SHARE -- CLASS A
($10.87 / 94.5%) ............................ $11.50
========
NET ASSET VALUE AND OFFERING
PRICE PER SHARE -- CLASS B ................... $10.83
========
- - ------------
* NON-INCOME PRODUCING SECURITY.
ADR -- AMERICAN DEPOSITORY RECEIPT
CL -- CLASS
F -- FOREIGN SHARES
GDR -- GLOBAL DEPOSITORY RECEIPT
At May 31, 1999, sector diversification of the
Portfolio was as follows:
SECTOR DIVERSIFICATION % OF
COMMON STOCK NET ASSETS VALUE
---------- --------
Banking 8.0% 16,065
Telecommunications 7.3% 14,644
Communications 6.6% 13,234
Pharmaceuticals 6.4% 12,822
Oil and Gas 6.4% 12,777
Consumer Goods 6.3% 12,673
Insurance 6.1% 12,180
Industrial Manufacturing 5.2% 10,453
Business Services 4.9% 9,825
Financial Services 4.8% 9,668
Electronic Equipment 4.6% 9,223
Food Product Retailer 4.4% 8,743
Electrical Services 3.0% 6,028
Computers 2.8% 5,518
Chemicals 2.7% 5,332
Automotive 2.2% 4,378
Publishing 1.7% 3,426
Real Estate 1.6% 3,228
Beverages 1.6% 3,121
News Media 1.4% 2,749
Machinery 1.3% 2,637
Transportation 1.2% 2,463
Communication Services 1.0% 2,049
Engineering Services 0.9% 1,873
Steel 0.9% 1,863
Agricultural 0.8% 1,589
Multi-Industry 0.8% 1,519
Aerospace 0.7% 1,382
Manufacturing 0.5% 1,051
Forestry 0.5% 957
Jewelry 0.3% 696
Computer Software 0.1% 229
----- --------
TOTAL COMMON STOCK 97.0% 194,395
TOTAL PREFERRED STOCK 0.8% 1,515
CASH EQUIVALENT 1.8% 3,555
----- --------
TOTAL INVESTMENTS 99.6% 199,465
OTHER ASSETS AND
LIABILITIES, NET 0.4% 909
----- --------
NET ASSETS 100.0% 200,374
===== ========
See Accompanying Notes
28
<PAGE> 31
[ARROW GRAPHIC OMITTED]
FINANCIAL HIGHLIGHTS
ARMADA INTERNATIONAL EQUITY FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE PERIOD
ENDED MAY 31, 1999 ENDED MAY 31, 1998
-----------------------------------------------------------------
CLASS I CLASS A CLASS B CLASS I2 CLASS A2 CLASS B3
-------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.86 $10.82 $10.83 $ 10.00 $10.00 $ 9.30
-------- ------ ------ -------- ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss) ................ (0.01) (0.01) (0.07) 0.08 0.04 0.05
Net gain on securities
(realized and unrealized) .................. 0.11 0.10 0.08 0.79 0.79 1.48
-------- ------ ------ -------- ------ ------
Total from investment operations ......... 0.10 0.09 0.01 0.87 0.83 1.53
-------- ------ ------ -------- ------ ------
LESS DISTRIBUTIONS
Dividends from net investment income ........ (0.05) (0.04) (0.01) (0.01) (0.01) (0.00)
-------- ------ ------ -------- ------ ------
Total distributions ...................... (0.05) (0.04) (0.01) (0.01) (0.01) (0.00)
-------- ------ ------ -------- ------ ------
Net asset value, end of period ................ $ 10.91 $10.87 $10.83 $ 10.86 $10.82 $10.83
======== ====== ====== ======== ====== ======
TOTAL RETURN .................................. 0.95% 0.84%1 0.10%1 8.76%4 8.28%1,4 16.45%1,4
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) ........ $199,205 $1,127 $ 42 $135,942 $ 276 $ 1
Ratio of expenses to average net assets ..... 1.43% 1.68% 2.43% 1.09%5 1.39%5 2.08%5
Ratio of net investment income/(loss) to
average net assets ......................... 0.12% (0.04)% (0.80)% 1.19%5 1.49%5 0.59%5
Ratio of expenses to average net assets
before fee waivers ......................... 1.43% 1.68% 2.43% 1.24%5 1.47%5 2.14%5
Ratio of net investment income/(loss) to
average net assets before fee waivers ...... 0.12% (0.04)% (0.80)% 1.04%5 1.41%5 0.53%5
Portfolio turnover rate ..................... 78% 78% 78% 28% 28% 28%
</TABLE>
1 TOTAL RETURN EXCLUDES SALES CHARGE.
2 CLASS I AND CLASS A BOTH COMMENCED OPERATIONS ON AUGUST 1, 1997.
3 CLASS B COMMENCED OPERATIONS ON JANUARY 6, 1998.
4 RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
5 ANNUALIZED.
See Accompanying Notes
29
<PAGE> 32
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA SMALL CAP VALUE FUND
MAY 31, 1999
NUMBER VALUE
OF SHARES (000)
--------- ---------
COMMON STOCK -- 95.8%
AUTOMOTIVE PARTS & EQUIPMENT -- 3.7%
Amcast Industrial ................. 100,800 $ 1,695
Simpson Industries ................ 170,000 1,711
Standard Products ................. 169,000 3,771
TBC* .............................. 267,500 1,898
Transpro .......................... 251,400 1,336
-------
10,411
-------
BANKS -- 5.6%
First Virginia# ................... 92,500 4,596
Pacific Century ................... 110,000 2,200
Susquehanna Bancshares ............ 125,000 2,273
UnionBanCal ....................... 186,100 6,880
-------
15,949
-------
BROADCASTING -- 0.7%
Liberty Corporation ............... 39,000 2,016
-------
BUILDING & BUILDING SUPPLIES -- 1.0%
Insteel Industries ................ 125,000 1,078
Patrick Industries ................ 125,000 1,625
-------
2,703
-------
BUSINESS SERVICES -- 2.9%
BancTec* .......................... 310,000 4,999
Wang Labs* ........................ 110,000 3,176
-------
8,175
-------
CHEMICALS -- 1.6%
Geon .............................. 115,000 3,464
High Plains* ...................... 324,600 680
Terra Industries .................. 83,000 327
-------
4,471
-------
COMPUTER SOFTWARE -- 1.2%
Structural Dynamics Research* ..... 75,000 1,331
Wall Data* ........................ 186,700 1,884
-------
3,215
-------
COMPUTERS -- 0.3%
Exabyte* .......................... 150,000 830
-------
CONTAINERS & PACKAGING -- 1.2%
Crown Cork & Seal ................. 105,000 3,294
-------
DRUGS & HEALTH CARE -- 2.8%
Bindley Western ................... 140,000 4,217
West Pharmaceutical Services ...... 110,651 3,797
-------
8,014
-------
ELECTRONICS -- 5.7%
Arrow Electronics*# ............... 220,000 3,822
Avnet Electronics ................. 150,000 6,534
Bell Industries* .................. 332,800 3,411
NUMBER VALUE
OF SHARES (000)
--------- ---------
COMMON STOCK -- CONTINUED
ELECTRONICS -- CONTINUED
Bell Micro Products* .............. 324,100 $ 2,294
-------
16,061
-------
FINANCIAL SERVICES -- 5.0%
ARM Financial, Cl A ............... 310,000 4,650
Liberty Financial ................. 190,150 4,968
Phoenix Investment Partners# ...... 450,800 4,423
-------
14,041
-------
FOOD & BEVERAGE -- 0.1%
John B. Sanfilippo* ............... 114,000 395
-------
HUMAN RESOURCES -- 0.5%
Kelly Services, Cl A .............. 50,000 1,450
-------
INSURANCE -- 4.5%
PMI Group# ........................ 190,000 11,115
State Auto Financial .............. 120,000 1,470
-------
12,585
-------
INSURANCE - LIFE -- 0.6%
Kansas City Life .................. 20,200 1,656
-------
INSURANCE - PROPERTY AND CASUALTY -- 6.5%
Commerce Group .................... 78,900 1,829
Farm Family Holdings* ............. 51,000 1,760
Harleysville Group ................ 203,900 3,951
Horace Mann Educators ............. 280,000 7,245
PXRE .............................. 94,700 1,764
Selective Insurance Group ......... 100,000 1,875
-------
18,424
-------
LEISURE & RECREATIONAL PRODUCTS -- 2.2%
Arctic Cat ........................ 175,500 1,470
Brunswick ......................... 200,000 4,800
-------
6,270
-------
MANUFACTURED HOUSING -- 3.1%
Cavalier Homes .................... 422,000 3,824
Fleetwood Enterprises# ............ 129,300 3,289
Southern Energy Homes* ............ 370,700 1,714
-------
8,827
-------
MARINE TRANSPORTATION -- 1.5%
Alexander & Baldwin ............... 185,000 4,186
-------
MEASURING DEVICES -- 1.5%
Watts Industries .................. 185,000 3,133
X-Rite ............................ 172,500 1,213
-------
4,346
-------
See Accompanying Notes
30
<PAGE> 33
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA SMALL CAP VALUE FUND
MAY 31, 1999
NUMBER VALUE
OF SHARES (000)
--------- ---------
COMMON STOCK -- CONTINUED
MEDICAL & MEDICAL SERVICES -- 0.4%
Maxicare Health Plans* ............ 200,000 $ 994
-------
METALS & MINING -- 3.3%
Cleveland Cliffs .................. 152,900 5,657
Nord Resources* ................... 113,200 46
Southern Peru Copper# ............. 291,500 3,607
-------
9,310
-------
MISCELLANEOUS CONSUMER SERVICES -- 0.3%
Unifirst .......................... 50,000 900
-------
OIL & GAS -- 1.2%
Helmerich & Payne ................. 80,000 1,865
Miller Exploration* ............... 100,000 211
Ocean Energy* ..................... 135,000 1,333
-------
3,409
-------
PAPER & FOREST PRODUCTS -- 3.8%
Caraustar Industries .............. 32,500 857
Rayonier .......................... 50,000 2,331
Rock Tennessee .................... 266,600 4,032
Westvaco .......................... 125,000 3,570
-------
10,790
-------
REAL ESTATE INVESTMENT TRUST -- 4.2%
Arden Realty ...................... 40,000 1,022
Capstead Mortgage ................. 320,000 1,860
Developers Diversified Realty ..... 52,000 858
Great Lakes ....................... 207,500 3,294
Mack-Cali Realty .................. 26,000 842
Thornburg Mortgage Asset# ......... 375,000 3,891
-------
11,767
-------
RESTAURANTS -- 2.2%
Buffets*# ......................... 201,500 2,116
Lone Star Steakhouse & Saloon* .... 57,500 579
Piccadilly Cafeterias ............. 145,000 1,541
Rare Hospitality* ................. 90,000 2,059
-------
6,295
-------
RETAIL -- 4.8%
Bon-Ton Stores* ................... 245,000 1,562
Dillards, Cl A .................... 310,000 10,889
Elder-Berman* ..................... 110,000 963
-------
13,414
-------
RUBBER & PLASTIC -- 1.4%
Cooper Tire and Rubber ............ 160,000 3,800
-------
SAVINGS & LOAN ASSOCIATIONS -- 1.2%
Washington Federal ................ 156,000 3,510
-------
NUMBER VALUE
OF SHARES (000)
--------- ---------
COMMON STOCK -- CONTINUED
SEMI-CONDUCTORS/CAPITAL EQUIPMENT -- 3.3%
Cypress Semiconductor* ............ 100,000 $ 1,113
Electroglas* ...................... 155,000 2,209
LTX* .............................. 225,000 2,011
Silicon Valley Group* ............. 295,000 4,075
--------
9,408
--------
SEMI-CONDUCTORS/INSTRUMENTS -- 0.8%
Opti* ............................. 334,800 2,124
--------
SPECIALTY CHEMICALS -- 1.3%
Amcol International ............... 4,500 64
Schulman .......................... 220,000 3,671
--------
3,735
--------
STEEL -- 7.0%
Armco* ............................ 520,000 3,348
Material Sciences* ................ 115,000 1,279
Novamerican* ...................... 190,200 2,068
Olympic* .......................... 427,500 3,286
Ryerson Tull ...................... 324,822 7,471
Steel Technologies ................ 268,800 2,411
--------
19,863
--------
TECHNOLOGY -- 0.9%
Mapinfo* .......................... 137,000 2,586
--------
TRUCKING -- 7.5%
Air Express International# ........ 106,200 2,668
Amerco* ........................... 160,000 3,960
Hunt Transport Services ........... 160,000 2,700
Pittston Bax Group ................ 213,100 2,304
Wabash National# .................. 280,700 5,351
Yellow* ........................... 250,000 4,250
--------
21,233
--------
TOTAL COMMON STOCK
(Cost $256,291) .................. 270,457
--------
PREFERRED STOCK -- 0.7%
REAL ESTATE INVESTMENT TRUST -- 0.7%
Thornburg Mortgage Asset .......... 85,000 2,056
--------
TOTAL PREFERRED STOCK
(Cost $2,243) .................... 2,056
--------
CASH EQUIVALENT -- 3.5%
Fidelity Domestic Money
Market Fund ..................... 9,836,000 9,836
--------
TOTAL CASH EQUIVALENT
(Cost $9,836) .................... 9,836
--------
See Accompanying Notes
31
<PAGE> 34
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA SMALL CAP VALUE FUND
MAY 31, 1999
VALUE
(000)
----------
Total Investments -- 100.0%
(Cost $268,370) .................. $282,349
========
Other Assets and Liabilities,
Net -- 0.0% 90
--------
NET ASSETS:
Portfolio Shares of Class I (unlimited
authorization -- no par value) based
on 19,812,331 outstanding shares
of beneficial interest ........... 264,286
Portfolio Shares of Class A (unlimited
authorization -- no par value) based on
866,968 outstanding shares of
beneficial interest .............. 11,568
Portfolio Shares of Class B (unlimited
authorization -- no par value) based on
39,083 outstanding shares of
beneficial interest .............. 502
Accumulated net realized loss
on investments and futures ....... (9,192)
Net unrealized appreciation
on investments ................... 13,979
Undistributed net investment income 1,296
--------
TOTAL NET ASSETS -- 100.0% .......... $282,439
========
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
PER SHARE -- CLASS I .............. $13.65
========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A ......... $13.31
========
MAXIMUM OFFERING PRICE PER
SHARE -- CLASS A ($13.31 / 94.5%) . $14.08
========
NET ASSET VALUE AND OFFERING
PRICE PER SHARE -- CLASS B ........ $13.19
========
- - ------------
* NON-INCOME PRODUCING SECURITY.
# SECURITY FULLY OR PARTIALLY ON LOAN.
CL -- CLASS
See Accompanying Notes
32
<PAGE> 35
[ARROW GRAPHIC OMITTED]
FINANCIAL HIGHLIGHTS
ARMADA SMALL CAP VALUE FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
--------------------------------------------------------------
1999 1998
--------------------------------------------------------------
CLASS I CLASS A CLASS B CLASS I CLASS A CLASS B4
-------- ------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning
of period ......................... $ 15.72 $ 15.47 $ 15.42 $ 15.15 $ 14.95 $ 15.28
-------- ------- ------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .............. 0.09 0.06 (0.03) 0.06 0.01 0.00
Net gain/(loss) on securities
(realized and unrealized) ......... (0.78) (0.85) (0.87) 2.87 2.84 0.14
-------- ------- ------- -------- ------- -------
Total from investment
operations ................... (0.69) (0.79) (0.90) 2.93 2.85 0.14
-------- ------- ------- -------- ------- -------
LESS DISTRIBUTIONS
Dividends from net
investment income ................. (0.05) (0.04) (0.00) (0.07) (0.04) (0.00)
Dividends in excess of net
investment income ................. (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
Distributions from net realized
capital gains ..................... (1.33) (1.33) (1.33) (2.29) (2.29) (0.00)
-------- ------- ------- -------- ------- -------
Total distributions ............. (1.38) (1.37) (1.33) (2.36) (2.33) (0.00)
-------- ------- ------- -------- ------- -------
Net asset value, end of period ....... $ 13.65 $ 13.31 $ 13.19 $ 15.72 $ 15.47 $ 15.42
======== ======= ======= ======== ======= =======
TOTAL RETURN ......................... (3.67)% (4.38)%3 (5.13)%3 19.82% 19.51%3 19.12%2,3
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $270,382 $11,542 $ 515 $284,295 $10,634 $ 61
Ratio of expenses to
average net assets ................ 1.12% 1.38% 2.08% 0.98% 1.23% 1.92%2
Ratio of net investment
income to average
net assets ........................ 0.70% 0.44% (0.26)% 0.43% 0.19% (0.48)%2
Ratio of expenses to
average net assets
before fee waivers ................ 1.12% 1.38% 2.08% 0.98% 1.23% 1.92%2
Ratio of net investment income
to average net assets
before fee waivers ................ 0.70% 0.44% (0.26)% 0.43% 0.19% (0.48)%2
Portfolio turnover rate ............ 79% 79% 79% 89% 89% 89%
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
ENDED MAY 31,
1997 1996 1995
------------------------------------------------------------
CLASS I CLASS A CLASS I CLASS A CLASS I1 CLASS A1
------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning
of period ......................... $ 13.10 $ 12.94 $ 11.38 $ 11.26 $ 10.00 $ 10.16
-------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .............. 0.09 0.08 0.08 0.06 0.10 0.07
Net gain/(loss) on securities
(realized and unrealized) ......... 2.90 2.83 2.41 2.37 1.36 1.11
-------- ------- ------- ------- ------- -------
Total from investment
operations ................... 2.99 2.91 2.49 2.43 1.46 1.18
-------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net
investment income ................. (0.09) (0.05) (0.08) (0.06) (0.04) (0.04)
Dividends in excess of net
investment income ................. (0.00) (0.05) (0.02) (0.02) (0.00) (0.00)
Distributions from net realized
capital gains ..................... (0.85) (0.85) (0.67) (0.67) (0.04) (0.04)
-------- ------- ------- ------ ------- -------
Total distributions ............. (0.94) (0.90) (0.77) (0.75) (0.08) (0.08)
-------- ------- ------- ------ ------- -------
Net asset value, end of period ....... $ 15.15 $ 14.95 $ 13.10 $12.94 $ 11.38 $ 11.26
======== ======= ======= ====== ======= =======
TOTAL RETURN ......................... 23.61% 23.26%3 22.64% 22.28%3 17.42%2 14.80%3,5
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $199,311 $ 4,929 $99,294 $4,702 $50,993 $ 3,567
Ratio of expenses to
average net assets ................ 0.97% 1.22% 1.05% 1.30% 1.01%2 1.34%2
Ratio of net investment
income to average
net assets ........................ 0.83% 0.57% 0.83% 0.58% 1.31%2 1.09%2
Ratio of expenses to
average net assets
before fee waivers ................ 0.97% 1.22% 1.06% 1.32% 1.15%2 1.38%2
Ratio of net investment income
to average net assets
before fee waivers ................ 0.83% 0.51% 0.82% 0.56% 1.17%2 1.05%2
Portfolio turnover rate ............ 64% 64% 106% 106% 69% 69%
</TABLE>
1 CLASS I AND CLASS A COMMENCED OPERATIONS ON JULY 26, 1994
AND AUGUST 15, 1994, RESPECTIVELY.
2 ANNUALIZED.
3 TOTAL RETURN EXCLUDES SALES CHARGE.
4 CLASS B COMMENCED OPERATIONS ON JANUARY 6, 1998.
5 RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
See Accompanying Notes
33
<PAGE> 36
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA SMALL CAP VALUE FUND
MAY 31, 1999
NUMBER VALUE
OF SHARES (000)
--------- ---------
COMMON STOCK -- 83.8%
AEROSPACE & DEFENSE -- 0.8%
Aeroflex* ......................... 47,100 $ 686
-------
AIR TRANSPORTATION -- 1.2%
Atlas Air* ........................ 25,100 675
Expeditors International
of Washington .................... 5,200 289
-------
964
-------
APPAREL/TEXTILES -- 0.4%
Tarrant Apparel*# ................. 10,500 318
-------
AUTOMOTIVE -- 0.9%
Monaco Coach* ..................... 25,000 750
-------
BANKS -- 1.6%
Cullen/Frost Bankers .............. 8,700 489
Republic Security Financial ....... 99,900 837
-------
1,326
-------
BROADCASTING, NEWSPAPERS &
ADVERTISING -- 1.6%
Citadel Communications* ........... 29,500 824
Doubleclick*# ..................... 4,750 463
-------
1,287
-------
BUILDING & CONSTRUCTION -- 0.5%
Standard-Pacific .................. 32,600 428
-------
BUSINESS SERVICES -- 2.2%
Barnett* .......................... 36,500 333
FYI* .............................. 23,900 662
Iron Mountain* .................... 13,400 370
Nova*# ............................ 19,000 423
-------
1,788
-------
CHEMICALS -- 1.2%
MacDermid ......................... 23,500 946
-------
COMMUNICATIONS EQUIPMENT -- 3.9%
Dii Group* ........................ 31,400 1,034
Mercury Computer Systems* ......... 33,800 669
Microwave Power Devices* .......... 33,300 508
Sawtek* ........................... 24,000 951
-------
3,162
-------
COMPUTER SERVICES -- 7.7%
Ardent Software* .................. 24,300 486
Checkfree Holdings* ............... 11,800 555
Electronics for Imaging* .......... 23,000 1,128
Inspire Insurance Solutions* ...... 42,800 746
Intervu* .......................... 11,600 402
Mercury Interactive* .............. 9,000 296
Micromuse* ........................ 14,800 590
NUMBER VALUE
OF SHARES (000)
--------- ---------
COMMON STOCK -- CONTINUED
COMPUTER SERVICES -- CONTINUED
National Computer Systems ......... 17,300 $ 541
Platinum technology
International* ................... 15,500 451
Sykes Enterprises* ................ 22,600 703
Unigraphics Solutions* ............ 22,200 354
-------
6,252
-------
CONSUMER PRODUCTS -- 1.3%
Jakks Pacific* .................... 26,300 728
K-Swiss, Cl A ..................... 6,200 356
-------
1,084
-------
DATA PROCESSING/MANAGEMENT -- 1.5%
National Data ..................... 26 1,233
-------
DRUGS & HEALTH CARE -- 0.9%
Alpharma, Cl A# ................... 13,300 355
Geltex Pharmaceuticals*# .......... 23,200 394
-------
749
-------
ELECTRICAL SERVICES -- 1.1%
Calpine* .......................... 16,000 867
-------
ELECTRICAL TECHNOLOGY -- 0.5%
Smart Modular ..................... 27,800 419
-------
ELECTRONICS -- 3.0%
CTS ............................... 21,400 1,198
Gentex* ........................... 42,300 1,270
-------
2,468
-------
ENTERTAINMENT -- 2.4%
Macrovision* ...................... 19,800 898
Premier Parks* .................... 28,800 1,026
-------
1,924
-------
FINANCIAL SERVICES -- 4.4%
Affiliated Managers* .............. 25,000 731
Amresco* .......................... 50,300 346
E*trade*# ......................... 22,000 979
Metris ............................ 21,400 1,248
Prism Financial* .................. 12,700 281
-------
3,585
-------
HAZARDOUS WASTE MANAGEMENT -- 0.6%
Casella Waste Systems, Cl A*# ..... 25,200 497
-------
HOME FURNISHINGS & HOUSEWARES -- 1.0%
Ethan Allen Interiors ............. 25,950 827
-------
See Accompanying Notes
34
<PAGE> 37
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA SMALL CAP VALUE FUND
MAY 31, 1999
NUMBER VALUE
OF SHARES (000)
--------- ---------
COMMON STOCK -- CONTINUED
HOTELS & LODGING -- 0.4%
Pegasus Systems* .................. 9,300 $ 324
-------
INFORMATION RETRIEVAL SERVICES -- 3.2%
CMG Information Services* ......... 8,400 871
Infospace.com* .................... 12,000 564
Onesource Information
Services* ........................ 22,400 211
QRS* .............................. 12,800 950
-------
2,596
-------
INSURANCE -- 2.1%
Annuity & Life .................... 46,400 1,198
Scottish Annuity & Life* .......... 54,000 527
-------
1,725
-------
MACHINERY -- 0.8%
Applied Power, Cl A ............... 2,400 58
Astec Industries* ................. 16,000 598
-------
656
-------
MEDICAL & MEDICAL SERVICES -- 9.5%
ABR Information Services* ......... 31,700 801
American Retirement*# ............. 38,600 654
Biomatrix*# ....................... 25,800 790
Gliatech* ......................... 18,000 461
Hooper Holmes ..................... 56,200 1,019
Laser Vision Centers* ............. 21,800 1,243
Life Technologies ................. 4,300 160
Medquist* ......................... 22,500 823
Minimed* .......................... 3,500 207
Priority Healthcare, Cl B* ........ 34,900 1,191
VISX* 7,300 379
-------
7,728
-------
METALS & MINING -- 0.7%
Stillwater Mining* ................ 18,450 589
-------
OFFICE SUPPLIES -- 0.5%
School Specialty* ................. 25,000 372
-------
PETROLEUM & FUEL PRODUCTS -- 0.5%
Cal Dive International* ........... 15,400 377
-------
PHARMACEUTICAL -- 1.1%
King Pharmaceuticals* ............. 39,300 935
-------
PRINTING & PUBLISHING -- 1.0%
Valassis Communications* .......... 22,350 778
-------
COMMON STOCK -- CONTINUED
PROFESSIONAL SERVICES -- 1.3%
Corporate Executive Board* ........ 5,908 $ 173
Diamond Technology Partners*# ..... 22,600 542
Safeguard Scientifics* ............ 5,100 373
-------
1,088
-------
RAILROADS -- 0.9%
Motivepower Industries* ........... 45,150 765
-------
RETAIL -- 4.9%
Ames Department Stores* ........... 15,200 623
BJ's Wholesale Club* .............. 21,600 562
Cheap Tickets* .................... 14,300 451
Foodmaker* ........................ 28,600 772
Men's Wearhouse*# ................. 27,000 689
The Children's Place
Retail Stores* ................... 22,600 880
-------
3,977
-------
RUBBER & PLASTIC -- 0.6%
Trex* ............................. 20,800 456
-------
SEMI-CONDUCTORS/INSTRUMENTS -- 8.6%
Applied Micro Circuits* ........... 11,500 680
Atmi* ............................. 19,400 426
Burr-Brown* ....................... 18,600 595
Credence Systems* ................. 22,900 678
Cymer*# ........................... 32,300 592
Optical Coating Laboratory ........ 8,780 570
Photronics Labs*# ................. 11,600 229
PMC-Sierra* ....................... 28,000 1,360
PRI Automation, Cl A*# ............ 21,200 519
SDL* .............................. 14,300 1,329
-------
6,978
-------
TELEPHONE & TELECOMMUNICATION -- 7.8%
Antec*# ........................... 26,100 765
Commscope* ........................ 38,900 1,021
Dycom* ............................ 31,200 1,505
Gilat Satellite Networks* ......... 11,350 599
Intermedia*# ...................... 22,500 570
Mastec* ........................... 22,700 551
SkyTel* ........................... 36,600 743
Worldgate Communications* ......... 16,000 592
-------
6,346
-------
TRUCKING -- 0.7%
Wabash National# .................. 30,800 587
-------
See Accompanying Notes
35
<PAGE> 38
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA SMALL CAP GROWTH FUND
VALUE
SHARES/PAR (000)
---------- ---------
COMMON STOCK -- CONTINUED
WHOLESALE -- 0.5%
Wesco International* ............ 20,300 $ 402
-------
Total Common Stock
(Cost $61,921) 68,239
-------
REPURCHASE AGREEMENT -- 12.8%
Prudential
4.780% (dated 05/28/99, matures
06/01/99, repurchase price
$10,405,524; collateralized by
FHLMC obligation: market
value $10,703,130) ............. $10,400,000 10,400
-------
Total Repurchase Agreement
(Cost $10,400) 10,400
-------
CASH EQUIVALENT -- 4.0%
Goldman Sachs Financial Square
Premium Money Market Fund .... 3,258,000 3,258
-------
Total Cash Equivalent
(Cost $3,258) ................. 3,258
-------
Total Investments -- 100.6%
(Cost $75,579) ................ $81,897
=======
Other Assets and Liabilities,
Net -- (0.6%) ................. (524)
-------
NET ASSETS:
Portfolio Shares of Class I
(unlimited authorization --
no par value) based on
7,902,867 outstanding shares of
beneficial interest .......... 83,235
Portfolio Shares of Class A (unlimited
authorization -- no par value) based
on 107,770 outstanding shares of
beneficial interest ........... 1,149
Portfolio Shares of Class B (unlimited
authorization -- no par value) based
on 13,896 outstanding shares of
beneficial interest ........... 135
Accumulated net realized loss
on investments and futures .... (10,437)
Net unrealized appreciation
on investments ................ 6,318
Net unrealized appreciation on futures 973
-------
TOTAL NET ASSETS -- 100.0% $81,373
=======
VALUE
-----
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SHARE -- CLASS I ............................ $10.14
=======
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A $10.11
............................................... =======
MAXIMUM OFFERING PRICE PER
SHARE -- CLASS A ($10.11 / 94.5%) ............ $10.70
=======
NET ASSET VALUE AND OFFERING
PRICE PER SHARE -- CLASS B .................... $10.01
=======
- - ------------
* NON-INCOME PRODUCING SECURITY.
# SECURITY FULLY OR PARTIALLY ON LOAN.
CL -- CLASS
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
See Accompanying Notes
36
<PAGE> 39
[ARROW GRAPHIC OMITTED]
FINANCIAL HIGHLIGHTS
ARMADA SMALL CAP GROWTH FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE PERIOD
ENDED MAY 31, 1999 ENDED MAY 31, 1998
------------------------------ ------------------------------
CLASS I CLASS A CLASS B CLASS I3 CLASS A3 CLASS B4
------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................. $ 11.69 $11.68 $11.66 $ 10.00 $10.00 $10.64
------- ------ ------ ------- ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss) ....................... (0.03)6 (0.05)6 (0.10)6 0.01 0.01 (0.01)
Net gain/(loss) on securities
(realized and unrealized) ......................... (1.41) (1.41) (1.44) 1.72 1.71 1.03
------- ------ ------ ------- ------ ------
Total from investment operations ................ (1.44) (1.46) (1.54) 1.73 1.72 1.02
------- ------ ------ ------- ------ ------
LESS DISTRIBUTIONS
Dividends from net investment income ............... (0.00) (0.00) (0.00) (0.01) (0.01) (0.00)
Distributions from net realized capital gains ...... (0.11) (0.11) (0.11) (0.03) (0.03) (0.00)
------- ------ ------ ------- ------ ------
Total distributions ............................. (0.11) (0.11) (0.11) (0.04) (0.04) (0.00)
------- ------ ------ ------- ------ ------
Net asset value, end of period ....................... $ 10.14 $10.11 $10.01 $ 11.69 $11.68 $11.66
======= ====== ====== ======= ====== ======
TOTAL RETURN ......................................... (12.36)% (12.54)%1 (13.26)%1 17.35%2 17.18%1,2 9.59%1,2
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) ............... $80,145 $1,089 $ 139 $54,476 $ 331 $ 1
Ratio of expenses to average net assets ............ 1.27% 1.51% 2.23% 0.98%5 1.23%5 1.92%5
Ratio of net investment income/(loss) to
average net assets ............................... (0.27)% (0.51)% (1.23)% 0.14%5 (0.32)%5 (0.87)%5
Ratio of expenses to average net assets
before fee waivers ................................ 1.27% 1.51% 2.23% 1.09%5 1.34%5 3.06%5
Ratio of net investment income/(loss) to
average net assets before fee waivers ............. (0.27)% (0.51)% (1.23)% 0.03%5 (0.43)%5 (2.01)%5
Portfolio turnover rate ............................ 159% 159% 159% 31% 31% 31%
</TABLE>
1 TOTAL RETURN EXCLUDES SALES CHARGE.
2 RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
3 CLASS I AND CLASS A BOTH COMMENCED OPERATIONS ON AUGUST 1, 1997.
4 CLASS B COMMENCED OPERATIONS ON JANUARY 6, 1998.
5 ANNUALIZED.
6 CALCULATED BASED UPON AVERAGE SHARES OUTSTANDING.
See Accompanying Notes
37
<PAGE> 40
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA EQUITY GROWTH FUND
MAY 31, 1999
NUMBER VALUE
OF SHARES (000)
--------- ----------
COMMON STOCK -- 97.4%
AIRCRAFT -- 0.4%
United Technologies# ........... 95,600 $ 5,933
--------
BANKS -- 2.8%
Comerica ....................... 80,950 4,892
MBNA ........................... 537,500 14,848
Northern Trust ................. 62,200 5,629
State Street ................... 183,600 13,999
--------
39,368
--------
BROADCASTING, NEWSPAPERS & ADVERTISING -- 1.0%
Omnicom Group# ................. 211,000 14,770
--------
BUSINESS SERVICES -- 1.0%
Automatic Data Processing ...... 357,200 14,712
--------
CABLE TELEVISION -- 1.3%
Comcast, Cl A Special .......... 484,800 18,695
--------
CHEMICALS -- 0.5%
Monsanto# ...................... 175,000 7,263
--------
COMMUNICATIONS EQUIPMENT -- 3.7%
Lucent Technologies# ........... 685,000 38,959
Nortel Networks ................ 185,000 13,875
--------
52,834
--------
COMPUTER HARDWARE -- 9.8%
Cisco Systems* ................. 388,000 42,280
Dell Computer* ................. 280,200 9,641
EMC* ........................... 247,900 24,697
Hewlett Packard ................ 146,700 13,836
International Business Machines# 339,200 39,453
Sun Microsystems* .............. 160,000 9,560
--------
139,467
--------
COMPUTER SERVICES -- 1.2%
Ceridian* ...................... 293,200 9,676
Oracle*# ....................... 316,500 7,853
--------
17,529
--------
COMPUTER SOFTWARE -- 3.6%
Microsoft* ..................... 632,000 51,014
--------
DRUGS & HEALTH CARE -- 11.4%
Abbott Laboratories ............ 214,720 9,703
American Home Products ......... 165,000 9,508
Bristol-Myers Squibb ........... 445,200 30,552
Johnson & Johnson .............. 199,300 18,460
Lilly (Eli) .................... 149,000 10,644
Merck .......................... 307,000 20,723
Pfizer ......................... 242,900 25,990
Schering-Plough ................ 517,000 23,297
Warner-Lambert ................. 203,000 12,586
--------
161,463
--------
ENTERTAINMENT -- 0.7%
AT&T-Liberty Media, Cl A*# ..... 158,200 10,510
--------
NUMBER VALUE
OF SHARES (000)
--------- --------
COMMON STOCK -- CONTINUED
ENVIRONMENTAL SERVICES -- 1.3%
Waste Management ............... 348,000 $ 18,401
--------
FINANCIAL SERVICES -- 5.7%
American Express ............... 155,000 18,784
Associates First Capital, Cl A . 133,600 5,478
Citigroup ...................... 210,000 13,913
DLJ Direct* .................... 15,000 619
Fannie Mae ..................... 163,000 11,084
Freddie Mac .................... 280,700 16,368
J.P. Morgan .................... 104,000 14,488
--------
80,734
--------
FOOD & BEVERAGE -- 1.5%
Coca Cola ...................... 209,000 14,277
PepsiCo ........................ 195,000 6,983
--------
21,260
--------
HOUSEHOLD PRODUCTS -- 3.2%
Colgate Palmolive .............. 152,500 15,231
Procter & Gamble ............... 316,000 29,507
--------
44,738
--------
INSURANCE -- 2.6%
American International Group ... 325,260 37,181
--------
MEDICAL & MEDICAL SERVICES -- 1.1%
Medtronic ...................... 210,800 14,967
--------
MISCELLANEOUS MANUFACTURING -- 2.4%
Tyco International ............. 395,800 34,583
--------
MOTORCYCLE & MOTOR SCOOTER -- 0.9%
Harley-Davidson ................ 256,300 13,087
--------
OFFICE & BUSINESS EQUIPMENT -- 2.9%
Lexmark International, Cl A* ... 125,000 17,016
Pitney Bowes ................... 207,000 13,196
Xerox .......................... 204,000 11,462
--------
41,674
--------
OIL MACHINERY & EQUIPMENT -- 0.5%
Schlumberger ................... 120,000 7,223
--------
PAPER & FOREST PRODUCTS -- 1.0%
International Paper ............ 275,000 13,750
--------
PERSONAL CARE -- 0.5%
Gillette ....................... 141,400 7,211
--------
PETROLEUM & FUEL PRODUCTS -- 0.5%
Burlington Resources ........... 165,000 7,085
--------
PETROLEUM REFINING -- 2.0%
Chevron ........................ 147,000 13,625
Exxon .......................... 177,000 14,138
--------
27,763
--------
See Accompanying Notes
38
<PAGE> 41
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA EQUITY GROWTH FUND
MAY 31, 1999
NUMBER VALUE
OF SHARES (000)
--------- --------
COMMON STOCK -- CONTINUED
PRINTING & PUBLISHING -- 2.1%
Time Warner# ................... 440,000 $ 29,947
----------
RETAIL DRUG STORES -- 1.6%
CVS ............................ 302,000 13,892
Walgreen ....................... 354,000 8,231
----------
22,123
----------
RETAIL FOOD CHAINS -- 3.4%
Costco* ........................ 290,600 21,078
Kroger*# ....................... 209,100 12,245
Safeway* ....................... 327,000 15,206
----------
48,529
----------
RETAIL STORES -- 11.1%
Dayton Hudson .................. 435,500 27,437
Gap ............................ 230,000 14,389
Home Depot# .................... 495,698 28,193
Lowe's ......................... 208,000 10,803
Staples* ....................... 460,000 13,225
Tandy .......................... 260,000 21,450
TJX Companies .................. 445,000 13,350
Wal-Mart ....................... 687,000 29,283
----------
158,130
----------
SEMI-CONDUCTORS/INSTRUMENTS -- 2.5%
Intel .......................... 395,000 21,404
Texas Instruments .............. 134,000 14,656
----------
36,060
----------
SPECIALTY MACHINERY -- 3.2%
General Electric ............... 439,800 44,722
----------
TELEPHONE & TELECOMMUNICATION -- 7.7%
Airtouch Communications* ....... 158,000 15,879
Alltel ......................... 281,000 20,144
Ameritech ...................... 150,000 9,872
BellSouth ...................... 244,000 11,514
MCI WorldCom* .................. 426,500 36,826
SBC Communications ............. 288,000 14,724
----------
108,959
----------
TRAVEL -- 1.0%
Carnival, Cl A ................. 329,900 13,526
----------
WHOLESALE -- 1.3%
Cardinal Health ................ 165,000 9,962
Sysco .......................... 264,700 7,858
----------
17,820
----------
TOTAL COMMON STOCK
(Cost $1,040,745) ........................... 1,383,031
----------
NUMBER OF VALUE
SHARES(000) (000)
--------- ----------
CASH EQUIVALENT -- 2.7%
Fidelity Domestic Money
Market Fund .................. 38,800 $ 38,800
----------
TOTAL CASH EQUIVALENT
(Cost $38,800) .............................. 38,800
----------
TOTAL INVESTMENTS -- 100.1%
(Cost $1,079,545) ........................... $1,421,831
==========
OTHER ASSETS AND LIABILITIES,
NET -- (0.1%) ............................... (1,921)
----------
Portfolio Shares of Class I
(unlimited authorization -- no par value)
based on 51,286,720 outstanding shares
of beneficial interest ..................... 943,499
Portfolio Shares of Class A
(unlimited authorization -- no par value)
based on 6,369,718 outstanding shares
of beneficial interest ..................... 134,137
Portfolio Shares of Class B (unlimited
authorization -- no par value) based on
57,531 outstanding shares of beneficial interest 1,375
Accumulated net realized loss on investments
and futures ................................ (1,387)
Net unrealized appreciation on investments .. 342,286
----------
TOTAL NET ASSETS -- 100.0% .................... $1,419,910
==========
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
PER SHARE -- CLASS I ........................ $24.61
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A ................... $24.55
==========
MAXIMUM OFFERING PRICE
PER SHARE -- CLASS A ($24.55 / 94.5%) ........ $25.98
==========
NET ASSET VALUE AND OFFERING
PRICE PER SHARE -- CLASS B ................... $24.33
==========
- - ------------
* NON-INCOME PRODUCING SECURITY.
# SECURITY FULLY OR PARTIALLY ON LOAN.
CL -- CLASS
See Accompanying Notes
39
<PAGE> 42
[ARROW GRAPHIC OMITTED]
FINANCIAL HIGHLIGHTS
ARMADA EQUITY GROWTH FUND
MAY 31, 1999
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
---------------------------------------------------------------------------
1999 1998 1997
---------------------------------------------------------------------------
CLASS I CLASS A CLASS B CLASS I CLASS A CLASS B3 CLASS I
---------- -------- ------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ................ $ 21.35 $ 21.35 $21.28 $ 18.63 $ 18.67 $19.44 $ 18.02
---------- -------- ------ -------- ------- ------ --------
INCOME FROM INVESTMENT
OPERATIONS
Net investment
income/(loss) ........... (0.03)4 (0.09)4 (0.27)4 (0.00) (0.04) (0.24) 0.09
Net gain on securities
(realized and unrealized) 4.28 4.28 4.31 5.00 4.99 2.08 4.66
---------- -------- ------ -------- ------- ------ --------
Total from investment
operations ......... 4.25 4.19 4.04 5.00 4.95 1.84 4.75
---------- -------- ------ -------- ------- ------ --------
LESS DISTRIBUTIONS
Dividends from net
investment income ....... (0.00) (0.00) (0.00) (0.01) (0.00) (0.00) (0.09)
Dividends in excess of net
investment income ....... (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.02)
Distributions from net realized
capital gains ........... (0.99) (0.99) (0.99) (2.27) (2.27) (0.00) (4.03)
Distributions in excess of net
realized capital gains .. (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
---------- -------- ------ -------- ------- ------ --------
Total distributions ... (0.99) (0.99) (0.99) (2.28) (2.27) (0.00) (4.14)
---------- -------- ------ -------- ------- ------ --------
Net asset value, end of period $ 24.61 $ 24.55 $24.33 $ 21.35 $ 21.35 $21.28 $ 18.63
========== ======== ====== ======== ======= ====== ========
TOTAL RETURN ............... 20.16% 19.88%1 19.22%1 28.65% 28.32%1 27.90%1,2 29.57%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's) ............... $1,262,154 $156,356 $1,400 $352,413 $12,380 $ 24 $255,594
Ratio of expenses to
average net assets ...... 0.92% 1.17% 1.88% 0.98% 1.23% 1.92%2 0.97%
Ratio of net investment
income/(loss) to average
net assets .............. (0.11)% (0.36)% (1.07)% (0.01)% (0.26)% (0.92)%2 0.49%
Ratio of expenses to average
net assets before
fee waivers ............. 0.92% 1.17% 1.88% 0.98% 1.23% 1.92%2 0.97%
Ratio of net investment
income/(loss) to average
net assets before
fee waivers ............. (0.11)% (0.36)% (1.07)% (0.01)% (0.26)% (0.92)%2 0.49%
Portfolio turnover rate 57% 57% 57% 260% 260% 260% 197%
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
------------------------------------------------
1996 1995
------------------------------------------------
CLASS A CLASS I CLASS A CLASS I CLASS A
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ................ $18.05 $ 14.77 $14.79 $ 13.66 $13.68
------ -------- ------ -------- ------
INCOME FROM INVESTMENT
OPERATIONS
Net investment
income/(loss) ........... 0.05 0.14 0.10 0.21 0.18
Net gain on securities
(realized and unrealized) 4.66 3.46 3.47 1.21 1.21
------ -------- ------ -------- ------
Total from investment
operations ......... 4.71 3.60 3.57 1.42 1.39
------ -------- ------ -------- ------
LESS DISTRIBUTIONS
Dividends from net
investment income ....... (0.05) (0.14) (0.10) (0.20) (0.17)
Dividends in excess of net
investment income ....... (0.01) (0.02) (0.02) (0.00) (0.00)
Distributions from net realized
capital gains ........... (4.03) (0.19) (0.19) (0.00) (0.00)
Distributions in excess of net
realized capital gains .. (0.00) (0.00) (0.00) (0.11) (0.11)
------ -------- ------ -------- ------
Total distributions ... (4.09) (0.35) (0.31) (0.31) (0.28)
------ -------- ------ -------- ------
Net asset value, end of period $18.67 $ 18.02 $18.05 $ 14.77 $14.79
------ -------- ------ -------- ------
TOTAL RETURN ............... 29.24%1 24.61% 24.34%1 10.62% 10.35%1
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's) ............... $6,931 $166,671 $6,013 $119,634 $5,974
Ratio of expenses to
average net assets ...... 1.22% 1.01% 1.26% 1.01% 1.27%
Ratio of net investment
income/(loss) to average
net assets .............. 0.25% 0.85% 0.60% 1.53% 1.23%
Ratio of expenses to average
net assets before
fee waivers ............. 1.22% 1.03% 1.28% 1.02% 1.28%
Ratio of net investment
income/(loss) to average
net assets before
fee waivers ............. 0.25% 0.83% 0.58% 1.51% 1.22%
Portfolio turnover rate .. 197% 74% 74% 17% 17%
</TABLE>
1 TOTAL RETURN EXCLUDES SALES CHARGE.
2 ANNUALIZED.
3 CLASS B COMMENCED OPERATIONS ON JANUARY 6, 1998.
4 CALCULATED BASED UPON AVERAGE SHARES OUTSTANDING.
See Accompanying Notes
40
<PAGE> 43
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA TAX MANAGED EQUITY FUND
NUMBER VALUE
OF SHARES (000)
--------- ---------
COMMON STOCK -- 96.6%
AIR TRANSPORTATION -- 0.2%
Southwest Airlines ....... 12,000 $ 385
-------
BANKS -- 7.6%
Bank of America .......... 6,000 388
First Union .............. 20,000 921
Northern Trust ........... 16,000 1,446
State Street ............. 89,000 6,786
SunTrust ................. 10,000 675
Wachovia ................. 35,600 3,142
Wells Fargo .............. 148,000 5,920
-------
19,278
-------
BROADCASTING, NEWSPAPERS & ADVERTISING -- 1.1%
Omnicom Group# ........... 39,000 2,730
-------
BUSINESS SERVICES -- 3.0%
Automatic Data Processing 188,000 7,743
-------
CHEMICALS -- 0.9%
Air Products & Chemicals . 56,000 2,296
-------
COMMUNICATIONS EQUIPMENT -- 1.8%
Lucent Technologies# ..... 60,000 3,412
Nortel Networks .......... 16,500 1,237
-------
4,649
-------
COMPUTER HARDWARE -- 5.4%
Cisco Systems* ........... 36,475 3,976
Compaq Computer# ......... 20,000 474
Dell Computer* ........... 20,000 689
Hewlett Packard .......... 74,400 7,017
Sun Microsystems* ........ 28,000 1,673
-------
13,829
-------
COMPUTER SOFTWARE -- 1.9%
Microsoft* ............... 60,600 4,892
-------
DRUGS & HEALTH CARE -- 19.0%
Abbott Laboratories ...... 192,000 8,676
American Home Products ... 10,000 576
Bristol-Myers Squibb ..... 154,880 10,629
Johnson & Johnson ........ 17,500 1,621
Lilly (Eli) .............. 13,000 929
Merck .................... 96,000 6,480
Pfizer ................... 93,000 9,951
Schering-Plough .......... 212,400 9,571
-------
48,433
-------
ENTERTAINMENT -- 1.5%
Walt Disney .............. 132,000 3,844
-------
NUMBER VALUE
OF SHARES (000)
--------- ---------
COMMON STOCK -- CONTINUED
FINANCIAL SERVICES -- 0.4%
Fannie Mae ............... 13,500 $ 918
-------
FOOD & BEVERAGE -- 4.6%
Anheuser Busch ........... 5,000 365
Coca Cola ................ 48,800 3,334
PepsiCo .................. 224,500 8,040
-------
11,739
-------
HOLDING COMPANIES -- 1.4%
Berkshire Hathaway, Cl A* 49 3,528
-------
HOUSEHOLD PRODUCTS -- 1.8%
Procter & Gamble ......... 48,000 4,482
-------
INFORMATION RETRIEVAL SERVICES -- 1.3%
America Online* .......... 27,000 3,223
-------
INSURANCE -- 5.4%
American International Group 102,431 11,709
Chubb .................... 30,000 2,102
-------
13,811
-------
MEDICAL & MEDICAL SERVICES -- 0.2%
Medtronic ................ 7,200 511
-------
MISCELLANEOUS MANUFACTURING -- 1.0%
Illinois Tool Works ...... 12,000 921
Minnesota Mining &
Manufacturing ........... 17,600 1,509
-------
2,430
-------
MOTORCYCLE & MOTOR SCOOTER -- 2.4%
Harley-Davidson .......... 117,600 6,005
-------
OFFICE & BUSINESS EQUIPMENT -- 5.0%
Pitney Bowes ............. 153,000 9,754
Xerox .................... 52,000 2,922
-------
12,676
-------
OIL MACHINERY & EQUIPTMENT -- 1.2%
Schlumberger ............. 52,500 3,160
-------
PERSONAL CARE -- 0.1%
Gillette ................. 5,000 255
-------
PETROLEUM REFINING -- 5.0%
BP Amoco, ADR# ........... 43,934 4,706
Exxon .................... 52,000 4,153
Mobil .................... 10,000 1,012
Royal Dutch Petroleum .... 52,400 2,964
-------
12,835
-------
See Accompanying Notes
41
<PAGE> 44
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA TAX MANAGED EQUITY FUND
MAY 31, 1999
NUMBER VALUE
OF SHARES (000)
--------- -------
COMMON STOCK -- CONTINUED
RESTAURANTS -- 1.0%
McDonald's ............... 64,000 $ 2,464
--------
RETAIL -- 6.9%
Dayton Hudson ............ 13,300 838
Home Depot ............... 192,000 10,920
Nordstrom ................ 22,000 781
Staples* ................. 45,000 1,294
Wal-Mart ................. 89,000 3,794
--------
17,627
--------
SEMI-CONDUCTORS/INSTRUMENTS -- 4.4%
Intel# ................... 172,000 9,320
Texas Instruments ........ 16,000 1,750
--------
11,070
--------
SPECIALTY MACHINERY -- 5.7%
Emerson Electric# ........ 70,200 4,484
General Electric ......... 97,900 9,955
--------
14,439
--------
TELEPHONE & TELECOMMUNICATION -- 6.4%
Ameritech ................ 27,200 1,790
BellSouth ................ 89,000 4,200
GTE ...................... 5,500 347
MCI WorldCom* ............ 46,750 4,038
Motorola ................. 30,000 2,484
SBC Communications ....... 24,000 1,227
US West .................. 24,800 1,341
Vodafone Group# .......... 4,000 766
--------
16,193
--------
TOTAL COMMON STOCK
(Cost $59,112) ............................. 245,445
--------
CASH EQUIVALENT -- 3.3%
Fidelity Domestic
Money Market Fund ............ 8,464,000 8,464
--------
TOTAL CASH EQUIVALENT
(Cost $8,464) .............................. 8,464
--------
TOTAL INVESTMENTS -- 99.9%
(Cost $67,576) ............................. $253,909
========
VALUE
(000)
-------
OTHER ASSETS AND LIABILITIES,
NET -- 0.1% ................................. $ 322
--------
NET ASSETS:
Portfolio Shares of Class I
(unlimited authorization -- no par value)
based on 19,901,687 outstanding shares of
beneficial interest ........................ 55,196
Portfolio Shares of Class A
(unlimited authorization -- no par value)
based on 604,299 outstanding shares of
beneficial interest ........................ 7,046
Portfolio Shares of Class B
(unlimited authorization -- no par value)
based on 443,687 outstanding shares of
beneficial interest ........................ 5,305
Accumulated net realized gain
on investments ............................. 143
Net unrealized appreciation on investments .. 186,333
Undistributed net investment income ......... 208
--------
TOTAL NET ASSETS -- 100.0% ..................... $254,231
========
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SHARE -- CLASS I ............................ $12.13
========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A ................... $12.16
========
MAXIMUM OFFERING PRICE PER
SHARE -- CLASS A ($12.16 / 94.5%) ............ $12.87
========
NET ASSET VALUE AND OFFERING
PRICE PER SHARE -- CLASS B ................... $12.12
========
- - ------------
* NON-INCOME PRODUCING SECURITY.
# SECURITY FULLY OR PARTIALLY ON LOAN.
ADR--AMERICAN DEPSITORY RECEIPT
CL--CLASS
See Accompanying Notes
42
<PAGE> 45
[ARROW GRAPHIC OMITTED]
FINANCIAL HIGHLIGHTS
ARMADA TAX MANAGED EQUITY FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE PERIOD
ENDED MAY 31, 1999 ENDED MAY 31, 1998
-----------------------------------------------------------------
CLASS I CLASS A CLASS B CLASS I2 CLASS A3 CLASS B4
------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .......... $ 9.93 $ 9.93 $ 9.93 $ 10.00 $10.10 $10.21
-------- ------- ------- -------- ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ....................... 0.05 0.04 (0.02) 0.00 0.00 0.00
Net gain/(loss) loss on securities
(realized and unrealized) .................. 2.21 2.24 2.23 (0.07) (0.17) (0.28)
-------- ------- ------- -------- ------ ------
Total from investment operations ......... 2.26 2.28 2.21 (0.07) (0.17) (0.28)
-------- ------- ------- -------- ------ ------
LESS DISTRIBUTIONS
Dividends from net investment income ..... (0.05) (0.04) (0.01) (0.00) (0.00) (0.00)
Distributions from net realized capital gains (0.01) (0.01) (0.01) (0.00) (0.00) (0.00)
-------- ------- ------- -------- ------ ------
Total distributions ...................... (0.06) (0.05) (0.02) (0.00) (0.00) (0.00)
-------- ------- ------- -------- ------ ------
Net asset value, end of period ................ $ 12.13 $12.16 $12.12 $ 9.93 $ 9.93 $ 9.93
======== ======= ======= ======== ====== ======
TOTAL RETURN .................................. 22.82% 23.03%1 22.31%1 (4.81%)5 (23.63%)1,5 (32.24%)1,5
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) ........ $241,501 $7,353 $5,377 $158,867 $ 10 $ 85
Ratio of expenses to average net assets ..... 0.83% 1.09% 1.79% 0.29%5 0.54%5 1.23%5
Ratio of net investment income/(loss) to
average net assets ........................ 0.37% 0.11% (0.59%) 0.91%5 0.63%5 0.43%5
Ratio of expenses to average net assets
before fee waivers ........................ 1.01% 1.27% 1.97% 1.02%5 1.24%5 1.98%5
Ratio of net investment income/(loss) to average
net assets before fee waivers .............. 0.19% (0.07%) (0.77%) 0.18%5 (0.07%)5 1.18%5
Portfolio turnover rate ..................... 5% 5% 5% 0% 0% 0%
</TABLE>
1 TOTAL RETURN EXCLUDES SALES CHARGE.
2 CLASS I COMMENCED OPERATIONS ON APRIL 9, 1998.
3 CLASS A COMMENCED OPERATIONS ON MAY 11, 1998.
4 CLASS B COMMENCED OPERATIONS ON MAY 4, 1998.
5 ANNUALIZED.
See Accompanying Notes
43
<PAGE> 46
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA CORE EQUITY FUND
MAY 31, 1999
NUMBER VALUE
OF SHARES (000)
--------- --------
COMMON STOCK -- 98.9%
BANKS -- 5.4%
Bank One# ...................... 51,310 $ 2,902
Chase Manhattan ................ 25,660 1,860
Comerica ....................... 29,580 1,788
Commerce Bancshares ............ 36,400 1,499
-------
8,049
-------
BROADCASTING, NEWSPAPERS & ADVERTISING -- 0.4%
Interpublic Group of Companies . 7,150 542
-------
BUILDING & BUILDING SUPPLIES -- 1.1%
Sherwin Williams ............... 53,080 1,635
-------
BUSINESS SERVICES -- 6.7%
Automatic Data Processing ...... 98,920 4,074
Cintas ......................... 27,120 1,720
Computer Sciences* ............. 38,100 2,465
Fiserv* ........................ 46,550 1,746
-------
10,005
-------
CHEMICALS -- 2.5%
E.I. duPont de Nemours ......... 28,470 1,863
Praxair ........................ 36,940 1,803
-------
3,666
-------
COMPUTER HARDWARE -- 6.8%
Cisco Systems* ................. 25,612 2,791
Hewlett Packard ................ 24,720 2,331
International Business Machines# 42,100 4,897
-------
10,019
-------
COMPUTER SERVICES -- 1.3%
Ceridian*# ..................... 57,320 1,892
-------
COMPUTER SOFTWARE -- 3.2%
Microsoft* ..................... 59,200 4,779
-------
DRUGS & HEALTH CARE -- 8.3%
Bristol-Myers Squibb ........... 55,200 3,788
Lilly (Eli) .................... 35,570 2,541
Merck .......................... 54,460 3,676
Schering-Plough ................ 51,800 2,334
-------
12,339
-------
FINANCIAL SERVICES -- 5.2%
Associates First Capital, Cl A . 48,550 1,991
Citigroup ...................... 31,750 2,103
Fannie Mae ..................... 48,510 3,299
Goldman Sachs Group* ........... 3,500 238
-------
7,631
-------
NUMBER VALUE
OF SHARES (000)
--------- --------
COMMON STOCK -- CONTINUED
FOOD & BEVERAGE -- 1.6%
Coca Cola ...................... $33,950 $ 2,319
-------
INSURANCE -- 7.7%
American General ............... 26,850 1,940
American International Group ... 37,075 4,238
CMAC Investment# ............... 52,620 2,661
MGIC Investment ................ 30,810 1,483
PMI Group ...................... 19,410 1,135
-------
11,457
-------
MACHINERY -- 3.2%
Applied Materials* ............. 35,690 1,964
Ingersoll Rand ................. 43,930 2,798
-------
4,762
-------
MEDICAL & MEDICAL SERVICES -- 3.6%
Guidant ........................ 45,500 2,275
Medtronic ...................... 33,278 2,363
Steris* ........................ 45,240 749
-------
5,387
-------
METALS & MINING -- 1.6%
Alcoa .......................... 42,220 2,322
-------
OFFICE & BUSINESS EQUIPMENT -- 1.5%
Pitney Bowes ................... 35,000 2,231
-------
OIL MACHINERY &EQUIPMENT -- 1.5%
Schlumberger ................... 36,890 2,220
-------
PAPER & FOREST PRODUCTS -- 3.5%
Champion International ......... 31,370 1,608
Georgia Pacific# ............... 19,220 1,661
Willamette Industries .......... 46,530 1,972
-------
5,241
-------
PETROLEUM REFINING -- 6.4%
Exxon .......................... 42,760 3,415
Mobil .......................... 38,120 3,860
Texaco ......................... 34,620 2,268
-------
9,543
-------
RETAIL -- 8.6%
CVS ............................ 58,530 2,692
Dayton Hudson .................. 39,700 2,501
Home Depot ..................... 54,480 3,099
Safeway* ....................... 42,270 1,966
Wal-Mart ....................... 58,960 2,513
-------
12,771
-------
See Accompanying Notes
44
<PAGE> 47
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA CORE EQUITY FUND
MAY 31, 1999
NUMBER VALUE
OF SHARES (000)
--------- --------
COMMON STOCK -- CONTINUED
SEMI-CONDUCTORS/INSTRUMENTS -- 3.5%
Intel .......................... 48,480 $ 2,627
Xilinx* ........................ 56,000 2,487
--------
5,114
--------
SPECIALTY CHEMICALS -- 1.3%
Sigma Aldrich .................. 62,190 1,988
--------
SPECIALTY MACHINERY -- 5.1%
Emerson Electric ............... 37,122 2,371
Hubbell ........................ 38,876 1,628
General Electric ............... 35,030 3,562
--------
7,561
--------
TECHNOLOGY -- 6.0%
Altera* ........................ 64,460 2,242
Linear Technology .............. 45,120 2,390
Maxim Integrated Products* ..... 40,810 2,176
Teradyne*# ..................... 39,580 2,090
--------
8,898
--------
TELEPHONE & TELECOMMUNICATION -- 1.9%
BellSouth ...................... 60,420 2,851
--------
TOBACCO -- 1.0%
Philip Morris .................. 39,780 1,534
--------
TOTAL COMMON STOCK
(Cost $113,088) 146,756
--------
CASH EQUIVALENT -- 1.3%
Goldman Sachs Financial Square
Premium Money Market Fund .... 1,892,000 1,892
--------
TOTAL CASH EQUIVALENT
(Cost $1,892) 1,892
--------
TOTAL INVESTMENTS -- 100.2%
(Cost $114,980) ............................. $148,648
========
OTHER ASSETS AND LIABILITIES,
NET -- (0.2%) ................................ (208)
--------
VALUE
(000)
-------
NET ASSETS:
Portfolio Shares of Class I
(unlimited authorization -- no par value)
based on 10,588,638 outstanding shares
of beneficial interest ..................... $107,647
Portfolio Shares of Class A
(unlimited authorization -- no par value)
based on 126,332 outstanding shares of
beneficial interest ........................ 1,584
Portfolio Shares of Class B (unlimited
authorization -- no par value) based on
81,197 outstanding shares of
beneficial interest ........................ 1,051
Accumulated net realized gain on investments 4,490
Net unrealized appreciation on investments .. 33,668
--------
TOTAL NET ASSETS -- 100.0% ..................... $148,440
========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SHARE -- CLASS I ............................ $13.75
========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A ................... $13.71
========
MAXIMUM OFFERING PRICE PER
SHARE -- CLASS A ($13.71 / 94.5%) ............ $14.51
========
NET ASSET VALUE AND OFFERING
PRICE PER SHARE -- CLASS B ................... $13.63
========
- - ------------
* NON-INCOME PRODUCING SECURITY.
# SECURITY FULLY OR PARTIALLY ON LOAN.
CL--CLASS
See Accompanying Notes
45
<PAGE> 48
[ARROW GRAPHIC OMITTED]
FINANCIAL HIGHLIGHTS
ARMADA CORE EQUITY FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE PERIOD
ENDED MAY 31, 1999 ENDED MAY 31, 1998
--------------------------------------------------------------------
CLASS I CLASS A CLASS B CLASS I3 CLASS A3 CLASS B4
------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................ $ 11.35 $11.34 $11.33 $ 10.00 $10.00 $10.25
-------- ------ ------ -------- ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss) ...................... (0.02)6 (0.05)6 (0.16)6 0.05 0.04 0.00
Net gain on securities (realized and unrealized) .. 2.94 2.93 2.97 1.35 1.34 1.08
-------- ------ ------ -------- ------ ------
Total from investment operations ............... 2.92 2.88 2.81 1.40 1.38 1.08
-------- ------ ------ -------- ------ ------
LESS DISTRIBUTIONS
Dividends from net investment income .............. (0.01) (0.00) (0.00) (0.05) (0.04) (0.00)
Distributions from net realized capital gains ..... (0.51) (0.51) (0.51) (0.00) (0.00) (0.00)
-------- ------ ------ -------- ------ ------
Total distributions ............................ (0.52) (0.51) (0.51) (0.05) (0.04) (0.00)
-------- ------ ------ -------- ------ ------
Net asset value, end of period ...................... $ 13.75 $13.71 $13.63 $ 11.35 $11.34 $11.33
======== ====== ====== ======== ====== ======
TOTAL RETURN ........................................ 26.08% 25.78%1 25.17%1 14.03%2 13.85%1,2 10.54%1,2
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) .............. $145,603 $1,731 $1,106 $110,504 $ 408 $ 2
Ratio of expenses to average net assets ........... 0.98% 1.23% 1.94% 0.89%5 1.14%5 1.83%5
Ratio of net investment income/(loss) to
average net assets ............................... (0.15)% (0.40)% (1.11%) 0.61%5 0.14%5 (0.51)%5
Ratio of expenses to average net assets
before fee waivers ............................... 0.98% 1.23% 1.94% 1.06%5 1.30%5 2.00%5
Ratio of net investment income/(loss) to
average net assets before fee waivers ............ (0.15)% (0.40)% (1.11%) 0.44%5 0.04%5 (0.50)%5
Portfolio turnover rate ............................. 43% 43% 43% 60% 60% 60%
</TABLE>
1 TOTAL RETURN EXCLUDES SALES CHARGE.
2 RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
3 CLASS I AND CLASS A BOTH COMMENCED OPERATIONS ON AUGUST 1, 1997.
4 CLASS B COMMENCED OPERATIONS ON JANUARY 6, 1998.
5 ANNUALIZED.
6 CALCULATED BASED UPON AVERAGE SHARES OUTSTANDING.
See Accompanying Notes
46
<PAGE> 49
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA EQUITY INDEX FUND
MAY 31, 1999
NUMBER VALUE
OF SHARES (000)
--------- -------
COMMON STOCK -- 95.6%
AEROSPACE & DEFENSE -- 0.5%
General Dynamics# .............. 2,932 $ 193
Lockheed Martin ................ 9,082 367
Northrop Grumman ............... 1,553 105
Raytheon , Cl B ................ 7,797 531
-------
1,196
-------
AGRICULTURE -- 0.1%
Pioneer Hi Bred International .. 5,541 208
-------
AIRCRAFT -- 0.9%
Allied-Signal .................. 12,891 748
Boeing ......................... 21,703 917
United Technologies# ........... 10,451 649
-------
2,314
-------
AIR TRANSPORTATION -- 0.5%
AMR* ........................... 4,219 274
Delta Air Lines ................ 3,278 188
FDX* ........................... 6,847 377
Southwest Airlines ............. 7,783 250
US Airways* .................... 1,972 96
-------
1,185
-------
APPAREL/TEXTILES -- 0.1%
Fruit of the Loom, Cl A* ....... 1,627 17
Liz Claiborne .................. 1,457 52
Russell ........................ 816 19
Springs Industries, Cl A ....... 404 16
Vanity Fair .................... 2,775 128
-------
232
-------
AUTOMOTIVE -- 1.4%
Dana ........................... 3,841 198
Delphi* ........................ 10,585 208
Eaton .......................... 1,652 144
Ford ........................... 27,998 1,598
General Motors ................. 15,144 1,045
Genuine Parts .................. 4,162 140
Navistar International* ........ 1,510 75
Paccar ......................... 1,763 100
TRW ............................ 2,771 139
-------
3,647
-------
BANKS -- 6.8%
Amsouth ........................ 4,179 119
Bank of America ................ 40,045 2,590
Bank of New York ............... 17,601 629
Bank One# ...................... 27,207 1,539
BankBoston ..................... 6,860 325
Bankers Trust .................. 2,205 204
BB&T ........................... 7,192 262
NUMBER VALUE
OF SHARES (000)
--------- -------
COMMON STOCK -- CONTINUED
BANKS -- CONTINUED
Chase Manhattan ................ 19,570 $ 1,419
Comerica ....................... 3,599 217
Fifth Third Bancorp ............ 6,155 420
First Union .................... 22,925 1,056
Firstar# ....................... 15,966 460
Fleet Financial ................ 13,150 541
Golden West Financial .......... 1,317 125
Huntington Bancshares .......... 4,876 169
Keycorp ........................ 10,533 366
MBNA ........................... 18,552 512
Mellon ......................... 12,085 431
Mercantile Bancorporation ...... 3,641 213
National City .................. 7,551 500
Northern Trust ................. 2,569 232
PNC ............................ 6,962 399
Regions ........................ 5,117 194
Republic New York .............. 2,482 169
Southtrust ..................... 3,824 149
State Street ................... 3,714 283
Summit Bancorp ................. 4,017 164
SunTrust ....................... 7,416 501
Synovus ........................ 6,185 124
U.S. Bancorp ................... 16,862 548
Union Planters ................. 3,181 131
Wachovia ....................... 4,691 414
Washington Mutual .............. 13,727 524
Wells Fargo .................... 38,040 1,522
................................. -------
17,451
-------
BEAUTY PRODUCTS -- 0.7%
Avon ........................... 6,074 300
Gillette ....................... 25,668 1,309
International Flavors & Fragrances 2,395 98
-------
1,707
-------
BROADCASTING, NEWSPAPERS & ADVERTISING -- 1.1%
CBS* ........................... 16,338 682
Clear Channel Communications* .. 7,481 494
Interpublic Group of Companies# 3,216 244
Mediaone Group*# ............... 14,043 1,037
Omnicom Group .................. 3,903 273
-------
2,730
-------
BUILDING & BUILDING SUPPLIES -- 0.2%
Armstrong World Industries ..... 904 53
Masco .......................... 7,849 224
McDermott International ........ 1,332 34
Owens Corning .................. 1,224 48
Sherwin Williams ............... 3,978 123
-------
482
-------
See Accompanying Notes
47
<PAGE> 50
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA EQUITY INDEX FUND
MAY 31, 1999
NUMBER VALUE
OF SHARES (000)
--------- -------
COMMON STOCK -- CONTINUED
BUILDING & CONSTRUCTION -- 0.0%
Centex ......................... 1,341 $ 50
Fluor .......................... 1,709 64
-------
114
-------
BUSINESS SERVICES -- 5.6%
Adobe Systems .................. 1,467 109
Autodesk ....................... 1,371 38
Automatic Data Processing ...... 14,254 587
BMC Software* .................. 5,456 270
Cabletron Systems* ............. 3,984 59
Cendant* ....................... 17,772 328
Computer Associates International 12,466 590
Computer Sciences* ............. 3,675 238
Compuware* ..................... 8,504 264
Deluxe ......................... 1,815 65
Ecolab ......................... 2,994 127
Electronic Data Systems ........ 11,402 641
First Data ..................... 10,242 460
Microsoft* ..................... 116,778 9,426
Novell* ........................ 7,898 185
Parametric Technology* ......... 6,127 85
Peoplesoft* .................... 5,259 85
Shared Medical Systems ......... 600 39
Sun Microsystems* .............. 17,829 1,065
-------
14,661
-------
CABLE TELEVISION -- 0.3%
Comcast, Cl A Special .......... 17,112 660
-------
CANNED SPECIALTIES -- 0.2%
Campbell Soup .................. 10,287 454
-------
CHEMICAL PREPARATIONS -- 0.0%
Morton International ........... 2,736 107
-------
CHEMICALS -- 1.7%
Air Products & Chemicals ....... 5,306 218
Avery Dennison ................. 2,690 161
Dow ............................ 5,121 622
E.I. duPont de Nemours ......... 26,051 1,705
Eastman Chemical ............... 1,788 91
FMC* ........................... 746 49
Great Lakes Chemical ........... 1,334 60
Hercules ....................... 2,270 79
Monsanto ....................... 14,496 602
Nalco Chemical ................. 1,478 49
PPG Industries ................. 4,072 247
Praxair ........................ 3,650 178
Rohm & Haas .................... 3,878 156
Union Carbide .................. 3,075 158
W.R. Grace & Company* .......... 1,659 30
-------
4,405
-------
COMBINATION UTILITIES -- 0.2%
Entergy ........................ 5,706 185
PG&E ........................... 8,851 299
-------
484
-------
NUMBER VALUE
OF SHARES (000)
--------- -------
COMMON STOCK -- CONTINUED
COMMUNICATIONS EQUIPMENT -- 2.3%
Andrew* ........................ 1,932 $ 30
Ascend Communications*# ........ 5,019 465
General Instrument* ............ 3,873 150
ITT Industries ................. 2,108 80
Lucent Technologies# ........... 61,162 3,479
Nortel Networks ................ 15,355 1,152
Scientific-Atlanta ............. 1,692 60
Tellabs* ....................... 8,989 526
-------
5,942
-------
COMPUTER COMMUNICATIONS EQUIPMENT -- 0.1%
3Com* .......................... 8,301 227
-------
COMPUTER HARDWARE & EQUIPMENT -- 6.3%
Apple Computer* ................ 3,156 139
Cisco Systems* ................. 36,537 3,981
Compaq Computer ................ 39,035 925
Data General* .................. 1,119 15
Dell Computer* ................. 58,876 2,026
EMC* ........................... 11,612 1,157
Gateway 2000* .................. 3,616 220
Hewlett Packard ................ 23,486 2,215
International Business Machines# 42,706 4,967
Seagate Technology* ............ 5,642 170
Silicon Graphics* .............. 4,229 52
Unisys* ........................ 6,031 229
-------
16,096
-------
COMPUTER SERIVCES -- 0.4%
Ceridian* ...................... 3,229 107
Oracle*# ....................... 33,309 825
-------
932
-------
CONTAINERS & PACKAGING -- 0.2%
Ball ........................... 695 34
Crown Cork & Seal .............. 2,760 87
Newell Rubbermaid .............. 6,499 263
Owens-Illinois* ................ 3,506 107
-------
491
-------
DRUGS & HEALTH CARE -- 8.7%
Abbott Laboratories ............ 35,115 1,587
Alza* .......................... 2,311 82
American Home Products ......... 30,497 1,757
Amgen* ......................... 11,778 745
Bristol-Myers Squibb ........... 45,979 3,155
Johnson & Johnson .............. 31,114 2,882
Lilly (Eli) .................... 25,445 1,818
Merck .......................... 55,119 3,721
Millipore ...................... 993 33
Pfizer ......................... 30,029 3,213
Pharmacia & Upjohn ............. 11,756 652
Schering-Plough ................ 34,005 1,532
Warner-Lambert ................. 19,006 1,178
Watson Pharmaceuticals* ........ 2,201 84
-------
22,439
-------
See Accompanying Notes
48
<PAGE> 51
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA EQUITY INDEX FUND
MAY 31, 1999
NUMBER VALUE
OF SHARES (000)
--------- -------
COMMON STOCK -- CONTINUED
ELECTRICAL SERVICES -- 2.0%
AES* ........................... 4,404 $ 219
Ameren ......................... 3,175 130
American Electric Power ........ 4,428 192
Carolina Power & Light ......... 3,502 153
Central & South West ........... 4,919 127
Cinergy ........................ 3,579 122
CMS Energy ..................... 2,714 126
Consolidated Edison ............ 5,396 262
Constellation Energy Group ..... 3,368 105
Dominion Resources ............. 4,520 195
DTE Energy ..................... 3,356 146
Duke Energy .................... 8,376 505
Edison International ........... 8,161 224
First Energy ................... 5,485 174
FPL Group ...................... 4,185 243
GPU ............................ 2,961 129
New Century Energies ........... 2,579 104
Niagara Mohawk Holdings* ....... 4,228 63
Northern States Power .......... 3,444 90
PacifiCorp ..................... 6,709 122
PP & L Resources ............... 3,413 102
Public Service Enterprise ...... 5,134 215
Reliant Energy ................. 6,582 201
Sempra Energy .................. 5,416 116
Southern ....................... 16,133 458
Texas Utilities ................ 6,533 294
Unicom ......................... 5,025 213
-------
5,030
-------
ENTERTAINMENT -- 0.6%
King World Productions* ........ 1,646 55
Mirage Resorts* ................ 4,549 93
Walt Disney .................... 47,568 1,385
-------
1,533
-------
ENVIRONMENTAL SERVICES -- 0.4%
Browning-Ferris Industries ..... 3,659 152
Laidlaw ........................ 7,442 52
Waste Management ............... 13,849 732
-------
936
-------
FINANCIAL SERVICES -- 5.1%
American Express ............... 10,472 1,269
Associates First Capital, Cl A . 16,845 691
Bear Stearns ................... 2,646 117
Capital One .................... 1,518 229
Charles Schwab ................. 9,277 982
Citigroup ...................... 52,246 3,461
Countrywide Credit ............. 2,605 107
Equifax ........................ 3,412 123
Fannie Mae ..................... 23,992 1,631
Franklin Resources ............. 5,846 254
Freddie Mac .................... 15,702 916
NUMBER VALUE
OF SHARES (000)
--------- -------
COMMON STOCK -- CONTINUED
FINANCIAL SERVICES -- CONTINUED
Household International ........ 11,171 $ 485
J.P. Morgan .................... 4,045 563
Lehman Brothers ................ 2,610 143
Merrill Lynch .................. 8,207 689
Morgan Stanley, Dean Witter, Discover 13,366 1,290
SLM Holding .................... 3,834 159
-------
13,109
-------
FOOD & BEVERAGE -- 4.3%
Adolph Coors, Cl B ............. 826 39
Anheuser Busch ................. 11,058 808
Archer-Daniels-Midland ......... 13,700 205
Bestfoods ...................... 6,612 331
Brown-Forman, Cl B ............. 1,549 103
Coca Cola ...................... 57,039 3,896
Coca-Cola Enterprises .......... 9,821 356
Conagra ........................ 11,322 295
General Mills .................. 3,548 285
Hershey Foods .................. 3,312 180
H.J. Heinz ..................... 8,372 404
Kellogg# ....................... 9,378 325
PepsiCo ........................ 33,949 1,216
Quaker Oats .................... 3,153 208
Ralston Purina ................. 7,598 207
RJR Nabisco .................... 7,516 233
Sara Lee ....................... 21,103 506
Seagram ........................ 9,233 480
Unilever NV .................... 13,225 864
Wm. Wrigley, Jr. ............... 2,687 234
-------
11,175
-------
FURNITURE/HOME APPLIANCE -- 0.0%
National Service Industries .... 935 34
-------
GAMES, TOYS, CHILDREN'S VEHICLES -- 0.1%
Hasbro ......................... 4,540 130
Mattel ......................... 9,640 255
-------
385
-------
GAS & NATURAL GAS -- 0.6%
Columbia Gas Systems ........... 1,883 101
Consolidated Natural Gas ....... 2,217 132
Eastern Enterprises ............ 508 18
Enron .......................... 8,123 580
Nicor .......................... 1,075 40
ONEOK .......................... 711 21
Peoples Energy ................. 799 31
Sonat .......................... 2,482 88
Williams ....................... 9,898 513
-------
1,524
-------
See Accompanying Notes
49
<PAGE> 52
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA EQUITY INDEX FUND
MAY 31, 1999
NUMBER VALUE
OF SHARES (000)
--------- -------
COMMON STOCK -- CONTINUED
GENERAL UTILITIES -- 0.1%
PECO Energy .................... 5,184 $ 254
-------
GLASS PRODUCTS -- 0.1%
Corning Glass .................. 5,368 293
-------
GOLD MINING -- 0.0%
Newmont Mining ................. 3,773 67
-------
HANDTOOLS & GENERAL HARDWARE -- 0.1%
Fortune Brands ................. 3,957 162
Snap-On Tools .................. 1,518 55
Stanley Works .................. 2,003 65
-------
282
-------
HEAVY CONSTRUCTION -- 0.0%
Foster Wheeler ................. 918 13
-------
HOTELS & LODGING -- 0.1%
Harrah's Entertainment* ........ 2,849 62
Hilton Hotels .................. 5,884 81
Marriott International, Cl A ... 5,621 214
-------
357
-------
HOUSEHOLD PRODUCTS -- 1.8%
Clorox ......................... 2,711 274
Colgate Palmolive .............. 6,775 677
Danaher ........................ 3,095 187
Maytag ......................... 2,082 147
Procter & Gamble ............... 30,722 2,869
Raychem ........................ 1,780 62
Solectron* ..................... 5,820 319
Whirlpool ...................... 1,716 111
-------
4,646
-------
INFORMATION RETRIEVAL SERVICES -- 1.1%
America Online*# ............... 23,772 2,838
-------
INSURANCE -- 3.7%
Aetna .......................... 3,308 300
Allstate ....................... 18,985 692
American General ............... 5,832 421
American International Group ... 28,413 3,248
Aon ............................ 5,903 254
Chubb# ......................... 3,770 264
Cigna .......................... 4,778 446
Cincinnati Financial ........... 3,863 159
Conseco ........................ 7,412 227
Hartford Financial ............. 5,402 342
Humana* ........................ 3,778 47
Jefferson-Pilot ................ 2,452 166
Lincoln National ............... 2,338 238
Loews .......................... 2,631 214
Marsh & McLennan ............... 5,954 433
MBIA ........................... 2,299 157
NUMBER VALUE
OF SHARES (000)
--------- -------
COMMON STOCK -- CONTINUED
INSURANCE -- CONTINUED
MGIC Investment ................ 2,472 $ 119
Progressive .................... 1,677 235
Provident ...................... 3,129 122
Providian Financial ............ 3,277 314
Safeco ......................... 3,153 139
St. Paul ....................... 5,455 194
Torchmark ...................... 3,165 106
Transamerica ................... 2,886 212
United Healthcare# ............. 4,309 251
UNUM ........................... 3,202 172
-------
9,472
-------
LEASING & RENTING -- 0.0%
Ryder System ................... 1,618 39
-------
LEISURE & RECREATIONAL PRODUCTS -- 0.0%
Brunswick ...................... 2,153 52
-------
MACHINERY -- 1.0%
Applied Materials* ............. 8,538 470
Baker Hughes ................... 7,565 235
Black & Decker ................. 1,983 113
Briggs & Stratton .............. 525 33
Case ........................... 1,712 80
Caterpillar .................... 8,299 455
Crane .......................... 1,548 47
Cummins Engine ................. 945 48
Deere .......................... 5,519 210
Dover .......................... 5,163 195
Harnischfeger Industries ....... 1,076 8
Harris ......................... 1,802 68
Ingersoll Rand ................. 3,805 242
Milacron ....................... 867 18
NACCO Industries, Cl A ......... 184 14
Pall ........................... 2,798 56
Parker-Hannifin ................ 2,456 107
Tenneco ........................ 3,840 90
Timken ......................... 1,402 29
-------
2,518
-------
MANUFACTURED HOUSING -- 0.0%
Fleetwood Enterprises .......... 783 20
-------
MEASURING DEVICES -- 0.2%
Honeywell ...................... 2,914 276
KLA-Tencor* .................... 1,973 90
Mallinckrodt ................... 1,610 56
PE - Celera Genomics* .......... 562 10
PE - PE Biosystems ............. 1,124 126
Tektronix ...................... 1,066 25
Thermo Electron* ............... 3,584 69
-------
652
-------
See Accompanying Notes
50
<PAGE> 53
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA EQUITY INDEX FUND
MAY 31, 1999
NUMBER VALUE
OF SHARES (000)
--------- -----
COMMON STOCK -- CONTINUED
MEDICAL & MEDICAL SERVICES -- 1.4%
Allergan ....................... 1,527 $ 142
Bausch & Lomb .................. 1,265 97
Baxter International ........... 6,617 427
Becton Dickinson ............... 5,762 223
Biomet ......................... 2,532 101
Boston Scientific* ............. 9,092 345
C.R. Bard ...................... 1,209 55
Columbia/HCA Healthcare ........ 14,936 352
Guidant ........................ 6,971 349
HCR Manor Care* ................ 2,501 67
Healthsouth* ................... 9,789 131
Lifepoint Hospitals* ........... 766 8
Medtronic ...................... 13,517 960
St. Jude Medical * ............. 1,899 64
Tenet Healthcare* .............. 7,176 176
Triad Hospitals* ............... 766 8
-------
3,505
-------
METAL/FABRICATE HARDWARE -- 0.0%
Reynolds Metals ................ 1,454 77
-------
METALS & MINING -- 0.3%
Alcan Aluminum ................. 5,267 147
Alcoa .......................... 8,495 467
Asarco ......................... 895 14
Cyprus AMAX Minerals ........... 2,052 26
Freeport-McMoRan Copper &
Gold, Cl B .................... 3,736 53
Phelps Dodge ................... 1,307 68
USX-U.S. Steel Group ........... 1,993 54
-------
829
-------
MISCELLANEOUS CONSUMER SERVICES -- 0.0%
Service International .......... 6,168 118
-------
MISCELLANEOUS MANUFACTURING -- 1.3%
Illinois Tool Works ............ 5,786 444
Jostens ........................ 798 17
Minnesota Mining &
Manufacturing ................. 9,302 798
Textron ........................ 3,666 326
Tyco International ............. 18,889 1,650
-------
3,235
-------
OFFICE & BUSINESS EQUIPMENT -- 0.5%
Pitney Bowes ................... 6,308 402
Xerox .......................... 15,175 853
-------
1,255
-------
OFFICE FURNITURE & FIXTURES -- 0.1%
Ikon Office Solutions .......... 3,417 48
Johnson Controls ............... 1,964 124
-------
172
-------
NUMBER VALUE
OF SHARES (000)
--------- -----
COMMON STOCK -- CONTINUED
OIL & GAS EXTRACTION -- 0.1%
Helmerich & Payne .............. 1,133 $ 26
USX Marathon ................... 7,117 213
-------
239
-------
PAPER & FOREST PRODUCTS -- 1.0%
Bemis .......................... 1,181 45
Boise Cascade .................. 1,272 50
Champion International ......... 2,157 111
Fort James ..................... 5,101 187
Georgia Pacific ................ 2,036 176
International Paper ............ 9,488 474
Kimberly-Clark ................. 12,538 736
Louisiana-Pacific .............. 2,452 50
Mead ........................... 2,315 87
Potlatch ....................... 654 26
Temple-Inland .................. 1,255 84
Westvaco ....................... 2,281 65
Weyerhaeuser ................... 4,604 286
Willamette Industries .......... 2,504 106
-------
2,483
-------
PETROLEUM & FUEL PRODUCTS -- 0.7%
Amerada Hess ................... 2,091 125
Anadarko Petroleum ............. 2,929 110
Apache ......................... 2,563 92
Burlington Resources ........... 4,104 176
Kerr-McGee ..................... 1,949 91
Occidental Petroleum ........... 8,004 169
Phillips Petroleum ............. 5,892 309
Rowan Companies* ............... 1,891 32
Schlumberger ................... 12,631 760
Union Pacific Resources ........ 5,664 79
-------
1,943
-------
PETROLEUM REFINING -- 4.9%
Ashland ........................ 1,720 70
Atlantic Richfield ............. 7,543 631
Chevron ........................ 15,097 1,399
Coastal ........................ 4,921 190
Exxon .......................... 56,255 4,493
Mobil .......................... 18,044 1,827
Pennzenergy .................... 716 11
Royal Dutch Petroleum# ......... 49,616 2,806
Sunoco ......................... 2,111 64
Texaco ......................... 12,368 810
Unocal ......................... 5,585 222
-------
12,523
-------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES -- 0.2%
Eastman Kodak .................. 7,496 507
Polaroid ....................... 989 21
-------
528
-------
See Accompanying Notes
51
<PAGE> 54
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA EQUITY INDEX FUND
MAY 31, 1999
NUMBER VALUE
OF SHARES (000)
--------- -----
COMMON STOCK -- CONTINUED
PRECIOUS METALS -- 0.1%
Barrick Gold# .................. 8,631 $ 149
Battle Mountain Gold ........... 5,186 13
Homestake Mining ............... 6,016 47
Placer Dome .................... 5,642 63
-------
272
-------
PRINTING & PUBLISHING -- 1.6%
American Greetings, Cl A ....... 1,595 46
Dow Jones ...................... 2,118 111
Gannett ........................ 6,516 471
Knight-Ridder .................. 1,771 93
McGraw-Hill .................... 4,554 236
Meredith ....................... 1,179 41
Moore .......................... 1,996 18
New York Times, Cl A ........... 4,220 144
R.R. Donnelley & Sons .......... 3,060 111
Time Warner .................... 28,390 1,932
Times Mirror, Cl A ............. 1,772 104
Tribune ........................ 2,748 217
Viacom, Cl B* .................. 16,097 620
-------
4,144
-------
PROFESSIONAL SERVICES -- 0.4%
Dun & Bradstreet ............... 3,765 132
EG & G ......................... 1,008 30
H & R Block .................... 2,259 109
Halliburton .................... 10,173 421
IMS Health ..................... 7,375 182
Paychex ........................ 5,631 167
-------
1,041
-------
RAILROADS -- 0.4%
Burlington Northern Santa Fe ... 10,854 336
Kansas City Southern ........... 2,535 143
Norfolk Southern ............... 8,774 287
Union Pacific .................. 5,724 327
-------
1,093
-------
REAL ESTATE -- 0.0%
Kaufman & Broad Home ........... 1,079 26
-------
RESTAURANTS -- 0.6%
Darden Restaurants ............. 3,131 67
McDonald's ..................... 31,309 1,205
Tricon Global Restaurants* ..... 3,529 206
Wendy's International .......... 2,808 77
-------
1,555
-------
NUMBER VALUE
OF SHARES (000)
--------- -----
COMMON STOCK -- CONTINUED
RETAIL -- 6.0%
Alberto-Culver, Cl B ........... 1,250 $ 33
Albertson's# ................... 5,683 304
American Stores ................ 6,362 210
Autozone* ...................... 3,437 99
Circuit City ................... 2,324 167
Consolidated* .................. 2,471 85
Costco* ........................ 5,051 366
CVS ............................ 9,023 415
Dayton Hudson .................. 10,200 643
Dillards, Cl A ................. 2,411 85
Dollar General ................. 5,180 138
Federated Department Stores*# .. 4,852 264
Gap ............................ 13,190 825
Great Atlantic & Pacific Tea ... 863 28
Harcourt General ............... 1,602 79
Home Depot ..................... 34,110 1,940
J.C. Penney .................... 6,098 315
Kmart* ......................... 11,406 175
Kohls* ......................... 3,662 250
Kroger* ........................ 9,519 557
Limited# ....................... 5,236 256
Longs Drug Stores .............. 878 31
Lowe's ......................... 8,592 446
May Department Stores .......... 8,108 351
Nike ........................... 6,538 398
Nordstrom ...................... 3,338 119
Pep Boys ....................... 1,186 22
Reebok* ........................ 1,274 25
Rite Aid ....................... 5,987 150
Safeway* ....................... 11,250 523
Sears Roebuck .................. 8,864 424
Staples* ....................... 10,666 307
Tandy .......................... 2,290 189
TJX Companies .................. 7,478 224
Toys "R" Us* ................... 5,863 135
Wal-Mart ....................... 102,895 4,386
Walgreen ....................... 23,100 537
Winn Dixie Stores .............. 3,353 120
-------
15,621
-------
RUBBER & PLASTIC -- 0.2%
B.F. Goodrich .................. 1,678 68
Cooper ......................... 1,710 41
Goodyear ....................... 3,607 215
Sealed Air* .................... 1,930 120
Tupperware ..................... 1,300 29
-------
473
-------
See Accompanying Notes
52
<PAGE> 55
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA EQUITY INDEX FUND
MAY 31, 1999
NUMBER VALUE
OF SHARES (000)
--------- -----
COMMON STOCK -- CONTINUED
SEMI-CONDUCTORS/INSTRUMENTS -- 2.2%
Advanced Micro Devices* ........ 3,267 $ 60
Intel .......................... 77,144 4,180
LSI Logic* ..................... 3,272 121
Micron Technology*# ............ 5,730 217
National Semiconductor* ........ 3,752 73
Texas Instruments .............. 9,024 987
--------
5,638
--------
SINGLE FAMILY HOUSING CONSTRUCTION -- 0.0%
Pulte .......................... 974 23
--------
SPECIALTY CHEMICALS -- 0.0%
Sigma Aldrich .................. 2,271 73
--------
SPECIALTY MACHINERY -- 3.4%
Cooper Industries .............. 2,183 108
Emerson Electric ............... 10,120 646
General Electric ............... 75,821 7,710
Rockwell ....................... 4,391 242
Thomas & Betts ................. 1,280 55
--------
8,761
--------
STEEL & STEEL WORKS -- 0.1%
Allegheny Teledyne ............. 4,426 90
Bethlehem Steel* ............... 2,933 24
Engelhard ...................... 2,898 59
Inco ........................... 4,189 60
Nucor .......................... 1,975 99
Worthington Industries ......... 2,086 27
--------
359
--------
TELEPHONE & TELECOMMUNICATION -- 8.9%
Airtouch Communications* ....... 13,237 1,330
Alltel ......................... 6,363 456
Ameritech ...................... 25,429 1,674
AT&T ........................... 72,817 4,041
Bell Atlantic .................. 35,917 1,966
BellSouth ...................... 45,120 2,129
Centurytel ..................... 3,148 121
Frontier ....................... 3,971 209
GTE ............................ 22,331 1,408
MCI WorldCom* .................. 42,423 3,663
Motorola ....................... 13,887 1,150
Nextel, Cl A* .................. 6,652 245
SBC Communications ............. 45,259 2,314
Sprint ......................... 10,339 1,166
Sprint (PCS )* ................. 10,176 458
US West ........................ 11,643 629
--------
22,959
--------
NUMBER VALUE
OF SHARES (000)
--------- -----
COMMON STOCK -- CONTINUED
TOBACCO -- 0.9%
Philip Morris .................. 56,335 $ 2,172
UST ............................ 4,303 131
--------
2,303
--------
TRANSPORTATION SERVICES -- 0.1%
CSX ............................ 5,022 236
--------
TRAVEL -- 0.2%
Carnival, Cl A ................. 14,182 581
--------
WHOLESALE -- 0.4%
Cardinal Health ................ 6,295 380
McKesson ....................... 6,411 218
Supervalu ...................... 2,717 66
Sysco .......................... 7,703 229
W.W. Grainger .................. 2,142 114
--------
1,007
--------
TOTAL COMMON STOCK
(Cost $227,848) ............... 246,465
--------
REGISTERED INVESTMENT
COMPANIES -- 0.5%
S&P Depository Receipt ......... 9,000 1,172
--------
TOTAL REGISTERED INVESTMENT COMPANIES
(Cost $953) ................... 1,172
--------
CASH EQUIVALENT -- 3.4%
Goldman Sachs Financial Square
Premium Money Market Fund .... 8,714,000 8,714
--------
TOTAL CASH EQUIVALENT
(Cost $8,714) .............................. 8,714
--------
TOTAL INVESTMENTS -- 99.5%
(Cost $237,515) ............................ $256,351
========
OTHER ASSETS AND LIABILITIES,
NET -- 0.5% ................................. 1,395
--------
See Accompanying Notes
53
<PAGE> 56
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA EQUITY INDEX FUND
MAY 31, 1999
VALUE
(000)
-----
NET ASSETS:
Portfolio Shares of Class I
(unlimited authorization -- no par
value) based on 22,430,310
outstanding shares
of beneficial interest ..................... $233,585
Portfolio Shares of Class A
(unlimited authorization -- no par
value) based on 344,718 outstanding
shares of beneficial interest .............. 3,701
Accumulated net realized gain
on investments and futures ................. 1,051
Net unrealized appreciation on investments .. 18,836
Net unrealized depreciation on futures ...... (104)
Undistributed net investment income ......... 677
--------
TOTAL NET ASSETS -- 100.0% $257,746
========
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SHARE -- CLASS I ........................... $11.32
========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A .................. $11.29
========
MAXIMUM OFFERING PRICE PER
SHARE -- CLASS A ($11.29 / 96.25%) .......... $11.73
========
- - -----------
*NON-INCOME PRODUCING SECURITY.
# SECURITY FULLY OR PARTIALLY ON LOAN.
CL--CLASS
See Accompanying Notes
54
<PAGE> 57
[ARROW GRAPHIC OMITTED]
FINANCIAL HIGHLIGHTS
ARMADA EQUITY INDEX FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE PERIOD
ENDED MAY 31, 1999
----------------------------
CLASS I1 CLASS A1
--------- --------
<S> <C> <C>
Net asset value, beginning of period .................................... $ 10.00 $ 9.09
-------- ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ................................................. 0.11 0.07
Net gain on securities
(realized and unrealized) ............................................ 1.29 2.18
-------- ------
Total from investment operations ................................... 1.40 2.25
-------- ------
LESS DISTRIBUTIONS
Dividends from net investment income .................................. (0.08) (0.05)
-------- ------
Total distributions ................................................ (0.08) (0.05)
-------- ------
Net asset value, end of period .......................................... $ 11.32 $11.29
======== ======
TOTAL RETURN ............................................................ 14.16%3 24.83%2,3
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) .................................. $253,854 $3,892
Ratio of expenses to average net assets ............................... 0.20%4 0.36%4
Ratio of net investment income to average net assets .................. 1.38%4 1.22%4
Ratio of expenses to average net assets before fee waivers ............ 0.55%4 0.71%4
Ratio of net investment income to average net assets before fee waivers 1.03%4 0.87%4
Portfolio turnover rate ............................................... 9% 9%
</TABLE>
1 CLASS I AND CLASS A COMMENCED OPERATIONS ON JULY 10, 1998 AND OCTOBER 15,
1998, RESPECTIVELY.
2 TOTAL RETURN EXCLUDES SALES CHARGE.
3 RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
4 ANNUALIZED.
See Accompanying Notes
55
<PAGE> 58
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA EQUITY INCOME FUND
MAY 31, 1999
NUMBER VALUE
OF SHARES (000)
--------- -----
COMMON STOCK -- 95.1%
AEROSPACE -- 2.9%
General Dynamics# .............. 127,100 $ 8,357
Northrop Grumman ............... 55,653 3,757
United Technologies# ........... 70,200 4,357
-------
16,471
-------
AUTOMOTIVE -- 3.4%
Delphi* ........................ 64,371 1,263
Ford ........................... 120,500 6,876
General Motors ................. 92,100 6,355
Genuine Parts# ................. 135,000 4,548
-------
19,042
-------
BANKS -- 8.0%
Bank of America# ............... 193,939 12,545
Bank One# ...................... 33,330 1,885
First Tennessee National# ...... 145,100 5,976
First Union# ................... 101,300 4,666
Fleet Financial ................ 129,600 5,330
PNC# ........................... 170,000 9,732
Washington Mutual .............. 115,500 4,411
-------
44,545
-------
BUILDING & BUILDING SUPPLIES -- 2.5%
Armstrong World Industries ..... 97,200 5,662
Masco .......................... 289,500 8,269
-------
13,931
-------
CHEMICALS -- 3.4%
Dow ............................ 62,984 7,653
E.I. duPont de Nemours ......... 75,700 4,954
RPM ............................ 470,550 6,529
-------
19,136
-------
DIVERSIFIED MANUFACTURING -- 1.7%
Minnesota Mining &
Manufacturing ................. 65,900 5,651
Textron ........................ 40,700 3,625
-------
9,276
-------
DRUGS & HEALTH CARE -- 2.7%
American Home Products ......... 112,200 6,466
Bristol-Myers Squibb ........... 129,200 8,866
-------
15,332
-------
NUMBER VALUE
OF SHARES (000)
--------- -----
COMMON STOCK -- CONTINUED
ELECTRICAL SERVICES -- 7.2%
Consolidated Edison ............ 178,000 $ 8,644
Dominion Resources# ............ 140,500 6,068
Duke Energy .................... 63,400 3,824
Florida Progress ............... 75,300 3,158
FPL Group ...................... 75,700 4,405
GPU ............................ 141,200 6,151
LG&E Energy .................... 145,400 3,317
Wisconsin Energy# .............. 172,600 4,790
-------
40,357
-------
ENVIRONMENTAL SERVICES -- 0.8%
Browning-Ferris Industries ..... 109,600 4,548
-------
FINANCIAL SERVICES -- 3.3%
Fannie Mae ..................... 136,700 9,296
J.P. Morgan .................... 65,300 9,097
-------
18,393
-------
FOOD & BEVERAGE -- 2.4%
Flowers Industries ............. 224,100 4,986
General Mills .................. 106,300 8,544
-------
13,530
-------
GAS & NATURAL GAS -- 3.5%
Consolidated Natural Gas ....... 154,725 9,196
Enron .......................... 146,400 10,449
-------
19,645
-------
HANDTOOLS & GENERAL HARDWARE -- 2.2%
Fortune Brands ................. 191,700 7,836
Snap-On Tools .................. 123,000 4,451
-------
12,287
-------
HOUSEHOLD PRODUCTS -- 1.0%
Maytag ......................... 82,900 5,850
-------
INSURANCE -- 3.9%
Allstate ....................... 56,500 2,059
Chubb# ......................... 78,661 5,511
Cigna .......................... 57,600 5,371
Marsh & McLennan ............... 120,250 8,748
-------
21,689
-------
MACHINERY -- 0.3%
Caterpillar .................... 35,200 1,932
-------
See Accompanying Notes
56
<PAGE> 59
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA EQUITY INCOME FUND
MAY 31, 1999
NUMBER VALUE
OF SHARES (000)
--------- -----
COMMON STOCK -- CONTINUED
MEDICAL & MEDICAL SERVICES -- 0.7%
Baxter International ........... 62,400 $ 4,029
-------
METALS & MINING -- 2.7%
Alcoa .......................... 231,600 12,738
USX-U.S. Steel Group ........... 93,400 2,516
-------
15,254
-------
OFFICE & BUSINESS EQUIPMENT -- 2.7%
Pitney Bowes ................... 149,300 9,518
Xerox .......................... 95,000 5,338
-------
14,856
-------
PAPER & FOREST PRODUCTS -- 1.1%
Kimberly-Clark ................. 40,000 2,347
Weyerhaeuser ................... 64,200 3,984
-------
6,331
-------
PETROLEUM REFINING -- 13.1%
Atlantic Richfield ............. 124,500 10,419
Chevron ........................ 130,100 12,059
Exxon .......................... 110,000 8,786
Mobil .......................... 118,800 12,028
Royal Dutch Petroleum# ......... 195,000 11,030
Texaco ......................... 211,100 13,827
Ultramar Diamond Shamrock ...... 230,300 5,067
-------
73,216
-------
PROFESSIONAL SERVICES -- 1.5%
Dun & Bradstreet ............... 234,400 8,204
-------
REAL ESTATE INVESTMENT TRUST -- 3.1%
Arden Realty ................... 205,200 5,245
Duke Realty# ................... 324,800 7,511
Kimco Realty ................... 65,000 2,596
Mack-Cali Realty ............... 70,400 2,279
-------
17,631
-------
RETAIL -- 5.9%
Intimate Brands# ............... 193,900 10,046
J.C. Penney# ................... 106,000 5,479
May Department Stores .......... 247,900 10,737
Sears Roebuck# ................. 144,000 6,885
-------
33,147
-------
NUMBER VALUE
OF SHARES (000)
--------- -----
COMMON STOCK -- CONTINUED
SPECIALTY MACHINERY -- 4.3%
Cooper Industries .............. 82,700 $ 4,099
Emerson Electric ............... 111,200 7,103
Hubbell ........................ 95,700 4,007
Rockwell International ......... 84,600 4,669
Thomas & Betts# ................ 104,000 4,452
--------
24,330
--------
TELEPHONE & TELECOMMUNICATION -- 9.0%
Ameritech ...................... 158,600 10,438
AT&T ........................... 270,150 14,993
Bell Atlantic .................. 82,540 4,519
BellSouth ...................... 80,800 3,813
Frontier ....................... 115,800 6,094
GTE ............................ 170,800 10,771
--------
50,628
--------
TOBACCO -- 1.1%
UST ............................ 196,000 5,978
--------
UTILITIES -- 0.7%
American Water Works ........... 118,500 3,674
--------
TOTAL COMMON STOCK
(Cost $396,954) ............................ 533,242
--------
PREFERRED STOCK -- 1.8%
FINANCIAL -- 1.1%
American General Delaware,
CV to 1.2288 Shares .......... 69,695 6,281
--------
PAPER & FOREST PRODUCTS -- 0.7%
International Paper, CV
to .9259 Shares ............... 70,386 3,660
--------
TOTAL PREFERRED STOCK
(Cost $8,099) ............................... 9,941
--------
CASH EQUIVALENT -- 2.8%
Fidelity Domestic Money Market
Fund 15,555,000 15,555
--------
TOTAL CASH EQUIVALENT
(Cost $15,555) .............................. 15,555
--------
TOTAL INVESTMENTS -- 99.7%
(Cost $420,608) ............................. $558,738
========
OTHER ASSETS AND LIABILITIES,
NET -- 0.3% .................................. 1,695
--------
See Accompanying Notes
57
<PAGE> 60
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA EQUITY INCOME FUND
MAY 31, 1999
VALUE
(000)
-----
NET ASSETS:
Portfolio Shares of Class I
(unlimited authorization -- no par
value) based on 29,162,186
outstanding shares of beneficial interest .... $393,634
Portfolio Shares of Class A (unlimited
authorization-- no par value) based
on 589,557 outstanding shares of
beneficial interest .......................... 9,698
Portfolio Shares of Class B (unlimited
authorization-- no par value) based
on 53,355 outstanding shares of
beneficial interest .......................... 897
Accumulated net realized gain on investments . 15,621
Net unrealized appreciation on investments ... 138,130
Undistributed net investment income .......... 2,453
--------
TOTAL NET ASSETS -- 100.0% ..................... $560,433
========
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
PER SHARE -- CLASS I ........................ $18.80
========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A ................... $18.79
========
MAXIMUM OFFERING PRICE PER
SHARE -- CLASS A ($18.79 / 94.5%) ............ $19.88
========
Net Asset Value and offering
Price Per Share -- Class B ................... $18.69
========
- - ------------
* NON-INCOME PRODUCING SECURITY.
# SECURITY FULLY OR PARTIALLY ON LOAN.
CV--CONVERTIBLE
See Accompanying Notes
58
<PAGE> 61
[ARROW GRAPHIC OMITTED]
FINANCIAL HIGHLIGHTS
ARMADA EQUITY INCOME FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
1999 1998
--------------------------------------------------------------
CLASS I CLASS A CLASS B CLASS I CLASS A CLASS B4
-------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning
of period ......................... $ 17.53 $ 17.51 $ 17.54 $ 14.87 $ 14.86 $ 16.28
-------- ------- ------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .............. 0.30 0.21 0.17 0.27 0.26 0.46
Net gain on securities
(realized and unrealized) ......... 1.50 1.55 1.39 3.44 3.41 0.86
-------- ------- ------- -------- ------- -------
Total from investment
operations ................... 1.80 1.76 1.56 3.71 3.67 1.32
-------- ------- ------- -------- ------- -------
LESS DISTRIBUTIONS
Dividends from net
investment income ................. (0.28) (0.23) (0.16) (0.32) (0.29) (0.06)
Distributions from net realized
capital gains ..................... (0.25) (0.25) (0.25) (0.73) (0.73) (0.00)
-------- ------- ------- -------- ------- -------
Total distributions ............. (0.53) (0.48) (0.41) (1.05) (1.02) (0.06)
-------- ------- ------- -------- ------- -------
Net asset value, end of period ....... $ 18.80 $ 18.79 $ 18.69 $ 17.53 $ 17.51 $ 17.54
======== ======= ======= ======== ======= =======
TOTAL RETURN ......................... 10.62% 10.40%3 9.14%3 25.69% 25.41%3 25.58%2,3
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $548,361 $11,075 $ 997 $193,923 $2,151 $ 3
Ratio of expenses to
average net assets ................ 0.93% 1.18% 1.89% 0.92% 1.17% 1.86%2
Ratio of net investment
income to average
net assets ........................ 2.07% 1.82% 1.11% 1.80% 1.62% 0.68%2
Ratio of expenses to
average net assets
before fee waivers ................ 0.93% 1.18% 1.89% 0.92% 1.17% 1.86%2
Ratio of net investment income
to average net assets
before fee waivers ................ 2.07% 1.82% 1.11% 1.80% 1.62% 0.68%2
Portfolio turnover rate ............ 19% 19% 19% 18% 18% 18%
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
ENDED MAY 31,
1997 1996 1995
-----------------------------------------------------------
CLASS I CLASS A CLASS I CLASS A CLASS I1 CLASS A1
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning
of period ......................... $ 12.66 $ 12.65 $ 11.01 $ 11.01 $ 10.00 $ 10.26
-------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .............. 0.30 0.31 0.34 0.33 0.34 0.26
Net gain on securities
(realized and unrealized) ......... 2.73 2.68 1.79 1.77 0.94 0.75
-------- ------- ------- ------- ------- -------
Total from investment
operations ................... 3.03 2.99 2.13 2.10 1.28 1.01
-------- ------- -------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net
investment income ................. (0.31) (0.27) (0.34) (0.32) (0.27) (0.26)
Distributions from net realized
capital gains ..................... (0.51) (0.51) (0.14) (0.14) (0.00) (0.00)
-------- ------- -------- ------ ------ ------
Total distributions ............. (0.82) (0.78) (0.48) (0.46) (0.27) (0.26)
-------- ------- ------- ------ ------ ------
Net asset value, end of period ....... $ 14.87 $ 14.86 $ 12.66 $12.65 $11.01 $11.01
======== ======= ======= ====== ======= =======
TOTAL RETURN ......................... 24.62% 24.33%3 19.72% 19.37%3 14.34%2 13.18%2,3
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $127,130 $ 410 $61,978 $ 263 $36,194 $ 125
Ratio of expenses to
average net assets ................ 1.01% 1.26% 1.06% 1.31% 0.99%2 1.41%2
Ratio of net investment
income to average
net assets ........................ 2.44% 2.17% 3.02% 2.75% 3.87%2 3.45%2
Ratio of expenses to
average net assets
before fee waivers ................ 1.01% 1.26% 1.08% 1.32% 1.21%2 1.45%2
Ratio of net investment income
to average net assets
before fee waivers ................ 2.44% 2.17% 3.00% 2.74% 3.66%2 3.40%2
Portfolio turnover rate ............ 35% 35% 53% 53% 12% 12%
</TABLE>
1 CLASS I AND CLASS A COMMENCED OPERATIONS ON JULY 1, 1994
AND AUGUST 22, 1994, RESPECTIVELY.
2 ANNUALIZED.
3 TOTAL RETURN EXCLUDES SALES CHARGE.
4 CLASS B COMMENCED OPERATIONS ON JANUARY 6, 1998.
See Accompanying Notes
59
<PAGE> 62
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA BALANCED ALLOCATION FUND
MAY 31, 1999
NUMBER VALUE
OF SHARES (000)
--------- -----
COMMON STOCK -- 53.5%
AIRCRAFT -- 0.6%
United Technologies# ........... 7,900 $ 490
-------
BANKS -- 1.6%
Comerica ....................... 6,200 375
Golden West Financial .......... 4,000 379
State Street ................... 8,400 640
-------
1,394
-------
BROADCASTING, NEWSPAPERS & ADVERTISING -- 0.6%
Omnicom Group .................. 7,200 504
-------
BUSINESS SERVICES -- 0.6%
Automatic Data Processing ...... 12,000 494
-------
CABLE TELEVISION -- 1.1%
Comcast, Cl A Special .......... 25,400 978
-------
CHEMICALS -- 1.1%
E.I. duPont de Nemours ......... 5,900 386
Monsanto# ...................... 12,900 535
-------
921
-------
COMMUNICATIONS EQUIPMENT -- 0.8%
Lucent Technologies# ........... 11,800 671
-------
COMPUTER HARDWARE -- 4.2%
Cisco Systems* ................. 13,350 1,455
Compaq Computer ................ 10,100 239
EMC* ........................... 4,800 478
Hewlett Packard ................ 5,500 519
International Business Machines 8,600 1,000
-------
3,691
-------
COMPUTER SERVICES -- 0.5%
Ceridian*# ..................... 14,600 482
-------
COMPUTER SOFTWARE -- 1.8%
Microsoft* ..................... 19,900 1,606
-------
DRUGS & HEALTH CARE -- 4.9%
Abbott Laboratories ............ 8,400 380
Johnson & Johnson .............. 7,100 658
Lilly (Eli) .................... 5,200 371
Merck .......................... 12,300 830
Pfizer ......................... 8,600 920
Schering-Plough ................ 11,600 523
Warner-Lambert ................. 8,800 546
-------
4,228
-------
ELECTRICAL SERVICES -- 0.8%
Texas Utilities ................ 14,600 657
-------
NUMBER VALUE
OF SHARES (000)
--------- -----
COMMON STOCK -- CONTINUED
ENTERTAINMENT -- 0.4%
Walt Disney .................... 11,200 $ 326
-------
ENVIRONMENTAL SERVICES -- 0.5%
Waste Management ............... 7,400 391
-------
FINANCIAL SERVICES -- 3.0%
Fannie Mae ..................... 17,200 1,170
Freddie Mac .................... 15,400 898
J.P. Morgan .................... 4,100 571
-------
2,639
-------
FOOD & BEVERAGE -- 0.8%
Coca-Cola ...................... 10,000 683
-------
HOUSEHOLD PRODUCTS -- 1.1%
Procter & Gamble ............... 10,600 990
-------
INSURANCE -- 1.4%
American International Group ... 10,455 1,195
-------
MEDICAL & MEDICAL SERVICES -- 0.6%
Medtronic ...................... 7,600 540
-------
MISCELLANEOUS MANUFACTURING -- 1.7%
Tyco International ............. 16,800 1,468
-------
MOTORCYCLE & MOTOR SCOOTER -- 0.7%
Harley-Davidson ................ 12,500 638
-------
OFFICE & BUSINESS EQUIPMENT -- 1.4%
Lexmark International, Cl A* ... 4,100 558
Xerox .......................... 12,400 697
-------
1,255
-------
PAPER & FOREST PRODUCTS -- 0.5%
International Paper ............ 8,900 445
-------
PERSONAL CARE -- 0.8%
Gillette ....................... 13,100 668
-------
PETROLEUM & FUEL PRODUCTS -- 0.6%
Schlumberger ................... 8,300 500
-------
PETROLEUM REFINING -- 2.5%
Chevron ........................ 9,100 843
Exxon .......................... 1,700 1,358
-------
2,201
-------
PRINTING & PUBLISHING -- 1.2%
Time Warner .................... 15,900 1,082
-------
RETAIL -- 9.6%
Albertson's# ................... 10,800 578
See Accompanying Notes
60
<PAGE> 63
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA BALANCED ALLOCATION FUND
MAY 31, 1999
NUMBER OF VALUE
MATURITY SHARES/PAR (000) (000)
-------- ---------------- -----
COMMON STOCK -- CONTINUED
RETAIL -- CONTINUED
Costco* ........................ 10,300 $ 747
CVS ............................ 10,600 488
Dayton Hudson .................. 14,400 907
Gap ............................ 16,000 1,001
Home Depot ..................... 22,800 1,297
Safeway* ....................... 16,900 786
Tandy .......................... 8,400 693
TJX Companies .................. 16,000 480
Wal-Mart ....................... 22,000 938
Walgreen ....................... 20,100 467
-------
8,382
-------
SEMI-CONDUCTORS/INSTRUMENTS -- 1.4%
Intel .......................... 14,400 780
Texas Instruments .............. 3,800 416
-------
1,196
-------
SPECIALTY MACHINERY -- 2.0%
Emerson Electric ............... 10,100 645
General Electric ............... 10,600 1,078
-------
1,723
-------
TELEPHONE & TELECOMMUNICATION -- 4.1%
Alltel ......................... 7,700 552
Ameritech ...................... 9,400 619
GTE ............................ 13,300 839
MCI WorldCom* .................. 12,600 1,088
SBC Communications ............. 8,800 450
-------
3,548
-------
WHOLESALE -- 0.6%
Cardinal Health ................ 8,900 537
-------
TOTAL COMMON STOCK
(Cost $43,430)................. 46,523
-------
CORPORATE BONDS -- 10.5%
BANKS -- 1.2%
Citicorp
7.125% ........... 09/01/05 75 76
6.375% ........... 11/15/08 300 294
First Maryland Bancorp
7.200% ........... 07/01/07 300 309
Security Cap
7.800% ........... 01/12/05 350 345
-------
1,024
-------
PAR VALUE
MATURITY (000) (000)
-------- ----- -------
CORPORATE BONDS -- CONTINUED
BUILDING & CONSTRUCTION -- 0.2%
Halliburton
5.625% ........... 12/01/08 $ 175 $ 165
-------
CHEMICALS -- 0.6%
Lubrizol
5.875% ........... 12/01/08 250 232
Monsanto (A)
5.375% ........... 12/01/01 300 294
-------
526
-------
COMMUNICATIONS EQUIPMENT -- 0.4%
Motorola
7.500% ........... 05/15/25 300 313
-------
COMPUTER SOFTWARE -- 0.7%
Computer Associates
6.250% ........... 04/15/03 645 626
-------
ENTERTAINMENT -- 0.2%
Time Warner
9.625% ........... 05/01/02 150 163
-------
FINANCIAL SERVICES -- 0.4%
Associates
5.750% ........... 11/01/03 100 97
6.250% ........... 11/01/08 300 291
-------
388
-------
FOOD & BEVERAGE -- 0.6%
Archer Daniels Midland
7.500% ........... 03/15/27 100 105
Dean Foods
6.625% ........... 05/15/09 400 397
-------
502
-------
FOREIGN -- 0.6%
Saskatchewan
8.000% ........... 07/15/04 500 537
-------
GAS & NATURAL GAS -- 0.2%
Williams Companies
6.200% ........... 08/01/02 200 198
-------
LEISURE & RECREATIONAL PRODUCTS -- 0.3%
Brunswick
6.750% ........... 12/15/06 300 290
-------
See Accompanying Notes
61
<PAGE> 64
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA BALANCED ALLOCATION FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
CORPORATE BONDS -- CONTINUED
MACHINERY -- 0.2%
Cummins Engine
6.450% ........... 03/01/05 $ 200 $ 192
-------
MISCELLANEOUS FINANCIAL SERVICES -- 0.4%
Erac USA Finance
6.350% ........... 01/15/01 300 300
-------
MISCELLANEOUS PERSONAL CREDIT -- 0.7%
CSX
5.850% ........... 12/01/03 250 242
Ford Motor Credit
6.000% ........... 01/14/03 350 346
General Motors Acceptance
9.000% ........... 10/15/02 50 54
-------
642
-------
MORTGAGE BANKERS & CORRESPONDENTS -- 0.6%
Countrywide Home Loan
6.840% ........... 10/22/04 500 498
-------
PETROLEUM REFINING -- 0.1%
Amoco Canada
6.750% ........... 02/15/05 50 51
-------
PRINTING & PUBLISHING -- 0.6%
American Greetings
6.100% ........... 08/01/28 500 479
Times Mirror
6.610% ........... 09/15/27 50 50
-------
529
-------
REAL ESTATE INVESTMENT TRUSTS -- 1.0%
AvalonBay Communities
6.580% ........... 02/15/04 75 73
EOP Operating
6.500% ........... 06/15/04 250 243
6.625% ........... 02/15/05 250 243
Simon Property Group
6.750% ........... 02/09/04 30 29
Simon Property Group (A)
6.625% ........... 06/15/03 300 286
-------
874
-------
STEEL REFINING -- 0.5%
Worthington Industries
6.700% ........... 12/01/09 430 414
-------
TELEPHONE & TELECOMMUNICATION -- 1.0%
AT&T
6.500% ........... 03/15/29 385 359
Cable & Wireless Communications
6.750% ........... 12/01/08 300 293
Sprint Capital
6.875% ........... 11/15/28 265 249
-------
901
-------
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
TOTAL CORPORATE BONDS
(Cost $9,492) ............................... $ 9,133
-------
ASSET BACKED SECURITIES -- 4.0%
Advanta Mortgage Loan Trust,
Series 1999-2, Cl A4
6.890% ............ 05/25/29 $ 295 294
Discover Card Master Trust I,
Series 1996-3, Cl A
6.050% ............ 08/18/08 500 493
First Security Auto Owner Trust,
Series 1999-1, Cl A4
5.740% ............ 06/15/04 400 395
GE Capital Mortgage,
Series 1997-2, HE4, Cl A4
6.765% ............ 04/25/15 350 353
Series 1998-2, Cl A3
6.180% ............ 06/25/15 500 500
Series 1999-1, Cl A1
6.500% ............ 01/25/29 159 153
Series 1999-HE1, Cl A4
6.185% ............ 01/25/23 290 288
IMC Home Equity Loan Trust,
Series 1997-7, Cl A5
6.760% ............ 10/20/20 560 564
Newcourt Receivables Asset Trust,
Series 1997-1, Cl A4
6.193% ............ 05/20/05 410 408
-------
TOTAL ASSET BACKED SECURITIES
(Cost $3,492) ........ 3,448
-------
COLLATERALIZED MORTGAGE
OBLIGATIONS -- 3.7%
Credit Suisse First Boston Mortgage
Securities, Series 1997-C1, Cl A1C
7.240% ............ 01/01/29 410 416
First Union-Chase Commercial Mortgage,
Series 1999-C2, Cl A2
6.645% ............ 04/14/09 200 198
Heller Financial Commercial Mortgage,
Series 1999-PH1, Cl A1
6.500% ............ 05/15/31 295 294
Morgan Stanley Capital I, Series
1999-FNV1, Cl A2
6.530% ............ 03/15/32 550 543
Morgan Stanley Capital I, Series 1999-
RM1, Cl A2
6.710% ............ 12/15/31 390 390
See Accompanying Notes
62
<PAGE> 65
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA BALANCED ALLOCATION FUND
MAY 31, 1999
NUMBER OF VALUE
MATURITY SHARES/PAR (000) (000)
-------- ---------------- -----
COLLATERALIZED MORTGAGE
OBLIGATIONS -- CONTINUED
PNC Trust, Series 1998-7, Cl A5
6.750% ............ 09/25/28 $ 229 $ 224
Prudential Securities Secured Financing,
Series 1999-NRF1, Cl A1
6.074% ............ 01/15/08 356 350
Residential Accredit Loans,
Series 1999-QS3, Cl A8
6.500% ............ 03/25/29 529 507
Residential Funding Mortgage
Securities I, Series 1998-S13, Cl A21
6.750% ............ 06/25/28 270 263
-------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS
(Cost $3,268) ............................... 3,185
-------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 12.1%
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 8.8%
Pool # 376750
7.000% ............ 09/01/27 868 871
Pool # 417392
6.500% ............ 02/01/28 180 176
Pool # 433330
6.500% ............ 08/01/28 198 194
Pool # 440148
6.500% ............ 08/01/28 2,227 2,181
Pool # 437810
6.000% ............ 08/01/28 850 810
Pool # 437972
6.000% ............ 08/01/28 198 189
Pool # 437979
6.000% ............ 08/01/28 490 466
Pool # 453931
6.500% ............ 11/01/28 560 548
Pool # 484693
6.000% ............ 02/01/29 1,361 1,295
Pool # TBA
7.000% ............ 04/01/29 300 302
Pool # 494724
6.500% ............ 05/01/29 650 636
-------
7,668
-------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 3.3%
Pool # 780213
7.500% ............ 08/15/25 440 452
Pool # 439229
7.500% ............ 07/15/27 379 388
Pool # 451490
7.500% ............ 09/15/27 579 594
PAR/SHARES VALUE
MATURITY (000) (000)
-------- ---------- -----
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- CONTINUED
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- CONTINUED
Pool # TBA
6.500% ............ 03/01/29 $ 240 $ 234
Pool # 498651
6.500% ............ 04/01/29 1,198 1,171
-------
2,839
-------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $10,703) .............................. 10,507
-------
U.S. TREASURY OBLIGATIONS -- 6.7%
U.S. TREASURY NOTES -- 6.7%
5.750%# ........... 11/15/00 2,175 2,188
5.750%# ........... 08/15/03 1,425 1,428
6.125%# ........... 08/15/07 1,310 1,336
6.250%# ........... 08/15/23 855 872
-------
5,824
-------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $5,967) ............................... 5,824
-------
CASH EQUIVALENT -- 0.1%
Goldman Sachs Financial Square Premium
Money Market Fund ............. 61 61
-------
TOTAL CASH EQUIVALENT
(Cost $61) .................................. 61
-------
TOTAL INVESTMENTS -- 90.6%
(Cost $76,413) .............................. $78,681
=======
OTHER ASSETS AND LIABILITIES,
NET -- 9.4% ................................. 8,197
-------
TOTAL NET ASSETS -- 100.0% ..................... $86,878
=======
- - ------------
* NON-INCOME PRODUCING SECURITY.
# SECURITY FULLY OR PARTIALLY ON LOAN.
(A) PRIVATE PLACEMENT SECURITY
CL--CLASS
TBA--TO BE ANNOUNCED
See Accompanying Notes
63
<PAGE> 66
[ARROW GRAPHIC OMITTED]
FINANCIAL HIGHLIGHTS
ARMADA BALANCED ALLOCATION FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE PERIOD
ENDED MAY 31, 1999
---------------------------------------------
CLASS I3 CLASS A3 CLASS B4
----------- ----------- -----------
<S> <C> <C> <C>
Net asset value, beginning of period ........................................... $ 10.00 $ 9.74 $ 9.82
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.18 0.14 0.10
Net gain on securities (realized and unrealized) ............................. 0.28 0.57 0.51
------- ------- -------
Total from investment operations .......................................... 0.46 0.71 0.61
------- ------- -------
LESS DISTRIBUTIONS
Dividends from net investment income ......................................... (0.15) (0.14) (0.10)
------- ------- -------
Total distributions ....................................................... (0.15) (0.14) (0.10)
------- ------- -------
Net asset value, end of period ................................................. $ 10.31 $10.31 $ 10.33
======= ======= =======
TOTAL RETURN ................................................................... 4.57%2 7.26%1,2 6.07%1,2
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) ......................................... $85,027 $1,466 $ 385
Ratio of expenses to average net assets ...................................... 1.06%5 1.31%5 2.02%5
Ratio of net investment income to average net assets ......................... 2.25%5 2.50%5 1.29%5
Ratio of expenses to average net assets before fee waivers ................... 1.06%5 1.31%5 2.02%5
Ratio of investment income to average net assets before fee waivers .......... 2.25%5 2.50%5 1.29%5
Portfolio turnover rate ...................................................... 116% 116% 116%
</TABLE>
1 TOTAL RETURN EXCLUDES SALES CHARGE.
2 RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
3 CLASS I AND CLASS A COMMENCED OPERATIONS ON JULY 10, 1998 AND
JULY 31, 1998, RESPECTIVELY.
4 CLASS B COMMENCED OPERATIONS ON NOVEMBER 11, 1998.
5 ANNUALIZED.
See Accompanying Notes
64
<PAGE> 67
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA TOTAL RETURN ADVANTAGE FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
CORPORATE BONDS -- 39.9%
AGRICULTURE -- 0.9%
Cargill (B)
6.150% ............ 02/25/08 $3,100 $ 2,946
-------
AUTO -- 2.7%
Chrysler Financial
5.150% ............ 01/22/01 3,525 3,490
Ford Motor
6.375% ............ 02/01/29 6,125 5,505
-------
8,995
-------
BANKS -- 4.9%
Bank of America
7.875% ............ 12/01/02 3,600 3,775
Citicorp
7.125% ............ 09/01/05 4,000 4,075
First Union
7.125% ............ 10/15/06 4,400 4,515
Fleet Financial
6.500% ............ 03/15/08 2,775 2,710
6.375% ............ 05/15/08 1,175 1,137
-------
16,212
-------
BROKERAGE -- 1.1%
Lehman Brothers
6.625% ............ 04/01/04 3,800 3,743
-------
CABLE & MEDIA -- 3.0%
News America Holdings
7.375% ............ 10/17/08 6,150 6,302
Time Warner Entertainment
10.150% ............ 05/01/12 2,900 3,678
-------
9,980
-------
CONSULTING SERVICES -- 1.0%
CSC Enterprises
6.500% ............ 11/15/01 3,365 3,383
-------
DEFENSE -- 0.7%
Raytheon
5.950% ............ 03/15/01 2,500 2,494
-------
EDUCATION -- 0.8%
Harvard University
8.125% ............ 04/15/07 2,400 2,658
-------
FINANCIAL SERVICES -- 0.9%
Household Finance
5.875% ............ 02/01/09 3,400 3,166
-------
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
CORPORATE BONDS -- CONTINUED
FOOD & BEVERAGE -- 1.0%
Philip Morris Global
7.000% ............ 07/15/05 $3,300 $ 3,311
-------
INSURANCE -- 3.1%
Metropolitan Life
7.000% ............ 11/01/05 5,900 5,957
Nationwide
9.875% ............ 02/15/25 4,000 4,373
-------
10,330
-------
OIL & GAS -- 1.4%
Atlantic Richfield
9.875% ............ 03/01/16 1,900 2,449
Conoco
6.950% ............ 04/15/29 2,150 2,067
-------
4,516
-------
REAL ESTATE INVESTMENT TRUST -- 0.5%
Mack-Cali Realty
7.000% ............ 03/15/04 1,650 1,629
-------
RETAIL -- 0.9%
Dayton Hudson
6.650% ............ 08/01/28 3,000 2,839
-------
SPECIALTY CHEMICALS -- 2.6%
Engelhard
7.000% ............ 08/01/01 5,600 5,719
Monsanto (B)
6.600% ............ 12/01/28 3,150 2,898
-------
8,617
-------
TECHNOLOGY -- 1.0%
Applied Material
7.125% ............ 10/15/17 3,475 3,417
-------
TELEPHONE & TELECOMMUNICATION -- 6.7%
AT&T
6.500% ............ 03/15/29 4,100 3,818
BellSouth Communications
6.300% ............ 12/15/15 2,952 2,831
GTE Northwest
5.550% ............ 10/15/08 2,600 2,411
Sprint Capital
6.875% ............ 11/15/28 5,300 4,989
Telephone & Data Systems
7.000% ............ 08/01/06 5,500 5,390
Worldcom
6.400% ............ 08/15/05 3,100 3,042
-------
22,481
-------
See Accompanying Notes
65
<PAGE> 68
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA TOTAL RETURN ADVANTAGE FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
CORPORATE BONDS -- CONTINUED
UTILITIES-ELECTRIC -- 2.5%
Consolidated Edison#
6.450% ............ 12/01/07 $3,250 $ 3,234
Pennsylvania Power & Light
6.125% ............ 05/01/01 3,550 3,554
Puget Sound Energy
6.740% ............ 06/15/18 1,525 1,462
--------
8,250
--------
UTILITIES-GAS DISTRIBUTION -- 0.9%
KN Energy
6.450% ............ 03/01/03 3,100 3,073
--------
YANKEE -- 3.3%
Ahold Financial
6.250% ............ 05/01/09 2,200 2,106
City of Naples
7.520% ............ 07/15/06 4,350 4,482
Quebec Province
8.625% ............ 01/19/05 3,875 4,261
--------
10,849
--------
TOTAL CORPORATE BONDS
(Cost $134,746) 132,889
--------
ASSET BACKED SECURITIES -- 17.1%
AUTO -- 1.7%
World Omni Automobile Lease Securitization
Trust, Series 1997, Cl A3 (B)
5.962% ............ 08/14/01 5,644 5,632
--------
CREDIT CARDS -- 5.6%
First USA Credit Card Master Trust,
Series 1999-1, Cl C (B)
6.420% ............ 10/19/06 3,895 3,784
Series 1999-2, Cl C (B)
6.650% ............ 10/19/08 3,235 3,132
MBNA Credit Card Master Trust,
Series 1998-F, Cl C (B)
6.450% ............ 02/15/08 4,985 4,836
Series 1999-B, Cl C (B)
6.650% ............ 08/15/11 2,780 2,671
Metris Master Trust, Series 1997-1,
Cl A
6.870% ............ 10/20/05 4,040 4,095
--------
18,518
--------
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
ASSET BACKED SECURITIES -- CONTINUED
FINANCIAL SERVICES -- 7.3%
Aesop (B)
6.140% ............ 05/20/06 $4,750 $ 4,695
Series 1997-A, Cl A2 (B)
6.400% 10/20/03 3,495 3,504
Copelco Capital Funding, Series 1997-A,
Cl A4
6.470% ............ 04/20/05 3,735 3,765
Green Tree Financial, Series 1997-5,
Cl A5
6.620% ............ 05/15/29 2,535 2,528
Metlife Capital Equipment Loan Trust,
Series 1997-A, Cl A
6.850% ............ 05/20/08 3,025 3,078
PNC Student Loan Trust I,
Series 1997-2, Cl A4
6.446% ............ 01/25/02 3,840 3,866
Series 1997-2, Cl A6
6.572% ............ 01/25/04 2,870 2,864
-------
24,300
-------
MISCELLANEOUS -- 2.5%
Comed Trust Financial, Series 1998-1,
Cl A6
5.630% ............ 06/25/09 3,270 3,109
Franchise Funding Credit Association,
Series 97-1 Cl A (B)
7.020% ............ 12/18/06 1,678 1,678
Railcar Leasing, Series 1997-1,
Cl A2 (B)
7.125% ............ 01/15/13 3,610 3,686
-------
8,473
-------
TOTAL ASSET BACKED SECURITIES
(Cost $57,584) ....... 56,923
-------
COLLATERALIZED MORTGAGE
OBLIGATIONS -- 11.3%
Collateralized Mortgage Obligation Trusts,
Series 13, Cl A (A)
5.425% ............ 01/20/03 34 34
Commercial Mortgage Acceptance,
Series 1997-ML1, Cl A-4
6.735% ............ 08/15/07 5,323 5,307
Federal Home Loan Mortgage
Corporation, Series 2095, Cl Pe
6.000% ............ 11/15/28 6,189 5,646
See Accompanying Notes
66
<PAGE> 69
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA TOTAL RETURN ADVANTAGE FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
COLLATERALIZED MORTGAGE
OBLIGATIONS -- CONTINUEd
Federal Home Loan Mortgage Corporation
Series 2101, Cl Pd
6.000% ............ 11/15/28 $2,245 $ 2,055
Series 2104, Cl Pg
6.000% ............ 12/15/28 2,131 1,957
First Union Lehman Brothers Trust,
Series 1997, Cl A3
7.380% ............ 04/18/07 4,425 4,560
Series 1998, Cl A2
6.560% ............ 11/18/08 4,745 4,698
Merrill Lynch Mortgage Investors,
Series 1998-GN1, Cl A1
7.110% ............ 08/25/27 3,486 3,481
Series 1996-C2, Cl A2
6.820% ............ 11/21/28 3,195 3,235
Morgan Stanley Capital, Series
1999-WF1, Cl A2
6.210% ............ 09/15/08 6,835 6,600
-------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS
(Cost $38,715) ....... 37,573
-------
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 5.8%
FEDERAL HOME LOAN MORTGAGE CORPORATION -- 0.0%
Pool # 16-0045
8.750% ............ 05/01/08 3 4
Pool # 18-1063
7.500% ............ 12/01/10 84 88
-------
92
-------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 5.6%
Pool # 323538
6.500% ............ 01/01/29 9,677 9,472
Pool # 323434
7.500% ............ 04/01/29 9,084 9,283
-------
18,755
-------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 0.2%
Pool # 132781
10.500% ............ 11/15/00 6 7
Pool # 780919
9.500% ............ 10/15/18 463 500
-------
507
-------
PAR/SHARES VALUE
MATURITY (000) (000)
-------- ----- -----
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- CONTINUED
Total U.S. Government Agency
Obligations
(Cost $19,684) .............................. $ 19,354
--------
MORTGAGE PASS THROUGH
OBLIGATIONS -- 0.1%
Thirty-Seventh FHA Insurance Project
7.430% ............ 05/01/22 $ 442 442
--------
Total Mortgage Pass Through
Obligations
(Cost $442) 442
--------
U.S. TREASURY OBLIGATIONS -- 22.0%
U.S. TREASURY BONDS -- 10.4%
7.500%# ........... 11/15/16 16,985 19,457
8.125%# ........... 08/15/21 12,100 15,023
--------
34,480
--------
U.S. TREASURY NOTES -- 11.6%
6.125%# ........... 07/31/00 21,865 22,091
5.875%# ........... 11/30/01 4,150 4,187
5.375%# ........... 06/30/03 4,555 4,508
7.250%# ........... 05/15/04 150 160
6.500% ............ 10/15/06 3,025 3,147
6.125%# ........... 08/15/07 4,500 4,591
--------
38,684
--------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $74,705) .............................. 73,164
--------
CASH EQUIVALENT -- 2.8%
Fidelity Domestic Money Market
Fund .......................... 9,441 9,441
--------
TOTAL CASH EQUIVALENT
(Cost $9,441) .................. 9,441
--------
TOTAL INVESTMENTS -- 99.0%
(Cost $335,317) ............................. $329,786
========
OTHER ASSETS AND LIABILITIES,
NET -- 1.0% .................................. 3,317
--------
See Accompanying Notes
67
<PAGE> 70
STATEMENT OF NET ASSETS
ARMADA TOTAL RETURN ADVANTAGE FUND
MAY 31, 1999
VALUE
(000)
-----
NET ASSETS:
Portfolio Shares of Class I
(unlimited authorizat -- no par
value) based on 32,874,699
outstanding shares of
beneficial interest ......................... $332,005
Portfolio Shares of Class A (unlimited
authorization -- no par value) based on
469,625 outstanding shares of
beneficial interest ......................... 4,784
Undistributed net investment income .......... 3
Accumulated net realized gain on investments . 1,842
Net unrealized depreciation on investments ... (5,531)
--------
Total Net Assets -- 100.0% ...................... 333,103
========
Net Asset Value, Offering
and Redemption Price Per
Share -- Class I ............................ $9.99
========
Net Asset Value and Redemption
Price Per Share -- Class A ................... $9.98
========
Maximum Offering Price Per
Share -- Class A ($9.98 / 95.25%) ............ $10.48
========
- - -----------------
# SECURITY FULLY OR PARTIALLY ON LOAN.
(A) VARIABLE RATE SECURITY -- THE RATE REFLECTED ONE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON MAY 31, 1999.
(B) PRIVATE CEMENT SECURITY
CL -- CLASS
See Accompanying Notes
68
<PAGE> 71
FINANCIAL HIGHLIGHTS
ARMADA TOTAL RETURN ADVANTAGE FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
------------------------------------------------------------------------------
1999 1998 1997 1996
------------------ ------------------ ------------------ ------------------
CLASS I CLASS A CLASS I CLASS A CLASS I CLASS A CLASS I CLASS A
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..... $ 10.25 $ 10.25 $ 9.89 $ 9.89 $ 9.88 $ 9.87 $ 10.55 $ 10.54
-------- -------- -------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .................. 0.58 0.56 0.64 0.61 0.67 0.64 0.705 0.625
Net gain/ (loss) on securities
(realized and unrealized) ............ (0.22) (0.23) 0.36 0.36 0.15 0.16 (0.24) (0.22)
-------- -------- -------- -------- -------- -------- -------- --------
Total from investment operations ..... 0.36 0.33 1.00 0.97 0.82 0.80 0.46 0.40
-------- -------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Dividends from net investment income ... (0.58) (0.56) (0.64) (0.61) (0.67) (0.64) (0.70) (0.62)
Dividends in excess of net
investment income .................... (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.12) (0.14)
Distributions from net realized
capital gains ........................ (0.04) (0.04) (0.00) (0.00) (0.00) (0.00) (0.31) (0.31)
Distributions in excess of net
realized capital gains ............... (0.00) (0.00) (0.00) (0.00) (0.14) (0.14) (0.00) (0.00)
-------- -------- -------- -------- -------- -------- -------- --------
Total distributions .................. (0.62) (0.60) (0.64) (0.61) (0.81) (0.78) (1.13) (1.07)
-------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of period ........... $ 9.99 $ 9.98 $ 10.25 $ 10.25 $ 9.89 $ 9.89 $ 9.88 $ 9.87
======== ======== ======== ======== ======== ======== ======== ========
TOTAL RETURN ............................. 3.54% 3.18%3 10.35% 10.08%3 8.51% 8.35%3 4.22% 3.74%3
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) ... $328,417 $ 4,686 $296,075 $ 640 $259,228 $ 2,186 $280,401 $ 2,040
Ratio of expenses to average net assets 0.45% 0.69% 0.31% 0.54% 0.16% 0.41% 0.13% 0.36%
Ratio of net investment income to
average net assets ................... 5.72% 5.48% 6.29% 6.14% 6.70% 6.46% 6.67% 6.12%
Ratio of expenses to average net assets
before fee waivers ................... 0.65% 0.89% 0.72% 0.97% 0.71% 0.96% 0.69% 0.89%
Ratio of net investment income to
average net assets before fee waivers 5.52% 5.28% 5.88% 5.71% 6.15% 5.91% 6.11% 5.59%
Portfolio turnover rate ................ 142% 1.42% 170% 170% 169% 169% 268% 268%
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
ENDED MAY 31, 1995
------------------
CLASS I1 CLASS A1
-------- --------
<S> <C> <C>
Net asset value, beginning of period ..... $ 10.00 $ 10.16
-------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .................. 0.655 0.495
Net gain/ (loss) on securities
(realized and unrealized) ............ 0.43 0.40
-------- --------
Total from investment operations ..... 1.08 0.89
-------- --------
LESS DISTRIBUTIONS
Dividends from net investment income ... (0.53) (0.49)
Dividends in excess of net
investment income .................... (0.00) (0.02)
Distributions from net realized
capital gains ........................ (0.00) (0.00)
Distributions in excess of net
realized capital gains ............... (0.00) (0.00)
-------- --------
Total distributions .................. (0.53) (0.51)
-------- --------
Net asset value, end of period ........... $ 10.55 $ 10.54
======== ========
TOTAL RETURN ............................. 12.52%4 12.65%3,4
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) ... $261,403 $ 106
Ratio of expenses to average net assets 0.18%2 0.31%2
Ratio of net investment income to
average net assets ................... 7.23%2 6.92%2
Ratio of expenses to average net assets
before fee waivers ................... 0.77%2 0.87%2
Ratio of net investment income to
average net assets before fee waivers 6.64%2 6.36%2
Portfolio turnover rate ................ 166% 166%
</TABLE>
1 CLASS I AND CLASS A COMMENCED OPERATIONS ON JULY 7, 1994 AND
SEPTEMBER 6, 1994, RESPECTIVELY.
2 ANNUALIZED.
3 TOTAL RETURN EXCLUDES SALES CHARGE.
4 TOTAL RETURNS HAVE BEEN ANNUALIZED BASED UPON THE PERIOD FROM EACH CLASS'
COMMENCEMENT DATE THROUGH MAY 31, 1995. GROSS TOTAL RETURNS OF CLASS I
AND CLASS A FOR THE PERIOD WERE 11.22% AND 9.14%, RESPECTIVELY.
5 CALCULATED BASED UPON AVERAGE SHARES OUTSTANDING.
See Accompanying Notes
69
<PAGE> 72
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA BOND FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -------
CORPORATE BONDS -- 25.2%
BANKS -- 1.8%
Citicorp
6.375% ............ 11/15/08 $ 8,000 $ 7,830
First Maryland Bancorp
7.200% ............ 07/01/07 5,000 5,144
International Bank For
Reconstruction & Development
8.500% ............ 07/19/99 900 904
-------
13,878
-------
BUILDING & CONSTRUCTION -- 0.3%
Halliburton
5.625% ............ 12/01/08 2,000 1,880
-------
CHEMICALS -- 1.8%
Dow Chemical
9.200% ............ 06/01/10 1,000 1,169
Lubrizol
5.875% ............ 12/01/08 7,300 6,780
Monsanto
8.130% ............ 12/15/06 2,000 2,145
Monsanto (B)
5.375% ............ 12/01/01 3,580 3,506
-------
13,600
-------
COMMUNICATIONS EQUIPMENT -- 0.6%
Motorola
7.500% ............ 05/15/25 4,680 4,879
-------
COMPUTER SOFTWARE -- 1.9%
Computer Associates
6.250% ............ 04/15/03 15,000 14,550
-------
ELECTRICAL SERVICES -- 0.5%
Central Power & Light
6.625% ............ 07/01/05 920 914
Eastern Energy
6.750% ............ 12/01/06 3,000 2,957
-------
3,871
-------
FINANCIAL SERVICES -- 3.7%
Associates
5.800% ............ 04/20/04 3,000 2,925
6.250% ............ 11/01/08 5,000 4,850
Ford Motor Credit
6.000% ............ 01/14/03 10,000 9,887
Prime Property Funding, Series II (B)
6.800% ............ 08/15/02 10,000 9,985
Sallie Mae
7.300% ............ 08/01/09 500 537
-------
28,184
-------
PAR VALUE
MATURITY (000) (000)
-------- ----- -------
CORPORATE BONDS -- CONTINUED
FOOD & BEVERAGE -- 1.9%
Archer Daniels Midland
7.500% ............ 03/15/27 $ 6,900 $ 7,271
Dean Foods
6.625% ............ 05/15/09 5,970 5,922
Kraft
8.500% ............ 02/15/17 1,313 1,354
-------
14,547
-------
GAS & NATURAL GAS -- 1.3%
Williams Companies
6.200% ............ 08/01/02 10,000 9,912
-------
INSURANCE -- 0.8%
Cigna
7.400% ............ 05/15/07 3,000 3,120
Lincoln National
6.500% ............ 03/15/08 2,895 2,833
-------
5,953
-------
LEASING & RENTING -- 0.7%
Trans Ocean Container, Callable 07/01/99
@ 106.15
12.250% ............ 07/01/04 5,000 5,450
-------
LEISURE & RECREATIONAL PRODUCTS -- 1.7%
Brunswick
6.750% ............ 12/15/06 8,170 7,904
First American Cap
8.500% ............ 04/15/12 5,000 5,262
-------
13,166
-------
MACHINERY -- 0.6%
Cummins Engine
6.450% ............ 03/01/05 4,800 4,608
-------
PRINTING & PUBLISHING -- 1.5%
American Greetings
6.100% ............ 08/01/28 10,390 9,961
Knight-Ridder
8.500% ............ 09/01/01 1,555 1,598
-------
11,559
-------
RAILROADS -- 0.3%
CSX Transportation
7.540% ............ 03/15/03 2,000 2,056
-------
REAL ESTATE INVESTMENT TRUSTS -- 2.6%
AvalonBay Communities
6.580% ............ 02/15/04 2,200 2,148
EOP Operating
6.625% ............ 02/15/05 10,400 10,088
Simon Property Group (B)
6.625% ............ 06/15/03 4,600 4,516
See Accompanying Notes
70
<PAGE> 73
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA BOND FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
CORPORATE BONDS -- CONTINUED
REAL ESTATE INVESTMENT TRUSTS -- CONTINUED
Simon Property Group
6.750% ............ 02/09/04 $ 2,960 $ 2,875
--------
19,627
--------
TELEPHONE & TELECOMMUNICATION -- 3.2%
AT&T
6.500% ............ 03/15/29 8,400 7,822
Cable & Wireless Communications
6.750% ............ 12/01/08 7,000 6,825
Sprint Capital
6.875% ............ 11/15/28 10,000 9,413
--------
24,060
--------
TOTAL CORPORATE BONDS
(Cost $197,671) ............................. 191,780
--------
ASSET BACKED SECURITIES -- 12.1%
Advanta Home Equity Loan Trust,
Series 1991-2, Cl A
8.800% ............ 06/25/06 1,207 1,211
Advanta Mortgage Loan Trust,
Series 1999-2, Cl A4
6.890% ............ 05/25/29 7,225 7,207
Amresco Securitized Net Interest
Margin, Series 1999-1A, Cl A
9.100% ............ 09/27/29 9,945 9,821
Export Funding Trust, Series 1995-A,
Cl A
8.210% ............ 12/29/06 2,364 2,546
First Security Auto Owner Trust,
Series 1999-1, Cl A4
5.740% ............ 06/15/04 9,970 9,856
GE Capital Mortgage, Series
1999-HE1, Cl A4
6.185% ............ 01/25/23 9,760 9,705
Series 1999-1, Cl A1
6.500% ............ 01/25/29 6,976 6,683
IMC Home Equity Loan Trust, Series
1997-7, Cl A5
6.760% ............ 10/20/20 12,810 12,905
Newcourt Receivables Asset Trust,
Series 1997-1, Cl A4
6.193% ............ 05/20/05 13,360 13,312
Pegasus Aviation Lease Securitization,
Series 1999-1, Cl A1 (B)
6.300% ............ 03/25/29 7,804 7,685
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
ASSET BACKED SECURITIES -- CONTINUED
Residential Asset Securities, Series
1998-KS3, Cl AI3
5.910% ............ 08/25/22 $ 8,500 $ 8,397
The Money Store Home Equity Trust,
Series 1998-A, Cl AV (A)
5.100% ............ 06/15/29 2,699 2,696
Turkey Trust, Series T-3
9.625% ............ 05/15/02 405 417
-------
TOTAL ASSET BACKED SECURITIES
(Cost $93,234) .............................. 92,441
-------
COLLATERALIZED MORTGAGE
OBLIGATIONS -- 19.2%
Chase Commercial Mortgage Securities,
Series 1996-2, Cl A1
6.700% ............ 07/19/03 1,402 1,414
Credit Suisse First Boston Mortgage
Securities, Series 1997-C1, Cl A1C
7.240% ............ 01/01/29 7,500 7,601
Federal Home Loan Mortgage Corporation,
Series C-78
9.400% ............ 09/15/08 26 27
Federal National Mortgage Association,
Series 1-C
9.250% ............ 11/15/01 939 959
First Union-Chase Commercial Mortgage,
Series 1999-C2, Cl A2
6.645% ............ 04/14/09 4,700 4,663
GMAC Commercial Mortgage Securities,
Series 1997-C1, Cl X
1.565% ............ 07/15/27 18,129 1,516
Heller Financial Commercial Mortgage,
Series 1999-PH1, Cl A1
6.500% ............ 05/15/31 7,225 7,198
Housing Securities, Series 1993-G,
Cl G9
7.500% ............ 01/25/09 4,984 5,059
J.P. Morgan Commercial Mortgage
Finance,
Series 1997-C4, Cl X, (A)(C)
1.379% 12/26/28 116,567 6,967
Series 1997-C5, (A)(C)
1.550% ............ 09/15/29 20,400 1,538
Midland Realty Acceptance, Series
1996-C2, Cl A1
7.020% ............ 01/25/29 1 1
See Accompanying Notes
71
<PAGE> 74
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA BOND FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
COLLATERALIZED MORTGAGE
OBLIGATIONS -- CONTINUED
Morgan Stanley Capital I,
Series 1999-RM1, Cl A2
6.710% ............ 12/15/31 $ 9,530 $ 9,523
Series 1999-FNV1, Cl A2
6.530% ............ 03/15/32 13,000 12,824
PNC Trust, Series 1998-7, Cl A5
6.750% ............ 09/25/28 2,997 2,916
Prudential Home Mortgage Securities,
Series 1996-7, Cl A4
6.750% ............ 06/25/11 1,500 1,473
Prudential Securities Secured Financing,
Series 1999-NRF1, Cl A1
6.074% ............ 01/15/08 12,560 12,314
Residential Accredit Loans,
Series 1998-QS7, Cl NB4
6.750% ............ 07/25/28 13,684 13,350
Series 1999-QS3, Cl A8
6.500% ............ 03/25/29 16,845 16,129
Residential Asset Securitization Trust,
Series 1997-A5, Cl A13
7.750% ............ 07/25/27 10,786 10,975
Residential Funding Mortgage
Securities I, Series 1998-S13,
Cl A21
6.750% ............ 06/25/28 6,170 6,010
Residential Funding, Series 1993-S44,
Cl A3 (A)
5.490% ............ 11/25/23 2,342 2,359
Structured Asset Sales, Series 1994-5,
Cl A
7.000% ............ 07/25/24 22,019 21,876
--------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS
(Cost $148,867) ............................. 146,692
--------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 25.2%
FEDERAL HOME LOAN MORTGAGE CORPORATION -- 1.5%
Pool # 219329
9.250% ............ 12/01/02 52 55
Pool # E31059
8.500% ............ 05/01/06 66 69
Pool # E00164
6.500% ............ 10/01/07 347 348
Pool # 252804
8.500% ............ 07/01/08 62 67
Pool # E50893
6.500% ............ 09/01/08 828 831
Pool # E60894
7.500% ............ 07/01/10 29 31
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- CONTINUED
FEDERAL HOME LOAN MORTGAGE CORPORATION -- CONTINUED
Pool # E61277
7.500% ............ 09/01/10 $ 121 $ 125
Pool # E20206
7.500% ............ 11/01/10 163 169
Pool # E61976
7.000% ............ 11/01/10 4,189 4,272
Pool # E20204
6.500% ............ 11/01/10 566 568
Pool # E64179
7.500% ............ 05/01/11 422 435
Pool # E64198
7.500% ............ 05/01/11 165 171
Pool # E64229
7.500% ............ 05/01/11 10 11
Pool # E64248
7.500% ............ 05/01/11 697 719
Pool # 280417
8.500% ............ 09/01/16 6 7
Pool # 141138
7.500% ............ 05/01/17 426 444
Pool # 294315
8.500% ............ 06/01/17 14 16
Pool # 450074
8.500% ............ 06/01/17 171 184
Pool # 80322
8.000% ............ 07/01/25 2,468 2,574
-------
11,096
-------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 16.9%
Pool # 77831
7.500% ............ 12/01/07 127 131
Pool # 31592
7.500% ............ 03/01/08 109 113
Pool # 190506
6.500% ............ 12/01/08 1,003 1,005
Pool # 1125
9.000% ............ 07/01/09 41 44
Pool # 35366
8.500% ............ 11/01/09 73 78
Pool # 316357
7.000% ............ 07/01/10 1,237 1,260
Pool # 210452
9.500% ............ 05/01/18 119 128
Pool # 250060
7.500% ............ 06/01/24 4,689 4,817
Pool # 322344
7.500% ............ 09/01/25 2,772 2,843
Pool # 250433
7.500% ............ 01/01/26 4,831 4,954
See Accompanying Notes
72
<PAGE> 75
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA BOND FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- CONTINUEd
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- CONTINUED
Pool # 346316
7.500% ............ 05/01/26 $ 2,739 $ 2,810
Pool # 407603
7.500% ............ 12/01/27 1,101 1,127
Pool # 413863
7.500% ............ 12/01/27 5,708 5,835
Pool # 420621
7.500% ............ 12/01/27 4,330 4,426
Pool # 417392
6.500% ............ 02/01/28 4,300 4,213
Pool # 435082
6.000% ............ 07/01/28 1,241 1,181
Pool # 440148
6.500% ............ 08/01/28 3,364 3,293
Pool # 446109
7.500% ............ 10/01/28 1,190 1,218
Pool # 452026
6.500% ............ 11/01/28 7,295 7,140
Pool # 448509
6.000% ............ 11/01/28 4,948 4,749
Pool # 252162
6.500% ............ 12/01/28 9,707 9,502
Pool # C00690
6.000% ............ 12/01/28 7,412 7,064
Pool # C18901
6.000% ............ 12/01/28 1,982 1,889
Pool # 252212
6.500% ............ 01/01/29 3,621 3,542
Pool # 484693
6.000% ............ 02/01/29 13,322 12,682
Pool # 484699
6.000% ............ 02/01/29 17,957 17,088
Pool # TBA
7.000% ............ 04/01/29 8,150 8,203
Pool # 494724
6.500% ............ 05/01/29 4,650 4,551
Pool # 492335
6.000% ............ 05/01/29 11,000 10,469
Pool # 441542
7.500% ............ 10/01/29 2,383 2,436
--------
128,791
--------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 6.8%
Pool # 22374
8.000% ............ 03/15/08 85 90
Pool # 9244
8.250% ............ 04/20/17 51 54
Pool # 9279
8.250% ............ 07/20/17 132 139
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- CONTINUED
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- CONTINUED
Pool # 1136
9.000% ............ 02/20/19 $ 126 $ 135
Pool # 164775
9.500% ............ 06/15/19 148 162
Pool # 308571
8.500% ............ 05/15/21 80 86
Pool # 310780
8.500% ............ 09/15/21 26 28
Pool # 303442
8.500% ............ 11/15/21 11 13
Pool # 306473
8.500% ............ 11/15/21 100 107
Pool # 314586
8.500% ............ 11/15/21 216 231
Pool # 315728
8.500% ............ 11/15/21 202 216
Pool # 319999
8.500% ............ 07/15/22 129 138
Pool # 321786
8.500% ............ 07/15/22 145 155
Pool # 332285
8.500% ............ 07/15/22 142 151
Pool # 321563
8.500% ............ 08/15/22 38 41
Pool # 325399
7.500% ............ 08/15/22 11 12
Pool # 304732
7.500% ............ 12/15/22 760 784
Pool # 337049
7.500% ............ 04/15/23 397 410
Pool # 348665
7.500% ............ 04/15/23 260 269
Pool # 337062
7.500% ............ 05/15/23 267 276
Pool # 331869
7.500% ............ 06/15/23 300 309
Pool # 371437
7.000% ............ 11/15/23 190 192
Pool # 451459
7.500% ............ 09/15/27 10,458 10,714
Pool # 483453
6.500% ............ 09/15/28 5,879 5,742
Pool # 483469
6.500% ............ 09/15/28 5,861 5,724
Pool # 486516
6.500% ............ 09/15/28 8,892 8,684
Pool # 482829
6.500% ............ 11/15/28 8,886 8,679
See Accompanying Notes
73
<PAGE> 76
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA BOND FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- CONTINUED
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- CONTINUED
Pool # TBA
6.500% ............ 03/01/29 $ 5,480 $ 5,352
Pool # 498652
6.500% ............ 04/15/29 3,606 3,522
--------
52,415
--------
Total U.S. Government Agency
Obligations
(Cost $197,510) ............................. 192,302
--------
U.S. TREASURY OBLIGATIONS -- 17.1%
U.S. TREASURY NOTES -- 17.1%
U.S. Treasury Notes
5.750%# ........... 11/15/00 39,235 39,466
5.750%# ........... 08/15/03 20,925 20,969
6.125%# ........... 08/15/07 1,035 1,056
6.250%# ........... 08/15/23 49,090 50,072
U.S. Treasury Note TIPS
3.625%# 04/15/28 19,373 18,508
--------
130,071
--------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $132,312) 130,071
--------
CASH EQUIVALENT -- 0.7%
Goldman Sachs Financial Square Premium
Money Market Fund 5,219 5,219
--------
TOTAL CASH EQUIVALENT
(Cost $5,219) ............................... 5,219
--------
TOTAL INVESTMENTS -- 99.5%
(Cost $772,841) ............................. 758,505
========
OTHER ASSETS AND LIABILITIES,
NET -- 0.5% ................................. 3,737
--------
VALUE
(000)
-----
NET ASSETS:
Portfolio Shares of Class I
(unlimited authorization -- no par value)
based on 76,192,200 outstanding shares of
beneficial interest ......................... $776,499
Portfolio Shares of Class A
(unlimited authorization -- no par value)
based on 280,950 outstanding shares of
beneficial interest ......................... 2,897
Portfolio Shares of Class B
(unlimited authorization -- no par value)
based on 72,734 outstanding shares of
beneficial interest ......................... 757
Accumulated net realized loss on investments . (3,526)
Net unrealized depreciation on investments ... (14,336)
Distributions in excess of net investment income (49)
--------
TOTAL NET ASSETS -- 100.0% ..................... $762,242
========
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SHARE -- CLASS I ............................ $9.96
========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A .................. $9.98
========
MAXIMUM OFFERING PRICE PER
SHARE -- CLASS A ($9.98 / 95.25%) ........... $10.48
========
NET ASSET VALUE AND OFFERING
PRICE PER SHARE -- CLASS B .................. $9.97
========
- - ----------
# SECURITY FULLY OR PARTIALLY ON LOAN.
(A) VARIABLE RATE SECURITY -- THE RATE REFLECTED ON THE STATEMENT OF NET
ASSETS IS THE RATE IN EFFECT ON MAY 31, 1999.
(B) PRIVATE PLAENT SECURITY
(C) INTEREST ONLY SECURITY
CL -- CLASS
TBA -- TO BE ANNOUNCED
TIPS -- TREASURY INFLATION PROTECTED SECURITY
See Accompanying Notes
74
<PAGE> 77
[ARROW GRAPHIC OMITTED]
FINANCIAL HIGHLIGHTS
ARMADA BOND FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
----------------------------------------------------------------------------------
1999 1998 1997
---------------------------- ---------------------------- ------------------
CLASS I CLASS A CLASS B CLASS I CLASS A CLASS B CLASS I CLASS A
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..... $ 10.27 $ 10.27 $ 10.26 $ 10.02 $ 10.02 $ 10.35 $ 9.97 $ 9.97
-------- -------- -------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .................. 0.56 0.54 0.47 0.59 0.56 0.47 0.59 0.41
Net gain/(loss) on securities
(realized and unrealized) ............. (0.17) (0.15) (0.15) 0.25 0.25 (0.09) 0.13 0.13
-------- -------- -------- -------- -------- -------- -------- --------
Total from investment operations ...... 0.39 0.39 0.32 0.84 0.81 0.38 0.72 0.54
-------- -------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Dividends from net
investment income ..................... (0.56) (0.54) (0.47) (0.59) (0.56) (0.47) (0.59) (0.41)
Distributions from net realized
capital gains ......................... (0.14) (0.14) (0.14) (0.00) (0.00) (0.00) (0.00) (0.00)
Distributions in excess of
net realized capital gains ............ (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.08) (0.08)
-------- -------- -------- -------- -------- -------- -------- --------
Total distributions ................... (0.70) (0.68) (0.61) (0.59) (0.56) (0.47) (0.67) (0.49)
-------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of period ........... $ 9.96 $ 9.98 $ 9.97 $ 10.27 $ 10.27 $ 10.26 $ 10.02 $ 10.02
======== ======== ======== ======== ======== ======== ======== ========
TOTAL RETURN ............................. 3.82% 3.77%5 3.06%5 8.55% 8.29%5 8.36%1,5 7.41% 7.22%1,5
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) ... $758,713 $ 2,804 $ 725 $132,620 $ 161 $ 1 $ 91,161 $ 23
Ratio of expenses to average
net assets ............................ 0.70% 0.96% 1.66% 0.80% 1.05% 1.74%1 0.83% 1.07%1
Ratio of net investment income
to average net assets ................. 5.44% 5.18% 4.48% 5.72% 5.52% 2.71%1 5.83% 5.64%1
Ratio of expenses to average
net assets before fee waivers ......... 0.70% 0.96% 1.66% 0.80% 1.05% 1.74%1 0.96% 1.07%1
Ratio of net investment income
to average net
assets before fee waivers ............. 5.44% 5.18% 4.48% 5.72% 5.52% 2.71%1 5.71% 5.64%1
Portfolio turnover rate ................ 270% 270% 270% 220% 220% 220% 96% 96%
</TABLE>
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE
PERIOD ENDED YEAR ENDED PERIOD ENDED
MAY 31, 19963 APRIL 30, 19963 APRIL 30, 19953
------------ -------------- --------------
<S> <C> <C> <C>
Net asset value, beginning of period ..... $ 10.04 $ 10.02 $ 10.00
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .................. 0.05 0.64 0.44
Net gain/(loss) on securities
(realized and unrealized) ............. (0.07) 0.07 0.02
-------- -------- --------
Total from investment operations ...... (0.02) 0.71 0.46
-------- -------- --------
LESS DISTRIBUTIONS
Dividends from net
investment income ..................... (0.05) (0.64) (0.44)
Distributions from net realized
capital gains ......................... (0.00) (0.05) (0.00)
Distributions in excess of
net realized capital gains ............ (0.00) (0.00) (0.00)
-------- -------- --------
Total distributions ................... (0.05) (0.69) (0.44)
-------- -------- --------
Net asset value, end of period ........... $ 9.97 $ 10.04 $ 10.02
======== ======== ========
TOTAL RETURN ............................. (0.19)%2,5 7.09%5 4.75%2,5
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) ... $ 88,829 $ 89,901 $53,316
Ratio of expenses to average
net assets ............................ 0.85%1 0.85% 0.85%1
Ratio of net investment income
to average net assets ................. 5.88%1 6.20% 6.17%1
Ratio of expenses to average
net assets before fee waivers ......... 1.25%1 1.25% 1.33%1
Ratio of net investment income
to average net
assets before fee waivers ............. 5.48%1 5.80% 5.69%1
Portfolio turnover rate ................ 2% 94% 172%
</TABLE>
1 ANNUALIZED.
2 RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
3 ACTIVITY FOR THE PERIOD PRESENTED INCLUDES THAT OF A PREDECESSOR FUND THROUGH
SEPTEMBER 6, 1996. THE PREDECESSOR FUND COMMENCED OPERATIONS ON AUGUST 10,
1994.
DURING 1996, THE PREDECESSOR FUND CHANGED ITS FISCAL YEAR-END FROM APRIL 30 TO
MAY 31.
4 CLASS A COMMENCED OPERATIONS ON SEPTEMBER 11, 1996.
5 TOTAL RETURN EXCLUDES SALES CHARGE.
6 CLASS B SHARES COMMENCED OPERATIONS JANNUARY 6, 1998.
See Accompanying Notes
75
<PAGE> 78
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA INTERMEDIATE BOND FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
CORPORATE BONDS -- 40.0%
BANKS -- 1.3%
First Maryland Bancorp
7.200% ............ 07/01/07 $2,500 $ 2,572
Huntington National
7.625% ............ 01/15/03 500 516
Northern Trust
7.300% ............ 09/15/06 500 507
Society National
7.250% ............ 06/01/05 500 512
-------
4,107
-------
BUILDING & CONSTRUCTION -- 0.3%
Halliburton
5.625% ............ 12/01/08 1,000 940
-------
CHEMICALS -- 2.9%
Dow
9.350% ............ 03/15/02 1,000 1,022
Lubrizol
5.875% ............ 12/01/08 4,000 3,715
Monsanto (B)
5.375% ............ 12/01/01 4,500 4,408
-------
9,145
-------
COMPUTER SOFTWARE -- 2.6%
Computer Associates
6.250% ............ 04/15/03 6,300 6,111
6.375% ............ 04/15/05 2,220 2,123
-------
8,234
-------
DRUGS & HEALTH CARE -- 0.2%
Amgen
6.210% ............ 08/27/03 500 477
-------
FINANCIAL SERVICES -- 10.2%
Associates
7.250% ............ 09/01/99 500 503
5.750% ............ 11/01/03 2,435 2,371
7.700% ............ 06/10/04 500 524
Chrysler
5.690% ............ 11/15/01 3,200 3,176
Commercial Credit
6.500% ............ 06/01/05 500 489
Ford Motor Credit
6.000% ............ 01/14/03 4,550 4,499
GMAC
7.125% ............ 05/01/03 5,000 5,119
Goldman Sachs
7.250% ............ 10/01/05 500 509
6.650% ............ 05/15/09 5,120 5,056
Ikon Capital
6.730% ............ 06/15/01 5,000 4,944
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
CORPORATE BONDS -- CONTINUED
FINANCIAL SERVICES -- CONTINUED
Prime Property Funding, Series II (B)
6.800% 08/15/02 $5,000 $ 4,993
US Leasing Capital
6.625% ............ 05/15/03 300 302
-------
32,485
-------
FOOD & BEVERAGE -- 1.0%
Dean Foods
6.625% ............ 05/15/09 3,325 3,298
-------
GAS & NATURAL GAS -- 1.3%
Northern Illinois
6.450% ............ 08/01/01 1,500 1,511
Williams Companies
6.200% ............ 08/01/02 2,800 2,776
-------
4,287
-------
INSURANCE -- 1.0%
Aetna Services
6.750% ............ 08/15/01 500 504
Lincoln National
7.625% ............ 07/15/02 300 309
6.500% ............ 03/15/08 2,150 2,104
Saint Paul
6.170% ............ 01/15/01 300 300
-------
3,217
-------
LEASING & RENTING -- 1.0%
Comdisco
6.000% ............ 01/30/02 3,200 3,168
-------
LEISURE & RECREATIONAL PRODUCTS -- 1.0%
Brunswick
6.750% ............ 12/15/06 3,150 3,048
-------
MACHINERY -- 0.6%
Cummins Engine
6.450% ............ 03/01/05 2,100 2,016
-------
MEDICAL & MEDICAL SERVICES -- 0.9%
Guidant
6.150% ............ 02/15/06 3,125 2,980
-------
MISCELLANEOUS CONSUMER SERVICES -- 1.6%
Service Corporate, International
6.375% ............ 10/01/00 5,245 5,225
-------
PRINTING & PUBLISHING -- 1.1%
Scholastic
7.000% ............ 12/15/03 3,600 3,659
-------
See Accompanying Notes
76
<PAGE> 79
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA INTERMEDIATE BOND FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
CORPORATE BONDS -- CONTINUED
REAL ESTATE INVESTMENT TRUSTS -- 5.6%
AvalonBay Communities
6.580% ............ 02/15/04 $3,200 $ 3,124
EOP Operating
6.625% ............ 02/15/05 3,190 3,094
Mack-Cali Realty
7.000% ............ 03/15/04 5,150 5,086
New Plan Excel Realty Trust
6.875% ............ 10/15/04 3,670 3,647
Simon Property Group
6.750% ............ 02/09/04 1,200 1,166
Simon Property Group (B)
6.625% ............ 06/15/03 1,825 1,792
--------
17,909
--------
RENTAL SERVICES -- 1.5%
Hertz
7.000% ............ 05/01/02 1,000 1,015
Ryder System
6.600% ............ 11/15/05 4,000 3,900
--------
4,915
--------
TAXABLE MUNICIPAL OBLIGATION -- 0.1%
Westview School (C)
6.400% ............ 09/01/05 200 196
--------
TELEPHONE & TELECOMMUNICATION -- 4.8%
AT&T
5.625% ............ 03/15/04 4,085 3,983
Cable & Wireless Communication
6.625% ............ 03/06/05 4,000 3,935
Sprint Capital
5.700% ............ 11/15/03 7,600 7,344
--------
15,262
--------
TRUCKING -- 1.0%
JB Hunt
6.000% ............ 12/12/00 3,200 3,172
--------
TOTAL CORPORATE BONDS
(Cost $130,083) ............................. 127,740
--------
ASSET BACKED SECURITIES -- 18.0%
Amresco Securitized Net Interest Margin,
Series 1999-1A, Cl A
9.100% 09/27/29 4,192 4,140
Arcardia Automobile Receivables Trust,
Series 1997-C, Cl A4
6.375% 01/15/03 7,310 7,400
Case Equipment Loan Trust, Series
1998-C, Cl A4
5.610% 04/15/05 7,950 7,858
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
ASSET BACKED SECURITIES -- CONTINUED
Contimortgage Home Equity Loan Trust,
Series 1998-2, Cl A6
6.360% ............ 11/15/19 $ 3,575 $ 3,540
GE Capital Mortgage,
Series 1997-HE4, Cl A4
6.765% ............ 04/25/15 5,290 5,334
Series 1999-1, Cl A1
6.500% ............ 01/25/29 3,049 2,921
IMC Home Equity Loan Trust, Series
1997-7, Cl A5
6.760% ............ 10/20/20 4,220 4,251
Oakwood Mortgage Investors, Series
1997-D, Cl A3
6.500% ............ 02/15/28 5,000 5,032
Pegasus Aviation Lease Securitization,
Series 1999-1, Cl A1 (B)
6.300% ............ 03/25/29 2,536 2,498
Residential Funding Mortgage Services,
Series 1999-HI1, Cl A3
6.310% ............ 08/25/13 7,800 7,783
The Money Store Home Equity Trust,
Series 1993-C, Cl A3
5.750% ............ 10/15/22 3,980 3,902
UCFC Manufactured Housing Contract,
Series 1997-3, Cl A2
6.360% ............ 02/15/11 2,940 2,974
--------
TOTAL ASSET BACKED SECURITIES
(Cost $57,942) .............................. 57,633
--------
COLLATERALIZED MORTGAGE
OBLIGATIONS -- 9.8%
Chase Commercial Mortgage Securities,
Series 1996-2, Cl A1
6.700% ............ 07/19/03 2,788 2,812
Credit Suisse First Boston Mortgage
Securities, Series 1997-C1, Cl A1C
7.240% ............ 01/01/29 3,000 3,040
FHLMC Series T-8, Cl A5
7.000% ............ 06/15/15 2,970 2,988
Housing Securities, Series 1994-I,
Cl A15
7.500% ............ 03/25/09 3,556 3,619
J.P. Morgan Commercial Mortgage
Finance, Series 1997-C5 (A) (D)
1.550% ............ 09/15/29 45,657 3,442
Merrill Lynch Mortgage Investors,
Series 1996-C1, Cl A1
7.150% ............ 04/25/28 3,803 3,843
Norwest Asset Securities, Series
1998-18, Cl A4
6.250% ............ 08/25/28 6,380 5,955
See Accompanying Notes
77
<PAGE> 80
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA INTERMEDIATE BOND FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
COLLATERALIZED MORTGAGE
OBLIGATIONS -- CONTINUED
Prudential Home Mortgage Securities,
Series 1996-7, Cl A4
6.750% ............ 06/25/11 $2,500 $ 2,455
Residential Funding Mortgage
Security I Series 1999-S12, Cl A11
6.500% ............ 05/25/29 3,210 3,126
-------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS
(Cost $32,071) .............................. 31,280
-------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 4.0%
FEDERAL HOME LOAN BANK -- 0.5%
5.860% ............ 08/03/01 95 95
6.565% ............ 01/10/03 500 503
6.135% ............ 12/23/04 1,000 1,002
-------
1,600
-------
FEDERAL HOME LOAN MORTGAGE CORPORATION -- 0.0%
Pool # 16-0015
8.250% ............ 06/01/06 19 21
-------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 3.5%
MTN, Callable 04/14/00 @ 100
7.060% ............ 04/24/02 2,000 2,020
7.340% ............ 04/14/04 1,000 1,008
Pool # 412232
6.500% ............ 01/01/28 4,056 3,974
Pool # 437764
6.500% ............ 08/01/28 3,755 3,673
Pool # 453931
6.500% ............ 11/01/28 589 577
-------
11,252
-------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 0.0%
Pool #154047
9.000% ............ 05/15/16 36 40
-------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $13,069) 12,913
-------
U.S. TREASURY OBLIGATIONS -- 25.1%
U.S. Treasury Notes
5.750%# ........... 11/15/00 14,590 14,676
6.250% ............ 02/15/03 3,000 3,058
5.750%# ........... 08/15/03 34,760 34,833
6.125%# ........... 08/15/07 21,050 21,476
U.S. Treasury Note TIPS
3.625% ............ 01/15/08 5,104 5,011
U.S. Treasury Bond
3.625%# ........... 04/15/28 1,019 974
-------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $82,156) .............................. 80,028
-------
NUMBER OF VALUE
SHARES (000) (000)
------------ -----
CASH EQUIVALENT -- 2.1%
Fidelity Domestic Money Market
Fund ................ 6,530 $ 6,530
--------
TOTAL CASH EQUIVALENT
(Cost $6,530) ............................... 6,530
--------
TOTAL INVESTMENTS -- 99.0%
(Cost $321,851) ............................. 316,124
========
OTHER ASSETS AND LIABILITIES,
NET -- 1.0% ................................. 3,082
--------
NET ASSETS:
Portfolio Shares of Class I
(unlimited authorization -- no par value)
based on 30,149,270 outstanding shares
of beneficial interest ...................... 318,591
Portfolio Shares of Class A
(unlimited authorization -- no par value)
based on 492,519 outstanding shares
of beneficial interest ...................... 5,457
Portfolio Shares of Class B
(unlimited authorization -- no par value)
based on 68,038 outstanding shares of
beneficial interest ......................... 726
Accumulated net realized gain on investments . 108
Net unrealized depreciation on investments ... (5,727)
Undistributed net investment income .......... 51
--------
TOTAL NET ASSETS -- 100.0% ..................... 319,206
========
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SHARE -- CLASS I ............................ $10.39
========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A .................. $10.41
========
MAXIMUM OFFERING PRICE PER
SHARE -- CLASS A ($10.41 / 95.25%) .......... $10.93
========
NET ASSET VALUE AND OFFERING
PRICE PER SHARE -- CLASS B .................. $10.41
========
- - -------------------------
# SECURITY FULLY OR PARTIALLY ON LOAN.
(A) VARIABLE RATE SECURITY -- THE RATE REFLECTED ONE STATEMENT OF NET
ASSETS IS THE RATE IN EFFECT ON MAY 31, 1999.
(B) PRIVATE PLACEMENT SECURITY
(C) CERTIFICATE OF PARTICIPATION
(D) INTEREST ONLY SECURITY
CL -- CLASS
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
MTN -- MEDIUM TERM NOTE
TIPS -- TREASURY INFLATED PROTECTED SECURITY
See Accompanying Notes
78
<PAGE> 81
[ARROW GRAPHIC OMITTED]
FINANCIAL HIGHLIGHTS
ARMADA INTERMEDIATE BOND FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
----------------------------------------------------------
1999 1998
---------------------------- ----------------------------
CLASS I CLASS A CLASS B CLASS I CLASS A CLASS B3
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period .............................. $ 10.59 $ 10.63 $ 10.63 $ 10.37 $ 10.42 $ 10.70
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income .................. 0.56 0.54 0.45 0.60 0.58 0.20
Net gain/ (loss) on securities
(realized and unrealized) ............. (0.14) (0.16) (0.15) 0.22 0.21 (0.07)
-------- -------- -------- -------- -------- --------
Total from investment
operations .......................... 0.42 0.38 0.30 0.82 0.79 0.13
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Dividends from net
investment income ..................... (0.56) (0.54) (0.46) (0.60) (0.58) (0.20)
Distributions from net realized
capital gains ......................... (0.06) (0.06) (0.06) (0.00) (0.00) (0.00)
Distributions in excess of
net realized capital gains ............ (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
-------- -------- -------- -------- -------- --------
Total distributions .................. (0.62) (0.60) (0.52) (0.60) (0.58) (0.20)
-------- -------- -------- -------- -------- --------
Net asset value, end of period ......... $ 10.39 $ 10.41 $ 10.41 $ 10.59 $ 10.63 $ 10.63
======== ======== ======== ======== ======== ========
TOTAL RETURN 3.98% 3.54%1 2.83% 8.09% 7.71%1 7.39%1,2
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (in 000's) ..................... $313,368 $ 5,129 $ 709 $166,710 $ 3,288 $ 2
Ratio of expenses to average
net assets ............................ 0.61% 0.86% 1.57% 0.65% 0.91% 1.60%2
Ratio of net investment income
to average net assets ................. 5.21% 4.96% 4.25% 5.71% 5.48% 3.38%2
Ratio of expenses to average
net assets before
fee waivers ........................... 0.75% 1.00% 1.71% 0.80% 1.06% 1.49%2
Ratio of net investment income
to average net assets
before fee waivers .................... 5.07% 4.82% 4.11% 5.56% 5.33% 3.49%2
Portfolio turnover rate ................ 256% 256% 256% 160% 160% 160%
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
---------------------------------------------------------------
1997 1996 1995
------------------ ------------------- -------------------
CLASS I CLASS A CLASS I CLASS A CLASS I CLASS A
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period .............................. $ 10.30 $ 10.35 $ 10.54 $ 10.60 $ 10.24 $ 10.30
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income .................. 0.60 0.57 0.61 0.59 0.63 0.61
Net gain/ (loss) on securities
(realized and unrealized) ............. 0.07 0.07 (0.22) (0.23) 0.30 0.30
-------- -------- -------- -------- -------- --------
Total from investment
operations .......................... 0.67 0.64 0.39 0.36 0.93 0.91
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Dividends from net
investment income ..................... (0.60) (0.57) (0.61) (0.59) (0.63) (0.61)
Distributions from net realized
capital gains ......................... (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
Distributions in excess of
net realized capital gains ............ (0.00) (0.00) (0.02) (0.02) (0.00) (0.00)
-------- -------- -------- -------- -------- --------
Total distributions .................. (0.60) (0.57) (0.63) (0.61) (0.63) (0.61)
-------- -------- -------- -------- -------- --------
Net asset value, end of period ......... $ 10.37 $ 10.42 $ 10.30 $ 10.35 $ 10.54 $ 10.60
======== ======== ======== ======== ======== ========
TOTAL RETURN 6.63% 6.36%1 3.79% 3.44%1 9.55% 9.26%1
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (in 000's) ..................... $121,271 $ 3,720 $111,240 $ 6,216 $ 88,047 $ 5,527
Ratio of expenses to average
net assets ............................ 0.70% 0.96% 0.80% 1.04% 0.85% 1.09%
Ratio of net investment income
to average net assets ................. 5.76% 5.52% 5.78% 5.50% 6.24% 5.95%
Ratio of expenses to average
net assets before
fee waivers ........................... 0.79% 1.05% 0.82% 1.06% 0.86% 1.10%
Ratio of net investment income
to average net assets
before fee waivers .................... 5.66% 5.44% 5.76% 5.48% 6.23% 5.94%
Portfolio turnover rate ................ 217% 217% 45% 45% 42% 42%
</TABLE>
1 TOTAL RETURN EXCLUDES SALES CHARGE.
2 ANNUALIZED.
3 CLASS B SHARES COMMENCED OPERATIONS JANUARY 6, 1998.
See Accompanying Notes
79
<PAGE> 82
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSET
ARMADA GNMA FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 80.1%
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 2.7%
Pool # 397814
6.500% ............ 12/01/12 $1,535 $ 1,531
Pool # 408074
6.500% ............ 12/01/12 139 139
Pool # 417392
6.500% ............ 02/01/28 950 931
-------
2,601
-------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 77.4%
Pool # 5147
7.250% ............ 11/15/04 109 112
Pool # 90069
9.000% ............ 05/15/09 53 57
Pool # 90223
9.000% ............ 05/15/09 62 66
Pool # 90250
9.000% ............ 05/15/09 67 72
Pool # 90332
9.000% ............ 05/15/09 31 33
Pool # 90626
9.000% ............ 05/15/09 53 57
Pool # 90923
9.000% ............ 05/15/09 97 104
Pool # 90337
9.000% ............ 06/15/09 46 50
Pool # 419305
7.000% ............ 12/15/10 1,225 1,255
Pool # 780807
7.000% ............ 06/15/11 1,971 2,021
Pool # 162246
9.000% ............ 06/15/16 27 30
Pool # 608
9.000% ............ 08/20/16 867 925
Pool # 200669
8.500% ............ 01/15/17 115 123
Pool # 183426
8.500% ............ 02/15/17 67 72
Pool # 206979
8.500% ............ 02/15/17 46 50
Pool # 203154
8.500% ............ 03/15/17 63 67
Pool # 212306
8.500% ............ 03/15/17 61 65
Pool # 210565
8.000% ............ 03/15/17 12 13
Pool # 202955
8.500% ............ 04/15/17 81 87
Pool # 228869
8.500% ............ 04/15/17 808 861
Pool # 208540
8.000% ............ 04/15/17 56 59
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- CONTINUED
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- CONTINUED
Pool # 209632
9.000% ............ 05/15/17 $ 49 $ 54
Pool # 216632
8.500% ............ 05/15/17 40 43
Pool # 199649
8.000% ............ 05/15/17 27 29
Pool # 202671
8.000% ............ 05/15/17 18 19
Pool # 220950
9.000% ............ 06/15/17 292 315
Pool # 213458
8.000% ............ 07/15/17 39 42
Pool # 231935
9.000% ............ 08/15/17 118 128
Pool # 780048
8.500% ............ 11/15/17 263 278
Pool # 289354
9.000% ............ 07/15/20 158 170
Pool # 301286
8.500% ............ 04/15/21 160 171
Pool # 302597
8.500% ............ 05/15/21 18 19
Pool # 300698
9.000% ............ 06/15/21 243 262
Pool # 248132
8.500% ............ 06/15/21 112 120
Pool # 312919
8.500% ............ 11/15/21 333 355
Pool # 314292
8.500% ............ 11/15/21 134 143
Pool # 316989
8.500% ............ 12/15/21 82 88
Pool # 303772
8.500% ............ 02/15/22 119 128
Pool # 327085
7.500% ............ 05/15/22 21 22
Pool # 333977
7.500% ............ 09/15/22 43 45
Pool # 334116
7.500% ............ 10/15/22 197 204
Pool # 336541
7.500% ............ 10/15/22 38 40
Pool # 320229
7.500% ............ 12/15/22 171 177
Pool # 340419
8.500% ............ 02/15/23 2,032 2,162
Pool # 340307
7.500% ............ 02/15/23 181 188
Pool # 329620
7.500% ............ 04/15/23 2,351 2,423
See Accompanying Notes
80
<PAGE> 83
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSET
ARMADA GNMA FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- CONTINUED
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- CONTINUED
Pool # 348778
7.500% ............ 04/15/23 $ 245 $ 253
Pool # 352189
7.500% ............ 04/15/23 14 15
Pool # 352217
7.500% ............ 04/15/23 3,998 4,122
Pool # 340792
7.500% ............ 05/15/23 19 20
Pool # 354106
7.500% ............ 05/15/23 31 32
Pool # 338766
7.500% ............ 06/15/23 242 250
Pool # 266878
7.500% ............ 07/15/23 340 350
Pool # 352143
7.500% ............ 07/15/23 18 19
Pool # 352144
7.500% ............ 07/15/23 227 234
Pool # 353185
7.500% ............ 07/15/23 2,941 3,011
Pool # 359600
7.500% ............ 07/15/23 61 63
Pool # 364258
7.500% ............ 07/15/23 107 111
Pool # 352724
7.500% ............ 08/15/23 120 124
Pool # 357235
7.500% ............ 10/15/23 461 475
Pool # 358845
7.500% ............ 10/15/23 147 152
Pool # 362619
7.500% ............ 10/15/23 313 322
Pool # 370019
7.500% ............ 10/15/23 100 103
Pool # 358308
7.500% ............ 01/15/24 243 251
Pool # 374876
7.500% ............ 01/15/24 215 221
Pool # 369696
7.500% ............ 02/15/24 155 160
Pool # 384077
8.000% ............ 04/15/24 498 521
Pool # 385654
8.000% ............ 04/15/24 584 611
Pool # 388741
7.500% ............ 04/15/24 171 177
Pool # 353023
7.500% ............ 06/15/24 207 213
Pool # 371816
7.500% ............ 06/15/24 92 95
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- CONTINUED
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- CONTINUED
Pool # 780029
9.000% ............ 11/15/24 $1,639 $ 1,771
Pool # 412760
8.750% ............ 06/15/25 229 245
Pool # 428443
7.500% ............ 05/15/26 2,071 2,127
Pool # 412663
8.000% ............ 09/15/26 2,576 2,688
Pool # 780618
8.000% ............ 08/15/27 1,468 1,528
Pool # 451898
7.500% ............ 10/15/27 2,542 2,608
Pool # 427794
7.000% ............ 01/15/28 5,459 5,476
Pool # 478016
6.500% ............ 06/15/28 1,457 1,424
Pool # 433881
6.500% ............ 07/15/28 315 308
Pool # 450934
6.500% ............ 07/15/28 626 612
Pool # 466002
6.500% ............ 07/15/28 689 673
Pool # 476113
6.500% ............ 07/15/28 2,028 1,981
Pool # 480411
6.500% ............ 07/15/28 636 621
Pool # 480412
6.500% ............ 07/15/28 568 555
Pool # 480451
6.500% ............ 07/15/28 2,263 2,210
Pool # 462641
6.000% ............ 07/15/28 2,951 2,801
Pool # 486468
7.000% ............ 08/15/28 3,685 3,696
Pool # 465549
6.500% ............ 08/15/28 1,573 1,537
Pool # 446699
6.000% ............ 08/15/28 1,487 1,411
Pool # 2673
6.500% ............ 11/20/28 3,504 3,407
Pool # 469795
7.000% ............ 12/15/28 2,947 2,954
Pool # 495838
7.000% ............ 01/15/29 2,987 2,994
Pool # 483887
6.000% ............ 01/15/29 2,013 1,911
Pool # 501561
6.500% ............ 03/15/29 2,497 2,439
Pool # 472946
6.500% ............ 05/15/29 2,500 2,441
-------
76,127
-------
See Accompanying Notes
81
<PAGE> 84
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSET
ARMADA GNMA FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- CONTINUED
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS
(Cost $78,871) .............................. $78,728
-------
ASSET BACKED SECURITIES -- 7.0%
BA Mortgage Securities, Series 1997-2,
Cl A6
7.250% ............ 10/25/27 $ 2,148 2,166
GE Capital Mortgage, Series 1999-1,
Cl A1
6.500% ............ 01/25/29 996 955
Residential Funding Mortgage Securities
I, Series 1992-S31, Cl A5
7.500% ............ 09/25/07 2,390 2,426
The Money Store Home Equity Trust,
Series 1998-A, Cl AV (A)
5.100% ............ 06/15/29 1,349 1,348
-------
TOTAL ASSET BACKED SECURITIES
(Cost $6,961) ............................... 6,895
-------
COLLATERALIZED MORTGAGE
OBLIGATIONS -- 4.8%
Credit Suisse First Boston Mortgage
Securities, Series 1997-C1, Cl A1C
7.240% ............ 01/01/29 1,100 1,115
J.P. Morgan Commercial Mortgage
Finance, Series 1997-C5 (A) (B)
1.550% ............ 09/15/29 25,257 1,904
Morgan Stanley Capital I, Series
1999-RM1, Cl A2
6.710% ............ 12/15/31 1,000 999
Residential Funding Mortgage
Securities I, Series 1998-S13,
Cl A21
6.750% ............ 06/25/28 730 711
-------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS
(Cost $5,246) ............................... 4,729
-------
U.S. TREASURY OBLIGATION -- 4.1%
U.S. Treasury Note
5.750% ............ 08/15/03 4,000 4,008
-------
TOTAL U.S. TREASURY OBLIGATION
(Cost $4,048) ............................... 4,008
-------
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA GNMA FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
CASH EQUIVALENT -- 3.5%
Goldman Sachs Financial Square
Government Money Market Fund 3,472 $ 3,472
-------
TOTAL CASH EQUIVALENT
(Cost $3,472) ............................... 3,472
-------
TOTAL INVESTMENTS -- 99.5%
(Cost $98,598) .............................. $97,832
=======
OTHER ASSETS AND LIABILITIES,
NET -- 0.5% ................................. 473
-------
NET ASSETS:
Portfolio Shares of Class I (unlimited
authorization -- no par value) based
on 9,585,582 outstanding shares of
beneficial interest ........................ 97,537
Portfolio Shares of Class A (unlimited
authorization -- no par value) based
on 148,223 outstanding shares of
beneficial interest ........................ 1,530
Accumulated net realized loss on investments . (5)
Net unrealized depreciation on investments ... (766)
Undistributed net investment income .......... 9
-------
TOTAL NET ASSETS -- 100.0% ..................... $98,305
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SHARE -- CLASS I ............................ $10.10
=======
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A .................. $10.10
=======
MAXIMUM OFFERING PRICE PER
SHARE -- CLASS A ($10.10 / 95.25%) .......... $10.60
=======
- - --------
CL -- CLASS
(A) VARIABLE RATE SECURITY -- THE RATE REFLECTED ON THE STATEMENT OF NET
ASSETS IS THE RATE IN EFFECT ON MAY 31, 1999.
(B) INTEREST ONLY SECURITY
See Accompanying Notes
82
<PAGE> 85
[ARROW GRAPHIC OMITTED]
FINANCIAL HIGHLIGHTS
ARMADA GNMA FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
----------------------------------------------------------
1999 1998 1997
----------------------------------------------------------
CLASS I CLASS A CLASS I CLASS A CLASS I3 CLASS A4
------------------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ......... $ 10.36 $ 10.36 $ 10.15 $ 10.15 $ 10.03 $ 10.02
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ...................... 0.61 0.59 0.61 0.58 0.65 0.45
Net gain/(loss) on securities
(realized and unrealized) ................. (0.20) (0.20) 0.31 0.31 0.22 0.23
-------- -------- -------- -------- -------- --------
Total from investment operations .......... 0.41 0.39 0.92 0.89 0.87 0.68
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Dividends from net investment income ....... (0.60) (0.58) (0.61) (0.58) (0.65) (0.45)
Dividends from net realized capital gains .. (0.07) (0.07) (0.10) (0.10) (0.01) (0.01)
Distributions in excess of net
realized capital gains .................... (0.00) (0.00) (0.00) (0.00) (0.09) (0.09)
-------- -------- -------- -------- -------- --------
Total distributions ....................... (0.67) (0.65) (0.71) (0.68) (0.75) (0.55)
-------- -------- -------- -------- -------- --------
Net asset value, end of period ............... $ 10.10 $ 10.10 $ 10.36 $10.36 $ 10.15 $10.15
======== ======== ======== ======== ======== ========
TOTAL RETURN ................................. 4.02% 3.75%5 9.17% 8.90%5 9.03% 8.83%1,5
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) ....... $ 96,808 $ 1,497 $83,624 $ 549 $64,501 $ 128
Ratio of expenses to average net assets .... 0.78% 1.03% 0.84% 1.09% 0.86% 1.12%1
Ratio of net investment income to average
net assets ................................ 5.92% 5.67% 5.83% 5.54% 6.45% 6.17%1
Ratio of expenses to average net assets
before fee waivers ........................ 0.78% 1.03% 0.84% 1.09% 1.01% 1.12%1
Ratio of net investment income to average
net assets before fee waivers ............. 5.9% 5.67% 5.83% 5.54% 6.30% 6.17%1
Portfolio turnover rate .................... 85% 85% 291% 291% 57% 57%
</TABLE>
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE
PERIOD ENDED YEAR ENDED PERIOD ENDED
MAY 31, 19963 APRIL 30, 19963 APRIL 30, 19953
------------ -------------- --------------
<S> <C> <C> <C>
Net asset value, beginning of period ......... $ 10.12 $ 10.16 $ 10.00
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ...................... 0.05 0.66 0.48
Net gain/(loss) on securities
(realized and unrealized) ................. (0.09) 0.14 0.16
-------- -------- --------
Total from investment operations .......... (0.04) 0.80 0.64
-------- -------- --------
LESS DISTRIBUTIONS
Dividends from net investment income ....... (0.05) (0.66) (0.48)
Dividends from net realized capital gains .. (0.00) (0.18) (0.00)
Distributions in excess of net
realized capital gains .................... (0.00) (0.00) (0.00)
-------- -------- --------
Total distributions ....................... (0.05) (0.84) (0.48)
-------- -------- --------
Net asset value, end of period ............... $ 10.03 $ 10.12 $ 10.16
======== ======== ========
TOTAL RETURN ................................. (0.35)%2,5 7.97%5 6.61%2,5
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) ....... $ 60,532 $ 62,161 $ 42,212
Ratio of expenses to average net assets .... 0.85%1 0.85% 0.85%1
Ratio of net investment income to average
net assets ................................ 6.33%1 6.30% 6.68%1
Ratio of expenses to average net assets
before fee waivers ........................ 1.28%1 1.29% 1.40%1
Ratio of net investment income to average
net assets before fee waivers ............. 5.90%1 5.86% 6.13%1
Portfolio turnover rate .................... 1% 149% 226%
</TABLE>
1 ANNUALIZED.
2 RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
3 ACTIVITY FOR THE PERIOD PRESENTED INCLUDES THAT OF THE PREDECESSOR FUND
THROUGH SEPTEMBER 6, 1996. THE PREDECESSOR FUND COMMENCED OPERATIONS ON
AUGUST 10, 1994. DURING 1996, THE PREDECESSOR FUND CHANGED ITS FISCAL
YEAR-END FROM APRIL 30 TO MAY 31.
4 CLASS A COMMENCED OPERATIONS ON SEPTEMBER 11, 1996.
5 TOTAL RETURN EXCLUDES SALES CHARGE.
See Accompanying Notes
83
<PAGE> 86
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA ENHANCED INCOME FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
CORPORATE BONDS -- 34.1%
BANKS -- 2.0%
First Union
8.125% ............ 06/24/02 $1,400 $ 1,467
-------
BEAUTY PRODUCTS -- 2.4%
Dial del Note
6.625% ............ 06/15/03 1,800 1,782
-------
COMPUTER SOFTWARE -- 1.4%
Computer Associates
6.250% ............ 04/15/03 1,025 994
-------
CONSULTING SERVICES -- 1.5%
CSC Enterprises
6.500% ............ 11/15/01 1,100 1,104
-------
DEFENSE -- 1.5%
Raytheon
5.950% ............ 03/15/01 1,100 1,097
-------
ENVIRONMENTAL SERVICES -- 2.3%
Browning Ferris
6.080% ............ 01/18/00 1,700 1,685
-------
EURO BOND -- 2.5%
Hydro Quebec (A)
5.375% ............ 07/31/02 1,850 1,850
-------
FINANCIAL SERVICES -- 4.1%
Case Credit
6.120% ............ 08/01/01 1,000 996
Ford Motor Credit
6.550% ............ 09/10/02 1,000 1,008
Prime Property Funding, Series II (B)
6.800% ............ 08/15/02 1,000 969
-------
2,973
-------
GAS & NATURAL GAS -- 1.6%
Enserch
7.000% ............ 08/15/99 1,150 1,153
-------
INDUSTRIAL -- 1.1%
Monsanto-Esop
7.090% ............ 12/15/00 780 788
-------
LEASING & RENTING -- 4.2%
Comdisco
6.000% ............ 01/30/02 2,000 1,978
Trans Ocean Container,
Callable 07/1/99 @ 106.15
12.250% ............ 07/01/04 1,000 1,090
-------
3,068
-------
PAPER & PAPER PRODUCTS -- 2.2%
Champion International
9.700% ............ 05/01/01 1,500 1,583
-------
REAL ESTATE -- 1.4%
Weingarten Realty
6.000% ............ 08/10/01 1,000 996
-------
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
CORPORATE BONDS --CONTINUED
RETAIL STORES -- 1.4%
Sears, MTN
9.750% ............ 03/21/00 $1,000 $ 1,031
-------
TELEPHONE & TELECOMMUNICATION -- 2.1%
Cable & Wireless
6.375% ............ 03/06/03 1,575 1,555
-------
TRUCKING -- 2.4%
JB Hunt
6.000% ............ 12/12/00 1,750 1,735
-------
TOTAL CORPORATE BONDS
(Cost $25,066) .............................. 24,861
-------
ASSET BACKED SECURITIES -- 33.1%
AESOP Funding, Series 1997-1, Cl A1
6.220% ............ 10/20/01 915 916
Capital Equipment, Series 1997-1,
Cl A4
6.190% ............ 02/15/02 2,855 2,871
Citibank Credit Card Master Trust,
Series 1996-1, Cl A
6.300% ............ 02/07/03 1,260 1,144
Copelco Capital Funding, Series
1997-A, Cl A4
6.470% ............ 04/20/05 2,490 2,503
Discover Card, Series 1998-4A, Cl A
5.750% ............ 10/16/03 1,060 1,045
Empire Funding, Series 1999-1, Cl A3
6.440% 04/25/13 1,500 1,494
GE Capital Mortgage, Series 1997-HE4,
Cl A4
6.765% ............ 04/25/15 1,240 1,250
Metlife Capital Equipment Loan Trust,
Series 1997-A, Cl A
6.850% ............ 05/20/08 910 924
Navistar Series 1997-B, Cl A
6.300% ............ 08/15/04 4,060 4,086
Pegasus Aviation Lease Securitization,
Series 1999-1, Cl A1 (B)
6.300% ............ 03/25/29 1,463 1,441
PNC Student Loan Trust I, Series
1997-2, Cl A4
6.446% ............ 01/25/02 915 921
Sears Credit Account Master Trust, Series
1996-4, Cl A
6.450% ............ 10/16/06 790 788
Westo, Series 1999-A, Cl A4
5.700% ............ 11/20/03 2,750 2,741
World Omni Automobile Lease Securitization
Trust, Series 1997-A, Cl A3
6.850% ............ 06/25/03 594 604
See Accompanying Notes
84
<PAGE> 87
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA ENHANCED INCOME FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
ASSET BACKED SECURITIES -- CONTINUED
World Omni Automobile Lease Securitization Trust,
Series 1997, Cl A3 (B)
5.962% ............ 08/14/01 $1,410 $ 1,405
-------
TOTAL ASSET BACKED SECURITIES
(Cost $24,156) .............................. 24,133
-------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 9.5%
Evans Withycombe, Series 1, Cl A
7.980% ............ 08/01/01 1,395 1,457
Federal National Mortgage Association
Series 1997-26, Cl E
5.000% ............ 11/18/20 1,696 1,678
Series 1999-W4, Cl A
6.250% ............ 10/25/08 2,494 2,485
Merrill Lynch Mortgage Investors,
Series 1996-C1, Cl A1
7.150% ............ 04/25/28 1,288 1,302
Series 1998-GN1, Cl A1
7.110% ............ 08/25/27 23 24
-------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS
(Cost $6,951) ............................... 6,946
-------
MORTGAGE-BACKED SECURITIES -- 10.0%
Champion Home Equity Loan, Series 1998-1,
Cl A2
8.120% ............ 09/25/01 6,000 1,000
Countrywide Home Loans, Series 1997-8,
Cl A2
6.750% ............ 01/25/28 2,910 2,912
Oakwood Mortgage,Series 1997-B,
Cl B
6.950% ............ 08/15/27 2,000 2,013
Residential Asset Securitization Trust,
Series 1997-A1, Cl A1
7.000% ............ 03/25/27 1,339 1,341
-------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $7,366) ............................... 7,266
-------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 2.7%
Federal National Mortgage Association
Pool #426798 7.500% ..... 07/01/08 1,643 1,692
Small Business Administration
Pool #503115 8.975% ..... 04/25/09 272 289
-------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $1,983) ............................... 1,981
-------
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
U.S. TREASURY OBLIGATIONS -- 9.1%
U.S. TREASURY NOTES -- 9.1%
5.750%# 11/15/00 $2,560 $ 2,575
5.750%# 08/15/03 4,000 4,009
-------
6,584
-------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $6,715) ............................... 6,584
-------
CASH EQUIVALENT -- 2.1%
Fidelity Domestic Money Market
Fund ................ 1,519 1,519
-------
TOTAL CASH EQUIVALENT
(Cost $1,519) ............................... 1,519
-------
TOTAL INVESTMENTS -- 100.6%
(Cost $73,756) .............................. $73,290
=======
OTHER ASSETS AND LIABILITIES,
NET -- (0.6%) ............................... (449)
-------
NET ASSETS:
Portfolio Shares of Class I
(unlimited authorization no par value)
based on 7,261,308 outstanding shares
of beneficial interest 72,877
Portfolio Shares of Class A
(unlimited authorization no par value)
based on 55,120 outstanding shares of
beneficial interest 563
Accumulated net realized loss on investments (118)
Net unrealized depreciation on investments (466)
Distributions in excess of net investment income (15)
-------
TOTAL NET ASSETS -- 100.0% ..................... $72,841
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SHARE -- CLASS I ............................ $9.96
=======
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A .................. $9.99
=======
MAXIMUM OFFERING PRICE PER
SHARE -- CLASS A ($9.99 / 97.25%) ........... $10.27
=======
- - ----------
# SECURITY FULLY OR PARTIALLY ON LOAN.
(A) VARIABLE RATE SECURITY -- THE RATE REFLECTED ON THE STATEMENT OF NET
ASSETS IS THE RATE IN EFFECT ON MAY 31, 1999.
(B) PRIVATE PLACEMENT SECURITY
CL -- CLASS
MTN -- MEDIUM TERM NOTE
See Accompanying Notes
85
<PAGE> 88
[ARROW GRAPHIC OMITTED]
FINANCIAL HIGHLIGHTS
ARMADA ENHANCED INCOME FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
------------------------------------------------------------------------------
1999 1998 1997 1996
------------------ ------------------ ------------------ ------------------
CLASS I CLASS A CLASS I CLASS A CLASS I CLASS A CLASS I CLASS A
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..... $ 10.06 $ 10.08 $ 9.99 $ 10.00 $ 10.01 $ 10.02 $ 10.16 $ 10.18
-------- -------- -------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .................. 0.56 0.56 0.57 0.57 0.58 0.57 0.58 0.56
Net gain/ (loss) on securities
(realized and unrealized) ............ (0.05) (0.05) 0.08 0.09 0.01 0.01 (0.05) (0.05)
-------- -------- -------- -------- -------- -------- -------- --------
Total from investment operations ..... 0.51 0.51 0.65 0.66 0.59 0.58 0.53 0.51
-------- -------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Dividends from net investment income ... (0.56) (0.55) (0.57) (0.57) (0.58) (0.57) (0.58) (0.56)
Dividends in excess of net
investment income .................... 0.00 0.00 (0.00) (0.00) (0.00) (0.00) (0.10) (0.11)
Distributions from net realized
capital gains ........................ (0.05) (0.05) (0.01) (0.01) (0.03) (0.03) (0.00) (0.00)
-------- -------- -------- -------- -------- -------- -------- --------
Total distributions .................. (0.61) (0.60) (0.58) (0.58) (0.61) (0.60) (0.68) (0.67)
-------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of period ........... $ 9.96 $ 9.99 $ 10.06 $ 10.08 $ 9.99 $ 10.00 $ 10.01 $ 10.02
======== ======== ======== ======== ======== ======== ======== ========
TOTAL RETURN ............................. 5.14% 4.94%3 6.68% 6.68%3 6.02% 5.91%3 5.36% 5.13%3
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) ... $ 72,291 $ 550 $ 71,888 $ 559 $ 61,031 $ 2,051 $ 66,918 $ 1,718
Ratio of expenses to average net assets 0.43% 0.53% 0.33% 0.41% 0.21% 0.31% 0.23% 0.33%
Ratio of net investment income to
average net assets ................... 5.49% 5.39% 5.69% 5.65% 5.74% 5.63% 5.72% 5.55%
Ratio of expenses to average net assets
before fee waivers ................... 0.65% 0.75% 0.69% 0.80% 0.66% 0.75% 0.70% 0.80%
Ratio of net investment income to
average net assets before fee waivers 5.27% 5.17% 5.33% 5.26% 5.29% 5.18% 5.25% 5.08%
Portfolio turnover rate ................ 190% 190% 135% 135% 225% 225% 98% 98%
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
ENDED MAY 31, 1995
---------------------
CLASS I1 CLASS A1
-------- --------
<S> <C> <C>
Net asset value, beginning of period ..... $ 10.00 $ 10.10
-------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .................. 0.515 0.435
Net gain/ (loss) on securities
(realized and unrealized) ............ 0.06 0.06
-------- --------
Total from investment operations ..... 0.57 0.49
-------- --------
LESS DISTRIBUTIONS
Dividends from net investment income ... (0.41) (0.41)
Dividends in excess of net
investment income .................... (0.00) (0.00)
Distributions from net realized
capital gains ........................ (0.00) (0.00)
-------- --------
Total distributions .................. (0.41) (0.41)
-------- --------
Net asset value, end of period ........... $ 10.16 $ 10.18
======== ========
TOTAL RETURN ............................. 6.54%2,4 6.84%2,3,4
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) ... $ 60,467 $ 2,547
Ratio of expenses to average net assets 0.21%2 0.32%2
Ratio of net investment income to
average net assets ................... 5.70%2 5.89%2
Ratio of expenses to average net assets
before fee waivers ................... 0.71%2 0.79%2
Ratio of net investment income to
average net assets before fee waivers 5.20%2 5.42%2
Portfolio turnover rate ................ 36% 36%
</TABLE>
1 CLASS I AND CLASS A COMMENCED OPERATIONS ON JULY 7, 1994 AND
SEPTEMBER 9, 1994, RESPECTIVELY.
2 ANNUALIZED.
3 TOTAL RETURN EXCLUDES SALES CHARGE.
4 TOTAL RETURNS HAVE BEEN ANNUALIZED BASED UPON THE PERIOD FROM EACH CLASS'
COMMENCEMENT DATE THROUGH MAY 31, 1995. GROSS TOTAL RETURNS OF THE CLASS I
AND CLASS A FOR THE PERIOD WERE 5.87% AND 4.92%, RESPECTIVELY.
5 CALCULATION BASED UPON AVERAGE SHARES OUTSTANDING.
See Accompanying Notes
86
<PAGE> 89
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA OHIO TAX EXEMPT FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- 97.9%
OHIO -- 97.5%
Akron (GO)
10.500% ............ 12/01/99 $ 100 $ 104
6.000% ............ 12/01/12 1,000 1,101
Akron, Economic Development
(RB) (MBIA)
5.750% ............ 12/01/09 1,680 1,835
6.000% ............ 12/01/12 935 1,045
Akron, Sewer System (RB)
(MBIA)
5.650% ............ 12/01/08 560 605
(FGIC)
5.500% ............ 12/01/11 1,035 1,106
Akron Waterworks (RB)
(FGIC)
5.150% ............ 03/01/01 500 512
(MBIA)
4.900% ............ 03/01/08 1,500 1,541
Allen County (GO) (AMBAC)
4.950% ............ 12/01/04 500 520
Ashland City School District (GO)
4.950% ............ 12/01/07 345 358
(AMBAC)
5.000% ............ 12/01/08 250 260
5.100% ............ 12/01/09 245 254
Avon Local School District (GO)
(AMBAC)
5.800% ............ 12/01/12 1,000 1,077
Bay Village City School District,
Prerefunded 12/01/00 @ 102 (GO)
7.350% ............ 12/01/11 200 215
Beavercreek Local School District
(GO) (FGIA)
5.250% ............ 12/01/07 1,130 1,195
Berea (GO)
7.000% ............ 12/01/99 400 408
Big Walnut Local School District
(AMBAC)
6.900% ............ 06/01/00 235 243
7.000% ............ 06/01/01 220 234
Bowling Green City School District,
Prerefunded 12/01/99 @ 102 (GO)
7.000% ............ 12/01/02 260 270
Brown County (GO) (AMBAC)
5.200% ............ 12/01/04 455 479
Butler County, Sewer System (RB)
(AMBAC) Pre-Refunded 12/01/02 @101
6.000% ............ 12/01/04 500 539
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
Butler County, Sewer System (RB) (AMBAC)
4.600% ............ 12/01/09 $1,540 $1,542
4.600% ............ 12/01/10 1,520 1,507
Butler County, Transportation (RB) (FSA)
5.500% ............ 04/01/09 1,150 1,225
Celina City School District (GO) (FGIC)
5.250% ............ 12/01/20 1,750 1,750
Centerville (GO) (MBIA)
5.650% ............ 12/01/18 500 528
Centerville City School District
(GO) (FGIC)
5.500% ............ 12/01/07 500 537
Cincinnati (GO)
5.375% ............ 12/01/99 250 253
Clermont County, Hospital Facility,
Mercy Healthcare, Prerefunded
09/01/99 @ 102 (RB) (AMBAC)
7.500% ............ 09/01/19 770 793
Clermont County, Waterworks (RB)
(AMBAC)
5.300% ............ 12/01/05 500 531
Cleveland Heights (GO)
5.400% ............ 12/01/00 900 926
Cleveland Ohio, Cap Appreciation (RB) (B)
0.000% ............ 12/01/07 810 554
0.000% ............ 12/01/09 825 505
0.000% ............ 12/01/10 815 470
0.000% ............ 12/01/13 815 358
0.000% ............ 12/01/18 820 269
0.000% ............ 12/01/19 815 253
Cleveland, Regional Sewer District Water,
Prerefunded 05/15/04 @ 100 (RB)
6.750% ............ 04/01/07 600 670
Cleveland, Waterworks, Prerefunded
01/01/02 @ 102 (RB) (AMBAC) Cl A
6.500% ............ 01/01/21 1,000 1,082
(MBIA)
5.400% ............ 01/01/06 500 531
Columbus (GO)
5.250% ............ 05/01/02 1,000 1,040
5.300% ............ 05/01/03 1,000 1,050
5.250% ............ 05/15/08 1,000 1,061
Columbus City, School District,
Prerefunded 12/01/99 @ 102 (GO)
(AMBAC)
6.950% ............ 12/01/02 100 104
7.050% ............ 12/01/08 500 519
See Accompanying Notes
87
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[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA OHIO TAX EXEMPT FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
Columbus City, School District,
Prerefunded 12/01/00 @ 102 (GO)
(FGIC)
7.000% ............ 12/01/11 $ 100 $ 107
Prerefunded 12/01/02 @ 102 (GO)
(FGIC)
6.650% ............ 12/01/12 900 998
Columbus, Sewer (RB)
6.200% ............ 06/01/04 1,500 1,620
Columbus, Water System (RB)
6.000% ............ 11/01/02 330 353
Columbus, Water System (GO)
5.800% ............ 02/15/01 500 517
Cuyahoga County (GO)
5.650% ............ 05/15/18 600 637
Cuyahoga County, Hospital, Cleveland
Clinic Foundation (RB)
6.000% ............ 11/15/03 890 961
6.125% ............ 11/15/04 840 906
Cuyahoga County, Prerefunded
10/01/99 @ 102 (GO)
6.900% ............ 10/01/03 600 619
10/01/01 @ 102 (GO)
7.000% ............ 10/01/13 100 109
Cuyahoga County, University Hospital
System Health Project (RB) Series B
6.000% ............ 01/15/03 400 427
(MBIA) Series A
6.000% ............ 01/15/06 1,000 1,091
5.250% ............ 01/15/08 2,000 2,102
Cuyahoga Falls, Callable 12/01/07
@ 102 (GO)
5.250% ............ 12/01/17 2,500 2,528
Dayton, Airport (RB) (AMBAC)
5.400% ............ 12/01/06 1,000 1,067
5.150% ............ 12/01/07 1,000 1,052
Delaware City School District (GO) (FGIC)
5.250% ............ 12/01/06 770 815
Delaware County (GO)
5.250% ............ 12/01/06 500 529
5.450% ............ 12/01/08 250 266
Delaware (GO)
6.125% ............ 04/01/00 500 512
Delphos, Sewer System Management,
Prerefunded 09/01/00 @ 102 (RB) (FSA)
7.200% ............ 09/01/10 200 213
Euclid, Prerefunded 12/01/99 @ 102 (GO)
7.375% ............ 12/01/09 450 468
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
Forest Hills Local School District (GO)
(MBIA)
6.000% ............ 12/01/08 $1,210 $1,349
6.000% ............ 12/01/09 830 925
Franklin County (GO)
6.500% ............ 09/01/99 100 101
5.050% ............ 12/01/05 2,000 2,102
5.450% ............ 12/01/09 1,000 1,059
Franklin County, Prerefunded 12/01/01
@ 102 (GO)
6.000% ............ 12/01/03 500 535
6.300% ............ 12/01/09 250 269
Franklin County, Convention Facilities
Authority Tax & Lease (BAN) (MBIA)
6.700% ............ 12/01/99 500 509
Franklin County, Hospital,
Children's Hospital (RB)
6.000% ............ 11/01/06 1,035 1,136
Doctors Healthcare (RB)
4.750% ............ 12/01/03 2,175 2,148
Holy Cross Health System (RB)
5.875% ............ 06/01/21 2,000 2,125
Riverside United Hospital Project,
Prerefunded 05/15/00 @ 102 (MBIA)
7.125% ............ 05/15/05 1,000 1,056
7.600% ............ 05/15/20 1,500 1,589
US Health Group (RB) (A) (C)
4.500% ............ 12/01/20 1,000 1,008
Granville Exempted Village School
District (ETM) (GO) (AMBAC)
4.650% ............ 12/01/05 500 512
Greater Cleveland Regional
Transportation Authority (RB) (FGIC)
4.750% ............ 12/01/16 2,850 2,732
Greene County, Water Works Systems
(RB) (AMBAC)
5.300% ............ 12/01/05 500 531
Hamilton County (GO)
5.750% ............ 12/01/01 250 262
5.500% ............ 12/01/07 240 259
5.000% ............ 12/01/08 675 692
5.125% ............ 12/01/08 1,000 1,050
5.100% ............ 12/01/11 1,025 1,043
5.000% ............ 12/01/20 2,060 2,008
Hamilton County, Childrens Hospital
Facility (RB) (MBIA)
5.375% 05/15/13 1,100 1,147
See Accompanying Notes
88
<PAGE> 91
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA OHIO TAX EXEMPT FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
Hamilton County, Sewer System (RB)
6.200% ............ 12/01/00 $1,000 $1,039
6.300% ............ 12/01/01 65 69
(FGIC)
5.300% ............ 12/01/06 1,000 1,061
5.400% ............ 12/01/08 1,000 1,069
5.500% ............ 12/01/10 1,240 1,331
5.000% ............ 12/01/17 1,000 986
(ETM)
6.300% ............ 12/01/01 35 37
Hamilton (GO) (FSA)
5.050% ............ 11/01/21 1,630 1,579
Hancock County (GO)
5.750% ............ 12/01/16 500 541
Hilliard City School District (GO)
5.300% ............ 12/01/99 250 252
Prerefunded
12/01/01 @ 102 (GO)
5.900% ............ 12/01/04 1,000 1,067
(FGIC)
6.150% ............ 12/01/01 625 660
Hudson Local School District (GO)
(FGIC)
5.000% ............ 12/15/02 500 518
Kenston Local School District (GO)
5.550% ............ 12/01/03 500 531
Kent (GO)
5.200% ............ 12/01/18 500 501
Kent State University (RB) (AMBAC)
6.150% 05/01/04 250 270
Kettering, Prerefunded 12/01/00
@ 102 (GO)
7.200% ............ 12/01/02 480 515
Kettering (GO)
5.150% ............ 12/01/05 550 579
Lakewood, Prerefunded 12/01/02
@ 102 (GO)
6.500% ............ 12/01/12 1,500 1,652
Lakewood (GO)
5.000% ............ 12/01/08 1,055 1,096
4.900% ............ 12/01/11 1,070 1,078
Lakota Local School District,
Prerefunded 12/01/00 @ 101 (GO)
7.000% ............ 12/01/03 200 212
(AMBAC)
5.700% ............ 12/01/05 250 271
(FGIC)
5.000% ............ 12/01/12 1,000 1,019
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
Licking County (GO) (FGIC)
7.000% ............ 12/01/02 $ 100 $ 110
5.750% ............ 12/01/15 550 600
5.750% ............ 12/01/16 400 434
Loveland City School District (GO)
6.000% ............ 12/01/00 250 259
Lucas County, Hospital, Mercy Hospital
(ETM) (RB)
6.000% ............ 09/01/04 170 178
Marysville Exempted Village School
District (GO) (AMBAC)
5.100% ............ 12/01/04 500 524
Mason City School District (GO) (FGIC)
5.200% ............ 12/01/08 865 899
Massillon City School District,
Prerefunded 12/01/00 @ 102 (GO)
(AMBAC)
6.950% ............ 12/01/03 300 321
7.000% ............ 12/01/04 150 161
Medina City School District (GO) (FGIC)
5.000% ............ 12/01/12 1,000 1,008
Miami University General Receipts (RB)
5.400% ............ 12/01/05 1,000 1,058
Miamisburg, Sewer System (RB) (AMBAC)
5.000% ............ 11/15/08 500 516
Montgomery County,
Catholic Health Initiatives (RB)
5.000% ............ 12/01/08 1,000 1,031
5.000% ............ 12/01/09 1,000 1,020
Sisters of Charity Health Care (RB)
(MBIA)
6.500% ............ 05/15/08 300 321
Solid Waste (RB) (MBIA)
5.300% ............ 11/01/07 1,000 1,060
5.125% ............ 11/01/08 500 520
5.350% ............ 11/01/10 900 942
Water (RB) (AMBAC)
5.250% ............ 11/15/06 500 529
Newark (GO) (AMBAC)
5.450% ............ 12/01/02 1,000 1,051
North Canton City School District (GO)
(AMBAC)
5.000% ............ 12/01/12 1,000 1,009
5.250% ............ 12/01/01 500 518
5.750% ............ 12/01/06 250 271
See Accompanying Notes
89
<PAGE> 92
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA OHIO TAX EXEMPT FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
Northeast Ohio Regional Sewer District
Wastewater, Prerefunded 11/15/01
@ 101 (RB) (AMBAC)
6.400% ............ 11/15/03 $ 250 $ 268
Wastewater, Prerefunded 11/01/01
@ 101 (RB) (AMBAC)
6.500% ............ 11/15/08 250 268
Wastewater, Prerefunded 11/15/01
@ 101 (RB) (AMBAC)
6.500% ............ 11/15/16 500 537
Northwest Local School District (GO)
(FGIC)
5.400% ............ 12/01/09 520 554
Oak Hills Local School District (GO)
5.650% ............ 12/01/07 350 380
5.125% ............ 12/01/25 1,250 1,234
Ohio State (GO)
5.000% ............ 08/01/00 500 509
5.150% ............ 09/01/01 500 516
4.700% ............ 08/01/03 1,000 1,030
6.600% ............ 09/01/03 150 165
5.200% ............ 08/01/08 1,000 1,041
Series A
5.400% ............ 10/01/07 1,370 1,439
Series C
4.700% ............ 04/01/04 1,000 1,030
Prerefunded 08/01/05 @ 102 (GO)
6.200% ............ 08/01/12 860 962
Ohio State, Air Quality Development
Authority,
Power Company Project (RB) (AMBAC)
7.400% 08/01/09 190 195
Buckeye Power Project (RB)
5.250% ............ 08/01/07 400 414
Ohio State, Building Authority Facilities,
Adult Correctional Building Fund,
(RB) Series A
6.125% ............ 10/01/09 1,300 1,415
Correctional Facilities Project,
Prerefunded 08/01/99 @ 102 (RB)
Series A
7.350% ............ 08/01/04 600 616
(RB)
5.200% ............ 10/01/04 500 526
Highway Safety Building (RB) (MBIA)
5.400% ............ 10/01/02 250 262
James Rhodes Project, (RB) Series A
5.900% ............ 06/01/00 500 513
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
Ohio State, Building Authority Facilities,
Juvenile Correctional Building (RB)
5.800% ............ 10/01/02 $ 250 $ 265
Ohio State, Department of Administrative
Services (RB) (AMBAC)
5.000% ............ 12/15/12 1,210 1,222
Ohio State, Higher Educational Facility,
Case Western Reserve University Project,
Prerefunded 10/01/00 @ 102 (RB)
Series B
7.125% ............ 10/01/14 60 64
(RB) (AMBAC) Series B
5.875% ............ 12/01/01 500 525
5.000% ............ 10/01/10 905 924
Denison University Project (RB)
5.250% ............ 11/01/09 1,000 1,041
5.000% ............ 07/01/18 600 584
John Carroll University Project (RB)
5.750% ............ 04/01/19 1,000 1,028
University of Dayton (RB)
5.875% ............ 12/01/04 250 265
Ohio State, Highways (GO)
4.750% ............ 05/15/02 1,000 1,026
Ohio State, Housing Financial Agency,
Single Family Mortgage (RB)
7.400% ............ 03/01/05 40 42
7.400% ............ 09/01/05 40 42
7.600% ............ 09/01/16 120 125
6.375% ............ 04/01/17 85 87
Ohio State, Infrastructure
Improvement (GO)
5.250% ............ 08/01/03 1,265 1,330
Ohio State, Public Facilities,
Higher Education (RB)
Series II-A
5.500% ............ 12/01/00 500 515
(AMBAC) Series II-A
5.200% ............ 05/01/06 500 523
5.200% ............ 05/01/07 1,000 1,041
4.250% ............ 12/01/07 1,000 990
(AMBAC) Series II-B
5.700% ............ 11/01/03 1,000 1,069
Mental Health (RB)
(MBIA)
6.800% ............ 12/01/02 2,000 2,069
(FSA)
5.000% ............ 12/01/02 1,500 1,553
Ohio State, School District, School
Bus Project (GO) (AMBAC)
5.250% ............ 04/15/00 440 447
See Accompanying Notes
90
<PAGE> 93
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA OHIO TAX EXEMPT FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
Ohio State, Special Obligation
Elementary & Secondary Education
(RB) (AMBAC)
5.000% ............ 06/01/07 $5,000 $ 5,200
Ohio State, Turnpike Commission (RB)
(FGIC)
Series A
5.500% ............ 02/15/17 1,805 1,911
Series AA
5.500% ............ 02/15/18 1,000 1,056
Ohio State, University General Receipts
5.150% ............ 12/01/00 250 256
5.400% ............ 12/01/02 1,500 1,573
Ohio State, Unlimited Tax (GO)
5.000% ............ 05/01/06 1,000 1,045
Ohio State, Water Control Loan Fund,
Water Quality, (RB) (MBIA)
5.000% ............ 06/01/09 1,000 1,029
Ohio State, Water Development Authority,
Revenue Refunding & Improvement,
Pure Water (RB) (MBIA)
5.500% ............ 06/01/01 200 207
5.500% ............ 12/01/01 1,000 1,041
5.550% ............ 06/01/04 1,000 1,065
5.750% ............ 12/01/05 500 534
(AMBAC)
5.600% ............ 06/01/07 1,500 1,613
Fresh Water (RB) (AMBAC)
5.400% ............ 12/01/04 510 543
7.250% ............ 12/01/08 500 573
(RB)
8.000% ............ 12/01/99 150 154
Pollution Control Facilities (RB)
5.900% ............ 06/01/00 500 513
5.900% ............ 12/01/02 320 341
Olentangy Local School District (GO)
Series 97 (C)
5.050% ............ 12/01/09 700 728
Ontario Local School District (GO) (FSA)
4.800% ............ 12/01/11 790 788
4.900% ............ 12/01/12 630 630
Orrville Electric System (RB) (AMBAC)
5.500% ............ 12/01/08 1,220 1,313
Ottawa County (GO) (MBIA)
5.500% ............ 09/01/10 500 533
5.400% ............ 09/01/11 500 524
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
Parma City School District (AN)
4.600% ............ 12/01/03 $1,360 $ 1,370
4.600% ............ 12/01/04 1,360 1,367
Perrysburg Village School District (GO)
(FSA) Series B
5.750% ............ 12/01/12 1,225 1,337
Portage County (GO)
6.000% ............ 12/01/03 915 989
5.100% ............ 12/01/12 2,500 2,541
Portage County, Hospital Facility,
Robinson Memorial (RB) (MBIA)
5.625% ............ 11/15/07 1,000 1,075
Richland County (GO) (AMBAC)
5.200% ............ 12/01/08 515 540
Rocky River City School District (GO)
5.100% ............ 12/01/07 625 656
Sandusky County, Hospital Facility (RB)
4.900% ............ 01/01/05 500 498
Springfield Local School District (GO)
6.100% ............ 12/01/03 250 272
Strongsville (GO)
5.900% ............ 12/01/15 1,575 1,736
Strongsville City School District (GO)
(MBIA)
4.900% ............ 12/01/05 550 571
5.150% ............ 12/01/08 1,000 1,050
5.200% ............ 12/01/09 670 704
Summit County (GO) (FGIC)
5.000% ............ 12/01/04 500 521
Sycamore City School District (GO)
5.500% ............ 12/01/12 390 414
5.500% ............ 12/01/13 410 435
5.500% ............ 12/01/14 435 461
Toledo (GO)
7.375% ............ 12/01/99 500 510
7.375% ............ 12/01/01 100 108
University of Cincinnati,
General Receipts (RB)
5.350% ............ 06/01/08 1,000 1,039
5.500% ............ 06/01/10 525 557
5.500% ............ 06/01/11 555 584
7.000% ............ 06/01/11 500 536
Prerefunded 06/01/99 @ 102 (RB)
Series I1
7.000% ............ 06/01/01 400 408
7.100% ............ 06/01/10 200 204
Series W
5.700% ............ 06/01/12 1,240 1,294
See Accompanying Notes
91
<PAGE> 94
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA OHIO TAX EXEMPT FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
University of Toledo General Receipts
(RB) (FGIC)
5.300% ............ 06/01/01 $ 175 $ 180
Upper Arlington (GO)
6.200% ............ 12/01/01 270 285
Upper Arlington, City School District
(GO) (MBIA)
6.000% ............ 12/01/05 1,170 1,287
(GO)
5.125% ............ 12/01/19 1,000 995
Vandalia (GO)
5.350% ............ 12/01/09 505 535
Washington County, Hospital, Marietta
Area Healthcare (RB) (FSA)
5.375% ............ 09/01/18 1,500 1,532
West Clermont Local School District
(GO) (AMBAC)
5.650% ............ 12/01/08 1,030 1,115
West Geauga Local School District
(GO) (AMBAC)
5.650% ............ 11/01/06 1,000 1,079
Westerville (GO)
5.250% ............ 12/01/09 1,885 1,998
5.250% ............ 12/01/10 1,990 2,090
5.250% ............ 12/01/12 1,755 1,816
5.250% ............ 12/01/13 1,850 1,906
Westlake (GO)
5.300% ............ 12/01/03 500 528
Westlake City School District (GO)
Series A
6.200% ............ 12/01/06 1,635 1,825
Wilmington City School District (GO)
(FGIC)
5.350% ............ 12/01/00 225 231
Worthington City School District (GO)
(FGIC)
5.800% ............ 12/01/01 1,200 1,257
5.850% ............ 12/01/02 500 532
Wright State University General Receipts
(RB) (AMBAC)
4.900% ............ 05/01/05 500 518
Wyoming City School District (GO)
(FGIC)
5.750% ............ 12/01/13 135 147
5.750% ............ 12/01/14 690 750
5.750% ............ 12/01/17 400 433
--------
204,913
--------
PAR/SHARES VALUE
(000) (000)
---------- -----
MUNICIPAL BONDS -- CONTINUED
PUERTO RICO -- 0.4%
Commonwealth of Puerto Rico,
Prerefunded 07/01/00 @ 102 (GO)
(FGIC)
7.200% ............ 07/01/03 $ 500 $ 531
Housing Financial Corporation (RB)
(A) (C)
7.300% ............ 10/01/06 190 197
7.400% ............ 04/01/07 210 218
--------
946
--------
TOTAL MUNICIPAL BONDS
(Cost $201,801) ............................. 205,859
--------
CASH EQUIVALENT -- 1.5%
Federated Ohio Municipal Cash Trust 3,058 3,058
--------
TOTAL CASH EQUIVALENT
(Cost $3,058) ............................... 3,058
--------
TOTAL INVESTMENTS -- 99.4%
(Cost $204,859) ............................. $208,917
========
OTHER ASSETS AND LIABILITIES,
NET -- 0.6% ................................. 1,256
--------
See Accompanying Notes
92
<PAGE> 95
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA OHIO TAX EXEMPT FUND
MAY 31, 1999
VALUE
(000)
-----
NET ASSETS:
Portfolio Shares of Class I
(unlimited authorization -- no par value)
based on 18,612,428 outstanding shares of
beneficial interest ......................... $201,328
Portfolio Shares of Class A
(unlimited authorization -- no par value)
based on 437,155 outstanding shares of
beneficial interest ......................... 4,582
Accumulated net realized gain on investments . 143
Net unrealized appreciation on investments ... 4,058
Undistributed net investment income .......... 62
--------
TOTAL NET ASSETS -- 100.0% ..................... $210,173
========
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SHARE -- CLASS I ............................ $11.03
========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A .................. $11.00
========
MAXIMUM OFFERING PRICE PER
SHARE -- CLASS A ($11.00 / 97.00%) .......... $11.34
========
- - ------------
(A) VARIABLE RATE SECURITY -- THE RATE REFLECTED IN THE NET ASSETS IS THE RATE
IN EFFECT ON MAY 31, 1999
(B) ZERO COUPON
(C) SECURITY IS BACKED BY A LETTER OF CREDIT BACKED BY A MAJOR FINANCIAL
INSTITUTION.
AMBAC -- AMERICAN MUNICIPAL BOND ASSURANCE CORPORATION
AN -- ANTICIPATION NOTE
BAN -- BONANTICIPATION NOTE
ETM -- ESCROWED TO MATURITY
FGIA -- FEDERAL GUARANTY INSANCE AGENCY
FGIC -- FEDERAL GUARANTY INSURANCE COMPANY
FSA -- FEDERAL SECURITY ASSANCE
GO -- GENERAL OBLIGATION
MBIA -- MUNICIPAL BOND INSURANCE ASSOCIATION
RB -- REVENUE BOND
See Accompanying Notes
93
<PAGE> 96
[ARROW GRAPHIC OMITTED]
FINANCIAL HIGHLIGHTS
ARMADA OHIO TAX EXEMPT FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
--------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------------ ------------------ ------------------ ------------------ ------------------
CLASS I CLASS A CLASS I CLASS A CLASS I CLASS A CLASS I CLASS A CLASS I CLASS A
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period .................. $ 11.13 $ 11.09 $ 10.86 $ 10.82 $ 10.70 $ 10.66 $ 10.74 $ 10.70 $ 10.57 $ 10.53
-------- -------- -------- -------- -------- -------- -------- -------- ------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income ...... 0.53 0.52 0.51 0.51 0.51 0.51 0.50 0.50 0.50 0.50
Net gain/(loss) on
securities (realized and
unrealized) ............... (0.09) (0.08) 0.28 0.28 0.16 0.16 (0.04) (0.04) 0.17 0.17
-------- -------- -------- -------- -------- -------- -------- -------- ------- --------
Total from investment
operations ........... 0.44 0.44 0.79 0.79 0.67 0.67 0.46 0.46 0.67 0.67
-------- -------- -------- -------- -------- -------- -------- -------- ------- --------
LESS DISTRIBUTIONS
Dividends from net
investment income ......... (0.53) (0.52) (0.51) (0.51) (0.51) (0.51) (0.50) (0.50) (0.50) (0.50)
Distributions from net
realized capital gains .... (0.01) (0.01) (0.01) (0.01) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
-------- -------- -------- -------- -------- -------- -------- -------- ------- --------
Total distributions .... (0.54) (0.53) (0.52) (0.52) (0.51) (0.51) (0.50) (0.50) (0.50) (0.50)
-------- -------- -------- -------- -------- -------- -------- -------- ------- --------
Net asset value, end of
period ..................... $ 11.03 $ 11.00 $ 11.13 $ 11.09 $ 10.86 $ 10.82 $ 10.70 $ 10.66 $ 10.74 $ 10.70
======== ======== ======== ======== ======== ======== ======== ======== ======= ========
TOTAL RETURN ................. 3.94% 3.93%1 7.43% 7.39%1 6.37% 6.38%1 4.36% 4.35%1 6.61% 6.64%1
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's) ................ $205,365 $ 4,808 $165,395 $ 4,037 $ 91,366 $ 3,535 $82,886 $2,869 $71,996 $3,168
Ratio of expenses to
average net assets ........ 0.28% 0.38% 0.25% 0.25% 0.24% 0.24% 0.26% 0.26% 0.24% 0.24%
Ratio of net investment
income to average
net assets ................ 4.77% 4.67% 4.67% 4.59% 4.71% 4.71% 4.68% 4.68% 4.82% 4.82%
Ratio of expenses to
average net assets
before fee waivers ........ 0.78% 0.88% 0.80% 0.80% 0.79% 0.79% 0.83% 0.83% 0.80% 0.78%
Ratio of net investment
income to average net
assets before fee waivers . 4.27% 4.17% 4.12% 4.04% 4.16% 4.16% 4.11% 4.11% 4.26% 4.27%
Portfolio turnover rate .... 19% 19% 15% 15% 23% 23% 10% 10% 3% 3%
</TABLE>
1 TOTAL RETURN EXCLUDES SALES CHARGE.
See Accompanying Notes
94
<PAGE> 97
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA PENNSYLVANIA MUNICIPAL FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- 94.9%
PENNSYLVANIA -- 94.2%
Allegheny County, Higher Education
Building Authority, Duquesne
University Project (RB) (AMBAC)
6.500% ............ 03/01/10 $ 380 $ 439
Allegheny County, Hospital Development
Authority, Magee Woman's Hospital
Project (RB) (ETM) Series O
10.125% ............ 10/01/02 105 117
Allegheny County, Industrial
Development Authority (RB)
5.250% ............ 12/01/14 650 661
Allegheny County, Sanitation Authority
Sewer (RB) (FGIC) (A)
0.000% ............ 12/01/08 2,750 1,784
Ambridge Area School District (GO)
(FGIC)
4.750% ............ 11/01/08 500 509
Bradford County, School District,
Prerefunded 10/01/05 @ 100 (GO)
(FGIC)
5.250% ............ 10/01/05 1,000 1,045
Bucks County, Community College
Authority, College Building (RB)
5.300% ............ 06/15/10 100 103
Butler County, Sewer Authority,
Prerefunded 01/01/04 @ 100 (RB)
7.250% ............ 01/01/04 110 122
Cumberland County, Messiah College
Project (RB) (AMBAC)
5.000% ............ 10/01/07 1,000 1,034
Dauphin County, General Authority,
Mandatory Put 12/01/05 @100 (RB)
(AMBAC)
5.400% ............ 06/01/26 800 853
Delaware County (GO)
5.000% ............ 11/15/07 1,000 1,044
Delaware County, Villanova University
(RB) (MBIA)
4.700% ............ 12/01/08 365 370
Delaware River Port Authority,
Pennsylvania & New Jersey Bridges
Project (RB) (AMBAC) (ETM)
6.000% ............ 01/15/10 570 606
Downingtown School District (GO)
5.500% ............ 02/01/10 1,000 1,070
Erie County, Prison Authority Lease,
Prerefunded 11/01/01 @ 100 (RB)
(MBIA)
6.600% ............ 11/01/02 1,000 1,065
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
PENNSYLVANIA -- CONTINUED
Gettysburg College (RB) (MBIA)
5.375% ............ 08/15/13 $1,000 $1,059
Lower Providence Township (GO)
(MBIA)
5.000% ............ 05/01/07 215 222
Middletown Township, Bucks County,
Special Obligation (RB) (ETM)
6.100% ............ 10/01/00 175 178
Monroeville County, Hospital Authority,
East Suburban Health Center Project,
Prerefunded 07/01/04 @ 100 (RB)
7.600% ............ 07/01/08 920 1,009
Montgomery County (GO)
5.000% ............ 10/15/06 500 525
Montgomery County, Hospital Authority,
Suburban General Hospital Project
(RB) (ETM)
7.750% ............ 05/01/02 85 90
Moon Area School District (GO) ( FGIC)
(A) Series A
0.000% ............ 11/15/11 1,520 826
Parkland School District (GO) (FGIC)
5.375% ............ 09/01/14 1,000 1,047
Penn Hills Township (GO) (AMBAC)
5.500% ............ 12/01/04 1,000 1,066
Pennsylvania State (GO) (AMBAC) Series 1
5.125% ............ 03/15/12 1,475 1,508
Pennsylvania State Higher Education
Assistance Authority (RB) (FGIC)
Series A
6.800% ............ 12/01/00 685 716
Pennsylvania State Higher Education
Facilities Authority
University of Pennsylvania Project (RB)
6.500% ............ 09/01/04 250 279
Series A
5.550% ............ 09/01/09 1,300 1,376
Pennsylvania State Housing Finance
Agency, Single Family Mortgage (RB)
Series Z
7.000% ............ 10/01/02 50 52
Pennsylvania State Industrial Economic
Development Authority (RB) (AMBAC)
Series 94
5.800% ............ 07/01/09 700 764
Pennsylvania State Infrastructure
Investment Authority, Penvest (RB)
Series A
5.000% ............ 09/01/08 250 261
Series B
6.450% ............ 09/01/04 1,500 1,637
See Accompanying Notes
95
<PAGE> 98
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA PENNSYLVANIA MUNICIPAL FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
PENNSYLVANIA -- CONTINUED
Pennsylvania State Intergovernmental
Cooperative Authority,
City of Philadelphia Funding Program,
Prerefunded 06/15/02 @ 100 (RB)
6.800% ............ 06/15/22 $ 500 $ 542
(RB) (FGIC)
5.000% ............ 06/15/09 500 514
Pennsylvania State Public School
Building Authority, Montgomery
County Community College (RB)
4.600% ............ 05/01/12 160 156
Pennsylvania State Turnpike Commission
(RB) (FGIC) Series O
5.250% ............ 12/01/01 1,010 1,045
Philadelphia Gas Works,
Prerefunded 06/15/01 @ 102
(RB) Series 13
7.700% ............ 06/15/11 460 504
(RB) (FSA) Series 14
6.250% ............ 07/01/08 300 329
Philadelphia, Hospital & Higher
Educational Facilities Authority,
Children's Hospital Project, Prerefunded
02/15/02 @ 102 (RB) Series A
6.500% ............ 02/15/21 200 217
Graduate Hospital Project
(RB) (ETM)
7.000% ............ 07/01/10 385 431
Thomas Jefferson University
Hospital (RB) (ETM)
7.000% ............ 07/01/08 205 227
Philadelphia, Water & Waste Authority
(RB) (MBIA)
5.500% ............ 06/15/07 1,500 1,607
6.250% ............ 08/01/11 200 227
Series 95
6.750% ............ 08/01/03 200 221
Pittsburgh & Allegheny County,
Auditorium Authority (RB) (AMBAC)
6.400% ............ 12/01/01 620 621
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
PENNSYLVANIA -- CONTINUED
Pittsburgh (GO) (MBIA) Series A
5.500% ............ 09/01/06 $ 955 $ 1,017
Pleasant Valley School District (RB)
(FGIC)
5.000% ............ 09/01/10 500 521
Scranton, Lackawanna Health & Welfare,
Moses Taylor Hospital (ETM)
6.625% ............ 07/01/09 495 548
Seneca Valley, School District,
Prerefunded 07/01/02 @ 100 (GO)
(FGIC) Series A
5.700% ............ 07/01/06 1,000 1,054
Somerset County (GO) (AMBAC)
5.000% ............ 10/01/14 550 549
Swarthmore College Authority (RB)
5.250% ............ 09/15/10 410 434
Callable 09/15/02 @102 (RB)
6.000% ............ 09/15/06 700 752
Tyrone School District (GO) (MBIA)
5.700% ............ 09/15/08 1,000 1,043
Union City, Higher Educational
Facilities Financing Authority,
Bucknell University Project (RB)
(MBIA)
6.200% ............ 04/01/06 1,000 1,063
West Mifflin, Sewer Authority (RB)
(MBIA)
5.000% ............ 08/01/14 250 250
Westmoreland County, Municipal
Authority (RB) (FGIC) (ETM)
2.000% ............ 07/01/07 500 414
(A)
0.000% ............ 07/01/08 500 330
-------
38,053
-------
PUERTO RICO -- 0.7%
Commonwealth of Puerto Rico, Public
Finance Corporation (RB) (AMBAC)
Series A
5.375% ............ 06/01/10 250 266
-------
TOTAL MUNICIPAL BONDS
(Cost $37,066) .............................. 38,319
-------
See Accompanying Notes
96
<PAGE> 99
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA PENNSYLVANIA MUNICIPAL FUND
MAY 31, 1999
NUMBER
OF SHARES VALUE
(000) (000)
--------- -----
CASH EQUIVALENT -- 4.0
Federated Pennsylvania
Cash Trust 1,610 $ 1,610
-------
TOTAL CASH EQUIVALENT
(Cost $1,610) ................................ 1,610
-------
TOTAL INVESTMENTS -- 98.9%
(Cost $38,676) ............................... $39,929
=======
OTHER ASSETS AND LIABILITIES,
NET -- 1.1% .................................. 460
-------
NET ASSETS:
Portfolio Shares of Class I
(unlimited authorization -- no par value)
based on 3,867,921 outstanding shares of
beneficial interest .......................... 38,770
Portfolio Shares of Class A
(unlimited authorization -- no par value)
based on 20,958 outstanding shares of
beneficial interest .......................... 217
Accumulated net realized gain on investments .. 73
Net unrealized appreciation on investments .... 1,253
Undistributed net investment income ........... 76
-------
TOTAL NET ASSETS -- 100.0% ...................... $40,389
=======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SHARE -- CLASS I ............................. $10.39
=======
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A ................... $10.40
=======
MAXIMUM OFFERING PRICE PER
SHARE -- CLASS A ($10.40 / 97%) .............. $10.72
=======
- - --------
(A) ZERO COUPON BOND
AMBAC -- AMERICAN MUNICIPAL BOND ASSURANCE CORPORATION
ETM -- ESCROW TO MATURITY
FGIC -- FEDERAL GUARANTY INSURANCE CORPORATION
FSA -- FINANCIAL SECURITY ASSURANCE
GO -- GENERAL OBLIGATION
MBIA -- MUNICIPAL BOND INSURANCE ASSOCIATION
RB -- REVENUE BOND
See Accompanying Notes
97
<PAGE> 100
[ARROW GRAPHIC OMITTED]
FINANCIAL HIGHLIGHTS
ARMADA PENNSYLVANIA MUNICIPAL FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
----------------------------------------------------------
1999 1998 1997
----------------------------------------------------------
CLASS I CLASS A CLASS I CLASS A CLASS I3 CLASS A4
------------------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ......... $ 10.45 $ 10.45 $ 10.22 $ 10.22 $ 10.08 $ 10.13
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ...................... 0.51 0.48 0.46 0.45 0.44 0.31
Net gain/(loss) on securities
(realized and unrealized) ................. (0.07) (0.04) 0.24 0.24 0.17 0.12
-------- -------- -------- -------- -------- --------
Total from investment operations .......... 0.44 0.44 0.70 0.69 0.61 0.43
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Dividends from net investment income ....... (0.49) (0.48) (0.46) (0.45) (0.44) (0.31)
Dividends from net realized capital gains .. (0.01) (0.01) (0.00) (0.00) (0.02) (0.02)
Distributions in excess of net
realized capital gains .................... (0.00) (0.00) (0.01) (0.01) (0.01) (0.01)
-------- -------- -------- -------- -------- --------
Total distributions ....................... (0.50) (0.49) (0.47) (0.46) (0.47) (0.34)
-------- -------- -------- -------- -------- --------
Net asset value, end of period ............... $ 10.39 $ 10.40 $ 10.45 $10.45 $ 10.22 $10.22
======== ======== ======== ======== ======== ========
TOTAL RETURN ................................. 4.21% 4.21%5 6.95% 6.84%5 6.21% 6.13%1,5
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) ....... $ 40,171 $ 218 $ 38,753 $ 125 $ 36,769 $ 81
Ratio of expenses to average net assets .... 0.48% 0.58% 0.69% 0.77% 0.87% 0.99%1
Ratio of net investment income to average
net assets ................................ 4.80% 4.70% 4.40% 4.32% 4.35% 4.26%1
Ratio of expenses to average net assets
before fee waivers ........................ 0.83% 0.93% 0.84% 0.94% 1.02% 1.00%1
Ratio of net investment income to average
net assets before fee waivers ............. 4.45% 4.35% 4.25% 4.15% 4.20% 4.25%1
Portfolio turnover rate .................... 15% 15% 20% 20% 42% 42%
</TABLE>
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE
PERIOD ENDED YEAR ENDED PERIOD ENDED
MAY 31, 19963 APRIL 30, 19963 APRIL 30, 19953
------------ -------------- --------------
<S> <C> <C> <C>
Net asset value, beginning of period ......... $ 10.12 $ 10.04 $ 10.00
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ...................... 0.04 0.43 0.29
Net gain/(loss) on securities
(realized and unrealized) ................. (0.04) 0.08 0.04
-------- -------- --------
Total from investment operations .......... (0.00) 0.51 0.33
-------- -------- --------
LESS DISTRIBUTIONS
Dividends from net investment income ....... (0.04) (0.43) (0.29)
Dividends from net realized capital gains .. (0.00) (0.00) (0.00)
Distributions in excess of net
realized capital gains .................... (0.00) (0.00) (0.00)
-------- -------- --------
Total distributions ....................... (0.04) (0.43) (0.29)
-------- -------- --------
Net asset value, end of period ............... $ 10.08 $ 10.12 $ 10.04
======== ======== ========
TOTAL RETURN ................................. (0.03)%1,5 5.06%5 3.38%2,5
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) ....... $ 38,733 $ 38,809 $ 34,638
Ratio of expenses to average net assets .... 0.85%1 0.85% 0.85%1
Ratio of net investment income to average
net assets ................................ 4.32%1 4.16% 4.05%1
Ratio of expenses to average net assets
before fee waivers ........................ 1.31%1 1.24% 1.36%1
Ratio of net investment income to average
net assets before fee waivers ............. 3.86%1 3.77% 3.54%1
Portfolio turnover rate .................... 0% 22% 4%
</TABLE>
1 ANNUALIZED.
2 RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
3 ACTIVITY FOR THE PERIOD PRESENTED INCLUDES THAT OF THE PREDECESSOR FUND
THROUGH SEPTEMBER 6, 1996. THE PREDECESSOR FUND COMMENCED OPERATIONS ON
AUGUST 10, 1994. DURING 1996, THE PREDECESSOR FUND CHANGED ITS FISCAL
YEAR-END FROM APRIL 30 TO MAY 31.
4 CLASS A COMMENCED OPERATIONS ON SEPTEMBER 11, 1996.
5 TOTAL RETURN EXCLUDES SALES CHARGE.
See Accompanying Notes
98
<PAGE> 101
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA NATIONAL TAX EXEMPT FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- 96.4%
ALASKA -- 1.2%
Alaska State, Housing Finance
Corporation Mortgage (RB) (MBIA)
4.950% ............ 06/01/02 $ 80 $ 81
5.050% ............ 12/01/03 75 77
Anchorage (GO) (MBIA)
5.000% ............ 07/01/14 1,100 1,104
------
1,262
------
ARIZONA -- 3.6%
Glendale (GO)
4.500% ............ 07/01/02 250 255
Maricopa County, Industrial Development
Authority, Madera Pointe Apartments
Project (RB) (FSA)
5.300% ............ 06/01/06 1,000 1,031
Salt River Project (RB)
5.125% ............ 01/01/10 2,415 2,484
------
3,770
------
ARKANSAS -- 0.4%
Arkansas State, Development Finance
Authority, Correction Facility (RB)
(MBIA)
4.800% ............ 11/15/06 200 205
Pulaski County, Health Facilities Board,
Catholic Health Initiatives (RB)
4.150% ............ 12/01/00 250 252
------
457
------
CALIFORNIA -- 1.0%
San Francisco, City & County (GO)
(FGIC) (A) Series 1
5.000% ............ 06/15/10 1,000 1,032
San Jose Unified School District
(GO)
4.500% ............ 08/01/06 15 15
------
1,047
------
CONNECTICUT -- 1.0%
Connecticut State, (GO) Series B
5.500% ............ 03/15/11 1,000 1,074
------
GEORGIA -- 3.2%
Fulton County, Housing Authority,
Single Family (RB) (GNMA)
5.100% ............ 03/01/03 40 41
5.300% ............ 03/01/05 45 47
Georgia State (GO)
6.250% ............ 08/01/06 2,000 2,242
Private Colleges & Universities
Authority, Emory University Project (RB)
5.375% ............ 11/01/05 1,000 1,070
------
3,400
------
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
ILLINOIS -- 7.9%
Chicago, Sales Tax (RB) (FGIC)
5.000% ............ 01/01/10 $ 500 $ 511
Glenview (BAN)
5.550% ............ 12/01/99 175 176
Illinois State, Development Financial
Authority Revenue School District
Number 189 (RB)
5.000% ............ 01/01/04 400 414
Illinois State, Educational Facility
Authority, Robert Morris College
(RB) (MBIA)
4.700% ............ 06/01/04 200 205
Sales Tax (RB)
6.000% ............ 06/15/12 1,000 1,106
Sales Tax (A)
5.100% ............ 06/15/18 2,200 2,167
Toll Road Authority
(RB) (FSA)
5.500% ............ 01/01/13 2,500 2,659
Lake County, First Preservation
District (GO)
5.500% ............ 02/01/09 1,000 1,074
------
8,312
------
INDIANA -- 10.3%
East Chicago, Elementary School
Building Corp (RB) (A)
6.250% ............ 01/05/16 1,750 1,953
Fort Wayne, Redevelopment
District (FSA)
4.550% ............ 02/01/08 500 501
Fort Wayne, South Side School Building
Corp (RB) (A)
4.700% ............ 07/15/10 750 747
Fort Wayne, First Mortgage (RB)
4.750% ............ 07/15/11 500 496
Hamilton, School Building Corp, First
Mortgage (RB)
4.400% ............ 07/15/01 100 101
4.500% ............ 07/05/03 365 372
4.550% ............ 07/05/04 300 306
Hammond, Multi-School Building
Corp (RB)
6.000% ............ 01/15/18 1,250 1,364
Indiana State, Prerefunded 07/15/04 @ 102
(RB)
6.150% ............ 01/15/16 1,200 1,329
Indiana State, Bond Bank (RB)
5.000% ............ 02/01/10 1,000 1,024
See Accompanying Notes
99
<PAGE> 102
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA NATIONAL TAX EXEMPT FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
INDIANA -- CONTINUED
Indiana State, Office Building (RB) (A)
4.150% ............ 07/01/04 $ 400 $ 399
Indiana State, Vinton - Tecumseh School
Building Corp (RB) (A)
4.450% ............ 01/05/05 300 301
Lagrange County, Jail Building
Corporation, First Mortgage (RB)
5.300% ............ 10/01/10 300 306
Marion County, Convention &
Recreational Facilities Authority (RB)
(MBIA)
4.500% ............ 06/01/05 300 303
North West Hendricks, School Building,
First Mortgage (RB) (AMBAC)
4.450% ............ 07/15/99 100 100
Purdue University, Certificate
Participation (RB)
4.250% ............ 07/01/99 200 200
South Bend, Waterworks (RB) (FSA)
4.350% ............ 01/01/03 215 217
Southeast Dubois County, School
Building Corp, First Mortgage (RB)
(FSA)
4.150% ............ 07/01/99 100 100
Steuben County, School Building
Corp, First Mortgage (RB)
4.250% ............ 03/01/02 245 247
Vinton-Tecumseh, School Building, First
Mortgage (RB) (A)
4.350% ............ 01/05/04 495 498
-------
10,864
-------
KANSAS -- 0.3%
Johnson County, Water District Number
001 (RB)
4.300% ............ 06/01/01 300 303
-------
KENTUCKY -- 0.4%
Elizabethtown, Public Properties Holding
Revenue (RB) (MBIA)
4.875% ............ 04/01/04 375 388
-------
MARYLAND -- 3.3%
Montgomery County (GO)
5.000% ............ 05/01/03 1,000 1,040
Prince Georges County (GO) (MBIA)
6.000% ............ 03/15/06 1,000 1,104
University of Maryland, Tuition Revenue
(RB)
4.350% ............ 10/01/03 235 239
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
MARYLAND -- CONTINUED
Washington, Suburban Sanitation District,
Prerefunded 11/01/01 @ 102 (RB)
6.500% ............ 11/01/05 $1,000 $ 1,081
-------
3,464
-------
MASSACHUSETTS -- 4.6%
Brockton (GO) (MBIA)
4.500% ............ 04/01/03 500 511
Massachusetts State, Bay Transportation
Authority, General Transportation System,
Prerefunded 03/01/05 @ 102 (RB) (A)
Series A
5.800% ............ 03/01/11 1,000 1,090
5.750% ............ 03/01/18 3,040 3,291
-------
4,892
-------
MICHIGAN -- 5.8%
Birmingham School District (GO)
5.000% ............ 11/01/18 25 24
Grand Rapids Community College (GO)
(MBIA) (A)
5.900% ............ 05/01/22 2,000 2,163
Michigan State, Municipal Bond Authority
(RB)
6.000% ............ 10/01/07 2,000 2,210
Redford School District (GO) (AMBAC)
5.500% ............ 05/01/06 1,315 1,405
Troy, City School District, (RB) (A)
4.400% ............ 05/01/03 300 305
-------
6,107
-------
MINNESOTA -- 1.5%
Minnesota State, Housing Finance
Agency, Residential Housing (RB)
4.750% ............ 07/01/01 200 202
Minnesota State, Public Facilities
Authority, Prerefunded 03/01/00
@ 102 (RB)
7.100% ............ 03/01/12 1,300 1,362
-------
1,564
-------
MISSOURI -- 2.3%
Columbia, Water & Electric (RB)
5.600% ............ 10/01/04 2,245 2,402
-------
NEBRASKA -- 1.2%
Douglas County, Hospital Authority,
Immanuel Medical Center (RB) (AMBAC)
4.450% ............ 09/01/02 300 305
See Accompanying Notes
100
<PAGE> 103
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA NATIONAL TAX EXEMPT FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
NEBRASKA -- CONTINUED
Nebraska State, American Public Energy
Agency, Gas Refunding (RB)
(AMBAC)
4.200% ............ 09/01/10 $1,000 $ 951
-------
1,256
-------
NEVADA -- 2.1%
Henderson (GO) (MBIA)
6.500% ............ 06/01/07 1,000 1,138
Nevada State, (ETM) (GO)
6.300% ............ 07/01/04 1,000 1,078
-------
2,216
-------
NEW JERSEY -- 2.1%
New Jersey State, Transportation Fund
(RB) (AMBAC) Series B
6.000% ............ 06/15/05 2,000 2,190
-------
NEW MEXICO -- 0.7%
New Mexico State, Severance Tax (RB)
Series B
4.750% ............ 07/01/06 750 761
-------
NEW YORK -- 3.3%
New York State, Power Authority,
Prerefunded 01/01/10 @ 100 (RB)
7.000% ............ 01/01/10 1,000 1,181
Orange County (GO)
5.000% ............ 07/15/11 2,225 2,289
-------
3,470
-------
OHIO -- 9.2%
Butler County, Transportation
Improvement (RB) (FSA)
6.000% ............ 04/01/10 1,000 1,105
Cleveland, Public Power System (RB)
(MBIA)
6.000% ............ 11/15/10 995 1,112
Cleveland, Water Works (RB) (MBIA)
5.500% ............ 01/01/09 1,500 1,599
Hudson, Local School District (GO)
(FGIC) (B)
0.000% ............ 12/15/10 1,000 575
Ohio State, Higher Educational Facility,
John Carroll University Project (RB)
5.750% ............ 04/01/19 1,250 1,284
Ohio State, Housing Finance Agency
Mortgage (RB) (GNMA)
5.350% ............ 09/01/04 200 207
Ohio State, Turnpike Commission (RB)
(FGIC) Series A
5.500% ............ 02/15/17 2,000 2,118
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
OHIO -- CONTINUED
Wyoming City School District (GO)
(FGIC)
5.750% ............ 12/01/15 $ 740 $ 807
5.750% ............ 12/01/16 800 868
-------
9,675
-------
PENNSYLVANIA -- 0.1%
Pennsylvania State, Higher Educational
Facility Authority, Philadelphia College
Osteopathic (RB) (CONNLEE)
4.450% ............ 12/01/01 100 102
-------
RHODE ISLAND -- 1.3%
Convention Center Authority, Prerefunded
05/15/01 @ 102 (RB) (MBIA) Series A
6.700% ............ 05/15/01 1,310 1,407
-------
SOUTH CAROLINA -- 4.1%
South Carolina State, Public Service
Authority (RB) (FGIC)
5.875% ............ 01/01/23 4,000 4,270
-------
TENNESSE -- 2.4%
Jackson (GO) (MBIA)
4.500% ............ 03/01/02 300 305
Memphis (GO)
4.700% ............ 08/01/03 300 309
Nashville & Davidson County,
Metropolitan Government (GO)
6.000% ............ 12/01/10 1,500 1,678
Water & Sewer Revenue (FGIC)
4.700% ............ 01/01/02 200 204
-------
2,496
-------
TEXAS -- 7.2%
Dallas County (GO) (MBIA)
5.000% ............ 02/15/09 600 609
Leander, School District (GO) (A)
4.750% ............ 08/15/11 500 499
Plano, Independent School District
(GO) (A)
6.000% ............ 02/15/06 1,000 1,096
5.900% ............ 02/15/10 1,000 1,064
Texas State, Public Finance Authority,
Prerefunded 10/01/00 @ 100 (RB)
6.375% ............ 10/01/00 4,100 4,254
-------
7,522
-------
See Accompanying Notes
101
<PAGE> 104
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA NATIONAL TAX EXEMPT FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
UTAH -- 2.5%
Utah State, Intermountain Power Agency,
(RB) (FSA) Series E
6.250% ............ 07/01/09 $2,000 $ 2,270
Weber County, Municipal Building
Authority (RB) (MBIA)
4.900% ............ 12/15/05 300 311
--------
2,581
--------
VERMONT -- 0.5%
Vermont State (GO) Series A
4.500% ............ 01/15/03 500 510
--------
VIRGINIA -- 1.0%
Richmond, Public Improvement,
Prerefunded 01/15/01 @ 102 (GO)
6.250% ............ 01/15/21 1,000 1,059
--------
WASHINGTON -- 4.8%
Washington State (GO)
6.500% ............ 09/01/01 1,900 2,012
Washington State, Public Power Supply
Systems, Nuclear Project No. 2,
Prerefunded 01/01/01 @ 102 (RB)
Series C
7.625% ............ 07/01/10 2,500 2,694
Yakima County (GO) (MBIA)
4.600% ............ 11/01/03 295 302
--------
5,008
--------
WEST VIRGINIA -- 0.3%
West Virginia State, School Building
Authority, Capital Improvement
Revenue (RB) (FSA)
4.500% ............ 07/01/03 300 306
--------
WISCONSIN -- 6.8%
Cottage Grove (GO) (FSA)
4.700% ............ 08/01/07 260 263
Milwaukee (GO)
5.000% ............ 06/15/05 300 313
Wisconsin State, Prerefunded 05/01/02
@ 100 (GO) Series A
6.300% ............ 05/01/02 3,275 3,492
Clean Water (RB)
5.000% ............ 06/01/06 3,000 3,109
--------
7,177
--------
TOTAL MUNICIPAL BONDS
(Cost $99,583) .............................. 101,312
--------
PAR/SHARES VALUE
(000) (000)
----- -----
MISCELLANEOUS -- 0.1%
Greystone Tax-Exempt Assets Trust
Series 1998-1 Cl A (B) (D)
4.300% ............ 06/20/00 $ 74 $ 75
--------
TOTAL MISCELLANEOUS
(Cost $75) .................................. 75
--------
CASH EQUIVALENT -- 2.0%
Federated Tax-Free
Money Market Fund ... 2,125 2,125
--------
TOTAL CASH EQUIVALENTS
(Cost $2,125) ............................... 2,125
--------
TOTAL INVESTMENTS -- 98.5%
(Cost $101,783) ............................. $103,512
========
OTHER ASSETS AND LIABILITIES,
NET -- 1.5% .................................. 1,606
--------
NET ASSETS:
Portfolio Shares of Class I
(unlimited authorization -- no par value)
based on 10,099,999 outstanding shares of
beneficial interest ......................... 98,699
Portfolio Shares of Class A
(unlimited authorization -- no par value)
based on 421,712 outstanding shares of
beneficial interest ......................... 4,300
Portfolio Shares of Class B
(unlimited authorization -- no par value)
based on 27,561 outstanding shares of
beneficial interest ......................... 279
Accumulated net realized gain on investments . 154
Net unrealized appreciation on investments ... 1,729
Distributions in excess of net investment income (43)
--------
TOTAL NET ASSETS -- 100.0% ...................... $105,118
========
See Accompanying Notes
102
<PAGE> 105
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA NATIONAL TAX EXEMPT FUND
MAY 31, 1999
VALUE
(000)
-----
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SHARE -- CLASS I ............................ $9.96
========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A ................... $9.97
========
MAXIMUM OFFERING PRICE PER
SHARE -- CLASS A ($9.97 / 95.25%) ........... $10.47
========
NET ASSET VALUE AND OFFERING
PRICE PER SHARE -- CLASS B .................. $9.96
========
- - ------------
(A) SECURITY IS BACKED BY A LETTER OF CREDIT BACKEY A MAJOR FINANCIAL
INSTITUTION.
(B) VARIABLE RATE SECURITY -- THE RATEFLECTED ON THE STATEMENT OF NET
ASSETS IS THE RATE IN EFFECT ON MAY 31, 1999
(C) ZERO COUPON BOND
(D) PRIVATE PLACEMENT SECURITY
AMBAC -- AMERICAN MUNICIPAL BOND ASSURANCE CORPORATION
BAN -- BOND ANTICIPATION NOTE
CONNLEE -- CONNIE LEE
ETM -- ESCROW TO MATURITY
FGIC -- FEDERAL GUARANTY INSURANCE COMPANY
FSA -- FEDERAL SECURITY ASSURANCE
GNMA -- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
GO -- GENERAL OBLIGATION
MBIA -- MUNICIPAL BOND INSURANCE ASSOCIATION
RB -- REVENUE BOND
See Accompanying Notes
103
<PAGE> 106
[ARROW GRAPHIC OMITTED]
FINANCIAL HIGHLIGHTS
ARMADA NATIONAL TAX EXEMPT FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE PERIOD
ENDED MAY 31, 1999 ENDED MAY 31, 1998
---------------------------- ---------------------------
CLASS I CLASS A3 CLASS B6 CLASS I1
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ............................ $ 10.03 $ 10.04 $ 10.23 $ 10.00
-------- ------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ......................................... 0.45 0.41 0.13
0.07
Net gain/(loss) on securities (realized and unrealized) ....... (0.04) (0.04) (0.26) 0.03
-------- ------- -------- --------
Total from investment operations ........................... 0.41 0.37 (0.13) 0.10
-------- ------- -------- --------
LESS DISTRIBUTIONS
Dividends from net investment income .......................... (0.45) (0.41) (0.14) (0.07)
Distribution from net realized capital gains .................. (0.03) (0.03) (0.00) (0.00)
-------- ------- -------- --------
Total distributions ........................................ (0.48) (0.44) (0.14) (0.07)
-------- ------- -------- --------
Net asset value, end of period .................................. $ 9.96 $ 9.97 $ 9.96 $ 10.03
======== ======= ======== ========
TOTAL RETURN .................................................... 4.07% 3.67%4,5 (1.22)%4,5 7.03%2
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) .......................... $100,638 $4,205 $ 275 $ 80,259
Ratio of expenses to average net assets ....................... 0.36% 0.46%2 1.17%2 0.33%2
Ratio of net investment income to average
net assets .................................................. 4.39% 4.29%2 3.58%2 4.62%2
Ratio of expenses to average net assets before
fee waivers ................................................. 0.87% 0.97%2 1.68%2 0.87%2
Ratio of net investment income to average net
assets before fee waivers ................................... 3.88% 3.78%2 3.07%2 4.08%2
Portfolio turnover rate ....................................... 23% 23% 23% 0%
</TABLE>
1 CLASS I COMMENCED OPERATIONS ON APRIL 9, 1998.
2 ANNUALIZED
3 CLASS A COMMENCED OPERATIONS ON JUNE 19, 1998.
4 TOTAL RETURN EXCLUDES SALES CHARGE.
5 RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT
BEEN ANNUALIZED.
6 CLASS B COMMENCED OPERATIONS ON JANUARY 29, 1999.
See Accompanying Notes
104
<PAGE> 107
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA OHIO MUNICIPAL MONEY MARKET FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- 100.5%
OHIO -- 100.5%
Allen County Health Care Facilities
Mennonite Memorial Home
Project (RB) (A)
3.300% ............ 02/01/18 $1,740 $1,740
City of Ashland (GO)
3.950% ............ 07/15/99 500 500
Bay Village (BAN)
3.790% ............ 07/09/99 500 500
Canton, Pension (GO) (AMBAC)
3.150% ............ 12/01/99 230 230
Columbus (GO) (A) Series 1995-1
3.100% ............ 06/01/16 1,200 1,200
3.100% ............ 12/01/17 2,000 2,000
Cuyahoga County (GO) (BAN)
3.220% ............ 09/15/99 1,365 1,365
Cuyahoga County,
Hospital Facilities Authority, Cleveland
Clinic Foundation (RB) (AMBAC) (A)
Series B
3.300% ............ 01/01/16 680 680
(RB) (A) Series A
3.300% ............ 01/01/24 500 500
(RB) (A) Series 1997-D
3.400% ............ 01/01/26 3,500 3,500
(RB) (A) Series 1996-A
3.250% ............ 01/01/26 2,000 2,000
Cuyahoga County, Industrial
Development Authority,
Allen Group Project (A)
3.200% ............ 12/01/15 1,600 1,600
Dayton, Ohio (GO) (BAN)
3.400% ............ 03/03/00 1,000 1,001
Euclid County School District
(GO) (BAN)
3.990% ............ 06/17/99 1,242 1,242
Evandale, Industrial Development
Authority (RB) (A)
3.350% ............ 09/01/15 3,900 3,900
Fairview Park (GO) (BAN)
4.000% ............ 08/12/99 1,030 1,031
Franklin County, Hospital Authority,
Holy Cross Health System (RB) (A)
3.300% ............ 06/01/16 5,000 5,000
Hillard (GO) Series B
5.150% ............ 12/01/99 280 283
Hudson City (BAN)
3.350% ............ 09/09/99 440 440
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
OHIO -- CONTINUED
Lake County (GO) (BAN)
3.625% ............ 10/07/99 $2,020 $2,024
Lancaster (GO) (BAN)
3.600% ............ 04/27/00 1,400 1,404
Lebanon (GO) (BAN)
3.230% ............ 09/02/99 600 600
Lima Memorial Hospital (RB)
(A) Series 1996
3.350% ............ 12/01/10 4,000 4,000
Lorain County, Industrial Development
Revenue, Elyria Regional Medical
Center (RB) (A)
3.350% ............ 05/01/22 1,675 1,675
Louisville (GO) (BAN)
4.000% ............ 05/03/00 1,200 1,205
Lucas County, Facility Improvement,
Toledo Zoological Society (A)
3.250% ............ 10/01/05 1,000 1,000
Marysville (GO) (BAN)
3.460% ............ 09/15/99 1,000 1,001
3.460% ............ 04/13/00 900 902
Masillion, Ohio (GO) (BAN)
3.980% ............ 01/14/00 550 552
Mason City School District (GO) (BAN)
3.680% ............ 01/27/00 415 416
Mayfield School District (GO) (BAN)
3.450% ............ 04/20/00 540 541
Medina County, Notes (GO)
3.940% ............ 06/17/99 1,000 1,000
Miamisburg (GO) (BAN)
3.520% ............ 10/14/99 560 561
New Albany (GO) (MBIA)
3.100% ............ 12/01/99 135 135
Ohio State,
Air Quality Development Authority, (GO)
4.000% ............ 08/01/99 500 501
Air Quality Development Authority, (RB)
3.100% ............ 06/17/99 1,000 1,000
Air Quality Development Authority,
Cincinnati Gas & Electric (RB) (A)
3.350% ............ 09/01/30 7,000 7,000
Series 1985-A
3.450% ............ 12/01/15 2,400 2,400
See Accompanying Notes
105
<PAGE> 108
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA OHIO MUNICIPAL MONEY MARKET FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
OHIO -- CONTINUED
Ohio State,
Air Quality Development Authority, (RB)
3.000% ............ 06/01/99 $1,000 $ 1,000
Air Quality Development Authority,
Duquesne Light (RB)
3.150% ............ 07/08/99 1,955 1,955
Air Quality Development Authority,
Timken Project (RB) (A)
3.250% ............ 07/01/03 2,000 2,000
Ohio State, Arts Facilities Building Fund
(RB) Series A
4.750% ............ 10/01/99 1,200 1,207
Ohio State, Building Authority (RB)
4.000% ............ 09/01/99 80 80
Ohio State, Coal Development Unlimited
Tax (GO) Series B
5.000% ............ 08/01/99 300 301
Ohio State, Environmental Improvement,
US Steel (A)
3.900% ............ 12/01/01 1,000 1,000
Ohio State, Higher Educational Facilities,
(RB) Series A-1
4.500% ............ 12/01/99 1,250 1,260
Case Western Reserve University (RB)
5.000% 10/01/99 1,000 1,006
Kenyon College (RB) (A)
3.300% ............ 08/01/03 2,000 2,000
Mount Vernon College (RB) (A)
3.250% ............ 09/01/20 820 820
Ohio State, Pollution Control (RB) (A)
3.400% ............ 05/01/22 1,600 1,600
Ohio State, Highland Heights (BAN)
3.250% ............ 11/18/99 1,200 1,201
Ohio State, Public Facilities Commission
(RB) Series II-A
5.625% ............ 12/01/99 500 506
4.250% ............ 06/01/99 1,000 1,000
4.500% ............ 11/01/99 800 804
Ohio State University, General
Receipts (RB) (A)
3.150% ............ 12/01/01 155 155
3.200% ............ 12/01/07 1,250 1,250
3.200% ............ 12/01/27 3,890 3,890
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
OHIO -- CONTINUED
Ohio State University, General
Receipts (RB) (A)
Series 1986-B
3.150% ............ 12/01/06 $1,550 $1,550
Ohio State, Water Development
Authority (RB) (A)
4.200% ............ 09/01/18 1,000 1,001
3.400% ............ 05/01/22 900 900
Water Development Authority,
Cleveland Electric (RB) (A) Series B
3.250% ............ 08/01/20 4,000 4,000
Water Development Authority,
Timken Project (RB) (A)
3.400% ............ 07/01/32 200 200
Orange City School District
(GO) (BAN)
3.440% ............ 08/18/99 500 500
Ross County, Hospital Facilities Authority,
Adena Health System (RB) (A)
Series 1998
3.250% ............ 12/01/23 1,000 1,000
Medical Center Hospital Project
(RB) (A)
3.250% ............ 12/01/20 460 460
Rossford, Special Obligation Note,
Exempted Village (AN)
4.000% ............ 12/01/99 270 271
Saint Clairsville (GO) (BAN)
3.510% ............ 05/04/00 370 371
Saint Mary School District (BAN)
3.840% ............ 02/23/00 709 712
Sandusky City, (GO) (BAN)
3.875% ............ 09/16/99 1,000 1,001
Scioto County, Volunteer Hospital
Administration, Central Capital Asset
Financing Program (RB) (AMBAC) (A)
Series 1985-C
3.350% ............ 12/01/25 815 815
Series B
3.350% ............ 12/01/25 2,725 2,725
Series F
3.350% ............ 12/01/25 2,030 2,030
See Accompanying Notes
106
<PAGE> 109
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA OHIO MUNICIPAL MONEY MARKET FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
OHIO -- CONTINUED
Seven Hills (GO) (BAN)
3.410% ............ 10/28/99 $1,000 $ 1,001
Southwestern City School District
(GO) (AMBAC)
3.000% ............ 12/01/99 1,260 1,260
Summit County (GO) (BAN)
Series B
3.630% ............ 11/18/99 2,000 2,007
Toledo, Services Special
Assessment Note (A)
3.250% ............ 06/01/00 2,000 2,000
Toledo, Sewer System (RB)
3.200% ............ 11/15/99 755 755
University of Cincinnati, General
Receipts (BAN)
3.260% ............ 08/18/99 1,000 1,001
University of Toledo, General
Receipts (RB)
3.600% ............ 06/01/99 285 285
Warren County (RB) (A)
3.300% ............ 07/01/23 2,000 2,000
Willowick (GO) (BAN)
3.625% ............ 04/27/00 800 802
Wooster, Industrial Development
Authority, Allen Group Project
(RB) (A)
3.500% ............ 12/01/10 2,100 2,100
Wooster, Waterworks System
Improvement (GO) (BAN)
3.300% ............ 10/14/99 500 500
--------
110,911
--------
TOTAL MUNICIPAL BONDS
(Cost $110,911) ............................. 110,911
--------
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
CASH EQUIVALENTS -- 0.6%
Blackrock Funds Ohio Municipal
Money Market Portfolio 100 $ 100
Federated Ohio Cash Trust 520 520
--------
TOTAL CASH EQUIVALENTS
(Cost $620) ................................. 620
--------
TOTAL INVESTMENTS -- 101.1%
(Cost $111,531)* ............................ $111,531
========
OTHER ASSETS AND LIABILITIES,
NET -- (1.1%) ................................ (1,170)
--------
NET ASSETS:
Portfolio Shares of Class I
(unlimited authorization -- no par value)
based on 99,361,718 outstanding
shares of beneficial interest ............... 99,362
Portfolio Shares of Class A
(unlimited authorization -- no par value)
based on 11,019,559 outstanding shares of
beneficial interest ......................... 11,019
Distributions in excess of net investment income (20)
--------
TOTAL NET ASSETS -- 100.0% ...................... $110,361
========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE -- CLASS I ........ $1.00
========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE -- CLASS A ........ $1.00
========
- - -------------
(A) VARIABLE RATE SECURITY -- THE RATE REFLECTED OHE STATEMENT OF NET
ASSETS IS THE RATE IN EFFECT ON MAY 31, 1999. THE MATURITY DATE SHOWN
IS THE LONGER OF THE NEXT RESET DATE OR THE DATE IN WHICH THE PRINCIPAL
AMOUNT CAN BE RECOVERED THROUGH DEMAND.
* ALSO COST FOR FEDERAL INCOME TAX PURPOSES.
AMBAC -- AMERICAN MUNICIPAL BOND ASSURANCE CORPORATION
AN -- ANTICIPATION NOTE
BAN -- BOND ANTICIPATION NOTE
GO -- GENERAL OBLIGATION
MBIA -- MUNIAL BOND INSURANCE ASSOCIATION
RB -- REVENUE BOND
See Accompanying Notes
107
<PAGE> 110
[ARROW GRAPHIC OMITTED]
FINANCIAL HIGHLIGHTS
ARMADA OHIO MUNICIPAL MONEY MARKET FUND
MAY 31, 1999
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FOR THE PERIOD
ENDED MAY 31, 1999
-----------------------
CLASS I1 CLASS A1
-------- --------
Net asset value, beginning of period ............. $ 1.00 $ 1.00
------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .......................... 0.02 0.02
------- -------
LESS DISTRIBUTIONS
Dividends from net investment income ........... (0.02) (0.02)
------- -------
Net asset value, end of period ................... $ 1.00 $ 1.00
======= =======
TOTAL RETURN ..................................... 2.01%2 1.50%2
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) ........... $99,342 $11,019
Ratio of expenses to average net assets 0.35%3 0.50%3
Ratio of net investment income to
average net assets ........................... 2.77%3 2.62%3
Ratio of expenses to average net assets
before fee waivers ........................... 0.55%3 0.70%3
Ratio of net investment income to average net
assets before fee waivers .................... 2.57%3 2.42%3
1 CLASS I AND CLASS A COMMENCED OPERATIONS ON SEPTEMBER 15, 1998
AND NOVEMBER 2, 1998, RESPECTIVELY.
2 RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
3 ANNUALIZED.
See Accompanying Notes
108
<PAGE> 111
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- 98.9%
PENNSYLVANIA -- 98.9%
Allegheny County, Higher Education
Building Authority, University of
Pittsburgh Project (RB) (B)
Series 1985 B
3.150% ............ 07/01/15 $1,180 $1,180
Allegheny County, Hospital
Development Authority,
Presbyterian University Hospital
Project, (RB) (A) (B) Series B-3
3.300% ............ 03/01/18 935 935
Allegheny County, Industrial
Development Authority,
Environmental-Improvement
(RB) (A) (B)
3.150% ............ 12/01/32 1,000 1,000
Longwood at Oakmont Project (RB) (A) (B)
3.300% ............ 07/01/29 2,500 2,500
Allentown, Water Improvement
(RB) (AMBAC) (ETM)
4.500% ............ 07/15/99 150 150
Altoona, Area School District (GO)
4.900% ............ 01/15/00 2,000 2,024
Armstrong County (GO)
3.750% ............ 06/01/99 110 110
Beaver County, Industrial Development
Authority, Duquesne Light
(TECP) (B)
3.350% ............ 06/09/99 2,000 2,000
3.350% ............ 06/17/99 1,500 1,500
3.200% ............ 07/06/99 2,000 2,000
3.100% ............ 07/09/99 2,000 2,000
Belle Vernon Area School District
(GO) (FGIC)
4.000% ............ 10/01/99 500 502
Bethel Park School District (GO)
5.250% ............ 08/01/99 500 501
(FSA) Series B
4.000% ............ 08/01/99 1,000 1,001
Boyertown Area School District (GO)
3.800% ............ 03/01/00 290 291
Bucks County, Industrial Development
Authority, USX Corporation Project,
(RB) (A) Series 1995
3.100% ............ 11/04/99 2,250 2,250
Bucks County, Water & Sewer
Authority, Neshaminy Interceptor
Sewer System (RB)
5.000% ............ 12/01/99 175 176
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
PENNSYLVANIA -- CONTINUED
Cheltenham Township School
District (GO)
3.050% ............ 11/15/99 $ 220 $ 220
Chester County (GO)
4.550% ............ 12/15/99 400 403
4.200% ............ 11/15/99 100 100
College Township, Industrial
Development Authority,
Ball Corporation Project
(RB) (A) (B) Series 1993
3.250% ............ 11/01/11 3,200 3,200
Conewago Valley School District (GO)
3.050% ............ 09/01/99 465 465
Cumberland County, Municipal College
Authority, Dickinson College
(RB) Series-A
2.950% ............ 11/01/99 1,000 1,000
Delaware County,
Industrial Development Authority,
BP Oil Project (RB) (A) (B)
Series 1995
3.400% ............ 12/01/09 1,500 1,500
3.400% ............ 10/01/19 1,750 1,750
General Electric Project
(RB) (B) Series 1997-G
3.200% ............ 12/01/31 5,200 5,200
PECO Energy (TECP)
2.850% ............ 07/06/99 2,000 2,000
2.800% ............ 07/26/99 1,100 1,100
Scott Paper Project (RB)
(A) (B) Series 1984-A
3.350% ............ 12/01/18 4,500 4,500
United Parcel Service Project
(RB) (B) Series 1985
3.200% ............ 12/01/15 2,200 2,200
Delaware County, Villanova
University (RB)
3.100% ............ 12/01/99 770 770
East Norriton (GO)
3.100% ............ 08/15/99 285 285
Emmaus, General Authority
(RB) (A) (B)
3.450% ............ 03/01/24 2,800 2,800
Erie, Higher Educational Building
Authority, Mercyhurst College
Project (RB) (B)
7.850% ............ 09/15/19 1,500 1,520
See Accompanying Notes
109
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STATEMENT OF NET ASSETS
ARMADA PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
PENNSYLVANIA -- CONTINUED
Franklin Regional School District
(GO) Series A
3.000% ............ 08/15/99 $ 290 $ 290
Lancaster County, Donegal
School District (GO)
3.000% ............ 10/01/99 200 200
Lancaster, Higher Education Authority,
Franklin & Marshall College Project,
(RB) (A) (B) Series 1997
3.370% ............ 04/15/27 3,995 3,995
Lebanon, Water Authority (RB)
3.100% ............ 12/15/99 415 415
Lehigh County General Purpose Authority
Lehigh Valley Hospital, (RB) (B) Series A
3.250% ............ 07/01/28 100 100
Lehigh County, Prerefunded 10/15/99
@ 100 (AMBAC) Series A
6.000% ............ 10/15/11 200 202
Lower Merion Township (GO)
3.000% ............ 09/01/99 185 185
Mercersburg, General Purpose Authority,
Mercersburg College Project
(RB) (A) (B) Series 1997
3.350% ............ 11/01/27 1,000 1,000
Montgomery County (GO) Series 1999
2.950% ............ 07/15/99 1,000 1,000
Montgomery County, Prerefunded
@ 100 07/15/99 (GO) Series A
6.400% ............ 07/15/03 300 301
6.500% ............ 07/15/04 500 502
Montgomery County, Industrial
Development Authority,
Peco Energy (TECP)
3.400% ............ 06/08/99 1,000 1,000
Montgomery County, Pollution
Control Revenue, PECO Energy
(TECP) Series 1994-A
2.850% ............ 07/21/99 5,200 5,200
2.950% ............ 06/10/99 2,000 2,000
3.100% ............ 09/08/99 2,500 2,500
Northampton County,
Higher Education Authority,
Lehigh University (RB)
4.450% ............ 08/15/99 300 301
Lafayette College
(RB) (A) (B) Series B
3.300% ............ 11/01/28 1,500 1,500
Northeastern Pennsylvania, Hospital
Authority, Hospital Center Services
Capital Asset Project (TECP)
3.050% ............ 07/30/99 1,000 1,000
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
PENNSYLVANIA -- CONTINUED
Pennsylvania State (GO)
4.750% ............ 06/15/99 $ 250 $ 250
5.300% ............ 07/01/99 500 501
5.600% ............ 11/15/99 125 126
5.250% ............ 11/15/99 100 101
4.625% ............ 05/01/00 1,000 1,013
Pennsylvania State (TECP)
3.200% ............ 07/07/99 2,000 2,000
4.000% ............ 11/01/99 1,000 1,000
(B)
4.000% ............ 11/01/99 1,300 1,309
Pennsylvania State, Delaware River
Joint Toll Bridge Commission
(RB) (FGIC)
5.650% ............ 07/01/99 500 501
Pennsylvania State, Higher
Education Authority,
Carnegie Mellon University
Project (RB) (B) Series 1995-C
3.350% ............ 11/01/25 500 500
Carnegie Mellon University
Project (RB) (A) (B) Series 1995-B
3.350% ............ 11/01/27 4,400 4,400
University of Pennsylvania
Health Services Project (RB) (A) (B)
Series C
3.450% ............ 01/01/26 2,000 2,000
Pennsylvania State, Highway
Improvement (RB)
4.000% ............ 06/01/99 1,040 1,040
Pennsylvania State, Infrastructure
Authority (RB)
5.000% ............ 09/01/99 1,000 1,004
Pennsylvania State, Intergovernmental
Cooperative Authority,
Philadelphia Funding Program,
Special Tax (RB) (FGIC)
5.750% ............ 06/15/99 2,000 2,002
3.200% ............ 06/15/99 315 315
Pennsylvania State, Public School
Building Authority, Allegheny County
Project (RB) Series E
3.750% ............ 11/01/99 200 201
Pennsylvania State, Turnpike
Commission (RB)
Series K
7.500% ............ 12/01/99 200 206
Series P
5.100% ............ 12/01/99 150 151
Series Q (B)
3.350% ............ 06/01/28 2,800 2,800
See Accompanying Notes
110
<PAGE> 113
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
PENNSYLVANIA -- CONTINUED
Philadelphia, Hospital & Higher
Educational Facility Authority,
Children's Hospital Project
(RB) Series 1992B
4.750% ............ 02/15/00 $ 375 $ 379
(B)
3.350% ............ 03/01/27 4,300 4,300
(RB) (A) (B) Series 1996-A
3.350% ............ 03/01/27 1,000 1,000
Philadelphia, Industrial Development
Authority,
Fox Chase Cancer Center
Project (RB) (A) (B) Series 1997
3.400% ............ 07/01/25 5,000 5,000
Chemical Heritage Foundation
Project (RB) (B)
3.250% ............ 07/01/27 1,000 1,000
Pittsburgh, Urban Redevelopment
Authority, Mortgage Revenue,
Series D
3.150% ............ 12/01/99 1,170 1,170
Pocono Mountain School District
(GO) Series AA
4.000% 09/01/99 380 381
Quakertown, General Authority
(RB) (A) (B) Series A
3.450% ............ 07/01/26 3,850 3,850
3.450% ............ 06/01/28 700 700
Reading, Public Development
Improvement (GO)
5.000% ............ 11/15/99 275 278
Reynolds School District (GO) (A)
3.600% ............ 10/01/99 105 105
Sayre, Healthcare Facility Authority,
Capital Asset Finance Group
(RB) (AMBAC) (B)
3.300% ............ 12/01/20 3,700 3,700
Schuylkill County, Redevelopment
Authority (FGIC) (A)
6.450% ............ 06/01/99 150 150
Scranton-Lackawanna, Health & Welfare
Authority, University of Scranton,
(RB) (A)
3.250% ............ 11/01/99 1,665 1,665
Shaler Area School District
(GO) Series B
3.700% ............ 09/01/99 720 720
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
PENNSYLVANIA -- CONTINUED
South Butler County School District (GO)
4.250% ............ 10/01/99 $ 300 $ 301
Spring Cove School District (GO)
2.998% ............ 10/01/99 290 290
Temple University, Funding Obligations,
Callable @100 10/01/99 Series 1999
3.150% 05/12/00 1,000 1,000
Upper State Clair Township (GO)
3.600% ............ 10/15/99 405 405
Venango, Pollution Control Revenue
(RB) (A) (B)
3.750% ............ 12/01/12 895 895
Washington County, Authority Lease
(RB) (A) (B) Series 1985
3.250% ............ 11/01/05 4,560 4,560
West Allegheny School District
(GO) Series B
3.050% ............ 08/15/99 265 265
West Chester School District (GO)
3.050% ............ 11/15/99 185 185
West Perry School District (GO)
3.000% ............ 10/01/99 185 185
West View, Municipal Water
Authority (RB)
4.150% ............ 11/15/99 1,000 1,006
West York Area School District
(GO) (FSA)
3.600% ............ 09/01/99 200 200
York County, General Authority Pooled
Financing, School District of
Harrisburg (RB) (AMBAC) (A) (B)
Sub Series 96-b
3.400% ............ 09/01/26 2,000 2,000
York County, Industrial Development
Authority,
PECO Energy Project (RB) (A) (B)
Series A
3.300% ............ 08/01/16 1,000 1,000
Public Service Electric &
Gas Project (RB) (MBIA) (B)
Series 1995-A
3.300% 09/01/20 600 600
--------
129,534
--------
TOTAL MUNICIPAL BONDS
(Cost $129,534) ............................. 129,534
--------
See Accompanying Notes
111
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[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND
MAY 31, 1999
NUMBER
OF SHARES VALUE
(000) (000)
----- -----
CASH EQUIVALENTS -- 0.2%
Blackrock Pennsylvania Municipal
Money Market Fund ... 100 $ 100
Federated Pennsylvania Cash Trust Fund 219 219
--------
TOTAL CASH EQUIVALENTS
(Cost $319) ................................. 319
--------
TOTAL INVESTMENTS -- 99.1%
(Cost $129,853)* ............................ $129,853
========
OTHER ASSETS AND LIABILITIES,
NET -- 0.9% ................................. 1,183
--------
NET ASSETS:
Portfolio Shares of Class I
(unlimited authorization -- no
par value) based on 77,207,813
outstanding shares of beneficial interest ... 77,208
Portfolio Shares of Class A (unlimited
authorization -- no par value) based on
53,824,158 outstanding shares of
beneficial interest ......................... 53,824
Undistributed net investment income .......... 17
Accumulated net realized loss on investments . (13)
--------
TOTAL NET ASSETS -- 100.0% ..................... $131,036
========
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SHARE -- CLASS I ............................. $1.00
========
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
PER SHARE -- CLASS A ........................ $1.00
========
- - --------
* ALSO COST FOR FEDERAL INCOME TAX PURPOSES.
(A) SECURITIES ARE BACKED BY A LETTER OF CREDIT BACKED BY A MAJOR FINANCIAL
INSTITUTION. THE MATURITY DATE SHOWN IS THE LONGER THE NEXT RESET DATE
OR THE DATE IN WHICH THE PRINCIPAL AMOUNT CAN BE RECOVERED THROUGH
DEMAND.
(B) VARIABLE RATE SECURITY -- THE RATE REFLECTED ON THE STATEMENT OF NET
ASSETS IS THE RATE IN EFFECT ON MAY 31, 1999.
AMBAC -- AMERICAN MUNICIPBOND ASSURANCE CORPORATION
ETM -- ESCROWED TO MATURITY
FGIC -- FEDERALARANTY INSURANCE COMPANY
FSA -- FINANCIAL SECURITY ASSURANCE
GO -- GENERAL OBLIION
MBIA -- MUNICIPAL BOND INSURANCE ASSOCIATION
RB -- REVENUE BOND
TECP -- TAX EXEMPT COMMERCIAL PAPER
See Accompanying Notes
112
<PAGE> 115
[ARROW GRAPHIC OMITTED
FINANCIAL HIGHLIGHTS
ARMADA PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
----------------------------------------------------------
1999 1998 1997
----------------------------------------------------------
CLASS I CLASS A CLASS I CLASS A CLASS I3 CLASS A4
------------------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ......... $ 1.00 $ 1.00 $ 1.00 1.00 1.00 $ 1.00
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ...................... 0.03 0.03 0.03 0.03 0.03 0.02
LESS DISTRIBUTIONS
Dividends from net investment income ....... (0.03) (0.03) (0.03) (0.03) (0.03) (0.02)
-------- -------- -------- -------- -------- --------
Net asset value, end of period ............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
TOTAL RETURN ................................. 2.92% 2.76%5 3.41% 3.29%5 3.26% 3.18%1
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) ....... $ 77,214 $ 53,822 $73,264 $ 33,375 $60,876 $ 20,830
Ratio of expenses to average net assets .... 0.34% 0.49% 0.34% 0.46% 0.41% 0.46%1
Ratio of net investment income to average
net assets ................................ 2.82% 2.67% 3.35% 3.23% 3.20% 3.27%1
Ratio of expenses to average net assets
before fee waivers ........................ 0.59% 0.74% 0.58% 0.71% 0.74% 0.71%1
Ratio of net investment income to average
net assets before fee waivers ............. 2.57% 2.42% 3.11% 2.98% 2.87% 3.02%1
</TABLE>
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE
PERIOD ENDED YEAR ENDED PERIOD ENDED
MAY 31, 19963 APRIL 30, 19963 APRIL 30, 19953
------------ -------------- --------------
<S> <C> <C> <C>
Net asset value, beginning of period ......... $ 1.00 $ 1.00 $ 1.00
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ...................... 0.00 0.03 0.02
LESS DISTRIBUTIONS
Dividends from net investment income ....... (0.00) (0.03) (0.02)
-------- -------- --------
Net asset value, end of period ............... $ 1.00 $ 1.00 $ 1.00
======== ======== ========
TOTAL RETURN ................................. 0.28%2 3.36% 2.32%2
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) ....... $ 68,742 $ 70,422 $ 56,668
Ratio of expenses to average net assets .... 0.55%1 0.55% 0.55%1
Ratio of net investment income to average
net assets ................................ 3.24%1 3.29% 3.21%1
Ratio of expenses to average net assets
before fee waivers ........................ 0.97%1 0.96% 1.04%1
Ratio of net investment income to average
net assets before fee waivers ............. 2.82%1 2.88% 2.72%1
</TABLE>
1 ANNUALIZED.
2 RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
3 ACTIVITY FOR THE PERIOD PRESENTED INCLUDES THAT OF THE PREDECESSOR FUND
THROUGH SEPTEMBER 6, 1996. THE PREDECESSOR FUND COMMENCED OPERATIONS ON
AUGUST 10, 1994. DURING 1996, THE PREDECESSOR FUND CHANGED ITS FISCAL
YEAR-END FROM APRIL 30 TO MAY 31.
4 CLASS A COMMENCED OPERATIONS ON SEPTEMBER 11, 1996.
See Accompanying Notes
113
<PAGE> 116
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA TAX EXEMPT MONEY MARKET FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- 101.2%
ALASKA -- 1.5%
Valdez, Marine Terminal,
Arco Transportation Project
(RB) (A) (B) Series 1994-B
3.300% ............ 05/01/31 $ 6,000 $ 6,000
(RB) (A) Series 1994-A
2.800% ............ 06/10/99 3,300 3,300
-------
9,300
-------
ARIZONA -- 4.6%
Arizona State, School District (TRAN)
4.100% 07/30/99 1,500 1,501
Maricopa County, Pollution Control
Revenue, Southern California Edison
Project (TECP)
2.850% ............ 06/16/99 1,000 1,000
2.850% ............ 06/17/99 1,150 1,150
3.050% ............ 07/29/99 2,000 2,000
3.050% ............ 08/12/99 2,600 2,600
Series D
2.950% ............ 06/10/99 1,000 1,000
Series E
2.800% ............ 06/11/99 2,000 2,000
Series F
3.050% ............ 07/23/99 3,250 3,250
Arizona State, Agricultural
Improvement & Power District,
Salt River Project (TECP)
2.700% ............ 06/15/99 4,000 4,000
3.050% ............ 08/11/99 1,370 1,370
3.150% ............ 09/13/99 3,000 3,000
Series B
3.150% ............ 07/15/99 6,000 6,000
-------
28,871
-------
COLORADO -- 2.1%
Colorado Springs, Utility (RB)
6.100% 11/15/99 820 831
Colorado State, Health Facilities Authority,
Catholic Health Initiatives
(RB) (A) (B) Series B
3.300% ............ 12/01/25 7,700 7,700
North Colorado Medical Center
(RB) (A) (B)
3.200% ............ 05/15/20 4,300 4,300
-------
12,831
-------
CONNECTICUT -- 0.6%
Connecticut State (GO) Series C
3.500% ............ 10/15/99 4,000 4,010
-------
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
FLORIDA -- 2.9%
Gainesville, Utilities System (TECP)
3.100% 06/22/99 $3,251 $ 3,251
Jacksonville, Pollution Control Revenue,
Florida Power & Light (TECP)
2.750% ............ 06/15/99 5,810 5,810
3.450% ............ 06/17/99 5,000 5,000
2.850% ............ 06/17/99 2,450 2,450
3.050% ............. 08/11/99 1,700 1,700
-------
18,211
-------
GEORGIA -- 3.8%
Burke County, Pollution Control
Revenue, Oglethorne Power Plant,
Vogtle Project (A) (B) Series 1995
3.400% ............ 04/01/25 5,000 5,000
Georgia State, Municipal
Electric Authority
3.400% 06/08/99 5,435 5,435
Georgia State, ........
Agency Project (RB) (A) (B) Series C
3.300% ............ 11/01/07 7,800 7,800
Municipal Gas Authority Southern
Portfolio Project (RB) (A)
3.100% ............ 09/08/99 3,585 3,585
Savannah, Development Authority,
Downtown Parking Authority
(RB) (A) (B)
3.200% ............ 09/01/05 2,000 2,000
-------
23,820
-------
ILLINOIS -- 3.2%
Illinois State, Educational Facilities
Authority, Northwestern University
(RB) (A) (B)
3.300% ............ 03/01/28 8,736 8,736
Illinois State, Fox Valley Park (GO)
3.375% ............ 12/15/99 2,975 2,979
Illinois State, Health Facilities Authority,
Advocate Healthcare Network
(RB) (A) (B) Series B
3.300% ............ 08/15/22 4,965 4,965
Illinois State, Health Facilities Authority,
Evanston Northwestern (RB)
3.700% ............ 06/01/99 2,000 2,000
Illinois State, Hospital Development
Finance Authority, Palos Community
Hospital (RB) (A) (B) Series 1994-2
3.300% ............ 11/15/11 1,500 1,500
-------
20,180
-------
See Accompanying Notes
114
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[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA TAX EXEMPT MONEY MARKET FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
INDIANA -- 8.9%
Evansville, Economic Development
Authority, Ball Corporation Project
(RB) (A) (B)
3.250% ............ 12/01/08 $1,500 $ 1,500
Indiana State, Bond Bank Advance
Funding Program Notes, Series A2
3.500% ............ 01/19/00 2,550 2,558
Indiana State, Health Facilities Finance
Authority (RB) (A) (B)
3.300% ............ 12/01/02 1,000 1,000
3.300% ............ 08/01/06 3,400 3,400
Indiana State, Hospital Equipment
Finance Authority (RB) (A) (B)
3.300% ............ 12/01/15 11,200 11,200
Purdue University, Indiana Universities
Trustees Student Fee (RB) (A) (B)
Series E
3.250% ............ 07/01/11 5,465 5,465
Series H
3.250% ............ 07/01/17 4,965 4,965
Series L
3.250% ............ 07/01/20 905 905
Series O
3.250% ............ 07/01/19 5,850 5,850
Sullivan, Hoosier Energy (TECP)
Series F
2.950% ............ 06/10/99 1,500 1,500
3.050% ............ 08/13/99 4,545 4,545
Series L2
3.050% ............ 07/30/99 4,000 4,000
Series L4
2.800% ............ 06/11/99 4,295 4,295
Sullivan, National Rural Utilities (RB)
3.100% ............ 06/21/99 4,500 4,500
-------
55,683
-------
KENTUCKY -- 1.4%
Jefferson County, Louisville
Gas & Electric (TECP)
Series1996-A
3.250% ............ 06/16/99 4,000 4,000
3.000% ............ 06/24/99 2,000 2,000
Kentucky State, Economic Development,
Turnpike Authority (RB)
7.250% ............ 05/15/00 1,000 1,053
Lexington-Fayette, Urban County
Public Facility (RB)
3.500% ............ 05/01/00 1,550 1,554
-------
8,607
-------
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
LOUISIANA -- 0.3%
Louisiana State, Parrish of Saint James,
Pollution Control Revenue,
Texaco Project, Series 1988 A
3.250% ............ 07/29/99 $ 2,000 $ 2,000
-------
MAINE -- 0.4%
Maine State, Health & Higher
Education Facilities Authority
(RB) (A) (B) Series C
3.350% ............ 12/01/25 2,600 2,600
-------
MARYLAND -- 0.8%
Montgomery County (TECP)
3.350% ............ 06/25/99 3,000 3,000
Washington Suburban Station,
Sanitation Authority (BAN) (A) (B)
3.250% ............ 08/01/04 2,000 2,000
-------
5,000
-------
MASSACHUSETTS -- 0.1%
Massachusetts State (GO) (FGIC)
7.250% ............ 03/01/09 725 761
-------
MICHIGAN -- 2.4%
Michigan State, Building Authority
(TECP) Series 1
3.150% ............ 08/05/99 2,000 2,000
Michigan State, Housing Development
Authority, Pine Ridge (RB) (A) (B)
3.250% ............ 10/01/17 3,900 3,900
Michigan State, Municipal Bond
Authority (RB)
Series 1998-D1
3.580% ............ 08/27/99 2,000 2,003
3.500% ............ 12/01/99 2,000 2,006
Series 1998-B2
4.500% ............ 07/02/99 2,000 2,002
Michigan State, Truck Line
(FGIC) (RB) Series B
4.700% ............ 11/15/99 1,780 1,794
Michigan Technological University,
Board of Control (RB) (A) (B)
Series A
3.300% ............ 10/01/18 1,000 1,000
-------
14,705
-------
MINNESOTA -- 8.4%
Becker, Pollution Control Revenue,
Northern States Power (TECP)
2.950% ............ 06/09/99 2,200 2,200
2.850% ............ 06/16/99 2,000 2,000
3.100% ............ 06/23/99 5,000 5,000
3.050% ............ 07/30/99 4,000 4,000
3.150% ............ 08/25/99 2,000 2,000
See Accompanying Notes
115
<PAGE> 118
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA TAX EXEMPT MONEY MARKET FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
MINNESOTA -- CONTINUED
Hennepin County (GO) (A) (B) Series C
3.150% ............ 12/01/04 $ 6,100 $ 6,100
3.150% ............ 12/01/10 4,000 4,000
Minneapolis (GO) (A) (B) Series 1997-B
3.150% ............ 12/01/07 5,850 5,850
Minneapolis, University Gateway Project
(GO) (A) (B) Series B
3.200% ............ 12/01/27 6,350 6,350
Minnesota State (GO)
6.400% ............ 08/01/99 3,000 3,018
Minnesota State, School Districts
Tax & Aid Anticipation Borrowing
Certificate,
Series A 3.000% 02/03/00 2,000 2,000
Series B ............
2.950% ............ 02/24/00 2,000 2,000
Olmsted County, Human Services
Campus Infrastructure (RB) (A) (B)
3.200% ............ 08/01/05 3,755 3,755
Rochester, Healthcare Facilities,
Mayo Foundation, (TECP) Series E
3.150% ............ 07/14/99 4,100 4,100
-------
52,373
-------
MISSISSIPPI -- 1.8%
Forest, Industrial Development
(RB) (A) (B)
3.300% ............ 10/01/12 8,000 8,000
Jackson County, Water System (GO)
2.900% ............ 08/02/99 2,200 2,200
Mississippi State (GO) Series E
5.000% ............ 09/01/99 1,000 1,005
-------
11,205
-------
MISSOURI -- 0.8%
Missouri State, Health & Educational
Facility Authority,
School District Advance Funding Note
4.250% ............ 09/13/99 2,000 2,003
Sisters of Mercy (RB) (A) (B) Series C
3.200% ............ 06/01/19 2,100 2,100
(RB) (A) (B) Series D
3.200% ............ 06/01/19 1,000 1,000
-------
5,103
-------
NEBRASKA -- 0.3%
Nebraska State, Public Power
District (RB)
5.000% ............ 07/01/99 2,000 2,003
-------
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
NEVADA -- 1.2%
Clarke County, Flood Control
District (GO)
4.500% ............ 11/01/99 $ 4,640 $ 4,664
Henderson, Water & Sewer (GO)
5.000% ............ 09/01/99 2,860 2,872
-------
7,536
-------
NEW HAMPSHIRE -- 0.3%
New Hampshire State, Higher Education
& Health Facilities (RB) (A) (B)
Series E
3.350% ............ 12/01/25 1,000 1,000
New Hampshire State (GO)
5.000% ............ 02/01/00 1,000 1,012
-------
2,012
-------
NEW YORK -- 0.2%
New York State, Public Improvements
(GO) (A) (B) Series A-9
3.200% ............ 08/01/18 1,415 1,415
-------
NORTH CAROLINA -- 3.3%
North Carolina State, Educational
Facilities,
Bowman Gray School of Medicine
Project (RB) (A) (B)
3.250% ............ 09/01/20 10,600 10,600
Guilford College
(RB) (MBIA) (A) (B)
3.300% ............ 05/01/24 2,000 2,000
Winston-Salem, Municipal Leasing
(RB) (A) (B)
3.250% ............ 07/01/03 7,800 7,800
-------
20,400
-------
OHIO -- 19.8%
Cleveland (GO) (MBIA)
4.000% ............ 08/01/99 100 100
Columbus (GO) (B) Series 1
3.100% ............ 12/01/17 400 400
Columbus (TRAN) (B) Series 1995-1
3.100% ............ 06/01/16 4,750 4,750
Cuyahoga County, Hospital Facilities
Authority, Cleveland Clinic Foundation
(RB) (A) (B) Series 1996-B
3.300% ............ 01/01/26 5,800 5,800
(RB) (AMBAC) (B) Series 1997-A
3.300% ............ 01/01/16 860 860
Refunding (RB) (AMBAC) (B)
Series B
3.300% ............ 01/01/16 280 280
See Accompanying Notes
116
<PAGE> 119
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA TAX EXEMPT MONEY MARKET FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
OHIO -- CONTINUED
Cuyahoga County, Hospital Facilities
Authority, Cleveland Clinic Foundation
(RB) (A) (B) Series 1997-D
3.400% ............ 01/01/26 $ 7,250 7,250
Dublin County, City School District
(GO) (MBIA)
4.000% ............ 12/01/99 155 156
Ohio State, Water Improvement (BAN)
4.200% ............ 12/02/99 1,500 1,502
Erie County (BAN)
4.250% ............ 06/01/99 2,000 2,000
Franklin County, Hospital Authority,
Holy Cross Health System
(RB) (A) (B)
3.300% ............ 06/01/16 3,800 3,800
Greater Cleveland, Regional
Transportation Authority (GO) (FGIC)
4.450% ............ 12/01/99 100 101
Lake County (GO) (BAN)
3.375% ............ 10/07/99 1,807 1,809
Lima Memorial Hospital (RB) (B)
Series 1996
3.350% ............ 12/01/10 310 310
Lucas County (GO) (FGIC)
5.000% ............ 12/01/99 600 606
4.100% ............ 12/01/99 100 101
Mahoning County (RB) (MBIA) (B)
3.250% ............ 12/01/28 11,600 11,600
Masillon (GO) (BAN)
3.730% ............ 01/14/00 1,800 1,805
Mason County, City School District
(GO) (BAN) Series 1999
3.380% ............ 02/17/00 750 752
Milford (GO) (BAN)
3.300% ............ 03/01/00 1,160 1,162
Monroe, Unlimited Notes (GO)
3.350% ............ 10/07/99 2,400 2,401
Muskingum County (GO) (BAN)
3.750% ............ 06/01/00 2,650 2,658
Northeast Ohio, Regional Sewer District
(RB) (AMBAC)
4.200% ............ 11/15/99 1,000 1,005
Northwest Ohio School District
(GO) (FGIC)
3.900% ............ 12/01/99 100 100
Ohio State, Air Quality Development
Authority, Cincinnati Gas & Electric
(RB) (B) Series 1985-A
3.450% ............ 12/01/15 2,300 2,300
(RB) (A) (B)
3.450% ............ 12/01/15 1,050 1,050
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
OHIO -- CONTINUED
Ohio State, Air Quality Development
Authority, Cleveland Electric
Illuminating Co. (TECP)
3.100% ............ 06/16/99 $ 2,500 2,500
Ohio Edison Project (RB) (A) (B) Series A
2.950% ............ 02/01/15 3,000 3,000
USX Corp. (RB)
3.000% ............ 06/01/99 1,115 1,115
Ohio State, Higher Education Authority,
Lake Erie Project (RB) (A) (B)
3.320% ............ 12/01/16 4,780 4,780
Ohio State, Infrastructure Development
Authority (RB)
4.250% ............ 12/15/99 1,685 1,696
Ohio State, Public Facilities, Higher
Education Commission (RB) Series II-B
4.250% ............ 06/01/99 250 250
Ohio State, School District Tax
Anticipation Certificate, Series B
4.050% ............ 06/30/99 1,000 1,000
Ohio State University, General Receipts
(RB) (B) Series 1986-B
3.150% ............ 12/01/06 10,310 10,310
Ohio State Water Development
Authority (RB)
6.500% ............ 09/01/99 1,615 1,629
Orange City, State School District
3.460% ............ 08/18/99 2,000 2,001
(GO) (BAN)
3.440% ............ 08/18/99 4,500 4,504
Orrville, Electric System
(RB) (AMBAC)
4.100% ............ 12/01/99 200 201
Pike Delta, York School (BAN)
3.480% ............ 03/02/00 1,850 1,855
Ross County, Hospital Facilities
Authority, Medical Center Hospital
Project (RB) (B)
3.250% ............ 12/01/20 150 150
Adena Health System
(RB) (B) Series 1998
3.250% ............ 12/01/23 1,800 1,800
Scioto County, Volunteer Hospital
Administration, Central Capital Asset
Financing Program
(RB) (AMBAC) (A) (B) Series D
3.350% ............ 12/01/25 600 600
(RB) (A) (B) Series E
3.350% ............ 12/01/25 590 590
(RB) (A) (B) Series G
3.350% ............ 12/01/25 800 800
See Accompanying Notes
117
<PAGE> 120
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA TAX EXEMPT MONEY MARKET FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
OHIO -- CONTINUED
Southwest Licking, School District
(AN)
3.750% ............ 06/15/99 $ 1,000 $ 1,000
Series B
3.730% ............ 07/20/99 1,500 1,501
Summit County (TRAN)
4.250% ............ 06/03/99 8,000 8,000
Summit County (GO) (BAN)
3.800% ............ 06/01/00 8,000 8,046
Sycamore, Community School
District (AN)
3.850% ............ 07/28/99 1,000 1,001
Toledo, Services Special Assessment
Notes (A) (B) Series B
3.250% ............ 06/01/00 4,220 4,220
Twinsburg, Ohio Local School
District (GO)
5.750% ............ 12/01/99 200 203
University of Cincinnati, General Receipts
(BAN)
3.260% ............ 12/21/99 1,375 1,377
(RB)
4.150% ............ 06/01/99 235 235
Warren County, (GO)
4.150% ............ 12/01/99 115 116
Warren County, Health Facilities/
Otterbein Homes (RB) (A) (B)
3.300% ............ 07/01/23 1,900 1,900
Washington Water System Improvement
(BAN)
3.250% ............ 11/18/99 1,550 1,552
Whitehall (GO) (AMBAC)
4.100% ............ 12/01/99 100 101
Wooster, Industrial Development
Authority, Allen Group Project (RB) (B)
3.500% ............ 12/01/10 700 700
--------
123,391
--------
PENNSYLVANIA -- 10.7%
Allegheny County, Higher Educational
Carnegie Mellon University Building
Authority (RB) (A) (B)
3.350% ............ 12/01/03 2,000 2,000
Allegheny County, Industrial
Development Authority,
Environmental Improvement, USX
(RB) (A) (B)
3.150% ............ 12/01/32 10,000 10,000
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
PENNSYLVANIA --CONTINUED
Beaver County, Pollution Control
Revenue,
Atlantic Richfield Project (RB) (A) (B)
3.400% ............ 12/01/20 $ 1,000 $ 1,000
Duquesne Light
Project (TECP)
3.100% ............ 07/09/99 2,500 2,500
Delaware County, Industrial
Development Authority,
PECO Energy (TECP)
2.850% ............ 07/06/99 2,000 2,000
Delaware County, Pollution Control
Revenue, PECO Energy
(TECP) (FGIC)
3.100% ............ 07/30/99 2,000 2,000
Delaware Valley, Finance Authority,
Local Government (RB) (A) (B)
Series D
3.200% ............ 08/01/16 2,700 2,700
Emmaus, General Authority
(RB) (A) (B)
3.250% ............ 12/01/28 3,000 3,000
(RB) (A) (B) Series G-9
3.450% ............ 03/01/24 1,000 1,000
(RB) (A) (B) Series E-11
3.450% ............ 03/01/24 100 100
3.450% ............ 03/01/24 1,600 1,600
Lehigh County, Lehigh Valley Hospital
(RB) (Mbia) (A) (B) Series B
3.250% ............ 07/01/29 4,900 4,900
Northampton County, Higher Education
Authority, Lafayette College
(RB) (A) (B) Series B
3.300% ............ 11/01/28 2,000 2,000
Pennsylvania State (TECP)
3.200% ............ 07/07/99 3,000 3,000
Pennsylvania State, Economic
Development Authority (RB) (AMBAC)
5.000% ............ 01/01/00 2,000 2,022
Pennsylvania State, Higher Education
Facility,
Carnegie Mellon University Project,
(RB) (A) (B) Series C
3.350% ............ 11/01/29 2,400 2,400
University of Pennsylvania
Health Services Project (RB) (A) (B)
Series C
3.450% ............ 01/01/26 6,000 6,000
See Accompanying Notes
118
<PAGE> 121
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA TAX EXEMPT MONEY MARKET FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
PENNSYLVANIA -- CONTINUED
Pennsylvania State, Turnpike
Commission (RB) Series P
5.100% ............ 12/01/99 $ 1,150 $ 1,161
Philadelphia, Industrial Development
Authority, Fox Chase Cancer Center
Project (RB) (A) (B) Series 1997
3.400% ............ 07/01/25 6,200 6,200
Quakertown, Hospital Facilities Authority
(RB) (A) (B)
3.450% ............ 07/01/05 4,700 4,700
Sayre, Healthcare Center Facility
Authority (RB) (AMBAC) (B)
3.300% ............ 12/01/20 3,000 3,000
University of Pennsylvania (GO) (A) (B)
3.450% 01/01/24 100 100
Washington County, Authority Lease
(RB) (A) (B) Series 1985
3.250% ............ 11/01/05 3,730 3,730
-------
67,113
-------
SOUTH CAROLINA -- 1.0%
Lexington, Water & Sewer System (AN)
3.500% ............ 10/15/99 1,000 1,002
Oconee County School District (GO)
6.100% ............ 03/01/00 1,505 1,538
South Carolina State, Public Service,
Santee Cooper Project (TECP)
3.150% ............ 07/22/99 1,500 1,500
York County, Pollution Control Revenue,
North Carolina Electric Cooperative
(RB) (A) (B) Series N3
3.000% ............ 09/15/14 2,000 2,000
-------
6,040
-------
TENNESSEE -- 2.9%
Sevier County, Public Building Authority
(RB) (AMBAC) (B)
3.250% ............ 06/01/17 3,105 3,105
3.250% ............ 06/01/27 2,500 2,500
Tennessee State (A) (B) (GO), Puttable
Trust Receipts @ 108 Series
3.370% ............ 05/01/14 2,000 2,000
Tennessee State, School Bond
Authority (TECP)
3.100% ............ 06/16/99 1,000 1,000
3.150% ............ 07/29/99 5,800 5,800
2.950% ............ 08/18/99 3,400 3,400
-------
17,805
-------
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
TEXAS -- 4.2%
Austin, Combined Utility System (TECP)
3.200% ............ 06/24/99 $3,600 $ 3,600
Gulf Coast, Industrial Development
Authority, Amoco Oil Project
(RB) (A) (B)
3.000% ............ 06/01/25 2,500 2,500
Red River Authority, Pollution Control
Revenue, Southwestern Public
Service Company Project
(RB) (A) (B)
3.450% ............ 07/01/11 10,000 10,000
San Antonio (GO)
5.000% ............ 08/01/99 1,355 1,358
Stephen F. Austin, University of Texas
(RB) (MBIA) Series A
6.250% ............ 10/15/99 600 607
Texas State (TECP)
2.950% ............ 08/23/99 3,000 3,000
University of Texas,
Permanent University Fund (RB)
3.150% ............ 09/15/99 2,000 2,000
Revenue Financing System (RB)
Series A
5.400% ............ 08/15/99 1,320 1,327
Series B
5.000% ............ 08/15/99 1,550 1,557
-------
25,949
-------
UTAH -- 2.8%
Emery County, Pollution Control
Revenue, Pacificorp Project
(RB) (A) (B)
3.250% ............ 07/01/15 2,700 2,700
Intermountain Power (TECP)
Series 1997-B
2.950% ............ 06/08/99 2,000 2,000
3.050% ............ 08/13/99 1,000 1,000
Series 1985-F
3.100% ............ 08/12/99 1,500 1,500
Utah State Highway (GO)
3.150% ............ 08/16/99 2,000 2,000
3.150% ............ 08/16/99 3,000 3,000
Utah University, Auxiliary & Campus
Facilities (RB) (A) (B) Series 1997-A
3.300% ............ 04/01/27 5,050 5,050
-------
17,250
-------
See Accompanying Notes
119
<PAGE> 122
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA TAX EXEMPT MONEY MARKET FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
VERMONT -- 0.4%
Vermont State (GO)
6.800% ............ 02/01/00 $ 1,300 $ 1,331
Series A
4.250% ............ 01/15/00 1,215 1,224
--------
2,555
--------
VIRGINIA -- 3.3%
Hampton, Hospital Facilities Authority,
Sentara Health System (RB) Series B
3.050% ............ 08/12/99 2,300 2,300
Roanoke, Industrial Development
Authority, Roanoke Memorial Hospital
(RB) (A) (B) Series A
3.400% ............ 07/01/19 5,000 5,000
3.400% ............ 07/01/27 6,200 6,200
Virginia State, Peninsula Ports Authority,
Coal Terminal, Dominion Project (RB)
Series PJ-B
3.000% ............ 06/04/99 2,835 2,835
Virginia State, Public School Authority
(RB)
5.000% ............ 08/01/99 3,105 3,116
4.000% ............ 08/01/99 1,185 1,187
--------
20,638
--------
WASHINGTON -- 1.5%
Chelan County, Chelan Homes
(RB) (A) (B)
3.250% ............ 06/01/15 4,260 4,260
Washington State, Healthcare Facility
Authority, Fred Hutchinson Cancer
Research Center (RB) (A) (B)
Series 1991-A
3.500% ............ 01/01/18 200 200
(RB) (B)
3.500% ............ 01/01/23 5,000 5,000
--------
9,460
--------
WISCONSIN -- 4.2%
Kenosha (TRAN)
3.380% ............ 09/28/99 2,000 2,000
Oak Creek, Pollution Control Revenue,
Wisconsin Electric Power Company
Project (RB) (A) (B)
3.400% ............ 08/01/16 3,300 3,300
Wisconsin State (GO)
4.800% ............ 11/01/99 1,250 1,259
Wisconsin State (TECP)
3.150% ............ 09/13/99 3,154 3,154
3.150% ............ 09/14/99 4,040 4,040
PAR/SHARES VALUE
MATURITY (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
WISCONSIN -- CONTINUED
Wisconsin State (TECP)
2.800% ............ 06/14/99 $ 3,916 $ 3,916
2.750% ............ 06/14/99 2,301 2,301
Series A
2.700% ............ 06/11/99 4,188 4,188
Series B
2.650% ............ 06/14/99 2,386 2,386
--------
26,544
--------
WYOMING -- 1.1%
Lincoln County, Pollution Control
Revenue, Pacificorp (TECP)
3.200% ............ 07/13/99 2,000 2,000
Sweetwater, Pollution Control Revenue,
Pacificorp (TECP)
3.400% ............ 06/17/99 3,500 3,500
3.150% ............ 06/17/99 1,400 1,400
--------
6,900
--------
TOTAL MUNICIPAL BONDS
(Cost $632,271) ............................. 632,271
--------
CASH EQUIVALENTS -- 0.1%
Federated Tax-Free Money
Market Fund ......... 100 100
Goldman Sachs Financial Square Tax-
Exempt Money Market Fund 308 308
--------
TOTAL CASH EQUIVALENTS
(Cost $408) ................................. 408
--------
TOTAL INVESTMENTS -- 101.3%
(Cost $632,679)* ............................ $632,679
========
OTHER ASSETS AND LIABILITIES,
NET -- (1.3%) .............................. (8,032)
--------
See Accompanying Notes
120
<PAGE> 123
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA TAX EXEMPT MONEY MARKET FUND
MAY 31, 1999
VALUE
(000)
-----
NET ASSETS:
Portfolio Shares of Class I
(unlimited authorization -- no par value)
based on 434,455,683 outstanding shares of
beneficial interest ......................... $434,456
Portfolio Shares of Class A
(unlimited authorization -- no par value)
based on 190,481,642 outstanding shares of
beneficial interest ......................... 190,482
Accumulated net realized loss on investments . (25)
Distributions in excess of net investment income (266)
--------
TOTAL NET ASSETS -- 100.0% ..................... $624,647
========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SHARE -- CLASS I ............................ $1.00
========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SHARE -- CLASS A ........................... $1.00
========
----------
* ALSO COST FOR FEDERAL INCOME TAX PURPOSES.
(A) SECURITIES ARE BACKED BY A LETTER OF CREDIT BY A MAJOR FINANCIAL
INSTITUTION.
(B) VARIABLE RATE SECURITIES -- THE RATE REFLECTED ON THE STATEMENT OF NET
ASSETS IS THE RATE IN EFFECT ON MAY 31, 1999. THE MATURITY DATE SHOWN
IS THE LONGER OF THE NEXT RESET DATE OR THE DATE IN WHICH THE PRINCIPAL
AMOUNT CAN BE RECOVERED THROUGH DEMAND.
AMBAC -- AMERICAN MUNICIPAL BOND ASSURANCE CORPORATION
AN -- ANTICIPATION NOTE
BAN -- BOND ANTICIPATION NOTE
FGIC -- FEDERAL GUARANTY INSURANCE CORPORATION
GO -- GENERAL OBLIGATION
MBIA -- PRINICIPAL BOND INSURANCE ASSOCIATION
RB -- REVENUE BOND
TECP -- TAX EXEMPT COMMERCIAL PAPER
TRAN -- TAX AND REVENUE ANTICIPATION NOTE
See Accompanying Notes
121
<PAGE> 124
[ARROW GRAPHIC OMITTED]
FINANCIAL HIGHLIGHTS
ARMADA TAX EXEMPT MONEY MARKET FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
-----------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
-----------------------------------------------------------------------------------------------------------
CLASS I CLASS A CLASS I CLASS A CLASS I CLASS A CLASS I CLASS A CLASS I CLASS A
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning
of period .......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net investment
income ........... 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03
LESS DISTRIBUTIONS
Dividends from net
investment income . (0.03) (0.03) (0.03) (0.03) (0.03) (0.03) (0.03) (0.03) (0.03) (0.03)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value,
end of period ..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
TOTAL RETURN 3.00% 2.85% 3.40% 3.27% 3.23% 3.12% 3.40% 3.29% 3.14% 3.04%
RATIOS/SUPPLEMENTAL DATA
Net assets,
end of period
(in 000's) ........ $434,178 $190,469 $418,953 $132,548 $370,679 $ 71,917 $261,808 $ 85,928 $172,643 $51,916
Ratio of expenses
to average
net assets ....... 0.30% 0.44% 0.30% 0.42% 0.29% 0.39% 0.30% 0.40% 0.35% 0.46%
Ratio of net
investment income
to average
net assets ........ 2.92% 2.78% 3.32% 3.20% 3.18% 3.08% 3.33% 3.23% 3.15% 3.17%
Ratio of expenses to
average net assets
before fee waivers 0.50% 0.64% 0.50% 0.62% 0.49% 0.59% 0.51% 0.61% 0.56% 0.67%
Ratio of net
investment
income to
average net
assets before
fee waivers ...... 2.72% 2.58% 3.12% 3.00% 2.98% 2.88% 3.12% 3.02% 2.94% 2.96%
</TABLE>
See Accompanying Notes
122
<PAGE> 125
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSET
ARMADA MONEY MARKET FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
COMMERCIAL PAPER+-- 83.7%
AGRICULTURE -- 1.0%
Canadian Wheat Board
4.770% ............ 07/16/99 $ 12,290 $ 12,217
4.820% ............ 09/27/99 7,500 7,381
4.760% ............ 10/08/99 15,000 14,744
--------
34,342
--------
AUTOMOTIVE -- 2.8%
Daimler Chrysler
4.860% ............ 06/16/99 10,000 9,980
4.820% ............ 07/07/99 15,000 14,928
4.790% ............ 08/04/99 15,000 14,872
4.810% ............ 08/05/99 15,000 14,870
4.810% ............ 08/06/99 15,000 14,868
4.810% ............ 08/25/99 15,000 14,830
4.810% ............ 09/08/99 15,000 14,802
--------
99,150
--------
CHEMICALS & ALLIED PRODUCTS -- 13.7%
Air Products & Chemicals
4.770% ............ 07/22/99 15,000 14,899
Akzo Nobel
4.810% ............ 06/02/99 5,000 4,999
4.860% ............ 06/03/99 10,000 9,997
4.840% ............ 07/29/99 15,000 14,883
4.810% ............ 08/18/99 15,000 14,844
4.800% ............ 08/24/99 10,000 9,888
4.870% ............ 09/17/99 15,000 14,781
Bayer
4.780% ............ 07/27/99 15,000 14,888
Clorox
4.810% ............ 06/24/99 5,000 4,985
4.810% ............ 06/25/99 13,720 13,676
E.I. duPont de Nemours
4.810% ............ 06/07/99 15,000 14,988
4.840% ............ 06/16/99 15,000 14,970
4.810% ............ 06/23/99 15,000 14,956
4.810% ............ 07/14/99 15,000 14,914
4.810% ............ 07/19/99 15,000 14,904
4.800% ............ 11/10/99 15,000 14,676
Great Lakes Chemical
4.820% ............ 06/09/99 11,000 10,988
4.780% ............ 06/14/99 5,000 4,991
4.780% ............ 06/22/99 10,000 9,972
4.800% ............ 06/23/99 10,000 9,971
4.820% ............ 07/01/99 10,000 9,960
4.790% ............ 07/22/99 10,000 9,932
4.820% ............ 08/11/99 10,000 9,905
4.850% ............ 08/19/99 4,440 4,393
4.800% ............ 08/25/99 10,000 9,887
Henkel
4.800% ............ 06/07/99 15,000 14,988
4.820% ............ 06/23/99 10,000 9,970
4.800% ............ 08/02/99 10,000 9,917
4.810% ............ 08/18/99 8,000 7,917
4.800% ............ 09/01/99 14,000 13,828
4.800% ............ 10/05/99 11,000 10,815
4.790% ............ 10/06/99 12,000 11,797
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
COMMERCIAL PAPER -- CONTINUED
CHEMICALS & ALLIED PRODUCTS -- CONTINUED
Monsanto
4.850% ............ 06/02/99 $ 10,000 $ 9,999
4.780% ............ 06/09/99 15,000 14,984
4.820% ............ 06/22/99 15,781 15,737
4.820% ............ 07/06/99 5,000 4,977
4.770% ............ 07/28/99 14,000 13,894
4.810% ............ 09/28/99 7,015 6,903
Procter & Gamble
4.800% ............ 06/02/99 15,000 14,998
4.810% ............ 06/16/99 15,000 14,970
4.800% ............ 06/29/99 15,000 14,944
--------
477,885
--------
COMMUNICATIONS -- 2.1%
Ameritech
4.900% ............ 06/03/99 20,000 19,995
AT & T
4.820% ............ 06/02/99 15,000 14,998
4.820% ............ 06/08/99 15,000 14,986
Bell South
4.900% ............ 06/02/99 25,000 24,997
--------
74,976
--------
COMPUTER & OFFICE EQUIPMENT -- 0.4%
Xerox
4.830% ............ 06/02/99 15,000 14,998
--------
DIVERSIFIED -- 4.7%
General Electric Capital
4.820% ............ 06/02/99 10,000 9,999
4.820% ............ 06/16/99 15,000 14,970
4.880% ............ 08/18/99 15,000 14,841
4.810% ............ 09/08/99 5,000 4,934
4.820% ............ 09/14/99 15,000 14,789
4.910% ............ 01/31/00 15,000 14,501
4.950% ............ 02/03/00 10,000 9,660
5.080% ............ 02/16/00 15,000 14,450
Koch
4.920% ............ 06/01/99 50,000 50,000
Minnesota Mining & Manufacturing
4.800% ............ 07/19/99 15,000 14,904
--------
163,048
--------
ELECTRIC UTILITIES -- 0.3%
South California Edison
4.810% ............ 06/10/99 10,000 9,988
--------
ELECTRONICS & OTHER ELECTRICAL EQUIPMENT -- 4.2%
Avnet
4.860% ............ 06/03/99 10,000 9,997
4.800% ............ 06/07/99 5,000 4,996
4.800% ............ 06/11/99 10,000 9,987
4.820% ............ 06/14/99 5,000 4,991
4.820% ............ 06/23/99 5,000 4,985
4.800% ............ 07/16/99 5,000 4,970
See Accompanying Notes
123
<PAGE> 126
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSET
ARMADA MONEY MARKET FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
COMMERCIAL PAPER -- CONTINUED
ELECTRONICS & OTHER ELECTRICAL EQUIPMENT -- CONTINUED
Eaton
4.870% ............ 08/17/99 $ 15,000 $ 14,844
4.840% ............ 09/01/99 15,000 14,814
4.950% ............ 01/31/00 15,000 14,497
Lucent Technologies
4.980% ............ 01/26/00 15,000 14,504
4.910% ............ 02/02/00 10,000 9,664
5.100% ............ 02/22/00 10,000 9,623
Motorola
4.810% ............ 07/01/99 15,000 14,940
4.790% ............ 07/29/99 15,000 14,884
--------
147,696
--------
ENTERTAINMENT -- 0.3%
Walt Disney
4.810% ............ 06/17/99 10,000 9,979
--------
FABRICATED METAL PRODUCTS -- 0.7%
Stanley Works
4.810% ............ 06/02/99 15,000 14,998
4.830% ............ 06/17/99 8,000 7,983
--------
22,981
--------
FINANCIAL CONDUIT -- 9.2%
Ciesco
4.800% ............ 06/08/99 15,000 14,986
4.830% ............ 06/16/99 15,000 14,970
4.780% ............ 06/16/99 15,000 14,970
4.780% ............ 06/18/99 9,035 9,015
4.780% ............ 07/19/99 15,000 14,904
Corporate Asset Funding
4.810% ............ 06/01/99 15,000 15,000
4.800% ............ 06/16/99 15,000 14,970
4.810% ............ 06/24/99 15,000 14,954
4.800% ............ 07/16/99 10,000 9,940
4.800% ............ 07/28/99 15,000 14,886
4.820% ............ 08/23/99 15,000 14,833
4.820% ............ 11/10/99 15,000 14,675
Delaware Funding
4.820% ............ 06/07/99 10,000 9,992
4.800% ............ 06/17/99 15,000 14,968
4.800% ............ 07/20/99 10,000 9,935
4.800% ............ 07/21/99 10,000 9,933
4.870% ............ 08/17/99 8,561 8,472
4.900% ............ 08/20/99 10,000 9,891
4.900% ............ 08/23/99 15,000 14,832
Preferred Receivables
4.810% ............ 06/21/99 15,000 14,960
4.810% ............ 07/12/99 15,000 14,918
4.870% ............ 08/20/99 30,000 29,675
4.880% ............ 08/25/99 15,000 14,827
--------
320,506
--------
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
COMMERCIAL PAPER -- CONTINUED
FINANCIAL SERVICES -- 20.4%
ABB Treasury
4.930% 06/01/99 $ 25,000 $ 25,000
Abbey National
4.820% ............ 07/08/99 15,000 14,926
4.810% ............ 07/15/99 5,000 4,971
4.810% ............ 07/22/99 10,000 9,932
4.800% ............ 08/09/99 15,000 14,862
4.895% ............ 11/23/99 15,000 14,643
4.970% ............ 12/01/99 15,000 14,621
American Express
4.810% ............ 07/07/99 15,000 14,928
4.800% ............ 08/18/99 25,000 24,740
4.800% ............ 08/25/99 15,000 14,830
4.780% ............ 10/20/99 15,000 14,719
4.790% ............ 10/27/99 15,000 14,705
Associates First Capital
4.840% ............ 06/09/99 10,000 9,989
4.830% ............ 06/10/99 10,000 9,988
4.800% ............ 06/16/99 15,000 14,970
4.860% ............ 08/18/99 15,000 14,842
4.800% ............ 08/25/99 15,000 14,830
Ford Motor Credit
4.810% ............ 06/22/99 10,000 9,972
4.810% ............ 07/14/99 15,000 14,914
4.790% ............ 07/14/99 15,000 14,914
4.790% ............ 07/21/99 15,000 14,900
4.750% ............ 08/04/99 45,000 44,618
GMAC
4.790% ............ 07/21/99 15,000 14,900
4.810% ............ 07/28/99 15,000 14,886
4.870% ............ 08/18/99 15,000 14,842
Household Finance
4.860% ............ 08/25/99 15,000 14,828
National Rural Utilities Cooperative
4.820% ............ 06/09/99 10,000 9,989
4.820% ............ 06/23/99 30,000 29,912
4.780% ............ 07/09/99 10,000 9,950
4.790% ............ 07/12/99 15,000 14,918
4.820% ............ 07/21/99 15,000 14,900
New Center Asset Trust
4.800% ............ 06/23/99 10,000 9,971
4.790% ............ 07/21/99 15,000 14,900
4.800% ............ 08/11/99 15,000 14,858
4.860% ............ 08/25/99 15,000 14,828
New York Life Capital
4.820% ............ 06/02/99 15,000 14,998
4.800% ............ 06/09/99 10,000 9,989
4.820% ............ 06/17/99 15,000 14,968
4.810% ............ 07/21/99 15,000 14,900
4.800% ............ 08/11/99 10,000 9,905
4.800% ............ 08/26/99 15,000 14,828
4.800% ............ 09/15/99 15,000 14,788
See Accompanying Notes
124
<PAGE> 127
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSET
ARMADA MONEY MARKET FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
COMMERCIAL PAPER -- CONTINUED
FINANCIAL SERVICES -- CONTINUED
Paccar Financial
4.810% ............ 06/03/99 $ 6,000 $ 5,998
4.810% ............ 06/10/99 5,030 5,024
4.810% ............ 06/22/99 9,000 8,975
4.800% ............ 06/24/99 15,000 14,954
Transamerica
4.810% ............ 07/08/99 15,000 14,926
4.830% ............ 07/19/99 15,000 14,903
4.920% ............ 09/01/99 15,000 14,811
--------
714,463
--------
FOOD & KINDRED PRODUCTS -- 6.2%
Archer Daniels Midland
4.800% ............ 08/12/99 15,000 14,856
4.850% ............ 09/09/99 15,000 14,798
Campbell Soup
4.820% ............ 06/09/99 30,000 29,968
4.810% ............ 06/14/99 15,000 14,974
4.780% ............ 09/13/99 10,000 9,862
4.800% ............ 09/15/99 15,000 14,788
4.800% ............ 12/01/99 15,000 14,634
Diageo
4.850% ............ 06/09/99 15,000 14,984
4.820% ............ 08/02/99 15,000 14,875
4.860% ............ 08/06/99 15,000 14,868
4.850% ............ 08/11/99 11,000 10,895
4.800% ............ 09/07/99 15,000 14,804
4.860% ............ 09/22/99 15,000 14,771
Golden Peanut
4.820% ............ 07/09/99 2,000 1,990
4.820% ............ 07/20/99 8,000 7,947
4.820% ............ 07/27/99 8,000 7,940
--------
216,954
--------
GLASS PRODUCTS -- 0.1%
Guardian Industries
4.810% ............ 07/14/99 5,000 4,971
--------
INSURANCE CARRIERS -- 3.5%
American General
4.860% ............ 06/01/99 15,000 15,000
4.820% ............ 08/11/99 15,000 14,857
John Hancock Capital
4.820% ............ 06/29/99 13,000 12,951
4.780% ............ 07/13/99 15,000 14,916
Prudential Funding
4.820% ............ 06/09/99 10,000 9,989
4.810% ............ 06/16/99 10,000 9,980
4.790% ............ 08/11/99 10,000 9,905
4.800% ............ 09/22/99 15,000 14,774
4.810% ............ 10/06/99 10,000 9,830
4.890% ............ 10/20/99 10,000 9,808
--------
122,010
--------
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
COMMERCIAL PAPER -- CONTINUED
MACHINERY & EQUIPMENT -- 4.1%
Caterpillar Financial
4.780% ............ 07/07/99 $15,000 $ 14,928
4.790% ............ 08/02/99 20,600 20,430
4.780% ............ 08/04/99 15,000 14,872
4.850% ............ 08/10/99 9,750 9,658
4.860% ............ 08/30/99 15,000 14,818
4.900% ............ 10/04/99 15,000 14,745
John Deere Capital
4.810% ............ 06/02/99 15,000 14,998
4.800% ............ 07/07/99 15,000 14,928
4.820% ............ 08/04/99 15,000 14,871
4.800% ............ 08/11/99 10,000 9,905
--------
144,153
--------
MISCELLANEOUS MANUFACTURING -- 1.4%
Hasbro
4.800% ............ 08/06/99 10,000 9,912
4.800% ............ 08/10/99 9,446 9,358
4.880% ............ 09/13/99 15,000 14,788
5.030% ............ 01/19/00 15,000 14,514
--------
48,572
--------
OIL & GAS -- 1.6%
Baker Hughes
4.830% ............ 06/23/99 15,000 14,956
4.800% ............ 08/09/99 10,000 9,908
BP America
4.790% ............ 07/12/99 15,000 14,918
BP Amoco
4.860% ............ 01/24/00 15,000 14,520
--------
54,302
--------
PHARMACEUTICALS -- 4.1%
American Home Products
4.800% ............ 06/10/99 10,000 9,988
4.850% ............ 06/16/99 15,000 14,970
4.790% ............ 07/28/99 25,000 24,810
4.800% ............ 08/17/99 9,000 8,908
4.800% ............ 08/26/99 15,000 14,828
Glaxo Wellcome
4.820% ............ 06/11/99 15,000 14,980
4.810% ............ 06/23/99 15,000 14,956
4.800% ............ 07/06/99 13,499 13,436
4.800% ............ 08/10/99 13,000 12,879
4.850% ............ 08/18/99 15,000 14,842
--------
144,597
--------
PHOTOGRAPHY -- 2.3%
Eastman Kodak
4.820% ............ 06/01/99 15,000 15,000
4.810% ............ 06/03/99 15,000 14,996
4.810% ............ 07/12/99 10,000 9,945
4.810% ............ 07/14/99 5,000 4,971
4.800% ............ 07/15/99 15,000 14,912
4.790% ............ 08/04/99 10,000 9,915
4.860% ............ 09/22/99 10,000 9,847
--------
79,586
--------
See Accompanying Notes
125
<PAGE> 128
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSET
ARMADA MONEY MARKET FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
COMMERCIAL PAPER -- CONTINUED
PRIMARY METAL INDUSTRIES -- 0.6%
Aluminum Company of America
4.810% ............ 06/15/99 $ 5,000 $ 4,991
4.810% ............ 06/23/99 15,000 14,956
----------
19,947
----------
TOTAL COMMERCIAL PAPER
(Cost $2,925,104) ........................... 2,925,104
----------
YANKEE CERTIFICATES OF DEPOSIT -- 3.1%
Abbey National Treasury
5.130% ............ 05/04/00 15,000 14,991
ABN Amro, Chicago
4.935% ............ 11/17/99 15,000 14,994
Bank of Montreal, Chicago
5.160% ............ 05/03/00 15,000 14,995
Deutsche Bank, New York
5.050% ............ 02/09/00 15,000 14,994
5.150% ............ 04/25/00 25,000 24,993
Rabobank, New York
5.130% ............ 04/27/00 25,000 24,989
----------
TOTAL YANKEE CERTIFICATES OF
DEPOSIT
(Cost $109,956) ............................. 109,956
----------
FLOATING RATE NOTES (A) -- 3.9%
Allstate Funding
5.050% ............ 08/31/99 10,000 10,000
4.953% ............ 12/01/99 10,000 10,000
5.080% ............ 03/31/00 10,000 10,000
Federal Home Loan Bank
5.071% ............ 03/24/00 25,000 25,000
John Hancock Mutual Life
5.020% 15,000 15,000
J.P. Morgan Guarantee Trust
4.968% ............ 11/29/99 15,000 15,000
Key Bank, NA
4.975% ............ 09/23/99 25,000 24,996
Travelers Funding
5.030% ............ 08/17/99 10,000 10,000
5.060% ............ 03/31/00 15,000 15,000
----------
TOTAL FLOATING RATE NOTES
(Cost $134,996) ............................. 134,996
----------
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 0.7%
Student Loan Marketing Association,
Callable 08/11/99 @ 100, MTN
5.050% ............ 02/11/00 24,000 24,000
----------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS
(Cost $24,000) .............................. 24,000
----------
PAR/SHARES VALUE
MATURITY (000) (000)
-------- ---------- -----
REPURCHASE AGREEMENTS -- 8.6%
Credit Suisse First Boston
4.920% ............ 06/01/99 $125,000 $ 125,000
(dated 05/28/99, matures
06/01/99, repurchase price
$125,068,333; collateralized
by U.S. Treasury Bills
total market value $129,132,191)
Lehman
4.850% ............ 06/01/99 42,111 42,111
(dated 05/28/99, matures
06/01/99, repurchase price
$42,133,693; collateralized
by various FHLMC obligations:
total market value $42,956,074)
Prudential
4.930% ............ 06/01/99 85,000 85,000
(dated 05/28/99, matures
06/01/99, repurchase price
$85,046,561; collateralized
by various FHLB, FHLMC, FNMA
and U.S. Treasury obligations:
total market value $86,700,604)
Salomon Smith Barney
4.900% ............ 06/01/99 50,000 50,000
(dated 05/28/99, matures
06/01/99, repurchase price
$50,027,222; collateralized
by various FHLMC and FNMA
obligations: total market value $51,055,849)
TOTAL REPURCHASE AGREEMENTS
(Cost $302,111) ............................. 302,111
----------
CASH EQUIVALENT -- 0.4%
Goldman Sachs Financial Square
Premium Money Market Fund 12,936 12,936
----------
TOTAL CASH EQUIVALENT
(Cost $12,936) .............................. 12,936
----------
TOTAL INVESTMENTS -- 100.4%
(Cost $3,509,103)* .......................... $3,509,103
==========
OTHER ASSETS AND LIABILITIES,
NET -- (0.4%) ............................... (14,593)
----------
See Accompanying Notes
126
<PAGE> 129
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSET
ARMADA MONEY MARKET FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
NET ASSETS:
Portfolio Shares of Class I
(unlimited authorization --
no par value) based on
2,134,096,737 outstanding shares
of beneficial interest ...................... $2,134,090
Portfolio Shares of Class A
(unlimited authorizan -- no
par value) based on
1,360,656,724 outstanding shares
of beneficial interest ...................... 1,360,657
Portfolio Shares of Class B
(unlimited authorizan -- no
par value) based on
26,540 outstanding shares of
beneficial interest ......................... 27
Accumulated net realized loss on investments . (11)
Distributions in excess of net
investment income ........................... (253)
----------
TOTAL NET ASSETS -- 100.0% ..................... $3,494,510
==========
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SHARE -- CLASS I ............................ $1.00
==========
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SHARE -- CLASS A ............................ $1.00
==========
NET ASSET VALUE AND OFFERING
PRICE PER SHARE-- CLASS B ................... $1.00
==========
- - -----------
* ALSO COST FOR FEDERAL INCOME TAX PURPOSES.
+ EFFECTIVE YIELD
(A) VARIABLE RATE SECURITIES -- THE RATE REFLECTED ON THE STATEMENT OF NET
ASSETS IS THE RATE IN EFFECT ON MAY 31, 1999. THE MATURITY DATE SHOWN
IS THE LONGER OF THE NEXT RESET DATE OR THE DATE IN WHICH THE PRINCIPAL
AMOUNT CAN BE RECOVERED THROUGH DEMAND.
FHLB -- FEDERAL HOME LOAN BANK
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
MTN -- MEDIUM TERM NOTE
See Accompanying Notes
127
<PAGE> 130
[ARROW GRAPHIC OMITTED]
FINANCIAL HIGHLIGHTS
ARMADA MONEY MARKET FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
------------------------------------------------------------------------------
1999 1998
------------------------------------------------------------------------------
CLASS I CLASS A CLASS B CLASS I CLASS A CLASS B1
-------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning
of period .......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- --------- ---------- -------- ---------
INCOME FROM
INVESTMENT
OPERATIONS
Net investment
income ............. 0.05 0.05 0.04 0.05 0.05 0.05
LESS DISTRIBUTIONS
Dividends from
net investment
income ............ (0.05) (0.05) (0.04) (0.05) (0.05) (0.05)
---------- --------- --------- ---------- -------- ---------
Net asset value,
end of period ...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========= ========== ======== =========
TOTAL RETURN ......... 4.96% 4.82% 4.21% 5.39% 5.26% 5.04%2
RATIOS/SUPPLEMENTAL
DATA
Net assets, end
of period
(in 000's) ........ $2,133,839 $1,360,644 $ 27 $1,911,689 $696,893 $ 5
Ratio of
expenses to
average
net assets ........ 0.42% 0.56% 1.27% 0.38% 0.51% 1.22%2
Ratio of net
investment
income
to average
net assets ........ 4.82% 4.68% 3.97% 5.27% 5.14% 4.39%2
Ratio of
expenses to
average net
assets before
fee waivers ....... 0.52% 0.66% 1.37% 0.48% 0.61% 1.27%2
Ratio of
net investment
income to average
net assets before
fee waivers ....... 4.72% 4.58% 3.87% 5.17% 5.08% 4.31%2
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
--------------------------------------------------------------------------
1997 1996 1995
--------------------------------------------------------------------------
CLASS I CLASS A CLASS I CLASS A CLASS I CLASS A
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning
of period .......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- -------- ---------- -------- ---------- --------
INCOME FROM
INVESTMENT
OPERATIONS
Net investment
income ............. 0.05 0.05 0.05 0.05 0.05 0.05
LESS DISTRIBUTIONS
Dividends from
net investment
income ............ (0.05) (0.05) (0.05) (0.05) (0.05) (0.05)
---------- -------- ---------- -------- ---------- --------
Net asset value,
end of period ...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ======== ========== ======== ========== ========
TOTAL RETURN ......... 5.19% 5.09% 5.45% 5.35% 5.11% 5.01%
RATIOS/SUPPLEMENTAL
DATA
Net assets, end
of period
(in 000's) ........ $1,943,021 $346,172 $1,344,414 $343,087 $1,083,243 $175,192
Ratio of
expenses to
average
net assets ........ 0.37% 0.47% 0.37% 0.47% 0.37% 0.47%
Ratio of net
investment
income
to average
net assets ........ 5.07% 4.97% 5.30% 5.18% 5.07% 5.12%
Ratio of
expenses to
average net
assets before
fee waivers ....... 0.47% 0.57% 0.48% 0.58% 0.48% 0.58%
Ratio of
net investment
income to average
net assets before
fee waivers ....... 4.97% 4.87% 5.19% 5.07% 4.96% 5.01%
</TABLE>
1 THE MONEY MARKET FUND CLASS B COMMENCED OPERATIONS JANUARY 5, 1998.
2 ANNUALIZED.
See Accompanying Notes
128
<PAGE> 131
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA GOVERNMENT MONEY MARKET FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 81.1%
FEDERAL FARM CREDIT BANK -- 10.5%
Discount Notes+
4.660% .......... 06/02/99 $ 8,980 $ 8,979
4.710% ........... 06/03/99 15,000 14,996
4.710% ........... 06/07/99 14,000 13,989
4.674% ........... 06/15/99 32,173 32,114
4.730% ........... 06/23/99 8,000 7,977
4.750% ........... 07/07/99 15,000 14,929
4.740% ........... 07/09/99 11,975 11,915
4.730% ........... 07/28/99 10,000 9,925
4.750% ........... 08/04/99 8,000 7,932
4.760% ........... 08/05/99 15,000 14,871
4.750% ........... 08/09/99 15,000 14,865
4.700% ........... 09/20/99 6,000 5,913
4.830% ........... 11/24/99 10,000 9,764
Notes (A)
5.500% ........... 08/03/99 5,950 5,955
--------
174,124
--------
FEDERAL HOME LOAN BANK -- 21.8%
Discount Notes+
4.785% ........... 06/02/99 10,000 9,999
4.770% ........... 06/02/99 10,105 10,104
4.775% ........... 06/04/99 10,000 9,996
4.760% ........... 06/09/99 13,575 13,561
4.670% ........... 06/11/99 10,000 9,987
4.728% ........... 06/16/99 30,000 29,941
4.750% ........... 06/30/99 10,000 9,962
4.730% ........... 06/30/99 10,000 9,962
4.660% ........... 06/30/99 15,000 14,944
4.710% ........... 07/02/99 10,000 9,959
4.710% ........... 07/06/99 12,245 12,189
4.714% ........... 07/07/99 10,000 9,953
4.690% ........... 07/09/99 10,000 9,951
4.699% ........... 07/14/99 15,000 14,916
4.710% ........... 07/21/99 20,000 19,868
4.690% ........... 07/23/99 10,000 9,932
4.725% ........... 08/01/99 10,000 9,910
4.730% ........... 08/04/99 10,000 9,916
4.720% ........... 08/04/99 10,000 9,916
4.720% ........... 08/04/99 5,839 5,790
4.660% ........... 08/04/99 10,000 9,917
4.703% ........... 08/13/99 10,000 9,905
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- CONTINUED
FEDERAL HOME LOAN BANK -- CONTINUED
Discount Notes+
4.771% ........... 08/16/99 $ 7,016 $ 6,945
4.730% ........... 10/13/99 10,000 9,825
4.740% ........... 11/05/99 20,000 19,586
4.740% ........... 11/10/99 10,000 9,787
4.782% ........... 11/17/99 10,000 9,776
Notes (A)
4.870% ........... 11/10/99 15,000 14,996
5.071% ........... 03/24/00 15,000 15,000
4.915% ........... 04/14/00 15,000 14,994
--------
361,487
--------
FEDERAL HOME LOAN MORTGAGE CORPORATION+ -- 17.8%
4.790% ........... 06/01/99 15,000 15,000
4.800% ........... 06/03/99 10,000 9,997
4.790% ........... 06/03/99 10,000 9,997
4.770% ........... 06/15/99 10,000 9,981
4.778% ........... 06/18/99 7,491 7,474
4.760% ........... 06/22/99 10,000 9,972
4.790% ........... 06/25/99 10,000 9,968
4.760% ........... 06/25/99 10,000 9,968
4.780% ........... 06/28/99 10,157 10,121
4.740% ........... 06/30/99 10,000 9,962
4.800% ........... 07/09/99 10,000 9,949
4.730% ........... 07/12/99 10,000 9,946
4.713% ........... 07/13/99 15,000 14,918
4.710% ........... 07/14/99 15,000 14,916
4.700% ........... 08/05/99 20,000 19,829
4.720% ........... 08/06/99 15,000 14,870
4.700% ........... 08/20/99 10,000 9,896
4.690% ........... 08/25/99 10,000 9,889
4.770% ........... 08/27/99 10,000 9,885
4.750% ........... 09/03/99 10,000 9,876
4.740% ........... 09/03/99 10,000 9,876
4.770% ........... 09/09/99 10,000 9,869
4.705% ........... 09/13/99 10,000 9,864
4.745% ........... 09/24/99 10,000 9,848
4.740% ........... 09/24/99 10,000 9,849
4.700% ........... 10/08/99 10,000 9,832
4.700% ........... 10/12/99 10,000 9,826
--------
295,378
--------
See Accompanying Notes
129
<PAGE> 132
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA GOVERNMENT MONEY MARKET FUND
MAY 31, 1999
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- CONTINUED
FEDERAL NATIONAL MORTGAGE ASSOCIATION+ -- 25.9%
4.790% ........... 06/08/99 $10,000 $ 9,991
4.620% ........... 06/08/99 10,000 9,991
4.781% ........... 06/10/99 15,000 14,982
4.680% ........... 06/10/99 10,000 9,988
4.680% ........... 06/16/99 10,486 10,466
4.755% ........... 07/01/99 10,000 9,960
4.740% ........... 07/07/99 10,000 9,953
4.720% ........... 07/09/99 25,000 24,875
4.700% ........... 07/15/99 10,000 9,943
4.700% ........... 07/16/99 10,000 9,941
4.690% ........... 07/21/99 10,000 9,935
4.700% ........... 07/23/99 10,000 9,932
4.700% ........... 07/26/99 10,000 9,928
4.710% ........... 08/05/99 10,000 9,915
4.680% ........... 08/06/99 10,000 9,914
4.730% ........... 08/10/99 10,000 9,908
4.690% ........... 08/10/99 10,000 9,909
4.740% ........... 08/11/99 11,730 11,620
4.680% ........... 08/11/99 10,000 9,908
4.730% ........... 08/12/99 20,000 19,811
4.780% ........... 08/17/99 8,000 7,918
4.790% ........... 08/18/99 20,000 19,792
4.795% ........... 08/19/99 10,000 9,895
4.790% ........... 08/23/99 20,000 19,778
4.800% ........... 08/26/99 10,000 9,885
4.760% ........... 09/07/99 25,000 24,678
4.750% ........... 09/13/99 10,000 9,863
4.760% ........... 09/15/99 15,000 14,790
4.760% ........... 09/17/99 15,000 14,786
4.735% ........... 09/22/99 10,000 9,851
4.830% ........... 09/24/99 10,675 10,510
4.720% ........... 11/04/99 18,000 17,631
4.820% ........... 11/12/99 10,000 9,780
4.800% ........... 11/18/99 10,000 9,773
4.833% ........... 11/19/99 10,000 9,770
---------
429,570
---------
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- CONTINUED
STUDENT LOAN MARKETING ASSOCIATION -- 5.1%
Discount Notes+
4.670% ........... 06/30/99 $15,000 $ 14,944
Notes (A)
5.371% ........... 11/12/99 15,000 15,000
5.291% ........... 11/24/99 15,000 14,999
5.271% ........... 12/16/99 15,000 14,998
5.271% ........... 01/12/00 15,000 14,996
Callable 08/11/99 @ 100
5.050% ........... 02/11/00 10,000 10,000
---------
84,937
---------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS
(Cost $1,345,496).............................. 1,345,496
----------
REPURCHASE AGREEMENTS -- 18.7%
Credit Suisse First Boston
4.920% ........... 06/01/99 125,000 125,000
(dated 05/28/99, matures
06/01/99, repurchase price
$125,068,333; collateralized
by various FNMA and U.S. Treasury
obligations: total market
value $128,008,272)
Lehman Brothers
4.850% ........... 06/01/99 50,919 50,919
(dated 05/28/99, matures
06/01/99, repurchase price
$50,946,440; collateralized
by various FHLMC and GNMA
obligations: total market
value $51,940,085)
Prudential
4.930% ........... 06/01/99 85,000 85,000
(dated 05/28/99, matures
06/01/99, repurchase price
$85,046,561; collateralized
by various FHLMC, FNMA and
U.S. Treasury obligations:
total market value $86,700,175)
See Accompanying Notes
130
<PAGE> 133
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA GOVERNMENT MONEY MARKET FUND
MAY 31, 1999
PAR/SHARES VALUE
(000) (000)
----- -----
REPURCHASE AGREEMENTS -- CONTINUED
Salomon Smith Barney
4.900% ........... 06/01/99 $50,000 $ 50,000
(dated 05/28/99, matures
06/01/99, repurchase price
$50,027,222; collateralized
by various FHLMC and FNMA
obligations: total market
value $51,055,849)
TOTAL REPURCHASE AGREEMENTS
(Cost $310,919) ............................. 310,919
----------
CASH EQUIVALENT -- 0.6%
Goldman Sachs Financial Square
Government Money Market Fund ....... 10,294 10,294
----------
TOTAL CASH EQUIVALENT
(Cost $10,294) .............................. 10,294
----------
TOTAL INVESTMENTS -- 100.4%
(Cost $1,666,709)* .......................... $1,666,709
==========
OTHER ASSETS AND LIABILITIES,
NET -- (0.4%) ............................... (6,635)
----------
VALUE
(000)
-----
NET ASSETS:
Portfolio Shares of Class I
(unlimited authorization -- no par value)
based on 1,094,944,418 outstanding shares
of beneficial interest ...................... $1,094,945
Portfolio Shares of Class A
(unlimited authorization -- no par value)
based on 565,078,823 outstanding shares of
beneficial interest ......................... 565,079
Undistributed net investment income .......... 53
Accumulated net realized loss on investments . (3)
----------
TOTAL NET ASSETS-- 100.0% ...................... $1,660,074
==========
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
PER SHARE -- CLASS I ........................ $1.00
==========
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
PER SHARE -- CLASS A ........................ $1.00
==========
- - -----------
* ALSO COST FOR FEDERAL INCOME TAX PURPOSES.
+ EFFECTIVE YIELD
(A) VARIABLE RATE SECURITIES -- THE RATE REFLECTED ON THE STATEMENT OF NET
ASSETS IS THE RATE IN EFFECT ON MAY 31, 1999. THE MATURITY DATE SHOWN IS THE
LONGER OF THE NEXT RESET DATE OR THE DATE IN WHICH THE PRINCIPAL AMOUNT CAN
BE RECOVERED THROUGH DEMAND.
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
GNMA -- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
See Accompanying Notes
131
<PAGE> 134
[ARROW GRAPHIC OMITTED]
FINANCIAL HIGHLIGHTS
ARMADA GOVERNMENT MONEY MARKET FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
----------------------------------------------------------------------
1999 1998 1997
----------------------------------------------------------------------
CLASS I CLASS A CLASS I CLASS A CLASS I CLASS A
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning
of period .......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- -------- ---------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net investment
income ........... 0.05 0.05 0.05 0.05 0.05 0.05
LESS DISTRIBUTIONS
Dividends from net
investment income . (0.05) (0.05) (0.05) (0.05) (0.05) (0.05)
---------- -------- ---------- -------- -------- --------
Net asset value,
end of period ..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ======== ========== ======== ======== ========
TOTAL RETURN 4.86% 4.70% 5.30% 5.17% 5.15% 5.04%
RATIOS/SUPPLEMENTAL DATA
Net assets,
end of period
(in 000's) ........ $1,094,979 $565,095 $1,137,078 $247,281 $811,662 $159,129
Ratio of expenses
to average
net assets ....... 0.42% 0.57% 0.40% 0.52% 0.36% 0.47%
Ratio of net
investment income
to average
net assets ........ 4.76% 4.61% 5.17% 5.05% 5.03% 4.93%
Ratio of expenses to
average net assets
before fee waivers 0.52% 0.67% 0.50% 0.62% 0.46% 0.57%
Ratio of net
investment
income to
average net
assets before
fee waivers ...... 4.66% 4.51% 5.07% 4.95% 4.93% 4.83%
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
------------------------------------------
1996 1995
------------------------------------------
CLASS I CLASS A CLASS I CLASS A
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net asset value,
beginning
of period .......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net investment
income ........... 0.05 0.05 0.05 0.05
LESS DISTRIBUTIONS
Dividends from net
investment income . (0.05) (0.05) (0.05) (0.05)
-------- -------- -------- --------
Net asset value,
end of period ..... $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ========
TOTAL RETURN 5.41% 5.31% 4.97% 4.87%
RATIOS/SUPPLEMENTAL DATA
Net assets,
end of period
(in 000's) ........ $741,894 $131,194 $618,058 $19,174
Ratio of expenses
to average
net assets ....... 0.36% 0.46% 0.39% 0.51%
Ratio of net
investment income
to average
net assets ........ 5.27% 5.13% 4.83% 5.01%
Ratio of expenses to
average net assets
before fee waivers 0.47% 0.57% 0.50% 0.63%
Ratio of net
investment
income to
average net
assets before
fee waivers ...... 5.16% 5.02% 4.72% 4.90%
</TABLE>
See Accompanying Notes
132
<PAGE> 135
[ARROW GRAPHIC OMITTED]
STATEMENT OF NET ASSETS
ARMADA TREASURY MONEY MARKET FUND
MAY 31, 1999
PAR/SHARES VALUE
MATURITY (000) (000)
-------- ---------- -----
U.S. TREASURY OBLIGATIONS -- 92.4%
U.S. TREASURY BILLS + -- 75.6%
4.190% ........... 06/03/99 $51,000 $ 50,989
4.420% ........... 06/10/99 33,000 32,965
4.390% ........... 06/17/99 25,000 24,952
4.495% ........... 06/24/99 30,000 29,915
4.230% ........... 07/01/99 40,000 39,855
4.350% ........... 07/08/99 15,000 14,932
4.435% ........... 07/15/99 15,000 14,919
4.455% ........... 07/22/99 15,000 14,907
4.380% ........... 07/29/99 15,000 14,893
4.420% ........... 08/05/99 25,000 24,799
4.450% ........... 08/12/99 10,000 9,911
4.480% ........... 08/19/99 10,000 9,902
4.490% ........... 09/09/99 5,000 4,938
4.395% ........... 09/16/99 15,000 14,804
4.360% ........... 10/07/99 15,000 14,767
4.340% ........... 10/14/99 7,000 6,886
--------
324,334
--------
U.S. TREASURY NOTES -- 16.8%
6.000% ........... 06/30/99 38,000 38,043
5.875% ........... 08/31/99 34,000 34,094
--------
72,137
--------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $396,471) 396,471
--------
CASH EQUIVALENTS -- 7.6%
Federated U.S. Treasury Cash Reserve
Money Market Fund ............ 16,426 16,426
Goldman Sachs Financial Square
Treasury Money Market Fund ... 16,311 16,311
--------
TOTAL CASH EQUIVALENTS
(Cost $32,737) .............................. 32,737
--------
TOTAL INVESTMENTS -- 100.0%
(Cost $429,208)* ............................ $429,208
========
OTHER ASSETS AND LIABILITIES,
NET -- (0.0%) ............................... (96)
--------
VALUE
(000)
-----
NET ASSETS:
Portfolio Shares of Class I
(unlimited authorization -- no par value)
based on 346,023,547 outstanding shares
of beneficial interest ...................... $346,024
Portfolio Shares of Class A
(unlimited authorization -- no par value)
based on 83,014,927 outstanding shares of
beneficial interest ......................... 83,015
Undistributed net investment income .......... 73
--------
TOTAL NET ASSETS -- 100.0% ..................... $429,112
========
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SHARE -- CLASS I ............................ $1.00
========
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SHARE --- CLASS A ........................... $1.00
========
- - -----------
* ALSO COST FOR FEDERAL INCOME TAX PURPOSES.
+ EFFECTIVE YIELD
See Accompanying Notes
133
<PAGE> 136
[ARROW GRAPHIC OMITTED]
FINANCIAL HIGHLIGHTS
ARMADA TREASURY MONEY MARKET FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
----------------------------------------------------------------------
1999 1998 1997
----------------------------------------------------------------------
CLASS I CLASS A CLASS I CLASS A CLASS I CLASS A
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning
of period .......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- ------- -------- ------ -------- ------
INCOME FROM INVESTMENT
OPERATIONS
Net investment
income ........... 0.04 0.04 0.05 0.05 0.05 0.05
LESS DISTRIBUTIONS
Dividends from net
investment income . (0.04) (0.04) (0.05) (0.05) (0.05) (0.05)
-------- ------- -------- ------ -------- ------
Net asset value,
end of period ..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======= ======== ====== ======== ======
TOTAL RETURN 4.39% 4.23% 4.95% 4.82% 4.89% 4.79%
RATIOS/SUPPLEMENTAL DATA
Net assets,
end of period
(in 000's) ........ $346,092 $83,020 $359,605 $7,222 $276,327 $5,680
Ratio of expenses
to average
net assets ....... 0.41% 0.55% 0.39% 0.51% 0.37% 0.47%
Ratio of net
investment income
to average
net assets ........ 4.35% 4.21% 4.84% 4.71% 4.79% 4.68%
Ratio of expenses to
average net assets
before fee waivers 0.46% 0.60% 0.44% 0.56% 0.42% 0.52%
Ratio of net
investment
income to
average net
assets before
fee waivers ...... 4.30% 4.16% 4.79% 4.66% 4.74% 4.63%
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
------------------------------------------
1996 1995
------------------------------------------
CLASS I CLASS A CLASS I CLASS A
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net asset value,
beginning
of period .......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- ------ -------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net investment
income ........... 0.05 0.05 0.05 0.02
LESS DISTRIBUTIONS
Dividends from net
investment income . (0.05) (0.05) (0.05) (0.02)
-------- ------ -------- --------
Net asset value,
end of period ..... $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ====== ======== ========
TOTAL RETURN 5.07% 4.97% 4.86% 5.41%3
RATIOS/SUPPLEMENTAL DATA
Net assets,
end of period
(in 000's) ........ $312,255 $4,355 $142,877 $ 366
Ratio of expenses
to average
net assets ....... 0.41% 0.52% 0.43%3 0.56%3
Ratio of net
investment income
to average
net assets ........ 4.88% 4.77% 4.78%3 5.35%3
Ratio of expenses to
average net assets
before fee waivers 0.47% 0.58% 0.49%3 0.63%3
Ratio of net
investment
income to
average net
assets before
fee waivers ...... 4.82% 4.71% 4.72%3 5.28%3
</TABLE>
1 CLASS I COMMENCED OPERATIONS ON JUNE 16, 1994.
2 CLASS A COMMENCED OPERATIONS ON DECEMBER 22, 1994.
3 ANNUALIZED.
See Accompanying Notes
134
<PAGE> 137
[ARROW GRAPHIC OMITTED]
FINANCIAL STATEMENTS
ARMADA FUNDS
MAY 31, 1999
STATEMENT OF ASSETS AND LIABILITIES (000)
BALANCED
ALLOCATION
FUND
----------
ASSETS
Investments at value (Cost $76,413) ............................... $78,681
Interest and dividends receivable ................................. 395
Receivable for investments sold ................................... 840
Capital shares sold ............................................... 7,913
Prepaid expenses .................................................. 16
-------
TOTAL ASSETS ...................................................... 87,845
-------
LIABILITIES
Payable for investments purchased ................................. 831
Accrued expenses .................................................. 120
Other ............................................................. 16
-------
TOTAL LIABILITIES ................................................. 967
-------
NET ASSETS ........................................................ $86,878
=======
NET ASSETS:
Portfolio Shares of Class I
(unlimited authorization -- no par value)
based on 8,247,427 outstanding shares of
beneficial interest .......................................... $84,130
Portfolio Shares of Class A
(unlimited authorization-- no par value)
based on 142,171 outstanding shares of
beneficial interest ........................................... 1,473
Portfolio Shares of Class B (unlimited
authorization -- no par value)
based on 37,215 outstanding shares of
beneficial interest ........................................... 385
Accumulated net realized loss
on investments ................................................ (1,688)
Net unrealized appreciation on investments ...................... 2,268
Undistributed net investment income ............................. 310
-------
Total Net Assets -- 100.0% ........................................ $86,878
=======
Net Asset Value, Offering and Redemption
Price Per Share -- Class I ....................................... $10.31
=======
Net Asset Value and Redemption Price Per Share -- Class A .......... $10.31
=======
Maximum Offering Price Per Share -- Class A ($10.31 / 95.25%) ...... $10.82
=======
Net Asset Value and Offering Price Per Share -- Class B ............ $10.33
=======
See Accompanying Notes
135
<PAGE> 138
[ARROW GRAPHIC OMITTED]
FINANCIAL STATEMENTS
ARMADA FUNDS
STATEMENTS OF OPERATIONS (000)
FOR THE PERIOD ENDED MAY 31, 1999
<TABLE>
<CAPTION>
INTERNATIONAL SMALL CAP SMALL CAP EQUITY TAX MANAGED
EQUITY FUND VALUE FUND GROWTH FUND GROWTH FUND EQUITY FUND
------------- ---------- ----------- ----------- -----------
INVESTMENT INCOME:
<S> <C> <C> <C> <C> <C>
Dividends .................................... $2,525 $ 4,372 $ 135 $ 7,882 $ 2,275
Interest ..................................... 301 308 522 1,707 308
Less: foreign taxes withheld ................. (260) -- -- -- (12)
------ -------- -------- -------- -------
Total investment income ...................... 2,566 4,680 657 9,589 2,571
------ -------- -------- -------- -------
EXPENSES:
Investment Advisory fees ..................... 1,723 2,360 612 8,840 1,612
Less: Fees waived by Investment Adviser ...... -- -- -- -- (384)
Administration fees .......................... 117 180 46 828 150
12b-1 fees ................................... 75 108 27 483 98
Transfer Agent fees .......................... 72 71 64 137 67
Custodian fees ............................... 303 52 13 165 46
Professional fees ............................ 30 27 21 89 46
Printing and shareholder reports ............. 7 20 12 79 22
Registration and filing fees ................. 39 26 33 222 79
Trustees' fees ............................... 3 8 1 21 7
Miscellaneous ................................ 4 28 7 74 43
Amortization of deferred organizational costs -- 6 -- -- 5
Shareholder servicing fees --
Class A and B Shares ...................... 2 26 1 283 7
------ -------- -------- -------- -------
Total expenses ............................... 2,375 2,912 837 11,221 1,798
------ -------- -------- -------- -------
NET INVESTMENT INCOME/(LOSS) .................... 191 1,768 (180) (1,632) 773
------ -------- -------- -------- -------
REALIZED AND UNREALIZED GAIN/(LOSS)
ON INVESTMENTS:
Net realized gain/(loss) on investments sold . (2,790) (8,366) (10,502) (1,094) 312
Net realized loss on foreign
currency transactions ..................... (121) -- -- (6) --
Net realized gain/(loss) on futures .......... -- -- 63 -- --
Net change in unrealized appreciation/
depreciation on futures ................... -- -- 973 -- --
Net change in unrealized appreciation/
depreciation on foreign currency
and translation of other assets
and liabilities in foreign currencies ..... 632 -- -- -- --
Net change in unrealized appreciation/
depreciation on investments ............... 4,774 (5,622) 2,153 287,003 58,031
------ -------- -------- -------- -------
Net gain/(loss) on investments ............... 2,495 (13,988) (7,313) 285,903 58,343
------ -------- -------- -------- -------
NET INCREASE/(DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .................... $2,686 $(12,220) $ (7,493) $284,271 $59,116
====== ======== ======== ======== =======
</TABLE>
See Accompanying Notes
136
<PAGE> 139
[ARROW GRAPHIC OMITTED]
FINANCIAL STATEMENTS
ARMADA FUNDS
STATEMENTS OF OPERATIONS (000)
FOR THE PERIOD ENDED MAY 31, 1999
<TABLE>
<CAPTION>
BALANCED TOTAL RETURN
CORE EQUITY EQUITY ALLOCATION ADVANTAGE
EQUITY FUND INDEX FUND1 INCOME FUND FUND1 FUND
----------- ---------- ----------- ---------- ------------
INVESTMENT INCOME:
<S> <C> <C> <C> <C> <C>
Dividends .................................... $ 1,447 $ 1,999 $ 12,073 $ 284 $ --
Interest ..................................... (364) 288 652 1,584 19,644
Less: foreign taxes withheld ................. -- (11) (43) -- --
------- ------- -------- ------- -------
Total investment income ...................... 1,083 2,276 12,682 1,868 19,644
------- ------- -------- ------- -------
EXPENSES:
Investment Advisory fees ..................... 954 505 3,168 422 1,753
Less: Fees waived by Investment Adviser ...... -- (505) -- -- (637)
Administration fees .......................... 89 101 296 41 222
12b-1 fees ................................... 55 -- 175 23 --
Transfer Agent fees .......................... 68 17 85 22 36
Custodian fees ............................... 25 29 85 13 63
Professional fees ............................ 26 17 32 17 27
Printing and shareholder reports ............. 2 22 32 3 13
Registration and filing fees ................. 25 66 59 50 4
Trustees' fees ............................... 2 3 9 2 8
Miscellaneous ................................ 2 23 20 7 36
Amortization of deferred organizational costs -- -- 5 -- 4
Shareholder servicing fees --
Class A and B Shares ...................... 2 3 13 1 9
------- ------- -------- ------- -------
Total expenses 1,250 281 3,979 601 1,538
------- ------- -------- ------- -------
NET INVESTMENT INCOME/(LOSS) (167) 1,995 8,703 1,267 18,106
------- ------- -------- ------- -------
REALIZED AND UNREALIZED GAIN/(LOSS)
ON INVESTMENTS:
Net realized gain/(loss) on investments sold . 4,677 23 19,671 (1,688) 3,724
Net realized loss on foreign
currency transactions ..................... -- -- -- -- --
Net realized gain/(loss) on futures .......... -- 1,028 -- -- --
Net change in unrealized appreciation/
depreciation on futures ................... -- (104) -- -- --
Net change in unrealized appreciation/
depreciation on foreign currency
and translation of other assets
and liabilities in foreign currencies ..... -- -- -- -- --
Net change in unrealized appreciation/
depreciation on investments ............... 25,111 18,836 91,321 2,268 (11,244)
------- ------- -------- ------- -------
Net gain/(loss) on investments ............... 29,788 19,783 110,992 580 (7,520)
------- ------- -------- ------- -------
NET INCREASE/(DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .................... $29,621 $21,778 $119,695 $ 1,847 $10,586
======= ======= ======== ======= =======
</TABLE>
STATEMENTS OF OPERATIONS (000)
FOR THE PERIOD ENDED MAY 31, 1999
<TABLE>
<CAPTION>
INTERMEDIATE ENHANCED
BOND FUND BOND FUND GNMA FUND INCOME FUND
--------- ------------ --------- -----------
INVESTMENT INCOME:
<S> <C> <C> <C> <C>
Dividends .................................... $ -- $ -- $ -- $ --
Interest ..................................... 40,081 15,382 5,991 4,596
Less: foreign taxes withheld ................. -- -- -- --
------- ------- ------ ------
Total investment income ...................... 40,081 15,382 5,991 4,596
------- ------- ------ ------
EXPENSES:
Investment Advisory fees ..................... 3,583 1,450 489 349
Less: Fees waived by Investment Adviser ...... -- (395) -- (175)
Administration fees .......................... 456 184 62 54
12b-1 fees ................................... 265 110 37 --
Transfer Agent fees .......................... 54 47 38 39
Custodian fees ............................... 131 53 18 16
Professional fees ............................ 40 11 17 13
Printing and shareholder reports ............. 7 85 3 5
Registration and filing fees ................. 35 39 10 13
Trustees' fees ............................... 4 3 1 3
Miscellaneous ................................ 5 16 19 10
Amortization of deferred organizational costs 3 -- 3 4
Shareholder servicing fees --
Class A and B Shares ...................... 3 10 3 1
------- ------- ------ ------
Total expenses ............................... 4,586 1,613 700 332
------- ------- ------ ------
NET INVESTMENT INCOME/(LOSS) .................... 35,495 13,769 5,291 4,264
------- ------- ------ ------
REALIZED AND UNREALIZED GAIN/(LOSS)
ON INVESTMENTS:
Net realized gain/(loss) on investments sold . 6,607 2,105 234 236
Net realized loss on foreign
currency transactions ..................... -- -- -- --
Net realized gain/(loss) on futures .......... -- -- -- --
Net change in unrealized appreciation/
depreciation on futures ................... -- -- -- --
Net change in unrealized appreciation/
depreciation on foreign currency
and translation of other assets
and liabilities in foreign currencies ..... -- -- -- --
Net change in unrealized appreciation/
depreciation on investments ............... (15,918) (7,084) (2,090) (746)
------- ------- ------ ------
Net gain/(loss) on investments ............... (9,311) (4,979) (1,856) (510)
------- ------- ------ ------
NET INCREASE/(DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .................... $26,184 $ 8,790 $3,435 $3,754
======= ======= ====== ======
</TABLE>
1 FUND COMMENCED OPERATIONS ON JULY 10, 1998.
See Accompanying Notes
137
<PAGE> 140
[ARROW GRAPHIC OMITTED]
FINANCIAL STATEMENTS
ARMADA FUNDS
STATEMENTS OF OPERATIONS (000)
FOR THE PERIOD ENDED MAY 31, 1999
<TABLE>
<CAPTION>
OHIO TAX PENNSYLVANIA NATIONAL
EXEMPT FUND MUNICIPAL FUND TAX EXEMPT FUND
----------- -------------- ---------------
INVESTMENT INCOME:
<S> <C> <C> <C>
Interest ....................................................... $10,400 $2,078 $4,569
------- ------ ------
EXPENSES:
Investment Advisory fees ....................................... 1,132 217 524
Less: Fees waived by Investment Adviser ........................ (1,027) (138) (489)
Administration fees ............................................ 143 28 67
12b-1 fees ..................................................... 84 -- 37
Transfer Agent fees ............................................ 24 38 67
Custodian fees ................................................. 53 8 19
Professional fees .............................................. 14 16 28
Printing and shareholder reports ............................... 10 9 4
Registration and filing fees ................................... 73 2 76
Trustees' fees ................................................. 2 1 3
Miscellaneous .................................................. 74 3 14
Amortization of deferred organizational costs .................. -- 3 --
Shareholder servicing fees-- Class A and B Shares .............. 5 -- 2
------- ------ ------
Total expenses ................................................. 587 187 352
------- ------ ------
NET INVESTMENT INCOME ............................................. 9,813 1,891 4,217
------- ------ ------
REALIZED AND UNREALIZED GAIN/(LOSS)
ON INVESTMENTS:
Net realized gain/(loss) on investments sold ................... 180 116 412
Net change in unrealized appreciation/
depreciation on investments .................................. (2,191) (433) (581)
------- ------ ------
Net gain/(loss) on investments ................................. (2,011) (317) (169)
------- ------ ------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ...................................... $ 7,802 $1,574 $4,048
======= ====== ======
</TABLE>
See Accompanying Notes
138
<PAGE> 141
[ARROW GRAPHIC OMITTED]
<TABLE>
<CAPTION>
OHIO MUNICIPAL TAX EXEMPT TAX EXEMPT
MARKET FUND1 MONEY MARKET FUND MONEY MARKET FUND
------------ ----------------- -----------------
INVESTMENT INCOME:
<S> <C> <C> <C>
Interest ....................................................... $2,328 $4,281 $19,855
------ ------ -------
EXPENSES:
Investment Advisory fees ....................................... 261 542 2,160
Less: Fees waived by Investment Adviser ........................ (157) (339) (1,234)
Administration fees ............................................ 75 95 432
12b-1 fees ..................................................... 30 55 254
Transfer Agent fees ............................................ 3 33 8
Custodian fees ................................................. 15 27 123
Professional fees .............................................. 27 13 28
Printing and shareholder reports ............................... -- 6 11
Registration and filing fees ................................... -- 15 3
Trustees' fees ................................................. 2 4 6
Miscellaneous .................................................. 3 5 35
Amortization of deferred organizational costs .................. -- 3 --
Shareholder servicing fees-- Class A and B Shares .............. 7 62 297
------ ------ -------
Total expenses ................................................. 266 521 2,123
------ ------ -------
NET INVESTMENT INCOME ............................................. 2,062 3,760 17,732
------ ------ -------
REALIZED AND UNREALIZED GAIN/(LOSS)
ON INVESTMENTS:
Net realized gain/(loss) on investments sold ................... -- -- (36)
Net change in unrealized appreciation/
depreciation on investments .................................. -- -- --
------ ------ -------
Net gain/(loss) on investments ................................. -- -- (36)
------ ------ -------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ...................................... $2,062 $3,760 $17,696
====== ====== =======
</TABLE>
1 FUND COMMENCED OPERATIONS ON SEPTEMBER 15, 1998.
<TABLE>
<CAPTION>
GOVERNMENT TREASURY
MONEY MARKET FUND MONEY MARKET FUND MONEY MARKET FUND
----------------- ----------------- -----------------
INVESTMENT INCOME:
<S> <C> <C> <C>
Interest ....................................................... $167,720 $76,373 $18,465
-------- ------- -------
EXPENSES:
Investment Advisory fees ....................................... 11,223 5,183 1,177
Less: Fees waived by Investment Adviser ........................ (3,207) (1,481) (196)
Administration fees ............................................ 2,262 1,037 275
12b-1 fees ..................................................... 1,307 592 161
Transfer Agent fees ............................................ 52 79 17
Custodian fees ................................................. 641 163 78
Professional fees .............................................. 550 231 21
Printing and shareholder reports ............................... 283 161 15
Registration and filing fees ................................... 130 130 5
Trustees' fees ................................................. 125 21 4
Miscellaneous .................................................. 69 147 27
Amortization of deferred organizational costs .................. -- -- 14
Shareholder servicing fees-- Class A and B Shares .............. 1,650 685 80
-------- ------- -------
Total expenses ................................................. 15,085 6,948 1,678
-------- ------- -------
NET INVESTMENT INCOME ............................................. 152,635 69,425 16,787
-------- ------- -------
REALIZED AND UNREALIZED GAIN/(LOSS)
ON INVESTMENTS:
Net realized gain/(loss) on investments sold ................... (1) -- 85
Net change in unrealized appreciation/
depreciation on investments .................................. -- -- --
-------- ------- -------
Net gain/(loss) on investments ................................. (1) -- 85
-------- ------- -------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ...................................... $152,634 $69,425 $16,872
======== ======= =======
</TABLE>
See Accompanying Notes
139
<PAGE> 142
[ARROW GRAPHIC OMITTED]
FINANCIAL STATEMENTS
ARMADA FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (000)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND SMALL CAP VALUE FUND
------------ ------------ ---------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
MAY 31, 1999 MAY 31, 19981 MAY 31, 1999 MAY 31, 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITIES:
Net investment income/(loss) ....................... $ 191 $ 982 $ 1,768 $ 1,073
Net realized gain/(loss) on
investments sold, futures and
foreign currency transactions ................... (2,911) (3,995) (8,366) 49,934
Net unrealized appreciation/
depreciation on investments,
futures and foreign currency
transactions .................................... 5,406 13,359 (5,622) (9,363)
-------- -------- -------- --------
Net increase/(decrease) in net assets
resulting from operations ....................... 2,686 10,346 (12,220) 41,644
-------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income:
Class I ......................................... (830) (133) (867) (1,145)
Class A ......................................... (2) -- (28) (19)
Class B ......................................... -- -- -- --
Dividends from realized capital gains:
Class I ......................................... -- -- (23,595) (34,475)
Class A ......................................... -- -- (1,101) (1,000)
Class B ......................................... -- -- (31) --
-------- -------- -------- --------
Total distributions ................................ (832) (133) (25,622) (36,639)
-------- -------- -------- --------
SHARE TRANSACTIONS:
Class I
Proceeds from shares issued ..................... 71,205 127,644 73,379 108,947
Proceeds from Common Fund Conversion (note 6) ... -- -- -- --
Reinvestment of cash distributions .............. 42 3 13,812 15,365
Cost of shares redeemed ......................... (9,818) (1,906) (64,606) (44,464)
-------- -------- -------- --------
Net Class I share transactions ................ 61,429 125,741 22,585 79,848
-------- -------- -------- --------
Class A
Proceeds from shares issued ..................... 2,079 308 11,093 6,063
Reinvestment of cash distributions .............. 2 -- 1,030 915
Cost of shares redeemed ......................... (1,249) (44) (9,865) (1,135)
-------- -------- -------- --------
Net Class A share transactions ................ 832 264 2,258 5,843
-------- -------- -------- --------
Class B
Proceeds from shares issued ..................... 44 2 463 544
Reinvestment of cash distributions .............. -- -- 30 --
Cost of shares redeemed ......................... (4) (1) (45) (490)
-------- -------- -------- --------
Net Class B share transactions ................ 40 1 448 54
-------- -------- -------- --------
Increase in net assets from share transactions ..... 62,301 126,006 25,291 85,745
-------- -------- -------- --------
Contribution of capital from
affiliate (note 3) ......................... -- -- -- --
-------- -------- -------- --------
Total increase/(decrease) in net assets ............ 64,155 136,219 (12,551) 90,750
-------- -------- -------- --------
NET ASSETS:
Beginning of period ................................ 136,219 -- 294,990 204,240
-------- -------- -------- --------
End of period ...................................... $200,374 $136,219 $282,439 $294,990
======== ======== ======== ========
</TABLE>
See Accompanying Notes
140
<PAGE> 143
[ARROW GRAPHIC OMITTED]
<TABLE>
<CAPTION>
SMALL CAP GROWTH FUND EQUITY GROWTH FUND
------------ ------------ ---------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
MAY 31, 1999 MAY 31, 19981 MAY 31, 1999 MAY 31, 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITIES:
Net investment income/(loss) ....................... $ (180) $ 40 $ (1,632) $ (112)
Net realized gain/(loss) on
investments sold, futures and
foreign currency transactions ................... (10,439) 833 (1,100) 71,625
Net unrealized appreciation/
depreciation on investments,
futures and foreign currency
transactions .................................... 3,126 4,165 287,003 4,112
------- ------- ---------- --------
Net increase/(decrease) in net assets
resulting from operations ....................... (7,493) 5,038 284,271 75,625
------- ------- ---------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income:
Class I ......................................... (2) (44) -- (77)
Class A ......................................... -- -- -- --
Class B ......................................... -- -- -- --
Dividends from realized capital gains:
Class I ......................................... (733) (93) (51,288) (32,643)
Class A ......................................... (5) -- (4,297) (875)
Class B ......................................... -- -- (16) --
------- ------- ---------- --------
Total distributions ................................ (740) (137) (55,601) (33,595)
------- ------- ---------- --------
SHARE TRANSACTIONS:
Class I
Proceeds from shares issued ..................... 48,064 51,438 654,266 112,234
Proceeds from Common Fund Conversion (note 6) ... -- -- 257,675 --
Reinvestment of cash distributions .............. 382 79 44,257 15,580
Cost of shares redeemed ......................... (14,596) (1,949) (256,697) (72,440)
------- ------- ---------- --------
Net Class I share transactions ................ 33,850 49,568 699,501 55,374
------- ------- ---------- --------
Class A
Proceeds from shares issued ..................... 956 364 148,499 4,854
Reinvestment of cash distributions .............. 5 -- 4,243 816
Cost of shares redeemed ......................... (147) (26) (27,176) (1,269)
------- ------- ---------- --------
Net Class A share transactions ................ 814 338 125,566 4,401
------- ------- ---------- --------
Class B
Proceeds from shares issued ..................... 807 22 1,448 308
Reinvestment of cash distributions .............. -- -- 16 --
Cost of shares redeemed ......................... (673) (21) (108) (287)
------- ------- ---------- --------
Net Class B share transactions ................ 134 1 1,356 21
------- ------- ---------- --------
Increase in net assets from share transactions ..... 34,798 49,907 826,423 59,796
------- ------- ---------- --------
Contribution of capital from
affiliate (note 3) ......................... -- -- -- 466
------- ------- ---------- --------
Total increase/(decrease) in net assets ............ 26,565 54,808 1,055,093 102,292
------- ------- ---------- --------
NET ASSETS:
Beginning of period ................................ 54,808 -- 364,817 262,525
------- ------- ---------- --------
End of period ...................................... $81,373 $54,808 $1,419,910 $364,817
======= ======= ========== ========
</TABLE>
<TABLE>
<CAPTION>
TAX MANAGED EQUITY FUND CORE EQUITY FUND
----------------------------- ---------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
MAY 31, 1999 MAY 31, 19982 MAY 31, 1999 MAY 31, 19981
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITIES:
Net investment income/(loss) ....................... $ 773 $ 214 $ (167) $ 531
Net realized gain/(loss) on
investments sold, futures and
foreign currency transactions ................... 312 55 4,677 4,906
Net unrealized appreciation/
depreciation on investments,
futures and foreign currency
transactions .................................... 58,031 (1,407) 25,111 8,557
-------- -------- -------- --------
Net increase/(decrease) in net assets
resulting from operations ....................... 59,116 (1,138) 29,621 13,994
-------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income:
Class I ......................................... (776) -- (47) (505)
Class A ......................................... (3) -- -- --
Class B ......................................... -- -- -- --
Dividends from realized capital gains:
Class I ......................................... (221) -- (5,032) --
Class A ......................................... (2) -- (25) --
Class B ......................................... (1) -- (15) --
-------- -------- -------- --------
Total distributions ................................ (1,003) -- (5,119) (505)
-------- -------- -------- --------
SHARE TRANSACTIONS:
Class I
Proceeds from shares issued ..................... 4,526 1,477 6,590 106,584
Proceeds from Common Fund Conversion (note 6) ... 46,522 163,615 -- --
Reinvestment of cash distributions .............. 111 -- 4,989 503
Cost of shares redeemed ......................... (26,256) (5,090) (794) (10,061)
-------- -------- -------- --------
Net Class I share transactions ................ 24,903 160,002 10,785 97,026
-------- -------- -------- --------
Class A
Proceeds from shares issued ..................... 7,809 10 2,524 399
Reinvestment of cash distributions .............. 3 -- 25 --
Cost of shares redeemed ......................... (776) -- (1,360) (2)
-------- -------- -------- --------
Net Class A share transactions ................ 7,036 10 1,189 397
-------- -------- -------- --------
Class B
Proceeds from shares issued ..................... 5,341 88 1,071 2
Reinvestment of cash distributions .............. 1 -- 15 --
Cost of shares redeemed ......................... (125) -- (36) --
-------- -------- -------- --------
Net Class B share transactions ................ 5,217 88 1,050 2
-------- -------- -------- --------
Increase in net assets from share transactions ..... 37,156 160,100 13,024 97,425
-------- -------- -------- --------
Contribution of capital from
affiliate (note 3) ......................... -- -- -- --
-------- -------- -------- --------
Total increase/(decrease) in net assets ............ 95,269 158,962 37,526 110,914
-------- -------- -------- --------
NET ASSETS:
Beginning of period ................................ 158,962 -- 110,914 --
-------- -------- -------- --------
End of period ...................................... $254,231 $158,962 $148,440 $110,914
======== ======== ======== ========
</TABLE>
1 FUND COMMENCED OPERATIONS ON AUGUST 1, 1997.
2 FUND COMMENCED OPERATIONS ON APRIL 9, 1998.
See Accompanying Notes
141
<PAGE> 144
[ARROW GRAPHIC OMITTED]
FINANCIAL STATEMENTS
ARMADA FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (000)
<TABLE>
<CAPTION>
EQUITY INDEX FUND EQUITY INCOME FUND
----------------- -----------------------------
FOR THE FOR THE FOR THE
PERIOD ENDED YEAR ENDED YEAR ENDED
MAY 31, 19991 MAY 31, 1999 MAY 31, 1998
------------ ------------ ------------
INVESTMENT ACTIVITIES:
<S> <C> <C> <C>
Net investment income ........................... $ 1,995 $ 8,703 $ 3,301
Net realized gain/(loss) on investments
sold and futures ............................. 1,051 19,671 6,437
Net unrealized appreciation/depreciation
on investments and futures ................... 18,732 91,321 25,959
-------- -------- --------
Net increase in net assets resulting
from operations .............................. 21,778 119,695 35,697
-------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income:
Class I ...................................... (1,309) (6,836) (3,144)
Class A ...................................... (9) (73) (14)
Class B ...................................... -- (5) --
Dividends from realized capital gains:
Class I ...................................... -- (6,668) (7,211)
Class A ...................................... -- (70) (34)
Class B ...................................... -- (8) --
-------- -------- --------
Total distributions ............................. (1,318) (13,660) (10,403)
-------- -------- --------
SHARE TRANSACTIONS:
Class I
Proceeds from shares issued .................. 269,038 98,187 70,486
Proceeds from Common Fund Conversion (note 6) -- 212,347 --
Reinvestment of cash distributions ........... 1,150 7,529 5,680
Cost of shares redeemed ...................... (36,603) (68,381) (34,560)
-------- -------- --------
Net Class I share transactions ............. 233,585 249,682 41,606
-------- -------- --------
Class A
Proceeds from shares issued .................. 4,339 11,058 1,955
Reinvestment of cash distributions ........... 9 114 34
Cost of shares redeemed ...................... (647) (3,429) (353)
-------- -------- --------
Net Class A share transactions ............. 3,701 7,743 1,636
-------- -------- --------
Class B
Proceeds from shares issued .................. -- 1,036 45
Reinvestment of cash distributions ........... -- 12 --
Cost of shares redeemed ...................... -- (152) (44)
-------- -------- --------
Net Class B share transactions ............. -- 896 1
-------- -------- --------
Increase in net assets from share transactions .. 237,286 258,321 43,243
-------- -------- --------
Total increase in net assets .................... 257,746 364,356 68,537
-------- -------- --------
NET ASSETS:
Beginning of period ............................. -- 196,077 127,540
-------- -------- --------
End of period ................................... $257,746 $560,433 $196,077
======== ======== ========
</TABLE>
1 FUND COMMENCED OPERATIONS ON JULY 10, 1998.
See Accompanying Notes
142
<PAGE> 145
[ARROW GRAPHIC OMITTED]
<TABLE>
<CAPTION>
BALANCED ALLOCATION FUND TOTAL RETURN ADVANTAGE FUND
------------------------ ------------------------------
FOR THE FOR THE FOR THE
PERIOD ENDED YEAR ENDED YEAR ENDED
MAY 31, 19991 MAY 31, 1999 MAY 31, 1998
------------ ------------ ------------
INVESTMENT ACTIVITIES:
<S> <C> <C> <C>
Net investment income ........................... $ 1,267 $ 18,106 $ 17,772
Net realized gain/(loss) on investments
sold and futures ............................. (1,688) 3,724 2,672
Net unrealized appreciation/depreciation
on investments and futures ................... 2,268 (11,244) 7,028
-------- -------- --------
Net increase in net assets resulting
from operations .............................. 1,847 10,586 27,472
-------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income:
Class I ...................................... (948) (17,916) (17,637)
Class A ...................................... (7) (197) (125)
Class B ...................................... (2) -- --
Dvidends from realized capital gains:
Class I ...................................... -- (1,326) --
Class A ...................................... -- (17) --
Class B ...................................... -- -- --
-------- -------- --------
Total distributions ............................. (957) (19,456) (17,762)
-------- -------- --------
SHARE TRANSACTIONS:
Class I
Proceeds from shares issued .................. 109,461 74,950 83,718
Proceeds from Common Fund Conversion (note 6) -- -- --
Reinvestment of cash distributions ........... 929 12,191 9,472
Cost of shares redeemed ...................... (26,260) (46,083) (65,987)
-------- -------- --------
Net Class I share transactions ............. 84,130 41,058 27,203
-------- -------- --------
Class A
Proceeds from shares issued .................. 1,810 4,953 651
Reinvestment of cash distributions ........... 6 197 111
Cost of shares redeemed ...................... (343) (950) (2,374)
-------- -------- --------
Net Class A share transactions ............. 1,473 4,200 (1,612)
-------- -------- --------
Class B
Proceeds from shares issued .................. 390 -- --
Reinvestment of cash distributions ........... 2 -- --
Cost of shares redeemed ...................... (7) -- --
-------- -------- --------
Net Class B share transactions ............. 385 -- --
-------- -------- --------
Increase in net assets from share transactions . 85,988 45,258 25,591
-------- -------- --------
Total increase in net assets .................... 86,878 36,388 35,301
-------- -------- --------
NET ASSETS:
Beginning of period ............................. -- 296,715 261,414
-------- -------- --------
End of period ................................... $ 86,878 $333,103 $296,715
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
BOND FUND INTERMEDIATE BOND FUND
----------------------------- ---------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, 1999 MAY 31, 1998 MAY 31, 1999 MAY 31, 1998
------------ ------------ ---------------------------
INVESTMENT ACTIVITIES:
<S> <C> <C> <C> <C>
Net investment income ........................... $ 35,495 $ 5,994 $ 13,769 $ 8,477
Net realized gain/(loss) on investments
sold and futures ............................. 6,607 901 2,105 1,330
Net unrealized appreciation/depreciation
on investments and futures ................... (15,918) 1,479 (7,084) 1,379
-------- -------- -------- --------
Net increase in net assets resulting
from operations .............................. 26,184 8,374 8,790 11,186
-------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income:
Class I ...................................... (35,439) (6,010) (13,608) (8,255)
Class A ...................................... (67) (3) (205) (198)
Class B ...................................... (18) -- (13) --
Dvidends from realized capital gains:
Class I ...................................... (10,610) -- (1,679) --
Class A ...................................... (25) -- (20) --
Class B ...................................... (7) -- (2) --
-------- -------- -------- --------
Total distributions ............................. (46,166) (6,013) (15,527) (8,453)
-------- -------- -------- --------
SHARE TRANSACTIONS:
Class I
Proceeds from shares issued .................. 334,224 54,481 168,983 111,103
Proceeds from Common Fund Conversion (note 6) 444,085 -- 71,602 --
Reinvestment of cash distributions ........... 11,803 86 5,353 1,878
Cost of shares redeemed ...................... (144,163) (15,500) (92,671) (70,201)
-------- -------- -------- --------
Net Class I share transactions ............. 645,949 39,067 153,267 42,780
-------- -------- -------- --------
Class A
Proceeds from shares issued .................. 4,207 274 3,889 1,204
Reinvestment of cash distributions ........... 56 1 190 173
Cost of shares redeemed ...................... (1,526) (107) (2,127) (1,883)
-------- -------- -------- --------
Net Class A share transactions ............. 2,737 168 1,952 (506)
-------- -------- -------- --------
Class B
Proceeds from shares issued .................. 845 39 742 79
Reinvestment of cash distributions ........... 24 -- 12 --
Cost of shares redeemed ...................... (113) (38) (30) (77)
-------- -------- -------- --------
Net Class B share transactions ............. 756 1 724 2
-------- -------- -------- --------
Increase in net assets from share transactions . 649,442 39,236 155,943 42,276
-------- -------- -------- --------
Total increase in net assets .................... 629,460 41,597 149,206 45,009
-------- -------- -------- --------
NET ASSETS:
Beginning of period ............................. 132,782 91,185 170,000 124,991
-------- -------- -------- --------
End of period ................................... $762,242 $132,782 $319,206 $170,000
======== ======== ======== ========
</TABLE>
See Accompanying Notes
143
<PAGE> 146
[ARROW GRAPHIC OMITTED]
FINANCIAL STATEMENTS
ARMADA FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (000)
<TABLE>
<CAPTION>
GNMA FUND ENHANCED INCOME FUND
------------------------------- -------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, 1999 MAY 31, 1998 MAY 31, 1999 MAY 31, 1998
------------ ------------ ------------ ------------
INVESTMENT ACTIVITIES:
<S> <C> <C> <C> <C>
Net investment income .......................... $ 5,291 $ 4,195 $ 4,264 $ 4,180
Net realized gain/(loss) on investments sold ... 234 922 236 143
Net unrealized appreciation/depreciation
on investments ............................... (2,090) 1,152 (746) 411
------- ------- ------- -------
Net increase in net assets
resulting from operations .................... 3,435 6,269 3,754 4,734
------- ------- ------- -------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income:
Class I ................................... (5,162) (4,242) (4,259) (4,063)
Class A ................................... (61) (12) (23) (114)
Class B ................................... -- -- -- --
Dividends from realized capital gains:
Class I ................................... (581) (650) (405) (73)
Class A ................................... (8) (1) (2) (2)
Class B ................................... -- -- -- --
------- ------- ------- -------
Total distributions ............................ (5,812) (4,905) (4,689) (4,252)
------- ------- ------- -------
SHARE TRANSACTIONS:
Class I
Proceeds from shares issued ............... 28,666 28,426 58,938 61,441
Proceeds from Common Fund Conversion (note 6) -- -- -- --
Reinvestment of cash distributions ........ 470 148 2,437 2,282
Cost of shares redeemed ................... (13,612) (10,811) (60,044) (53,330)
------- ------- ------- -------
Net Class I share transactions .......... 15,524 17,763 1,331 10,393
------- ------- ------- -------
Class A
Proceeds from shares issued ............... 1,510 526 351 1,961
Reinvestment of cash distributions ........ 60 9 23 108
Cost of shares redeemed ................... (585) (119) (376) (3,579)
------- ------- ------- -------
Net Class A share transactions .......... 985 416 (2) (1,510)
------- ------- ------- -------
Class B
Proceeds from shares issued ............... -- -- -- --
Reinvestment of cash distributions ........ -- -- -- --
Cost of shares redeemed ................... -- -- -- --
------- ------- ------- -------
Net Class B share transactions .......... -- -- -- --
------- ------- ------- -------
Increase in net assets from share transactions . 16,509 18,179 1,329 8,883
------- ------- ------- -------
Total increase in net assets ................... 14,132 19,543 394 9,365
------- ------- ------- -------
NET ASSETS:
Beginning of period ............................ 84,173 64,630 72,447 63,082
------- ------- ------- -------
End of period .................................. $98,305 $84,173 $72,841 $72,447
======= ======= ======= =======
</TABLE>
1 FUND COMMENCED OPERATIONS ON APRIL 9, 1998.
See Accompanying Notes
144
<PAGE> 147
[ARROW GRAPHIC OMITTED]
FINANCIAL STATEMENTS
ARMADA FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (000)
<TABLE>
<CAPTION>
OHIO TAX EXEMPT FUND PENNSYLVANIA MUNICIPAL FUND
------------------------------- -------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, 1999 MAY 31, 1998 MAY 31, 1999 MAY 31, 1998
------------ ------------ ------------ ------------
INVESTMENT ACTIVITIES:
<S> <C> <C> <C> <C>
Net investment income .......................... $ 9,813 $ 5,512 $ 1,891 $ 1,658
Net realized gain/(loss) on investments sold ... 180 196 116 (1)
Net unrealized appreciation/depreciation
on investments ............................... (2,191) 2,886 (433) 895
--------- -------- ------- -------
Net increase in net assets
resulting from operations .................... 7,802 8,594 1,574 2,552
--------- -------- ------- -------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income:
Class I ................................... (9,541) (5,330) (1,807) (1,653)
Class A ................................... (212) (180) (8) (5)
Class B ................................... -- -- -- --
Dividends from realized capital gains:
Class I ................................... (136) (90) (41) (39)
Class A ................................... (3) (4) -- --
Class B ................................... -- -- -- --
--------- -------- ------- -------
Total distributions ............................ (9,892) (5,604) (1,856) (1,697)
--------- -------- ------- -------
SHARE TRANSACTIONS:
Class I
Proceeds from shares issued ............... 81,139 36,338 6,378 6,749
Proceeds from Common Fund Conversion (note 6) -- 51,852 -- --
Reinvestment of cash distributions ........ 278 147 38 22
Cost of shares redeemed ................... (39,407) (17,109) (4,718) (5,640)
--------- -------- ------- -------
Net Class I share transactions .......... 42,010 71,228 1,698 1,131
--------- -------- ------- -------
Class A
Proceeds from shares issued ............... 1,246 940 114 66
Reinvestment of cash distributions ........ 120 125 1 1
Cost of shares redeemed ................... (545) (752) (20) (25)
--------- -------- ------- -------
Net Class A share transactions .......... 821 313 95 42
--------- -------- ------- -------
Class B
Proceeds from shares issued ............... -- -- -- --
Reinvestment of cash distributions ........ -- -- -- --
Cost of shares redeemed ................... -- -- -- --
--------- -------- ------- -------
Net Class B share transactions .......... -- -- -- --
--------- -------- ------- -------
Increase in net assets from share transactions . 42,831 71,541 1,793 1,173
--------- -------- ------- -------
Total increase in net assets ................... 40,741 74,531 1,511 2,028
--------- -------- ------- -------
NET ASSETS:
Beginning of period ............................ 169,432 94,901 38,878 36,850
--------- -------- ------- -------
End of period .................................. $ 210,173 $169,432 $40,389 $38,878
========= ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
OHIO TAX EXEMPT FUND
-------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
MAY 31, 1999 MAY 31, 1998
------------ ------------
INVESTMENT ACTIVITIES:
<S> <C> <C>
Net investment income .......................... $ 4,217 $ 532
Net realized gain/(loss) on investments sold ... 412 --
Net unrealized appreciation/depreciation
on investments ............................... (581) 591
-------- -------
Net increase in net assets
resulting from operations .................... 4,048 1,123
-------- -------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income:
Class I ................................... (4,193) (530)
Class A ................................... (67) --
Class B ................................... (2) --
Dividends from realized capital gains:
Class I ................................... (257) --
Class A ................................... (1) --
Class B ................................... -- --
-------- -------
Total distributions ............................ (4,520) (530)
-------- -------
SHARE TRANSACTIONS:
Class I
Proceeds from shares issued ............... 20,912 1,962
Proceeds from Common Fund Conversion (note 6) 22,085 78,943
Reinvestment of cash distributions ........ 67 --
Cost of shares redeemed ................... (22,312) (1,239)
-------- -------
Net Class I share transactions .......... 20,752 79,666
-------- -------
Class A
Proceeds from shares issued ............... 8,788 --
Reinvestment of cash distributions ........ 63 --
Cost of shares redeemed ................... (4,551) --
-------- -------
Net Class A share transactions .......... 4,300 --
-------- -------
Class B
Proceeds from shares issued ............... 277 --
Reinvestment of cash distributions ........ 2 --
Cost of shares redeemed ................... -- --
-------- -------
Net Class B share transactions .......... 279 --
-------- -------
Increase in net assets from share transactions . 25,331 79,666
-------- -------
Total increase in net assets ................... 24,859 80,259
-------- -------
NET ASSETS:
Beginning of period ............................ 80,259 --
-------- -------
End of period .................................. $105,118 $80,259
======== =======
</TABLE>
1 FUND COMMENCED OPERATIONS ON APRIL 9, 1998.
See Accompanying Notes
145
<PAGE> 148
[ARROW GRAPHIC OMITTED]
FINANCIAL STATEMENTS
ARMADA FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (000)
<TABLE>
<CAPTION>
OHIO MUNICIPAL PENNSYLVANIA TAX EXEMPT TAX EXEMPT
MONEY MARKET FUND MONEY MARKET FUND MONEY MARKET FUND
----------------- ------------------------------ ---------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE
PERIOD ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, 19991 MAY 31, 1999 MAY 31, 1998 MAY 31, 1999 MAY 31, 1998
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT ACTIVITIES:
Net investment income ................. $ 2,062 $ 3,760 $ 3,188 $ 17,732 $ 16,326
Net realized gain/(loss)
on investments sold ................ -- -- (10) (36) 10
-------- -------- -------- -------- --------
Net increase in net assets resulting
from operations ....................... 2,062 3,760 3,178 17,696 16,336
-------- -------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income:
Class I ............................. (1,958) (2,667) (2,280) (12,418) (13,748)
Class A ............................. (124) (1,112) (872) (5,503) (2,665)
Class B ............................. -- -- -- -- --
Dividends from realized capital gains:
Class I ............................. -- -- -- -- --
Class A ............................. -- -- -- -- --
Class B ............................. -- -- -- -- --
-------- -------- -------- -------- --------
Total distributions ...................... (2,082) (3,779) (3,152) (17,921) (16,413)
-------- -------- -------- -------- --------
SHARE TRANSACTIONS:
Class I
Proceeds from shares issued ......... 273,577 176,111 171,384 760,407 881,569
Reinvestment of cash distributions .. 27 -- -- 98 1
Cost of shares redeemed ............. (174,242) (172,152) (159,015) (745,079) (833,210)
-------- -------- -------- -------- --------
Net Class I share transactions ... 99,362 3,959 12,369 15,426 48,360
-------- -------- -------- -------- --------
Class A
Proceeds from shares issued ......... 30,799 161,332 127,747 654,175 381,022
Reinvestment of cash distributions .. 98 490 295 5,196 2,404
Cost of shares redeemed ............. (19,878) (141,365) (115,504) (601,426) (322,804)
-------- -------- -------- -------- --------
Net Class A share transactions ... 11,019 20,457 12,538 57,945 60,622
-------- -------- -------- -------- --------
Class B
Proceeds from shares issued ......... -- -- -- -- --
Reinvestment of cash distributions .. -- -- -- -- --
Cost of shares redeemed ............. -- -- -- -- --
-------- -------- -------- -------- --------
Net Class B share transactions ... -- -- -- -- --
-------- -------- -------- -------- --------
Increase in net assets from
share transactions .................... 110,381 24,416 24,907 73,371 108,982
-------- -------- -------- -------- --------
Total increase in net assets ............. 110,361 24,397 24,933 73,146 108,905
-------- -------- -------- -------- --------
NET ASSETS:
Beginning of period ................... -- 106,639 81,706 551,501 442,596
-------- -------- -------- -------- --------
End of period ......................... $110,361 $131,036 $106,639 $624,647 $551,501
======== ======== ======== ======== ========
</TABLE>
1 FUND COMMENCED OPERATIONS ON SEPTEMBER 15, 1998.
See Accompanying Notes
146
<PAGE> 149
<TABLE>
<CAPTION>
MONEY MARKET FUND GOVERNMENT MONEY MARKET FUND
---------------------------------------- ----------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, 1999 MAY 31, 1998 MAY 31, 1999 MAY 31, 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITIES:
Net investment income ................. $ 152,635 $ 128,512 $ 69,425 $ 58,026
Net realized gain/(loss)
on investments sold ................ (1) (4) -- (1)
---------- ---------- ---------- ----------
Net increase in net assets resulting
from operations ....................... 152,634 128,508 69,425 58,025
---------- ---------- ---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income:
Class I ............................. (101,961) (103,139) (48,773) (47,874)
Class A ............................. (51,163) (25,134) (20,599) (10,152)
Class B ............................. (3) -- -- --
Dividends from realized capital gains:
Class I ............................. -- -- -- --
Class A ............................. -- -- -- --
Class B ............................. -- -- -- --
---------- ---------- ---------- ----------
Total distributions ...................... (153,127) (128,273) (69,372) (58,026)
---------- ---------- ---------- ----------
SHARE TRANSACTIONS:
Class I
Proceeds from shares issued ......... 6,186,234 5,718,525 3,760,181 3,557,896
Reinvestment of cash distributions .. 405 1,914 873 176
Cost of shares redeemed ............. (5,964,073) (5,751,937) (3,802,485) (3,233,359)
---------- ---------- ---------- ----------
Net Class I share transactions ... 222,566 (31,498) (41,431) 324,713
---------- ---------- ---------- ----------
Class A
Proceeds from shares issued ......... 3,828,467 2,079,077 1,375,632 614,377
Reinvestment of cash distributions .. 32,692 14,552 3,639 1,400
Cost of shares redeemed ............. (3,197,331) (1,742,976) (1,062,178) (526,921)
---------- ---------- ---------- ----------
Net Class A share transactions ... 663,828 350,653 317,093 88,856
---------- ---------- ---------- ----------
Class B
Proceeds from shares issued ......... 162 6 -- --
Reinvestment of cash distributions .. 2 -- -- --
Cost of shares redeemed ............. (142) (1) -- --
---------- ---------- ---------- ----------
Net Class B share transactions ... 22 5 -- --
---------- ---------- ---------- ----------
Increase in net assets from
share transactions .................... 886,416 319,160 275,662 413,569
---------- ---------- ---------- ----------
Total increase in net assets ............. 885,923 319,395 275,715 413,568
---------- ---------- ---------- ----------
NET ASSETS:
Beginning of period ................... 2,608,587 2,289,192 1,384,359 970,791
---------- ---------- ---------- ----------
End of period ......................... $3,494,510 $2,608,587 $1,660,074 $1,384,359
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
TREASURY MONEY MARKET FUND
----------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
MAY 31, 1999 MAY 31, 1998
------------ ------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
Net investment income ................. $ 16,787 $ 14,828
Net realized gain/(loss)
on investments sold ................ 85 8
---------- ----------
Net increase in net assets resulting
from operations ....................... 16,872 14,836
---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income:
Class I ............................. (14,683) (14,531)
Class A ............................. (2,138) (297)
Class B ............................. -- --
Dividends from realized capital gains:
Class I ............................. -- --
Class A ............................. -- --
Class B ............................. -- --
---------- ----------
Total distributions ...................... (16,821) (14,828)
---------- ----------
SHARE TRANSACTIONS:
Class I
Proceeds from shares issued ......... 1,602,785 1,565,848
Reinvestment of cash distributions .. 26 10
Cost of shares redeemed ............. (1,616,371) (1,482,587)
---------- ----------
Net Class I share transactions ... (13,560) 83,271
---------- ----------
Class A
Proceeds from shares issued ......... 647,257 14,124
Reinvestment of cash distributions .. 447 271
Cost of shares redeemed ............. (571,910) (12,854)
---------- ----------
Net Class A share transactions ... 75,794 1,541
---------- ----------
Class B
Proceeds from shares issued ......... -- --
Reinvestment of cash distributions .. -- --
Cost of shares redeemed ............. -- --
---------- ----------
Net Class B share transactions ... -- --
---------- ----------
Increase in net assets from
share transactions .................... 62,234 84,812
---------- ----------
Total increase in net assets ............. 62,285 84,820
---------- ----------
NET ASSETS:
Beginning of period ................... 366,827 282,007
---------- ----------
End of period ......................... $ 429,112 $ 366,827
========== ==========
</TABLE>
See Accompanying Notes
147
<PAGE> 150
[ARROW GRAPHIC OMITTED]
NOTES TO FINANCIAL STATEMENTS
1. FUND ORGANIZATION
Armada Funds (the "Trust") is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end investment management company.
The Trust was organized as a Massachusetts business trust on January 28, 1986.
The Trust is comprised of twenty four funds each of which is authorized to issue
two classes of shares designated as Class I and Class A shares. Effective
January 1, 1998, all funds except, Ohio Municipal Money Market, Pennsylvania
Tax-Exempt Money Market, Tax-Exempt MoneyMarket, Government Money Market and
Treasury Money Market were authorized to offer a third class of shares
designated as Class B shares. Each share class represents an interest in the
same portfolio of investments of the respective Fund and is substantially the
same in all respects, except that the classes are subject to different
distribution and/or shareholder service fees and investment minimums. Class A
shares are sold subject to a front-end sales charge and Class B shares are sold
with a contingent deferred sales charge, both of which may be reduced or waived
under certain circumstances.
The Trust currently has five Series that consist of the following Funds
(each referred to as a "Fund" or collectively as the "Funds"):
EQUITY SERIES
International Equity Fund, Small Cap Value Fund, Small Cap Growth Fund, Equity
Growth Fund, Tax Managed Equity Fund, Core Equity Fund, Equity Index Fund, and
Equity Income Fund;
ALLOCATION SERIES
Balanced Allocation Fund;
INCOME SERIES
Total Return Advantage Fund, Bond Fund, Intermediate Bond Fund, GNMA Fund,
Enhanced Income Fund, and Real Return Advantage Fund;
TAX EXEMPT SERIES
Ohio Tax Exempt Fund, Pennsylvania Municipal Fund, and National Tax Exempt Fund;
MONEY MARKET SERIES
Ohio Municipal Money Market Fund, Pennsylvania Tax Exempt Money Market Fund, Tax
Exempt Money Market Fund, Money Market Fund, Government Money Market Fund, and
Treasury Money Market Fund.
As of the date of this report, the Real Return Advantage Fund had not
commenced operations.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Funds.
SECURITY VALUATION: Securities listed on an exchange are valued at the last
quoted sales price as of the close of the New York Stock Exchange on the
valuation date. Securities not traded or securities not listed on an exchange
are valued at the mean of the last quoted bid and asked prices. Securities
listed on a foreign exchange are valued at the last quoted sales price before
the Fund is valued. Long-term debt securities are valued by an independent
pricing service and such prices are believed to reflect the fair value of such
securities. Short-term instruments having less than 60 days to maturity are
valued at amortized cost which approximates market value, which has been
determined by the Board of Trustees to represent a fair value of each Fund's
investments. Other securities and assets for which market quotations are not
readily available are valued at fair value as determined in good faith by or
under the direction of the Fund's Board of Trustees.
SECURITY TRANSACTIONS AND INVESTMENT INCOME: Security transactions are
recorded on trade date. Realized gains and losses on investments sold are
recorded on the identified cost basis. Interest income is accrued on a daily
basis. Dividends are recorded on the ex-dividend date. Expenses common to all of
the Funds in the Trust are allocated among the Funds on the basis of average net
assets. Original issue discounts and market premiums are amortized to interest
income over the lives of the respective securities.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Dividends from the net
investment income of the Equity Growth, Tax Managed Equity, Core Equity, Equity
Index, Equity Income and Balanced Allocation Funds are declared and paid
quarterly; dividends from net investment income of the International
148
<PAGE> 151
[ARROW GRAPHIC OMITTED]
NOTES TO FINANCIAL STATEMENTS
Equity, Small Cap Value and Small Cap Growth Funds are declared and paid
annually. With respect to the International Equity, Small Cap Value, Small Cap
Growth, Equity Growth, Tax Managed Equity, Core Equity, Equity Index, Equity
Income and Balanced Allocation Funds, net investment income for dividend
purposes consists of dividends, interest income, and discounts earned (including
both original issue and market discount), less amortization of any market
premiums and accrued expenses. Dividends from the net investment income of the
Total Return Advantage, Bond, Intermediate Bond, GNMA, Enhanced Income, Ohio Tax
Exempt, Pennsylvania Municipal, National Tax Exempt, Ohio Municipal Money
Market, Pennsylvania Tax Exempt Money Market, Tax Exempt Money Market, Money
Market, Government Money Market, and Treasury Money Market Funds are declared
daily and paid no later than five business days after the end of the month. Net
investment income of the Total Return Advantage, Bond, Intermediate Bond, GNMA,
Enhanced Income, Money Market, Government Money Market, and Treasury Money
Market Funds consists of dividend and interest income, discount earned
(including both original issue and market discount), less amortization of any
market premiums and accrued expenses. Net investment income of the Ohio Tax
Exempt, Pennsylvania Municipal, National Tax Exempt, Ohio Municipal Money
Market, Pennsylvania Tax Exempt Money Market, and Tax Exempt Money Market Funds
consists of interest accrued, original issue discount earned, less amortization
of any market premium and accrued expenses. Any net realized capital gains will
be distributed at least annually for all the Funds.
FEDERAL INCOME TAXES: Each of the Funds is classified as a separate taxable
entity for Federal income tax purposes. Each of the Funds intends to qualify or
continue to qualify as a separate "regulated investment company" under the
Internal Revenue Code and make the requisite distributions to shareholders that
will be sufficient to relieve it from Federal income tax and Federal excise tax.
Therefore, no Federal tax provision is required. To the extent that
distributions from net investment income and net realized capital gains exceed
amounts reported in the financial statements, such amounts are reported
separately.
The amounts of distributions from net investment income and net realized
capital gains are determined in accordance with Federal income tax regulations,
which may differ from those amounts determined under generally accepted
accounting principles. These book/tax differences are either temporary or
permanent in nature. These differences are primarily due to wash sales, foreign
currency gains and losses and the "mark to market" of certain Passive Foreign
Investment Companies (PFICs) for tax purposes. The character of distributions
made during the year from net investment income or net realized gains, and the
timing of distributions where the fiscal year in which the amounts are
distributed may differ from the year that the income or realized gains (losses)
were recorded by the Fund. To the extent these differences are permanent,
adjustments are made to the appropriate equity accounts in the period that the
differences arise. On the Statement of Net Assets the following adjustments were
made:
ACCUMULATED UNDISTRIBUTED
NET REALIZED NET INVESTMENT PAID-IN-
GAIN (LOSS) INCOME CAPITAL
FUND (000) (000) (000)
- - ---- ------------ -------------- ---------
Small Cap Growth $-- $ 182 $ (182)
Equity Growth (163) 1,693 (1,530)
Core Equity (22) 189 (167)
Bond 10 (1) (9)
Intermediate Bond (80) 84 (4)
Tax Exempt Money
Market (11) (77) 88
Money Market 3 -- (3)
Treasury Money
Market (107) 107 --
ORGANIZATION COSTS: 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 incurred through June 30, 1998, are being amortized on a
straight-line basis over a period of five years from the date of commencement of
operations.
FOREIGN CURRENCY TRANSLATION: The books and records of the International
Equity Fund are maintained in U.S. dollars as follows: (1) the foreign currency
market values of investment securities and other assets and liabilities stated
in foreign currencies are translated at the exchange rates prevailing at the end
of the period; and (2) purchases, sales and income are translated at the rates
of exchange prevailing on the respective dates of such transactions. The
resulting exchange gains and losses are included in the Statement of Operations.
The Fund does not isolate the portion of gains and losses on investments which
is due to fluctuations in foreign exchange rates from that which is due to
fluctuations in the market prices of investments.
FORWARD FOREIGN CURRENCY CONTRACTS: The International Equity Fund enters into
forward foreign currency contracts as hedges against either specific
transactions or portfolio positions. All commitments are "marked-to-market"
daily at the applicable foreign exchange rate and any resulting unrealized
149
<PAGE> 152
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NOTES TO FINANCIAL STATEMENTS
gains or losses are recorded currently. The Fund realizes gains or losses at the
time the forward contracts are extinguished. At May 31, 1999 forward foreign
currency contracts outstanding were as follows:
CONTRACTS TO UNREALIZED
(DELIVER)/ IN EXCHANGE APPRECIATION
RECEIVE FOR SETTLEMENT (DEPRECIATION)
(000) (000) DATE (000)
----------- ----------- ----------- -------------
JP (2,000,000) $(17,495) 04/03/00 $616
JP--Japanese Yen
FUTURES CONTRACTS: Certain of the Funds may engage in futures contracts for
the purpose of hedging against the value of the portfolio securities held and in
the value of the securities a Fund intends to purchase, in order to maintain
liquidity. Upon entering into a futures contract, a Fund is required to deposit
with the broker an amount of cash or cash equivalents equal to a certain
percentage of the contract amount. This is known as the "initial margin".
Subsequent payments ("variation margin") are made or received by a Fund each
day, depending on the daily fluctuation of the value of the contract. The daily
changes in the contract are recorded as unrealized gain or loss. The Fund
recognizes a realized gain or loss when the contact is closed. The net
unrealized appreciation/(depreciation), if any, is shown in the financial
statements.
There are several risks in connection with the use of futures contracts as a
hedging device. The change in value of futures contracts primarily corresponds
with the value of their underlying instruments, which may not correlate with the
change in value of the hedged investments. In addition, there is the risk that
the Fund may not be able to enter into a closing transaction because of an
illiquid secondary market.
Financial futures contracts open at May 31, 1999 were as follows:
NUMBER NOTIONAL UNREALIZED
OF COST AMOUNT EXPIRATION GAIN/(LOSS)
FUND CONTRACTS (000) DATE (000)
- - ----------- --------- ----------- ----------- -----------
Small Cap Growth -
Russell 2000
Futures 56 $11,371 Jun-99 $973
Equity Index -
S&P 500
Futures 28 918 Jun-99 (104)
MORTGAGE DOLLAR ROLLS: For the purpose of enhancing the Fund's yield, the
GNMA Fund may enter into mortgage dollar rolls (principally in TBA's) in which
the Fund sells mortgage securities for delivery in the current month and
simultaneously contracts to repurchase similar, but not identical, securities at
an agreed-upon price on a fixed date. The Fund accounts for such dollar rolls as
purchases and sales and maintains liquid high-grade securities in an amount at
least equal to its commitment to repurchase.
REPURCHASE AGREEMENTS: Repurchase Agreements are considered loans under the
1940 Act. In connection therewith, the Trust's custodian receives and holds
collateral of not less than 102% of the repurchase price plus accrued interest.
If the value of the collateral falls below this amount, the Trust will require
the seller to deposit additional collateral by the next business day. If the
request for additional collateral is not met or the seller defaults on its
repurchase obligation, the Trust maintains the right to sell the underlying
securities at market value and any remaining loss may be subject to legal
proceedings.
3. INVESTMENT ADVISER, DISTRIBUTION FEES AND OTHER RELATED PARTY TRANSACTIONS
Fees paid by the Trust pursuant to the Advisory Agreements with National City
Investment Management Company (the "Adviser"), an indirect wholly owned
subsidiary of National City Corporation, are payable monthly based on an annual
rate, listed in the table below, based on each Fund's average daily net assets.
The Adviser may from time to time waive its fees payable by the Funds. At May
31, 1999, advisory fees accrued and unpaid amounted to:
ANNUAL
RATE (000)
---------- ----------
International Equity Fund............... 1.15% $208
Small Cap Value Fund.................... 1.00% 246
Small Cap Growth Fund................... 1.00% 70
Equity Growth Fund...................... 0.75% 926
Tax Managed Equity Fund................. 0.75% 83
Core Equity Fund........................ 0.75% 254
Equity Index Fund....................... 0.35% --
Equity Income Fund...................... 0.75% 358
Balanced Allocation Fund................ 0.75% 53
Total Return Advantage Fund............. 0.55% 69
Bond Fund............................... 0.55% 373
Intermediate Bond Fund.................. 0.55% 113
GNMA Fund............................... 0.55% 44
Enhanced Income Fund.................... 0.45% 22
Ohio Tax Exempt Fund.................... 0.55% 64
Pennsylvania Municipal Fund............. 0.55% 7
National Tax Exempt Fund................ 0.55% 19
Ohio Municipal Money Market Fund........ 0.35% 15
Pennsylvania Tax Exempt Money
Market Fund.......................... 0.40% 17
Tax Exempt Money Market Fund............ 0.35% 81
Money Market Fund....................... 0.35% 772
Government Money Market Fund............ 0.35% 354
Treasury Money Market Fund.............. 0.30% 87
150
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[ARROW GRAPHIC OMITTED]
NOTES TO FINANCIAL STATEMENTS
During the fiscal year ended May 31, 1998, the Adviser contributed $466,000
to the Equity Growth Fund to offset the Fund's realized loss incurred on the
sale of a Standard & Poor's Depository Receipt.
National Asset Management Corporation serves as investment sub-adviser (the
"Sub Adviser") to the Core Equity and Total Return Advantage Funds. No fees are
paid to the Sub-Adviser directly from the Trust.
Wellington Management Company, LLP served, prior to August 1, 1998, as the
investment sub-adviser to the Small Cap Growth Fund. No fees were paid to the
sub-adviser directly from the Trust.
The Trust maintains a Shareholder Services Plan (the "Services Plan") with
respect to the Class A and B shares in the Funds. Pursuant to the Services Plan,
the Trust enters into shareholder servicing agreements with certain financial
institutions under which they agree to provide shareholder administrative
services to their customers who beneficially own Class A or B shares in
consideration for payment, listed in the table below, on an annual basis of the
net asset value of the Class A or B shares.
ANNUAL
RATE
----------
International Equity Fund....................... 0.25%
Small Cap Value Fund............................ 0.25%
Small Cap Growth Fund........................... 0.25%
Equity Growth Fund.............................. 0.25%
Tax Managed Equity Fund......................... 0.25%
Core Equity Fund................................ 0.25%
Equity Index Fund............................... 0.25%
Equity Income Fund.............................. 0.25%
Balanced Allocation Fund........................ 0.25%
Total Return Advantage Fund..................... 0.25%
Bond Fund....................................... 0.25%
Intermediate Bond Fund.......................... 0.25%
GNMA Fund....................................... 0.25%
Enhanced Income Fund............................ 0.10%
Ohio Tax Exempt Fund............................ 0.10%
Pennsylvania Municipal Fund..................... 0.10%
National Tax Exempt Fund........................ 0.10%
Ohio Municipal Money Market Fund................ 0.15%
Pennsylvania Tax Exempt Money Market Fund....... 0.15%
Tax Exempt Money Market Fund.................... 0.15%
Money Market Fund............................... 0.15%
Government Money Market Fund.................... 0.15%
Treasury Money Market Fund...................... 0.15%
National City Bank serves as the Fund's Custodian.
The Trust and SEI Investments Distribution Co., a wholly-owned subsidiary of
SEI Investments Company ("SEI" or the "Distributor") are parties to a
distribution agreement dated May 1, 1998. The Distributor receives no fees for
its distribution services under this agreement. The Trust reimburses the
Distributor for direct and indirect costs and expenses incurred in connection
with advertising, marketing and other distribution services. The Class I and
Class A shares are subject to a fee not to exceed .10% per annum of the average
net assets of its Class I and Class A shares. Currently the funds pay a fee
equal to .04% per annum, except Equity Index, Total Return Advantage, Enhanced
Income and Pennsylvania Municipal Fund, which are currently waiving their full
fee. The Class B shares of the Trust pays the Distributor up to .75% per annum
of the average net assets for the same services provided to the Class I and
Class A shares.
Each Trustee receives an annual fee of $15,000 plus $3,000 for each Board
meeting attended and reimbursement of out-of-pocket expenses. The Chairman of
the Board receives an additional $5,000 per annum for services in such capacity.
Such fees are paid for services rendered to all of the Funds and are allocated
accordingly. No person who is an officer, director, trustee, or employee of the
Investment Adviser, Distributor, or any parent or subsidiary thereof, who serves
as an officer, trustee, or employee of the Trust receives any compensation from
the Trust.
Expenses paid for the period ended May 31, 1999, include legal fees of
$687,000 paid to Drinker, Biddle & Reath LLP. A partner of that firm is
Secretary of the Trust.
The Trust and SEI Investments Mutual Funds Services (the "Administrator") are
parties to an Administration Agreement dated May 1, 1998, under which the
Administrator provides administrative services for an annual fee of 0.07% of the
aggregate average daily net assets of the Funds up to the first eighteen billion
and 0.06% of the aggregate average daily net assets of the Funds over eighteen
billion.
4. INVESTMENTS
During the year ended May 31, 1999, purchases and sales of securities, other
than short-term investments or U.S. government obligations, aggregated:
PURCHASES (000) SALES (000)
-------------- -------------
International Equity Fund..... $ 189,374 $ 126,989
Small Cap Value Fund.......... 199,967 201,002
Small Cap Growth Fund......... 117,391 89,069
Equity Growth Fund............ 1,228,343 636,089
Tax Managed Equity Fund....... 14,142 11,674
Core Equity Fund.............. 60,792 53,687
Equity Index Fund............. 243,329 14,551
Equity Income Fund............ 165,339 77,374
Balanced Allocation Fund...... 88,798 27,315
151
<PAGE> 154
[ARROW GRAPHIC OMITTED]
NOTES TO FINANCIAL STATEMENTS
PURCHASES (000) SALES (000)
-------------- -----------
Total Return Advantage Fund... $175,553 $119,909
Bond Fund..................... 258,785 589,003
Intermediate Bond Fund........ 362,936 270,186
GNMA Fund..................... 17,333 11,795
Enhanced Income Fund.......... 69,945 45,558
Ohio Tax Exempt Fund.......... 79,668 35,878
Pennsylvania Municipal Fund... 7,126 5,505
National Tax Exempt Fund...... 24,649 21,401
Purchases and sales of long-term U.S. government obligations were:
PURCHASES (000) SALES (000)
-------------- ----------
Balanced Allocation Fund...... $ 59,799 $ 43,163
Total Return Advantage Fund... 306,755 316,698
Bond Fund..................... 1,600,245 1,060,096
Intermediate Bond Fund........ 372,008 373,621
GNMA Fund..................... 73,969 59,304
Enhanced Income Fund.......... 59,693 79,246
As of May 31, 1999, the following funds have capital loss carryforwards:
AMOUNT EXPIRATION
FUND (000) DATE
---------- -------------
International Equity.......... $6,578 2006-2007
Small Cap Value............... 3,560 2007
Small Cap Growth.............. 4,342 2007
Equity Growth................. 1,032 2007
Balanced Allocation........... 821 2007
Pennsylvania Tax Exempt
Money Market................ 13 2003-2007
Tax Exempt Money Market....... 26 2006-2007
Money Market.................. 11 2001-2007
Government Money Market....... 2 2002-2006
The Small Cap Value, Small Cap Growth, Balanced Allocation, Bond, GNMA and
Enhanced Income Funds incurred losses in the amount of $5,454,834, $4,883,790,
$754,303, $1,545,272, $3,893 and $90,861 from November 1, 1998 to May 31, 1999.
As permitted by tax regulations, the funds intend to elect to defer and treat
these losses as arising in the fiscal year ending May 31, 2000.
At May 31, 1999 the total cost of securities for Federal income tax purposes
was not materially different from amounts reported for financial reporting
purposes. The aggregate gross unrealized appreciation and depreciation for
securities held by the Funds at May 31, 1999, is as follows:
AGGREGATE AGGREGATE
GROSS GROSS
APPRECIATION DEPRECIATION NET
(000) (000) (000)
-------------- ------------ ------------
International Equity Fund ..... $ 23,999 $ (5,844) $ 18,155
Small Cap Value Fund .......... 37,384 (23,405) 13,979
Small Cap Growth Fund ......... 10,325 (4,007) 6,318
Equity Growth Fund ............ 360,805 (18,519) 342,286
Tax Managed Equity Fund ....... 186,627 (294) 186,333
Core Equity Fund .............. 35,084 (1,416) 33,668
Equity Index Fund ............. 26,559 (7,723) 18,836
Equity Income Fund ............ 147,422 (9,292) 138,130
Balanced Allocation Fund ...... 4,475 (2,207) 2,268
Total Return Advantage Fund ... 1,521 (7,052) (5,531)
Bond Fund ..................... 1,796 (16,132) (14,336)
Intermediate Bond Fund ........ 375 (6,102) (5,727)
GNMA Fund ..................... 759 (1,525) (766)
Enhanced Income Fund .......... 142 (608) (466)
Ohio Tax Exempt Fund .......... 5,237 (1,179) 4,058
Pennsylvania Municipal Fund ... 1,382 (129) 1,253
National Tax Exempt Fund ...... 2,265 (536) 1,729
152
<PAGE> 155
[ARROW GRAPHIC OMITTED]
NOTES TO FINANCIAL STATEMENTS
5. SHARES OF BENEFICIAL INTEREST
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 of shares
and to classify or reclassify any class of shares into one or more series of
shares. Transactions in capital shares are summarized on the following pages for
the Funds.
<TABLE>
<CAPTION>
(000)
-----------------------------------------------------------------------
CLASS I CLASS A CLASS B
--------------------- ------------------- ------------------
YEAR PERIOD YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
5/31/99 5/31/98 5/31/99 5/31/98 5/31/99 5/31/98
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
INTERNATIONAL EQUITY FUND*
Shares sold ........................................... 6,630 12,708 189 30 4 --
Shares reinvested ..................................... 4 -- -- -- -- --
Shares repurchased .................................... (901) (185) (110) (4) -- --
------- ------- ------ ------ ------ ------
Net increase .......................................... 5,733 12,523 79 26 4 --
======= ======= ====== ======= ====== ======
SMALL CAP VALUE FUND
Shares sold ........................................... 5,565 6,633 853 367 36 35
Shares reinvested ..................................... 1,099 1,006 84 61 3 --
Shares repurchased .................................... (4,939) (2,710) (757) (71) (4) (31)
------- ------- ------ ------ ------ ------
Net increase .......................................... 1,725 4,929 180 357 35 4
======= ======= ====== ======= ====== ======
SMALL CAP GROWTH FUND*
Shares sold ........................................... 4,616 4,822 93 30 75 2
Shares reinvested ..................................... 36 8 1 -- -- --
Shares repurchased .................................... (1,409) (170) (14) (2) (61) (2)
------- ------- ------ ------ ------ ------
Net increase .......................................... 3,243 4,660 80 28 14 --
======= ======= ====== ======= ====== ======
EQUITY GROWTH FUND
Shares sold ........................................... 55,653 5,311 6,417 225 59 14
Shares sold from common fund .......................... 11,713 -- -- -- -- --
Shares reinvested ..................................... 1,893 839 182 44 -- --
Shares repurchased .................................... (34,479) (3,367) (809) (60) (3) (13)
------- ------- ------ ------ ------ ------
Net increase .......................................... 34,780 2,783 5,790 209 56 1
======= ======= ====== ======= ====== ======
TAX MANAGED EQUITY FUND**
Shares sold ........................................... 1,245 145 663 1 444 9
Shares sold from common fund .......................... 4,949 16,361 -- -- -- --
Shares reinvested ..................................... 10 -- -- -- -- --
Shares repurchased .................................... (2,301) (507) (60) -- (9) --
------- ------- ------ ------ ------ ------
Net increase .......................................... 3,903 15,999 603 1 435 9
======= ======= ====== ======= ====== ======
CORE EQUITY FUND*
Shares sold ........................................... 521 10,639 190 36 83 2
Shares reinvested ..................................... 396 49 2 -- 1 --
Shares repurchased .................................... (64) (952) (102) -- (3) --
------- ------- ------ ------ ------ ------
Net increase .......................................... 853 9,736 90 36 81 2
======= ======= ====== ======= ====== ======
</TABLE>
*Fund commenced operations on August 1, 1997.
**Fund commenced operations on April 9, 1998.
153
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NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
(000)
-----------------------------------------------------------------------
CLASS I CLASS A CLASS B
--------------------- ------------------- ------------------
PERIOD YEAR PERIOD YEAR PERIOD YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
5/31/99 5/31/98 5/31/99 5/31/98 5/31/99 5/31/98
------- ------- ------- ------- ------- -------
EQUITY INDEX FUND*
<S> <C> <C> <C> <C> <C> <C>
Shares sold 25,795 -- 400 -- -- --
Shares reinvested 113 -- 1 -- -- --
Shares repurchased (3,478) -- (56) -- -- --
------- ------- ------ ------ ------ ------
Net increase 22,430 -- 345 -- -- --
======= ======= ====== ======= ====== ======
EQUITY INCOME FUND
Shares sold 8,741 4,192 634 114 60 3
Shares sold from common fund 12,893 -- -- -- -- --
Shares reinvested 443 353 7 2 1 --
Shares repurchased (3,977) (2,031) (174) (21) (8) (3)
------- ------- ------ ------ ------ ------
Net increase 18,100 2,514 467 95 53 --
======= ======= ====== ======= ====== ======
BALANCED ALLOCATION FUND*
Shares sold 10,709 -- 173 -- 38 --
Shares reinvested 90 -- 1 -- -- --
Shares repurchased (2,552) -- (32) -- (1) --
------- ------- ------ ------ ------ ------
Net increase 8,247 -- 142 -- 37 --
======= ======= ====== ======= ====== ======
TOTAL RETURN ADVANTAGE FUND
Shares sold 7,279 8,225 478 63 -- --
Shares reinvested 1,179 930 19 12 -- --
Shares repurchased (4,461) (6,481) (90) (232) -- --
------- ------- ------ ------ ------ ------
Net increase/(decrease) 3,997 2,674 407 (157) -- --
======= ======= ====== ======= ====== ======
BOND FUND
Shares sold 54,213 5,321 407 24 81 4
Shares sold from common fund 42,948 -- -- -- -- --
Shares reinvested 1,144 11 5 -- 3 --
Shares repurchased (35,024) (1,520) (147) (10) (11) (4)
------- ------- ------ ------ ------ ------
Net increase 63,281 3,812 265 14 73 --
======= ======= ====== ======= ====== ======
INTERMEDIATE BOND FUND
Shares sold 15,932 10,533 363 113 69 7
Shares sold from common fund 6,642 -- -- -- -- --
Shares reinvested 503 178 18 17 1 --
Shares repurchased (8,677) (6,658) (197) (178) (2) (7)
------- ------- ------ ------ ------ ------
Net increase/(decrease) 14,400 4,053 184 (48) 68 --
======= ======= ====== ======= ====== ======
GNMA FUND
Shares sold 2,788 2,751 146 51 -- --
Shares reinvested 46 15 6 1 -- --
Shares repurchased (1,323) (1,046) (57) (12) -- --
------- ------- ------ ------ ------ ------
Net increase 1,511 1,720 95 40 -- --
======= ======= ====== ======= ====== ======
</TABLE>
- - --------------
*FUND COMMENCED OPERATIONS ON JULY 10, 1998.
154
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[ARROW GRAPHIC OMITTED]
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
(000)
-----------------------------------------------------------------------
CLASS I CLASS A CLASS B
--------------------- ------------------- ------------------
YEAR PERIOD YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
5/31/99 5/31/98 5/31/99 5/31/98 5/31/99 5/31/98
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
ENHANCED INCOME FUND
Shares sold 5,834 6,108 35 195 -- --
Shares reinvested 241 227 2 12 -- --
Shares repurchased (5,959) (5,302) (37) (356) -- --
------ ------- ----- ------ ------ ------
Net increase/(decrease) 116 1,033 -- (149) -- --
====== ======= ===== ====== ====== ======
OHIO TAX EXEMPT FUND
Shares sold 7,248 3,295 111 94 -- --
Shares sold from common fund -- 4,684 -- -- -- --
Shares reinvested 24 13 11 11 -- --
Shares repurchased (3,518) (1,545) (49) (68) -- --
------ ------- ----- ------ ------ ------
Net increase 3,754 6,447 73 37 -- --
====== ======= ===== ====== ====== ======
PENNSYLVANIA MUNICIPAL FUND
Shares sold 605 649 11 6 -- --
Shares reinvested 4 2 -- -- -- --
Shares repurchased (449) (542) (2) (2) -- --
------ ------- ----- ------ ------ ------
Net increase 160 109 9 4 -- --
====== ======= ===== ====== ====== ======
NATIONAL TAX EXEMPT FUND*
Shares sold 2,135 234 863 -- 28 --
Shares sold from common fund 2,165 7,894 -- -- -- --
Shares reinvested 6 -- 6 -- -- --
Shares repurchased (2,210) (124) (447) -- -- --
------ ------- ----- ------ ------ ------
Net increase 2,096 8,004 422 -- 28 --
====== ======= ===== ====== ====== ======
</TABLE>
*FUND COMMENCED OPERATIONS ON APRIL 9, 1998.
Since Ohio Municipal Money Market, Pennsylvania Tax Exempt Money Market, Tax
Exempt Money Market, Money Market, Government Money Market, and Treasury Money
Market Funds have each sold and redeemed shares only at a constant net asset
value of $1.00 per share, the number of shares represented by such sales,
reinvestments, and redemptions is the same as the amounts shown in the Statement
of Changes in Net Assets.
- --------------------------------------------------------------------------------
6. COMMON TRUST FUND CONVERSIONS
On October 9, 1998, the Fort Wayne Large Cap Equity Fund, Fort Wayne Equity
Fund, Fort Wayne Income Fund, and Fort Wayne Tax Free Fund of National City Bank
of Indiana (formerly, Fort Wayne National Bank) were converted into the Armada
Tax Managed Equity Fund, Armada Tax Managed Equity Fund, Armada Intermediate
Bond Fund and Armada National Tax Exempt Fund, respectively. The assets, which
consisted of securities and related receivables, were converted on a tax-free
basis at the respective Armada Fund's current day net asset value. At the time
of the conversion, 3,582,852 of Class I shares of the Armada Tax Managed Equity
Fund, 1,366,366 of Class I shares of the Armada Tax Managed Equity Fund,
6,642,146 of Class I shares of the Armada Intermediate Bond Fund and 2,165,202
of Class I shares of the Armada National Tax Exempt Fund were issued. The net
assets of the Fort Wayne Large Cap Equity Fund, Fort Wayne Equity Fund, Fort
Wayne Income Fund, and Fort Wayne Tax Free Fund immediately before the
conversion were $33,678,806, $12,843,563, $71,602,332 and $22,085,062,
respectively, which included unrealized appreciation of $3,966,820, $5,917,249,
$1,094,445 and $588,915, respectively.
On August 14, 1998, the National City Fixed Income Fund for Personal Trusts
of National City Bank was converted into the Armada Bond Fund. The assets which
consisted of securities and related receivables, were converted on a tax-free
basis at the respective Armada Fund's current day net asset value. At the time
of this conversion, 42,948,272 of Class I shares of the Armada Bond Fund were
issued. The net assets of the National City Fixed Income Fund for Personal
Trusts immediately before the conversion were $444,085,137 which included
unrealized appreciation of $7,241,615.
On August 7, 1998, the National City Equity Fund for Personal Trusts #1 and
the National City Income Equity Fund for Personal Trusts #1 of National City
Bank were converted into the Armada Equity Growth and Armada Equity Income
Funds, respectively. The assets, which consisted of securities and related
receivables, were converted on a tax-free basis at the respective Armada Fund's
current day net asset value. At the time of the conversion, 11,712,500 of Class
I shares of the Armada Equity Growth Fund and 12,892,934 of Class I shares of
the Armada Equity Income Fund were issued. The net assets of the National City
155
<PAGE> 158
[ARROW GRAPHIC OMITTED]
NOTES TO FINANCIAL STATEMENTS
Equity Fund for Personal Trusts #1 and National City Income Equity Fund for
Personal Trusts #1 immediately before the conversion were $257,675,010 and
$212,346,617, respectively, which included unrealized appreciation of
$102,201,766 and $51,916,108, respectively.
On April 9, 1998, the National City Personal Trust Tax Exempt Fund of
National City Bank was converted into the Armada National Tax Exempt Fund. The
assets, which consisted of securities and related receivables, were converted on
a tax-free basis at the respective Armada Fund's current day net asset value. At
the time of the conversion, 7,894,277 of Class I shares of the Armada National
Tax Exempt Fund were issued. The net assets of the National City Personal Trust
Tax Exempt Fund immediately before the conversion were $78,942,768, which
included unrealized appreciation of $1,718,900.
On April 9, 1998, the National City Personal Trust Equity Fund #2 of National
City Bank was converted into the Armada Tax Managed Equity Fund. The assets
which consisted of securities and related receivables, were converted on a
tax-free basis at the respective Armada Fund's current day net asset value. At
the time of the conversion, 16,361,494 of Class I shares of the Armada Tax
Managed Equity Fund were issued. The net assets of the National City Personal
Trust Equity Fund #2 immediately before the conversion were $163,614,941 which
included unrealized appreciation of $129,709,103.
On March 6, 1998, the National City Ohio Tax Exempt Fund of National City
Bank was converted into the Armada Ohio Tax Exempt Fund. The assets, which
consisted of securities and related receivables, were converted on a tax free
basis at the respective Armada Fund's current day net asset value. At the time
of the conversion, 4,684,047 of Class I shares of the Armada Ohio Tax Exempt
Fund were issued. The net assets of the National City Ohio Tax Exempt Fund
immediately before the conversion were $51,852,399, which included unrealized
appreciation of $2,009,105.
7. MARKET AND CREDIT RISK
Some countries in which the International Equity Fund may invest require
government approval for the repatriation of investment income, capital or the
proceeds of sales of securities by foreign investors. In addition, if there is a
deterioration in a country's balance of payments or for other reasons, a country
may impose temporary restrictions on foreign capital remittances abroad.
The securities exchanges of certain foreign markets are substantially
smaller, less liquid and more volatile than the major securities in the United
States. Consequently, acquisition and disposition of securities by the Fund may
be inhibited. In addition, a significant proportion of the aggregate market
value of equity securities listed on the major securities exchanges in emerging
markets are held by a smaller number of investors. This may limit the number of
shares available for acquisition or disposition of the Fund.
The Balanced Allocation, Total Return Advantage, Bond, Intermediate Bond,
GNMA, and Enhanced Income Funds may invest in securities whose value is derived
from an underlying pool of mortgages or consumer loans. Prepayment of these
loans may shorten the stated maturity of these respective obligations and may
result in a loss of premium, if any has been paid.
Each Fund, other than Ohio Municipal Money Market, Pennsylvania Tax Exempt
Money Market, Tax Exempt Money Market, Money Market, Government Money Market,
and Treasury Money Market Funds may invest up to 15% of its total assets in
illiquid securities which may include securities with contractual restrictions
on resale, securities exempt from registration under Rule 144A of the Securities
Act of 1933, as amended, and other securities which may not be readily
marketable. The Ohio Municipal Money Market, Pennsylvania Tax Exempt Money
Market, Tax Exempt Money Market, Money Market, Government Money Market, and
Treasury Money Market Funds may each invest up to 10% of total assets in
illiquid securities. The relative illiquidity of some of these securities may
adversely affect the Fund's ability to dispose of such securities in a timely
manner and at a fair price when it is necessary to liquidate such securities.
The Ohio Tax Exempt, Pennsylvania Municipal, Ohio Municipal Money Market and
the Pennsylvania Tax Exempt Money Market Funds follow an investment policy of
investing primarily in municipal obligations of one state. The National Tax
Exempt and the Tax Exempt Money Market Funds follow an investment policy of
investing in municipal obligations of various states which may, at times,
comprise concentrations in one or several states. Economic changes affecting
each state and related public bodies and municipalities may affect the ability
of issuers within the state to pay interest on, or repay principal of, municipal
obligations held by the Ohio Tax Exempt, Pennsylvania Municipal, National Tax
Exempt, Ohio Municipal Money Market, Pennsylvania Tax Exempt Money Market, and
the Tax Exempt Money Market Funds.
156
<PAGE> 159
[ARROW GRAPHIC OMITTED]
NOTES TO FINANCIAL STATEMENTS
Many municipalities insure repayment for their obligations. Although bond
insurance reduces the risk of loss due to default by an issuer, such bonds
remain subject to the risk that the market may fluctuate for other reasons and
there is no assurance that the insurance company will meet its obligations.
Insured securities have been identified in the Statement of Net Assets.
The Funds invest in securities that include revenue bonds, tax and revenue
anticipation notes, and general obligation bonds. At May 31, 1999, the
percentage of portfolio investments by each revenue source were as follows:
OHIO NATIONAL
TAX PENNSYLVANIA TAX
EXEMPT MUNICIPAL EXEMPT
Revenue Bonds: ------ ------------ --------
Education ............... 9% 20% 9%
Hospital/Nursing Homes .. 11 7 1
Housing ................. 1 -- 1
Industrial Development .. 1 4 2
Pollution Control ....... 1 -- 4
Public Facilities ....... 6 2 6
Transportation .......... 3 4 12
Utilities ............... 13 20 18
Other ................... 2 9 9
General Obligations: ....... 51 34 38
Anticipation Notes: ........ 2 -- --
------ ------------ --------
100% 100% 100%
The rating of long-term debt as a percentage of total value of investments at
May 31, 1999, is as follows:
OHIO NATIONAL
STANDARD & POOR'S/ TAX PENNSYLVANIA TAX
MOODY'S RATINGS EXEMPT MUNICIPAL EXEMPT
--------------- ------ ------------ --------
AAA/Aaa 60% 78% 52%
AA/Aa 30 21 38
A/A 7 -- 10
BBB/Baa 1 -- --
NR 2 1 --
------ ------------ --------
100% 100% 100%
Securities rated by only one agency are shown in that category. Securities
rated by both agencies are shown with their lowest rating.
8. SECURITIES LENDING
The Funds may participate in a Securities Lending Agreement ("Lending
Agreement"). Security loans made pursuant to the Lending Agreement are required
at all times to be secured by U.S. Treasury Obligations and/or cash collateral
at least equal to 100% of the market value of securities issued in the U.S. and
105% of the market value of securities issued outside of the U.S. cash
collateral received is invested in fixed-income securities, with a weighted
average maturity not to exceed 90 days, rated in one of the top two tiers by
Standard & Poor's ratings group or Moody's Investors Service, Inc. or repurchase
agreements collateralized by such securities. However, in the event of default
or bankruptcy by the lending agent, realization and/or retention of the
collateral may be subject to legal proceedings. In the event that the borrower
fails to return loaned securities and the collateral received is insufficient to
cover the value of the loaned securities and provided such collateral is not the
result of investment losses, the lending agent has agreed to pay the amount of
the shortfall to the funds, or at the discretion of the lending agent, replace
the loaned securities. The market value of the securities on loan, and related
collateral received at May 31, 1999, and income generated for the period ended
May 31, 1999 were as follows:
MARKET VALUE MARKET
OF SECURITIES VALUE OF
ON LOAN COLLATERAL INCOME
FUND (000) (000) (000)
------- ------------- ---------- ------
Small Cap Growth Fund $ 7,939 $ 7,939 $ 3
Small Cap Value Fund 23,406 23,406 4
Equity Growth Fund 75,999 75,999 15
Tax Managed Equity Fund 13,241 13,241 3
Core Equity Fund 13,459 13,459 1
Equity Index Fund 15,856 15,856 2
Equity Income Fund 70,819 70,819 30
Balanced Allocation Fund 9,313 9,313 1
Total Return Advantage Fund 71,854 71,854 5
Bond Fund 137,190 137,190 13
Intermediate Bond Fund 74,717 74,717 9
Enhanced Income Fund 6,785 6,785 590
157
<PAGE> 160
[ARROW GRAPHIC OMITTED]
NOTES
<PAGE> 161
[ARROW GRAPHIC OMITTED]
NOTES
<PAGE> 162
[ARROW GRAPHIC OMITTED]
NOTES
<PAGE> 1
Exhibit (17)(i)
ARMADA FUNDS
1999 SEMI-ANNUAL REPORT
[LOGO OMITTED]
<PAGE> 2
[GRAPHIC OMITTED] ARMADA FUNDS
SEMI-ANNUAL REPORT -- NOVEMBER 30, 1999
(UNAUDITED)
ARMADA CORE EQUITY FUND
ARMADA EQUITY GROWTH FUND
ARMADA EQUITY INCOME FUND
ARMADA EQUITY INDEX FUND
ARMADA INTERNATIONAL EQUITY FUND
ARMADA SMALL CAP GROWTH FUND
ARMADA SMALL CAP VALUE FUND
ARMADA TAX MANAGED EQUITY FUND
ARMADA BALANCED ALLOCATION FUND
ARMADA BOND FUND
ARMADA ENHANCED INCOME FUND
ARMADA GNMA FUND
ARMADA INTERMEDIATE BOND FUND
ARMADA TOTAL RETURN ADVANTAGE 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
TABLE OF CONTENTS
Chairman's Message ..................................... 1
FINANCIAL STATEMENTS
Statement of Net Assets and Financial Highlights ....... 4
Statements of Operations ............................... 114
Statements of Changes in Net Assets .................... 118
NOTES TO FINANCIAL STATEMENTS .......................... 126
[BOUNDING BOX]
[INNER BOUNDING BOX]
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
[END INNER BOUNDING BOX]
AN INVESTMENT IN MONEY MARKET FUNDS IS NOT INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
ALTHOUGH THE MONEY MARKET FUND(S) SEEKS TO PRESERVE THE VALUE OF YOUR
INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN
THE FUND(S).
National City Investment Management Company serves as investment adviser to
Armada Funds for which it receives an investment advisory fee. For more
complete information about Armada Funds, including charges and expenses,
please contact your investment specialist or call 1-800-622-FUND (3863) for a
prospectus. Read it carefully before you invest or send money. Armada Funds
are distributed by SEI Investments Distribution Co. (SIDC), Oaks, PA 19456.
SIDC is not affiliated with National City Bank and is not a bank.
[END OF BOUNDING BOX]
<PAGE> 3
[GRAPHIC OMITTED] CHAIRMAN'S MESSAGE
Dear Shareholders:
The past New Year's Eve was a memorable moment around the globe, as we
celebrated a new millennium. While 1999 was filled with a great deal of
anticipation and Y2K uncertainty, we can now greet the future with confidence
having addressed the challenges of this once in a lifetime event.
Despite Y2K concerns, Armada Funds continued to experience growth in 1999.
During the six-month period ended November 30, 1999, assets increased more than
half a billion dollars to $12.3 billion.
We continued to see strong performance in the equity sector, with exceptional
performance from the International Equity Fund for the eleven months ended
November 30, 1999. With a return of 31.32% (institutional shares) and 23.78% (A
shares), the fund was able to outperform its benchmark, the EAFE, by 14.81% and
7.27%, respectively, in a period when EAFE had outperformed the S&P 500 by 2.2%.
The solid performance of our funds this period was due in part to global
economic recovery, as well as the experience of our portfolio management teams.
THE CHANGING FACE OF BUSINESS
With the dawning of the Internet, consumer expectations were rapidly
transformed, and it became apparent that the business world had to change with
the times.
Last February, Armada Funds introduced its new Web site to Armada direct
shareholders, and it has evolved significantly in a very short period. As of
June 28, 1999, direct shareholders were able to access account information and
perform transactions online. This new function has allowed people to manage
their investments from the convenience of their homes, without compromising the
security of their transactions. Industry experts agreed that the site was easy
to use, when an evaluation team from IBM Corporation's e-business group gave the
site an "A" rating for its overall design and navigation.
You will currently find fund information, quarterly highlights, prospectuses,
the Total Investment Planning (TIP) newsletter, daily NAV updates, investing
calculators and more by visiting WWW.ARMADAFUNDS.COM, and we will continue to
keep you updated as new enhancements are available.
IN CLOSING . . .
Armada Funds understands the importance of asset diversification and building
a portfolio that reflects your goals and risk tolerance. We strive to create a
broad array of products for our clients and are proud to offer 23 different fund
choices to help you achieve a well-diversified portfolio.
We wish you and your family health and prosperity in the year ahead, and
thank you for your continued investment with us. If you have any questions
regarding the funds, please visit our Web site or call 800-622-FUND (3863).
Sincerely,
/s/signature omitted
Robert D. Neary
Chairman
[ARMADA LOGO OMITTED]
1
<PAGE> 4
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 5
[ARMADA LOGO OMITTED]
Financial Statements
FOR THE PERIOD ENDED NOVEMBER 30, 1999
(UNAUDITED)
<PAGE> 6
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA CORE EQUITY FUND
NOVEMBER 30, 1999
(UNAUDITED)
Number Value
of Shares (000)
--------- --------
COMMON STOCK -- 98.9%
BANKS -- 3.2%
Chase Manhattan 25,660 $ 1,982
Comerica 29,580 1,568
Commerce Bancshares 43,575 1,637
--------
5,187
--------
BROADCASTING, NEWSPAPERS & ADVERTISING -- 1.8%
Interpublic Group of Companies 61,510 2,891
--------
BUSINESS SERVICES -- 6.6%
Automatic Data Processing 101,420 5,008
Cintas# 27,120 1,246
Computer Sciences* 38,100 2,486
Fiserv* 58,040 2,060
--------
10,800
--------
CHEMICALS -- 2.4%
E.I. duPont de Nemours 39,495 2,347
Praxair 36,940 1,648
--------
3,995
--------
COMMUNICATIONS EQUIPMENT -- 3.4%
Lucent Technologies 57,380 4,192
Tellabs*# 21,260 1,379
--------
5,571
--------
COMPUTER HARDWARE -- 4.2%
Cisco Systems* 52,724 4,702
International Business Machines 20,690 2,132
--------
6,834
--------
COMPUTER SERVICES -- 0.5%
Ceridian* 41,590 899
--------
COMPUTER SOFTWARE -- 3.8%
Microsoft* 67,270 6,125
--------
DRUGS & HEALTH CARE -- 11.5%
Bristol-Myers Squibb 56,700 4,143
Johnson & Johnson 32,260 3,347
Lilly (Eli) 35,570 2,552
Merck 55,860 4,385
Pfizer 44,730 1,619
Schering-Plough 51,800 2,648
--------
18,694
--------
FINANCIAL SERVICES -- 4.8%
Associates First Capital, Cl A 59,240 1,970
Citigroup 47,625 2,566
Fannie Mae 48,510 3,232
--------
7,768
--------
Number Value
of Shares (000)
--------- --------
COMMON STOCK -- CONTINUED
FOOD & BEVERAGE -- 1.4%
Coca Cola 33,950 $ 2,285
--------
HOUSEHOLD FURNITURE & FIXTURES -- 0.8%
Masco 54,980 1,388
--------
INSURANCE -- 7.8%
American General 26,850 1,968
American International Group 48,443 5,002
MGIC Investment 30,810 1,741
PMI Group 29,115 1,454
Radian Group 52,620 2,572
--------
12,737
--------
MACHINERY -- 4.3%
Applied Materials* 30,030 2,926
Caterpillar 40,250 1,867
Ingersoll Rand 45,530 2,205
--------
6,998
--------
MEDICAL & MEDICAL SERVICES -- 2.7%
Guidant 35,720 1,786
Medtronic 66,556 2,587
--------
4,373
--------
METALS & MINING -- 1.7%
Alcoa# 42,220 2,765
--------
OFFICE & BUSINESS EQUIPMENT -- 2.5%
Lexmark International, Cl A* 17,300 1,436
Pitney Bowes 54,400 2,608
--------
4,044
--------
OIL MACHINERY & EQUIPMENT -- 1.4%
Schlumberger 36,890 2,216
--------
PAPER & FOREST PRODUCTS -- 2.2%
Champion International 31,370 1,739
Willamette Industries 46,530 1,925
--------
3,664
--------
PETROLEUM REFINING -- 6.0%
Chevron 9,590 849
Conoco 16,022 420
Exxon 30,310 2,404
Mobil 38,120 3,976
Texaco 34,620 2,110
--------
9,759
--------
RETAIL -- 10.8%
CVS 58,530 2,323
Dayton Hudson 39,700 2,801
Home Depot 54,480 4,307
See Accompanying Notes
4
<PAGE> 7
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA CORE EQUITY FUND
NOVEMBER 30, 1999
(UNAUDITED)
Number of Value
Shares/Par (000) (000)
----------------- --------
COMMON STOCK -- CONTINUED
RETAIL -- CONTINUED
Safeway* 51,950 $ 1,916
Wal-Mart 58,960 3,398
Walgreen# 97,960 2,853
--------
17,598
--------
SEMI-CONDUCTORS/INSTRUMENTS -- 2.4%
Intel 50,280 3,856
--------
SPECIALTY CHEMICALS -- 0.8%
Sigma Aldrich 45,000 1,288
--------
SPECIALTY MACHINERY -- 2.9%
General Electric 35,930 4,671
--------
TECHNOLOGY -- 4.4%
Altera* 52,110 2,807
Linear Technology 28,520 2,027
Maxim Integrated Products* 29,740 2,389
--------
7,223
--------
TELEPHONE & TELECOMMUNICATION -- 4.5%
BellSouth 60,420 2,791
MCI WorldCom* 27,970 2,313
SBC Communications 43,910 2,281
--------
7,385
--------
TOBACCO -- 0.1%
Philip Morris 7,060 186
--------
TOTAL COMMON STOCK
(Cost $121,326) 161,200
--------
CASH EQUIVALENT -- 1.3%
Goldman Sachs Financial Square
Premium Money Market
Fund 2,193 2,193
--------
TOTAL CASH EQUIVALENT
(Cost $2,193) 2,193
--------
TOTAL INVESTMENTS -- 100.2%
(Cost $123,519) $163,393
========
OTHER ASSETS AND LIABILITIES,
NET -- (0.2%) (352)
--------
Value
(000)
--------
NET ASSETS:
Portfolio Shares of Class I (unlimited
authorization -- no par value) based
on 10,685,759 outstanding shares of
beneficial interest $109,051
Portfolio Shares of Class A (unlimited
authorization -- no par value) based
on 202,629 outstanding shares of
beneficial interest 2,669
Portfolio Shares of Class B (unlimited
authorization -- no par value) based
on 86,676 outstanding shares of
beneficial interest 1,137
Accumulated net realized gain on investments 10,326
Net unrealized appreciation on investments 39,874
Net investment loss (16)
--------
TOTAL NET ASSETS -- 100.0% $163,041
========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SHARE -- CLASS I $14.86
========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A $14.80
========
MAXIMUM OFFERING PRICE PER
SHARE -- CLASS A ($14.80 / 94.5%) $15.66
========
NET ASSET VALUE AND OFFERING
PRICE PER SHARE -- CLASS B $14.68
========
- - ------------------------------------------------
* NON-INCOME PRODUCTING SECURITY.
# SECURITY FULLY OR PARTIALLY ON LOAN.
CL -- CLASS
See Accompanying Notes
5
<PAGE> 8
[GRAPHIC OMITTED] FINANCIAL HIGHLIGHTS
ARMADA CORE EQUITY FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
For the Six Months For the For the
Ended November 30, 1999 Year Ended Period Ended
(Unaudited) May 31, 1999 May 31, 1998
----------------------------- --------------------------- -----------------------------
Class I Class A Class B Class I Class A Class B Class I2 Class A2 Class B2
-------- ------- ------- ------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $13.75 $13.71 $ 13.63 $ 11.35 $11.34 $11.33 $ 10.00 $10.00 $10.25
-------- ------ ------- -------- ------ ------ -------- ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss) 0.02 0.01 (0.00) (0.02)3 (0.05)3 (0.16)3 0.05 0.04 0.00
Net gain on securities (realized
and unrealized) 1.09 1.08 1.05 2.94 2.93 2.97 1.35 1.34 1.08
-------- ------ ------- -------- ------ ------ -------- ------ ------
Total from investment operations 1.11 1.09 1.05 2.92 2.88 2.81 1.40 1.38 1.08
-------- ------ ------- -------- ------ ------ -------- ------ ------
LESS DISTRIBUTIONS
Dividends from net investment
income (0.00) (0.00) (0.00) (0.01) (0.00) (0.00) (0.05) (0.04) (0.00)
Distributions from net realized
capital gains (0.00) (0.00) (0.00) (0.51) (0.51) (0.51) (0.00) (0.00) (0.00)
-------- ------ ------- -------- ------ ------ -------- ------ ------
Total distributions (0.00) (0.00) (0.00) (0.52) (0.51) (0.51) (0.05) (0.04) (0.00)
-------- ------ ------- -------- ------ ------ -------- ------ ------
Net asset value, end of period $ 14.86 $ 14.80 $ 14.68 $ 13.75 $13.71 $13.63 $ 11.35 $11.34 $11.33
======== ======= ======= ======== ====== ====== ======== ====== ======
TOTAL RETURN 8.49%5 8.42%1,5 8.10%1,5 26.08% 25.78%1 25.17%1 14.03%5 13.85%1,5 10.54%1,5
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's) $158,769 $ 3,000 $ 1,272 $145,603 $1,731 $1,106 $110,504 $ 408 $ 2
Ratio of expenses to average net
assets 0.99%4 1.25%4 1.95%4 0.98% 1.23% 1.94% 0.89%4 1.14%4 1.83%4
Ratio of net investment income/
(loss) to average net assets 0.04%4 (0.22)%4 (0.92)%4 (0.15)% (0.40)% (1.11)% 0.61%4 0.14%4 (0.51)%4
Ratio of expenses to average net
assets before fee waivers 0.99%4 1.25%4 1.95%4 0.98% 1.23% 1.94% 1.06%4 1.30%4 2.00%4
Ratio of net investment income/
(loss) to average net assets
before fee waivers 0.04%4 (0.22)%4 (0.92)%4 (0.15)% (0.40)% (1.11)% 0.44%4 0.04%4 (0.50)%4
Portfolio turnover rate 18% 18% 18% 43% 43% 43% 60% 60% 60%
</TABLE>
1 TOTAL RETURN EXCLUDES SALES CHARGE.
2 CLASS I, CLASS A AND CLASS B COMMENCED OPERATIONS ON AUGUST 1, 1997,
AUGUST 1, 1997 AND JANUARY 6, 1998, RESPECTIVELY.
3 CALCULATED BASED UPON AVERAGE SHARES OUTSTANDING.
4 ANNUALIZED.
5 TOTAL RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
See Accompanying Notes
6
<PAGE> 9
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA EQUITY GROWTH FUND
NOVEMBER 30, 1999
(UNAUDITED)
Number Value
of Shares (000)
--------- --------
COMMON STOCK -- 98.0%
AIRCRAFT -- 0.4%
United Technologies 95,600 $ 5,401
--------
BANKS -- 2.4%
Comerica 80,950 4,290
MBNA 537,500 13,572
Northern Trust# 62,200 6,022
State Street 163,600 12,014
--------
35,898
--------
BROADCASTING, NEWSPAPERS & ADVERTISING -- 1.4%
Charter Communications* 70,600 1,637
Omnicom Group# 211,000 18,594
--------
20,231
--------
BUSINESS SERVICES -- 1.2%
Automatic Data Processing 357,200 17,637
--------
CABLE TELEVISION -- 1.3%
Comcast, Cl A Special 444,800 20,099
--------
CHEMICALS -- 0.9%
Avery Dennison 150,000 8,906
Monsanto# 112,000 4,725
--------
13,631
--------
COMMUNICATIONS EQUIPMENT -- 6.3%
Lucent Technologies# 495,000 36,166
Nortel Networks# 440,000 32,560
Qualcomm* 70,000 25,362
--------
94,088
--------
COMPUTER HARDWARE -- 9.2%
Cisco Systems* 776,000 69,210
EMC* 301,800 25,219
Hewlett Packard 31,700 3,008
International Business
Machines 239,200 24,653
Sun Microsystems* 108,000 14,283
--------
136,373
--------
COMPUTER SOFTWARE -- 3.9%
Microsoft* 632,000 57,542
--------
DRUGS & HEALTH CARE -- 10.8%
American Home Products 174,000 9,048
Bristol-Myers Squibb 365,200 26,682
Johnson & Johnson 183,300 19,017
Lilly (Eli) 56,000 4,018
Merck 265,000 20,803
Pfizer 724,700 26,225
Schering-Plough 513,000 26,227
Warner-Lambert 315,000 28,252
--------
160,272
--------
Number Value
of Shares (000)
--------- --------
COMMON STOCK -- CONTINUED
ELECTRICAL SERVICES -- 0.2%
Texas Utilities 65,000 $ 2,328
--------
ENTERTAINMENT -- 0.9%
AT&T-Liberty Media, Cl A*# 316,400 13,229
--------
FINANCIAL SERVICES -- 4.5%
American Express 145,000 21,940
Citigroup 315,000 16,971
Fannie Mae 163,000 10,860
Freddie Mac 197,700 9,761
J.P. Morgan 54,000 7,101
--------
66,633
--------
FOOD & BEVERAGE -- 1.0%
Coca Cola 132,000 8,885
PepsiCo 195,000 6,740
--------
15,625
--------
HOUSEHOLD PRODUCTS -- 3.0%
Colgate Palmolive 325,000 17,834
Procter & Gamble 254,000 27,432
--------
45,266
--------
INSURANCE -- 2.7%
American International Group 387,825 40,043
--------
MACHINERY -- 0.8%
Applied Materials*# 130,000 12,667
--------
MEDICAL & MEDICAL SERVICES -- 0.8%
Medtronic 311,600 12,113
--------
MISCELLANEOUS BUSINESS SERVICES -- 0.6%
Concord EFS*# 320,000 8,480
--------
MISCELLANEOUS MANUFACTURING -- 1.9%
Tyco International 701,658 28,110
--------
MOTORCYCLE & MOTOR SCOOTER -- 1.0%
Harley-Davidson 232,300 14,170
--------
OFFICE & BUSINESS EQUIPMENT -- 2.0%
Lexmark International, Cl A* 230,000 19,090
Pitney Bowes 237,000 11,361
--------
30,451
--------
OIL MACHINERY & EQUIPMENT -- 0.9%
Schlumberger# 233,000 13,995
--------
PAPER & FOREST PRODUCTS -- 1.1%
International Paper# 306,000 15,969
--------
PERSONAL CARE -- 0.3%
Gillette 111,400 4,477
--------
PETROLEUM & FUEL PRODUCTS -- 0.8%
Burlington Resources# 342,000 11,500
--------
See Accompanying Notes
7
<PAGE> 10
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA EQUITY GROWTH FUND
NOVEMBER 30, 1999
(UNAUDITED)
Number Value
of Shares (000)
--------- --------
COMMON STOCK -- CONTINUED
PETROLEUM REFINING -- 4.6%
BP Amoco, ADR# 85,000 $ 5,180
Chevron# 207,000 18,332
Coastal 270,000 9,518
Conoco 522,840 13,692
Exxon 282,000 22,366
--------
69,088
--------
PRINTING & PUBLISHING -- 1.3%
Time Warner# 310,000 19,123
--------
RETAIL -- 1.3%
Costco Wholesale*# 212,600 19,493
--------
RETAIL DRUG STORES -- 1.5%
CVS 302,000 11,986
Walgreen# 354,000 10,310
--------
22,296
--------
RETAIL FOOD CHAINS -- 1.3%
Kroger* 350,200 7,464
Safeway* 317,000 11,689
--------
19,153
--------
RETAIL STORES -- 9.1%
Dayton Hudson 282,500 19,934
Gap 125,000 5,063
Home Depot 352,698 27,885
Lowe's 154,000 7,671
Tandy 413,000 31,646
TJX Companies 385,000 10,082
Wal-Mart# 567,000 32,673
--------
134,954
--------
SEMI-CONDUCTORS/INSTRUMENTS -- 5.2%
Altera* 230,000 12,391
Analog Devices* 160,000 9,190
Intel# 395,000 30,292
Texas Instruments# 268,000 25,745
--------
77,618
--------
SPECIALTY MACHINERY -- 4.2%
Emerson Electric 100,000 5,700
General Electric 439,800 57,174
--------
62,874
--------
TELEPHONE & TELECOMMUNICATION -- 7.7%
Alltel 281,000 24,307
BellSouth 244,000 11,270
GTE 196,000 14,308
MCI WorldCom* 316,500 26,171
SBC Communications 485,400 25,210
Vodafone Group# 280,000 13,213
--------
114,479
--------
TRAVEL -- 0.8%
Carnival, Cl A 270,900 11,953
--------
Number of Value
Shares/Par (000) (000)
---------------- --------
COMMON STOCK -- CONTINUED
WHOLESALE -- 0.7%
Cardinal Health# 45,000 $ 2,354
Sysco# 217,700 8,286
----------
10,640
----------
TOTAL COMMON STOCK
(Cost $961,369) 1,457,899
----------
CASH EQUIVALENT -- 1.9%
Fidelity Domestic Money Market
Fund 28,861 28,861
----------
TOTAL CASH EQUIVALENT
(Cost $28,861) 28,861
----------
TOTAL INVESTMENTS -- 99.9%
(Cost $990,230) $1,486,760
==========
OTHER ASSETS AND LIABILITIES,
NET -- 0.1% 866
----------
NET ASSETS:
Portfolio Shares of Class I (unlimited
authorization -- no par value) based on
47,168,771 outstanding shares
of beneficial interest 837,408
Portfolio Shares of Class A (unlimited
authorization -- no par value) based on
6,282,636 outstanding shares
of beneficial interest 131,892
Portfolio Shares of Class B (unlimited
authorization -- no par value) based on
84,083 outstanding shares
of beneficial interest 2,055
Accumulated net realized gain on
investments 20,060
Net unrealized appreciation on investments 496,530
Net investment loss (319)
----------
TOTAL NET ASSETS -- 100.0% $1,487,626
==========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SHARE -- CLASS I $27.80
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS A $27.70
==========
MAXIMUM OFFERING PRICE
PER SHARE-- CLASS A ($27.70 / 94.5%) $29.31
==========
NET ASSET VALUE & OFFERING
PRICE PER SHARE-- CLASS B $27.41
==========
- - ------------------------------------------------
* NON-INCOME PRODUCING SECURITY.
# SECURITY FULLY OR PARTIALLY ON LOAN.
ADR -- AMERICAN DEPOSITORY RECEIPT
CL -- CLASS
See Accompanying Notes
8
<PAGE> 11
[GRAPHIC OMITTED] FINANCIAL HIGHLIGHTS
ARMADA EQUITY GROWTH FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
For the Six Months
Ended November 30, 1999 For the Year Ended May 31,
(Unaudited) 1999
----------------------------- ---------------------------
Class I Class A Class B Class I Class A Class B
-------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 24.61 $ 24.55 $24.33 $ 21.35 $ 21.35 $21.28
---------- ------- ------ ---------- -------- ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss) 0.03 (0.00) (0.05) (0.03)3 (0.09)3 (0.27)3
Net gain on securities (realized
and unrealized) 3.16 3.15 3.13 4.28 4.28 4.31
---------- ------- ------ ---------- -------- ------
Total from investment operations 3.19 3.15 3.08 4.25 4.19 4.04
---------- ------- ------ ---------- -------- ------
LESS DISTRIBUTIONS
Dividends from net investment
income (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
Dividends in excess of net
investment income (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
Dividends from net realized
capital gains (0.00) (0.00) (0.00) (0.99) (0.99) (0.99)
Distributions from net realized
capital gains (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
---------- ------ ------ ---------- -------- ------
Total distributions (0.00) (0.00) (0.00) (0.99) (0.99) (0.99)
---------- ------ ------ ---------- -------- ------
Net asset value, end of period $ 27.80 $ 27.70 $27.41 $ 24.61 $ 24.55 $24.33
========== ======== ====== ========== ======== ======
TOTAL RETURN 13.62%5 13.48%1,5 13.26%1,5 20.16% 19.88%1 19.22%1
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $1,311,296 $174,026 $2,304 $1,262,154 $156,356 $1,400
Ratio of expenses to average net
assets 0.90%4 1.15%4 1.86%4 0.92% 1.17% 1.88%
Ratio of net investment income/
(loss) to average net assets 0.01%4 (0.24)%4 (0.95)%4 (0.11)% (0.36)% (1.07)%
Ratio of expenses to average net
assets before fee waivers 0.90%4 1.15%4 1.86%4 0.92% 1.17% 1.88%
Ratio of net investment income/
(loss) to average net assets
before fee waivers 0.01%4 (0.24)%4 (0.95)%4 (0.11)% (0.36)% (1.07)%
Portfolio turnover rate 14% 14% 14% 57% 57% 57%
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended May 31,
1998 1997 1996 1995
----------------------------- ----------------- ----------------- -----------------
Class I Class A Class B2 Class I Class A Class I Class A Class I Class A
-------- ------- ------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 18.63 $ 18.67 $19.44 $ 18.02 $18.05 $ 14.77 $14.79 $ 13.66 $13.68
-------- ------- ------ -------- ------ -------- ------ -------- ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss) (0.00) (0.04) (0.24) 0.09 0.05 0.14 0.10 0.21 0.18
Net gain on securities (realized
and unrealized) 5.00 4.99 2.08 4.66 4.66 3.46 3.47 1.21 1.21
-------- ------- ------ -------- ------ -------- ------ -------- ------
Total from investment operations 5.00 4.95 1.84 4.75 4.71 3.60 3.57 1.42 1.39
-------- ------- ------ -------- ------ -------- ------ -------- ------
Less Distributions
Dividends from net investment
income (0.01) (0.00) (0.00) (0.09) (0.05) (0.14) (0.10) (0.20) (0.17)
Dividends in excess of net
investment income (0.00) (0.00) (0.00) (0.02) (0.01) (0.02) (0.02) (0.00) (0.00)
Dividends from net realized
capital gains (2.27) (2.27) (0.00) (4.03) (4.03) (0.19) (0.19) (0.00) (0.00)
Distributions from net realized
capital gains (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.11) (0.11)
-------- ------ ------ -------- ------ -------- ------ -------- ------
Total distributions (2.28) (2.27) (0.00) (4.14) (4.09) (0.35) (0.31) (0.31) (0.28)
-------- ------ ------ -------- ------ -------- ------ -------- ------
Net asset value, end of period $ 21.35 $ 21.35 $21.28 $ 18.63 $18.67 $ 18.02 $18.05 $ 14.77 $14.79
======== ======= ====== ======== ====== ======== ====== ======== ======
TOTAL RETURN 28.65% 28.32%1 27.90%1,4 29.57% 29.24%1 24.61% 24.34%1 10.62% 10.35%1
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's) $352,413 $12,380 $ 24 $255,594 $6,931 $166,671 $6,013 $119,634 $5.974
Ratio of expenses to average net
assets 0.98% 1.23% 1.92%4 0.97% 1.22% 1.01% 1.26% 1.01% 1.27%
Ratio of net investment income/
(loss) to average net assets (0.01)% (0.26)% (0.92)%4 0.49% 0.25% 0.85% 0.60% 1.53% 1.23%
Ratio of expenses to average net
assets before fee waivers 0.98% 1.23% 1.92%4 0.97% 1.22% 1.03% 1.28% 1.02% 1.28%
Ratio of net investment income/
(loss) to average net assets
before fee waivers (0.01)% (0.26)% (0.92)%4 0.49% 0.25% 0.83% 0.58% 1.51% 1.22%
Portfolio turnover rate 260% 260% 260% 197% 197% 74% 74% 17% 17%
</TABLE>
1 TOTAL RETURN EXCLUDES SALES CHARGE.
2 CLASS B COMMENCED OPERATIONS ON JANUARY 6, 1998.
3 CALCULATED BASED UPON AVERAGE SHARES OUTSTANDING.
4 ANNUALIZED.
5 TOTAL RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
See Accompanying Notes
9
<PAGE> 12
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA EQUITY INCOME FUND
NOVEMBER 30, 1999
(UNAUDITED)
Number Value
of Shares (000)
--------- --------
COMMON STOCK -- 96.9%
AEROSPACE -- 3.1%
General Dynamics 127,100 $ 6,554
Northrop Grumman 95,453 5,363
United Technologies 70,200 3,966
--------
15,883
--------
AUTOMOTIVE -- 3.3%
Ford Motors 120,500 6,085
General Motors 92,100 6,631
Genuine Parts # 175,600 4,522
--------
17,238
--------
BANKS -- 13.9%
Bank of America 177,139 10,363
Chase Manhattan 77,300 5,971
Comerica 169,400 8,978
First Tennessee National 145,100 4,770
Fleet Boston Financial 129,600 4,900
PNC 170,000 9,478
Southtrust 280,200 10,875
UnionBanCal 275,800 12,152
Washington Mutual # 156,800 4,547
--------
72,034
--------
BUILDING & BUILDING SUPPLIES -- 1.8%
Armstrong World Industries 97,200 3,256
Masco 243,100 6,138
--------
9,394
--------
CHEMICALS -- 3.4%
Dow # 62,984 7,377
E.I. duPont de Nemours 75,700 4,499
RPM 470,550 5,529
--------
17,405
--------
COMPUTERS -- 1.6%
International Business
Machines 82,600 8,513
--------
DIVERSIFIED MANUFACTURING -- 1.8%
Minnesota Mining &
Manufacturing 65,900 6,298
Textron 40,700 2,892
--------
9,190
--------
DRUGS & HEALTH CARE -- 0.1%
American Home Products 10,800 562
--------
ELECTRICAL SERVICES -- 2.7%
Consolidated Edison # 86,200 2,974
Duke Energy 63,400 3,214
FPL Group 75,700 3,312
GPU 52,400 1,677
LG&E Energy 145,400 2,908
--------
14,085
--------
Number Value
of Shares (000)
--------- --------
COMMON STOCK -- CONTINUED
FINANCIAL SERVICES -- 4.4%
Fannie Mae 136,700 $ 9,108
Freddie Mac 104,800 5,175
J.P. Morgan 65,300 8,587
--------
22,870
--------
FOOD & BEVERAGE -- 3.9%
Flowers Industries 224,100 3,670
General Mills 238,200 8,977
Sara Lee 308,600 7,484
--------
20,131
--------
GAMES, TOYS & CHILDREN'S VEHICLES -- 0.3%
Mattel 112,600 1,612
--------
GAS & NATURAL GAS -- 3.8%
Consolidated Natural Gas 154,725 9,922
Enron 258,600 9,843
--------
19,765
--------
HANDTOOLS & GENERAL HARDWARE -- 2.2%
Fortune Brands 222,300 7,600
Snap-On Tools 123,000 3,721
--------
11,321
--------
HOUSEHOLD APPLIANCES -- 0.6%
Maytag 62,600 2,985
--------
INSURANCE -- 4.0%
Allstate 56,500 1,480
Chubb 78,661 4,213
Cigna 70,400 5,790
Marsh & McLennan 120,250 9,455
--------
20,938
--------
MACHINERY -- 0.7%
Caterpillar # 35,200 1,632
Deere # 41,100 1,765
--------
3,397
--------
MEDICAL & MEDICAL SERVICES -- 0.8%
Baxter International 62,400 4,216
--------
METALS & MINING -- 3.5%
Alcoa # 227,300 14,888
USX-U.S. Steel Group # 133,400 3,377
--------
18,265
--------
OFFICE & BUSINESS EQUIPMENT -- 1.9%
Pitney Bowes 149,300 7,157
Xerox 95,000 2,571
--------
9,728
--------
See Accompanying Notes
10
<PAGE> 13
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA EQUITY INCOME FUND
NOVEMBER 30, 1999
(UNAUDITED)
Number Value
of Shares (000)
--------- --------
COMMON STOCK -- CONTINUED
PAPER & FOREST PRODUCTS -- 2.0%
Kimberly-Clark 64,000 $ 4,088
Temple-Inland 21,000 1,202
Weyerhaeuser 82,800 5,072
--------
10,362
--------
PETROLEUM REFINING -- 14.0%
Atlantic Richfield 124,500 11,999
Chevron 130,100 11,522
Mobil 198,600 20,716
Royal Dutch Petroleum 177,300 10,283
Texaco # 202,600 12,346
Ultramar Diamond
Shamrock # 230,300 5,829
--------
72,695
--------
PRINTING & PUBLISHING -- 0.5%
New York Times, Cl A 64,800 2,491
--------
PROFESSIONAL SERVICES -- 2.1%
Dun & Bradstreet 166,900 4,506
H & R Block # 146,200 6,287
--------
10,793
--------
REAL ESTATE INVESTMENT TRUST -- 3.2%
Arden Realty 205,200 3,950
Developers Diversified Realty 184,700 2,574
Duke Realty 324,800 6,009
Kimco Realty 65,000 2,161
Mack-Cali Realty 70,400 1,738
--------
16,432
--------
RETAIL -- 3.4%
Intimate Brands # 103,295 4,429
J.C. Penney 106,000 2,365
May Department Stores 205,800 6,920
Sears Roebuck # 108,700 3,716
--------
17,430
--------
SPECIALTY MACHINERY -- 3.2%
Cooper Industries 82,700 3,551
Emerson Electric 111,200 6,338
Hubbell 95,700 2,668
Thomas & Betts 104,000 4,264
--------
16,821
--------
Number of Value
Shares/Par (000) (000)
---------------- --------
COMMON STOCK -- CONTINUED
TELEPHONE & TELECOMMUNICATION -- 9.0%
AT&T 292,750 $ 16,357
Bell Atlantic # 82,540 5,226
GTE 170,800 12,468
SBC Communications 236,485 12,282
--------
46,333
--------
TOBACCO -- 1.1%
UST 211,900 5,642
--------
UTILITIES -- 0.6%
American Water Works 118,500 3,029
--------
TOTAL COMMON STOCK
(Cost $432,840) 501,560
--------
PREFERRED STOCK -- 2.1%
FINANCIAL -- 1.4%
American General Delaware,
CV to 1.2288 Shares 80,195 7,298
--------
PAPER & FOREST PRODUCTS -- 0.7%
International Paper,
CV to .9259 Shares* 70,386 3,616
--------
TOTAL PREFERRED STOCK
(Cost $9,136) 10,914
--------
CASH EQUIVALENT -- 0.8%
Fidelity Domestic Money
Market Fund 4,054 4,054
--------
TOTAL CASH EQUIVALENT
(Cost $4,054) 4,054
--------
TOTAL INVESTMENTS -- 99.8%
(Cost $446,030) $516,528
========
OTHER ASSETS AND LIABILITIES,
NET -- 0.2% 1,054
--------
See Accompanying Notes
11
<PAGE> 14
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA EQUITY INCOME FUND
NOVEMBER 30, 1999
(UNAUDITED)
Value
(000)
--------
NET ASSETS:
Portfolio Shares of Class I (unlimited
authorization -- no par value) based on
29,165,734 outstanding shares
of beneficial interest $394,362
Portfolio Shares of Class A (unlimited
authorization -- no par value) based on
687,173 outstanding shares
of beneficial interest 11,474
Portfolio Shares of Class B (unlimited
authorization -- no par value) based on
71,369 outstanding shares
of beneficial interest 1,215
Accumulated net realized gain on investments 38,435
Net unrealized appreciation on investments 70,498
Undistributed net investment income 1,598
--------
TOTAL NET ASSETS -- 100.0% $517,582
========
Net Asset Value, Offering and
Redemption Price Per
Share -- Class I $17.30
========
Net Asset Value and Redemption
Price Per Share-- Class A $17.27
========
Maximum Offering Price Per
Share-- Class A ($17.27 / 94.5%) $18.28
========
Net Asset Value and Offering
Price Per Share-- Class B $17.21
========
- - ------------------------------------------------
* NON-INCOME PRODUCING SECURITY.
# SECURITY FULLY OR PARTIALLY ON LOAN.
CL -- CLASS
CV -- CONVERTIBLE
See Accompanying Notes
12
<PAGE> 15
[GRAPHIC OMITTED] FINANCIAL HIGHLIGHTS
ARMADA EQUITY INCOME FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
For the Six Months
Ended November 30, 1999 For the Year Ended May 31,
(Unaudited) 1999
----------------------------- ---------------------------
Class I Class A Class B Class I Class A Class B
-------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 18.80 $ 18.79 $18.69 $ 17.53 $ 17.51 $17.54
-------- ------- ------ -------- ------- ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.17 0.14 0.09 0.30 0.21 0.17
Net gain on securities (realized
and unrealized) (1.47) (1.49) (1.45) 1.50 1.55 1.39
-------- ------- ------ -------- ------- ------
Total from investment operations (1.30) (1.35) (1.36) 1.80 1.76 1.56
-------- ------- ------ -------- ------- ------
LESS DISTRIBUTIONS
Dividends from net investment
income (0.20) (0.17) (0.12) (0.28) (0.23) (0.16)
Dividends from net realized
capital gains (0.00) (0.00) (0.00) (0.25) (0.25) (0.25)
-------- ------ ------ -------- ------- ------
Total distributions (0.20) (0.17) (0.12) (0.53) (0.48) (0.41)
-------- ------ ------ -------- ------- ------
Net asset value, end of period $ 17.30 $ 17.27 $17.21 $ 18.80 $ 18.79 $18.69
======== ======= ====== ======== ======= ======
TOTAL RETURN (7.26)%4 (7.45)%1,5 (7.62)%1,4 10.62% 10.40%1 9.14%1
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $504,489 $11,865 $1,228 $548,361 $11,075 $ 997
Ratio of expenses to average net
assets 0.97%3 1.22%3 1.93%3 0.93% 1.18% 1.89%
Ratio of net investment income
to average net assets 1.84%3 1.59%3 0.89%3 2.07% 1.82% 1.11%
Ratio of expenses to average net
assets before fee waivers 0.97%3 1.22%3 1.93%3 0.93% 1.18% 1.89%
Ratio of net investment income
to average net assets
before fee waivers 1.84%3 1.59%3 0.89%3 2.07% 1.82% 1.11%
Portfolio turnover rate 17% 17% 17% 19% 19% 19%
</TABLE>
<TABLE>
<CAPTION>
For the Year For the Period
Ended May 31, Ended May 31,
1998 1997 1996 1995
---------------------------- ----------------- ----------------- -----------------
Class I Class A Class B2 Class I Class A Class I Class A Class I2 Class A2
-------- ------- -------- -------- ------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 14.87 $ 14.86 $16.28 $ 12.66 $12.65 $ 11.01 $11.01 $ 10.00 $10.26
-------- ------- ------ -------- ------ -------- ------ ------- ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.27 0.26 0.46 0.30 0.31 0.34 0.33 0.34 0.26
Net gain on securities (realized
and unrealized) 3.44 3.41 0.86 2.73 2.68 1.79 1.77 0.94 0.75
-------- ------- ------ -------- ------ -------- ------ ------- ------
Total from investment operations 3.71 3.67 1.32 3.03 2.99 2.13 2.10 1.28 1.01
-------- ------- ------ -------- ------ -------- ------ ------- ------
LESS DISTRIBUTIONS
Dividends from net investment
income (0.32) (0.29) (0.06) (0.31) (0.27) (0.34) (0.32) (0.27) (0.26)
Distributions from net realized
capital gains (0.73) (0.73) (0.00) (0.51) (0.51) (0.14) (0.14) (0.00) (0.00)
-------- ------ ------ -------- ------ -------- ------ ------- ------
Total distributions (1.05) (1.02) (0.06) (0.82) (0.78) (0.48) (0.46) (0.27) (0.26)
-------- ------ ------ -------- ------ -------- ------ ------- ------
Net asset value, end of period $ 17.53 $ 17.51 $17.54 $ 14.87 $14.86 $ 12.66 $12.65 $ 11.01 $11.01
======== ======= ====== ======== ====== ======== ====== ======= ======
TOTAL RETURN 25.69% 25.41%1 25.58%1,3 24.62% 24.33%1 19.72% 19.37%1 14.34%3 13.18%1,3
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $193,923 $2,151 $ 3 $127,130 $ 410 $ 61,978 $ 263 $36,194 $ 125
Ratio of expenses to average net
assets 0.92% 1.17% 1.86%3 1.01% 1.26% 1.06% 1.31% 0.99%3 1.41%3
Ratio of net investment income/
(loss) to average net assets 1.80% 1.62% 0.68%3 2.44% 2.17% 3.02% 2.75% 3.87%3 3.45%3
Ratio of expenses to average net
assets before fee waivers 0.92% 1.17% 1.86%3 1.01% 1.26% 1.08% 1.32% 1.21%3 1.45%3
Ratio of net investment income/
(loss) to average net assets
before fee waivers 1.80% 1.62% 0.68%3 2.44% 2.17% 3.00% 2.74% 3.66%3 3.40%3
Portfolio turnover rate 18% 18% 18% 35% 35% 53% 53% 12% 12%
</TABLE>
1 TOTAL RETURN EXCLUDES SALES CHARGE.
2 CLASS I, CLASS A AND CLASS B COMMENCED OPERATIONS
ON JULY 1, 1994, AUGUST 22, 1994 AND JANUARY 6, 1998, RESPECTIVELY.
3 ANNUALIZED.
4 TOTAL RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
See Accompanying Notes
13
<PAGE> 16
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA EQUITY INDEX FUND
NOVEMBER 30, 1999
(UNAUDITED)
Number Value
of Shares (000)
--------- --------
COMMON STOCK -- 95.6%
AEROSPACE & DEFENSE -- 0.3%
General Dynamics 8,052 $ 415
Lockheed Martin 15,972 317
Northrop Grumman 2,806 158
Raytheon, Cl B 13,648 419
--------
1,309
--------
AIR TRANSPORTATION -- 0.3%
AMR* 6,084 370
Delta Air Lines 5,673 279
FDX* 12,022 507
Southwest Airlines 20,372 332
US Airways* 2,877 80
--------
1,568
--------
AIRCRAFT -- 0.8%
Allied-Signal # 22,239 1,330
Boeing 38,819 1,584
United Technologies 19,468 1,100
--------
4,014
--------
APPAREL/TEXTILES -- 0.1%
Liz Claiborne 2,462 92
Russell 1,311 17
Springs Industries, Cl A 692 28
Vanity Fair 4,805 144
--------
281
--------
AUTOMOTIVE -- 1.2%
Dana 6,699 186
Delphi 22,836 360
Eaton 2,918 226
Ford 48,897 2,469
General Motors 26,037 1,875
Genuine Parts # 7,236 186
Navistar International* 2,673 99
Paccar 3,165 130
Tenneco* 1,377 11
TRW 4,900 256
--------
5,798
--------
BANKS -- 5.8%
Amsouth 15,905 359
Bank of America 69,818 4,084
Bank of New York # 29,719 1,185
Bank One 47,401 1,671
BB&T 12,916 415
Chase Manhattan 33,643 2,599
Comerica 6,318 335
Fifth Third Bancorp 10,968 768
First Union 38,666 1,496
Number Value
of Shares (000)
--------- --------
COMMON STOCK -- CONTINUED
BANKS -- CONTINUED
Firstar 39,802 $ 1,035
Fleet Boston Financial 37,248 1,408
Golden West Financial 2,224 224
Huntington Bancshares 9,310 258
Keycorp 18,137 490
MBNA 32,406 818
Mellon Financial 20,783 757
National City 24,984 623
Northern Trust # 4,506 436
PNC 12,286 685
Regions 9,050 248
Republic New York 4,235 299
Southtrust 6,768 263
State Street 6,516 479
Summit Bancorp 7,157 233
SunTrust 13,003 909
Synovus 10,967 219
U.S. Bancorp 29,571 1,011
Union Planters 5,778 246
Wachovia 8,174 633
Washington Mutual # 23,406 679
Wells Fargo 66,659 3,100
--------
27,965
--------
BEAUTY PRODUCTS -- 0.5%
Avon 10,541 384
Gillette 43,854 1,762
International Flavors &
Fragrances 4,290 158
--------
2,304
--------
BROADCASTING, NEWSPAPERS & ADVERTISING -- 1.2%
CBS* 30,813 1,602
Clear Channel
Communications* # 13,647 1,097
Interpublic Group of
Companies 11,399 536
Mediaone Group* 24,516 1,943
Omnicom Group # 7,173 632
--------
5,810
--------
BUILDING & BUILDING SUPPLIES -- 0.1%
Armstrong World Industries 1,620 54
Masco 17,903 452
McDermott International 2,399 21
Owens Corning 2,216 35
Sherwin Williams 6,841 147
--------
709
--------
See Accompanying Notes
14
<PAGE> 17
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA EQUITY INDEX FUND
NOVEMBER 30, 1999
(UNAUDITED)
Number Value
of Shares (000)
--------- --------
COMMON STOCK -- CONTINUED
BUILDING & CONSTRUCTION -- 0.1%
Centex 2,409 $ 57
Fluor 3,065 129
Vulcan Materials 4,043 163
--------
349
--------
BUSINESS SERVICES -- 1.7%
Adobe Systems 4,931 339
Autodesk 2,382 70
Automatic Data Processing 25,008 1,235
BMC Software* 9,671 704
Cabletron Systems* 7,037 161
Cendant* 29,115 482
Computer Associates
International # 21,725 1,412
Computer Sciences* 6,467 422
Compuware* 14,434 488
Deluxe 3,046 80
Ecolab 5,233 181
Electronic Data Systems 19,925 1,281
First Data 17,340 750
Novell* 13,541 265
Parametric Technology* 10,882 247
Peoplesoft* 9,832 185
Shared Medical Systems 1,080 47
--------
8,349
--------
CABLE TELEVISION -- 0.3%
Comcast, Cl A Special # 30,291 1,369
--------
CANNED SPECIALTIES -- 0.2%
Campbell Soup 17,548 783
--------
CHEMICALS -- 1.4%
Air Products & Chemicals 9,268 300
Avery Dennison 4,591 273
Dow # 8,895 1,042
E.I. duPont de Nemours 41,903 2,491
Eastman Chemical 3,162 123
FMC* 1,285 62
Great Lakes Chemical 2,363 78
Hercules 4,287 102
Monsanto # 25,613 1,081
PPG Industries 7,017 411
Praxair 6,442 287
Rohm & Haas 8,803 322
Union Carbide 5,383 315
W.R. Grace & Company* 2,877 39
--------
6,926
--------
Number Value
of Shares (000)
--------- --------
COMMON STOCK -- CONTINUED
COMBINATION UTILITIES -- 0.1%
Entergy 9,976 $ 275
PG&E 15,519 347
--------
622
--------
COMMUNICATIONS EQUIPMENT -- 3.7%
ADC Telecommunications* 5,675 303
Andrew* 3,316 46
General Instrument* 7,007 459
ITT Industries 3,553 124
Lucent Technologies # 123,840 9,048
Network Appliance* 2,973 350
Nortel Networks # 53,643 3,970
Qualcomm* 6,489 2,351
Scientific-Atlanta 3,091 180
Tellabs* # 15,825 1,027
--------
17,858
--------
COMPUTER COMMUNICATIONS EQUIPMENT -- 0.2%
Adaptec* # 4,176 225
3Com* # 14,454 575
--------
800
--------
COMPUTER HARDWARE & EQUIPMENT -- 7.9%
Apple Computer* 6,502 636
Cisco Systems* 131,401 11,719
Compaq Computer 68,710 1,679
Dell Computer* # 102,697 4,416
EMC* # 41,374 3,457
Hewlett Packard 40,943 3,884
International Business
Machines 73,120 7,536
Seagate Technology* 9,001 333
Silicon Graphics* 7,630 72
Sun Microsystems* # 31,278 4,137
Unisys* 12,368 356
--------
38,225
--------
COMPUTER SERVICES -- 4.7%
Ceridian* 5,850 127
Microsoft* # 206,288 18,782
Oracle* 58,181 3,945
--------
22,854
--------
COMPUTERS -- 0.3%
Comverse Technology** # 2,997 362
Gateway* # 12,659 967
--------
1,329
--------
See Accompanying Notes
15
<PAGE> 18
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA EQUITY INDEX FUND
NOVEMBER 30, 1999
(UNAUDITED)
Number Value
of Shares (000)
--------- --------
COMMON STOCK -- CONTINUED
CONTAINERS & PACKAGING -- 0.1%
Ball 1,229 $ 46
Crown Cork & Seal 4,946 101
Newell Rubbermaid 11,394 374
Owens-Illinois* 6,298 151
--------
672
--------
DRUGS & HEALTH CARE -- 8.7%
Abbott Laboratories # 61,490 2,337
Alza* 4,107 177
American Home Products 52,812 2,746
Amgen* 41,224 1,878
Bristol-Myers Squibb 80,273 5,865
Johnson & Johnson 54,339 5,638
Lilly (Eli) 44,170 3,169
Merck 94,801 7,442
Millipore 1,819 60
Pfizer 156,619 5,668
Pharmacia & Upjohn, ADR 20,479 1,120
Schering-Plough 59,347 3,034
Warner-Lambert 34,546 3,098
Watson Pharmaceuticals* 3,872 144
--------
42,376
--------
ELECTRICAL SERVICES -- 1.6%
AES* # 7,960 461
Ameren 5,546 192
American Electric Power 7,816 245
Carolina Power & Light 6,450 194
Central & South West 8,595 172
Cinergy 6,422 163
CMS Energy 4,772 159
Consolidated Edison # 8,933 308
Constellation Energy Group 6,044 178
Dominion Resources 7,760 352
DTE Energy 5,862 194
Duke Energy 14,748 748
Edison International 14,034 372
First Energy 9,456 220
Florida Progress 3,969 170
FPL Group 7,245 317
GPU 5,070 162
New Century Energies 4,658 146
Niagara Mohawk Holdings* 7,573 114
Northern States Power 6,233 127
Pinnacle West Capital 3,427 114
PP & L Resources 6,374 147
Public Service Enterprise 8,861 310
Reliant Energy 11,956 297
Scottish Power, ADR 6,970 244
Sempra Energy* # 9,715 180
Number Value
of Shares (000)
--------- --------
COMMON STOCK -- CONTINUED
ELECTRICAL SERVICES -- CONTINUED
Southern 27,612 $ 645
Teledyne Technologies* 1,100 10
Texas Utilities 11,172 400
Unicom # 8,784 281
--------
7,622
--------
ENTERTAINMENT -- 0.5%
Mirage Resorts* 8,042 103
Walt Disney 83,356 2,324
--------
2,427
--------
ENVIRONMENTAL SERVICES -- 0.1%
Allied Waste Industries* 7,619 62
Laidlaw 13,344 82
Waste Management 25,029 407
--------
551
--------
FINANCIAL SERVICES -- 5.0%
American Express 18,160 2,748
Associates First Capital, Cl A 29,428 978
Bear Stearns 4,940 202
Capital One 7,982 372
Charles Schwab 33,053 1,254
Citigroup 136,504 7,354
Countrywide Credit 4,564 128
Equifax 5,810 144
Fannie Mae 41,429 2,760
Franklin Resources 10,191 320
Freddie Mac 28,098 1,387
Household International 19,345 765
J.P. Morgan 7,095 933
Lehman Brothers 4,844 370
Merrill Lynch 14,937 1,204
Morgan Stanley, Dean Witter,
Discover 23,061 2,782
Painewebber Group 5,884 231
SLM Holding 6,504 322
T. Rowe Price 5,122 184
--------
24,438
--------
FOOD & BEVERAGE -- 3.8%
Adolph Coors, Cl B 1,488 74
Anheuser Busch 18,896 1,414
Archer-Daniels-Midland 24,959 310
Bestfoods # 11,274 618
Brown-Forman, Cl B 2,769 174
Coca Cola 99,801 6,718
Coca-Cola Enterprises 17,177 364
Conagra 19,733 476
General Mills 12,354 466
H.J. Heinz 14,486 607
See Accompanying Notes
16
<PAGE> 19
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA EQUITY INDEX FUND
NOVEMBER 30, 1999
(UNAUDITED)
Number Value
of Shares (000)
--------- --------
COMMON STOCK -- CONTINUED
FOOD & BEVERAGE -- CONTINUED
Hershey Foods # 5,639 $ 277
Kellogg 16,377 555
Nabisco Group Holdings 13,182 152
PepsiCo 59,105 2,043
Quaker Oats 5,408 353
Ralston Purina 13,072 388
Sara Lee 36,517 886
Seagram 17,480 761
Unilever NV* # 23,103 1,258
Wm. Wrigley, Jr. 4,698 391
--------
18,285
--------
FURNITURE/HOME APPLIANCE -- 0.0%
National Service Industries 1,635 48
--------
GAMES, TOYS & CHILDREN'S VEHICLES -- 0.1%
Hasbro 7,869 170
Mattel 16,985 243
--------
413
--------
GAS & NATURAL GAS -- 0.5%
Columbia Gas Systems 3,315 208
Consolidated Natural Gas 3,877 249
Eastern Enterprises 1,085 62
El Paso Energy 4,580 176
Enron 28,852 1,098
Nicor 1,906 66
ONEOK 1,278 34
Peoples Energy # 1,435 53
Williams 17,550 592
--------
2,538
--------
GENERAL UTILITIES -- 0.1%
PECO Energy 7,542 248
--------
GLASS PRODUCTS -- 0.2%
Corning Glass 9,891 927
--------
GOLD MINING -- 0.0%
Newmont Mining 6,771 160
--------
HANDTOOLS & GENERAL HARDWARE -- 0.1%
Fortune Brands 6,725 230
Snap-On Tools 2,651 80
Stanley Works 3,593 112
--------
422
--------
HEAVY CONSTRUCTION -- 0.0%
Foster Wheeler 1,577 16
--------
Number Value
of Shares (000)
--------- --------
COMMON STOCK -- CONTINUED
HOTELS & LODGING -- 0.1%
Harrah's Entertainment* 5,187 $ 143
Hilton Hotels 10,306 104
Marriott International, Cl A* 10,055 327
--------
574
--------
HOUSEHOLD FURNITURE & FIXTURES -- 0.0%
Leggett & Platt 8,390 180
--------
HOUSEHOLD PRODUCTS -- 1.9%
Clorox # 9,539 425
Colgate Palmolive 23,563 1,293
Danaher 5,746 282
Maytag 3,527 168
Procter & Gamble 53,696 5,799
Solectron* 10,906 898
Whirlpool 3,047 186
--------
9,051
--------
INFORMATION RETRIEVAL SERVICES -- 1.3%
America Online* # 89,574 6,511
--------
INSURANCE -- 3.2%
Aetna 5,698 311
Aflac 10,745 514
Allstate 32,267 845
American General 10,069 738
American International Group 62,574 6,461
Aon 10,354 370
Chubb 7,121 381
Cigna 8,048 662
Cincinnati Financial 6,672 224
Conseco # 13,219 268
Hartford Financial 9,135 426
Humana* 6,775 47
Jefferson-Pilot # 4,260 289
Lincoln National 8,035 335
Loews 4,348 278
Marsh & McLennan 10,673 839
MBIA 4,039 202
MGIC Investment 4,411 249
Progressive 2,949 238
Providian Financial 5,732 454
Safeco 5,304 126
St. Paul 9,161 277
Torchmark # 5,378 171
United Healthcare 7,006 364
Unumprovident 9,651 314
--------
15,383
--------
See Accompanying Notes
17
<PAGE> 20
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA EQUITY INDEX FUND
NOVEMBER 30, 1999
(UNAUDITED)
Number Value
of Shares (000)
--------- --------
COMMON STOCK -- CONTINUED
LEASING & RENTING -- 0.0%
Ryder System 2,776 $ 63
--------
LEISURE & RECREATIONAL PRODUCTS -- 0.0%
Brunswick 3,719 81
--------
MACHINERY -- 0.9%
Applied Materials* 15,175 1,479
Baker Hughes 13,291 336
Black & Decker 3,518 158
Briggs & Stratton 941 50
Caterpillar # 14,371 666
Crane 2,735 50
Cummins Engine 1,694 69
Deere # 9,445 406
Dover 8,423 365
Ingersoll Rand 6,673 323
Milacron 1,433 21
NACCO Industries, Cl A 316 15
Pall 5,016 118
Parker-Hannifin 4,386 206
Timken 2,503 48
--------
4,310
--------
MANUFACTURED HOUSING -- 0.0%
Fleetwood Enterprises 1,329 28
--------
MEASURING DEVICES -- 0.3%
Honeywell 5,153 577
KLA-Tencor* 3,563 301
Mallinckrodt 2,869 95
PE - PE Biosystems 4,123 337
Tektronix 1,893 64
Thermo Electron* 6,382 96
--------
1,470
--------
MEDICAL & MEDICAL SERVICES -- 1.2%
Allergan 2,667 262
Bausch & Lomb 2,320 127
Baxter International 11,767 795
Becton Dickinson # 10,117 276
Biomet 4,544 144
Boston Scientific* 16,716 353
C.R. Bard 2,071 112
Columbia/HCA Healthcare 22,805 621
Guidant 12,212 611
Healthsouth* 16,771 95
Manor Care* 4,320 87
Medtronic # 47,432 1,844
St. Jude Medical 3,422 91
Tenet Healthcare* # 12,551 280
Wellpoint Health Networks* 2,660 153
--------
5,851
--------
Number Value
of Shares (000)
--------- --------
COMMON STOCK -- CONTINUED
METAL/FABRICATE HARDWARE -- 0.0%
Reynolds Metals 2,542 $ 159
--------
METALS & MINING -- 0.3%
Alcan Aluminum 9,134 311
Alcoa # 14,819 971
Freeport-McMoran Copper
& Gold, Cl B 6,607 104
Phelps Dodge 3,456 180
USX-U.S. Steel Group # 3,572 90
--------
1,656
--------
MISCELLANEOUS BUSINESS SERVICES -- 0.1%
Teradyne* 7,350 320
--------
MISCELLANEOUS CONSUMER SERVICES -- 0.0%
Service International 10,996 83
Water Pik Technologies* 385 3
--------
86
--------
MISCELLANEOUS MANUFACTURING -- 1.1%
Illinois Tool Works 10,129 656
Jostens 1,324 24
Minnesota Mining &
Manufacturing 16,279 1,556
Textron 6,069 431
Tyco International # 67,632 2,710
--------
5,377
--------
OFFICE & BUSINESS EQUIPMENT -- 0.3%
Pitney Bowes 10,814 518
Xerox 26,800 725
--------
1,243
--------
OFFICE FURNITURE & FIXTURES -- 0.1%
Ikon Office Solutions 6,028 40
Johnson Controls 3,448 188
Lexmark International, Cl A* 5,206 432
--------
660
--------
OIL & GAS EXTRACTION -- 0.1%
Helmerich & Payne 2,000 45
USX Marathon 12,478 330
--------
375
--------
PAPER & FOREST PRODUCTS -- 0.9%
Bemis 2,115 67
Boise Cascade 2,307 80
Champion International 3,879 215
Fort James 8,932 257
Georgia Pacific 6,932 276
International Paper 16,716 872
Kimberly-Clark 21,534 1,375
See Accompanying Notes
18
<PAGE> 21
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA EQUITY INDEX FUND
NOVEMBER 30, 1999
(UNAUDITED)
Number Value
of Shares (000)
--------- --------
COMMON STOCK -- CONTINUED
PAPER & FOREST PRODUCTS -- CONTINUED
Louisiana-Pacific 4,340 $ 53
Mead 4,137 148
Pactiv* 6,888 71
Potlatch 1,169 47
Temple-Inland 2,257 129
Westvaco 4,049 122
Weyerhaeuser 8,131 498
Willamette Industries 4,509 187
--------
4,397
--------
PETROLEUM & FUEL PRODUCTS -- 0.7%
Amerada Hess 3,660 212
Anadarko Petroleum 5,150 155
Apache 4,602 165
Burlington Resources # 7,174 241
Kerr-McGee 3,493 200
Occidental Petroleum 14,088 309
Phillips Petroleum 10,237 489
Rowan Companies* 3,363 58
Schlumberger 22,134 1,329
Union Pacific Resources # 10,180 133
--------
3,291
--------
PETROLEUM REFINING -- 4.7%
Ashland 2,917 98
Atlantic Richfield 13,028 1,256
Chevron 26,514 2,348
Coastal 8,626 304
Conoco 25,348 664
Exxon 98,126 7,783
Mobil 31,651 3,302
Royal Dutch Petroleum 86,668 5,027
Sunoco 3,658 94
Texaco 22,340 1,361
Tosco 6,158 167
Unocal 9,796 325
--------
22,729
--------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES -- 0.2%
Eastman Kodak 12,792 792
Lanier Worldwide Inc* 3,223 13
Polaroid 1,794 35
--------
840
--------
PRECIOUS METALS -- 0.1%
Barrick Gold # 15,762 284
Homestake Mining 10,517 87
Placer Dome 13,158 150
--------
521
--------
Number Value
of Shares (000)
--------- --------
COMMON STOCK -- CONTINUED
PRINTING & PUBLISHING -- 1.5%
American Greetings, Cl A 2,724 $ 64
Dow Jones 3,672 223
Gannett 11,306 809
Knight-Ridder 3,275 179
McGraw-Hill 7,954 451
Meredith 2,097 79
New York Times, Cl A 7,037 270
R.R. Donnelley & Sons 5,160 124
Time Warner # 52,279 3,225
Times Mirror, Cl A 2,734 177
Tribune 9,580 460
Viacom, Cl B* 28,158 1,401
--------
7,462
--------
PROFESSIONAL SERVICES -- 0.4%
Dun & Bradstreet 6,508 176
H & R Block # 3,946 170
Halliburton 17,834 690
IMS Health 12,644 298
Paychex 9,941 397
Perkinelmer 1,853 76
--------
1,807
--------
RAILROADS -- 0.3%
Burlington Northern Santa Fe 18,790 545
Kansas City Southern 4,466 266
Norfolk Southern 15,379 329
Union Pacific 10,016 471
--------
1,611
--------
REAL ESTATE -- 0.0%
Kaufman & Broad Home # 1,937 43
--------
RESTAURANTS -- 0.6%
Darden Restaurants 5,340 95
McDonald's 54,754 2,464
Tricon Global Restaurants* 6,206 258
Wendy's International 4,909 108
--------
2,925
--------
RETAIL -- 6.1%
Alberto-Culver, Cl B 2,212 58
Albertson's 16,990 543
Autozone* 6,016 166
Bed Bath & Beyond* 5,645 176
Best Buy* 8,237 515
Circuit City 8,121 394
Consolidated* 4,451 70
Costco Wholesale* # 8,926 818
CVS 15,833 628
Dayton Hudson 17,869 1,261
See Accompanying Notes
19
<PAGE> 22
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA EQUITY INDEX FUND
NOVEMBER 30, 1999
(UNAUDITED)
Number Value
of Shares (000)
--------- --------
COMMON STOCK -- CONTINUED
RETAIL -- CONTINUED
Dillards, Cl A 4,322 $ 82
Dollar General 9,080 222
Federated Department Stores* 8,430 397
Gap 34,658 1,404
Great Atlantic & Pacific Tea 1,549 39
Harcourt General 2,875 95
Home Depot 59,941 4,739
J.C. Penney 10,652 238
Kmart* # 19,954 198
Kohls* 6,580 475
Kroger* 33,525 715
Limited 8,653 367
Longs Drug Stores 1,587 40
Lowe's 15,417 768
May Department Stores 13,505 454
Nordstrom 5,670 158
Office Depot* 15,149 169
Pep Boys 2,126 21
Rite Aid 10,465 79
Safeway* # 20,625 761
Sears Roebuck # 15,375 526
Staples* 18,787 441
Tandy 7,810 598
TJX Companies # 12,839 336
Toys "R" Us* 10,007 175
Wal-Mart # 179,866 10,365
Walgreen # 40,559 1,181
Winn Dixie Stores 6,007 157
--------
29,829
--------
RUBBER & PLASTIC -- 0.1%
B.F. Goodrich 4,438 100
Cooper 3,066 46
Goodyear 6,316 213
Sealed Air* 3,380 159
Tupperware 2,329 41
--------
559
--------
RUBBER & PLASTIC FOOTWEAR -- 0.1%
Nike # 11,368 523
Reebok International 2,270 20
--------
543
--------
SEMI-CONDUCTORS/INSTRUMENTS -- 3.3%
Advanced Micro Devices* 5,951 168
Analog Devices* 7,351 422
Intel 133,702 10,253
LSI Logic* 5,957 360
Micron Technology # 10,120 679
Number Value
of Shares (000)
--------- --------
COMMON STOCK -- CONTINUED
SEMI-CONDUCTORS/INSTRUMENTS -- CONTINUED
National Semiconductor* 6,789 $ 289
Texas Instruments 31,754 3,050
Xilinx* 6,736 603
--------
15,824
--------
SINGLE FAMILY HOUSING CONSTRUCTION -- 0.0%
Pulte 1,747 35
--------
SPECIALTY CHEMICALS -- 0.0%
Sigma Aldrich 4,077 117
--------
SPECIALTY MACHINERY -- 3.9%
Cooper Industries 3,819 164
Emerson Electric 17,562 1,001
General Electric 132,579 17,235
Rockwell International 7,733 384
Thomas & Betts 2,301 94
--------
18,878
--------
STEEL & STEEL WORKS -- 0.1%
Allegheny Technologies* 3,850 97
Bethlehem Steel* 5,288 33
Engelhard 5,089 86
Inco 7,759 143
Nucor 3,529 178
Worthington Industries 3,712 59
--------
596
--------
TELEPHONE & TELECOMMUNICATION -- 8.9%
Alltel 12,337 1,067
AT&T 129,164 7,217
Bell Atlantic # 62,758 3,973
BellSouth 76,204 3,520
Centurytel 5,639 259
Global Crossing* # 31,051 1,355
GTE 39,647 2,894
MCI WorldCom* # 75,707 6,260
Motorola # 24,541 2,804
Nextel, Cl A* # 13,403 1,329
SBC Communications 137,990 7,167
Sprint 35,063 2,432
Sprint (PCS )* # 17,776 1,631
US West 20,397 1,266
--------
43,174
--------
TESTING LABORATORIES -- 0.0%
Quintiles Transnational* 4,957 109
--------
TOBACCO -- 0.6%
Philip Morris 96,604 2,542
UST 7,037 187
--------
2,729
--------
See Accompanying Notes
20
<PAGE> 23
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA EQUITY INDEX FUND
NOVEMBER 30, 1999
(UNAUDITED)
Number of Value
Shares/Par (000) (000)
---------------- --------
COMMON STOCK -- CONTINUED
TRANSPORTATION SERVICES -- 0.1%
CSX # 8,798 $ 313
--------
TRAVEL -- 0.2%
Carnival, Cl A 24,791 1,094
--------
WHOLESALE -- 0.3%
Cardinal Health 11,012 576
McKesson HBOC 11,370 266
Supervalu 5,613 109
Sysco 13,377 509
W.W. Grainger 3,773 178
--------
1,638
--------
TOTAL COMMON STOCK
(Cost $415,020) 464,807
--------
REGISTERED INVESTMENT
COMPANIES -- 1.9%
S&P Depository Receipt # 65,000 9,053
--------
TOTAL REGISTERED INVESTMENT COMPANIES
(Cost $8,702) 9,053
--------
CASH EQUIVALENT -- 2.2%
Goldman Sachs Financial Square
Premium Money Market
Fund 10,453 10,453
--------
TOTAL CASH EQUIVALENT
(Cost $10,453) 10,453
--------
TOTAL INVESTMENTS -- 99.7%
(Cost $434,175) $484,313
========
OTHER ASSETS AND LIABILITIES,
NET -- 0.3% 1,683
--------
Value
(000)
--------
NET ASSETS:
Portfolio Shares of Class I (unlimited
authorization -- no par value) based on
39,854,053 outstanding shares
of beneficial interest $429,095
Portfolio Shares of Class A (unlimited
authorization -- no par value) based on
498,626 outstanding shares
of beneficial interest 5,478
Accumulated net realized loss on investments (84)
Net unrealized appreciation on investments 50,138
Net unrealized appreciation on futures 664
Undistributed net investment income 705
--------
TOTAL NET ASSETS -- 100.0% $485,996
========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SHARE -- CLASS I $12.04
========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS A $12.01
========
MAXIMUM OFFERING PRICE PER
SHARE -- CLASS A
($12.01 / 96.25%) $12.48
========
- - ------------------------------------------------
* NON-INCOME PRODUCING SECURITY.
# SECURITY FULLY OR PARTIALLY ON LOAN.
ADR -- AMERICAN DEPOSITORY RECEIPT
CL -- CLASS
See Accompanying Notes
21
<PAGE> 24
[GRAPHIC OMITTED] FINANCIAL HIGHLIGHTS
ARMADA EQUITY INDEX FUND
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
For the Six Month
Period Ended
November 30, 1999 For the Period
(Unaudited) Ended May 31, 1999
---------------------------- --------------------------
Class I Class A Class I2 Class A2
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.32 $ 11.29 $ 10.00 $ 9.09
-------- ------- -------- ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.06 0.04 0.11 0.07
Net gain on securities (realized and unrealized) 0.73 0.74 1.29 2.18
-------- -------- -------- ------
Total from investment operations 0.79 0.78 1.40 2.25
-------- ------- -------- ------
LESS DISTRIBUTIONS
Dividends from net investment income (0.07) (0.06) (0.08) (0.05)
-------- ------- -------- ------
Total distributions (0.07) (0.06) (0.08) (0.05)
-------- ------- -------- ------
Net asset value, end of period $ 12.04 $ 12.01 $ 11.32 $11.29
======== ======= ======== ======
TOTAL RETURN 7.66%4 7.47%1,4 14.16%4 24.83%1,4
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $480,008 $5,988 $253,854 $3,892
Ratio of expenses to average net assets 0.35%3 0.64%3 0.20%3 0.36%3
Ratio of net investment income to average net assets 1.07%3 0.78%3 1.38%3 1.22%36
Ratio of expenses to average net assets before fee waivers 0.52%3 0.82%3 0.55%3 0.71%36
Ratio of net investment income to average net assets
before fee waivers 0.89%3 0.61%3 1.03%3 0.87%3
Portfolio turnover rate 7% 7% 9% 9%
</TABLE>
1 TOTAL RETURN EXCLUDES SALES CHARGE.
2 CLASS I AND CLASS A COMMENCED OPERATIONS ON JULY 10, 1998 AND OCTOBER 15,
1998, RESPECTIVELY.
3 ANNUALIZED.
4 TOTAL RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
See Accompanying Notes
22
<PAGE> 25
{GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA INTERNATIONAL EQUITY FUND
NOVEMBER 30, 1999
(UNAUDITED)
Number Value
of Shares (000)
--------- --------
COMMON STOCK -- 91.8%
AUSTRALIA -- 0.8%
National Australia Bank# 91,798 $ 1,324
National Australia Bank ADR 17,300 1,253
--------
2,577
--------
AUSTRIA -- 0.4%
Mayr Melnhof Karton 32,442 1,355
--------
CANADA -- 1.0%
BCE 46,490 3,144
--------
FINLAND -- 2.8%
Nokia ADR 36,043 4,981
Sonera Oyj 67,396 2,788
UPM-Kymmene 32,365 1,084
--------
8,853
--------
FRANCE -- 10.5%
Altran Technologies 9,667 4,608
Axa 29,402 3,972
Castorama Dubois 14,462 3,764
Compagnie de Saint Gobain 7,017 1,196
Equant*# 14,773 1,431
France Telecom 30,764 3,572
L'Oreal 2,070 1,365
Rhone-Poulenc 34,219 2,123
STMicroelectronics 30,755 4,188
Thomson Multimedia* 6,560 285
Total Fina ADR 8,458 559
Total Fina, Cl B 29,759 3,966
Vivendi 23,621 1,894
--------
32,923
--------
GERMANY -- 7.9%
Allianz 7,446 2,184
Deutsche Bank 50,956 3,364
Deutsche Telekom 30,786 1,766
Epcos*# 32,395 1,993
HypoVereinsbank 27,550 1,712
Linde 40,745 2,039
Mannesmann# 27,213 5,666
Siemens# 47,901 4,837
Viag 85,455 1,414
--------
24,975
--------
HONG KONG -- 5.6%
China Telecom (Hong Kong)* 923,776 4,960
HSBC Holdings 175,280 2,325
Hutchison Whampoa Limited 224,003 2,755
Johnson Electric Holdings 575,591 4,113
Number Value
of Shares (000)
--------- --------
COMMON STOCK -- CONTINUED
HONG KONG -- CONTINUED
Li & Fung 841,069 $ 1,933
Swire Pacific, Cl A 280,652 1,612
--------
17,698
--------
IRELAND -- 0.6%
Bank of Ireland 219,172 1,807
--------
ISRAEL -- 0.4%
BATM Advanced Communications 19,482 1,276
--------
ITALY -- 2.5%
Assicurazioni Generali 33,862 977
Bulgari 203,815 1,573
Telecom Italia 92,786 1,024
Telecom Italia ADR 19,700 2,125
Telecom Italia Mobile# 281,583 2,216
--------
7,915
--------
JAPAN -- 25.8%
Bank of Tokyo-Mitsubishi 62,533 905
Benesse 19,669 4,722
Fancl 3,114 1,105
Fanuc 58,645 4,889
Fujitsu# 71,631 2,543
Hikari Tsushin 1,942 3,047
Honda Motor 25,532 1,052
Internet Initiative Japan ADR* 9,038 863
Itochu 449,007 2,677
Marubeni 622,428 2,423
NEC# 113,788 2,661
Nihon Unisys 60,009 2,301
Nikko Securities# 162,807 2,028
Nintendo 9,443 1,575
Nippon Telegraph & Telephone 56 1,005
NTT Mobile Communications
Network 235 8,250
Sanwa Bank# 86,468 1,051
Seven-Eleven 34,595 5,632
SMC# 13,420 2,372
Softbank 8,090 5,847
Sony# 34,725 6,436
Sumitomo Bank 75,658 1,161
Takeda Chemical Industries 73,817 4,358
Takefuji 9,977 1,429
Tokyo Electron 28,699 2,983
Yahoo Japan* 11 7,767
--------
81,082
--------
See Accompanying Notes
23
<PAGE> 26
{GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA INTERNATIONAL EQUITY FUND
NOVEMBER 30, 1999
(UNAUDITED)
Number Value
of Shares (000)
--------- --------
COMMON STOCK -- CONTINUED
MEXICO -- 0.8%
Telefonos de Mexico ADR 28,541 $ 2,642
--------
NETHERLANDS -- 3.7%
Heineken 29,457 1,426
ING Groep 50,987 2,873
Koninklijke Ahold 13,260 423
Koninklijke Ahold ADR 29,850 955
Royal Dutch Petroleum 41,192 2,428
Royal Dutch Petroleum,
NY Shares 24,400 1,415
Wolters Kluwer 66,088 1,997
--------
11,517
--------
POLAND -- 0.1%
Polski Koncern Nafto GDR* 21,399 221
--------
SINGAPORE -- 3.1%
DBS Group Holdings 281,783 3,655
Natsteel Electronics 354,812 1,468
Singapore Airlines 323,136 3,269
Singapore Press Holdings 71,930 1,348
--------
9,740
--------
SOUTH KOREA -- 1.0%
Pohang Iron & Steel ADR 90,394 3,249
--------
SPAIN -- 1.1%
Telefonica* 60,074 1,253
Telefonica - New 1,184 20
Telefonica ADR 30,704 1,907
Terra Networks* 6,482 224
--------
3,404
--------
SWEDEN -- 3.1%
LM Ericsson ADR 84,489 4,071
Hennes & Mauritz, Series B 97,650 3,101
Pharmacia & Upjohn 21,153 1,157
Svenska Cellulosa, Series A 33,453 925
Svenska Cellulosa, Series B 13,307 370
--------
9,624
--------
SWITZERLAND -- 6.1%
Adecco 2,174 1,394
Credit Suisse Group 12,486 2,341
Nestle 1,100 1,984
Novartis 2,735 4,273
Roche Holding 302 3,655
Swiss Re 1,279 2,616
UBS, Registered 10,765 2,951
--------
19,214
--------
Number of Value
Shares/Par (000) (000)
--------------- --------
COMMON STOCK -- CONTINUED
TAIWAN -- 1.0%
Taiwan Semiconductor ADR* 83,836 $ 3,002
--------
UNITED KINGDOM -- 13.5%
Allied Zurich 226,290 2,745
Bass 114,295 1,291
BOC Group 134,231 2,773
BP Amoco 52,505 535
BP Amoco ADR 50,714 3,090
British Telecom 133,320 2,681
Colt Telecom Group* 46,780 1,769
Compass Group 169,884 2,063
Energis* 48,311 1,968
General Electric 247,370 3,805
Glaxo Wellcome 30 1
Invensys 510,052 2,380
Logica 135,099 3,271
National Grid Holdings 355,798 2,738
Pearson 168,731 4,039
QXL* 181,800 1,264
SmithKline Beecham 15,813 212
SmithKline Beecham ADR 16,600 1,104
Standard Chartered 94,755 1,289
Thus* 257,586 1,614
WPP Group 129,815 1,909
--------
42,541
--------
UNITED STATES -- 0.0%
OpenTV* 891 72
--------
TOTAL COMMON STOCK
(Cost $209,411) 288,831
--------
CASH EQUIVALENT -- 3.4%
Goldman Sachs Financial Square
Premium Money Market
Fund 10,712 10,712
--------
TOTAL CASH EQUIVALENT
(Cost $10,712) 10,712
--------
COMMERCIAL PAPER -- 4.1%
General Electric
5.480% 12/02/99 9,500 9,499
5.570% 12/16/99 3,500 3,492
--------
TOTAL COMMERCIAL PAPER
(Cost $12,991) 12,991
--------
TOTAL INVESTMENTS -- 99.3%
(Cost $233,114) $312,534
========
OTHER ASSETS AND LIABILITIES,
NET -- 0.7% 2,146
--------
See Accompanying Notes
24
<PAGE> 27
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA INTERNATIONAL EQUITY FUND
NOVEMBER 30, 1999
(UNAUDITED)
Value
(000)
--------
NET ASSETS:
Portfolio shares of Class I
(unlimited authorization -- no par
value) based on 21,473,469 outstanding
shares of beneficial interest $227,158
Portfolio shares of Class A
(unlimited authorization -- no par
value) based on 146,387 outstanding
shares of beneficial interest 1,620
Portfolio shares of Class B
(unlimited authorization -- no par
value) based on 7,825 outstanding
shares of beneficial interest 91
Accumulated net realized gain on
investments 4,978
Net unrealized appreciation on investments 77,964
Net unrealized appreciation on futures 1,456
Net unrealized appreciation of foreign
currency and translation of other assets
and liabilities in foreign currency investments 1,393
Undistributed net investment income 20
--------
TOTAL NET ASSETS -- 100.0% $314,680
========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SHARE -- CLASS I $14.55
========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS A $14.47
========
MAXIMUM OFFERING PRICE PER
SHARE -- CLASS A ($14.47 / 94.5%) $15.31
========
NET ASSET VALUE AND OFFERING
PRICE PER SHARE-- CLASS B $14.38
========
- - ------------------------------------------------
* NON INCOME PRODUCING SECURITY
# SECURITY FULLY OR PARTIALLY ON LOAN
ADR -- AMERICAN DEPOSITORY RECEIPT
CL -- CLASS
GDR -- GLOBAL DEPOSITORY RECEIPT
At November 30, 1999, sector diversification of the Portfolio was as follows:
% of
Sector Diversification Net Assets Value
- - ---------------------- ---------- ---------
COMMON STOCK
Banking 8.9% $ 28,013
Electronics 8.0% 25,298
Telephone 5.7% 17,995
Pharmaceuticals 5.4% 16,882
Internet Services 5.1% 15,965
Telecommunication
Equipment 5.1% 15,904
Consumer Goods 4.9% 15,440
Cellular
Telecommunications 4.9% 15,426
Manufacturing 4.1% 12,997
Insurance 4.0% 12,493
Oil and Gas 3.9% 12,215
Telecommunications 3.6% 11,283
Food Product Retailer 3.5% 11,057
Machinery 2.6% 8,038
Computers 2.3% 7,244
Distribution 2.2% 7,034
Engineering Services 2.1% 6,647
Business Services 2.1% 6,631
Manufacturing Products 1.6% 4,960
Multimedia 1.3% 4,039
Automotive 1.2% 3,789
Paper Products 1.2% 3,734
Financial Services 1.1% 3,456
Publishing 1.1% 3,345
Airlines 1.0% 3,269
Steel 1.0% 3,249
Chemicals 0.9% 2,773
Beverages 0.9% 2,718
Computer Software 0.8% 2,373
Multi-Industry 0.6% 1,894
Human Resources 0.4% 1,394
Networking Products 0.3% 1,276
------ --------
TOTAL COMMON STOCK 91.8% 288,831
TOTALCOMMERCIAL PAPER 4.1% 12,991
CASH EQUIVALENT 3.4% 10,712
------ --------
TOTAL INVESTMENTS 99.3% 312,534
OTHER ASSETS AND
LIABILITIES, NET 0.7% 2,146
------ --------
NET ASSETS 100.0% $314,680
====== ========
See Accompanying Notes
25
<PAGE> 28
[GRAPHIC OMITTED] FINANCIAL HIGHLIGHTS
ARMADA INTERNATIONAL EQUITY FUND
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
For the Six Months
Ended November 30, 1999 For the Year For the Period
(Unaudited) Ended May 31, 1999 Ended May 31, 1998
----------------------------- ----------------------------- ---------------------------
Class I3 Class A3 Class B3 Class I Class A Class B Class I2 lass A2 Class B2
-------- -------- --------- -------- ------- -------- --------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 10.91 $ 10.87 $ 10.83 $ 10.86 $10.82 $10.83 $ 10.00 $10.00 $ 9.30
-------- ------- --------- -------- ------ ------ -------- ------ ------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income/(loss) (0.00) (0.02) (0.06) (0.01) (0.01) (0.07) 0.08 0.04 0.05
Net gain on securities (realized
and unrealized) 3.64 3.62 3.61 0.11 0.10 0.08 0.79 0.79 1.48
-------- ------- --------- -------- ------ ------ -------- ------ ------
Total from investment
operations 3.64 3.60 3.55 0.10 0.09 0.01 0.87 0.83 1.53
-------- ------- --------- -------- ------ ------ -------- ------ ------
LESS DISTRIBUTIONS
Dividends from net investment
income (0.00) (0.00) (0.00) (0.05) (0.04) (0.01) (0.01) (0.01) (0.00)
-------- ------- --------- -------- ------ ------ -------- ------ ------
Total distributions (0.00) (0.00) (0.00) (0.05) (0.04) (0.01) (0.01) (0.01) (0.00)
-------- ------- --------- -------- ------ ------ -------- ------ ------
Net asset value, end of
period $ 14.55 $ 14.47 $ 14.38 $ 10.91 $10.87 $10.83 $ 10.86 $10.82 $10.83
-------- ------- --------- -------- ------ ------ -------- ------ ------
TOTAL RETURN 33.36%5 33.12%1,5 32.78%1,5 0.95% 0.84%1 0.10%1 8.76%4 8.28%1,5 16.45%1,5
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's) $312,437 $ 2,139 $ 104 $199,205 $1,127 $ 42 $135,942 $ 276 $ 1
Ratio of expenses to average
net assets 1.41%4 1.65%4 2.37%4 1.43% 1.68% 2.43% 1.09%4 1.39%4 2.08%4
Ratio of net investment
income/(loss) to average
net assets (0.00)%4 (0.27)%4 (1.04)%4 0.12% (0.04)% (0.80)% 1.19%4 1.49%4 0.59%4
Ratio of expenses to average
net assets before fee waivers 1.41%4 1.65%4 2.41%4 1.43% 1.68% 2.43% 1.24%4 1.47%4 2.14%4
Ratio of net investment income/
(loss) to average net assets
before fee waivers (0.00)%4 (0.27)%4 (1.04)%4 0.12% (0.04)% (0.80)% 1.04%4 1.41%4 0.53%4
Portfolio turnover rate 67% 67% 67% 78% 78% 78% 28% 28% 28%
</TABLE>
1 TOTAL RETURN EXCLUDES SALES CHARGE.
2 CLASS I, CLASS A AND CLASS B COMMENCED OPERATIONS ON AUGUST 1, 1997, AUGUST 1,
1997, AND JANUARY 6, 1998, RESPECTIVELY.
3 CALCULATED BASED UPON AVERAGE SHARES OUTSTANDING.
4 ANNUALIZED.
5 TOTAL RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
See Accompanying Notes
26
<PAGE> 29
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA SMALL CAP GROWTH FUND
NOVEMBER 30, 1999
(UNAUDITED)
Number Value
of Shares (000)
--------- -----
COMMON STOCK -- 86.9%
AIR TRANSPORTATION -- 0.7%
Atlas Air* 33,300 $ 839
--------
AUTO -- 1.1%
Monaco Coach* 61,200 1,316
--------
BANKS -- 2.4%
Cullen/Frost Bankers 29,800 849
Imperial Bancorp* 44,900 1,078
Republic Security Financial 117,350 942
--------
2,869
--------
BROADCASTING, NEWSPAPERS & ADVERTISING-- 3.6%
Ancor Communications* # 11,100 673
Citadel Communications* 18,000 901
Cumulus Media* 40,000 1,600
Spanish Broadcasting Systems,
Cl A* # 34,900 1,108
--------
4,282
--------
BUILDING & BUILDING SUPPLIES -- 0.9%
Trex* 41,200 1,061
--------
BUSINESS SERVICES -- 2.0%
FYI* 18,800 602
National Information
Consortium* # 36,200 955
Online Resources &
Communications* 64,900 795
--------
2,352
--------
CHEMICALS -- 0.4%
Church & Dwight 15,050 421
--------
COMMUNICATIONS EQUIPMENT -- 7.4%
Antec* # 22,700 1,271
C-COR Electronics 15,100 771
Commscope* 61,200 2,578
Mercury Computer Systems* 26,300 1,501
Optical Coating Laboratory 5,200 1,023
Sawtek* 33,550 1,531
--------
8,675
--------
COMPUTER COMMUNICATIONS EQUIPMENT -- 6.3%
Act Manufacturing* 41,500 1,268
Clarify* 17,400 1,622
Digex* 7,500 251
MicroStrategy* # 5,100 625
Optimal Robotics* 42,300 1,375
Proxim* 11,200 627
Visual Networks* 28,900 1,705
--------
7,473
--------
Number Value
of Shares (000)
--------- --------
COMMON STOCK -- CONTINUED
COMPUTER SERVICES -- 11.2%
Allaire* 6,500 $ 987
Business Objects* 12,800 1,133
Egain Communication* 13,400 563
Mercury Interactive* 15,900 1,322
Micromuse* 13,600 1,555
National Computer Systems 33,600 1,289
NetObjects* 53,900 731
Novadigm* 62,500 1,086
Onyx Software* 32,400 1,045
Remedy* 22,000 767
Sapiens International* 40,000 555
Sonicwall* # 15,870 543
Symantec* 35,200 1,643
--------
13,219
--------
COMPUTERS -- 0.8%
Advanced Digital Information* 21,500 966
--------
DRUGS & HEALTH CARE -- 1.4%
ChiRex* 24,400 848
Titan Pharmaceuticals* # 51,800 745
--------
1,593
--------
ELECTRICAL TECHNOLOGY -- 0.9%
SBS Technologies* 33,100 1,117
--------
ELECTRONICS -- 5.9%
CTS 33,500 2,686
Dii Group* 32,300 2,039
Gentex* 63,400 1,185
Titan* 37,900 1,026
--------
6,936
--------
ENTERTAINMENT -- 3.1%
3DO Company* 62,480 592
Anchor Gaming* 10,600 584
Macrovision* 22,800 1,456
T-HQ* # 20,100 1,080
--------
3,712
--------
FINANCIAL SERVICES -- 0.8%
Metris # 31,400 993
--------
GAS & NATURAL GAS -- 1.1%
Nicor 20,900 725
Southwest Gas 23,800 558
--------
1,283
--------
HOTELS & LODGING -- 0.7%
Station Casinos* 33,000 792
--------
See Accompanying Notes
27
<PAGE> 30
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA SMALL CAP GROWTH FUND
NOVEMBER 30, 1999
(UNAUDITED)
Number Value
of Shares (000)
--------- --------
COMMON STOCK -- CONTINUED
INFORMATION RETRIEVAL SERVICES -- 1.2%
Digital River* 24,500 $ 747
QRS* 12,000 698
--------
1,445
--------
INSURANCE - LIFE -- 1.3%
Annuity & Life 36,000 1,026
Scottish Annuity & Life 57,800 491
--------
1,517
--------
MEDICAL & MEDICAL SERVICES -- 6.0%
Arthrocare* 7,850 475
Biomatrix* # 24,200 569
Datascope* 52,300 1,940
Enzon* 14,450 488
Hooper Holmes 66,850 1,579
PolyMedica* 57,800 1,012
Priority Healthcare, Cl B* 20,700 512
Theragenics* 50,700 485
--------
7,060
--------
PETROLEUM & FUEL PRODUCTS -- 1.0%
Cal Dive International* 12,100 440
Forest Oil* 33,000 377
Louis Dreyfus Natural Gas* 19,850 357
--------
1,174
--------
PETROLEUM REFINING -- 0.3%
Tesoro Petroleum* 24,850 298
--------
PHARMACEUTICALS -- 1.7%
King Pharmaceuticals* # 42,400 1,956
--------
PRINTING & PUBLISHING -- 0.8%
Valassis Communications* 23,550 927
--------
PROFESSIONAL SERVICES -- 2.0%
Affymetrix* # 3,300 323
Corporate Executive Board* 14,700 684
Diamond Technology Partners* 16,300 856
Millennium Pharmaceutical* 5,200 506
--------
2,369
--------
RETAIL -- 5.2%
BJ's Wholesale Club* 32,000 1,196
Cheap Tickets* 32,400 541
Jack in the Box* 56,400 1,188
Rex Stores* 45,450 1,696
The Children's Place
Retail Stores* # 25,700 634
Too* 49,400 914
--------
6,169
--------
Number of Value
Shares/Par (000) (000)
---------------- --------
COMMON STOCK -- CONTINUED
SEMI-CONDUCTORS/INSTRUMENTS -- 10.5%
ASM International N.V.* # 84,300 $ 1,370
Burr-Brown* 17,100 758
Credence Systems* 15,900 921
Cymer* # 26,500 1,060
Exar* 27,400 1,332
Fairchild Semiconductor
Int'l, Cl A* 21,800 610
Helix Technology 20,614 835
Integrated Device Technology* 21,200 500
Netsilicon* 92,000 1,219
Next Level Communications* # 1,050 68
PRI Automation, Cl A* # 13,700 649
Silicon Storage Technology* 34,450 913
Transwitch* 16,200 761
Zoran* # 33,700 1,344
--------
12,340
--------
TELEPHONE & TELECOMMUNICATION -- 5.0%
Adelphia Business Solutions* 24,200 756
Audiovox, Cl A* 39,800 1,184
ICG Communications* # 60,100 1,138
Intermedia* # 24,300 677
Mastec* 20,300 836
SBA Communications* 114,300 1,314
--------
5,905
--------
TRUCKING -- 1.2%
Expeditors International of
Washington 34,000 1,386
--------
TOTAL COMMON STOCK
(Cost $76,511) 102,445
--------
REPURCHASE AGREEMENT -- 5.4%
Prudential
5.530% (dated 11/30/99, matures 12/01/99,
repurchase price $ 6,400,983;
collateralized by FHLMC obligation:
market value $ 6,532,350)
5.530% 12/01/99 6,400 6,400
--------
TOTAL REPURCHASE AGREEMENT
(Cost $6,400) 6,400
------------
See Accompanying Notes
28
<PAGE> 31
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA SMALL CAP GROWTH FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
(000) (000)
--------- --------
CASH EQUIVALENT -- 4.0%
Goldman Sachs Financial Square
Premium Money Market
Fund 4,718 $ 4,718
--------
TOTAL CASH EQUIVALENT
(Cost $4,718) 4,718
--------
TOTAL INVESTMENTS -- 96.3%
(Cost $87,628) $113,563
========
OTHER ASSETS AND LIABILITIES,
NET -- 3.7% 4,331
--------
NET ASSETS:
Portfolio Shares of Class I (unlimited
authorization -- no par value) based on
8,753,180 outstanding shares
of beneficial interest 93,456
Portfolio Shares of Class A (unlimited
authorization -- no par value) based on
139,813 outstanding shares
of beneficial interest 1,462
Portfolio Shares of Class B (unlimited
authorization -- no par value) based on
15,424 outstanding shares
of beneficial interest 149
Accumulated net realized loss on investments (3,326)
Net unrealized appreciation on investments 25,934
Net unrealized appreciation on futures 347
Net investment loss (128)
--------
TOTAL NET ASSETS -- 100.0% $117,894
========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SHARE -- CLASS I $13.24
========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A $13.17
========
MAXIMUM OFFERING PRICE PER
SHARE-- CLASS A ($13.17 / 94.5%) $13.94
========
NET ASSET VALUE AND OFFERING
PRICE PER SHARE -- CLASS B $13.00
========
- - ------------------------------------------------
* NON-INCOME PRODUCING SECURITY.
# SECURITY FULLY OR PARTIALLY ON LOAN.
CL -- CLASS
See Accompanying Notes
29
<PAGE> 32
[GRAPHIC OMITTED] FINANCIAL HIGHLIGHTS
ARMADA SMALL CAP GROWTH FUND
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
For the Six Months
Ended November 30, 1999 For the Year For the Period
(Unaudited) Ended May 31, 1999 Ended May 31, 1998
----------------------------- ---------------------------- ----------------------------
Class I Class A Class B Class I Class A Class B Class I2 Class A2 Class B2
-------- ------- ------- ------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 10.14 $10.11 $ 10.01 $ 11.69 $11.68 $ 11.66 $ 10.00 $10.00 $10.64
-------- ------ ------- ------- ------ ------- ------- ------ ------
INCOME FROM INVESTMENT
OPERATIONS
Net investment
income/(loss) 0.01 (0.00) (0.05) (0.03)3 (0.05)3 (0.10)3 0.01 0.01 (0.01)
Net gain/(loss) on securities
(realized and unrealized) 3.09 3.06 3.04 (1.41) (1.41) (1.44) 1.72 1.71 1.03
-------- ------ ------- ------- ------ ------- ------- ------ ------
Total from investment
operations 3.10 3.06 2.99 (1.44) (1.46) (1.54) 1.73 1.72 1.02
-------- ------ ------- ------- ------ ------- ------- ------ ------
LESS DISTRIBUTIONS
Dividends from net
investment income (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.01) (0.01) (0.00)
Distributions from net
realized capital gains (0.00) (0.00) (0.00) (0.11) (0.11) (0.11) (0.03) (0.03) (0.00)
-------- ------ ------- ------- ------ ------- ------- ------ ------
Total distributions (0.00) (0.00) (0.00) (0.11) (0.11) (0.11) (0.04) (0.04) (0.00)
-------- ------ ------- ------- ------ ------- ------- ------ ------
Net asset value, end of period $ 13.24 $13.17 $ 13.00 $ 10.14 $10.11 $ 10.01 $ 11.69 $11.68 $11.66
======== ====== ======= ======= ====== =======
TOTAL RETURN 30.96%5 30.65%1,5 30.26%1,5 (12.36)% (12.54)%1 (13.26)%1 17.35%5 17.18%1,5 9.59%1,5
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's) $115,852 $1,841 $ 201 $80,145 $1,089 $ 139 $54,476 $ 331 $ 1
Ratio of expenses to
average net assets 1.21%4 1.46%4 2.17%4 1.27% 1.51% 2.23% 0.98%4 1.23%4 1.92%4
Ratio of net investment
income/(loss) to average
net assets (0.25)%4 (0.50)%4 (1.21)%4 (0.27)% (0.51)% (1.23)% 0.14%4 (0.32)%4 (0.87)%4
Ratio of expenses to
average net assets
before fee waivers 1.21%4 1.46%4 (2.17%)4 1.27% 1.51% 2.23% 1.09%4 1.34%4 3.06%4
Ratio of net investment
income/(loss) to
average net assets before
fee waivers (0.25)%4 (0.50)%4 (1.21)%4 (0.27)% (0.51)% (1.23)% 0.03%4 (0.43)%4 (2.01)%4
Portfolio turnover rate 87% 87% 87% 159% 159% 159% 31% 31% 31%
</TABLE>
1 TOTAL RETURN EXCLUDES SALES CHARGE.
2 CLASS I, CLASS A AND CLASS B COMMENCED OPERATIONS ON AUGUST 1, 1997,
AUGUST 1, 1997 AND JANUARY 6, 1998, RESPECTIVELY.
3 CALCULATED BASED UPON AVERAGE SHARES OUTSTANDING.
4 ANNUALIZED.
5 TOTAL RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
See Accompanying Notes
30
<PAGE> 33
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA SMALL CAP VALUE FUND
NOVEMBER 30, 1999
(UNAUDITED)
Number Value
of Shares (000)
--------- --------
COMMON STOCK -- 89.7%
AUTOMOTIVE PARTS-EQUIPMENT -- 2.3%
Amcast Industrial 100,800 $ 1,411
Simpson Industries 170,000 1,790
TBC* 267,500 1,572
Transpro 251,400 1,666
--------
6,439
--------
BANKS -- 8.0%
Amcore Financial 90,000 2,272
Associated Banc 51,900 2,027
Bancwest 76,000 3,349
Colonial BancGroup 260,600 2,981
First Midwest Bancorp 70,000 2,940
Imperial Bancorp* 165,000 3,960
Pacific Century 161,800 3,175
Susquehanna Bancshares 100,000 1,731
--------
22,435
--------
BROADCASTING -- 0.6%
Liberty 39,000 1,784
--------
CHEMICALS -- 1.0%
Geon 93,700 2,834
--------
COMMUNICATIONS EQUIPMENT -- 0.7%
Act Manufacturing* 65,000 1,987
--------
COMPUTER HARDWARE -- 1.1%
Hutchinson Technology* # 70,300 1,301
Maxtor* 295,700 1,793
--------
3,094
--------
COMPUTER SOFTWARE -- 3.9%
Axent Technologies* 100,000 2,212
Datastream Systems* 162,600 2,276
Hyperion Solutions* # 100,000 2,737
Mapics* 248,900 2,365
Premisys Communications* 131,900 1,311
--------
10,901
--------
CONTAINERS & PACKAGING -- 1.0%
American National Can Group 223,750 2,895
--------
DRUGS & HEALTH CARE -- 0.6%
Bindley Western 137,000 1,815
--------
ELECTRICAL SERVICES -- 2.2%
Hawaiian Electric Industries # 72,000 2,200
Idacorp # 83,300 2,332
RGS Energy Group 79,600 1,776
--------
6,308
--------
Number Value
of Shares (000)
--------- --------
COMMON STOCK -- CONTINUED
ELECTRONICS -- 2.4%
Arrow Electronics* 167,300 $ 3,827
Avnet Electronics 55,700 3,060
--------
6,887
--------
ENTERTAINMENT -- 0.6%
Hollywood Park* 90,000 1,817
--------
FINANCIAL SERVICES -- 1.5%
Liberty Financial 130,000 3,055
Phoenix Investment Partners 162,600 1,270
--------
4,325
--------
FOOD & BEVERAGE -- 3.2%
Canandaigua Brands, Cl A* 44,100 2,348
Flowers Industries 191,600 3,137
IBP 160,100 3,532
--------
9,017
--------
GAS & NATURAL GAS -- 2.1%
MDU Resources 127,600 2,791
Peoples Energy # 86,400 3,175
--------
5,966
--------
HEALTH & ALLIED SERVICES -- 1.7%
First Health Group, Cl A* 113,000 2,846
Mid Atlantic Medical Services* 234,100 1,873
--------
4,719
--------
HUMAN RESOURCES -- 0.5%
Kelly Services, Cl A 58,600 1,536
--------
INSURANCE -- 6.4%
Chicago Title 89,900 4,085
PMI Group 110,000 5,493
Renaissancere Holdings 91,000 3,794
State Auto Financial 120,000 1,148
Triad Guaranty* 150,000 3,413
--------
17,933
--------
INSURANCE - LIFE -- 0.5%
Kansas City Life 40,400 1,414
--------
INSURANCE - PROPERTY AND CASUALTY -- 3.8%
Commerce Group 70,000 1,951
Farm Family Holdings* 45,000 1,834
Harleysville Group 190,000 2,862
Horace Mann Educators 110,000 2,413
Selective Insurance Group 100,000 1,750
--------
10,810
--------
See Accompanying Notes
31
<PAGE> 34
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA SMALL CAP VALUE FUND
NOVEMBER 30, 1999
(UNAUDITED)
Number Value
of Shares (000)
--------- --------
COMMON STOCK -- CONTINUED
LEASING & RENTING -- 2.0%
Amerco* 60,000 $ 1,586
Dollar Thrifty Automotive* 210,000 4,148
--------
5,734
--------
LEISURE & RECREATIONAL PRODUCTS -- 1.6%
Arctic Cat 199,600 2,046
Brunswick 110,100 2,402
--------
4,448
--------
MACHINERY -- 2.0%
AGCO # 262,200 3,327
Applied Power, Cl A 69,800 2,229
--------
5,556
--------
MARINE TRANSPORTATION -- 1.4%
Alexander & Baldwin 172,000 3,913
--------
MEASURING DEVICES -- 0.9%
Watts Industries 185,000 2,578
--------
MEDICAL & MEDICAL SERVICES -- 1.2%
Provantage Health Services* 170,000 1,764
Province Healthcare* 76,000 1,563
--------
3,327
--------
METALS & MINING -- 1.9%
Cleveland Cliffs 76,800 2,246
Southern Peru Copper 201,500 2,997
--------
5,243
--------
MISCELLANEOUS BUSINESS SERVICES -- 1.1%
American Management
Systems 56,500 1,660
Complete Business Solutions* 79,100 1,498
--------
3,158
--------
OIL & GAS -- 1.2%
Helmerich & Payne 89,000 2,014
Ocean Energy* 162,200 1,237
--------
3,251
--------
PAPER & FOREST PRODUCTS -- 3.0%
Rayonier 56,400 2,506
Rock Tennessee 136,600 2,117
Westvaco 125,000 3,773
--------
8,396
--------
PETROLEUM & FUEL PRODUCTS -- 1.6%
Equitable Resources 106,000 3,690
Titan Exploration* 223,700 797
--------
4,487
--------
Number Value
of Shares (000)
--------- --------
COMMON STOCK -- CONTINUED
PETROLEUM REFINING -- 0.9%
Pennzoil-Quaker State 240,100 $ 2,491
--------
REAL ESTATE INVESTMENT TRUST -- 9.2%
Arden Realty 98,000 1,887
Charles E. Smith Residential
Realty 60,000 1,950
Developers Diversified Realty 147,300 2,053
Essex Property Trust 74,000 2,400
First Industrial Realty Trust 95,000 2,423
General Growth Properties 73,000 2,185
Great Lakes 207,500 3,022
Highwoods Properties 70,000 1,540
Koger Equity 125,000 1,961
Mack-Cali Realty 69,500 1,716
Summit Properties 86,000 1,570
Thornburg Mortgage Asset 375,000 3,188
--------
25,895
--------
RESTAURANTS -- 1.5%
Buffets* # 175,000 1,881
Rare Hospitality* 106,000 2,253
--------
4,134
--------
RETAIL -- 0.9%
Zale* 50,000 2,531
--------
RETAIL MERCHANDISING -- 0.2%
Elder-Berman* 110,000 701
--------
SAVINGS & LOAN ASSOCIATIONS -- 0.9%
Washington Federal 120,000 2,505
--------
SEMI-CONDUCTORS/CAPITAL EQUIPMENT -- 2.5%
Electroglas* 57,600 1,640
LTX* 125,700 2,263
Silicon Valley Group* 220,500 3,156
--------
7,059
------------
SEMI-CONDUCTORS/INSTRUMENTS -- 1.5%
Amkor Technology* # 94,500 2,552
Integrated Device Technology* 74,000 1,744
--------
4,296
--------
SPECIALTY CHEMICALS -- 0.9%
Schulman 155,800 2,468
--------
STEEL -- 3.6%
AK Steel Holding 137,200 2,272
Material Sciences* 115,000 1,258
Olympic* 68,200 345
Ryerson Tull 158,200 3,233
Steel Technologies 268,800 3,024
--------
10,132
--------
See Accompanying Notes
32
<PAGE> 35
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA SMALL CAP VALUE FUND
NOVEMBER 30, 1999
(UNAUDITED)
Number of Value
Shares/Par (000) (000)
---------------- --------
COMMON STOCK -- CONTINUED
TELEPHONE & TELECOMMUNICATION -- 1.6%
Brightpoint* # 156,900 $ 1,736
Mastec* 68,000 2,801
--------
4,537
--------
TRUCKING -- 3.0%
Air Express International 36,300 1,171
Arkansas Best* 179,000 2,238
Landstar System* 39,800 1,594
Wabash National # 93,500 1,373
Yellow* 128,600 2,162
--------
8,538
--------
WHOLESALE -- 0.9%
United Stationers # 111,700 2,597
--------
TOTAL COMMON STOCK
(Cost $235,022) 252,891
--------
PREFERRED STOCK -- 0.5%
FINANCE -- 0.5%
Thornburg Mortgage Asset 74,500 1,485
--------
TOTAL PREFERRED STOCK
(Cost $1,964) 1,485
--------
CASH EQUIVALENT -- 4.0%
Fidelity Domestic Money Market
Fund 11,239 11,239
--------
TOTAL CASH EQUIVALENT
(Cost $11,239) 11,239
--------
REPURCHASE AGREEMENT -- 5.4%
Prudential
5.530% (dated 11/30/99, matures
12/01/99, repurchase price
$ 15,102,320; collateralized by
FNMA obligation: market
value $15,432,875) 15,100 15,100
--------
TOTAL REPURCHASE AGREEMENT
(Cost $15,100) 15,100
--------
TOTAL INVESTMENTS -- 99.5%
(Cost $263,325) $280,715
========
OTHER ASSETS AND LIABILITIES,
NET -- 0.5% 1,271
--------
Value
(000)
--------
NET ASSETS:
Portfolio Shares of Class I (unlimited
authorization -- no par value) based on
19,893,843 outstanding shares
of beneficial interest $265,322
Portfolio Shares of Class A (unlimited
authorization -- no par value) based on
796,873 outstanding shares
of beneficial interest 10,646
Portfolio Shares of Class B (unlimited
authorization -- no par value) based on
45,737 outstanding shares
of beneficial interest 591
Accumulated net realized loss on
investments (17,314)
Net unrealized appreciation on investments 17,390
Net unrealized appreciation on futures 383
Undistributed net investment income 4,968
--------
TOTAL NET ASSETS -- 100.0% $281,986
========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE
PER SHARE -- CLASS I $13.61
========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A $13.26
========
MAXIMUM OFFERING PRICE PER
SHARE -- CLASS A ($13.26 / 94.5%) $14.03
========
NET ASSET VALUE AND OFFERING
PRICE PER SHARE -- CLASS B $13.10
========
- - ------------------------------------------------
* NON-INCOME PRODUCING SECURITY.
# SECURTIY FULLY OR PARTIALLY ON LOAN.
CL -- CLASS
See Accompanying Notes
33
<PAGE> 36
[GRAPHIC OMITTED] FINANCIAL HIGHLIGHTS
ARMADA SMALL CAP VALUE FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
For the Six Months For the Year
Ended November 30, 1999 Ended May 31,
(Unaudited) 1999
----------------------------- ---------------------------
Class I Class A Class B Class I Class A Class B
-------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.65 $ 13.31 $13.19 $ 15.72 $ 15.47 $15.42
-------- ------- ------ -------- -------- ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.18 0.17 0.07 0.09 0.06 (0.03)
Net gain/(loss) on securities
(realized and unrealized) (0.22) (0.22) (0.16) (0.78) (0.85) (0.87)
-------- ------- ------ -------- -------- ------
Total from investment operations (0.04) (0.05) (0.09) (0.69) (0.79) (0.90)
-------- ------- ------ -------- -------- ------
LESS DISTRIBUTIONS
Dividends from net investment
income (0.00) (0.00) (0.00) (0.05) (0.04) (0.00)
Dividends in excess of net
investment income (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
Distributions from net realized
capital gains (0.00) (0.00) (0.00) (1.33) (1.33) (1.33)
-------- ------- ------ -------- -------- ------
Total distributions (0.00) (0.00) (0.00) (1.38) (1.37) (1.33)
-------- ------- ------ -------- -------- ------
Net asset value, end of period $ 13.61 $ 13.26 $13.10 $ 13.65 $ 13.31 $13.19
======== ======= ====== ======== ======== ======
TOTAL RETURN (0.58)%4 (0.75)%1,4 (0.98)%1,4 (3.67)% (4.38)%1 (5.13)%1
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $270,818 $10,569 $ 599 $270,382 $11,542 $ 515
Ratio of expenses to average net
assets 1.21%3 1.46%3 2.17%3 1.12% 1.38% 2.08%
Ratio of net investment income/
(loss) to average net assets 2.59%3 2.34%3 1.63%3 0.70% 0.44% (0.26)%
Ratio of expenses to average net
assets before fee waivers 1.21%3 1.46%3 2.17%3 1.12% 1.38% 2.08%
Ratio of net investment income/
(loss) to average net assets
before fee waivers 2.59%3 2.34%3 1.63%3 0.70% 0.44% (0.26)%
Portfolio turnover rate 57% 57% 57% 79% 79% 79%
</TABLE>
<TABLE>
<CAPTION>
For the Period
For the Year Ended May 31, Ended May 31,
1998 1997 1996 1995
----------------------------- ----------------- ----------------- -------------------
Class I Class A Class B2 Class I Class A Class I Class A Class I2 Class A2
-------- ------- -------- -------- ------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.15 $ 14.95 $15.28 $ 13.10 $12.94 $ 11.38 $11.26 $ 10.00 $10.16
-------- ------- ------ -------- ------ ------- ------ ------- ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.06 0.01 0.00 0.09 0.08 0.08 0.06 0.10 0.07
Net gain/(loss) on securities
realized and unrealized) 2.87 2.84 0.14 2.90 2.83 2.41 2.37 1.36 1.11
-------- ------- ------ -------- ------ ------- ------ ------- ------
Total from investment operations 2.93 2.85 0.14 2.99 2.91 2.49 2.43 1.46 1.18
-------- ------- ------ -------- ------ ------- ------ ------- ------
LESS DISTRIBUTIONS
Dividends from net investment
income (0.07) (0.04) (0.00) (0.09) (0.05) (0.08) (0.06) (0.04) (0.04)
Dividends in excess of net
investment income (0.00) (0.00) (0.00) (0.00) (0.00) (0.02) (0.02) (0.00) (0.00)
Distributions from net realized
capital gains (2.29) (2.29) (0.00) (0.85) (0.85) (0.67) (0.67) (0.04) (0.04)
-------- ------ ------ -------- ------ ------- ------ ------- ------
Total distributions (2.36) (2.33) (0.00) (0.94) (0.90) (0.77) (0.75) (0.08) (0.08)
-------- ------ ------ -------- ------ ------- ------ ------- ------
Net asset value, end of period $ 15.72 $ 15.47 $15.42 $ 15.15 $14.95 $ 13.10 $12.94 $ 11.38 $11.26
======== ======= ====== ======== ====== ======= ====== ======= ======
TOTAL RETURN 19.82% 19.51%1 19.12%1,3 23.61% 23.26%1 22.64% 22.28%1,4 17.42%1,4 14.80%1,4
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $284,295 $10,634 $ 61 $199,311 $4,929 $99,294 $4,702 $50,993 $3,567
Ratio of expenses to average net
assets 0.98% 1.23% 1.92%3 0.97% 1.22% 1.05% 1.30% 1.01%3 1.34%3
Ratio of net investment income/
(loss) to average net assets 0.43% 0.19% (0.48)%3 0.83% 0.57% 0.83% 0.58% 1.31%3 1.09%3
Ratio of expenses to average net
assets before fee waivers 0.98% 1.23% 1.92%3 0.97% 1.22% 1.06% 1.32% 1.15%3 1.38%3
Ratio of net investment income/
(loss) to average net assets
before fee waivers 0.43% 0.19% (0.48)%2 0.83% 0.51% 0.82% 0.56% 1.17%2 1.05%2
Portfolio turnover rate 89% 89% 89% 64% 64% 106% 106% 69% 69%
</TABLE>
1 TOTAL RETURN EXCLUDES SALES CHARGE.
2 CLASS I, CLASS A AND CLASS B COMMENCED OPERATIONS ON JULY 26, 1994,
AUGUST 15, 1994 AND JANUARY 6, 1998, RESPECTIVELY.
3 ANNUALIZED.
4 TOTAL RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
See Accompanying Notes
34
<PAGE> 37
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA TAX MANAGED EQUITY FUND
NOVEMBER 30, 1999
(UNAUDITED)
Number Value
of Shares (000)
--------- -------
COMMON STOCK -- 97.3%
AIR TRANSPORTATION -- 0.1%
Southwest Airlines 18,000 $ 294
-------
BANKS -- 6.6%
Northern Trust # 16,000 1,549
State Street 89,000 6,536
SunTrust 9,000 629
Wachovia 35,600 2,757
Wells Fargo # 148,000 6,882
-------
18,353
-------
BROADCASTING, NEWSPAPERS & ADVERTISING -- 1.2%
Omnicom Group # 39,000 3,437
-------
BUSINESS SERVICES -- 3.4%
Automatic Data Processing 188,000 9,282
-------
CHEMICALS -- 0.2%
Air Products & Chemicals 15,000 486
-------
COMMUNICATIONS EQUIPMENT -- 3.5%
Lucent Technologies 60,000 4,384
Nortel Networks # 33,000 2,442
Qualcomm* 8,000 2,898
-------
9,724
-------
COMPUTER HARDWARE -- 6.9%
Cisco Systems* # 72,950 6,506
Compaq Computer 12,500 305
Dell Computer* # 20,000 860
EMC* 10,000 836
Hewlett Packard 73,000 6,926
Sun Microsystems* # 28,000 3,703
-------
19,136
-------
COMPUTER SOFTWARE -- 2.0%
Microsoft* # 60,600 5,517
-------
DRUGS & HEALTH CARE -- 17.6%
Abbott Laboratories # 191,000 7,258
American Home Products 10,000 520
Bristol-Myers Squibb 152,880 11,170
Johnson & Johnson # 16,000 1,660
Merck 96,000 7,536
Pfizer 276,000 9,988
Schering-Plough 209,400 10,706
-------
48,838
-------
ENTERTAINMENT -- 1.3%
Walt Disney 126,750 3,533
-------
Number Value
of Shares (000)
--------- -------
COMMON STOCK -- CONTINUED
FINANCIAL SERVICES -- 0.3%
Fannie Mae 13,500 $ 899
-------
FOOD & BEVERAGE -- 3.8%
Anheuser Busch 5,000 374
Coca Cola 42,800 2,881
PepsiCo 211,500 7,310
-------
10,565
-------
HOLDING COMPANIES -- 1.0%
Berkshire Hathaway, Cl A* 47 2,693
-------
HOUSEHOLD PRODUCTS -- 1.9%
Procter & Gamble 48,000 5,184
-------
INFORMATION RETRIEVAL SERVICES -- 1.3%
America Online* # 48,000 3,489
-------
INSURANCE -- 5.2%
American International Group 124,788 12,884
Chubb 30,000 1,607
-------
14,491
-------
MEDICAL & MEDICAL SERVICES -- 0.2%
Medtronic # 14,400 560
-------
MISCELLANEOUS MANUFACTURING -- 0.9%
Illinois Tool Works 12,000 777
Minnesota Mining &
Manufacturing 17,600 1,682
-------
2,459
-------
MOTORCYCLE & MOTOR SCOOTER -- 2.6%
Harley-Davidson 117,600 7,174
-------
OFFICE & BUSINESS EQUIPMENT -- 3.0%
Lexmark International, Cl A* 12,000 996
Pitney Bowes 153,000 7,334
-------
8,330
-------
OIL MACHINERY & EQUIPMENT -- 1.1%
Schlumberger 50,000 3,003
-------
PERSONAL CARE -- 0.1%
Gillette 5,000 201
-------
PETROLEUM REFINING -- 4.9%
BP Amoco, ADR # 87,868 5,354
Exxon 52,000 4,124
Mobil 10,000 1,043
Royal Dutch Petroleum 52,400 3,039
-------
13,560
-------
See Accompanying Notes
35
<PAGE> 38
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA TAX MANAGED EQUITY FUND
NOVEMBER 30, 1999
(UNAUDITED)
Number of Value
Shares/Par (000) (000)
---------------- -------
COMMON STOCK -- CONTINUED
RESTAURANTS -- 1.0%
McDonald's # 64,000 $ 2,880
--------
RETAIL -- 8.2%
Dayton Hudson 13,300 938
Gap 17,000 688
Home Depot 187,500 14,824
Staples* 45,000 1,057
Wal-Mart # 89,000 5,129
--------
22,636
--------
SEMI-CONDUCTORS/INSTRUMENTS -- 5.8%
Intel # 168,000 12,884
Texas Instruments 32,000 3,074
--------
15,958
--------
SPECIALTY MACHINERY -- 6.0%
Emerson Electric 70,200 4,001
General Electric 97,900 12,727
--------
16,728
--------
TELEPHONE & TELECOMMUNICATION -- 7.1%
BellSouth 89,000 4,111
GTE 15,500 1,132
MCI WorldCom* # 46,750 3,866
Motorola # 42,000 4,799
SBC Communications 59,795 3,106
US West 24,800 1,539
Vodafone Group # 25,000 1,180
--------
19,733
--------
TOTAL COMMON STOCK
(Cost $54,872) 269,143
--------
CASH EQUIVALENT -- 2.5%
Fidelity Domestic Money
Market Fund 6,969 6,969
--------
TOTAL CASH EQUIVALENT
(Cost $6,969) 6,969
--------
TOTAL INVESTMENTS -- 99.8%
(Cost $61,841) $276,112
========
OTHER ASSETS AND LIABILITIES,
NET -- 0.2% 594
--------
Value
(000)
--------
NET ASSETS:
Portfolio Shares of Class I (unlimited
authorization -- no par value) based on
18,753,483 outstanding shares
of beneficial interest $ 40,651
Portfolio Shares of Class A (unlimited
authorization -- no par value) based on
1,109,819 outstanding shares
of beneficial interest 13,555
Portfolio Shares of Class B (unlimited
authorization -- no par value) based on
644,652 outstanding shares
of beneficial interest 7,853
Accumulated net realized gain on investments 270
Net unrealized appreciation on investments 214,271
Undistributed net investment income 106
--------
TOTAL NET ASSETS -- 100.0% $276,706
========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SHARE -- CLASS I $13.49
========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A $13.54
========
MAXIMUM OFFERING PRICE PER
SHARE -- CLASS A ($13.54 / 94.5%) $14.33
========
NET ASSET VALUE AND OFFERING
PRICE PER SHARE -- CLASS B $13.43
========
- - ------------------------------------------------
* NON-INCOME PRODUCING SECURITY.
# SECURITY FULLY OR PARTIALLY ON LOAN.
ADR -- AMERICAN DEPOSITORY RECEIPT
CL -- CLASS
See Accompanying Notes
36
<PAGE> 39
[GRAPHIC OMITTED] FINANCIAL HIGHLIGHTS
ARMADA TAX MANAGED EQUITY FUND
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
For the Six Months
Ended November 30, 1999 For the Year
(Unaudited) Ended May 31, 1999
-------------------------------- -----------------------------
Class I Class A Class B Class I Class A Class B
-------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 12.13 $ 12.16 $ 12.12 $ 9.93 $ 9.93 $ 9.93
-------- -------- -------- -------- ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.01 (0.00) (0.03) 0.05 0.04 (0.02)
Net gain/(loss) loss on securities
(realized and unrealized) 1.37 1.38 1.34 2.21 2.24 2.23
-------- -------- -------- -------- ------ ------
Total from investment operations 1.38 1.38 1.31 2.26 2.28 2.21
-------- -------- -------- -------- ------ ------
LESS DISTRIBUTIONS
Dividends from net
investment income (0.02) (0.00) (0.00) (0.05) (0.04) (0.01)
Distributions from net
realized capital gains (0.00) (0.00) (0.00) (0.01) (0.01) (0.01)
-------- -------- -------- -------- ------ ------
Total distributions (0.02) (0.00) (0.00) (0.06) (0.05) (0.02)
-------- -------- -------- -------- ------ ------
Net asset value, end of period $ 13.49 $ 13.54 $ 13.43 $ 12.13 $12.16 $12.12
======== ======== ======== ======== ====== ======
TOTAL RETURN 12.19%4 12.22%1,4 11.64%1,4 22.82% 23.03%1 22.31%1
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $253,021 $15,027 $ 8,658 $241,501 $7,353 $5,377
Ratio of expenses to average
net assets 0.92%3 1.17%3 1.88%3 0.83% 1.09% 1.79%
Ratio of net investment income/
(loss) to average net assets 0.22%3 (0.03)%3 (1.74)%3 0.37% 0.11% (0.59)%
Ratio of expenses to average
net assets
before fee waivers 0.92%3 1.17%3 1.88%3 1.01% 1.27% 1.97%
Ratio of net investment income/
(loss) to average
net assets before fee waivers 0.22%3 (0.03)%3 (1.74)%3 0.19% (0.07)% (0.77)%
Portfolio turnover rate 3% 3% 3% 5% 5% 5%
</TABLE>
<TABLE>
<CAPTION>
For the Period
Ended May 31, 1998
-------------------------------
Class I2 Class A2 Class B2
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning
of period $ 10.00 $10.10 $10.21
-------- ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.00 0.00 0.00
Net gain/(loss) loss on securities
(realized and unrealized) (0.07) (0.17) (0.28)
-------- ------ ------
Total from investment operations (0.07) (0.17) (0.28)
-------- ------ ------
LESS DISTRIBUTIONS
Dividends from net
investment income (0.00) (0.00) (0.00)
Distributions from net
realized capital gains (0.00) (0.00) (0.00)
-------- ------ ------
Total distributions (0.00) (0.00) (0.00)
-------- ------ ------
Net asset value, end of period $ 9.93 $ 9.93 $ 9.93
======== ====== ======
TOTAL RETURN (4.81)%3 (23.63)%1,3 (32.24)%1,3
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $158,867 $ 10 $ 85
Ratio of expenses to average
net assets 0.29%3 0.54%3 1.23%3
Ratio of net investment income/
(loss) to average net assets 0.91%3 0.63%3 0.43%3
Ratio of expenses to average
net assets
before fee waivers 1.02%3 1.24%3 1.98%3
Ratio of net investment income/
(loss) to average
net assets before fee waivers 0.18%3 (0.07)%3 1.18%3
Portfolio turnover rate 0% 0% 0%
</TABLE>
1 TOTAL RETURN EXCLUDES SALES CHARGE.
2 CLASS I, CLASS A AND CLASS B COMMENCED OPERATIONS ON APRIL 9, 1998,
MAY 11, 1998 AND MAY 4, 1998, RESPECTIVELY.
3 ANNUALIZED.
4 TOTAL RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
See Accompanying Notes
37
<PAGE> 40
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA BALANCED ALLOCATION FUND
NOVEMBER 30, 1999
(UNAUDITED)
Number Value
of Shares (000)
--------- -------
COMMON STOCK -- 48.9%
AIR TRANSPORTATION -- 0.2%
Atlas Air* 4,950 $ 125
-------
AIRCRAFT -- 0.3%
United Technologies 3,600 203
-------
AUTO -- 0.2%
Monaco Coach* 9,250 199
-------
BANKS -- 1.4%
Comerica 2,800 148
Cullen/Frost Bankers 4,250 121
Imperial Bancorp* 6,350 152
MBNA 8,800 222
Republic Security Financial 19,400 156
State Street 3,800 279
-------
1,078
-------
BROADCASTING, NEWSPAPERS & ADVERTISING-- 1.2%
Ancor Communications* 1,550 94
Antec*# 3,300 185
Citadel Communications* 2,550 128
Cumulus Media* 5,650 226
Omnicom Group 3,300 291
-------
924
-------
BUILDING & BUILDING SUPPLIES -- 0.2%
Trex* 5,850 151
-------
BUSINESS SERVICES -- 0.8%
Automatic Data Processing 5,500 272
FYI* 3,100 99
National Information
Consortium*# 5,100 135
Online Resources &
Communications* 9,150 112
-------
618
-------
CABLE TELEVISION -- 0.7%
Comcast, Cl A Special 11,600 524
-------
CHEMICALS -- 0.8%
Avery Dennison 4,900 291
Church & Dwight 2,350 66
Monsanto 5,900 249
-------
606
-------
COMMUNICATIONS EQUIPMENT -- 2.6%
Act Manufacturing* 6,000 183
C-COR Electronics 2,200 112
Lucent Technologies 5,400 395
Mercury Computer Systems* 3,750 214
Optical Coating Laboratory 1,350 266
Number Value
of Shares (000)
--------- -------
COMMON STOCK -- CONTINUED
COMMUNICATIONS EQUIPMENT -- CONTINUED
Qualcomm* 1,700 $ 616
Sawtek* 5,550 253
-------
2,039
-------
COMPUTER COMMUNICATIONS EQUIPMENT -- 1.1%
Clarify* 2,450 228
Digex* 1,100 37
MicroStrategy* 750 92
OpenTV* 31 2
Optimal Robotics* 5,950 193
Proxim* 1,750 98
Visual Networks* 4,250 251
-------
901
-------
COMPUTER HARDWARE -- 2.6%
Cisco Systems* 12,200 1,088
EMC* 4,400 368
Hewlett Packard 2,500 237
International Business
Machines 4,000 412
-------
2,105
-------
COMPUTER SOFTWARE -- 1.0%
Microsoft* 9,100 829
-------
COMPUTER SERVICES -- 2.4%
Advanced Digital Information* 3,050 137
Allaire* 950 144
Business Objects* 4,100 363
Egain Communication* 1,950 82
Mercury Interactive* 2,250 187
Micromuse* 2,000 229
National Computer Systems 4,750 182
NetObjects* 7,750 105
Novadigm* 8,850 154
Remedy* 3,200 112
Symantec* 5,200 243
-------
1,938
-------
DRUGS & HEALTH CARE -- 3.2%
Bristol-Myers Squibb 3,100 226
ChiRex* 3,450 120
Geltex Pharmaceuticals* 6,150 65
Johnson & Johnson 3,300 342
Lilly (Eli) 2,400 172
Merck 5,600 440
Pfizer 11,800 427
Schering-Plough 5,300 271
Titan Pharmaceuticals*# 8,550 123
Warner-Lambert 4,000 359
-------
2,545
-------
See Accompanying Notes
38
<PAGE> 41
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA BALANCED ALLOCATION FUND
NOVEMBER 30, 1999
(UNAUDITED)
Number Value
of Shares (000)
--------- -------
COMMON STOCK -- CONTINUED
ELECTRONICS -- 1.4%
CTS 5,500 $ 441
Dii Group* 5,350 338
Gentex* 8,950 167
Titan* 5,600 152
-------
1,098
-------
ELECTRICAL SERVICES -- 0.4%
Calpine* 2,700 159
Texas Utilities 5,000 179
-------
338
-------
ELECTRICAL TECHNOLOGY -- 0.2%
SBS Technologies* 4,800 162
-------
ENTERTAINMENT -- 0.7%
3DO Company* 9,350 89
Anchor Gaming* 1,600 88
Macrovision* 3,750 240
T-HQ*# 2,800 150
-------
567
-------
FINANCIAL SERVICES -- 1.5%
Fannie Mae 7,100 473
Freddie Mac 7,100 351
J.P. Morgan 1,900 250
Metris 4,650 147
-------
1,221
-------
FOOD & BEVERAGE -- 0.4%
Coca Cola 4,600 310
-------
GAS & NATURAL GAS -- 0.2%
Nicor 3,150 109
Southwest Gas 3,550 83
-------
192
-------
HOTELS & LODGING -- 0.1%
Station Casinos* 4,850 116
-------
HOUSEHOLD PRODUCTS -- 0.6%
Procter & Gamble 4,800 518
-------
INFORMATION RETRIEVAL SERVICES -- 0.4%
Digital River* 3,650 111
Infospace.com* 1,350 137
QRS* 1,600 93
-------
341
-------
Number Value
of Shares (000)
--------- -------
COMMON STOCK -- CONTINUED
INSURANCE -- 1.1%
American International Group 5,968 $ 616
Annuity & Life 5,100 145
Scottish Annuity & Life 12,200 104
-------
865
-------
MEDICAL & MEDICAL SERVICES -- 1.7%
Arthrocare* 1,150 70
Biomatrix*# 4,000 94
Colorado Medtech* 1,850 23
Datascope* 7,500 278
Enzon* 2,400 81
Hooper Holmes 11,050 261
Medtronic 7,000 272
PolyMedica* 8,150 143
Priority Healthcare, Cl B* 3,150 78
Theragenics* 7,550 72
-------
1,372
-------
MISCELLANEOUS BUSINESS SERVICES -- 0.5%
Concord EFS*# 8,100 215
Onyx Software* 4,800 155
-------
370
-------
MISCELLANEOUS MANUFACTURING -- 1.2%
Commscope* 8,750 369
Tyco International 13,800 553
-------
922
-------
MOTORCYCLE & MOTOR SCOOTER -- 0.4%
Harley-Davidson 4,900 299
-------
OFFICE & BUSINESS EQUIPMENT -- 0.5%
Lexmark International, Cl A* 4,600 382
-------
PAPER & FOREST PRODUCTS -- 0.4%
International Paper 5,400 282
-------
PERSONAL CARE -- 0.3%
Gillette 6,000 241
-------
PETROLEUM & FUEL PRODUCTS -- 0.5%
Cal Dive International* 1,850 67
Forest Oil* 5,000 57
Louis Dreyfus Natural Gas* 3,000 54
Schlumberger 3,800 228
-------
406
-------
See Accompanying Notes
39
<PAGE> 42
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA BALANCED ALLOCATION FUND
NOVEMBER 30, 1999
(UNAUDITED)
Number Value
of Shares (000)
--------- -------
COMMON STOCK -- CONTINUED
PETROLEUM REFINING -- 1.7%
Chevron 4,200 $ 372
Coastal 5,100 180
Conoco 8,000 209
Exxon 7,100 563
Tesoro Petroleum* 3,750 45
-------
1,369
-------
PHARMACEUTICALS -- 0.3%
King Pharmaceuticals*# 6,000 277
-------
PRINTING & PUBLISHING -- 0.8%
Time Warner 7,300 450
Valassis Communications* 3,900 154
-------
604
-------
PROFESSIONAL SERVICES -- 0.4%
Affymetrix* 550 54
Corporate Executive Board* 2,000 93
Diamond Technology Partners* 2,100 110
Millennium Pharmaceutical* 850 83
-------
340
-------
RETAIL -- 5.1%
Cheap Tickets* 5,250 88
Costco Wholesale* 3,500 321
Dayton Hudson 5,100 360
Gap 6,600 267
Home Depot 7,200 569
Jack in the Box* 7,950 167
Rex Stores* 6,550 244
Safeway* 7,700 284
Tandy 7,100 544
The Children's Place
Retail Stores*# 4,250 105
TJX Companies 7,300 191
Too* 7,000 129
Wal-Mart 9,100 524
Walgreen# 9,200 268
-------
4,061
-------
SEMI-CONDUCTORS/INSTRUMENTS -- 4.3%
Altera* 6,100 329
Analog Devices* 4,400 253
ASM International N.V.* 12,400 201
Burr-Brown* 2,800 124
Chartered Semiconductor
Manufacturing** 26 1
Credence Systems* 2,250 130
Cymer*# 3,950 158
Number Value
of Shares (000)
--------- -------
COMMON STOCK -- CONTINUED
SEMI-CONDUCTORS/INSTRUMENTS -- CONTINUED
Exar* 3,950 $ 192
Fairchild Semiconductor
Int'l, Cl A* 3,550 99
Helix Technology 3,350 136
Integrated Device Technology* 3,450 81
Intel 6,600 506
Netsilicon* 13,550 180
PRI Automation, Cl A* 2,250 107
Silicon Storage Technology* 5,100 135
Texas Instruments 4,900 471
Transwitch* 2,300 108
Zoran* 5,000 199
-------
3,410
-------
SPECIALTY MACHINERY -- 1.3%
Emerson Electric 4,600 262
General Electric 5,700 741
-------
1,003
-------
TELEPHONE & TELECOMMUNICATION -- 3.2%
Adelphia Business Solutions* 3,500 109
Alltel 3,500 303
Audiovox, Cl A* 6,050 180
GTE 6,100 445
ICG Communications*# 8,700 165
Intermedia# 3,450 96
Mastec* 2,600 107
MCI WorldCom* 5,700 471
SBA Communications* 12,600 145
SBC Communications 9,648 501
-------
2,522
-------
TRUCKING -- 0.2%
Expeditors International of
Washington 4,800 196
-------
WHOLESALE -- 0.5%
BJ's Wholesale Club* 4,500 168
Cardinal Health 4,100 214
-------
382
-------
TOTAL COMMON STOCK
(Cost $31,584) 38,951
-------
See Accompanying Notes
40
<PAGE> 43
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA BALANCED ALLOCATION FUND
NOVEMBER 30, 1999
(UNAUDITED)
Number Value
of Shares (000)
--------- -------
FOREIGN COMMON STOCK -- 12.5%
AUSTRALIA -- 0.1%
National Australia Bank*# 6,449 $ 93
-------
AUSTRIA -- 0.1%
Mayr Melnhof Karton* 1,131 47
-------
CANADA -- 0.1%
BCE 1,552 105
-------
FINLAND -- 0.4%
Nokia, ADR 1,284 177
Sonera Oyj 2,240 93
UPM-Kymmene* 1,121 38
-------
308
-------
FRANCE -- 1.4%
Altran Technologies* 348 166
Axa* 1,060 143
Castorama Dubois* 501 130
Compagnie de Saint Gobain* 266 45
Equant 502 49
France Telecom* 1,074 125
Rhone-Poulenc* 1,979 123
STMicroelectronics* 1,021 139
Thomson Multimedia* 224 10
Total Fina, Cl B* 1,200 160
Vivendi* 827 66
-------
1,156
-------
GERMANY -- 1.1%
Allianz* 278 82
HypoVereinsbank* 976 61
Deutsche Bank* 1,688 111
Deutsche Telekom 1,107 63
Epcos* 1,086 67
Linde* 1,473 74
Mannesmann*# 974 203
Siemens* 1,788 181
Foreign Stock* 3,207 53
-------
895
-------
HONG KONG -- 0.8%
China Telecom (Hong Kong)* 35,153 189
HSBC Holdings* 6,452 86
Hutchison Whampoa Limited* 7,776 96
Johnson Electric Holdings* 21,602 154
Li & Fung* 16,960 39
Swire Pacific, Cl A* 10,204 59
-------
623
-------
Number Value
of Shares (000)
--------- -------
FOREIGN COMMON STOCK -- CONTINUED
IRELAND -- 0.1%
Bank of Ireland* 8,010 $ 66
-------
ITALY -- 0.4%
Assicurazioni Generali* 1,176 34
Bulgari* 6,385 49
Telecom Italia* 9,888 109
Telecom Italia Mobile*# 14,188 112
-------
304
-------
JAPAN -- 3.4%
Fancl* 109 39
Bank of Tokyo-Mitsubishi* 1,758 25
Benesse* 748 180
Fanuc* 2,119 177
Fujitsu* 2,219 79
Hikari Tsushin* 69 108
Honda Motor* 283 12
Internet Initiative Japan, ADR* 358 34
Itochu* 10,995 66
Marubeni* 15,792 61
Nihon Unisys* 2,204 85
Nikko Securities* 6,023 75
Nintendo* 207 35
NEC* 3,352 78
Nippon Telegraph & Telephone* 1 18
NTT Mobile Communications
Network 10 351
Sanwa Bank* 3,086 38
Seven-Eleven* 392 64
SMC* 462 82
Softbank* 768 555
Sony* 1,213 225
Sumitomo Bank 1,950 30
Takeda Chemical Industries* 1,873 111
Takefuji 320 46
Tokyo Electron* 1,337 139
-------
2,713
-------
MEXICO -- 0.1%
Telefonos de Mexico, ADR 608 56
-------
NETHERLANDS -- 0.5%
Heineken* 1,050 51
ING Groep* 1,918 108
Koninklijke Ahold* 1,531 49
Royal Dutch Petroleum* 2,303 136
Wolters Kluwer* 2,283 69
-------
413
-------
See Accompanying Notes
41
<PAGE> 44
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA BALANCED ALLOCATION FUND
NOVEMBER 30, 1999
(UNAUDITED)
Number Value
of Shares (000)
--------- -------
FOREIGN COMMON STOCK -- CONTINUED
POLAND -- 0.0%
Polski Koncern Nafto ADR* 799 $ 8
-------
SINGAPORE -- 0.4%
DBS Group Holdings* 3,105 40
Development Bank Singapore* 6,000 78
Natsteel Electronics* 15,330 63
Singapore Airlines 11,511 116
Singapore Press Holdings* 2,392 45
-------
342
-------
SOUTH KOREA -- 0.1%
Pohang Iron & Steel, ADR* 3,127 112
-------
SPAIN -- 0.2%
Telefonica* 5,416 113
Telefonica - New* 114 2
Terra Networks* 237 8
-------
123
-------
SWEDEN -- 0.4%
LM Ericsson, ADR 2,814 136
Hennes & Mauritz, Series B* 3,572 113
Pharmacia & Upjohn, ADR 725 40
Svenska Cellulosa, Series A* 1,737 48
-------
337
-------
SWITZERLAND -- 0.8%
Adecco* 80 51
Credit Suisse Group* 452 85
Nestle* 37 67
Novartis* 73 114
Roche Holding* 11 133
Swiss Re* 45 92
UBS, Registered* 406 111
-------
653
-------
TAIWAN -- 0.1%
Taiwan Semiconductor, ADR* 2,885 103
-------
UNITED KINGDOM -- 1.9%
Allied Zurich* 8,076 98
Bass* 3,925 44
Batm Advanced Communications* 617 40
BOC Group* 4,839 100
BP Amoco* 12,265 125
British Telecom* 4,509 91
Colt Telecom Group* 1,545 58
Compass Group* 5,610 68
Ebookers.com, ADR* 974 22
Energis* 1,607 65
General Electric 8,379 129
Logica* 4,604 116
Number of Value
Maturity Shares/Par (000) (000)
--------- ---------------- -------
FOREIGN COMMON STOCK -- CONTINUED
UNITED KINGDOM -- CONTINUED
National Grid Holdings* 12,134 $ 93
Pearson* 5,716 137
QXL* 6,800 47
Invensys* 18,809 88
SmithKline Beecham* 3,202 43
Standard Chartered* 3,182 43
Thus* (B) 8,494 53
WPP Group* 4,677 69
-------
1,529
-------
TOTAL FOREIGN COMMON STOCKS
(Cost $8,414) 9,986
-------
CORPORATE BONDS -- 11.1%
BANKS -- 1.8%
Citicorp
7.125% 09/01/05 $ 75 75
6.375% 11/15/08 300 280
First Chicago Bank One
6.875% 06/15/03 310 309
First Maryland Bancorp
7.200% 07/01/07 300 295
First Union
6.950% 11/01/04 325 323
HSBC Holding
7.500% 07/15/09 155 155
-------
1,437
-------
BUILDING & CONSTRUCTION -- 0.2%
Halliburton
5.625% 12/01/08 175 157
-------
CHEMICALS -- 0.6%
Lubrizol
5.875% 12/01/08 250 224
Monsanto (B)*
5.375% 12/01/01 300 293
-------
517
-------
COMMUNICATIONS EQUIPMENT -- 0.4%
Motorola
7.500% 05/15/25 320 318
-------
COMPUTER SOFTWARE -- 0.6%
Computer Associates
6.250% 04/15/03 470 454
-------
FINANCIAL SERVICES -- 1.3%
Daimler Chrysler Global
6.900% 09/01/04 75 75
See Accompanying Notes
42
<PAGE> 45
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA BALANCED ALLOCATION FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
-------- ------ -------
CORPORATE BONDS -- CONTINUED
FINANCIAL SERVICES -- CONTINUED
First Union Capital Trust
7.950% 11/15/29 $ 340 $ 331
Ford Motor Credit Global
6.700% 07/16/04 275 272
7.375% 10/28/09 320 322
-------
1,000
-------
FOOD & BEVERAGE -- 0.1%
Archer Daniels Midland
7.500% 03/15/27 100 98
-------
FOREIGN -- 0.7%
Saskatchewan
8.000% 07/15/04 500 521
-------
LEISURE & RECREATIONAL PRODUCTS -- 0.4%
Brunswick
6.750% 12/15/06 300 284
-------
MACHINERY -- 0.5%
Cummins Engine
6.450% 03/01/05 200 189
Pentair
7.850% 10/15/09 250 247
-------
436
-------
MISCELLANEOUS PERSONAL CREDIT -- 0.1%
General Motors Acceptance
9.000% 10/15/02 50 53
-------
MORTGAGE BANKERS & CORRESPONDENTS -- 0.6%
Countrywide Home Loan
6.840% 10/22/04 500 489
-------
PRINTING & PUBLISHING -- 0.6%
American Greetings
6.100% 08/01/28 500 456
-------
REAL ESTATE DEVELOPMENT -- 0.3%
Susa Partnership
7.000% 12/01/07 300 272
-------
REAL ESTATE INVESTMENT TRUSTS -- 2.2%
Bradley Operating Partnership
7.000% 11/15/04 30 29
Commercial Net Lease Realty
8.125% 06/15/04 350 343
EOP Operating
6.500% 06/15/04 250 238
Federal Realty Investment Trust
8.750% 12/01/09 425 420
Gables Realty
6.800% 03/15/05 300 283
Par Value
Maturity (000) (000)
-------- ------ -------
CORPORATE BONDS -- CONTINUED
REAL ESTATE INVESTMENT TRUST -- CONTINUED
New Plan Excel Realty Trust
6.875% 10/15/04 $ 440 $ 431
-------
1,744
-------
STEEL & STEEL WORKS -- 0.5%
Worthington Industries
7.125% 05/15/06 430 417
-------
WHOLESALE -- 0.2%
Arrow Electronic
6.875% 06/01/18 225 199
-------
Total Corporate Bonds
(Cost $9,221) 8,852
-------
ASSET BACKED SECURITIES -- 5.3%
Champion Home Equity Loan Trust,
Series 1997-2, Class A5
6.710% 09/25/29 160 156
First Security Auto Owner Trust,
Series 1999-1, Class A4
5.740% 06/15/04 400 392
Flagship Auto Receivables Owner
Trust, Series 1999-2, Class A3
6.835% 11/18/04 135 135
GE Capital Mortgage,
Series 1999-HE1, Class A4
6.185% 01/25/23 290 282
Greenpoint Manufactured Housing,
Series 1999-1, Class A3
6.110% 11/15/18 290 273
IMC Home Equity Loan Trust,
Series 1997-7, Class A5
6.760% 10/20/20 560 554
New Century Home Equity Loan Trust,
Series 1999-NCA, Class A4
7.220% 07/25/30 300 294
New Century Home Equity Loan Trust,
Series 1999-NCB, Class A4
7.530% 09/25/28 285 284
New Century Home Equity Loan Trust,
Series 1997-NC6, Class A6
7.010% 05/25/26 380 375
Residential Asset Security Trust,
Series 1999-KS3, Class A3
7.180% 02/25/25 200 200
Saxon Asset Security Trust,
Series 1999-3, Class Af4
7.550% 10/25/26 670 671
See Accompanying Notes
43
<PAGE> 46
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA BALANCED ALLOCATION FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
-------- ------ -------
ASSET BACKED SECURITIES -- CONTINUED
Saxon Asset Security Trust,
Series 1999-3, Class Af6
7.525% 06/25/14 $ 295 $ 293
Vanderbilt Mortgage Finance,
Series 1999-C, Class 1A3
7.385% 01/07/20 300 300
-------
TOTAL ASSET BACKED SECURITIES
(Cost $4,252) 4,209
-------
COLLATERALIZED MORTGAGE
OBLIGATIONS -- 3.8%
Credit Suisse First Boston Mortgage
Securities, Series 1997-C1, Class A1C
7.240% 04/20/07 410 403
GE Capital Mortgage,
Series 1999-1, Class A1
6.500% 01/25/29 159 146
Morgan Stanley Capital I,
Series 1999-FNV1, Class A2
6.530% 03/15/32 550 521
PNC Trust, Series 1998-7, Class A5
6.750% 09/25/28 230 215
Prudential Securities Secured Financing,
Series 1999-NRF1, Class A2
6.480% 01/15/09 285 267
Prudential Securities Secured Financing,
Series 1998-C1, Class A1A3
6.350% 09/15/07 400 379
Residential Accredit Loans,
Series 1999-QS3, Class A8
6.500% 03/25/29 527 485
Residential Funding Mortgage
Securities I, Series 1998-S13,
Class A21
6.750% 06/25/28 270 248
Vende Mortgage Trust,
Series 1999-3, Class D
6.500% 06/15/15 350 328
-------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS
(Cost $3,146) 2,992
-------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 12.6%
FEDERAL HOME LOAN MORTGAGE CORPORATION -- 0.4%
Pool # C18271
7.000% 11/01/28 288 282
-------
Par Value
Maturity (000) (000)
-------- ------ -------
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- CONTINUED
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 7.0%
Pool # 376750
7.000% 09/01/27 $ 781 $ 766
Pool # 437810
6.000% 08/01/28 816 757
Pool # 437972
6.000% 08/01/28 197 183
Pool # 437979
6.000% 08/01/28 487 451
Pool # 440148
6.500% 08/01/28 1,805 1,722
Pool # 453931
6.500% 11/01/28 519 495
Pool # 484693
6.000% 02/01/29 1,328 1,232
-------
5,606
-------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 5.2%
Pool # 464845
7.500% 09/15/02 1,300 1,296
Pool # 17581
7.500% 08/15/25 392 392
Pool # 498651
6.500% 04/01/29 1,187 1,130
Pool # 472939
6.500% 05/15/29 236 225
Pool # 510422
7.500% 09/15/29 929 928
Pool # 481632
7.500% 11/15/29 155 155
-------
4,126
-------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $10,382) 10,014
-------
U.S. TREASURY OBLIGATIONS -- 3.2%
U.S. Treasury Note #
6.250% # 10/31/01 150 151
6.500% # 05/15/05 1,355 1,373
6.125% # 08/15/07 925 916
-------
U.S. Treasury Bonds #
6.250% # 08/15/23 110 106
-------
2,546
-------
TOTAL U.S. TREASURY
(Cost $2,541) 2,546
-------
See Accompanying Notes
44
<PAGE> 47
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA BALANCED ALLOCATION FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
(000) (000)
------ -------
CASH EQUIVALENT -- 0.2%
Goldman Sachs Financial Square
Premium Money Market
Fund $ 167 $ 167
-------
TOTAL CASH EQUIVALENT
(Cost $167) 167
-------
TOTAL INVESTMENTS -- 97.5%
(Cost $69,707) $77,717
=======
OTHER ASSETS AND LIABILITIES,
NET -- 2.5% 2,017
-------
NET ASSETS:
Portfolio Shares of Class I (unlimited
authorization -- no par value) based on
6,789,220 outstanding shares
of beneficial interest 68,855
Portfolio Shares of Class A (unlimited
authorization -- no par value) based on
349,662 outstanding shares
of beneficial interest 3,659
Portfolio Shares of Class B (unlimited
authorization -- no par value) based on
43,630 outstanding shares
of beneficial interest 453
Accumulated net realized loss on investments (1,531)
Net unrealized appreciation on investments 8,010
Undistributed net investment income 288
-------
TOTAL NET ASSETS -- 100.0% $79,734
=======
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SHARE -- CLASS I $11.10
=======
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A $11.09
=======
MAXIMUM OFFERING PRICE PER
SHARE -- CLASS A ($11.09 / 95.25%) $11.64
=======
NET ASSET VALUE AND OFFERING
PRICE PER SHARE -- CLASS B $11.12
=======
- - ------------------------------------------------
* NON-INCOME PRODUCING SECURITY.
# SECURITY FULLY OR PARTIALLY ON LOAN.
(A) VARIABLE RATE SECURITY - THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON NOVEMBER 30, 1999.
(B) -- PRIVATE PLACEMENT SECURITIES
ADR -- AMERICAN DEPOSITORY RECEIPT
CL -- CLASS
SER -- SERIES
See Accompanying Notes
45
<PAGE> 48
[GRAPHIC OMITTED] FINANCIAL HIGHLIGHTS
ARMADA BALANCED ALLOCATION FUND
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
For the Six Months
Ended November 30, 1999 For the Period
(Unaudited) Ended May 31, 1999
-------------------------------- -------------------------------------
Class I Class A Class B Class I2 Class A2 Class B2
-------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.31 $10.31 $10.33 $ 10.00 $ 9.74 $ 9.82
------- ------ ------ ------- ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.12 0.10 0.07 0.18 0.14 0.10
Net gain on securities
(realized and unrealized) 0.79 0.79 0.79 0.28 0.57 0.51
------- ------ ------ ------- ------ ------
Total from investment operations 0.91 0.89 0.86 0.75 0.71 0.61
------- ------ ------ ------- ------ ------
Less Distributions
Dividends from net investment income (0.12) (0.11) (0.07) (0.14) (0.10) (0.10)
------- ------ ------ ------- ------ ------
Total distributions (0.12) (0.11) (0.07) (0.15) (0.14) (0.10)
------- ------ ------ ------- ------ ------
Net asset value, end of period $ 11.10 $11.09 $11.12 $ 10.31 $10.31 $10.33
======= ====== ====== ======= ====== ======
TOTAL RETURN 9.29%4 9.09%1,4 8.77%1,4 4.57%4 7.26%1,4 6.07%1,4
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $75,370 $3,879 $ 485 $85,027 $1,466 $ 385
Ratio of expenses to average net assets 0.90%3 1.15%3 1.86%3 1.06%3 1.31%3 2.02%3
Ratio of net investment income to
average net assets 2.16%3 1.91%3 1.20%3 2.25%3 2.50%3 1.29%3
Ratio of expenses to average net assets
before fee waivers 0.90%3 1.15%3 1.86%3 1.06%3 1.31%3 2.02%3
Ratio of investment income to average net
assets before fee waivers 2.16%3 1.91%3 1.20%3 2.25%3 2.50%3 1.29%3
Portfolio turnover rate 87% 87% 87% 116% 116% 116%
</TABLE>
1 TOTAL RETURN EXCLUDES SALES CHARGE.
2 CLASS I, CLASS A AND CLASS B COMMENCED OPERATIONS ON JULY 10, 1998, JULY 31,
1998 AND NOVEMBER 11, 1998, RESPECTIVELY.
3 ANNUALIZED.
4 TOTAL RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
See Accompanying Notes
46
<PAGE> 49
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA BOND FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
-------- ----- -------
CORPORATE BONDS -- 26.2%
BANKS -- 5.9%
Citicorp
6.375% 11/15/08 $ 8,000 $ 7,480
First Chicago Bank One
6.875% 06/15/03 7,000 6,982
First Maryland Bancorp
7.200% 07/01/07 5,000 4,925
First Union
6.950% 11/01/04 7,970 7,920
First Union Capital Trust
7.950% 11/15/29 8,440 8,218
HSBC Holding
7.500% 07/15/09 5,750 5,764
-------
41,289
-------
BUILDING & CONSTRUCTION -- 0.3%
Halliburton
5.625% 12/01/08 2,000 1,797
-------
CHEMICALS -- 0.9%
Lubrizol
5.875% 12/01/08 7,360 6,587
-------
COMMUNICATIONS EQUIPMENT -- 1.2%
Motorola
7.500% 05/15/25 8,395 8,332
-------
COMPUTER SOFTWARE -- 1.7%
Computer Associates
6.250% 04/15/03 12,250 11,821
-------
FINANCIAL SERVICES -- 1.8%
Daimler Chrysler Global
6.900% 09/01/04 2,220 2,217
Ford Motor Credit Global
6.700% 07/16/04 2,750 2,719
7.375% 10/28/09 7,300 7,352
Sallie Mae
7.300% 08/01/09 500 517
-------
12,805
-------
FOOD & BEVERAGE -- 1.2%
Archer Daniels Midland
7.500% 03/15/27 6,900 6,771
Kraft
8.500% 02/15/17 1,313 1,354
-------
8,125
-------
INSURANCE -- 0.4%
Cigna
7.400% 05/15/07 3,000 2,951
-------
Par Value
Maturity (000) (000)
-------- ------- -------
CORPORATE BONDS -- CONTINUED
LEISURE & RECREATIONAL PRODUCTS -- 1.1%
Brunswick
6.750% 12/15/06 $ 8,170 $ 7,741
--------
MACHINERY -- 1.6%
Cummins Engine
6.450% 03/01/05 4,800 4,536
Pentair
7.850% 10/15/09 6,680 6,605
--------
11,141
--------
PRINTING & PUBLISHING -- 1.5%
American Greetings
6.100% 08/01/28 10,465 9,549
Knight-Ridder
8.500% 09/01/01 1,036 1,048
--------
10,597
--------
RAILROADS -- 0.3%
CSX Transportation
7.540% 03/15/03 2,000 2,020
--------
REAL ESTATE DEVELOPMENT -- 0.9%
Susa Partnership
7.000% 12/01/07 7,000 6,352
--------
REAL ESTATE INVESTMENT TRUSTS -- 4.6%
Bradley Operating Partnership
7.000% 11/15/04 3,100 2,949
Commercial Net Lease Realty
8.125% 06/15/04 5,500 5,397
Federal Realty Investment Trust
8.750% 12/01/09 10,000 9,889
Gables Realty
6.800% 03/15/05 4,665 4,407
Prime Property Funding,
Series II (B)
6.800% 08/15/02 10,000 9,865
--------
32,507
--------
STEEL & STEEL WORKS -- 1.9%
Worthington Industries
7.125% 05/15/06 13,910 13,510
--------
WHOLESALE -- 0.9%
Arrow Electronic
6.875% 06/01/18 6,700 6,036
--------
TOTAL CORPORATE BONDS
(Cost $190,333) 183,611
--------
See Accompanying Notes
47
<PAGE> 50
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA BOND FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
-------- ------- --------
ASSET BACKED SECURITIES -- 17.8%
Amresco Securitized Net Interest
Margin, Series 1999-1A, Class A
9.100% 09/27/29 $ 8,490 $ 8,299
Champion Home Equity Loan Trust,
Series 1997-2, Class A5
6.710% 09/25/29 3,900 3,799
Export Funding Trust,
Series 1995-A, Class A
8.210% 12/29/06 2,258 2,377
First Security Auto Owner Trust,
Series 1999-1, Class A4
5.740% 06/15/04 9,970 9,769
Flagship Auto Receivables Owner
Trust, Series 1999-2, Class A3
6.835% 11/18/04 3,250 3,243
GE Capital Mortgage,
Series 1999-HE1, Class A4
6.185% 01/25/23 9,760 9,488
Greenpoint Manufactured Housing,
Series 1999-1, Class A3
6.110% 11/15/18 6,880 6,485
IMC Home Equity Loan Trust,
Series 1997-7, Class A5
6.760% 10/20/20 12,810 12,664
New Century Home Equity Loan
Trust, Series 1997-NC6, Class A6
7.010% 05/25/26 9,000 8,891
New Century Home Equity Loan
Trust, Series 1999-NCB, Class A4
7.530% 09/25/28 7,525 7,499
New Century Home Equity Loan
Trust, Series 1999-NCA, Class A4
7.220% 07/25/30 7,029 6,885
Pegasus Aviation Lease Securitization,
Series 1999-1, Class A1 (B)
6.300% 03/25/29 7,292 7,071
Residential Asset Security Trust,
Series 1999-KS3, Class A3
7.180% 02/25/25 5,240 5,229
Saxon Asset Security Trust,
Series 1999-3, Class AF6
7.525% 06/25/14 7,303 7,264
Saxon Asset Security Trust,
Series 1999-3, Class AF4
7.550% 10/25/26 16,730 16,751
The Money Store Home Equity
Trust, Series 1998-A, Class AV (A)
5.610% 06/15/29 2,123 2,122
Par Value
Maturity (000) (000)
--------- ------- --------
ASSET BACKED SECURITIES -- CONTINUED
Turkey Trust, Series T-3
9.625% 05/15/02 $ 297 $ 304
Vanderbilt Mortgage Finance,
Series 1999-C, Class 1A3
7.385% 01/07/20 6,610 6,605
--------
TOTAL ASSET BACKED SECURITIES
(Cost $126,026) 124,745
--------
COLLATERALIZED MORTGAGE
OBLIGATIONS -- 16.8%
Credit Suisse First Boston
Mortgage Securities,
Series 1997-C1, Class A1C
7.240% 04/20/07 7,500 7,375
GE Capital Mortgage,
Series 1999-1, Class A1
6.500% 01/25/29 6,940 6,381
GMAC Commercial Mortgage
Securities, Series 1997-C1, Class X
1.640% 07/15/27 17,754 1,404
Housing Securities,
Series 1993-G, Class G9
7.500% 01/25/09 4,205 4,239
Morgan Stanley Capital I,
Series 1999-FNV1, Class A2
6.530% 03/15/32 13,000 12,324
PNC Trust, Series 1998-7, Class A5
6.750% 09/25/28 2,997 2,803
Prudential Home Mortgage
Securities, Series 1996-7, Class A4
6.750% 06/25/11 1,500 1,441
Prudential Securities
Secured Financing,
Series 1998-C1, Class A1A3
6.350% 09/15/07 10,090 9,563
Prudential Securities Secured
Financing, Series 1999-NRF1,
Class A2
6.480% 01/15/09 7,460 7,063
Residential Accredit Loans,
Series 1998-QS7, Class NB4
6.750% 07/25/28 13,684 12,838
Residential Accredit Loans,
Series 1999-QS3, Class A8
6.500% 03/25/29 16,797 15,467
See Accompanying Notes
48
<PAGE> 51
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA BOND FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
-------- ------- --------
COLLATERALIZED MORTGAGE
OBLIGATIONS -- CONTINUED
Residential Funding Mortgage
Securities I, Series 1993-S44,
Class A3 (A)
5.990% 11/25/23 $ 2,111 $ 2,115
Residential Funding Mortgage
Securities I, Series 1998-S13,
Class A21
6.750% 06/25/28 6,170 5,670
Structured Asset Sales,
Series 1994-5, Class A
7.000% 07/25/24 21,331 20,453
Vende Mortgage Trust,
Series 1999-3, Class D
6.500% 06/15/15 8,650 8,096
--------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $122,238) 117,232
--------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 25.9%
FEDERAL HOME LOAN MORTGAGE CORPORATION -- 3.3%
Pool # 219329
9.250% 12/01/02 46 48
Pool # E31059
8.500% 05/01/06 62 64
Pool # E00164
6.500% 10/01/07 302 296
Pool # 252804
8.500% 07/01/08 61 64
Pool # E50893
6.500% 09/01/08 752 742
Series C - 78
9.400% 09/15/08 19 19
Pool # E60894
7.500% 07/01/10 26 26
Pool # E61277
7.500% 09/01/10 110 112
Pool # E20204
6.500% 11/01/10 506 497
Pool # E61976
7.000% 11/01/10 3,590 3,585
Pool # E20206
7.500% 11/01/10 138 140
Pool # E64179
7.500% 05/01/11 293 297
Pool # E64198
7.500% 05/01/11 160 162
Pool # E64229
7.500% 05/01/11 9 9
Pool # E64248
7.500% 05/01/11 620 630
Par Value
Maturity (000) (000)
-------- ------- --------
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- CONTINUED
FEDERAL HOME LOAN MORTGAGE CORPORATION -- CONTINUED
Pool # 280417
8.500% 09/01/16 $ 7 $ 7
Pool # 141138
7.500% 05/01/17 420 428
Pool # 294315
8.500% 06/01/17 14 15
Pool # 450074
8.500% 06/01/17 169 178
Pool # 80322
8.000% 07/01/25 2,128 2,173
Pool # 483469
6.500% 09/15/28 5,827 5,549
Pool # C18271
7.000% 11/01/28 7,817 7,660
--------
22,701
--------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 14.9%
Series 1-C
9.250% 11/15/01 712 731
Pool # 77831
7.500% 12/01/07 110 111
Pool # 31592
7.500% 03/01/08 93 94
Pool # 190506
6.500% 12/01/08 900 888
FNMA (A)
6.375% 06/15/09 3,140 3,047
Pool # 1125
9.000% 07/01/09 37 39
Pool # 35366
8.500% 11/01/09 70 72
Pool # 316357
7.000% 07/01/10 1,001 1,000
Pool # 210452
9.500% 05/01/18 117 125
Pool # 250060
7.500% 06/01/24 4,137 4,159
Pool # 322344
7.500% 09/01/25 2,296 2,301
Pool # 250433
7.500% 01/01/26 4,253 4,261
Pool # 346316
7.500% 05/01/26 2,359 2,366
Pool # 407603
7.500% 12/01/27 1,028 1,028
Pool # 413863
7.500% 12/01/27 5,295 5,293
Pool # 420621
7.500% 12/01/27 3,964 3,961
See Accompanying Notes
49
<PAGE> 52
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA BOND FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
---------- ------- -------
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- CONTINUED
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- CONTINUED
Pool # 417392
6.500% 02/01/28 $ 1,222 $ 1,168
Pool # 435082
6.000% 07/01/28 1,224 1,136
Pool # 440148
6.500% 08/01/28 996 951
Pool # 446109
7.500% 10/01/28 1,038 1,035
Pool # 448509
6.000% 11/01/28 4,786 4,486
Pool # C00690
6.000% 12/01/28 7,184 6,673
Pool # C18901
6.000% 12/01/28 1,962 1,822
Pool # 252162
6.500% 12/01/28 9,321 8,895
Pool # 252212
6.500% 01/01/29 3,481 3,321
Pool # 484693
6.000% 02/01/29 13,001 12,063
Pool # 484699
6.000% 02/01/29 17,586 16,316
Pool # 484731
6.000% 03/01/29 489 454
Pool # 492335
6.000% 05/01/29 10,858 10,071
Pool # 494724
6.500% 05/01/29 4,601 4,388
Pool # 513370
6.500% 08/01/29 4 4
Pool # 441542
7.500% 10/01/29 2,015 2,012
--------
104,271
--------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 7.7%
Pool # 22374
8.000% 03/15/08 81 83
Pool # 9244
8.250% 04/20/17 47 48
Pool # 9279
8.250% 07/20/17 104 107
Pool # 1388
9.000% 02/20/19 125 132
Pool # 164775
9.500% 06/15/19 64 69
Pool # 36473
8.500% 11/15/21 100 104
Par Value
Maturity (000) (000)
---------- ------- -------
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- CONTINUED
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- CONTINUED
Pool # 303442
8.500% 11/15/21 $ 12 $ 12
Pool # 308571
8.500% 05/15/21 80 83
Pool # 310780
8.500% 09/15/21 19 20
Pool # 314586
8.500% 11/15/21 166 173
Pool # 315728
8.500% 11/15/21 192 200
Pool # 319999
8.500% 07/15/22 102 106
Pool # 321786
8.500% 07/15/22 106 110
Pool # 332285
8.500% 07/15/22 141 147
Pool # 325399
7.500% 08/15/22 9 9
Pool # 321563
8.500% 08/15/22 32 34
Pool # 304732
7.500% 12/15/22 684 690
Pool # 337049
7.500% 04/15/23 357 360
Pool # 348665
7.500% 04/15/23 231 233
Pool # 337062
7.500% 05/15/23 234 235
Pool # 331869
7.500% 06/15/23 248 249
Pool # 371437
7.000% 11/15/23 177 174
Pool # 483453
6.500% 09/15/28 5,641 5,371
Pool # 486516
6.500% 09/15/28 8,626 8,213
Pool # 482829
6.500% 11/15/28 8,488 8,082
Pool # 498652
6.500% 04/15/29 2,417 2,301
Pool # 480525
7.000% 06/15/29 1,857 1,817
Pool # 502768
7.500% 09/01/29 2,951 2,949
Pool # 505842
7.500% 09/15/29 2,995 2,992
See Accompanying Notes
50
<PAGE> 53
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA BOND FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
---------- ------- -------
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- CONTINUED
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- CONTINUED
Pool # 507382
7.500% 09/15/29 $ 5,027 $ 5,023
Pool # 510422
7.500% 09/15/29 10,065 10,055
Pool # 481632
7.500% 11/15/29 3,710 3,707
--------
53,888
--------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $187,362) 180,860
--------
U.S. TREASURY OBLIGATIONS -- 12.5%
U.S. Treasury Notes
6.250% 10/31/01 6,755 6,787
6.500% 05/15/05 2,880 2,919
6.125% 08/15/07 9,630 9,539
TIPS
3.875%# 01/15/09 15,201 14,893
3.625% 04/15/28 19,699 18,038
--------
U.S. TREASURY BONDS
6.250% 08/15/23 36,570 35,382
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $90,437) 87,558
--------
CASH EQUIVALENT -- 0.3%
Goldman Sachs Financial Square
Government Money Market Fund 2,408 2,408
--------
TOTAL CASH EQUIVALENT
(Cost $2,408) 2,408
--------
TOTAL INVESTMENTS -- 99.5%
(Cost $718,804) $696,414
========
OTHER ASSETS AND LIABILITIES,
NET -- 0.5% 3,262
--------
Value
(000)
-------
NET ASSETS:
Portfolio Shares of Class I (unlimited
authorization -- no par value) based on
71,771,666 outstanding shares
of beneficial interest $733,431
Portfolio Shares of Class A (unlimited
authorization -- no par value) based on
348,386 outstanding shares
of beneficial interest 3,561
Portfolio Shares of Class B (unlimited
authorization -- no par value) based on
68,807 outstanding shares
of beneficial interest 719
Accumulated net realized loss on investments (15,654)
Net unrealized depreciation on investments (22,390)
Undistributed net investment income 9
--------
TOTAL NET ASSETS -- 100.0% $699,676
========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SHARE -- CLASS I $9.69
========
NET ASSET VALUE, AND REDEMPTION
PRICE PER SHARE-- CLASS A $9.71
========
MAXIMUM PUBLIC OFFERING PRICE
PER SHARE -- CLASS A ($9.71 / 95.25%) $10.12
========
NET ASSET VALUE, AND OFFERING
PRICE PER SHARE -- CLASS B $9.70
========
- - ------------------------------------------------
# SECURITY FULLY OR PARTIALLY ON LOAN.
(A) VARIABLE RATE SECURITY - THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON NOVEMBER 30, 1999.
(B) PRIVATE PLACEMENT SECURITY
(C) INTEREST ONLY SECURITY
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
TBA -- TO BE ANNOUNCED
TIPS -- TREASURY INFLATION PROTECTED SECURITY
See Accompanying Notes
51
<PAGE> 54
[GRAPHIC OMITTED] FINANCIAL HIGHLIGHTS
ARMADA BOND FUND
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
For the Six Months
Ended November 30, 1999 For the Year Ended May 31,
(Unaudited) 1999 1998
----------------------------- ----------------------------- ------------------------------
Class I Class A Class B Class I Class A Class B Class I Class A Class B2
-------- ------- ------- -------- ------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 9.96 $ 9.98 $ 9.97 $ 10.27 $ 10.27 $ 10.26 $ 10.02 $ 10.02 $10.35
-------- ------- ------- -------- ------- ------- -------- ------- ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.30 0.29 0.25 0.56 0.54 0.47 0.59 0.56 0.47
Net gain/(loss) on securities
(realized and unrealized) (0.27) (0.28) (0.27) (0.17) (0.15) (0.15) 0.25 0.25 (0.09)
-------- ------- ------- -------- ------- ------- -------- ------- ------
Total from investment
operations 0.03 0.01 (0.02) 0.39 0.39 0.32 0.84 0.81 0.38
-------- ------- ------- -------- ------- ------- -------- ------- ------
LESS DISTRIBUTIONS
Dividends from net investment
income (0.30) (0.28) (0.25) (0.56) (0.54) (0.47) (0.59) (0.56) (0.47)
Distributions from net realized
capital gains (0.00) (0.00) (0.00) (0.14) (0.14) (0.14) (0.00) (0.00) (0.00)
Distributions in excess of net
realized capital gains (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
-------- ------- ------- -------- ------- ------- -------- ------- ------
Total distributions (0.30) (0.28) (0.25) (0.70) (0.68) (0.61) (0.59) (0.56) (0.47)
-------- ------- ------- -------- ------- ------- -------- ------- ------
Net asset value, end of period $ 9.69 $ 9.71 $ 9.70 $ 9.96 $ 9.98 $ 9.97 $ 10.27 $ 10.27 $10.26
======== ======= ======= ======== ======= ======= ======== ======= ======
TOTAL RETURN 0.86%5 0.74%1,5 0.49%1,5 3.82% 3.77%1 3.06%1 8.55% 8.29%1 8.36%1,4
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's) $695,625 $ 3,384 $ 667 $758,713 $ 2,804 $ 725 $132,620 $ 161 $ 1
Ratio of expenses to average
net assets 0.74%4 0.99%4 1.70%4 0.70% 0.96% 1.66% 0.80% 1.05% 1.74%4
Ratio of net investment income to
average net assets 6.04%4 5.79%4 5.08%4 5.44% 5.18% 4.48% 5.72% 5.52% 2.71%4
Ratio of expenses to averagenet
assets before fee waivers 0.74%4 0.99%4 1.70%4 0.70% 0.96% 1.66% 0.80% 1.05% 1.74%4
Ratio of net investment income to
average netassets before
fee waivers 6.04%4 5.79%4 5.08%4 5.44% 5.18% 4.48% 5.72% 5.52% 2.71%4
Portfolio turnover rate 62% 62% 62% 270% 270% 270% 220% 220% 220%
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended For the For the For the
May 31, Period Year Period
1997 Ended Ended Ended
-------------------- May 31, April 30, April 30,
Class I3 Class A2 1996(3) 1996(3) 1995(3)
-------- -------- ------ -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 9.97 $ 9.97 $ 10.04 $ 10.02 $ 10.00
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.59 0.41 0.05 0.64 0.44
Net gain/(loss) on securities
(realized and unrealized) 0.13 0.13 (0.07) 0.07 0.02
------- ------- ------- ------- -------
Total from investment
operations 0.72 0.54 (0.02) 0.71 0.46
------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net investment
income (0.59) (0.41) (0.05) (0.64) (0.44)
Distributions from net realized
capital gains (0.00) (0.00) (0.00) (0.05) (0.00)
Distributions in excess of net
realized capital gains (0.08) (0.08) (0.00) (0.00) (0.00)
------- ------- ------- ------- -------
Total distributions (0.67) (0.49) (0.05) (0.69) (0.44)
------- ------- ------- ------- -------
Net asset value, end of period $ 10.02 $ 10.02 $ 9.97 $ 10.04 $ 10.02
------- ------- ------- ------- -------
TOTAL RETURN 7.41% 7.22%1,4 (0.19)%1,5 7.09%1 4.75%1,5
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's) $91,161 $ 23 $88,829 $89,901 $53,316
Ratio of expenses to average
net assets 0.83% 1.07%4 0.85%4 0.85% 0.85%4
Ratio of net investment income to
average net assets 5.83% 5.64%4 5.88%4 6.20% 6.17%4
Ratio of expenses to average net
assets before fee waivers 0.96% 1.07%4 1.25%4 1.25% 1.33%4
Ratio of net investment income to
average net assets before
fee waivers 5.71% 5.64%4 5.48%4 5.80% 5.69%4
Portfolio turnover rate 96% 96% 2% 94% 172%
</TABLE>
1 TOTAL RETURN EXCLUDES SALES CHARGE.
2 CLASS A AND CLASS B COMMENCED OPERATIONS ON SEPTEMBER 11, 1996 AND JANUARY 6,
1998, RESPECTIVELY.
3 ACTIVITY FOR THE PERIOD PRESENTED INCLUDES THAT OF A PREDECESSOR FUND THROUGH
SEPTEMBER 6, 1996. THE PREDECESSOR FUND COMMENCED OPERATIONS ON AUGUST
10, 1994.
DURING 1996, THE PREDECESSOR FUND CHANGED ITS FISCAL YEAR-END FROM APRIL 30 TO
MAY 31.
4 ANNUALIZED.
5 TOTAL RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
See Accompanying Notes
52
<PAGE> 55
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA ENHANCED INCOME FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
--------- ------- -------
CORPORATE BONDS -- 30.7%
BANKS -- 2.9%
First Chicago
10.250% 05/01/05 $ 900 $ 940
First Union
8.125% 06/24/02 1,400 1,440
------
2,380
------
BEAUTY PRODUCTS -- 2.1%
Dial del Note
6.625% 06/15/03 1,800 1,762
------
COMPUTER SOFTWARE -- 1.2%
Computer Associates
6.250% 04/15/03 1,025 989
------
CONSULTING SERVICES -- 1.3%
CSC Enterprises
6.500% 11/15/01 1,100 1,096
------
DEFENSE -- 1.3%
Raytheon
5.950% 03/15/01 1,100 1,083
------
ENVIRONMENTAL SERVICES -- 2.1%
Browning Ferris
6.080% 01/18/00 1,700 1,696
------
EURO BOND -- 2.2%
Hydro Quebec (A)
5.813% 07/31/02 1,850 1,832
------
FINANCIAL SERVICES -- 2.4%
Case Credit
6.120% 08/01/01 1,000 989
Ford Motor Credit
6.550% 09/10/02 1,000 991
------
1,980
------
INDUSTRIAL -- 0.7%
Monsanto-Esop
7.090% 12/15/00 600 601
------
LEASING & RENTING -- 1.4%
Comdisco
5.950% 04/30/02 1,235 1,195
------
PAPER & PAPER PRODUCTS -- 1.9%
Champion International
9.700% 05/01/01 1,500 1,551
------
REAL ESTATE INVESTMENT TRUSTS -- 5.6%
Franchise Financial America
7.000% 11/30/00 1,810 1,800
Par Value
Maturity (000) (000)
-------- ------- ------
CORPORATE BONDS -- CONTINUED
REAL ESTATE INVESTMENT TRUSTS -- CONTINUED
Prime Property Funding,
Series II (B)
6.800% 08/15/02 $1,000 $ 986
7.000% 08/15/04 840 821
Weingarten Realty
6.000% 08/10/01 1,000 989
-------
4,596
-------
RETAIL -- 1.6%
Limited, Callable
12/10/99 @100 (A)
6.381% 05/22/01 1,300 1,297
-------
TRANSPORTATION -- 1.8%
General American
Transportation
10.125% 03/15/02 1,400 1,488
-------
TRUCKING -- 2.1%
JB Hunt
6.000% 12/12/00 1,750 1,730
-------
TOTAL CORPORATE BONDS
(Cost $25,558) 25,276
-------
ASSET BACKED SECURITIES -- 43.0%
AESOP Funding, Series 1997-1,
Class A1
6.220% 10/20/01 915 906
Bombardier Capital Mortgage
Securitization,
Series 1999-B,
Class A3
7.180% 12/15/15 1,335 1,337
Capital Equipment,
Series 1997-1,
Class A4
6.190% 02/15/02 2,855 2,836
Champion Home
Equity Loan,
Series 1998-1,
Class A2
8.120% 09/25/01 6,000 786
Citibank Credit
Card Master Trust,
Series 1996-1,
Class A (C)
0.000% 02/07/03 1,260 1,166
Copelco Capital Funding,
Series 1997-A, Class A4
6.470% 04/20/05 2,490 2,466
Countrywide Home Loans,
Series 1997-8, Class A2
6.750% 01/25/28 2,910 2,903
See Accompanying Notes
53
<PAGE> 56
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA ENHANCED INCOME FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
-------- ------- -------
ASSET BACKED SECURITIES -- CONTINUED
Discover Card,
Series 1998-4A,
Class A
5.750% 10/16/03 $ 1,060 $ 1,030
Empire Funding,
Series1999-1,
Class A3
6.440% 04/25/13 1,500 1,463
Flagship Auto Receivables
Owner Trust,
Series 1999-2,
Class A3
6.835% 11/18/04 3,000 2,993
Green Tree Home Equity
Loan Trust,
Series 1999-D,
Class A-7
6.500% 09/15/30 50,000 4,193
Household Automobile
Revolving Trust I,
Series 1998-1 Cl A3 (A)
5.858% 07/17/03 1,250 1,240
Merrill Lynch Mortgage
Investors,
Series 1998-GN1,
Class A1
7.110% 08/25/27 21 20
Metlife Capital Equipment
Loan Trust,
Series 1997-A,
Class A
6.850% 05/20/08 910 908
New Century Home Equity
Loan Trust,
Series 1997-NC6,
Class A6
7.010% 05/25/26 1,500 1,482
Oakwood Mortgage,
Series 1997-B,
Class B
6.950% 08/15/27 2,000 1,992
Pegasus Aviation Lease
Securitization,
Series 1999-1,
Class A1 (B)
6.300% 03/25/29 1,378 1,336
PNC Student Loan
Trust I,
Series 1997-2,
Class A4
6.446% 01/25/02 915 914
Sears Credit
Account Master
Trust, Series 1996-4,
Class A
6.450% 10/16/06 790 785
Westo, Series 1999-A,
Class A4
5.700% 11/20/03 2,750 2,687
World Omni Automobile
Lease Securitization
Trust, Series 1997,
Class A3 (B)
5.962% 08/14/01 1,410 1,399
Par Value
Maturity (000) (000)
-------- ------- ------
ASSET BACKED SECURITIES -- CONTINUED
World Omni Automobile
Lease Securitization Trust,
Series 1997-A, Class A3
6.850% 06/25/03 $ 589 $ 594
-------
TOTAL ASSET BACKED SECURITIES
(Cost $35,807) 35,436
-------
COLLATERALIZED MORTGAGE
OBLIGATIONS -- 5.6%
Evans Withycombe,
Series 1, Class A
7.980% 08/01/01 1,395 1,435
Merrill Lynch Mortgage
Investors,
Series 1996-C1,
Class A1
7.150% 04/25/28 1,122 1,120
Residential Asset
Securitization
Trust, Series 1997-A1,
Class A1
7.000% 03/25/27 589 587
Vendee Mortgage Trust,
Series 1999-2, Class LJ
6.500% 01/15/06 1,500 1,464
-------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS
(Cost $4,664) 4,606
-------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 6.9%
Federal Home Loan Mortgage
Corporation #
6.250% 10/15/02 3,000 2,987
Federal National Mortgage
Association
Pool # 426798
7.500% 07/01/08 1,394 1,414
Federal National Mortgage
Association,
Series 1997-26, Class E
5.000% 11/18/20 1,008 997
Small Business Administration
Pool # 503115
9.225% 04/25/09 258 274
-------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $5,698) 5,672
-------
U.S. TREASURY OBLIGATIONS -- 11.1%
U.S. Treasury Note #
6.250% 10/31/01 5,200 5,223
5.750% 08/15/03 4,000 3,951
-------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $9,213) 9,174
-------
See Accompanying Notes
54
<PAGE> 57
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA ENHANCED INCOME FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
(000) (000)
------- -------
CASH EQUIVALENT -- 0.8%
Fidelity Domestic Money Market
Fund $680 $ 680
-------
TOTAL CASH EQUIVALENT
(Cost $680) 680
-------
TOTAL INVESTMENTS -- 98.1%
(Cost $81,620) $80,844
=======
OTHER ASSETS AND LIABILITIES,
NET -- 1.9% 572
-------
NET ASSETS:
Portfolio Shares of Class I (unlimited
authorization -- no par value) based
8,178,251 on outstanding shares
of beneficial interest 81,984
Portfolio Shares of Class A (unlimited
authorization -- no par value) based on
53,367 outstanding shares
of beneficial interest 546
Portfolio Shares of Class B (unlimited
authorization -- no par value) based on
14,090 outstanding shares
of beneficial interest 140
Accumulated net realized loss on investments (470)
Net unrealized depreciation on investments (776)
Overdistributed net investment income (8)
-------
TOTAL NET ASSETS -- 100.0% $81,416
=======
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SHARE -- CLASS I $9.88
=======
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS A $9.91
=======
MAXIMUM OFFERING PRICE PER
SHARE-- CLASS A ($9.91 / 97.25%) $10.19
=======
NET ASSET VALUE AND OFFERING PRICE
PER SHARE -- CLASS B $9.91
=======
- - ------------------------------------------------
# SECURITY FULLY OR PARTIALLY ON LOAN.
(A) VARIABLE RATE SECURITY - THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON NOVEMBER 30, 1999
(B) PRIVATE PLACEMENT SECURITY
(C) ZERO COUPON BOND
MTN -- MEDIUM TERM NOTE
See Accompanying Notes
55
<PAGE> 58
[GRAPHIC OMITTED] FINANCIAL HIGHLIGHTS
ARMADA ENHANCED INCOME FUND
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
For the Six Months
Ended November 30, 1999 For the Year Ended May 31,
(Unaudited) 1999 1998
------------------------------- ------------------ -----------------
Class I Class A Class B2 Class I Class A Class I Class A
------- ------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.96 $ 9.99 $ 9.92 $ 10.06 $10.08 $ 9.99 $10.00
------- ------- ------- ------- ------ ------- ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.28 0.27 0.14 0.56 0.56 0.57 0.57
Net gain/(loss) on securities
(realized and unrealized) (0.08) (0.08) (0.08) (0.05) (0.05) 0.08 0.09
------- ------- ------- ------- ------ ------- ------
Total from investment operations 0.20 0.19 0.13 0.51 0.51 0.65 0.66
------- ------- ------- ------- ------ ------- ------
LESS DISTRIBUTIONS
Dividends from net
investment income (0.28) (0.27) (0.14) (0.56) (0.55) (0.57) (0.57)
Dividends in excess of net
investment income (0.00) (0.00) (0.00) 0.00 0.00 (0.00) (0.00)
Distributions of net realized
capital gains (0.00) (0.00) (0.00) (0.05) (0.05) (0.01) (0.01)
------- ------- ------- ------- ------ ------- ------
Total distributions (0.28) (0.27) (0.14) (0.61) (0.60) (0.58) (0.58)
------- ------- ------- ------- ------ ------- ------
Net asset value, end of period $ 9.88 $ 9.91 $ 9.91 $ 9.96 $ 9.99 $ 10.06 $10.08
======= ======= ======= ======= ====== ======= ======
TOTAL RETURN 2.29%6 2.27%1,6 1.47%1,6 5.14% 4.94%1,6 6.68% 6.68%1,6
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $80,751 $ 526 $ 139 $72,291 $ 550 $71,888 $ 559
Ratio of expenses to average net assets 0.48%5 0.58%5 1.33%5 0.43%5 0.53% 0.33% 0.41%
Ratio of net investment income to
average net assets 5.61%5 5.51%5 4.76%5 5.49%5 5.39% 5.69% 5.65%
Ratio of expenses to average net assets
before fee waivers 0.58%5 0.68%5 1.43%5 0.65%5 0.75% 0.69% 0.80%
Ratio of net investment income to
average net assets before
fee waivers 5.51%5 5.41%5 4.66%5 4.66%5 5.17% 5.33% 5.26%
Portfolio turnover rate 52% 52% 52% 190% 190% 135% 135%
</TABLE>
<TABLE>
<CAPTION>
For the Period
For the Year Ended May 31, Ended May 31,
1997 1996 1995
----------------- ----------------- -----------------
Class I Class A Class I Class A Class I2 Class A2
-------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.01 $10.02 $ 10.16 $10.18 $ 10.00 $10.10
-------- ------ ------- ------ ------- ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.58 0.57 0.58 0.56 0.51(4) 0.43(4)
Net gain/(loss) on securities
(realized and unrealized) 0.01 0.01 (0.05) (0.05) 0.06 0.06
-------- ------ ------- ------ ------- ------
Total from investment operations 0.59 0.58 0.53 0.51 0.57 0.49
-------- ------ ------- ------ ------- ------
LESS DISTRIBUTIONS
Dividends from net
investment income (0.58) (0.57) (0.58) (0.56) (0.41) (0.41)
Dividends in excess of net
investment income (0.00) (0.00) (0.10) (0.11) (0.00) (0.00)
Distributions of net realized
capital gains (0.03) (0.03) (0.00) (0.00) (0.00) (0.00)
-------- ------ ------- ------ ------- ------
Total distributions (0.61) (0.60) (0.68) (0.67) (0.41) (0.41)
-------- ------ ------- ------ ------- ------
Net asset value, end of period $ 9.99 $10.00 $ 10.01 $10.02 $ 10.16 $10.18
======== ====== ======= ====== ======= ======
TOTAL RETURN 6.02% 5.91%1,6 5.36% 5.13%1,6 6.54%1,3 6.84%1,3
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $ 61,031 $2,051 $66,918 $1,718 $60,467 $2,547
Ratio of expenses to average net assets 0.21% 0.31% 0.23% 0.33% 0.21%5 0.32%5
Ratio of net investment income to
average net assets 5.74% 5.63% 5.72% 5.55% 5.70%5 5.89%5
Ratio of expenses to average net assets
before fee waivers 0.66% 0.75% 0.70% 0.80% 0.71%5 0.79%5
Ratio of net investment income to
average net assets before
fee waivers 5.29% 5.18% 5.25% 5.08% 5.20%5 5.42%5
Portfolio turnover rate 225% 225% 98% 98% 36% 36%
</TABLE>
1 TOTAL RETURN EXCLUDES SALES CHARGE.
2 CLASS I, CLASS A AND CLASS B COMMENCED OPERATIONS ON JULY 7, 1994, SEPTEMBER
9, 1994 AND AUGUST 11, 1999, RESPECTIVELY.
3 TOTAL RETURNS HAVE BEEN ANNUALIZED BASED UPON THE PERIOD FROM EACH CLASS'
COMMENCEMENT DATE THROUGH MAY 31, 1995. GROSS TOTAL RETURNS OF THE
CLASS I AND CLASS A FOR THE PERIOD WERE 5.87% AND 4.92%, RESPECTIVELY.
4 CALCULATION BASED UPON AVERAGE SHARES OUTSTANDING.
5 ANNUALIZED.
6 TOTAL RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN
ANNUALIZED.
See Accompanying Notes
56
<PAGE> 59
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA GNMA FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
-------- ------- -------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 88.6%
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 2.3%
Pool # 397814
6.500% 12/01/12 $ 1,446 $ 1,428
Pool # 408074
6.500% 12/01/12 136 133
Pool # 417392
6.500% 02/01/28 899 860
-------
2,421
-------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 86.3%
Pool # 5147
7.250% 11/15/04 91 91
Pool # 90069
9.000% 05/15/09 43 46
Pool # 90223
9.000% 05/15/09 37 39
Pool # 90250
9.000% 05/15/09 60 63
Pool # 90332
9.000% 05/15/09 30 32
Pool # 90626
9.000% 05/15/09 31 33
Pool # 90923
9.000% 05/15/09 79 83
Pool # 90337
9.000% 06/15/09 45 47
Pool # 419305
7.000% 12/15/10 1,063 1,065
Pool # 780807
7.000% 06/15/11 1,768 1,772
Pool # 162246
9.000% 06/15/16 19 20
Pool # 608
9.000% 08/20/16 749 787
Pool # 200669
8.500% 01/15/17 80 83
Pool # 183426
8.500% 02/15/17 66 69
Pool # 206979
8.500% 02/15/17 35 37
Pool # 210565
8.000% 03/15/17 12 12
Pool # 203154
8.500% 03/15/17 60 63
Pool # 212306
8.500% 03/15/17 60 63
Pool # 208540
8.000% 04/15/17 49 50
Pool # 202955
8.500% 04/15/17 54 57
Pool # 228869
8.500% 04/15/17 732 763
Par Value
Maturity (000) (000)
-------- ------- -------
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- CONTINUED
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- CONTINUED
Pool # 199649
8.000% 05/15/17 $ 23 $ 23
Pool # 202671
8.000% 05/15/17 17 17
Pool # 216632
8.500% 05/15/17 40 42
Pool # 209632
9.000% 05/15/17 49 52
Pool # 220950
9.000% 06/15/17 289 307
Pool # 213458
8.000% 07/15/17 30 31
Pool # 231935
9.000% 08/15/17 92 98
Pool # 780048
8.500% 11/15/17 226 234
Pool # 289354
9.000% 07/15/20 111 118
Pool # 248132
8.500% 06/15/21 106 111
Pool # 300698
9.000% 06/15/21 195 208
Pool # 301286
8.500% 04/15/21 116 121
Pool # 302597
8.500% 05/15/21 15 15
Pool # 312919
8.500% 11/15/21 266 277
Pool # 314292
8.500% 11/15/21 120 125
Pool # 316989
8.500% 12/15/21 82 85
Pool # 303772
8.500% 02/15/22 97 101
Pool # 327085
7.500% 05/15/22 19 20
Pool # 333977
7.500% 09/15/22 44 44
Pool # 334116
7.500% 10/15/22 195 197
Pool # 336541
7.500% 10/15/22 16 16
Pool # 320229
7.500% 12/15/22 170 171
Pool # 340307
7.500% 02/15/23 176 177
Pool # 4280
8.500% 02/15/23 1,696 1,768
Pool # 329620
7.500% 04/15/23 1,950 1,964
See Accompanying Notes
57
<PAGE> 60
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA GNMA FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
-------- ------- -------
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- CONTINUED
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- CONTINUED
Pool # 348778
7.500% 04/15/23 $ 221 $ 223
Pool # 352189
7.500% 04/15/23 14 14
Pool # 352217
7.500% 04/15/23 3,541 3,567
Pool # 340792
7.500% 05/15/23 18 18
Pool # 354106
7.500% 05/15/23 28 28
Pool # 338766
7.500% 06/15/23 217 219
Pool # 266878
7.500% 07/15/23 302 304
Pool # 352143
7.500% 07/15/23 16 17
Pool # 352144
7.500% 07/15/23 207 209
Pool # 353185
7.500% 07/15/23 2,793 2,791
Pool # 359600
7.500% 07/15/23 55 55
Pool # 364258
7.500% 07/15/23 88 88
Pool # 352724
7.500% 08/15/23 106 107
Pool # 357235
7.500% 10/15/23 426 429
Pool # 358845
7.500% 10/15/23 135 136
Pool # 362619
7.500% 10/15/23 290 292
Pool # 370019
7.500% 10/15/23 86 87
Pool # 358308
7.500% 01/15/24 192 193
Pool # 374876
7.500% 01/15/24 185 186
Pool # 369696
7.500% 02/15/24 135 136
Pool # 388741
7.500% 04/15/24 167 168
Pool # 384077
8.000% 04/15/24 438 449
Pool # 385654
8.000% 04/15/24 551 564
Pool # 353023
7.500% 06/15/24 187 188
Pool # 371816
7.500% 06/15/24 88 88
Par Value
Maturity (000) (000)
-------- ------- -------
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- CONTINUED
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- CONTINUED
Pool # 32767
9.000% 11/15/24 $ 1,392 $ 1,482
Pool # 412760
8.750% 06/15/25 146 153
Pool # 412663
8.000% 09/15/26 2,259 2,309
Pool # 780618
8.000% 08/15/27 1,285 1,310
Pool # 427794
7.000% 01/15/28 5,315 5,191
Pool # 478016
6.500% 06/15/28 1,418 1,350
Pool # 462641
6.000% 07/15/28 2,885 2,665
Pool # 433881
6.500% 07/15/28 313 298
Pool # 450934
6.500% 07/15/28 623 593
Pool # 466002
6.500% 07/15/28 685 652
Pool # 476113
6.500% 07/15/28 1,942 1,849
Pool # 480411
6.500% 07/15/28 594 566
Pool # 480412
6.500% 07/15/28 549 523
Pool # 480451
6.500% 07/15/28 2,189 2,084
Pool # 446699
6.000% 08/15/28 1,478 1,365
Pool # 465549
6.500% 08/15/28 1,563 1,488
Pool # 486468
7.000% 08/15/28 3,595 3,511
Pool # 2673
6.500% 11/20/28 3,383 3,206
Pool # 469795
7.000% 12/15/28 2,741 2,685
Pool # 464488
6.000% 01/15/29 3,986 3,682
Pool # 483887
6.000% 01/15/29 1,999 1,847
Pool # 495838
7.000% 01/15/29 2,865 2,805
Pool # 464628
6.500% 03/15/29 3,989 3,798
Pool # 501561
6.500% 03/15/29 2,456 2,339
Pool # 472946
6.500% 05/15/29 2,486 2,367
See Accompanying Notes
58
<PAGE> 61
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA GNMA FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
-------- ------- -------
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- CONTINUED
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- CONTINUED
Pool # 480525
7.000% 06/15/29 $ 3,714 $ 3,634
Pool # 506302
6.500% 07/15/29 2,000 1,904
Pool # 468370
6.500% 07/15/29 998 950
Pool # 514262
6.500% 07/15/29 1,751 1,667
Pool # 518121
7.000% 09/15/29 2,997 2,931
Pool # 505842
7.500% 09/15/29 3,410 3,406
Pool # 510422
7.500% 09/15/29 3,495 3,491
-------
90,254
-------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS
(Cost $94,522) 92,675
-------
ASSET BACKED SECURITIES -- 1.0%
The Money Store
Home Equity Trust,
Series 1998-A,
Class AV (A)
5.610% 06/15/29 1,062 1,061
-------
TOTAL ASSET BACKED SECURITIES
(Cost $1,062) 1,061
-------
COLLATERALIZED MORTGAGE
OBLIGATIONS -- 6.7%
BA Mortgage Securities,
Series 1997-2, Class A6
7.250% 10/25/27 2,139 2,087
Credit Suisse First
Boston Mortgage
Securities, Series 1997-C1,
Class A1C
7.240% 04/20/07 1,100 1,082
GE Capital Mortgage,
Series 1999-1, Class A1
6.500% 01/25/29 1,126 1,036
Residential Funding
Mortgage
Securities I,
Series 1992-S31,
Class A5
7.500% 09/25/07 2,111 2,115
Residential Funding
Mortgage Securities I,
Series 1998-S13,
Class A21
6.750% 06/25/28 730 671
-------
Par Value
Maturity (000) (000)
-------- ------- -------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS
(Cost $7,309) $ 6,991
--------
U.S. TREASURY OBLIGATIONS -- 1.0%
U.S. Treasury Note
6.250% 10/31/01 $ 1,000 1,005
--------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $1,011) 1,005
--------
CASH EQUIVALENT -- 2.6%
Goldman Sachs Financial Square
Government Money Market Fund 2,754 2,754
--------
TOTAL CASH EQUIVALENT
(Cost $2,754) 2,754
--------
TOTAL INVESTMENTS -- 99.9%
(Cost $106,658) $104,486
========
OTHER ASSETS AND LIABILITIES,
NET -- 0.1% 145
--------
NET ASSETS:
Portfolio shares of Class I (unlimited
authorization -- no par value) based on
10,444,645 shares of beneficial
interest 106,054
Portfolio shares of Class A (unlimited
authorization -- no par value) based
on 12,974 shares of beneficial interest 1,291
Portfolio Shares of Class B (unlimited
authorization -- no par value) based
on 7,848 shares of beneficial interest 78
Accumulated net realized loss on investments (607)
Net unrealized depreciation on investments (2,172)
Overdistributed net investment income (13)
--------
TOTAL NET ASSETS -- 100.0% $104,631
========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SHARE -- CLASS I $9.89
========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A $9.90
========
MAXIMUM OFFERING PRICE PER
SHARE -- CLASS A ($9.90 / 95.25%) $10.39
========
NET ASSET VALUE & OFFERING PRICE
PER SHARE -- CLASS B $9.90
========
- - ------------------------------------------------
(A) VARIABLE RATE SECURITY - THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON NOVEMBER 30, 1999.
See Accompanying Notes
59
<PAGE> 62
[GRAPHIC OMITTED] FINANCIAL HIGHLIGHTS
ARMADA GNMA FUND
For a Portfolio Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
For the Six Months
Ended November 30, 1999 For the Year Ended May 31,
(Unaudited) 1999 1998
----------------------------- ----------------- -----------------
Class I Class A Class B2 Class I Class A Class I Class A
-------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.10 $ 10.10 $ 9.87 $ 10.36 $ 10.36 $ 10.15 $10.15
-------- ------- ----- ------- ------ ------- ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.29 0.28 0.14 0.61 0.59 0.61 0.58
Net gain/(loss) on securities
(realized and unrealized) (0.21) (0.20) 0.03 (0.20) (0.20) 0.31 0.31
-------- ------- ----- ------- ------ ------- ------
Total from investment operations 0.08 0.08 0.17 0.41 0.39 0.92 0.89
-------- ------- ----- ------- ------ ------- ------
LESS DISTRIBUTIONS
Dividends from net investment income (0.29) (0.28) (0.14) (0.60) (0.58) (0.61) (0.58)
Dividends from net realized capital gains (0.00) (0.00) (0.00) (0.07) (0.07) (0.10) (0.10)
Distributions in excess of net
realized capital gains (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
-------- ------- ----- ------- ------ ------- ------
Total distributions (0.29) (0.28) (0.14) (0.67) (0.65) (0.71) (0.68)
-------- ------- ----- ------- ------ ------- ------
Net asset value, end of period $ 9.89 $ 9.90 $ 9.90 $ 10.10 $ 10.10 $ 10.36 $10.36
======== ======= ======= ======= ======= ======= ======
TOTAL RETURN 1.35%5 1.33%1,5 2.90%1,5 4.02% 3.77%1 9.17% 8.90%1
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $103,326 $ 1,227 $ 78 $96,808 $1,497 $83,624 $ 549
Ratio of expenses to average net assets 0.77%4 1.02%4 1.77%4 0.78% 1.03% 0.84% 1.09%
Ratio of net investment income to
average net assets 5.88%4 5.63%4 4.88%4 5.92% 5.67% 5.83% 5.54%
Ratio of expenses to average net assets
before fee waivers 0.77%4 1.02%4 1.69%4 0.78% 1.03% 0.84% 1.09%
Ratio of net investment income to average
net assets before fee waivers 5.88%4 5.63%4 1.77%4 5.92% 5.67% 5.83% 5.54%
Portfolio turnover rate 42% 42% 42% 85% 85% 291% 291%
</TABLE>
<TABLE>
<CAPTION>
For the Year For the For the For the
Ended May 31, Period Year Period
1997 Ended Ended Ended
----------------- May 31, April 30, April 30,
Class I3 Class A2 1996(3) 1996(3) 1995(3)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.03 $10.02 $ 10.12 $ 10.16 $ 10.00
------- ------ ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.65 0.45 0.05 0.66 0.48
Net gain/(loss) on securities
(realized and unrealized) 0.22 0.23 (0.09) 0.14 0.16
------- ------ ------- ------- -------
Total from investment operations 0.87 0.68 (0.04) 0.80 0.64
------- ------ ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net investment income (0.65) (0.45) (0.05) (0.66) (0.48)
Dividends from net realized capital gains (0.01) (0.01) (0.00) (0.18) (0.00)
Distributions in excess of net
realized capital gains (0.09) (0.09) (0.00) (0.00) (0.00)
------- ------ ------- ------- -------
Total distributions (0.75) (0.55) (0.05) (0.84) (0.48)
------- ------ ------- ------- -------
Net asset value, end of period $ 10.15 $10.15 $ 10.03 $ 10.12 $ 10.16
======= ====== ======= ======= =======
TOTAL RETURN 9.03% 8.83%1,4 (0.35)%1,5 7.97%1 6.61%4,5
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $64,501 $ 128 $60,532 $62,161 $42,212
Ratio of expenses to average net assets 0.86% 1.12%4 0.85%1 0.85% 0.85%4
Ratio of net investment income to
average net assets 6.45% 6.17%4 6.33%1 6.30% 6.68%4
Ratio of expenses to average net assets
before fee waivers 1.01% 1.12%4 1.28%1 1.29% 1.40%4
Ratio of net investment income to average
net assets before fee waivers 6.30% 6.17%4 5.90%1 5.86% 6.13%4
Portfolio turnover rate 57% 57% 1% 149% 226%
</TABLE>
1 TOTAL RETURN EXCLUDES SALES CHARGE.
2 CLASS A AND CLASS B COMMENCED OPERATIONS ON SEPTEMBER 11, 1996 AND AUGUST 11,
1999 RESPECTIVELY.
3 ACTIVITY FOR THE PERIOD PRESENTED INCLUDES THAT OF THE PREDECESSOR FUND
THROUGH SEPTEMBER 6, 1996. THE PREDECESSOR FUND COMMENCED OPERATIONS ON AUGUST
10, 1994. DURING 1996, THE PREDECESSOR FUND CHANGED ITS FISCAL YEAR-END FROM
APRIL 30 TO MAY 31.
4 ANNUALIZED.
5 TOTAL RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
See Accompanying Notes
60
<PAGE> 63
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA INTERMEDIATE BOND FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
-------- ------- --------
CORPORATE BONDS -- 37.5%
BANKS -- 2.8%
First Maryland Bancorp
7.200% 07/01/07 $ 2,500 $ 2,463
First Union
6.950% 11/01/04 3,375 3,354
HSBC Holding
7.500% 07/15/09 1,580 1,584
Huntington National
7.625% 01/15/03 500 506
Northern Trust
7.300% 09/15/06 500 499
--------
8,406
--------
CHEMICALS -- 1.2%
Lubrizol
5.875% 12/01/08 4,000 3,580
Monsanto (B)
5.375% 12/01/01 1,175 1,146
--------
4,726
--------
COMPUTER SOFTWARE -- 1.5%
Computer Associates
6.250% 04/15/03 5,970 5,761
--------
DRUGS & HEALTH CARE -- 0.2%
Amgen
6.210% 08/27/03 500 473
--------
FINANCIAL SERVICES -- 5.8%
Ford Motor Credit Global
6.700% 07/16/04 2,550 2,521
GMAC
7.125% 05/01/03 5,000 5,025
Goldman Sachs
6.650% 05/15/09 5,120 4,826
Ikon Capital
6.730% 06/15/01 5,000 4,913
US Leasing Capital
6.625% 05/15/03 300 297
--------
17,582
--------
GAS & NATURAL GAS -- 0.8%
Northen Illinois
6.450% 08/01/01 1,500 1,496
Williams Companies
6.200% 08/01/02 820 798
--------
2,294
--------
INSURANCE -- 0.1%
Saint Paul
6.170% 01/15/01 300 298
--------
LEASING & RENTING -- 1.0%
Comdisco
6.000% 01/30/02 3,200 3,108
--------
Par Value
Maturity (000) (000)
------------- ----- -------
CORPORATE BONDS -- CONTINUED
LEISURE & RECREATIONAL PRODUCTS -- 1.0%
Brunswick
6.750% 12/15/06 $ 3,150 $ 2,985
--------
MACHINERY -- 0.6%
Cummins Engine
6.450% 03/01/05 2,100 1,985
--------
MISCELLANEOUS BUSINESS SERVICES -- 1.1%
Sun Microsystems
7.000% 08/15/02 3,325 3,329
--------
MISCELLANEOUS CONSUMER SERVICES -- 1.7%
Service Corporate, International
6.375% 10/01/00 5,245 5,107
--------
PETROLEUM REFINING -- 1.8%
Sun Petroleum
7.125% 03/15/04 5,490 5,394
--------
PRINTING & PUBLISHING -- 1.2%
Scholastic
7.000% 12/15/03 3,600 3,537
--------
REAL ESTATE INVESTMENT TRUST -- 9.0%
Bradley Operating Partnership
7.000% 11/15/04 1,200 1,141
Commercial Net
Lease Realty
8.125% 06/15/04 2,000 1,963
EOP Operating
6.625% 02/15/05 3,190 3,015
Federal Realty
Investors Trust
6.990% 03/10/06 1,550 1,419
Gables Realty
6.800% 03/15/05 5,025 4,747
Mack-Cali Realty
7.000% 03/15/04 5,150 4,989
New Plan Excel
Realty Trust
6.875% 10/15/04 3,670 3,592
Prime Property Funding,
Series II (B)
6.800% 08/15/02 5,000 4,932
United Dominion
Realty Trust
7.730% 04/05/05 1,600 1,547
--------
27,345
--------
REPAIR SERVICES -- 1.6%
Hertz
7.000% 05/01/02 1,000 1,004
Ryder System
6.600% 11/15/05 4,000 3,780
--------
4,784
--------
RUBBER & PLASTIC -- 1.6%
Armstrong World
6.350% 08/15/03 4,965 4,816
--------
STEEL & STEEL WORKS -- 1.8%
Worthington Industries
7.125% 05/15/06 5,605 5,444
--------
See Accompanying Notes
61
<PAGE> 64
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA INTERMEDIATE BOND FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
------------- ----- --------
CORPORATE BONDS -- CONTINUED
TAXABLE MUNICIPAL OBLIGATION -- 0.1%
Westview School (C)
6.400% 09/01/05 $ 200 $ 192
--------
TELEPHONE & TELECOMMUNICATION -- 1.3%
AT&T
5.625% 03/15/04 4,085 3,901
--------
TRUCKING -- 1.0%
JB Hunt
6.000% 12/12/00 3,200 3,164
--------
TOTAL CORPORATE BONDS
(Cost $117,787) 114,631
--------
ASSET BACKED SECURITIES -- 22.1%
Amresco Securitized Net Interest
Margin, Series 1999-1A, Class A
9.100% 09/27/29 3,579 3,498
Bombardier Capital Mortgage
Securitization, Series 1999-B,
Class A3
7.180% 12/15/15 4,000 4,005
Case Equipment Loan Trust,
Series 1998-C, Class A4
5.610% 04/15/05 7,950 7,751
Contimortgage Home Equity
Loan Trust, Series 1998-2,
Class A6
6.360% 11/15/19 3,575 3,455
Contimortgage Home Equity
Loan Trust, Series 1999-3,
Class A5
7.360% 10/25/26 4,550 4,489
IMC Home Equity Loan Trust,
Series 1997-7, Class A5
6.760% 10/20/20 4,220 4,172
Oakwood Mortgage Investors,
Series 1997-D, Class A3
6.500% 02/15/28 5,000 4,948
Pegasus Aviation Lease
Securitization, Series 1999-1,
Class A1 (B)
6.300% 03/25/29 2,370 2,298
Pennsylvania Power & Light,
Series 1999-1, Class A7
7.050% 06/25/09 4,750 4,795
Providian National Bank
Mortgage Trust, Series 1999-2,
Class A
6.600% 04/16/07 4,800 4,794
Residential Asset Securities,
Series 1999-KS3, Class AI5
7.570% 03/25/28 6,420 6,419
Par Value
Maturity (000) (000)
------------- -------- ------
ASSET BACKED SECURITIES -- CONTINUED
Residential Funding Collateralized
Mortgage Obligation,
Series 1999-HI6, Class A3
7.340% 08/25/12 $ 3,250 $ 3,243
Residential Funding Mortgage
Services, Series 1999-HI1,
Class A3
6.310% 08/25/13 7,800 7,677
The Money Store Home Equity
Trust, Series 1993-C, Class A3
5.750% 10/15/22 3,306 3,191
UCFC Manufactured Housing
Contract, Series 1997-3, Class A2
6.360% 02/15/11 2,818 2,821
--------
TOTAL ASSET BACKED SECURITIES
(Cost $68,368) 67,556
--------
COLLATERALIZED MORTGAGE
OBLIGATIONS -- 11.0%
Credit Suisse First Boston
Mortgage Securities,
Series 1997-C1, Class A1C
7.240% 04/20/07 3,000 2,950
GE Capital Mortgage,
Series 1999-1, Class A1
6.500% 01/25/29 3,034 2,789
Housing Securities,
Series 1994-I, Class A15
7.500% 03/25/09 3,168 3,197
Merrill Lynch Mortgage
Investors, Series 1996-C1,
Class A1
7.150% 04/25/28 3,293 3,289
Norwest Asset Securities,
Series 1998-18, Class A4
6.250% 08/25/28 6,380 5,757
Prudential Home Mortgage
Securities, Series 1996-7,
Class A4
6.750% 06/25/11 2,500 2,401
Prudential Securities Secured
Financing, Series 1999-NRF1,
Class A2
6.480% 01/15/09 6,650 6,296
Residential Funding Mortgage
Security, I Series 1999-S12,
Class A11
6.500% 05/25/29 3,210 3,065
Vende Mortgage Trust,
Series 1999-2, Class ID
6.500% 12/15/24 4,220 3,949
--------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS
(Cost $34,734) 33,693
--------
See Accompanying Notes
62
<PAGE> 65
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA INTERMEDIATE BOND FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
------------- ----- -------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 8.7%
FEDERAL HOME LOAN BANK -- 0.5%
5.860% 08/03/01 $ 95 $ 94
6.565% 01/10/03 500 498
6.135% 12/23/04 1,000 980
--------
1,572
--------
FEDERAL HOME LOAN MORTGAGE CORPORATION -- 1.0%
Pool # 16-0015
8.250% 06/01/06 17 18
Series T-8, Class A5
7.000% 06/15/15 2,970 2,957
--------
2,975
--------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 5.4%
Fannie Mae #
6.250% 11/15/02 2,000 1,992
Fannie Mae
5.625% 05/14/04 4,460 4,296
Fannie Mae, MTN,
Callable 4/14/00 @ 100
7.340% 04/14/04 1,000 997
Pool # 493767
6.500% 06/01/14 6,861 6,713
Pool # 412232
6.500% 01/01/28 2,553 2,442
--------
16,440
--------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 1.9%
Pool #154047
9.000% 05/15/16 32 34
Pool #472969
6.500% 06/15/29 5,941 5,657
--------
5,691
--------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $27,112) 26,678
--------
U.S. TREASURY OBLIGATIONS -- 18.9%
U.S. Treasury Note #
6.250% 10/31/01 8,045 8,083
6.250% 02/15/03 3,000 3,014
6.500% 05/15/05 14,965 15,169
6.125% 08/15/07 19,655 19,469
U.S. Treasury Note TIPS
3.625% # 01/15/08 5,186 4,999
3.875% # 01/15/09 6,080 5,957
3.625% 04/15/28 1,037 949
--------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $58,272) 57,640
--------
Par Value
(000) (000)
-------- -------
CASH EQUIVALENT -- 0.8%
Fidelity Domestic Money Market
Fund $ 2,395 $ 2,395
--------
TOTAL CASH EQUIVALENT
(Cost $2,395) 2,395
--------
TOTAL INVESTMENTS -- 99.1%
(Cost $308,668) $302,593
OTHER ASSETS AND LIABILITIES,
NET -- 0.9% 2,838
--------
NET ASSETS:
Portfolio Shares of Class I
(unlimited authorization -- no par
value) based on 29,344,786
outstanding shares of beneficial
interest 310,348
Portfolio Shares of Class A
(unlimited authorization -- no par
value) based on 477,565
outstanding shares
of beneficial interest 5,305
Portfolio Shares of Class B
(unlimited authorization -- no
par value) based on
60,572 outstanding shares
of beneficial interest 649
Accumulated net realized loss
on investments (4,881)
Net unrealized depreciation on investments (6,075)
Undistributed net investment income 85
--------
TOTAL NET ASSETS -- 100.0% $305,431
========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SHARE -- CLASS I $10.22
========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A $10.24
--------
MAXIMUM OFFERING PRICE PER
SHARE -- CLASS A ($10.24 / 95.25%) $10.75
========
NET ASSET VALUE & OFFERING
PRICE PER SHARE -- CLASS B $10.24
========
- - ------------------------------------------------
# SECURITY FULLY OR PARTIALLY ON LOAN.
(A) VARIABLE RATE SECURITY - THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON NOVEMBER, 30 1999.
(B) PRIVATE PLACEMENT SECURITY
(C) CERTIFICATE OF PARTICIPATION
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
MTN -- MEDIUM TERM NOTE
TIPS -- TREASURY INFLATION PROTECTED SECURITY
See Accompanying Notes
63
<PAGE> 66
[GRAPHIC OMITTED] FINANCIAL HIGHLIGHTS
ARMADA INTERMEDIATE BOND FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
For the Six Months
Ended November 30, 1999 For the Year Ended May 31,
(Unaudited) 1999
----------------------------- ----------------------------
Class I Class A Class B Class I Class A Class B
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 10.39 $ 10.41 $ 10.41 $ 10.59 $ 10.63 $ 10.63
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.30 0.29 0.26 0.56 0.54 0.45
Net gain/(loss) on securities
(realized and unrealized) (0.17) (0.17) (0.18) (0.14) (0.16) (0.15)
------- ------- ------- ------- ------- -------
Total from investment operations 0.13 0.12 0.08 0.42 0.38 0.30
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net
investment income (0.30) (0.29) (0.25) (0.56) (0.54) (0.46)
Distributions from net realized
capital gains (0.00) (0.00) (0.00) (0.06) (0.06) (0.06)
Distributions in excess of
net realized capital gains (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
------- ------- ------- ------- ------- -------
Total distributions (0.30) (0.29) (0.25) (0.62) (0.60) (0.52)
------- ------- ------- ------- ------- -------
Net asset value, end of period $ 10.22 $ 10.24 $ 10.24 $ 10.39 $ 10.41 $ 10.41
======= ======= ======= ======= ======= =======
TOTAL RETURN 1.78%4 1.66%1,4 1.30%1,4 3.98% 3.54%1 2.83%1
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (in 000's) $299,921 $ 4,890 $ 620 $313,368 $ 5,129 $ 709
Ratio of expenses to average
net assets 0.58%3 0.83%3 1.58%3 0.61% 0.86% 1.57%
Ratio of net investment income
to average net assets 5.85%3 5.60%3 4.85%3 5.21% 4.96% 4.25%
Ratio of expenses to average
net assets before
fee waivers 0.73%3 0.98%3 1.13%3 0.75% 1.00% 1.71%
Ratio of net investment income
to average net assets
before fee waivers 5.70%3 5.45%3 4.70%3 5.07% 4.82% 4.11%
Portfolio turnover rate 82% 82% 82% 256% 256% 256%
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended May 31,
1998 1997 1996 1995
---------------------------- ----------------- ------------------ ---------------
Class I Class A Class B2 Class I Class A Class I Class A Class I Class A
--------- -------- -------- -------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 10.37 $ 10.42 $ 10.70 $ 10.30 $ 10.35 $ 10.54 $ 10.60 $10.24 $ 10.30
------- ------- ------- -------- ------- ------- ------- ------ -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.60 0.58 0.20 0.60 0.57 0.61 0.59 0.63 0.61
Net gain/(loss) on securities
(realized and unrealized) 0.22 0.21 (0.07) 0.07 0.07 (0.22) (0.23) 0.30 0.30
------- ------- ------- -------- ------- ------- ------- ------ --------
Total from investment
operations 0.82 0.79 0.13 0.67 0.64 0.39 0.36 0.93 0.91
------- ------- ------- -------- ------- ------- ------- ------ --------
LESS DISTRIBUTIONS
Dividends from net
investment income (0.60) (0.58) (0.20) (0.60) (0.57) (0.61) (0.59) (0.63) (0.61)
Distributions from net realized
capital gains (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
Distributions in excess of
net realized capital gains (0.00) (0.00) (0.00) (0.00) (0.00) (0.02) (0.02) (0.00) (0.00)
------- ------- ------- -------- ------- ------- ------- ------ -------
Total distributions (0.60) (0.58) (0.20) (0.60) (0.57) (0.63) (0.61) (0.63) (0.61)
------- ------- ------- -------- ------- ------- ------- ------ -------
Net asset value, end of period $ 10.59 $ 10.63 $ 10.63 $ 10.37 $ 10.42 $ 10.30 $ 10.35 $ 10.54 $ 10.60
======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN 8.09% 7.71%1 7.39%1,3 6.63% 6.36%1 3.79% 3.44%1 9.55% 9.26%1
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (in 000's) 166,710 $ 3,288 $ 2 $121,271 $3,720 $111,240 $6,216 $88,047 $5,527
Ratio of expenses to average
net assets 0.65% 0.91% 1.60%3 0.70% 0.96% 0.80% 1.04% 0.85% 1.09%
Ratio of net investment income
to average net assets 5.71% 5.48% 3.38%3 5.76% 5.52% 5.78% 5.50% 6.24% 5.95%
Ratio of expenses to average
net assets before
fee waivers 0.80% 1.06% 1.49%3 0.79% 1.05% 0.82% 1.06% 0.86% 1.10%
Ratio of net investment income
to average net assets
before fee waivers 5.56% 5.33% 3.49%3 5.66% 5.44% 5.76% 5.48% 6.23% 5.94%
Portfolio turnover rate 160% 160% 160% 217% 217% 45% 45% 42% 42%
1 TOTAL RETURN EXCLUDES SALES CHARGE.
2 CLASS B COMMENCED OPERATIONS JANUARY 6, 1998.
3 ANNUALIZED.
4 TOTAL RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
</TABLE>
See Accompanying Notes
64
<PAGE> 67
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA TOTAL RETURN ADVANTAGE FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
---------- -------- --------
CORPORATE BONDS -- 38.5%
AGRICULTURE -- 0.9%
Cargill (B)
6.150% 02/25/08 $ 3,050 $ 2,790
--------
AUTO & AUTO FINANCES -- 3.0%
Chrysler Financial
5.150% 01/22/01 3,525 3,472
Ford Motor
6.375% 02/01/29 6,125 5,252
Ford Motor Credit
6.550% 09/10/02 750 743
--------
9,467
--------
BANKS -- 6.2%
BankAmerica
7.875% 12/01/02 3,600 3,699
Chase Manhattan
6.375% 02/15/08 3,200 3,044
Citicorp
7.125% 09/01/05 4,000 4,000
First Union
7.125% 10/15/06 4,400 4,395
Fleet Financial
6.500% 03/15/08 2,775 2,632
6.375% 05/15/08 1,175 1,088
Nationsbank
7.000% 09/15/01 815 819
--------
19,677
--------
BROKERAGE -- 1.2%
Lehman Brothers
6.625% 04/01/04 3,800 3,700
--------
CABLE & MEDIA -- 1.2%
Time Warner Entertainment
10.150% 05/01/12 3,080 3,686
--------
CONSULTING SERVICES -- 1.1%
CSC Enterprises
6.500% 11/15/01 3,365 3,352
--------
CONSUMER FINANCE -- 1.0%
Household Finance
5.875% 02/01/09 3,400 3,064
--------
DEFENSE -- 0.8%
Raytheon
5.950% 03/15/01 2,500 2,463
--------
FOOD & BEVERAGE -- 0.8%
Safeway
7.250% 09/15/04 2,420 2,420
--------
Par Value
Maturity (000) (000)
---------- ------- --------
CORPORATE BONDS -- CONTINUED
INSURANCE -- 3.3%
Lumbermans Mutual Casualty (B)
8.300% 12/01/37 $ 500 $ 446
Metropolitan Life
7.000% 11/01/05 5,900 5,776
Nationwide
9.875% 02/15/25 4,000 4,142
--------
10,364
--------
OIL & GAS -- 1.5%
Atlantic Richfield
9.875% 03/01/16 1,900 2,311
Conoco
6.950% 04/15/29 2,550 2,362
--------
4,673
--------
REAL ESTATE INVESTMENT TRUST -- 0.5%
Mack-Cali Realty
7.000% 03/15/04 1,650 1,598
--------
RETAIL -- 0.8%
Dayton Hudson
6.650% 08/01/28 3,000 2,648
--------
SPECIALTY CHEMICALS -- 2.6%
Engelhard
7.000% 08/01/01 5,600 5,649
Monsanto (B)
6.600% 12/01/28 3,150 2,737
--------
8,386
--------
TECHNOLOGY -- 1.0%
Applied Material
7.125% 10/15/17 3,475 3,187
--------
TELEPHONE & TELECOMMUNICATION -- 6.0%
AT&T
6.500% 03/15/29 4,100 3,593
GTE Northwest
5.550% 10/15/08 2,600 2,327
Sprint Capital
6.875% 11/15/28 5,410 4,923
Telephone & Data Systems
7.000% 08/01/06 5,500 5,266
Worldcom
6.400% 08/15/05 3,100 3,011
--------
19,120
--------
See Accompanying Notes
65
<PAGE> 68
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA TOTAL RETURN ADVANTAGE FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
---------- ------- --------
CORPORATE BONDS -- CONTINUED
TRANSPORTATION REVENUE BOND -- 0.5%
Federal Express
6.720% 01/15/22 $ 1,596 $ 1,501
--------
UTILITIES-ELECTRIC -- 2.5%
Consolidated Edison
6.450% 12/01/07 3,250 3,071
Pennsylvania Power & Light
6.125% 05/01/01 3,550 3,528
Puget Sound Energy
6.740% 06/15/18 1,525 1,359
--------
7,958
--------
YANKEE -- 3.9%
Ahold Financial
6.250% 05/01/09 4,200 3,896
City of Naples
7.520% 07/15/06 4,310 4,362
Quebec Province
8.625% 01/19/05 3,875 4,158
--------
12,416
--------
TOTAL CORPORATE BONDS
(Cost $128,289) 122,470
--------
ASSET BACKED SECURITIES -- 24.3%
AUTO -- 2.5%
Aesop (B)
6.140% 05/20/06 4,750 4,564
Aesop, Series 1997-A, Class A2 (B)
6.400% 10/20/03 3,495 3,452
--------
8,016
--------
COMMERCIAL MORTGAGE -- 6.0%
First Union Lehman Brothers Trust,
Series 1998, Class A2
6.560% 11/18/08 6,465 6,202
GMAC Commercial Mortgage
Security, Series 1997-C1,
Class A3
6.869% 08/15/07 6,750 6,509
Morgan Stanley Capital,
Series 1999-WF1, Class A2
6.210% 09/15/08 6,835 6,392
--------
19,103
--------
CREDIT CARDS -- 11.1%
First USA Credit Card Master Trust,
Series 1999-2, Class C (B)
6.650% 10/19/08 3,235 3,045
Par Value
Maturity (000) (000)
---------- ------- --------
ASSET BACKED SECURITIES -- CONTINUED
First USA Credit Card Master Trust,
Series1999-1, Class C (B)
6.420% 10/19/06 $ 3,895 $ 3,731
Green Tree Financial,
Series 1997-5, Class A5-MH
6.620% 05/15/29 2,535 2,490
MBNA Credit Card Master Trust,
Series 1999-B, Class C (B)
6.650% 08/15/11 2,780 2,547
Series 1998-F, Class C (B)
6.450% 02/15/08 4,985 4,660
MBNA Master Trust,
Series 1997-F, Class A
6.600% 11/15/04 4,405 4,459
Metris Master Trust,
Series 1997-1, Class A
6.870% 10/20/05 4,040 4,043
PNC Student Loan Trust I,
Series 1997-2, Class A6
6.572% 01/25/04 2,870 2,807
Sears Credit Series 1999-3
Class A
6.450% 11/17/09 7,635 7,483
--------
35,265
--------
HOME EQUITY -- 0.9%
Merrill Lynch Mortgage Investors,
Series 1998-GN1, Class A1
7.110% 08/25/27 3,001 2,995
--------
MISCELLANEOUS -- 3.8%
Comed Trust Financial Stranded
Asset, Series 1998-1, Class A6
5.630% 06/25/09 7,365 6,900
Franchise Funding Credit Association,
Series 97-1, Class A-EQ (B)
7.020% 12/18/06 1,577 1,569
Railcar Leasing, Series 1997-1,
Class A2-EQ (B)
7.125% 01/15/13 3,610 3,537
--------
12,006
--------
TOTAL ASSET BACKED SECURITIES
(Cost $79,862) 77,385
--------
See Accompanying Notes
66
<PAGE> 69
Statement of Net Assets
Armada Total Return Advantage Fund
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
---------- ------- --------
COLLATERALIZED MORTGAGE
OBLIGATIONS -- 3.4%
Collateralized Mortgage Obligation
Trust, Series 13, Class A (A)
5.940% 01/20/03 $ 24 $ 24
Federal Home Loan Mortgage
Corporation, Series 2095,
Class PE
6.000% 11/15/28 1,859 1,626
Federal Home Loan Mortgage
Corporation, Series 2101 Class PD
6.000% 11/15/28 2,245 1,959
Federal Home Loan Mortgage
Corporation, Series 2104, Class PG
6.000% 12/15/28 1,861 1,636
Merrill Lynch Mortgage Investors
Series 1999-C1, Class A-2
7.560% 09/15/09 5,650 5,692
--------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS
(Cost $11,478) 10,937
--------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 0.9%
FEDERAL HOME LOAN MORTGAGE CORPORATION -- 0.0%
Pool # 16-0045
8.750% 05/01/08 3 3
Pool # 18-1063
7.500% 12/01/10 69 71
--------
74
--------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 0.8%
Series 1999-51
6.500% 10/25/29 2,660 2,433
--------
2,433
--------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 0.1%
Pool # 132781
10.500% 11/15/00 4 5
Pool # 780919
9.500% 10/15/18 386 413
--------
418
--------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $2,906) 2,925
--------
Par Value
Maturity (000) (000)
---------- ---------- --------
MORTGAGE PASS THROUGH OBLIGATIONS -- 0.1%
Thirty-Seventh FHA Insurance Project
7.430% 05/01/22 $ 439 $ 434
--------
TOTAL MORTGAGE PASS THROUGH OBLIGATIONS
(Cost $439) 434
--------
U.S. TREASURY OBLIGATIONS -- 31.1%
U.S. TREASURY BONDS -- 20.6%
U.S. Treasury Bond #
7.500% 11/15/16 20,385 22,217
8.125% 08/15/21 36,945 43,390
--------
65,607
--------
U.S. TREASURY NOTES -- 10.5%
U.S. Treasury Note
5.375% 02/15/01 6,535 6,495
6.250%# 02/15/03 14,800 14,871
5.375%# 06/30/03 4,635 4,534
6.500%# 05/15/05 3,120 3,163
6.125%# 08/15/07 105 104
4.750%# 11/15/08 4,800 4,315
--------
33,482
--------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $102,373) 99,089
--------
CASH EQUIVALENT -- 0.6%
Fidelity Domestic Money Market
Fund 1,855 1,855
--------
TOTAL CASH EQUIVALENT
(Cost $1,855) 1,855
--------
TOTAL INVESTMENTS -- 98.9%
(Cost $327,202) $315,095
========
OTHER ASSETS AND LIABILITIES,
NET -- 1.1% 3,381
--------
See Accompanying Notes
67
<PAGE> 70
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA TOTAL RETURN ADVANTAGE FUND
NOVEMBER 30, 1999
(UNAUDITED)
Value
(000)
--------
NET ASSETS:
Portfolio Shares of Class I (unlimited
authorization -- no par value) based on
32,221,836 outstanding shares
of beneficial interest $325,589
Portfolio Shares of Class A (unlimited
authorization -- no par value) based on
647,738 outstanding shares
of beneficial interest 6,535
Portfolio Shares of Class B (unlimited
authorization -- no par value) based on 75
outstanding shares of beneficial interest 1
Accumulated net realized loss on investments (1,503)
Net unrealized depreciation on investments (12,107)
Overdistributed net investment income (39)
--------
TOTAL NET ASSETS -- 100.0% $318,476
========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SHARE -- CLASS I $9.69
========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A $9.68
========
MAXIMUM OFFERING PRICE PER
SHARE - CLASS A ($9.68 / 95.25%) $10.16
========
NET ASSET VALUE AND OFFERING
PRICE PER SHARE -- CLASS B $9.70
========
- - ------------------------------------------------
# SECURITY FULLY OR PARTIALLY ON LOAN.
(A) VARIABLE RATE SECURITY- THE RATE REFLECTED IN THE STATEMENT OF NET ASSETS IS
THE RATE IN EFFECT ON NOVEMBER 30, 1999.
(B) PRIVATE PLACEMENT SECURITY
CL -- CLASS
See Accompanying Notes
68
<PAGE> 71
[GRAPHIC OMITTED] FINANCIAL HIGHLIGHTS
ARMADA TOTAL RETURN ADVANTAGE FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
For the Six Months For the Year Ended
Ended November 30, 1999 May 31,
(Unaudited) 1999
----------------------------- -------------------
Class I Class A Class B2 Class I Class A
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.99 $ 9.98 $ 9.72 $ 10.25 $ 10.25
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.35 0.28 0.15 0.58 0.56
Net gain/(loss) on securities
(realized and unrealized) (0.30) (0.29) (0.04) (0.22) (0.23)
-------- -------- -------- -------- --------
Total from investment
operations 0.05 (0.01) 0.11 0.36 0.33
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Dividends from net investment
income (0.35) (0.29) (0.13) (0.58) (0.56)
Dividends in excess of net
investment income (0.00) (0.00) (0.00) (0.00) (0.00)
Distributions from net realized
capital gains (0.00) (0.00) (0.00) (0.04) (0.04)
Distributions in excess of net
realized capital gains (0.00) (0.00) (0.00) (0.00) (0.00)
-------- -------- -------- -------- --------
Total distributions (0.35) (0.29) (0.13) (0.62) (0.60)
-------- -------- -------- -------- --------
Net asset value, end of period $ 9.69 $ 9.68 $ 9.70 $ 9.99 $ 9.98
======== ======== ======== ======== ========
TOTAL RETURN 1.63%6 1.59%1,6 2.71%1,6 3.54% 3.18%1
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $312,208 $ 6,267 $ 1 $328,417 $ 4,686
Ratio of expenses to average net
assets 0.49%5 0.74%5 1.49%5 0.45% 0.69%
Ratio of net investment income to
average net assets 6.01%5 5.76%5 5.01%5 5.72% 5.48%
Ratio of expenses to average net
assets before fee waivers 0.69%5 0.94%5 1.69%5 0.65% 0.89%
Ratio of net investment income to
average net assets before fee waivers 5.81%5 5.56%5 4.82%5 5.52% 5.28%
Portfolio turnover rate 73% 73% 73% 142% 142%
</TABLE>
<TABLE>
<CAPTION>
For the Period
For the Year Ended May 31, Ended May 31,
1998 1997 1996 1995
------------------ ------------------ ------------------ --------------------
Class I Class A Class I Class A Class I Class A Class I2 Class A2
--------- -------- -------- ------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 9.89 $ 9.89 $ 9.88 $ 9.87 $ 10.55 $ 10.54 $ 10.00 $ 10.16
-------- ------- -------- ------- -------- ------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.64 0.61 0.67 0.64 0.70(4) 0.62(4) 0.65(4) 0.49(4)
Net gain/ (loss) on securities
(realized and unrealized) 0.36 0.36 0.15 0.16 (0.24) (0.22) 0.43 0.40
-------- ------- -------- ------- -------- ------- -------- --------
Total from investment
operations 1.00 0.97 0.82 0.80 0.46 0.40 1.08 0.89
-------- ------- -------- ------- -------- ------- -------- --------
LESS DISTRIBUTIONS
Dividends from net investment
income (0.64) (0.61) (0.67) (0.64) (0.70) (0.62) (0.53) (0.49)
Dividends in excess of net
investment income (0.00) (0.00) (0.00) (0.00) (0.12) (0.14) (0.00) (0.02)
Distributions from net realized
capital gains (0.00) (0.00) (0.00) (0.00) (0.31) (0.31) (0.00) (0.00)
Distributions in excess of net
realized capital gains (0.00) (0.00) (0.14) (0.14) (0.00) ( 0.00) (0.00) (0.00)
-------- ------- -------- ------- -------- ------- -------- --------
Total distributions (0.64) (0.61) (0.81) (0.78) (1.13) (1.07) (0.53) (0.51)
-------- ------- -------- ------- -------- ------- -------- --------
Net asset value, end of period $ 10.25 $ 10.25 $ 9.89 $ 9.89 $ 9.88 $ 9.87 $ 10.55 $ 10.54
======== ======= ======== ======= ======== ======= ======== ========
TOTAL RETURN 10.35% 10.08%1 8.51% 8.35%1 4.22% 3.74%1 12.52%3 12.65%1,3
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's) $296,075 $ 640 $259,228 $ 2,186 $280,401 $ 2,040 $261,403 $ 106
Ratio of expenses to average
net assets 0.31% 0.54% 0.16% 0.41% 0.13% 0.36% 0.18%2 0.31%2
Ratio of net investment income to
average net assets 6.29% 6.14% 6.70% 6.46% 6.67% 6.12% 7.23%2 6.92%2
Ratio of expenses to average
net assets before fee waivers 0.72% 0.97% 0.71% 0.96% 0.69% 0.89% 0.77%2 0.87%2
Ratio of net investment income to
average net assets before fee
waivers 5.88% 5.71% 6.15% 5.91% 6.11% 5.59% 6.64%2 6.36%2
Portfolio turnover rate 170% 170% 169% 169% 268% 268% 166% 166%
</TABLE>
1 TOTAL RETURN EXCLUDES SALES CHARGE.
2 CLASS I, CLASS A AND CLASS B COMMENCED OPERATIONS ON JULY 7, 1994, SEPTEMBER
6, 1994 AND AUGUST 11, 1999, RESPECTIVELY.
3 TOTAL RETURNS HAVE BEEN ANNUALIZED BASED UPON THE PERIOD FROM EACH CLASS'
COMMENCEMENT DATE THROUGH MAY 31, 1995. GROSS TOTAL RETURNS OF CLASS I AND
CLASS A FOR THE PERIOD WERE 11.22% AND 9.14%, RESPECTIVELY.
4 CALCULATED BASED UPON AVERAGE SHARES OUTSTANDING.
5 ANNUALIZED.
6 TOTAL RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
See Accompanying Notes
69
<PAGE> 72
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA NATIONAL TAX EXEMPT BOND FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
---------- ------- --------
MUNICIPAL BONDS -- 96.7%
ALASKA -- 1.2%
Alaska State, Housing Finance
Corporation Mortgage (RB) (MBIA)
4.950% 06/01/02 $ 75 $ 76
5.050% 12/01/03 70 71
Anchorage (GO) (MBIA)
5.000% 07/01/14 1,100 1,031
--------
1,178
--------
ARIZONA -- 3.5%
Maricopa County, Industrial
Development Authority,
Madera Pointe Apartments
Project (RB) (FSA)
5.300% 06/01/06 1,000 1,000
Salt River Project (RB)
5.125% 01/01/10 2,415 2,394
--------
3,394
--------
ARKANSAS -- 0.5%
Arkansas State, Development
Finance Authority, Correction
Facility (RB) (MBIA)
4.800% 11/15/06 200 200
Pulaski County, Health Facilities
Board, Catholic Health Initiatives (RB)
4.150% 12/01/00 250 250
--------
450
--------
CALIFORNIA -- 1.0%
San Francisco, City & County
(GO) (FGIC) (A) Series 1
5.000% 06/15/10 1,000 997
--------
CONNECTICUT -- 2.1%
Connecticut State (GO) Series B
5.500% 03/15/11 2,000 2,055
--------
DELAWARE -- 0.5%
Delaware (GO)
6.125% 04/01/00 500 504
--------
GEORGIA -- 3.5%
Fulton County, Housing Authority,
Single Family (RB) (GNMA)
5.100% 03/01/03 40 40
5.300% 03/01/05 45 46
Georgia State (GO)
6.250% 08/01/06 1,000 1,082
6.650% 03/01/09 1,000 1,120
Par Value
Maturity (000) (000)
---------- ------- --------
MUNICIPAL BONDS -- CONTINUED
GEORGIA -- CONTINUED
Private Colleges & Universities
Authority, Emory University
Project (RB)
5.375% 11/01/05 $1,000 $ 1,040
--------
3,328
--------
ILLINOIS -- 5.6%
Glenview (BAN)
5.550% 12/01/99 175 175
Illinois State, Development
Financial Authority Revenue
School District Number 189 (RB)
5.000% 01/01/04 400 405
Illinois State, Educational
Facility Authority, Robert Morris
College (RB) (MBIA)
4.700% 06/01/04 200 201
Illinois State, Sales Tax (RB)
6.000% 06/15/12 1,000 1,044
Illinois State, Toll Road Authority
(RB) (FSA)
5.500% 01/01/13 2,500 2,512
Lake County, First Preservation
District (GO)
5.500% 02/01/09 1,000 1,022
--------
5,359
--------
INDIANA -- 8.9%
East Chicago, Elementary School
Building (RB) (A)
6.250% 01/05/16 1,750 1,831
Fort Wayne, Redevelopment
District (FSA)
4.550% 02/01/08 500 484
Fort Wayne, South Side School
Building (A)
4.700% 07/15/10 750 716
Fort Wayne, South Side School
Building, First Mortgage (RB)
4.750% 07/15/11 500 473
Hamilton, School Building,
First Mortgage (RB)
4.400% 07/15/01 100 100
4.500% 07/05/03 365 366
4.550% 07/05/04 300 299
Hammond, Multi-School
Building (RB)
6.000% 01/15/18 1,250 1,289
Indiana State, Office
Building (RB) (A)
4.150% 07/01/04 400 388
See Accompanying Notes
70
<PAGE> 73
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA NATIONAL TAX EXEMPT BOND FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
---------- ------- --------
MUNICIPAL BONDS -- CONTINUED
INDIANA -- CONTINUED
Indiana State, Prerefunded
07/15/04 @ 102 (RB)
6.150% 01/15/16 $1,200 $ 1,293
Lagrange County, Jail Building,
First Mortgage (RB)
5.300% 10/01/10 300 296
Steuben County, School Building,
First Mortgage (RB)
4.250% 03/01/02 245 244
Vinton-Tecumseh, School
Building (RB) (A)
4.450% 01/05/05 300 294
Vinton-Tecumseh, School Building,
First Mortgage (RB) (A)
4.350% 01/05/04 495 489
--------
8,562
--------
MARYLAND -- 2.2%
Prince Georges County,
(GO) (MBIA)
6.000% 03/15/06 1,000 1,068
Washington, Suburban Sanitation
District, Prerefunded
11/01/01 @ 102 (RB)
6.500% 11/01/01 1,000 1,060
--------
2,128
--------
MASSACHUSETTS -- 4.4%
Massachusetts Bay Transportation
Authority, Callable 3/1/05 @ 102
5.750% 03/01/18 655 650
Massachusetts Bay Transportation
Authority, General Transportation
System, Prerefunded
03/01/05 @ 102 (RB) (A)
Series A
5.800% 03/01/11 1,000 1,050
Massachusetts Bay Transportation
Authority, Prerefunded
3/1/05 @ 102
5.750% 03/01/05 2,385 2,540
--------
4,240
--------
MICHIGAN -- 6.8%
Forest Hills Public Schools
Unlimited Tax (GO)
5.000% 05/01/12 1,000 966
Grand Rapids Community College
(GO) (MBIA) (A)
5.900% 05/01/03 2,000 2,113
Par Value
Maturity (000) (000)
---------- ------- --------
MUNICIPAL BONDS -- CONTINUED
MICHIGAN -- CONTINUED
Michigan Municipal Bond
Authority (RB)
6.000% 10/01/07 $2,000 $ 2,135
Redford School District
(GO) (AMBAC)
5.500% 05/01/06 1,315 1,361
--------
6,575
--------
MINNESOTA -- 1.6%
Minnesota State, Public Facilities
Authority, Prerefunded
03/01/00 @ 102 (RB)
7.100% 03/01/00 1,300 1,336
Minnesota State, Public
Housing Finance Agency,
Residential Housing (RB)
4.750% 07/01/01 200 201
--------
1,537
--------
MISSOURI -- 2.4%
Columbia, Water &
Electric (RB)
5.600% 10/01/04 2,245 2,335
--------
NEBRASKA -- 0.9%
Nebraska State, American
Public Energy Agency, Gas
Refunding (RB) (AMBAC)
4.200% 09/01/10 1,000 891
--------
NEVADA -- 3.3%
Henderson (GO) (MBIA)
6.500% 06/01/07 1,000 1,093
Nevada State (GO) (ETM)
6.300% 07/01/04 1,000 1,054
Nevada State (GO)
6.000% 05/15/09 1,000 1,063
--------
3,210
--------
NEW JERSEY -- 2.2%
New Jersey State, Transportation
Fund (RB) (AMBAC) Series B
6.000% 06/15/05 2,000 2,125
--------
NEW YORK -- 3.5%
New York State, Power
Authority, Prerefunded
01/01/10 @ 100 (RB)
7.000% 01/01/10 1,000 1,151
Orange County (GO)
5.000% 07/15/11 2,225 2,183
--------
3,334
--------
See Accompanying Notes
71
<PAGE> 74
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA NATIONAL TAX EXEMPT BOND FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
---------- ------- --------
MUNICIPAL BONDS -- CONTINUED
OHIO -- 8.3%
Butler County, Transportation
Improvement (RB) (FSA)
6.000% 04/01/10 $1,000 $ 1,066
Cleveland, Public Power
System (RB) (MBIA)
6.000% 11/15/10 995 1,065
Cleveland, Water Works
(RB) (MBIA)
5.500% 01/01/09 1,500 1,547
Hudson, Local School
District (GO) (FGIC) (C)
0.000% 12/15/10 1,000 563
Ohio State, Housing Finance
Agency Mortgage
(RB) (GNMA)
5.350% 09/01/04 190 193
Ohio State, Turnpike Commission
(RB) (FGIC) Series A
5.500% 02/15/17 2,000 1,965
Wyoming City, School
District (GO) (FGIC)
5.750% 12/01/15 740 759
5.750% 12/01/16 800 814
--------
7,972
--------
PENNSYLVANIA -- 0.1%
Pennsylvania State, Higher
Educational Facility Authority,
Philadelphia College
Osteopathic (RB)
4.450% 12/01/01 100 100
--------
RHODE ISLAND -- 1.4%
Convention Center Authority,
Prerefunded 05/15/01 @ 102
(RB) (MBIA) Series A
6.700% 05/15/01 1,310 1,379
--------
SOUTH CAROLINA -- 5.3%
Charleston County, Public
Improvement (GO)
6.000% 09/01/09 1,000 1,071
South Carolina State, Public
Service Authority (RB) (FGIC)
5.875% 01/01/23 4,000 4,010
--------
5,081
--------
TENNESSE -- 1.7%
Nashville & Davidson County,
Metropolitan Government (GO)
6.000% 12/01/10 1,500 1,616
--------
Par Value
Maturity (000) (000)
---------- ------- --------
MUNICIPAL BONDS -- CONTINUED
TEXAS -- 9.3%
Dallas County, (GO) (MBIA)
5.000% 02/15/09 $ 600 $ 594
Harris County, Toll Roads
Revenue (RB)
6.500% 08/15/15 2,000 2,100
Plano, Independent School
District (GO) (A)
6.000% 02/15/06 1,000 1,063
5.900% 02/15/10 1,000 1,039
Texas State, Public Finance
Authority, Prerefunded
10/01/00 @ 100 (RB)
6.375% 10/01/00 4,100 4,179
--------
8,975
--------
UTAH -- 2.6%
Utah State, Intermountain
Power Agency, Power Supply
(RB) (FSA) Series E
6.250% 07/01/09 2,000 2,165
Weber County, Municipal Building
Authority (RB) (MBIA)
4.900% 12/15/05 300 303
--------
2,468
--------
VERMONT -- 2.1%
Vermont Bank (RB)
5.500% 12/01/10 2,000 2,048
--------
VIRGINIA -- 1.1%
Richmond, Public Improvement,
Prerefunded 01/15/01 @ 102 (GO)
6.250% 01/15/01 1,000 1,041
--------
WASHINGTON -- 5.8%
King County (GO)
6.100% 12/01/01 1,000 1,002
Washington State (GO)
6.500% 09/01/01 1,900 1,969
Washington State, Public
Power Supply Systems,
Nuclear Project No. 2 ,
Prerefunded 01/01/01 @ 102
(RB) Series C
7.625% 07/01/10 2,500 2,637
--------
5,608
--------
WISCONSIN -- 4.8%
Cottage Grove (GO) (FSA)
4.700% 08/01/07 260 256
See Accompanying Notes
72
<PAGE> 75
[GRAPHIC OMITTED} STATEMENT OF NET ASSETS
ARMADA NATIONAL TAX EXEMPT BOND FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
---------- ------- --------
MUNICIPAL BONDS -- CONTINUED
WISCONSIN -- CONTINUED
Wisconsin State, Clean
Water (RB)
5.000% 06/01/06 $1,000 $ 1,006
Wisconsin State, Prerefunded
05/01/02 @ 100 (GO) Series A
6.300% 05/01/02 3,275 3,414
--------
4,676
--------
TOTAL MUNICIPAL BONDS
(Cost $94,033) 93,166
--------
CASH EQUIVALENT -- 2.0%
Federated Tax-Free Money
Market Fund 1,948 1,948
--------
TOTAL CASH EQUIVALENT
(Cost $1,948) 1,948
--------
TOTAL INVESTMENTS -- 98.7%
(Cost $95,981) $ 95,114
========
OTHER ASSETS AND LIABILITIES,
NET -- 1.3% 1,216
--------
NET ASSETS:
Portfolio Shares of Class I (unlimited
authorization -- no par value) based on
9,505,127 outstanding shares
of beneficial interest 92,932
Portfolio Shares of Class A (unlimited
authorization -- no par value) based on
442,838 outstanding shares
of beneficial interest 4,510
Portfolio Shares of Class B (unlimited
authorization -- no par value) based on
31,689 outstanding shares
of beneficial interest 319
Accumulated net realized loss on investments (283)
Net unrealized depreciation on investments (867)
Overdistributed net investment income (281)
--------
TOTAL NET ASSETS -- 100.0% $ 96,330
========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SHARE -- CLASS I $9.66
========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS A $9.67
========
MAXIMUM OFFERING PRICE PER
SHARE - CLASS A ($9.67 / 95.25%) $10.15
========
NET ASSET VALUE, AND OFFERING
PRICE PER SHARE-- CLASS B $9.66
========
- - ------------------------------------------------
(A) SECURITY IS BACKED BY A LETTER OF CREDIT BACKED BY A MAJOR FINANCIAL
INSTITUTION
(B) VARIABLE RATE SECURITY - THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON NOVEMBER 30, 1999.
(C) ZERO COUPON BOND
AMBAC -- AMERICAN MUNICIPAL BOND ASSURANCE CORPORATION
BAN -- BOND ANTICIPATION NOTE
ETM -- ESCROW TO MATURITY
FGIC -- FEDERAL GUARANTY INSURANCE COMPANY
FSA -- FEDERAL SECURITY ASSURANCE
GNMA -- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
GO -- GENERAL OBLIGATION
MBIA -- MUNICIPAL BOND INSURANCE ASSOCIATION
RB -- REVENUE BOND
See Accompanying Notes
73
<PAGE> 76
[GRAPHIC OMITTED] FINANCIAL HIGHLIGHTS
ARMADA NATIONAL TAX EXEMPT BOND FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
For the Six Months
Ended November 30, 1999 For the Year For the Period
(Unaudited) Ended May 31, 1999 Ended May 31, 1998
------------------------------- ----------------------------- ----------------------
Class I Class A Class B Class I Class A2 Class B2 Class I2
--------- ------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.96 $ 9.97 $ 9.96 $ 10.03 $ 10.04 $ 10.23 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.19 0.19 0.16 0.45 0.41 0.13 0.07
Net gain/(loss) on securities (realized
and unrealized) (0.28) (0.29) (0.29) (0.04) (0.04) (0.26) 0.03
---------- -------- -------- -------- -------- -------- --------
Total from investment operations (0.09) (0.10) (0.13) 0.41 0.37 (0.13) 0.10
---------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Dividends from net investment
income (0.21) (0.20) (0.17) (0.45) (0.41) (0.14) (0.07)
Distribution from net realized
capital gains (0.00) (0.00) (0.00) (0.03) (0.03) (0.00) (0.00)
---------- -------- -------- -------- -------- -------- --------
Total distributions (0.21) (0.20) (0.17) (0.48) (0.44) (0.14) (0.07)
---------- -------- -------- -------- -------- -------- --------
Net asset value, end of period $ 9.66 $ 9.67 $ 9.66 $ 9.96 $ 9.97 $ 9.96 $ 10.03
========== ======== ======== ======== ======== ======== ========
TOTAL RETURN (0.73)%4 (0.77)%1,4 (1.13)%1,4 4.07% 3.67%1,4 (1.22)%1,4 7.03%3
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $ 91,747 $ 4,278 $ 305 $100,638 $ 4,205 $ 275 $ 80,259
Ratio of expenses to average net assets 0.34%3 0.42%3 1.14%3 0.36% 0.46%3 1.17%3 0.33%3
Ratio of net investment income to
average net assets 3.93%3 3.86%3 3.15%3 4.39% 4.29%3 3.58%3 4.62%3
Ratio of expenses to average net
assets before fee waivers 0.63%3 0.71%3 1.42%3 0.87% 0.97%3 1.68%3 0.87%3
Ratio of net investment income to
average net assets before fee waivers 3.65%3 3.58%3 2.86%3 3.88% 3.78%3 3.07%3 4.08%3
Portfolio turnover rate 11% 11% 11% 23% 23% 23% 0%
</TABLE>
1 TOTAL RETURN EXCLUDES SALES CHARGE.
2 CLASS I, CLASS A AND CLASS B COMMENCED OPERATIONS ON APRIL 9 1998, JUNE 19,
1998 AND JANUARY 29, 1999, RESPECTIVELY.
3 ANNUALIZED.
4 TOTAL RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
See Accompanying Notes
74
<PAGE> 77
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA OHIO TAX EXEMPT BOND FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
-------- ----- ----
MUNICIPAL BONDS -- 98.4%
OHIO -- 97.4%
Akron (GO)
10.500% 12/01/99 $ 100 $ 100
6.000% 12/01/12 1,000 1,064
Akron, Economic Development
(RB) (MBIA)
5.750% 12/01/09 1,680 1,770
6.000% 12/01/12 935 990
Akron, Sewer System (RB) (MBIA)
5.650% 12/01/08 560 584
Akron, Sewer System (RB) (FGIC)
5.500% 12/01/11 1,035 1,057
Akron Waterworks (RB) (FGIC)
5.150% 03/01/01 500 506
Akron Waterworks (RB) (MBIA)
4.900% 03/01/08 1,500 1,492
Allen County (GO) (AMBAC)
4.950% 12/01/04 500 508
Ashland City School District (GO)
4.950% 12/01/07 345 347
Ashland City School District
(GO) (AMBAC)
5.000% 12/01/08 250 250
5.100% 12/01/09 245 246
Avon Lake City, Local School
District (GO)
5.750% 12/01/14 2,165 2,206
Avon Lake City, Local School
District (GO) (AMBAC)
5.800% 12/01/12 1,000 1,044
Bay Village City School District,
Prerefunded 12/01/00 @ 102 (GO)
7.350% 12/01/11 200 210
Beavercreek Local School District
(GO) (FGIA)
5.250% 12/01/07 1,130 1,153
Belefontaine School (GO)
5.750% 12/01/18 505 502
Berea (GO)
7.000% 12/01/99 400 400
Big Walnut, Local School
District (AMBAC)
6.900% 06/01/00 235 238
7.000% 06/01/01 220 229
Bowling Green City, School District,
Prerefunded 12/01/99 @ 102 (GO)
7.000% 12/01/02 260 265
Brown County (GO) (AMBAC)
5.200% 12/01/04 455 468
Par Value
Maturity (000) (000)
-------- ----- --------
MUNICIPAL BONDS -- CONTINUED
OHIO -- CONTINUED
Butler County, Sewer Systems,
Prerefunded 12/01/02 @101
(RB) (AMBAC)
6.000% 12/01/04 $ 500 $ 526
Butler County, Sewer Systems
(RB) (AMBAC)
4.600% 12/01/09 1,540 1,478
4.600% 12/01/10 1,520 1,436
Butler County, Transportation
(RB) (FSA)
5.500% 04/01/09 1,150 1,187
Celina City School District
(GO) (FGIC)
5.250% 12/01/20 1,750 1,612
Centerville City, School District
(GO) (MBIA)
5.650% 12/01/18 500 492
Centerville City, School District
(GO) (FGIC)
5.500% 12/01/07 500 518
Chesapeake Union, Exempted
Village (GO) (AMBAC)
6.250% 12/01/22 1,000 1,023
Cincinnati (GO)
5.375% 12/01/99 250 250
Clermont County, Waterworks
(RB) (AMBAC)
5.300% 12/01/05 500 515
Cleveland Heights (GO)
5.400% 12/01/00 900 913
Cleveland Ohio Cap Appreciation
(RB) (B)
0.000% 12/01/07 810 543
0.000% 12/01/09 825 483
0.000% 12/01/10 815 443
0.000% 12/01/13 815 369
0.000% 12/01/18 820 260
0.000% 12/01/19 815 240
Cleveland, Regional Sewer
District Water, Prerefunded
05/15/04 @ 100 (RB)
6.750% 04/01/07 600 650
Cleveland Ohio Waterworks (RB)
5.900% 01/01/01 500 509
Cleveland, Waterworks,
Prerefunded 01/01/02 @ 102
(RB) (AMBAC) Class A
6.500% 01/01/02 1,000 1,059
Cleveland, Waterworks (RB) (MBIA)
5.400% 01/01/06 500 516
Cleveland Ohio Waterworks (RB)
6.000% 01/01/06 2,000 2,128
See Accompanying Notes
75
<PAGE> 78
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA OHIO TAX EXEMPT BOND FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
-------- ----- --------
MUNICIPAL BONDS -- CONTINUED
OHIO -- CONTINUED
Cleveland Ohio Waterworks
(RB) (MBIA)
5.625% 01/01/13 $ 3,000 $ 3,038
Columbus (GO)
5.250% 05/01/02 1,000 1,021
5.300% 05/01/03 1,000 1,026
Columbus, Water System (GO)
5.800% 02/15/01 500 509
Columbus (GO) (A) Series 1
3.700% 12/01/17 1,500 1,500
Columbus City, School District,
Prerefunded 12/01/99 @ 102
(GO) (AMBAC)
6.950% 12/01/02 100 102
7.050% 12/01/08 500 510
Columbus City, School District,
Prerefunded 12/01/00 @ 102
(GO) (FGIC)
7.000% 12/01/11 100 105
Columbus City, School District,
Prerefunded 12/01/02 @ 102
(GO) (FGIC)
6.650% 12/01/02 900 972
Columbus, Sewer (RB)
6.200% 06/01/04 1,500 1,586
Columbus, Water System (RB)
6.000% 11/01/02 330 346
Cuyahoga County (GO)
5.650% 05/15/18 500 488
Cuyahoga County, Prerefunded
10/01/01 @ 102 (GO)
7.000% 10/01/13 100 107
Cuyahoga County, University
Hospital System Health Project
(RB) Series B
6.000% 01/15/03 400 415
Cuyahoga County, University
Hospital System Health Project
(RB) (MBIA) Series A
6.000% 01/15/06 1,000 1,061
5.250% 01/15/08 2,000 2,030
Cuyahoga County, Hospital,
Cleveland Clinic Foundation (RB)
6.000% 11/15/03 890 928
6.125% 11/15/04 840 882
Cuyahoga Falls, Callable
12/01/2007 @ 102 (GO)
5.250% 12/01/17 2,500 2,353
Dayton, Airport (RB) (AMBAC)
5.400% 12/01/06 1,000 1,036
5.150% 12/01/07 1,000 1,018
Par Value
Maturity (000) (000)
-------- ----- --------
MUNICIPAL BONDS -- CONTINUED
OHIO -- CONTINUED
Delaware County (GO)
5.250% 12/01/06 $ 500 $ 511
5.450% 12/01/08 250 256
Delaware City School District
(GO) (FGIC)
5.250% 12/01/06 770 790
Delphos, Sewer System Management,
Prerefunded 09/01/00 @ 102
(RB) (FSA)
7.200% 09/01/10 200 209
Euclid, Prerefunded
12/01/99 @ 102 (GO)
7.375% 12/01/09 450 459
Forest Hills Local School
District (GO) (MBIA)
6.000% 12/01/08 1,210 1,296
6.000% 12/01/09 830 890
Franklin County (GO)
5.050% 12/01/05 2,000 2,040
5.450% 12/01/09 1,000 1,020
Franklin County, Prerefunded
12/01/01 @ 102 (GO)
6.000% 12/01/03 500 525
6.300% 12/01/09 250 264
Franklin County, Convention
Facilities Authority Tax & Lease
(BAN) (MBIA)
6.700% 12/01/99 500 500
Franklin County, Hospital,
Children's Hospital (RB)
6.000% 11/01/06 1,035 1,087
Franklin County, Hospital,
Holy Cross Health System (RB)
5.875% 06/01/21 1,000 965
Franklin County, Hospital,
US Health Group (RB) (A)
4.500% 12/01/20 1,000 1,001
Franklin County, Hospital,
Riverside United Hospital
Project, Prerefunded
05/15/00 @ 102 (MBIA)
7.125% 05/15/05 1,000 1,034
Franklin County, Hospital,
Doctors Healthcare (RB)
4.750% 12/01/03 2,175 2,091
Franklin County, Hospital,
Riverside United Hospital Project,
Prerefunded 05/15/00 @ 102 (RB)
7.600% 05/15/00 1,500 1,554
See Accompanying Notes
76
<PAGE> 79
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA OHIO TAX EXEMPT BOND FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
-------- ----- --------
MUNICIPAL BONDS -- CONTINUED
OHIO -- CONTINUED
Greene County, Water Works
Systems (RB) (AMBAC)
5.300% 12/01/05 $ 500 $ 515
Hamilton County, Children's Hospital
Facility (RB) (MBIA)
5.375% 05/15/13 1,100 1,084
Hamilton County (GO)
5.750% 12/01/01 250 258
5.500% 12/01/07 240 249
5.000% 12/01/08 675 674
5.125% 12/01/08 1,000 1,008
5.100% 12/01/11 1,025 1,012
Hamilton County, Sewer System (RB)
6.200% 12/01/00 1,000 1,021
Hamilton County, Sewer System
(RB) (FGIC)
5.300% 12/01/06 1,000 1,030
5.400% 12/01/08 1,000 1,030
Hamilton County, Sewer System
(RB) (ETM)
6.300% 12/01/01 35 36
Hamilton County, Sewer System (RB)
6.300% 12/01/01 65 68
Hamilton County, Sewer System
(RB) (FGIC)
5.500% 12/01/10 1,240 1,276
5.000% 12/01/17 1,000 911
Hamilton City School (GO)
6.150% 12/01/13 1,000 1,071
Hancock County (GO)
5.750% 12/01/16 500 503
Hilliard City Schools (GO)
5.300% 12/01/99 250 250
Hilliard City School District,
Prerefunded 12/01/01 @ 102 (GO)
5.900% 12/01/04 1,000 1,049
Hilliard City Schools (GO) (FGIC)
6.150% 12/01/01 625 648
Hudson Local School District
(GO) (FGIC)
5.000% 12/15/02 500 509
Kenston Local School District (GO)
5.550% 12/01/03 500 517
Kent (GO)
5.200% 12/01/18 500 464
Kent State University (RB) (AMBAC)
6.150% 05/01/04 250 264
Kettering, Prerefunded
12/01/00 @ 102 (GO)
7.200% 12/01/02 480 504
Kettering (GO)
5.150% 12/01/05 550 561
Par Value
Maturity (000) (000)
-------- ----- --------
MUNICIPAL BONDS -- CONTINUED
OHIO -- CONTINUED
Lakewood, Prerefunded
12/01/02 @ 102 (GO)
6.500% 12/01/02 $ 1,500 $ 1,611
Lakewood (GO)
4.900% 12/01/11 1,070 1,035
Lakota School District, Prerefunded
12/01/00 @ 101 (GO)
7.000% 12/01/03 200 208
Lakota School District (GO) (AMBAC)
5.700% 12/01/05 250 263
Lakota School District (GO) (FGIC)
5.000% 12/01/12 1,000 958
Licking County (GO) (FGIC)
7.000% 12/01/02 100 107
Loveland City School District (GO)
6.000% 12/01/00 250 255
Lucas County, Hospital, Mercy
Hospital (ETM) (RB)
6.000% 09/01/04 155 159
Marysville Exempted Village
School District (GO) (AMBAC)
5.100% 12/01/04 500 511
Mason City School District (GO) (FGIC)
5.200% 12/01/08 865 871
Massillon City School District,
Prerefunded 12/01/00 @ 102
(GO) (AMBAC)
6.950% 12/01/03 300 314
7.000% 12/01/04 150 157
Miami University General
Receipts (RB)
5.400% 12/01/05 1,000 1,023
Miamisburg, Sewer System
(RB) (AMBAC)
5.000% 11/15/08 500 501
Middletown Ohio (GO) (FGIC)
5.750% 12/01/12 650 671
5.750% 12/01/13 640 658
Montgomery County, Sisters of
Charity Health Care (RB) (MBIA)
6.500% 05/15/08 300 315
Montgomery County, Catholic
Health Initiatives (RB)
5.000% 12/01/08 1,000 976
5.000% 12/01/09 1,000 968
Montgomery County,
Solid Waste (RB) (MBIA)
5.300% 11/01/07 1,000 1,024
5.125% 11/01/08 500 503
5.350% 11/01/10 900 911
See Accompanying Notes
77
<PAGE> 80
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA OHIO TAX EXEMPT BOND FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
-------- ----- --------
MUNICIPAL BONDS -- CONTINUED
OHIO -- CONTINUED
Montgomery County, Water
(RB) (AMBAC)
5.250% 11/15/06 $ 500 $ 514
Newark (GO) (AMBAC)
5.450% 12/01/02 1,000 1,030
North Canton City, School District
(GO) (AMBAC)
5.250% 12/01/01 500 510
5.750% 12/01/06 250 264
North Royalton City, School District
(GO) (MBIA)
6.625% 12/01/06 1,885 2,088
Northeast Regional Sewer
District Wastewater, Prerefunded
11/15/01 @ 101 (RB) (AMBAC)
6.400% 11/15/03 250 262
Northeast Regional Sewer District
Wastewater, Prerefunded
11/01/01 @ 101 (RB) (AMBAC)
6.500% 11/15/08 250 263
Northeast Regional Sewer District
Wastewater, Prerefunded
11/15/01 @ 101 (RB) (AMBAC)
6.500% 11/15/01 500 526
Oak Hills, Local School District (GO)
5.650% 12/01/07 350 367
Ohio Capital Corporation For
Housing, Housing & Urban
Development (RB) Series D
5.350% 02/01/09 650 640
Ohio State, Housing Financial
Agency, Single Family Mortgage (RB)
7.400% 03/01/05 35 36
7.400% 09/01/05 30 31
7.600% 09/01/16 100 103
6.375% 04/01/17 75 76
Ohio State, School District, School
Bus Project (GO) (AMBAC)
5.250% 04/15/00 440 442
Ohio State, Infrastructure
Improvement (GO)
5.250% 08/01/03 1,265 1,298
Ohio State (GO)
5.000% 08/01/00 500 503
5.150% 09/01/01 500 508
4.700% 08/01/03 1,000 1,008
6.600% 09/01/03 150 161
5.200% 08/01/08 1,000 1,013
Ohio State (GO) Series A
5.400% 10/01/07 1,370 1,401
Par Value
Maturity (000) (000)
-------- ----- --------
MUNICIPAL BONDS -- CONTINUED
OHIO -- CONTINUED
Ohio State, Prerefunded
08/01/05 @ 102 (GO)
6.200% 08/01/12 $ 860 $ 933
Ohio State, Highways (GO)
4.750% 05/15/02 1,000 1,010
Ohio State, Infrastructure
Improvement (GO)
5.750% 02/01/12 1,000 1,039
Ohio State, Air Quality Development
Authority, Buckeye Power Project (RB)
5.250% 08/01/07 400 401
Ohio State, Building Authority
Facilities, Adult Correctional
Building Fund (RB) (AMBAC)
Series A
6.125% 10/01/09 1,300 1,375
Ohio State, Building Authority
Facilities, James Rhodes
Project (RB) Series A
5.900% 06/01/00 500 505
Ohio State, Building Authority
Facilities, Juvenile Correctional
Building (RB)
5.800% 10/01/02 250 259
Ohio State, Building Authority
Facilities, State Arts Building (RB)
5.200% 10/01/04 500 513
Ohio State, Building Authority
Facilities, Highway Safety
Building (RB) (MBIA)
5.400% 10/01/02 250 257
Ohio State, Building Authority
Facilities, Adult Correctional
Building Fund (RB) (AMBAC)
Series A
6.000% 04/01/06 1,930 2,058
Ohio State, Building Authority
(RB) (AMBAC)
5.500% 04/01/14 1,500 1,496
Ohio State, Department of
Administrative Services
(RB) (AMBAC)
5.000% 12/15/12 1,210 1,169
Ohio State, Higher Educational
Facility, Denison University
Project (RB)
5.250% 11/01/09 1,000 1,001
Ohio State, Higher Educational
Facility (RB)
5.000% 07/01/18 600 532
See Accompanying Notes
78
<PAGE> 81
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA OHIO TAX EXEMPT BOND FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
-------- ----- --------
MUNICIPAL BONDS -- CONTINUED
OHIO -- CONTINUED
Ohio State, Higher Educational
Facility, Case Western Reserve
University Project, Prerefunded
10/01/00 @ 102 (RB) Series B
7.125% 10/01/14 $ 60 $ 63
Ohio State, Higher Educational
Facility (RB) (AMBAC) Series B
5.875% 12/01/01 500 516
Ohio State, Higher Educational
Facility, University of Dayton (RB)
5.875% 12/01/04 250 260
Ohio State, Higher Educational
Facility, Case Western University (RB)
5.000% 10/01/10 905 889
Ohio State, Public Facilities Mental
Health (RB) (MBIA)
6.800% 12/01/02 2,000 2,040
Ohio State, Public Facilities Higher
Education (RB) Series II-A
5.500% 12/01/00 500 507
Ohio State, Public Facilities Mental
Health (RB) (FSA)
5.000% 12/01/02 1,500 1,524
Ohio State, Public Facilities Higher
Education (RB) (AMBAC) Series II-A
4.250% 12/01/07 1,000 955
Ohio State, Public Facilities Higher
Education (RB) (AMBAC) Series II-B
5.700% 11/01/03 1,000 1,044
Ohio State, Public Facilities Higher
Education (RB) (AMBAC) Series II-A
5.200% 05/01/06 500 510
5.200% 05/01/07 775 787
Ohio State, Turnpike Commission
(RB) Series A
6.000% 02/15/07 3,100 3,309
Ohio State, Turnpike Commission
(RB) (FGIC) Series A
5.500% 02/15/17 1,805 1,773
Ohio State, Turnpike Commission
(RB) (FGIC) Series AA
5.500% 02/15/18 1,000 976
Ohio State, University General Receipts
5.150% 12/01/00 250 253
5.400% 12/01/02 1,500 1,541
Ohio State, Water Development
Authority, Pure Water (RB) (MBIA)
5.500% 06/01/01 200 204
5.500% 12/01/01 1,000 1,025
5.750% 12/01/05 500 523
Par Value
Maturity (000) (000)
-------- ----- --------
MUNICIPAL BONDS -- CONTINUED
OHIO -- CONTINUED
Ohio State, Water Development
Authority, Fresh Water
(RB) (AMBAC)
5.400% 12/01/04 $ 510 $ 528
Ohio State, Water Development
Authority, Pure Water
(RB) (AMBAC)
5.600% 06/01/07 1,500 1,558
Ohio State, Water Development
Authority, Safe Water
(RB) (AMBAC)
6.000% 12/01/06 1,075 1,152
Ohio State, Water Development
Authority, Pure Water
(RB) (AMBAC)
7.250% 12/01/08 500 551
Ohio State, Water Development
Authority (RB) (ETM)
8.000% 12/01/99 150 150
Ohio State, Water Development
Authority, Pure Water (RB) (MBIA)
5.550% 06/01/04 1,000 1,040
Ohio State, Water Development
Authority, Pollution Control
Facilities (RB)
5.900% 06/01/00 500 505
5.900% 12/01/02 320 334
Ohio State, Water Control Loan
Fund, Water Quality (RB) (MBIA)
5.000% 06/01/09 1,000 995
Ontario Local School District
(GO) (FSA)
4.800% 12/01/11 790 758
4.900% 12/01/12 630 606
Orrville Electric System
(RB) (AMBAC)
5.500% 12/01/08 1,220 1,264
Ottawa County (GO) (MBIA)
5.400% 09/01/11 500 505
Parma City School District (AN)
4.600% 12/01/03 1,360 1,336
4.600% 12/01/04 1,360 1,324
Parma City School District (GO)
5.550% 12/01/04 200 203
5.550% 12/01/05 290 294
5.550% 12/01/06 305 307
Perrysburg Village School District
(GO) (FSA) Series B
5.750% 12/01/12 1,225 1,277
See Accompanying Notes
79
<PAGE> 82
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA OHIO TAX EXEMPT BOND FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
-------- ----- --------
MUNICIPAL BONDS -- CONTINUED
OHIO -- CONTINUED
Portage County (GO)
6.000% 12/01/03 $ 915 $ 961
5.100% 12/01/12 2,500 2,447
Portage County, Hospital Facility
Authority, Robinson Memorial
(RB) (MBIA)
5.625% 11/15/07 1,000 1,040
Richland County (GO) (AMBAC)
5.200% 12/01/08 515 520
Rocky River, City School District (GO)
5.100% 12/01/07 625 631
Sandusky County, Hospital
Facility (RB)
4.900% 01/01/05 500 476
Southwest Licking School
District (GO) (FGIC)
5.750% 12/01/15 550 564
5.750% 12/01/16 400 407
Springfield Local School District (GO)
6.100% 12/01/03 250 263
Stow School District (GO)
9.125% 12/01/06 580 721
Strongsville (GO)
5.900% 12/01/15 1,575 1,608
Strongsville City School District
(GO) (MBIA)
5.150% 12/01/08 1,000 1,010
5.200% 12/01/09 670 678
Toledo (GO)
7.375% 12/01/99 500 500
7.375% 12/01/01 100 106
University of Cincinnati,
General Receipts (RB)
5.350% 06/01/08 1,000 1,008
5.500% 06/01/11 1,665 1,676
7.000% 06/01/11 500 526
University of Cincinnati, General
Receipts (RB) Series W
5.700% 06/01/12 1,240 1,251
University of Toledo General
Receipts (RB) (FGIC)
5.300% 06/01/01 175 178
Upper Arlington (GO)
6.200% 12/01/01 270 279
Upper Arlington, City School
District (GO) (MBIA)
6.000% 12/01/05 1,170 1,248
Par Value
Maturity (000) (000)
-------- ----- --------
MUNICIPAL BONDS -- CONTINUED
OHIO -- CONTINUED
Vandalia (GO)
5.350% 12/01/09 $ 505 $ 512
Washington County, Hospital,
Marietta Area Healthcare (RB) (FSA)
5.375% 09/01/18 1,500 1,440
West Clermont Local School
District (GO) (AMBAC)
5.650% 12/01/08 1,030 1,074
West Geauga Local School
District (GO) (AMBAC)
5.650% 11/01/06 1,000 1,049
Westerville (GO)
5.250% 12/01/10 1,990 2,002
5.250% 12/01/12 1,205 1,193
5.250% 12/01/13 1,850 1,815
Westlake (GO)
5.300% 12/01/03 500 516
Westlake City School
District (GO) Series A
6.200% 12/01/06 1,635 1,762
Wilmington City School
District (GO) (FGIC)
5.350% 12/01/00 225 228
Worthington City School
District (GO) (FGIC)
5.800% 12/01/01 1,200 1,236
5.850% 12/01/02 500 520
Wright State University
General Receipts (RB) (AMBAC)
4.900% 05/01/05 500 504
Wyoming City School
District (GO) (FGIC)
5.750% 12/01/13 135 140
5.750% 12/01/14 690 712
5.750% 12/01/17 400 406
--------
193,000
--------
PUERTO RICO -- 1.0%
Commonwealth of Puerto Rico,
Electric Power Authority
(RB) (MBIA)
6.500% 07/01/06 1,000 1,101
Commonwealth of Puerto Rico,
Housing Financial Corporation
(RB) (C)
7.300% 10/01/06 190 195
7.400% 04/01/07 210 215
See Accompanying Notes
80
<PAGE> 83
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA OHIO TAX EXEMPT BOND FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
-------- --------- --------
MUNICIPAL BONDS -- CONTINUED
Commonwealth of Puerto Rico,
Prerefunded 07/01/00 @ 102
(GO) (FGIC)
7.200% 07/01/03 $ 500 $ 520
--------
2,031
--------
TOTAL MUNICIPAL BONDS
(Cost $196,236) 195,031
--------
CASH EQUIVALENT -- 0.0%
Federated Ohio Municipal Cash
Trust 17 17
--------
TOTAL CASH EQUIVALENT
(Cost $17) 17
--------
TOTAL INVESTMENTS -- 98.4%
(Cost $196,253) $195,048
========
OTHER ASSETS AND LIABILITIES,
NET -- 1.6% 3,119
--------
NET ASSETS:
Portfolio Shares of Class I (unlimited
authorization -- no par value) based on
17,980,002 outstanding shares
of beneficial interest 194,520
Portfolio Shares of Class A (unlimited
authorization -- no par value) based on
595,193 outstanding shares
of beneficial interest 6,275
Accumulated net realized loss on investments (1,340)
Net unrealized depreciation on investments (1,206)
Overdistributed net investment income (82)
--------
TOTAL NET ASSETS -- 100.0% $198,167
========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SHARE -- CLASS I $10.67
========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS A $10.63
========
MAXIMUM OFFERING PRICE PER
SHARE -- CLASS A ($10.63 / 97.00%) $10.96
========
- - ------------------------------------------------
(A) -- VARIABLE RATE SECURITY- THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON NOVEMBER 30, 1999.
(B) -- ZERO COUPON
(C) -- SECURITY IS BACKED BY LETTER OF CREDIT BY MAJOR FINANCIAL INSTITUTION
AMBAC -- AMERICAN MUNICIPAL BOND ASSURANCE CORPORATION
AN -- ANTICIPATION NOTE
BAN -- BOND ANTICIPATION NOTE
ETM -- ESCROWED TO MATURITY
FGIA -- FEDERAL GUARANTY INSURANCE AGENCY
FGIC -- FEDERAL GUARANTY INSURANCE COMPANY
FSA -- FEDERAL SECURITY ASSURANCE
GO -- GENERAL OBLIGATION
MBIA -- MUNICIPAL BOND INSURANCE ASSOCIATION
RB -- REVENUE BOND
See Accompanying Notes
81
<PAGE> 84
[GRAPHIC OMITTED] FINANCIAL HIGHLIGHTS
ARMADA OHIO TAX EXEMPT BOND FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
For the Six Months For the Year Ended May 31,
Ended November 30, 1999
(Unaudited) 1999 1998
----------------------- ------------------- -------------------
Class I Class A Class I Class A Class I Class A
--------- --------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 11.03 $ 11.00 $ 11.13 $ 11.09 $ 10.86 $ 10.82
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.24 0.23 0.53 0.52 0.51 0.51
Net gain/(loss) on securities
(realized and unrealized) (0.35) (0.36) (0.09) (0.08) 0.28 0.28
-------- -------- -------- -------- -------- --------
Total from investment
operations (0.11) (0.13) 0.44 0.44 0.79 0.79
--------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Dividends from net
investment income (0.25) (0.24) (0.53) (0.52) (0.51) (0.51)
Distributions from net realized
capital gains (0.00) (0.00) (0.01) (0.01) (0.01) (0.01)
-------- -------- -------- -------- -------- --------
Total distributions (0.25) (0.24) (0.54) (0.53) (0.52) (0.52)
-------- -------- -------- -------- -------- --------
Net asset value, end of
period $ 10.67 $ 10.63 $ 11.03 $ 11.00 $ 11.13 $ 11.09
======== ======== ======== ======= ======== =======
TOTAL RETURN (0.87)%3 (0.93)%1,3 3.94% 3.93%1 7.43% 7.39%1
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's) $191,837 $ 6,330 $205,365 $4,808 $165,395 $ 4,037
Ratio of expenses to average
net assets 0.43%2 0.53%2 0.28% 0.38% 0.25% 0.25%
Ratio of net investment income
to average net assets 4.40%2 4.30%2 4.77% 4.67% 4.67% 4.59%
Ratio of expenses to average net
assets before fee waivers 0.72%2 0.82%2 0.78% 0.88% 0.80% 0.80%
Ratio of net investment income to
average net assets before fee
waivers 4.12%2 4.02%2 4.27% 4.17% 4.12% 4.04%
Portfolio turnover rate 15% 15% 19% 19% 15% 15%
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended May 31,
1997 1996 1995
--------------------- -------------------- --------------------
Class I Class A Class I Class A Class I Class A
-------------------- -------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 10.70 $ 10.66 $ 10.74 $ 10.70 $ 10.57 $ 10.53
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.51 0.51 0.50 0.50 0.50 0.50
Net gain/(loss) on securities
(realized and unrealized) 0.16 0.16 (0.04) (0.04) 0.17 0.17
-------- -------- -------- -------- -------- --------
Total from investment
operations 0.67 0.67 0.46 0.46 0.67 0.67
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Dividends from net
investment income (0.51) (0.51) (0.50) (0.50) (0.50) (0.50)
Distributions from net realized
capital gains (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
-------- -------- -------- -------- -------- --------
Total distributions (0.51) (0.51) (0.50) (0.50) (0.50) (0.50)
-------- -------- -------- -------- -------- --------
Net asset value, end of
period $10.86 $10.82 $ 10.70 $10.66 $10.74 $10.70
======== ======== ======== ======== ======== ========
TOTAL RETURN 6.37% 6.38%1 4.36% 4.35%1 6.61% 6.64%1
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's) 91,366% 3,535 82,886 2,869 71,996 3,168
Ratio of expenses to average
net assets 0.24% 0.24% 0.26% 0.26% 0.24% 0.24%
Ratio of net investment income
to average net assets 4.71% 4.71% 4.68% 4.68% 4.82% 4.82%
Ratio of expenses to average net
assets before fee waivers 0.79% 0.79% 0.83% 0.83% 0.80% 0.78%
Ratio of net investment income to
average net assets before fee
waivers 4.16% 4.16% 4.11% 4.11% 4.26% 4.27%
Portfolio turnover rate 23% 23% 10% 10% 3% 3%
</TABLE>
1 TOTAL RETURN EXCLUDES SALES CHARGE.
2 ANNUALIZED
3 TOTAL RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
See Accompanying Notes
82
<PAGE> 85
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA PENNSYLVANIA MUNICIPAL BOND FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
-------- ----- --------
MUNICIPAL BONDS -- 94.4%
PENNSYLVANIA -- 92.7%
Allegheny County, Hospital
Development Authority,
Magee Woman's Hospital
Project (RB) (ETM) Series O
10.125% 10/01/02 $ 80 $ 87
Allegheny County, Higher
Education Building Authority,
Duquesne University Project
(RB) (AMBAC)
6.500% 03/01/10 380 419
Allegheny County, Industrial
Development Authority (RB)
5.250% 12/01/14 650 654
Allegheny County, Higher
Education Community
College (RB) (MBIA)
5.800% 06/01/13 1,000 1,015
Allegheny County, Port Authority
Special Revenue (RB) (MBIA)
6.250% 03/01/17 685 712
Allegheny County, Sanitation
Authority Sewer (RB) (FGIC) (A)
0.000% 12/01/08 2,000 1,260
Ambridge Area School District
(GO) (FGIC)
4.750% 11/01/08 500 489
Bradford County, School District,
Prerefunded 10/01/05 @ 100
(GO) (FGIC)
5.250% 10/01/05 1,000 1,015
Bucks County, Community College
Authority, College Building (RB)
5.300% 06/15/10 100 100
Butler County, Sewer Authority,
Prerefunded 01/01/04 @100 (RB)
7.250% 01/01/04 105 112
Cumberland County, Messiah
College Project (RB) (AMBAC)
5.000% 10/01/07 1,000 1,002
Dauphin County, General Authority,
Mandatory Put 12/01/2005 @ 100
(RB) (AMBAC)
5.400% 06/01/26 800 826
Delaware County (GO)
5.000% 11/15/07 1,000 1,006
Delaware River Port Authority,
Pennsylvania & New Jersey
Bridges Project (RB) (AMBAC) (ETM)
6.000% 01/15/10 570 594
Par Value
Maturity (000) (000)
-------- ----- --------
MUNICIPAL BONDS -- CONTINUED
PENNSYLVANIA -- CONTINUED
Delaware Valley, Regional Finance
Authority (RB) (AMBAC) Series A
5.900% 04/15/16 $ 1,000 $ 1,009
Erie County, Prison Authority Lease,
Prerefunded 11/01/01 @100
(RB) (MBIA)
6.600% 11/01/01 1,000 1,042
Fairview School District (GO)
6.000% 02/15/07 1,140 1,211
Gettysburg College (RB) (MBIA)
5.375% 08/15/13 1,000 999
Indiana County, Industrial
Development Authority,
Pollution Control Revenue,
New York Electric & Gas
(MBIA) Series A
6.000% 06/01/06 1,000 1,062
Lehigh County, Industrial
Development Authority,
Pollution Control Revenue,
Pennsylvania Power & Light
Project (MBIA) Series A
6.400% 11/01/21 2,250 2,317
Lower Providence Township
(GO) (MBIA)
5.000% 05/01/07 215 216
Middletown Township,
Bucks County (RB) (ETM)
6.100% 10/01/00 70 71
Monroeville County, Hospital
Authority, East Suburban
Health Center Project,
Prerefunded 07/01/04 @ 100 (RB)
7.600% 07/01/08 850 931
Montgomery County, Hospital
Authority, Suburban General
Hospital Project (RB) (ETM)
7.750% 05/01/02 85 88
Moon Area School District
(GO) ( FGIC) (A) Series A
0.000% 11/15/11 1,520 800
Parkland School District (GO) (FGIC)
5.375% 09/01/14 1,000 989
Penn Hills Township (GO) (AMBAC)
5.500% 12/01/04 1,000 1,040
Pennsylvania State, Housing
Finance Agency, Single Family
Mortgage (RB) Series Z
7.000% 10/01/02 30 31
See Accompanying Notes
83
<PAGE> 86
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA PENNSYLVANIA MUNICIPAL BOND FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
-------- ----- --------
MUNICIPAL BONDS -- CONTINUED
PENNSYLVANIA -- CONTINUED
Pennsylvania State, Infrastructure
Investment Authority, Penvest
(RB) Series B
6.450% 09/01/04 $ 1,500 $ 1,601
Pennsylvania State, Infrastructure
Investment Authority, Penvest
(RB) Series A
5.000% 09/01/08 250 251
Pennsylvania State, Intergovernmental
Cooperative Authority, Special Tax,
City of Philadelphia Funding Program,
Prerefunded 06/15/02 (RB)
6.800% 06/15/02 500 528
Pennsylvania State, Intergovernmental
Cooperative Authority, Special Tax,
City of Philadelphia Funding Program
(RB) (FGIC)
5.000% 06/15/09 500 496
Pennsylvania State (GO) (AMBAC)
Series 1 5.125% 03/15/12 1,475 1,442
Pennsylvania State, Higher Education
Assistance Authority (RB) (FGIC)
Series A
6.800% 12/01/00 685 703
Pennsylvania State, Higher Education
Facilities Authority, University of
Pennsylvania Project (RB)
6.500% 09/01/04 250 270
Pennsylvania State, Higher Education
Facilities Authority, University of
Pennsylvania Project (RB) Series A
5.550% 09/01/09 1,300 1,328
Pennsylvania State, Industrial Economic
Development Authority
(RB) (AMBAC) Series 94
5.800% 07/01/09 700 733
Pennsylvania State, Industrial
Development Authority
(RB) (AMBAC)
6.000% 01/01/12 1,000 1,034
Pennsylvania State, Turnpike
Commission (RB) (FGIC) Series O
5.250% 12/01/01 1,010 1,029
Philadelphia Gas Works, Prerefunded
06/15/01 @102 (RB) Series 13
7.700% 06/15/01 460 492
Philadelphia Gas Works
(RB) (FSA) Series 14
6.250% 07/01/08 300 319
Par Value
Maturity (000) (000)
-------- ------- --------
MUNICIPAL BONDS -- CONTINUED
PENNSYLVANIA -- CONTINUED
Philadelphia, Thomas Jefferson
University Hospital (RB) (ETM)
7.000% 07/01/08 $ 205 $ 225
Philadelphia, Graduate Hospital
Project (RB) (ETM)
7.000% 07/01/10 365 394
Philadelphia, Water & Waste
Authority (RB) (MBIA)
5.500% 06/15/07 1,500 1,551
Philadelphia, Water & Waste
Authority (RB) (MBIA) Series 95
6.750% 08/01/03 200 215
Philadelphia, Water & Waste
Authority (RB) (MBIA)
6.250% 08/01/08 500 541
6.250% 08/01/11 200 216
Philadelphia, Hospital & Higher
Educational Facilities Authority,
Children's Hospital Project,
Prerefunded 02/15/02 @102
(RB) Series A
6.500% 02/15/02 200 212
Pittsburgh (GO) (MBIA) Series A
5.500% 09/01/06 955 988
Pleasant Valley School District
(RB) (FGIC)
5.000% 09/01/10 500 502
Quakertown General Authority
(RB) (VRDN) (A) Series A
3.800% 07/01/26 1,000 1,000
Scranton, Lackawanna Health &
Welfare, Moses Taylor Hospital
(ETM)
6.625% 07/01/09 465 494
Seneca Valley, School District,
Prerefunded 07/01/02 @100 (GO)
(FGIC) Series A
5.700% 07/01/06 1,000 1,031
Somerset County (GO) (AMBAC)
5.000% 10/01/14 550 511
State Public School Building Authority,
Montgomery County Community
College (RB)
4.600% 05/01/12 160 148
Swarthmore College Authority (RB)
5.250% 09/15/10 410 414
Swarthmore College Authority,
Callable 09/15/02 @ 102 (RB)
6.000% 09/15/06 700 735
Tyrone School District (GO) (MBIA)
5.700% 09/15/08 1,000 1,025
See Accompanying Notes
84
<PAGE> 87
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA PENNSYLVANIA MUNICIPAL BOND FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
-------- --------- --------
MUNICIPAL BONDS -- CONTINUED
PENNSYLVANIA -- CONTINUED
Union City, Higher Educational
Facilities Financing Authority,
Bucknell University Project
(RB) (MBIA)
6.200% 04/01/06 $ 1,000 $ 1,039
West Mifflin, Sewer Authority
(RB) (MBIA)
5.000% 08/01/14 250 232
West Whiteland, Municipal Sewer
Authority (RB) (ETM)
6.400% 09/15/13 240 262
Westmoreland County, Municipal
Authority (RB) (FGIC) (ETM)
2.000% 07/01/07 500 402
Westmoreland County, Municipal
Authority (RB) (FGIC) (ETM) (A)
0.000% 07/01/08 500 320
--------
43,780
--------
PUERTO RICO -- 1.7%
Commonwealth of Puerto Rico,
Public Finance Corporation
(RB) (AMBAC) Series A
5.375% 06/01/10 250 258
Commonwealth of Puerto Rico,
Public Improvement (GO) (MBIA)
6.250% 07/01/12 500 549
--------
807
--------
TOTAL MUNICIPAL BONDS
(Cost $44,386) 44,587
--------
CASH EQUIVALENT -- 3.5%
Federated Pennsylvania Cash
Trust 1,656 1,656
--------
TOTAL CASH EQUIVALENT
(Cost $1,656) 1,656
--------
TOTAL INVESTMENTS -- 97.9%
(Cost $46,042) $ 46,243
========
OTHER ASSETS AND LIABILITIES,
NET -- 2.1% 477
--------
Value
(000)
--------
NET ASSETS:
Portfolio Shares of Class I (unlimited
authorization -- no par value) based on
4,634,574 outstanding shares
of beneficial interest $46,410
Portfolio Shares of Class A (unlimited
authorization -- no par value) based on
12,733 outstanding shares
of beneficial interest 133
Accumulated net realized loss on investments (29)
Net unrealized appreciation on investments 201
Undistributed net investment income 5
--------
TOTAL NET ASSETS -- 100.0% $46,720
========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SHARE -- CLASS I $10.06
========
NET ASSET VALUE REDEMPTION
PRICE PER SHARE-- CLASS A $10.07
========
MAXIMUM OFFERING PRICE PER
SHARE -- CLASS A ($10.07 / 97%) $10.38
========
- - ------------------------------------------------
(A) ZERO COUPON BOND
AMBAC -- AMERICAN MUNICIPAL BOND ASSURANCE CORPORATION
ETM -- ESCROW TO MATURITY
FGIC -- FEDERAL GUARANTY INSURANCE CORPORATION
FSA -- FINANCIAL SECURITY ASSURANCE
GO -- GENERAL OBLIGATION
MBIA -- MUNICIPAL BOND INSURANCE ASSOCIATION
RB -- REVENUE BOND
VRDN -- VARIABLE RATE DEMAND NOTE
See Accompanying Notes
85
<PAGE> 88
[GRAPHIC OMITTED] FINANCIAL HIGHLIGHTS
ARMADA PENNSYLVANIA MUNICIPAL BOND FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
For the Six Months
Ended November 30, 1999 For the Year Ended May 31,
(Unaudited) 1999 1998
------------------- ------------------ ---------------------
Class I Class A Class I Class A Class I Class A
------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 10.39 $ 10.40 $ 10.45 $10.45 $ 10.22 $10.22
------- ------ ------- ------ ------- ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.22 0.21 0.51 0.48 0.46 0.45
Net gain/(loss) on securities
realized and unrealized) (0.31) (0.31) (0.07) (0.04) 0.24 0.24
------- ------ ------- ------ ------- ------
Total from investment operations (0.09) (0.10) 0.44 0.44 0.70 0.69
------- ------ ------- ------ ------- ------
LESS DISTRIBUTIONS
Dividends from net investment
income (0.24) (0.23) (0.49) (0.48) (0.46) (0.45)
Distributions from net realized
capital gains (0.00) (0.00) (0.01) (0.01) (0.00) (0.00)
Distributions in excess of net
realized capital gains (0.00) (0.00) (0.00) (0.00) (0.01) (0.01)
------- ------ ------- ------ ------- ------
Total distributions (0.24) (0.23) (0.50) (0.49) (0.47) (0.46)
------- ------ ------- ------ ------- ------
Net asset value, end of period $ 10.06 $ 10.07 $ 10.39 $10.40 $ 10.45 $10.45
======= ====== ======= ====== ======= ======
TOTAL RETURN (0.60)%5 (0.75)%1,5 4.21% 4.21%1 6.95% 6.84%1
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's) $46,593 $ 127 $40,171 $ 218 $38,753 $ 125
Ratio of expenses to average
net assets 0.38%4 0.48%4 0.48% 0.58% 0.69% 0.77%
Ratio of net investment income
to average net assets 4.41%4 4.31%4 4.80% 4.70% 4.40% 4.32%
Ratio of expenses to average net
assets before fee waivers 0.38%4 0.48%4 0.83% 0.93% 0.84% 0.94%
Ratio of net investment income
to average net assets before
fee waivers 4.41%4 4.31%4 4.45% 4.35% 4.25% 4.15%
Portfolio turnover rate 8% 8% 15% 15% 20% 20%
</TABLE>
<TABLE>
<CAPTION>
For the Year For the For the For the
Ended May 31, Period Year Period
1997 Ended Ended Ended
-------------------- May 31, April 30, April 30,
Class I3 Class A2 1996(3) 1996(3) 1995(3)
-------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 10.08 $10.13 $ 10.12 $10.04 $10.00
------- ------ ------- ------- ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.44 0.31 0.04 0.43 0.29
Net gain/(loss) on securities
realized and unrealized) 0.17 0.12 (0.04) 0.08 0.04
------- ------ ------- ------- ------
Total from investment
operations 0.61 0.43 0.00 0.51 0.33
------- ------ ------- ------- ------
LESS DISTRIBUTIONS
Dividends from net investment
income (0.44) (0.31) (0.04) (0.43) (0.29)
Distributions from net realized
capital gains (0.02) (0.02) (0.00) (0.00) (0.00)
Distributions in excess of net
realized capital gains (0.01) (0.01) (0.00) (0.00) (0.00)
------- ------ ------- ------- ------
Total distributions (0.47) (0.34) (0.04) (0.43) (0.29)
------- ------ ------- ------- ------
Net asset value, end of period $ 10.22 $10.22 $ 10.08 $ 10.12 $10.04
------- ------ ------- ------- ------
TOTAL RETURN 6.21% 6.13%1,4 (0.03)%1,4 5.06%1 3.38%1,5
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's) $36,769 $ 81 $38,733 $38,809 $34,638
Ratio of expenses to average
net assets 0.87% 0.99%1 0.85%1 0.85% 0.85%1
Ratio of net investment income
to average net assets 4.35% 4.26%1 4.32%1 4.16% 4.05%1
Ratio of expenses to average net
assets before fee waivers 1.02% 1.00%1 1.31%1 1.24% 1.36%1
Ratio of net investment income
to average net assets before
fee waivers 4.20% 4.25%1 3.86%1 3.77% 3.54%1
Portfolio turnover rate 42% 42% 0% 22% 4%
</TABLE>
1 TOTAL RETURN EXCLUDES SALES CHARGE.
2 CLASS A COMMENCED OPERATIONS ON SEPTEMBER 11, 1996.
3 ACTIVITY FOR THE PERIOD PRESENTED INCLUDES THAT OF THE PREDECESSOR FUND
THROUGH SEPTEMBER 6, 1996. THE PREDECESSOR FUND COMMENCED OPERATIONS ON AUGUST
10, 1994. DURING 1996, THE PREDECESSOR FUND CHANGED ITS FISCAL YEAR END FROM
APRIL 30 TO MAY 31.
4 ANNUALIZED.
5 TOTAL RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
See Accompanying Notes
86
<PAGE> 89
[GRAPHIC OMMITTED] STATEMENT OF NET ASSETS
ARMADA GOVERNMENT MONEY MARKET FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
-------- ----- ---------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 79.1%
FEDERAL FARM CREDIT BANK -- 6.6%
Federal Farm Credit Bank, MTN
4.750% 12/01/99 $ 15,000 $ 15,000
Discount Notes+
5.250% 12/14/99 4,203 4,195
5.090% 12/15/99 10,000 9,980
5.330% 12/29/99 10,550 10,506
5.540% 01/24/00 25,000 24,792
5.450% 01/25/00 10,000 9,917
5.540% 01/26/00 8,502 8,429
5.550% 02/15/00 10,000 9,883
5.500% 02/25/00 10,000 9,868
5.450% 03/31/00 7,140 7,009
---------
109,579
---------
FEDERAL HOME LOAN BANK -- 21.9%
Discount Notes+
5.530% 01/12/00 10,000 9,936
5.565% 01/14/00 20,000 19,864
5.130% 01/19/00 20,000 19,860
5.210% 01/21/00 10,000 9,926
5.500% 01/26/00 30,000 29,746
5.530% 01/28/00 10,000 9,911
5.520% 01/31/00 20,000 19,819
5.520% 02/01/00 10,000 9,905
5.390% 02/02/00 20,000 19,810
5.531% 02/03/00 10,000 9,902
5.530% 02/11/00 10,000 9,889
5.510% 02/16/00 10,000 9,882
5.520% 02/22/00 10,000 9,873
5.560% 02/23/00 20,000 19,742
5.570% 03/02/00 10,000 9,858
5.510% 03/08/00 20,000 19,701
5.510% 04/17/00 8,653 8,470
5.580% 04/19/00 10,000 9,783
5.590% 04/26/00 10,000 9,772
5.490% 05/10/00 10,000 9,755
5.600% 05/17/00 10,000 9,739
5.550% 05/24/00 10,000 9,730
5.700% 10/06/00 10,000 9,995
Federal Home Loan Bank (A)
5.220% 12/01/99 10,000 10,000
5.706% 03/24/00 15,000 15,000
5.655% 04/14/00 15,000 14,997
5.666% 06/09/00 10,000 10,000
5.706% 07/14/00 10,000 10,000
---------
364,865
---------
Par Value
Maturity (000) (000)
-------- ----- ---------
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- CONTINUED
FEDERAL HOME LOAN MORTGAGE CORPORATION+-- 22.5%
5.260% 12/02/99 $ 10,000 $ 9,999
5.260% 12/03/99 10,000 9,997
5.110% 12/09/99 10,000 9,989
5.140% 12/10/99 10,000 9,987
5.240% 12/15/99 10,000 9,980
5.090% 12/17/99 10,000 9,976
5.220% 12/22/99 10,000 9,970
5.540% 01/10/00 10,000 9,938
5.540% 01/10/00 20,666 20,540
5.470% 01/12/00 10,000 9,936
5.470% 01/13/00 30,000 29,802
5.200% 01/18/00 10,000 9,931
5.110% 01/21/00 10,000 9,926
5.200% 01/25/00 8,000 7,936
5.480% 01/27/00 17,725 17,576
5.400% 02/03/00 10,000 9,904
5.470% 02/04/00 20,992 20,785
5.470% 02/07/00 10,000 9,897
5.520% 02/09/00 20,000 19,786
5.474% 02/10/00 20,000 19,785
5.530% 02/15/00 10,000 9,883
5.520% 02/23/00 10,000 9,871
5.540% 02/24/00 20,567 20,300
5.580% 02/28/00 10,000 9,862
5.520% 03/09/00 10,000 9,848
5.540% 03/16/00 20,000 19,674
5.470% 03/23/00 10,000 9,828
5.510% 03/30/00 10,000 9,816
5.450% 04/13/00 10,000 9,792
---------
374,514
---------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 22.2%
Discount Notes+
5.270% 12/02/99 10,000 9,999
5.265% 12/06/99 20,000 19,985
5.203% 12/07/99 10,000 9,991
5.260% 12/08/99 10,000 9,990
5.100% 12/10/99 20,000 19,974
5.230% 12/13/99 20,000 19,965
5.240% 12/15/99 15,000 14,969
5.530% 01/18/00 10,000 9,926
5.570% 01/20/00 40,000 39,709
5.520% 01/24/00 10,000 9,917
5.500% 02/02/00 20,000 19,807
5.490% 02/08/00 17,985 17,795
See Accompanying Notes
87
<PAGE> 90
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA GOVERNMENT MONEY MARKET FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
-------- ----- ---------
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- CONTINUED
FEDERAL NATIONAL MORTGAGE ASSOCIATION-- CONTINUED
5.520% 02/10/00 $ 10,000 $ 9,891
5.590% 02/17/00 20,000 19,759
5.510% 02/24/00 10,000 9,870
5.525% 03/15/00 10,000 9,839
5.230% 03/16/00 10,000 9,838
5.530% 03/27/00 10,000 9,820
5.600% 04/06/00 10,000 9,802
5.600% 04/10/00 20,000 19,592
5.580% 04/17/00 10,000 9,786
5.480% 04/24/00 10,187 9,962
5.480% 04/25/00 10,000 9,778
5.590% 05/04/00 10,000 9,759
5.540% 05/18/00 20,000 19,481
Federal National Mortgage Association (A)
5.226% 08/02/00 10,000 9,996
----------
369,200
----------
STUDENT LOAN MARKETING ASSOCIATION -- 5.8%
Student Loan Marketing Association, MTN (A)
5.050% 02/11/00 10,000 10,000
6.055% 08/10/00 10,000 9,998
6.035% 10/27/00 20,000 19,984
6.055% 11/15/00 15,000 14,993
Student Loan Marketing Association
6.055% 11/12/00 12,000 11,998
Student Loan Marketing Association (A)
6.005% 12/16/99 15,000 15,000
6.005% 01/12/00 15,000 14,999
----------
96,972
----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $1,315,130) 1,315,130
----------
REPURCHASE AGREEMENTS -- 20.7%
Credit Suisse First Boston 5.750%
(dated 11/30/99, matures 12/01/99,
repurchase price $ 230,036,736;
collateralized by GNMA obligations:
total market value
$ 235,561,851) 230,000 230,000
Lehman
5.690% (dated 11/30/99, matures
12/01/99, repurchase price $ 38,893,146;
collateralized by FNMA and GNMA
obligations: total market value
$ 39,665,640) 38,887 38,887
Par Value
(000) (000)
--------- ---------
REPURCHASE AGREEMENTS -- CONTINUED
Prudential
5.720% (dated 11/30/99, matures
12/01/99, repurchase price $ 75,011,917;
collateralized by FHLMC, FNMA and
U.S. Treasury obligations: total
market value $ 76,500,139) $75,000 $ 75,000
----------
TOTAL REPURCHASE AGREEMENTS
(Cost $343,887) 343,887
----------
CASH EQUIVALENT -- 0.6%
Goldman Sachs Financial Square
Government Money Market
Fund 10,294 10,294
----------
TOTAL CASH EQUIVALENT
(Cost $10,294) 10,294
----------
TOTAL INVESTMENTS -- 100.4%
(COST $1,669,311) 1,669,311
==========
OTHER ASSETS AND LIABILITIES,
NET -- (0.4%) (6,725)
----------
NET ASSETS:
Portfolio Shares of Class I
(unlimited authorization -- no par value)
based on 1,079,832,992 outstanding shares
of beneficial interest 1,079,835
Portfolio Shares of Class A (unlimited
authorization -- no par value) based on
582,715,395 outstanding shares
of beneficial interest 582,716
Undistributed net investment income 38
Accumulated net realized loss on
investments (3)
----------
TOTAL NET ASSETS -- 100.0% $1,662,586
==========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SHARE -- CLASS I $1.00
==========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SHARE -- CLASS A $1.00
==========
- - ------------------------------------------------
+ EFFECTIVE YIELD
(A) VARIABLE RATE SECURITY - THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON NOVEMBER 30, 1999.
MTN -- MEDIUM TERM NOTE
See Accompanying Notes
88
<PAGE> 91
[GRAPHIC OMITTED] FINANCIAL HIGHLIGHTS
ARMADA GOVERNMENT MONEY MARKET FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
For the Six Months
Ended November 30, 1999 For the Year Ended May 31,
(Unaudited) 1999 1998
-------------------- ---------------------- ---------------------
Class I Class A Class I Class A Class I Class A
--------- -------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- -------- ---------- -------- ---------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.02 0.02 0.05 0.05 0.05 0.05
LESS DISTRIBUTIONS
Dividends from net
investment income (0.02) (0.02) (0.05) (0.05) (0.05) (0.05)
--------- -------- ---------- -------- ---------- --------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ======== ========== ======== ========== ========
TOTAL RETURN 2.42%2 2.35%2 4.86% 4.70% 5.30% 5.17%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's) $1,079,858 $582,728 $1,094,979 $565,095 $1,137,078 $247,281
Ratio of expenses to
average net assets 0.39%1 0.54%1 0.42% 0.57% 0.40% 0.52%
Ratio of net
investment income to
average net assets 4.81%1 4.66%1 4.76% 4.61% 5.17% 5.05%
Ratio of expenses to average net
assets before fee waivers 0.49%1 0.64%1 0.52% 0.67% 0.50% 0.62%
Ratio of net investment
income to average net assets
before fee waivers 4.71%1 4.56%1 4.66% 4.51% 5.07% 4.95%
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended May 31,
1997 1996 1995
------------------- -------------------- --------------------
Class I Class A Class I Class A Class I Class A
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.05 0.05 0.05 0.05 0.05 0.05
LESS DISTRIBUTIONS
Dividends from net
investment income (0.05) (0.05) (0.05) (0.05) (0.05) (0.05)
-------- -------- -------- -------- -------- --------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== =======
TOTAL RETURN 5.15% 5.04% 5.41% 5.31% 4.97% 4.87%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's) $811,662 $159,129 $741,894 $131,194 $618,058 $19,174
Ratio of expenses to
average net assets 0.36% 0.47% 0.36% 0.46% 0.39% 0.51%
Ratio of
net investment income to
average net assets 5.03% 4.93% 5.27% 5.13% 4.83% 5.01%
Ratio of expenses to average net
assets before fee waivers 0.46% 0.57% 0.47% 0.57% 0.50% 0.63%
Ratio of net investment
income to average net assets
before fee waivers 4.93% 4.83% 5.16% 5.02% 4.72% 4.90%
</TABLE>
1 ANNUALIZED.
2 TOTAL RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
See Accompanying Notes
89
<PAGE> 92
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA MONEY MARKET FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
-------- ----- -----
COMMERCIAL PAPER+ -- 80.6%
AGRICULTURE -- 1.9%
Cargill
5.700% 01/13/00 $ 15,000 $ 14,898
5.720% 01/14/00 12,475 12,388
5.420% 01/19/00 15,000 14,889
5.400% 01/20/00 15,000 14,887
5.420% 01/21/00 15,000 14,885
---------
71,947
---------
AUTO -- 2.6%
Daimler Chrysler
5.310% 12/08/99 15,000 14,985
5.310% 12/15/99 25,000 24,948
5.550% 02/02/00 15,000 14,854
5.590% 02/09/00 15,000 14,837
5.700% 03/01/00 15,000 14,784
5.890% 03/15/00 15,000 14,742
---------
99,150
---------
CHEMICALS -- 6.4%
Akzo Nobel
5.800% 03/02/00 18,750 18,472
5.840% 03/09/00 25,000 24,598
5.800% 03/13/00 10,000 9,834
5.850% 03/21/00 15,000 14,729
Colgate Palmolive
5.800% 01/20/00 8,500 8,432
Great Lakes Chemical
5.930% 01/19/00 25,000 24,798
5.930% 01/26/00 15,000 14,862
5.850% 01/31/00 10,000 9,901
Henkel
5.310% 12/14/99 10,000 9,981
5.320% 12/16/99 15,000 14,967
5.880% 01/27/00 12,000 11,888
6.000% 02/02/00 12,000 11,874
5.790% 02/11/00 17,000 16,803
Monsanto
5.400% 01/18/00 5,000 4,964
5.400% 01/19/00 10,000 9,926
5.770% 03/22/00 10,000 9,820
5.770% 03/24/00 13,980 13,725
5.770% 03/28/00 14,000 13,735
---------
243,309
---------
COMMUNICATIONS -- 2.0%
AT&T
5.280% 12/02/99 25,000 24,996
Bell Atlantic
5.840% 01/13/00 21,800 21,648
Bell South
5.800% 01/25/00 15,000 14,867
SBC Communications
5.800% 01/19/00 15,000 14,882
---------
76,393
---------
Par Value
Maturity (000) (000)
-------- -------- ---------
COMMERCIAL PAPER -- CONTINUED
DIVERSIFIED -- 4.0%
Bass Financial
5.330% 12/01/99 $ 15,610 $ 15,610
5.310% 12/06/99 15,000 14,989
5.870% 02/10/00 9,000 8,896
5.880% 02/23/00 14,190 13,995
General Electric Capital
5.330% 12/16/99 10,000 9,978
5.730% 02/23/00 5,000 4,933
4.910% 01/31/00 15,000 14,875
4.950% 02/03/00 10,000 9,912
5.080% 02/16/00 15,000 14,837
5.720% 02/16/00 15,000 14,816
5.720% 03/01/00 15,000 14,783
5.730% 03/22/00 15,000 14,733
---------
152,357
---------
ELECTRICAL UTILITIES -- 2.4%
Potomac Electric Power
5.950% 02/08/00 10,000 9,886
Southern California Edison
5.320% 12/15/99 10,000 9,979
Southern Company
5.900% 02/09/00 25,000 24,713
5.850% 02/10/00 22,000 21,746
5.650% 02/14/00 9,100 8,993
5.700% 02/23/00 15,000 14,800
---------
90,117
---------
ELECTRONICS & OTHER ELECTRICAL EQUIPMENT -- 1.8%
Eaton
5.470% 01/19/00 10,000 9,926
4.950% 01/31/00 15,000 14,874
Lucent Technologies
4.980% 01/26/00 15,000 14,884
4.910% 02/02/00 10,000 9,914
5.100% 02/22/00 10,000 9,882
Motorola Credit
5.800% 03/10/00 7,821 7,695
---------
67,175
---------
FABRICATED METAL PRODUCTS -- 1.8%
Gillette
5.280% 12/02/99 15,000 14,998
Stanley Works
5.300% 12/02/99 6,000 5,999
5.650% 02/09/00 9,650 9,544
5.720% 03/01/00 15,000 14,783
5.920% 03/15/00 10,000 9,827
5.750% 03/22/00 15,000 14,732
---------
69,883
---------
See Accompanying Notes
90
<PAGE> 93
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA MONEY MARKET FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
-------- ----- -----
COMMERCIAL PAPER -- CONTINUED
FINANCIAL CONDUIT -- 9.6%
Ciesco
5.350% 12/01/99 $ 25,000 $ 25,000
5.300% 12/08/99 15,000 14,985
5.350% 12/13/99 15,000 14,973
5.920% 01/20/00 15,000 14,877
5.800% 01/26/00 15,000 14,865
5.900% 02/09/00 15,000 14,828
Corporate Asset Funding
5.350% 12/02/99 10,000 9,999
5.300% 12/13/99 15,000 14,974
5.500% 12/16/99 10,000 9,977
5.800% 01/19/00 10,000 9,921
6.070% 01/26/00 28,664 28,394
5.910% 01/28/00 10,000 9,905
6.000% 02/10/00 15,000 14,822
Delaware Funding
5.950% 01/13/00 15,000 14,893
5.850% 01/18/00 10,000 9,922
6.100% 01/20/00 10,000 9,915
5.780% 01/24/00 35,000 34,690
5.820% 02/22/00 15,000 14,799
Preferred Receivables
5.360% 12/02/99 15,000 14,998
5.340% 12/20/99 15,000 14,958
6.000% 01/13/00 15,000 14,892
6.070% 01/18/00 15,000 14,879
6.010% 02/02/00 10,000 9,895
5.850% 02/07/00 15,000 14,834
---------
366,195
---------
FINANCIAL SERVICES -- 24.3%
Abbey National
4.970% 12/01/99 15,000 15,000
5.355% 12/03/99 15,000 14,996
5.340% 12/10/99 15,000 14,980
6.000% 01/24/00 10,000 9,910
5.800% 02/28/00 15,000 14,785
American Express
5.950% 01/19/00 15,000 14,879
5.980% 01/26/00 15,000 14,860
American Express -- Continued
5.810% 01/27/00 10,000 9,908
5.970% 01/31/00 30,000 29,700
5.970% 02/01/00 15,000 14,846
5.900% 02/02/00 15,000 14,845
Associates First Capital
5.320% 12/06/99 15,000 14,989
5.310% 12/08/99 5,000 4,995
5.700% 02/17/00 15,000 14,815
5.710% 03/01/00 15,000 14,783
Par Value
Maturity (000) (000)
-------- -------- ---------
COMMERCIAL PAPER -- CONTINUED
FINANCIAL SERVICES -- CONTINUED
Den Danske
5.340% 12/14/99 $ 20,000 $ 19,961
5.330% 12/22/99 15,000 14,953
5.980% 01/12/00 20,000 19,860
6.030% 01/25/00 15,000 14,862
6.050% 01/26/00 15,000 14,859
5.830% 02/28/00 15,000 14,784
Deutche Bank Financial
5.340% 12/15/99 15,000 14,969
5.860% 01/04/00 15,000 14,917
5.740% 01/19/00 15,000 14,883
Dresdner
5.350% 12/15/99 30,000 29,938
5.810% 01/10/00 25,000 24,839
5.400% 01/26/00 15,000 14,874
Ford Motor Credit
5.280% 12/15/99 10,000 9,979
5.810% 01/04/00 15,000 14,918
5.910% 01/06/00 15,000 14,911
5.710% 01/10/00 15,000 14,905
5.560% 01/31/00 15,000 14,859
5.830% 04/12/00 15,000 14,677
5.830% 04/19/00 15,000 14,660
General Motors Acceptance
5.420% 01/26/00 15,000 14,874
5.990% 01/26/00 15,000 14,860
5.690% 02/09/00 15,000 14,834
5.900% 02/09/00 15,000 14,828
5.700% 02/23/00 10,000 9,867
5.690% 02/24/00 15,000 14,798
5.380% 03/22/00 15,000 14,749
Household Finance
5.300% 12/02/99 15,000 14,998
5.700% 01/12/00 30,000 29,800
5.940% 01/18/00 15,000 14,881
5.710% 01/27/00 15,000 14,864
5.960% 02/02/00 10,000 9,896
5.650% 02/03/00 15,000 14,849
National Rural Utilities
5.800% 02/23/00 11,000 10,851
New York Life Capital
5.300% 12/02/99 15,000 14,998
5.300% 12/08/99 15,000 14,985
Paccar
5.850% 01/28/00 10,000 9,906
Pemex
5.320% 12/06/99 10,000 9,993
Svenska
5.330% 12/21/99 15,000 14,956
5.340% 12/29/99 25,000 24,896
5.880% 03/01/00 25,000 24,628
See Accompanying Notes
91
<PAGE> 94
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA MONEY MARKET FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
-------- -------- ---------
COMMERCIAL PAPER -- CONTINUED
FINANCIAL SERVICES -- CONTINUED
Transamerica
6.000% 01/26/00 $ 15,000 $ 14,860
5.580% 02/02/00 10,000 9,902
5.820% 02/28/00 15,000 14,784
5.920% 03/07/00 5,000 4,920
5.700% 03/08/00 5,000 4,922
5.850% 04/12/00 15,000 14,676
5.720% 05/09/00 10,000 9,746
---------
928,020
---------
FOOD & BEVERAGE -- 4.9%
Archer Daniels
5.740% 04/05/00 15,000 14,699
Brown Foreman
5.620% 12/01/99 13,715 13,715
5.850% 01/14/00 7,650 7,595
5.900% 01/27/00 10,000 9,907
Cambell Soup
4.800% 12/01/99 15,000 15,000
Diageo
5.550% 01/12/00 10,000 9,935
5.950% 01/18/00 45,000 44,643
5.500% 02/09/00 15,000 14,840
5.800% 04/04/00 15,000 14,698
5.750% 04/06/00 15,000 14,696
Golden Peanut
5.900% 03/22/00 9,000 8,835
Sysco
5.950% 01/12/00 20,000 19,861
---------
188,424
---------
GLASS PRODUCTS -- 0.4%
Guardian Industries
6.000% 01/13/00 11,600 11,517
5.900% 01/28/00 5,000 4,952
---------
16,469
---------
INSURANCE -- 6.7%
Allstate
5.750% 02/02/00 15,000 14,849
5.740% 03/13/00 15,000 14,754
American General
5.830% 02/14/00 15,000 14,818
5.800% 03/01/00 15,000 14,780
5.810% 03/15/00 25,000 24,576
John Hancock Capital
6.000% 01/14/00 12,012 11,924
Par Value
Maturity (000) (000)
-------- --------- ---------
COMMERCIAL PAPER -- CONTINUED
INSURANCE -- CONTINUED
Prudential Funding
5.770% 01/10/00 $ 25,000 $ 24,837
5.900% 01/11/00 10,000 9,933
5.750% 01/12/00 15,000 14,899
5.750% 01/19/00 10,000 9,922
6.000% 01/26/00 40,000 39,630
St. Paul
5.630% 02/09/00 15,000 14,836
5.800% 02/10/00 15,000 14,828
5.700% 02/23/00 30,000 29,593
---------
254,179
---------
MACHINERY & EQUIPMENT -- 2.1%
Caterpillar Financial
5.780% 02/28/00 15,000 14,786
5.800% 03/16/00 17,200 16,906
Fortune Brands
5.400% 02/18/00 15,000 14,822
John Deere Capital
5.820% 01/12/00 15,000 14,898
5.750% 02/16/00 20,000 19,754
---------
81,166
---------
MISCELLANEOUS MANUFACTURING -- 1.3%
Hasbro
5.310% 12/09/99 14,380 14,363
5.300% 12/15/99 10,859 10,837
5.380% 01/10/00 10,000 9,940
5.030% 01/19/00 15,000 14,897
---------
50,037
---------
OIL & GAS -- 1.8%
Atlantic Richfield
5.300% 12/02/99 15,000 14,998
Baker Hughes
5.690% 12/01/99 38,325 38,325
BP Amoco
4.860% 01/24/00 15,000 14,891
---------
68,214
---------
PAPER & PAPER PRODUCTS -- 0.4%
Sonoco Products
5.750% 03/14/00 15,000 14,751
---------
PHARMACEUTICALS -- 3.6%
American Home Products
5.420% 01/25/00 15,000 14,876
5.980% 02/02/00 15,000 14,843
5.720% 02/16/00 15,000 14,816
5.800% 02/22/00 5,836 5,758
5.700% 03/06/00 15,000 14,772
5.750% 03/27/00 15,000 14,720
See Accompanying Notes
92
<PAGE> 95
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA MONEY MARKET FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
-------- -------- ---------
COMMERCIAL PAPER -- CONTINUED
PHARMACEUTICALS -- CONTINUED
Glaxo Wellcome
5.780% 02/09/00 $ 10,000 $ 9,888
5.920% 02/23/00 25,000 24,655
5.850% 03/10/00 25,000 24,594
----------
138,922
----------
PHOTOGRAPHY -- 0.4%
Eastman Kodak
5.890% 01/19/00 15,000 14,880
----------
PRIMARY METAL INDUSTRIES -- 0.8%
Aluminum Company of America
5.300% 12/01/99 15,000 15,000
5.300% 12/08/99 15,000 14,985
----------
PRINTING & PUBLISHING -- 0.5%
Gannett
5.950% 01/19/00 20,000 19,838
----------
RETAIL STORES -- 0.9%
Wal-Mart
5.600% 12/01/99 35,000 35,000
----------
29,985
----------
TOTAL COMMERCIAL PAPER
(Cost $3,076,411) 3,076,411
----------
YANKEE CERTIFICATES OF DEPOSIT -- 4.2%
Abbey National Treasury
5.130% 05/04/00 15,000 14,996
Bank of Montreal, Chicago
5.160% 05/03/00 15,000 14,998
Bayerische Landisbank
5.400% 12/08/99 20,000 20,000
5.940% 01/05/00 20,000 20,000
Deutsche Bank, New York
5.050% 02/09/00 15,000 14,998
5.150% 04/25/00 25,000 24,997
Rabobank, New York
5.130% 04/27/00 25,000 24,995
Royal Bank, Canada
5.300% 12/29/99 15,000 14,938
UBS AG, Connecticut
5.600% 06/14/00 10,000 9,998
----------
TOTAL YANKEE CERTIFICATES OF DEPOSIT
(Cost $159,920) 159,920
----------
Par Value
Maturity (000) (000)
-------- ----- ---------
FLOATING RATE NOTES (A) -- 3.7%
Allstate Funding
5.488% 12/01/99 $ 10,000 $ 10,000
6.084% 03/31/00 10,000 10,000
5.573% 08/31/00 10,000 10,000
AT&T
6.136% 07/13/00 15,000 14,996
Ciesco
5.493% 08/17/00 15,000 14,997
Comerica
5.429% 09/01/00 15,000 14,994
Daimler Chrysler N.A.
5.283% 07/06/00 15,000 14,989
Key Bank NA
5.730% 03/20/00 10,000 9,993
Transamerica
6.354% 04/06/00 10,000 10,007
Travelers Funding
6.139% 03/31/00 15,000 15,000
5.499% 08/17/00 15,000 15,000
----------
Total Floating Rate Notes
(Cost $139,976) 139,976
----------
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 5.3%
Federal National Mortgage Association
5.265%+ 12/06/99 50,000 49,963
Federal Home Loan Bank (A)
5.706% 03/24/00 25,000 25,000
Student Loan Marketing Association, MTN (A)
5.050% 02/11/00 24,000 24,000
6.055% 08/10/00 25,000 24,995
6.035% 10/27/00 30,000 29,976
6.055% 11/15/00 50,000 49,977
----------
Total U.S. Government Agency
Obligations
(Cost $203,911) 203,911
----------
REPURCHASE AGREEMENTS -- 7.7%
Credit Suisse First Boston 5.750%
(dated 11/30/99, matures 12/01/99,
repurchase price $ 205,032,743;
collateralized by GNMA obligations:
total market value $ 209,276,506) 205,000 205,000
See Accompanying Notes
93
<PAGE> 96
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA MONEY MARKET FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
(000) (000)
------- ---------
REPURCHASE AGREEMENTS -- CONTINUED
Lehman
5.690% (dated 11/30/99, matures
12/01/99, repurchase price $ 64,212,147;
collateralized by FHLMC, FNMA,
and GNMA obligations: total market
value $ 65,277,004) $ 64,202 $ 64,202
Prudential
5.720% (dated 11/30/99, matures
12/01/99, repurchase price
$ 25,003,972; collateralized by
FHLMC obligation: market
value $ 25,500,173) 25,000 25,000
----------
TOTAL REPURCHASE AGREEMENTS
(Cost $294,202) 294,202
----------
CASH EQUIVALENT -- 0.3%
Goldman Sachs Financial Square
Premium Money Market
Fund 11,416 11,416
----------
TOTAL CASH EQUIVALENT
(Cost $11,416) 11,416
----------
TOTAL INVESTMENTS -- 101.8%
(Cost $3,885,836) $3,885,836
==========
OTHER ASSETS AND LIABILITIES,
NET -- (1.8%) (67,393)
----------
NET ASSETS:
Portfolio Shares of Class I
(unlimited authorization --
no par value) based on
2,220,283,156 outstanding shares
of beneficial interest 2,220,276
Portfolio Shares of Class A (unlimited
authorization -- no par value) based
on 1,598,087,824 outstanding shares
of beneficial interest 1,598,088
Value
(000)
---------
Portfolio Shares of Class B (unlimited
authorization -- no par value) based on
231,081 outstanding shares
of beneficial interest $ 231
Accumulated net realized loss on investments (11)
Overdistributed net investment income (141)
----------
TOTAL NET ASSETS -- 100.0% $3,818,443
==========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SHARE -- CLASS I $1.00
==========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SHARE -- CLASS A $1.00
==========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SHARE -- CLASS B $1.00
==========
- - ------------------------------------------------
+ EFFECTIVE YIELD
(A) VARIABLE RATE SECURITIES - THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON NOVEMBER 30, 1999
FHLB -- FEDERAL HOME LOAN BANK
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
MTN -- MEDIUM TERM NOTE
SLMA -- STUDENT LOAN MARKETING ASSOCIATION
See Accompanying Notes
94
<PAGE> 97
[GRAPHIC OMITTED] FINANCIAL HIGHLIGHTS
ARMADA MONEY MARKET FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
For the Six Months
Ended November 30, 1999 For the Year Ended May 31,
(Unaudited) 1999
---------- ---------- ------- ---------- ---------- -------
Class I Class A Class B Class I Class A Class B
---------- ---------- ------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning
of period $ 1.00 $ 1.00 $1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ----- ---------- ---------- -------
INCOME FROM
INVESTMENT
OPERATIONS
Net investment
income 0.02 0.02 0.02 0.05 0.05 0.04
LESS DISTRIBUTIONS
Dividends from
net investment
income (0.02) (0.02) (0.02) (0.05) (0.05) (0.04)
---------- ---------- ----- ---------- ---------- -------
Net asset value,
end of period $ 1.00 $ 1.00 $1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ===== ========== ========== =======
TOTAL RETURN 2.47%3 2.39%3 2.03%3 4.96% 4.82% 4.21%
RATIOS/SUPPLEMENTAL DATA
Net assets,
end of period
(in 000's) $2,220,015 $1,598,198 $ 230 $2,133,839 $1,360,644 $ 27
Ratio of expenses
to average
net assets 0.40%2 0.55%2 1.30%2 0.42% 0.56% 1.27%
Ratio of net
investment
income to
average net
assets 4.91%2 4.76%2 4.01%2 4.82% 4.68% 3.97%
Ratio of expenses
to average
net assets
before fee
waivers 0.50%2 0.65%2 1.40%2 0.52% 0.66% 1.37%
Ratio of net
investment
income to
average net
assets before fee
waivers 4.81%2 4.66%2 3.91%2 4.72% 4.58% 3.87%
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended May 31,
1998 1997 1996 1995
--------------------------------- ---------------------- ---------------------- --------------------
Class I Class A Class B1 Class I Class A Class I Class A Class I Class A
---------- -------- ------ ---------- ------- ---------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- -------- ------ ---------- ------- ---------- -------- ---------- --------
INCOME FROM
INVESTMENT
OPERATIONS
Net investment
income 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05
LESS DISTRIBUTIONS
Dividends from
net investment
income (0.05) (0.05) (0.05) (0.05) (0.05) (0.05) (0.05) (0.05) (0.05)
---------- -------- ------ ---------- ------- ---------- -------- ---------- --------
Net asset value,
end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ======== ====== ========== ======= ========== ======== ========== ========
TOTAL RETURN 5.39% 5.26% 5.04%2 5.19% 5.09% 5.45% 5.35% 5.11% 5.01%
RATIOS/SUPPLEMENTAL DATA
Net assets,
end of period
(in 000's) $1,911,689 $696,893 $ 5 $1,943,021 $346,172 $1,344,414 $343,087 $1,083,243 $175,192
Ratio of expenses
to average
net assets 0.38% 0.51% 1.22%2 0.37% 0.47% 0.37% 0.47% 0.37% 0.47%
Ratio of net
investment
income to
average net
assets 5.27% 5.14% 4.39%2 5.07% 4.97% 5.30% 5.18% 5.07% 5.12%
Ratio of expenses
to average
net assets
before fee
waivers 0.48% 0.61% 1.27%2 0.47% 0.57% 0.48% 0.58% 0.48% 0.58%
Ratio of net
investment
income to
average net
assets before fee
waivers 5.17% 5.08% 4.31%2 4.97% 4.87% 5.19% 5.07% 4.96% 5.01%
</TABLE>
1 CLASS B COMMENCED OPERATIONS JANUARY 5, 1998.
2 ANNUALIZED.
3 TOTAL RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
See Accompanying Notes
95
<PAGE> 98
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA OHIO MUNICIPAL MONEY MARKET FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
-------- ------ ---------
MUNICIPAL BONDS -- 98.4%
OHIO -- 98.4%
Allen County (BAN)
4.250% 09/14/00 $ 645 $ 646
Allen County, Health Care Facilities,
Mennonite Memorial Home
Project (RB) (A)
3.900% 02/01/18 3,355 3,355
Barberton (BAN)
3.700% 04/20/00 725 726
Bellbrook (BAN)
4.250% 10/20/00 1,000 1,002
Butler County (BAN)
4.250% 09/27/00 1,225 1,230
Canton, Pension (GO) (AMBAC)
3.150% 12/01/99 230 230
Canton (BAN)
3.910% 06/08/00 2,625 2,629
Centerville Healthcare (RB) (A)
4.000% 05/01/08 7,100 7,100
Chillicothe (BAN)
4.210% 09/15/00 675 677
Cleveland Heights (BAN)
3.820% 08/25/00 1,035 1,036
Columbus Sewer & Water
Improvement (RB) (A)
Series 1995-1
3.700% 06/01/16 2,450 2,450
Columbus (GO) (A) Series 1
3.700% 12/01/17 5,000 5,000
Columbus Sewer Authority
(RB) (A) (B)
3.800% 06/01/11 3,100 3,100
Coshocton County Hospital (RB) (A)
3.900% 03/01/19 5,000 5,000
Cuyahoga County, Health
Care, Applewood Center (RB) (A)
3.970% 11/01/14 1,250 1,250
Cuyahoga County, University
Healthcare System (RB) (A) (B)
3.900% 01/15/29 3,000 3,000
Cuyahoga County, Ohio University
Hospital Cleveland (RB)
3.600% 01/01/16 675 675
Cuyahoga County, Hospital Facilities
Authority, Cleveland Clinic Foundation
(RB) (A)
Series 1996-A
3.900% 01/01/26 2,000 2,000
Series 1997-D
3.800% 01/01/26 5,050 5,050
Cuyahoga County, Industrial
Development Authority, Allen
Group Project (RB) (A)
3.800% 12/01/15 1,600 1,600
Par Value
Maturity (000) (000)
-------- ------- --------
MUNICIPAL BONDS -- CONTINUED
OHIO -- CONTINUED
Dayton (GO) (AN)
3.400% 03/03/00 $ 1,000 $ 1,000
Eastlake (GO) (BAN)
4.500% 07/27/00 350 352
Euclid County, School District (BAN)
3.700% 07/28/00 2,055 2,058
Evandale, Industrial Development
Authority, Ohio Edison
Project (RB) (A)
3.850% 09/01/15 3,900 3,900
Fairfield (BAN)
3.900% 08/24/00 1,900 1,903
Franklin County, Hospital Authority,
Holy Cross Health System (RB) (A)
3.850% 06/01/16 3,000 3,000
Hillard (GO) Series B
5.150% 12/01/99 280 280
Kent City (GO) (BAN)
4.750% 07/20/00 525 528
Lancaster (GO) (BAN)
3.600% 04/27/00 1,400 1,402
Lima Memorial Hospital
(RB) (A) Series 1996
4.000% 12/01/10 4,210 4,210
Lorain County, Industrial
Development Authority, Regional
Medical Center (RB) (A)
4.000% 05/01/22 1,675 1,675
Louisville (GO) (BAN)
4.000% 05/03/00 1,200 1,202
Lucas County, Facility Improvement
(RB) (A)
3.900% 10/01/05 1,000 1,000
Marysville (GO) (BAN)
3.460% 04/13/00 900 901
Mason City, School District
(GO) (BAN)
3.680% 01/27/00 415 415
Masillion (GO) (BAN)
3.980% 01/14/00 550 550
Massilion (BAN)
4.070% 01/14/00 1,200 1,201
Mayfield, School District (GO) (BAN)
3.450% 04/20/00 540 540
Medina County, Construction
Note (GO)
3.500% 06/15/00 1,000 1,001
Medina County (BAN)
4.125% 08/31/00 195 196
See Accompanying Notes
96
<PAGE> 99
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA OHIO MUNICIPAL MONEY MARKET FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
-------- ----- ------
MUNICIPAL BONDS -- CONTINUED
OHIO -- CONTINUED
Mentor (GO) (BAN)
3.850% 08/03/00 $ 685 $ 686
Miamisburg (BAN)
4.200% 09/22/00 530 532
Middleburg Heights City (GO) (BAN)
3.850% 08/10/00 1,200 1,202
Muskingum County (BAN)
4.250% 11/30/00 505 506
New Albany (GO) (MBIA)
3.100% 12/01/99 135 135
Ohio School District, 1999 Cash
Flow Borrowing Program (AN)
4.140% 06/30/00 1,000 1,004
Ohio State Infra Structure (GO)
4.500% 02/01/00 1,090 1,092
Ohio State, Air Quality, Cleveland
Electric & Illumination (TECP)
3.650% 12/10/99 4,000 4,000
3.450% 01/21/00 1,000 1,000
3.650% 02/09/00 2,500 2,500
Ohio State, Air Quality Development
Authority, Cincinnati Gas &
Electric Project (RB) (A)
3.700% 09/01/30 2,600 2,600
Ohio State, Air Quality,
USX Corp. Project (TECP)
3.850% 05/01/00 2,115 2,115
Ohio State, Air Quality Development
Authority, Cincinnati Gas &
Electric Project (RB) (A)
Series 1985-A
3.950% 12/01/15 2,700 2,700
Ohio State, Air Quality Development
Authority, Cincinnati Gas &
Electric (RB) (A) (B)
3.950% 12/01/15 600 600
Ohio State, Air Quality Development
Authority, Timken Project (RB) (A)
3.900% 07/01/03 2,000 2,000
Ohio State, Air Quality, Duquesne Light
(TECP) (AMBAC)
3.900% 01/19/00 3,500 3,500
Ohio State, Environmental Association,
U.S. Steel (RB) (A)
3.900% 12/01/01 1,000 1,000
Ohio State, Higher Educational
Facilities, Mount Union College
Project (RB) (A)
3.900% 09/01/20 980 980
Par Value
Maturity (000) (000)
-------- ------- -------
MUNICIPAL BONDS -- CONTINUED
OHIO -- CONTINUED
Ohio State, Higher Educational
Facilities, Kenyon College (RB) (A)
3.950% 08/01/03 $ 3,700 $ 3,700
Ohio State, Pollution Control (RB) (A)
3.800% 05/01/22 2,000 2,000
Ohio State, Pollution Control
Water Project (A)
3.800% 05/01/22 900 900
Ohio State, Higher Educational
Facilities (RB) Series A-1
4.500% 12/01/99 1,250 1,250
Ohio State, Public Facilities
Commission (RB) Series II-A
5.625% 12/01/99 500 500
Ohio State University (TECP)
3.500% 12/02/99 3,000 3,000
Ohio State University, General
Receipts (RB) (A) Series 1985-B
4.250% 12/01/01 155 155
Ohio State University, General
Receipts (RB) (B) Series 1986-B
4.250% 12/01/06 1,550 1,550
Ohio State, Water Development
Authority, Cleveland Electric
Project (RB) Series B (A)
3.900% 08/01/20 4,000 4,000
Ohio State, Water Development
Authority (RB) (A)
3.950% 07/01/32 200 200
Orange County, School District (BAN)
3.640% 07/20/00 2,300 2,303
Richmond Heights (BAN) (GO)
4.350% 05/15/00 825 827
Ridgewood, School District (BAN)
4.150% 04/15/00 1,300 1,304
Ross County, Hospital Facilities
Authority, Adena Health System
(RB) (A) Series 1998
3.900% 12/01/23 2,800 2,800
Ross County, Hospital Facilities
Authority, Medical Center
Hospital Project (RB) (A)
3.900% 12/01/20 1,020 1,020
Rossford, Special Obligation Note,
Exempted Village (AN)
4.000% 12/01/99 270 270
Saint Clairsville (GO) (BAN)
3.510% 05/04/00 370 370
Saint Mary School District (BAN)
3.840% 02/23/00 709 710
See Accompanying Notes
97
<PAGE> 100
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA OHIO MUNICIPAL MONEY MARKET FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
-------- ------- -------
MUNICIPAL BONDS -- CONTINUED
OHIO -- CONTINUED
Scioto County, Veteran Hospital
Administration, Central Capital
Asset Financing Program
(RB) (AMBAC) (A) Series B
3.950% 12/01/25 $ 2,725 $ 2,725
Scioto County, Veteran Hospital
Administration, Central Capital Asset
Financing Program (RB) (AMBAC) (A)
Series 1985-C
3.950% 12/01/25 815 815
Scioto County, Veteran Hospital
Administration, Central Capital
Asset Financing Program
(RB) (AMBAC) (A) (B) Series D
3.950% 12/01/25 100 100
Scioto County, Veteran Hospital
Administration, Central Capital
Asset Financing Program
(RB) (A) (B) Series E (AMBAC)
3.950% 12/01/25 590 590
Scioto County, Veteran Hospital
Administration, Central Capital
Asset Financing Program (RB)
(AMBAC) (A) Series F
3.950% 12/01/25 2,030 2,030
Scioto County, Veteran Hospital
Administration, Central Capital
Asset Financing Program
(RB) (A) (B) Series G (AMBAC)
3.950% 12/01/25 800 800
Sevin Hills (GO) (BAN)
4.250% 05/25/00 1,500 1,504
Southwestern City, School District
(GO) (AMBAC)
3.000% 12/01/99 1,260 1,260
Southwestern City, School District
(BAN)
4.125% 06/13/00 500 501
Toledo City, Services Special
Assessment Note (RB) (A)
3.900% 06/01/00 2,000 2,000
Warren County, Industrial
Development Authority, Cincinnati
Electric Project (RB) (A)
4.100% 09/01/15 7,650 7,650
Warren County, Healthcare Facilities,
Otterbein Homes (RB) (A)
3.850% 07/01/23 3,900 3,900
Willowick (GO) (BAN)
3.625% 04/27/00 800 801
Par Value
(000) (000)
------- -------
MUNICIPAL BONDS -- CONTINUED
OHIO -- CONTINUED
Wooster, Industrial Development
Authority, Allen Group Project
(RB) (A)
4.100% 12/01/10 $ 2,100 $ 2,100
--------
156,857
--------
TOTAL MUNICIPAL BONDS
(Cost $156,857) 156,857
--------
CASH EQUIVALENTS -- 1.3%
Blackrock Funds Ohio Municipal
Money Market Portfolio 1,000 1,000
Federated Ohio Cash Trust 1,127 1,127
--------
TOTAL CASH EQUIVALENTS
(Cost $2,127) 2,127
--------
TOTAL INVESTMENTS -- 99.7%
(Cost $158,984) $158,984
========
OTHER ASSETS AND LIABILITIES,
NET -- 0.3% 406
--------
NET ASSETS:
Portfolio Shares of Class I (unlimited
authorization -- no par value) based on
129,474,506 outstanding shares
of beneficial interest 129,475
Portfolio Shares of Class A (unlimited
authorization -- no par value) based on
29,974,107 outstanding shares
of beneficial interest 29,973
Overdistributed net investment income (58)
--------
TOTAL NET ASSETS -- 100.0% $159,390
========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SHARE -- CLASS I $1.00
========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SHARE -- CLASS A $1.00
========
- - ------------------------------------------------
(A) VARIABLE RATE SECURITY- THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS IS
THE RATE IN EFFECT ON NOVEMBER 31, 1999.
AMBAC -- AMERICAN MUNICIPAL BOND ASSURANCE CORPORATION
AN -- ANTICIPATION NOTE
BAN -- BOND ANTICIPATION NOTE
GO -- GENERAL OBLIGATION
MBIA -- MUNICIPAL BOND INSURANCE ASSOCIATION
RB -- REVENUE BOND
TECP -- TAX EXEMPT COMMERCIAL PAPER
See Accompanying Notes
98
<PAGE> 101
[GRAPHIC OMITTED] FINANCIAL HIGHLIGHTS
ARMADA OHIO MUNICIPAL MONEY MARKET FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
For the Six Months Ended
November 30, 1999 For the Period
(Unaudited) Ended May 31, 1999
--------------------------- ------------------------
Class I Class A Class I1 Class A1
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.02 0.01 0.02 0.02
-------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net investment income (0.02) (0.01) (0.02) (0.02)
-------- ------- ------- -------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======= ======= =======
TOTAL RETURN 1.48%3 1.40%3 2.01%3 1.50%3
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $129,424 $29,966 $99,342 $11,019
Ratio of expenses to average net assets 0.41%2 0.57%2 0.35%2 0.50%2
Ratio of net investment income to average net assets 2.90%2 2.78%2 2.77%2 2.62%2
Ratio of expenses to average net assets before
fee waivers 0.61%2 0.77%2 0.55%2 0.70%2
Ratio of net investment income to average net assets
before fee waivers 2.70%2 2.58%2 2.57%2 2.42%2
</TABLE>
1 CLASS I AND CLASS A COMMENCED OPERATIONS ON SEPTEMBER 15, 1998 AND NOVEMBER 2,
1998, RESPECTIVELY.
2 ANNUALIZED.
3 TOTAL RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
See Accompanying Notes
99
<PAGE> 102
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
-------- ------- -------
MUNICIPAL BONDS -- 94.1%
PENNSYLVANIA -- 94.1%
Allegheny County, Hospital
Development Authority,
Presbyterian University Hospital
Project (RB) (A) (B) Series B-3
4.000% 03/01/18 $ 1,000 $ 1,000
Allegheny County, Industrial
Development Authority, Longwood
At Oakmont (RB) (A) (B)
3.700% 07/01/27 2,000 2,000
Allegheny County, Industrial
Development Authority,
Environmental Improvement,
USX Corp. Project
(RB) (A) (B)
3.850% 12/01/32 6,000 6,000
Allegheny County, Higher Education
Building Authority, University of
Pittsburgh Project
(RB) (B) Series 1985 B
3.750% 07/01/15 1,080 1,080
Allegheny County, Port Authority
(AN) (B)
4.000% 06/30/00 2,000 2,008
Alleghney County, Port Authority
(RB) (AMBAC)
5.000% 03/01/00 850 852
Altoona, Area School District (GO)
4.900% 01/15/00 2,000 2,005
Beaver County, Industrial
Development Authority, Duquesne
Series D
3.900% 01/26/00 2,600 2,600
Series E
3.900% 01/26/00 2,100 2,100
Beaver County, Pollution Control
Revenue, Atlantic Richfield Project
(RB) (A) (B)
3.850% 12/01/20 2,000 2,000
Boyertown Area School District (GO)
3.800% 03/01/00 290 290
Bucks County, Industrial Development
Authority, Edgecomb Metals
(RB) (A) (B)
3.900% 10/01/09 2,500 2,500
Par Value
Maturity (000) (000)
-------- ------- --------
MUNICIPAL BONDS -- CONTINUED
PENNSYLVANIA -- CONTINUED
Bucks County, Industrial Development
Authority, USX Corporation Project
(RB) (A) Series 1995
3.850% 05/01/00 $ 3,250 $ 3,250
Bucks County, Water & Sewer
Authority, Neshaminy Interceptor
Sewer System (RB)
5.000% 12/01/99 175 175
Chester County (GO)
4.550% 12/15/99 400 400
Delaware County, Industrial
Development Authority
(RB) (A) (B) Series 1985
3.800% 12/01/09 1,500 1,500
Delaware County, Industrial
Development Authority, PECO
Energy (RB) (A) (B) Series A
3.650% 08/01/16 1,000 1,000
Delaware County, Industrial
Development Authority, Scott
Paper Project (RB) (A) (B)
Series 1984-A
3.900% 12/01/18 1,900 1,900
3.900% 12/01/18 2,600 2,600
Delaware County, Industrial
Development Authority, United
Parcel Service Project
(RB) (B) Series 1985
3.600% 12/01/15 600 600
Delaware County, Pollution Control
Revenue, PECO Energy
(TECP) (FGIC)
3.500% 12/09/99 1,000 1,000
3.650% 01/18/00 2,000 2,000
Delaware County, Villanova
University (RB)
3.100% 12/01/99 770 770
Delaware Valley, Finance Authority,
Local Government
(RB) (A) (B) Series D
3.800% 08/01/16 2,700 2,700
See Accompanying Notes
100
<PAGE> 103
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
-------- ------- -------
MUNICIPAL BONDS -- CONTINUED
PENNSYLVANIA -- CONTINUED
Emmaus, General Authority
(RB) (A) (B) (FSA)
3.900% 12/01/28 $ 3,000 $ 3,000
Emmaus, General Authority
(RB) (A) (B)
3.950% 03/01/24 4,400 4,400
Geisinger Authority, Pennsylvania
Health System, Penn State
Geisinger Health (RB) (A)
Series 1998-B
3.800% 08/15/28 1,000 1,000
Iroquois School District (GO)
4.500% 06/01/00 2,500 2,509
Lancaster, Higher Education
Authority, Franklin & Marshall
College Project (RB) (A) (B)
Series 1997
3.970% 04/15/27 3,995 3,995
Lebanon, Water Authority (RB)
3.100% 12/15/99 415 415
Lehigh County, Callable
08/01/00 @102 (GO) (FGIC)
6.900% 08/01/00 2,500 2,600
Lehigh County (RB) (MBIA)
(A) (B) Series B
3.650% 07/01/29 900 900
Lehigh County General Purpose,
Lehigh Valley Hospital
(RB) (B) Series A
3.650% 07/01/28 400 400
Mercersburg, General Purpose
Authority, Mercersburg College
Project (RB) (A) (B) Series 1997
3.950% 11/01/27 1,000 1,000
Montgomery County, Industrial
Development Authority, PECO
Energy (TECP)
3.450% 01/21/00 1,000 1,000
Montgomery County, Pollution
Control Revenue, PECO Energy
(TECP) (A)
3.650% 12/10/99 2,000 2,000
3.600% 01/20/00 2,500 2,500
Par Value
Maturity (000) (000)
-------- ------- -------
MUNICIPAL BONDS -- CONTINUED
PENNSYLVANIA -- CONTINUED
Montgomery County, Pollution
Control Revenue, PECO Energy
(TECP) (A) Series 1994 A
3.700% 01/24/00 $ 2,000 $ 2,000
3.800% 01/27/00 2,000 2,000
Northampton County, Higher
Education Authority, Lafayette
College (RB) (A) (B) Series B
4.000% 11/01/28 1,500 1,500
Northeast Pennsylvania, Hospital
Authority (TECP) (MBIA) (B)
3.800% 02/17/00 1,000 1,000
Northern Cambria School District
(GO) (AMBAC)
5.100% 09/01/00 300 303
Old Forge School District (TRAN) (B)
4.300% 06/30/00 1,572 1,575
Pen Argyl School District (TRAN) (B)
3.750% 06/30/00 1,700 1,701
Pennsylvania State (GO) Series 1
4.625% 05/01/00 1,000 1,006
Pennsylvania State (TECP)
3.600% 01/19/00 3,000 3,000
3.550% 01/25/00 2,000 2,000
3.800% 11/01/00 3,000 3,000
Pennsylvania State, Higher
Educational Facilities Authority,
University of Pennsylvania,
Health Services Project
(RB) (A) (B) Series C
3.850% 01/01/26 5,000 5,000
Pennsylvania State, Higher
Education Authority, Valley Forge
Academy (TECP) (A)
3.800% 11/01/00 2,000 2,000
Pennsylvania State, Turnpike
Commission (RB) Series K
7.500% 12/01/99 200 204
Pennsylvania State, Turnpike
Commission (RB) Series P
5.100% 12/01/99 150 150
Pennsylvania State, Turnpike
Commission Series Q (B)
3.700% 06/01/28 3,000 3,000
See Accompanying Notes
101
<PAGE> 104
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
-------- ------ --------
MUNICIPAL BONDS -- CONTINUED
PENNSYLVANIA -- CONTINUED
Pennsylvania State University (RB)
4.950% 08/15/00 $ 500 $ 504
Philadelphia (TRAN) Series A
4.250% 06/30/00 2,000 2,008
Philadelphia, Industrial Development
Revenue, Chemical Heritage
Foundation Project (RB) (B)
3.900% 07/01/27 1,000 1,000
Philadelphia, Hospital & Higher
Educational Facility Authority,
Children's Hospital Project
(RB) (B) Series 1992-B
3.750% 03/01/27 4,100 4,100
Philadelphia, Hospital & Higher
Educational Facility Authority,
Children's Hospital (RB)
4.750% 02/15/00 375 376
Pittsburgh, Urban Redevelopment
Authority, (RB) Series D
3.150% 12/01/99 1,170 1,170
Quakertown, Hospital Facilities
Authority (RB) (A)
3.800% 07/01/05 2,800 2,800
Sayre, Healthcare Center Facility
Authority (RB) (AMBAC) (A)
3.900% 12/01/20 2,000 2,000
Scranton-Lackawanna, Health &
Welfare Authority, University of
Scranton (RB) (A)
3.900% 05/01/18 1,665 1,665
Shaler Area School District
(GO) (FSA) Series B
3.750% 09/01/00 600 601
State, Pittsburgh Urban Mortgage
Redevelopment Authority,
Callable 04/01/2000 @ 100
(RB) Series 1999
3.545% 08/15/00 1,045 1,045
Par Value
Maturity (000) (000)
-------- ------- --------
MUNICIPAL BONDS -- CONTINUED
PENNSYLVANIA -- CONTINUED
Temple University Funding,
Callable 12/13/99 @100
(GO) Series 1999
3.150% 05/12/00 $ 1,000 $ 1,000
Venango, Pollution Control
Revenue (RB) (A) (B)
4.000% 12/01/12 895 895
Western Berks Water Authority
(RB) (FSA) Series A
3.900% 04/01/00 535 536
York County, Industrial Development
Authority, PECO Energy Project
(RB) (A) (B) Series A
3.650% 08/01/16 1,400 1,400
York County, Industrial Development
Authority, Public Service Electric &
Gas Project (RB) (MBIA) (B)
Series 1995-A
3.850% 09/01/20 600 600
York County, City School District
(GO) (FGIC) (A)
4.100% 02/15/00 300 300
--------
119,488
--------
TOTAL MUNICIPAL BONDS
(Cost $119,488) 119,488
--------
CASH EQUIVALENTS -- 1.8%
Blackrock Pennsylvania Municipal
Money Market Fund 100 100
Federated Pennsylvania Cash
Trust Fund 2,120 2,120
--------
TOTAL CASH EQUIVALENTS
(Cost $2,220) 2,220
--------
TOTAL INVESTMENTS -- 95.9%
(Cost $121,708) $121,708
========
OTHER ASSETS AND LIABILITIES,
NET -- 4.1% 5,248
--------
See Accompanying Notes
102
<PAGE> 105
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND
Value
(000)
--------
NET ASSETS:
Portfolio Shares of Class I (unlimited
authorization -- no par value) based
on 78,008,624 outstanding shares
of beneficial interest $ 78,009
Portfolio Shares of Class A (unlimited
authorization -- no par value) based on
48,920,439 outstanding shares
of beneficial interest 48,921
Accumulated net realized loss on investments (18)
Undistributed net investment income 44
--------
TOTAL NET ASSETS -- 100.0% $126,956
========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SHARE -- CLASS I $1.00
========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SHARE -- CLASS A $1.00
========
- - -----------------------------------------------
(A) SECURITIES ARE BACKED BY A LETTER OF CREDIT BACKED BY A MAJOR FINANCIAL
INSTITUTION. THE MATURITY DATE SHOWN IS THE LONGER OF THE NEXT RESET
DATE OR THE DATE IN WHICH THE PRINCIPAL AMOUNT CAN BE RECOVERED
THROUGH DEMAND.
(B) VARIABLE RATE SECURITY - THE RATE REFLECTED ON THE STATEMENT OF NET
ASSETS IS THE RATE IN EFFECTON NOVEMBER 30, 1999
AMBAC -- AMERICAN MUNICIPAL BOND ASSURANCE CORPORATION
AN -- ANTICIPATION NOTE
FGIC -- FEDERAL GUARANTY INSURANCE COMPANY
FSA -- FINANCIAL SECURITY ASSURANCE
GO -- GENERAL OBLIGATION
MBIA -- MUNICIPAL BOND INSURANCE ASSOCIATION
RB -- REVENUE BOND
TECP -- TAX EXEMPT COMMERCIAL PAPER
TRAN -- TAX REVENUE ANTICIPATION NOTE
See Accompanying Notes
103
<PAGE> 106
[GRAPHIC OMITTED] FINANCIAL HIGHLIGHTS
ARMADA PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
For Year Ended May 31,
For the Six Months -----------------------------------------------------------------
Ended November 30, 1999 1999 1998 1997
(Unaudited) ------------------- ----------------- ------------------
Class I Class A Class I Class A Class I Class A Class I2 Class A1
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net investment
income 0.02 0.01 0.03 0.03 0.03 0.03 0.03 0.02
LESS DISTRIBUTIONS
Dividends from net
investment
income (0.02) (0.01) (0.03) (0.03) (0.03) (0.03) (0.03) (0.02)
------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN 1.49%4 1.42%4 2.92% 2.76% 3.41% 3.29% 3.26% 3.18%3
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (in 000's) $78,030 $48,926 $77,214 $53,822 $73,264 $33,375 $60,876 $20,830
Ratio of expenses to
average net
assets 0.32%3 0.47%3 0.34% 0.49% 0.34% 0.46% 0.41% 0.46%3
Ratio of net investment
income to average
net assets 3.02%3 2.87%3 2.82% 2.67% 3.35% 3.23% 3.20% 3.27%3
Ratio of expenses to
average net assets
before fee waivers 0.57%3 0.72%3 0.59% 0.74% 0.58% 0.71% 0.74% 0.71%3
Ratio of net investment
income to average
net assets before
fee waivers 2.77%3 2.62%3 2.57% 2.42% 3.11% 2.98% 2.87% 3.02%3
</TABLE>
For the For the For the
Period Ended Year Ended Period Ended
May 31, 19962 April 30, 19962 April 30, 19952
------------- --------------- ---------------
Net asset value,
beginning of period $ 1.00 $ 1.00 $ 1.00
------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net investment
income 0.00 0.03 0.02
LESS DISTRIBUTIONS
Dividends from net
investment
income (0.00) (0.03) (0.02)
------- ------- -------
Net asset value, end
of period $ 1.00 $ 1.00 $ 1.00
======= ======= =======
TOTAL RETURN 0.28%4 3.36% 2.32%4
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's) $68,742 $70,422 $56,668
Ratio of expenses to
average net
assets 0.55%3 0.55% 0.55%3
Ratio of net investment
income to average
net assets 3.24%3 3.29% 3.21%3
Ratio of expenses to
average net assets
before fee waivers 0.97%3 0.96% 1.04%3
Ratio of net investment
income to average
net assets before
fee waivers 2.82%3 2.88% 2.72%3
1 CLASS A COMMENCED OPERATIONS ON SEPTEMBER 11, 1996.
2 ACTIVITY FOR THE PERIOD PRESENTED INCLUDES THAT OF THE PREDECESSOR FUND
THROUGH SEPTEMBER 6, 1996. THE PREDECESSOR FUND COMMENCED OPERATIONS ON AUGUST
10, 1994. DURING 1996, THE PREDECESSOR FUND CHANGED ITS FISCAL YEAR END FROM
APRIL 30 TO MAY 31.
3 ANNUALIZED.
4 TOTAL RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
See Accompanying Notes
104
<PAGE> 107
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA TAX EXEMPT MONEY MARKET FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
-------- ------ -------
MUNICIPAL BONDS -- 98.1%
ALASKA -- 1.7%
Valdez, Marine Terminal, Arco
Transportation Project
(RB) (A) (B) Series 1994-B
3.900% 05/01/31 $ 6,000 $ 6,000
Valdez, Marine Terminal, Arco
Transportation Project (TECP)
Series A
3.400% 01/28/00 3,300 3,300
---------
9,300
---------
ARIZONA -- 3.6%
Arizona State, Salt River Project,
Agricultural Improvemnt &
Power District (TECP) Series B
3.600% 01/25/00 5,000 5,000
3.750% 02/14/00 6,000 6,000
3.750% 02/18/00 4,000 4,000
Maricopa County Pollution
Control, Southern California
Edison, (RB) Series E
3.450% 01/31/00 2,000 2,000
Maricopa County Pollution
Control Revenue, State Public
Service, (RB) (A) (B) Series C
3.750% 05/01/29 2,000 2,000
---------
19,000
---------
COLORADO -- 2.2%
Colorado State, Health Facilities
Authority, Catholic Health
Initiatives (RB) (A) (B) Series B
4.000% 12/01/25 7,700 7,700
Colorado State, Health Facilities
Authority, North Colorado
Medical Center (RB) (A) (B)
3.900% 05/15/20 4,300 4,300
---------
12,000
---------
FLORIDA -- 2.7%
Jacksonville, Pollution Control
Revenue, Florida Power &
Light (TECP)
3.500% 01/28/00 5,750 5,750
3.750% 02/11/00 5,810 5,810
3.750% 02/15/00 3,000 3,000
---------
14,560
---------
GEORGIA -- 3.0%
Municipal Electric Authority
Georgia (TECP)
3.650% 03/10/00 2,657 2,657
Par Value
Maturity (000) (000)
-------- ------- -------
MUNICIPAL BONDS -- CONTINUED
GEORGIA -- CONTINUED
Municipal Electric Authority
Georgia (TECP) Series A
3.450% 01/21/00 $ 5,435 $ 5,435
Savannah, Development
Authority, Downtown Parking
Authority (RB) (A) (B)
3.800% 09/01/05 2,000 2,000
State of Georgia,Trust Receipts
(GO) (A) (B) (C) Series 128
3.970% 02/01/12 6,000 6,000
-------
16,092
-------
ILLINOIS -- 6.5%
ABN Amro Munitops
TX FortBend ISD TX Certificate
Trust, (B) (C) Series 1999-6
4.100% 03/07/07 3,000 3,000
Illinois State, Trust Receipts
(GO) (A) (B) (C) Series 133
3.960% 10/01/07 5,000 5,000
Illinois State, Educational
Facilities Authority,
Northwestern University
(RB) (A) (B)
3.950% 03/01/28 8,736 8,736
Illinois State, Educational
Facility Authority, National
Louis University (RB) Series B
3.900% 06/01/29 3,000 3,000
Illinois State, Fox Valley Park (GO)
3.375% 12/15/99 2,975 2,975
Illinois State, Health Facilities
Authority, Northwestern
Memorial Hospital Project,
VRDN (A) (E)
3.700% 08/15/25 1,200 1,200
Illinois State, Health Facilities
Authority, Advocate Healthcare
Network (RB) (A) (B) Series B
3.950% 08/15/22 4,820 4,820
Illinois State, Health Facility
Authority, Evanston
Northwestern (TECP)
3.250% 05/31/00 2,000 2,000
Illinois State, Hospital Development
Finance Authority, Palos
Community Hospital
(RB) (A) (B) Series 1994-2
3.900% 11/15/11 3,900 3,900
--------
34,631
--------
See Accompanying Notes
105
<PAGE> 108
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA TAX EXEMPT MONEY MARKET FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
-------- ------- -------
MUNICIPAL BONDS -- CONTINUED
INDIANA -- 7.2%
Indiana State, Health Facility
Finance Authority, Ascension
Health, (TECP) Series B
3.800% 02/09/00 $ 5,000 $ 5,000
Indiana State, Bond Bank
Advance Funding Program
Notes, Series A-2
3.500% 01/19/00 2,550 2,552
Indiana State, Health Facilities Finance
Authority, Capital Access (RB) (A) (B)
PGM 1992
3.900% 12/01/02 1,000 1,000
PGM 1991
3.900% 08/01/06 4,300 4,300
PGM 1997
3.900% 01/01/12 1,450 1,450
PGM 1998
3.900% 04/01/13 4,250 4,250
Indiana State, Hospital Equipment
Finance Authority (RB) (A) (B)
3.900% 12/01/15 10,000 10,000
Purdue University, Indiana
Universities Trustees Student Fee
(RB) (A) (B)
Series H
3.800% 07/01/17 930 930
Series O
3.800% 07/01/19 5,850 5,850
Sullivan, Indiana Hoosier
Energy (TECP)
3.850% 01/24/00 3,400 3,400
-------
38,732
-------
KENTUCKY -- 3.3%
Jefferson County, Louisville Gas &
Electric (TECP) Series 1996-A
3.700% 02/16/00 4,000 4,000
Kentucky State, Economic
Development, Turnpike
Authority (RB)
7.250% 05/15/00 2,000 2,064
Kentucky State, Interlocal School
Transportation Association (TRAN)
4.000% 06/30/00 5,000 5,012
Lexington-Fayette, Urban County
Public Facility (RB)
3.500% 05/01/00 1,550 1,552
Owensboro Davies County,
Regional Water Agency
(RB) Series A
4.400% 09/01/00 4,765 4,782
-------
17,410
-------
Par Value
Maturity (000) (000)
-------- ------ -------
LOUISIANA -- 0.4%
Louisiana State, Parrish of Saint
James, Pollution Control Revenue,
Texaco Project, (RB) Series 1988 A
3.500% 01/19/00 $ 2,000 $ 2,000
-------
MUNICIPAL BONDS -- CONTINUED
MAINE -- 0.4%
Maine State, Health & Higher
Education Facilities Authority
(RB) (A) (B) Series C
3.950% 12/01/25 2,300 2,300
-------
MARYLAND -- 0.7%
Montgomery County (TECP)
3.450% 01/21/00 3,500 3,500
-------
MASSACHUSETTS -- 0.1%
Massachusetts State (GO) (FGIC)
7.250% 03/01/09 725 747
-------
MICHIGAN -- 5.8%
Bellevue Michigan, Community
School (GO)
4.375% 08/31/00 2,000 2,009
Detroit Michigan, Sewer Dispense
(RB) Series A
3.950% 07/01/23 2,000 2,000
Michigan State, Housing
Development Authority, Pine
Ridge (RB) (A) (B)
3.900% 10/01/17 3,900 3,900
Michigan State, Clean Air Michigan
Initatives Series A
3.950% 11/01/13 5,000 5,000
Michigan State, Municipal Bond
Authority (RB)
3.500% 12/01/99 2,000 2,000
Michigan State, Strategic,
Consumers Power Company
(RB) Project J
3.700% 06/01/10 2,500 2,500
Michigan State, Strategic, Detroit
Edison Project (RB)
3.700% 09/01/30 5,800 5,800
Monroe County, Economic
Development Detroit Edison
(RB) (A) (B) Series C
3.700% 10/01/24 4,100 4,100
Mount Morris Michigan, Consolidated
School District State Aid Notes
4.050% 08/30/00 2,500 2,504
University of Michigan, School
Revenues Health System
(RB) (A) (B)
3.650% 12/01/24 1,350 1,350
-------
31,163
-------
See Accompanying Notes
106
<PAGE> 109
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA TAX EXEMPT MONEY MARKET FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
-------- ------- -------
MUNICIPAL BONDS -- CONTINUED
MINNESOTA -- 8.1%
Becker, Pollution Control Revenue,
Northern States Power (TECP)
3.750% 02/15/00 $ 4,000 $ 4,000
3.700% 02/22/00 4,200 4,200
Hennepin County (GO) (A) (B) Series C
3.700% 12/01/04 2,000 2,000
3.700% 12/01/10 4,000 4,000
Minneapolis (GO) (A) (B)
3.750% 12/01/06 3,235 3,235
3.700% 12/01/07 1,600 1,600
3.700% 12/01/16 4,000 4,000
Minneapolis University
Gateway Project (GO)
3.750% 12/01/27 6,350 6,350
Minneapolis Variable Tax Increment,
(GO) (A) (B) Series A
3.750% 03/01/12 1,830 1,830
Minnesota State, School District (TRAN)
3.450% 08/15/00 3,400 3,400
Minnesota State, School Districts
Tax & Aid Anticipation Borrowing
Certificate, Series A
3.000% 02/03/00 2,000 2,000
Minnesota State, School Districts
Tax & Aid Anticipation Borrowing
Certificate, Series B
2.950% 02/24/00 2,000 2,000
Olmsted County, Human Services
Campus Infrastructure (RB) (A) (B)
3.800% 08/01/05 3,310 3,310
Rochester Minnesota (TECP) Series A
3.750% 03/08/00 1,500 1,500
-------
43,425
-------
MISSISSIPPI -- 2.3%
Forest, Industrial Development,
Sara Lee Project
(RB) (A) (B)
3.950% 10/01/12 8,000 8,000
Jackson County, Water System,
Chevron Project (GO)
3.350% 02/01/00 4,400 4,400
-------
12,400
-------
MISSOURI -- 0.6%
Missouri State, Health &
Educational Facility Authority,
Sisters of Mercy
(RB) (A) (B) Series C
3.850% 06/01/19 2,100 2,100
Par Value
Maturity (000) (000)
-------- ----- -----
MUNICIPAL BONDS -- CONTINUED
MISSOURI -- CONTINUED
Missouri State, Health &
Educational Facility Authority,
Sisters of Mercy
(RB) (A) (B) Series D
3.850% 06/01/19 $ 1,000 $ 1,000
-------
3,100
-------
NEVADA -- 0.3%
Clarke County, University of
Nevada Las Vegas, Development
Project (RB) (A) (B)
3.900% 08/01/19 1,545 1,545
-------
NEW HAMPSHIRE -- 0.4%
New Hampshire State (GO)
5.000% 02/01/00 1,000 1,003
New Hampshire State, Higher
Education & Health Facilities
(RB) (A) (B) Series E
3.950% 12/01/25 1,000 1,000
-------
2,003
-------
NEW JERSEY -- 0.6%
West Deptford Township (BAN)
4.250% 01/18/00 3,000 3,003
-------
NORTH CAROLINA -- 3.9%
North Carolina State, Educational
Facilities, Bowman Gray School
of Medicine Project (RB) (A) (B)
3.850% 09/01/20 10,600 10,600
North Carolina State, Educational
Facilities, Guilford College
(RB) (MBIA) (A) (B)
3.850% 05/01/24 2,000 2,000
Winston-Salem, Municipal Leasing
(RB) (A) (B)
4.050% 07/01/03 8,300 8,300
-------
20,900
-------
OHIO -- 14.6%
Columbus (GO) (B) Series 1
3.700% 12/01/17 10,575 10,575
Columbus Sewer & Water
Improvements (RB) (B)
Series 1995-1
3.700% 06/01/16 2,000 2,000
Columbus Sewer Authority
(RB) (A) (B)
3.800% 06/01/11 2,200 2,200
Cuyahoga County, University
Health Systems (RB) (A) (B)
3.900% 01/15/29 1,425 1,425
See Accompanying Notes
107
<PAGE> 110
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA TAX EXEMPT MONEY MARKET FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
-------- ------ -------
MUNICIPAL BONDS -- CONTINUED
OHIO -- CONTINUED
Dublin County, City School District
(GO) (MBIA)
4.000% 12/01/99 $ 155 $ 155
Eastern Ohio, Regional Wastewater
Authority (BAN)
4.240% 11/30/00 3,500 3,508
Eastern Ohio, Regional Wastewater
Authority, Water Improvement
(BAN)
4.200% 12/02/99 1,500 1,500
Greater Cleveland, Regional
Transportation Authority
(GO) (FGIC)
4.450% 12/01/99 100 100
Hamilton, Ohio City School District,
(GO) (BAN)
4.200% 12/22/99 3,500 3,501
Lucas County (GO) (FGIC)
4.100% 12/01/99 100 100
5.000% 12/01/99 600 600
Mahoning County, Hospital Facilities
Authority, Forum Health System,
(RB) (MBIA) (B)
3.900% 12/01/28 6,600 6,600
Mason County City School District
(GO) (BAN) Series 1999
3.380% 02/17/00 750 751
Massillon (GO) (BAN)
3.730% 01/14/00 1,800 1,801
Mayfield Village, (GO) (BAN)
4.000% 09/27/00 4,500 4,505
Milford, (GO) (BAN)
3.300% 03/01/00 1,160 1,161
Muskingum County, Various Purpose
(GO) (BAN)
3.750% 06/01/00 2,650 2,654
4.050% 09/20/00 1,980 1,984
Northwest Ohio School District
(GO) (FGIC)
3.900% 12/01/99 100 100
Ohio State, Air Quality Development
Authority, Cincinnati Gas &
Electric (RB) (A) (B)
3.950% 12/01/15 1,050 1,050
Ohio State, Air Quality Development
Authority, Ohio Edison Project TECD
(RB) (A) (B)
2.950% 02/01/00 3,000 3,000
Ohio State, Higher Education Authority,
Lake Erie Project (RB) (A) (B)
4.000% 12/01/16 4,780 4,780
Par Value
Maturity (000) (000)
-------- ------- -------
MUNICIPAL BONDS -- CONTINUED
OHIO -- CONTINUED
Ohio State, Infrastructure
Development Authority (RB)
4.250% 12/15/99 $ 1,685 $ 1,686
Ohio State University General Receipts
3.850% 12/01/07 1,250 1,250
Ohio State University, General
Receipts (RB) (B) Series 1986-B
4.250% 12/01/06 2,710 2,710
Orrville, Electric System
(RB) (AMBAC)
4.100% 12/01/99 200 200
Pike Delta, York School (BAN)
3.480% 03/02/00 1,850 1,852
Saint Mary's Ohio (BAN)
3.700% 06/13/00 1,570 1,572
Summit County (GO) (BAN)
3.800% 06/01/00 8,000 8,023
Toledo City, Services Special
Assessment Notes (A) (B) Series B
3.900% 06/01/00 4,220 4,220
Twinsburg, Ohio Local School
District (GO)
5.750% 12/01/99 200 200
University of Cincinnati, General
Receipts (BAN)
3.260% 12/21/99 1,375 1,375
Warren County, Waterstone
Boulevard (GO)
4.150% 12/01/99 115 115
Whitehall (GO) (AMBAC)
4.100% 12/01/99 100 100
Wooster, Industrial Development
Authority, Allen Group Project (RB) (B)
4.100% 12/01/10 700 700
-------
78,053
-------
PENNSYLVANIA -- 7.5%
Allegheny County, Higher Educational
University Building Authority, Carnegie
Mellon University (RB) (A) (B)
3.700% 12/01/03 6,000 6,000
Allegheny County, Industrial
Development Authority,
Environmental Improvement,
USX Corp. (RB) (A) (B)
3.850% 12/01/32 5,000 5,000
Allegheny County, Residential
Finance Authority, Mortgage Notes
(RB) Series Gg-1
3.900% 10/01/00 4,755 4,755
Delaware County, Industrial
Development Authority, PECO
Energy (TECP) (FGIC)
3.650% 01/18/00 2,000 2,000
See Accompanying Notes
108
<PAGE> 111
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA TAX EXEMPT MONEY MARKET FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par Value
Maturity (000) (000)
-------- ------- -------
MUNICIPAL BONDS -- CONTINUED
PENNSYLVANIA -- CONTINUED
Delaware County, Industrial
Development Authority, PECO
Energy (RB) (A) (B) Series A
3.650% 08/01/16 $ 2,625 $ 2,625
Northampton County, Higher
Education Authority, Lafayette
College (RB) (A) (B) Series B
4.000% 11/01/28 2,000 2,000
Pennsylvania State, Higher Educational
Facilities Authority Refunding,
Carnegie Mellon University Project,
(RB) (A) Series 1995-C
3.700% 11/01/30 1,000 1,000
Pennsylvania State, Higher
Educational Facilities Authority,
University of Pennsylvania, Health
Services Project (RB) (A) (B) Series C
3.850% 01/01/26 1,000 1,000
Pennsylvania State, Industrial
Development Authority
(RB) (AMBAC)
5.000% 01/01/00 2,000 2,003
Pennsylvania State, Turnpike
Commission (RB) Series P
5.100% 12/01/99 1,150 1,150
Quakertown General Authority
(RB) (A) Series A
3.800% 07/01/26 2,745 2,745
Quakertown, Hospital Facilities
Authority (RB) (A) (B)
3.800% 07/01/05 4,000 4,000
Sayre, Healthcare Center Facility
Authority (RB) (AMBAC) (B)
3.900% 12/01/20 2,000 2,000
University of Pennsylvania
(GO) (A) (B)
3.850% 01/01/24 100 100
Washington County, Authority
Equipment Lease (RB) (A) (B)
Series 1985
3.900% 11/01/05 3,730 3,730
-------
40,108
-------
SOUTH CAROLINA -- 2.2%
Oconee County School District (GO)
6.100% 03/01/00 1,505 1,516
Richland County School District (GO)
4.250% 05/01/00 3,400 3,408
South Carolina Public Service (TECP)
3.500% 12/09/99 3,000 3,000
3.700% 01/27/00 4,000 4,000
-------
11,924
-------
Par Value
Maturity (000) (000)
-------- ------- -------
MUNICIPAL BONDS -- CONTINUED
TENNESSE -- 2.8%
Tennessee School Bond Authority
(TECP) Series A
3.550% 01/27/00 $ 5,800 $ 5,800
Tennessee State (GO) (A) (B) Series 108
3.970% 05/01/14 2,000 2,000
Virginia Public School Authority
(RB) (A) (B) (C) Series 109
3.970% 08/01/17 7,000 7,000
-------
14,800
-------
TEXAS -- 5.4%
Fort Worth (TECP)
3.550% 12/08/99 2,700 2,700
Harris County (TAN)
4.000% 02/29/00 3,000 3,004
Houston (TECP)
3.500% 01/26/00 4,000 4,000
Series 1999-A
3.700% 01/27/00 5,000 5,000
Houston, Independant School
District Asbestos Abatement (GO)
4.000% 07/15/00 1,600 1,605
Northside, Independant School
District (GO) Series A
6.375% 08/15/00 700 713
Texas State (TRAN)
4.500% 08/31/00 8,000 8,046
University of Texas, Permament
University Fund (TECP)
3.700% 04/11/00 4,000 4,000
-------
29,068
-------
UTAH -- 3.9%
Emery County, Pollution Control
Revenue, Pacificorp Project (RB) (A) (B)
3.850% 07/01/15 2,700 2,700
Intermountain Power
(TECP) (AMBAC)
3.600% 01/21/00 3,300 3,300
Series 1997-B
3.750% 01/14/00 5,000 5,000
3.500% 01/27/00 2,000 2,000
3.700% 03/08/00 4,000 4,000
Utah University, Auxiliary &
Campus Facilities (RB) (A) (B)
Series 1997-A
3.850% 04/01/27 3,850 3,850
-------
20,850
-------
See Accompanying Notes
109
<PAGE> 112
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA TAX EXEMPT MONEY MARKET FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par/Shares Value
Maturity (000) (000)
-------- ---------- -------
MUNICIPAL BONDS -- CONTINUED
VERMONT -- 0.5%
Vermont State (GO)
6.800% 02/01/00 $ 1,300 $ 1,308
Series A
4.250% 01/15/00 1,215 1,217
--------
2,525
--------
VIRGINIA -- 0.9%
Norfolk Virginia, Industrial
Development Authority, Pooled
Finance Program, Sentara
Health System (TECP)
3.600% 01/26/00 5,000 5,000
--------
WASHINGTON -- 2.1%
Chelan County (RB) (A) (B)
3.800% 06/01/15 4,260 4,260
Washington State, Healthcare
Facility Authority, Fred Hutchinson
Cancer Research Center
(RB) (A) (B) Series 1991-B
4.000% 01/01/18 7,200 7,200
--------
11,460
--------
WISCONSIN -- 4.0%
Carlton, Wisconsin Power and Light
Company Pollution Control Revenue
(RB) (VRDN) Project B
3.700% 09/01/05 2,000 2,000
Oak Creek, Wisconsin Electric Power
Company Project Pollution
Control Revenue (RB) (A) (B)
3.850% 08/01/16 3,100 3,100
Wisconsin State (TECP)
3.650% 03/10/00 4,085 4,085
Series A
3.750% 02/10/00 6,350 6,350
3.750% 02/23/00 6,010 6,010
--------
21,545
--------
WYOMING -- 0.4%
Lincoln County, Pollution Control
Revenue, Pacificorp (TECP)
3.200% 12/09/99 2,000 2,000
--------
TOTAL MUNICIPAL BONDS
(Cost $525,144) 525,144
--------
CASH EQUIVALENTS -- 1.3%
Federated Tax-Free Money
Market Fund 4,100 4,100
Goldman Sachs Financial Square
Tax - Exempt Money Market
Fund 2,539 2,539
--------
Value
(000)
--------
TOTAL CASH EQUIVALENTS
(COST $6,639) $ 6,639
--------
TOTAL INVESTMENTS -- 99.4%
(COST $531,783) $531,783
========
OTHER ASSETS AND LIABILITIES,
NET -- 0.6% 3,299
--------
NET ASSETS:
Portfolio Shares of Class I (unlimited
authorization -- no par value) based on
349,786,810 outstanding shares
of beneficial interest 349,788
Portfolio Shares of Class A (unlimited
authorization -- no par value) based on
185,501,814 outstanding shares
of beneficial interest 185,502
Accumulated net realized loss on investments (25)
Overdistributed net investment income (183)
--------
TOTAL NET ASSETS -- 100.0% $535,082
========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SHARE -- CLASS I $1.00
========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SHARE -- CLASS A $1.00
========
- - ------------------------------------------------
(A) SECURITIES ARE BACKED BY A LETTER OF CREDIT BY A MAJOR FINANCIAL INSTITUTION
(B) VARIABLE RATE SECURITY - THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON NOVEMBER 30,1999. THE MATURITY DATE SHOWN IS THE
LONGER OF THE NEXT RESET DATE OR THE DATE IN WHICH THE PRINCIPAL AMOUNT CAN
BE RECOVERED THROUGH DEMAND.
(C) PRIVATE PLACEMENT SECURITY
AMBAC -- AMERICAN MUNICIPAL BOND ASSURANCE CORPORATION
AN -- ANTICIPATION NOTE
BAN -- BOND ANTICIPATION NOTE
FGIC -- FEDERAL GUARANTY INSURANCE CORPORATION
GO -- GENERAL OBLIGATION
MBIA -- MUNICIPAL BOND INSURANCE ASSOCIATION
RB -- REVENUE BOND
TECP -- TAX EXEMPT COMMERCIAL PAPER
TRAN -- TAX AND REVENUE ANTICIPATION NOTE
VDRN -- VARIABLE RATE DEMAND NOTE
See Accompanying Notes
110
<PAGE> 113
[GRAPHIC OMITTED] FINANCIAL HIGHLIGHTS
ARMADA TAX EXEMPT MONEY MARKET FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
For the Six Months For the Year Ended May 31,
Ended November 30, 1999 --------------------------------------------
(Unaudited) 1999 1998
-------------------- -------------------- --------- --------
Class I Class A Class I Class A Class I Class A
-------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.02 0.01 0.03 0.03 0.03 0.03
LESS DISTRIBUTIONS
Dividends from net
investment income (0.02) (0.01) (0.03) (0.03) (0.03) (0.03)
-------- -------- -------- -------- --------- --------
Net asset value, end
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========= ========
TOTAL RETURN 1.49%2 1.41%2 3.00% 2.85% 3.40% 3.27%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's) $349,641 $185,441 $434,178 $190,469 $ 418,953 $132,548
Ratio of expenses to
average net assets 0.33%1 0.47%1 0.30% 0.44% 0.30% 0.42%
Ratio of net investment
income to average
net assets 2.98%1 2.83%1 2.92% 2.78% 3.32% 3.20%
Ratio of expenses to
average net assets
before fee waivers 0.53%1 0.67%1 0.50% 0.64% 0.50% 0.62%
Ratio of net investment
income to average net
assets before fee
waivers 2.78%1 2.63%1 2.72% 2.58% 3.12% 3.00%
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended May 31,
------------------------------------------------------------------
1997 1996 1995
------------------ ------------------- ---------------------
Class I Class A Class I Class A Class I Class A
-------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- ------- -------- ------- -------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.03 0.03 0.03 0.03 0.03 0.03
LESS DISTRIBUTIONS
Dividends from net
investment income (0.03) (0.03) (0.03) (0.03) (0.03) (0.03)
-------- ------- -------- ------- -------- -------
Net asset value, end
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======= ======== ======= ======== =======
TOTAL RETURN 3.23% 3.12% 3.40% 3.29% 3.14% 3.04%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's) $370,679 $71,917 $261,808 $85,928 $172,643 $51,916
Ratio of expenses to
average net assets 0.29% 0.39% 0.30% 0.40% 0.35% 0.46%
Ratio of net investment
income to average
net assets 3.18% 3.08% 3.33% 3.23% 3.15% 3.17%
Ratio of expenses to
average net assets
before fee waivers 0.49% 0.59% 0.51% 0.61% 0.56% 0.67%
Ratio of net investment
income to average net
assets before fee
waivers 2.98% 2.88% 3.12% 3.02% 2.94% 2.96%
</TABLE>
1 ANNUALIZED.
2 TOTAL RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
See Accompanying Notes
111
<PAGE> 114
[GRAPHIC OMITTED] STATEMENT OF NET ASSETS
ARMADA TREASURY MONEY MARKET FUND
NOVEMBER 30, 1999
(UNAUDITED)
Par/Shares Value
Maturity (000) (000)
-------- ---------- --------
U.S. TREASURY OBLIGATIONS -- 90.8%
TREASURY BILLS+ -- 76.1%
U.S. Treasury Bill
4.835% 12/02/99 $ 99,000 $ 98,988
4.680% 12/09/99 35,000 34,964
4.570% 12/16/99 25,000 24,954
4.670% 12/23/99 15,000 14,958
4.680% 12/30/99 15,000 14,943
4.660% 01/06/00 20,000 19,905
4.840% 01/13/00 35,000 34,789
4.985% 01/20/00 40,000 39,715
4.985% 01/27/00 25,000 24,802
4.930% 02/03/00 20,000 19,823
4.910% 02/10/00 25,000 24,752
5.045% 02/17/00 15,000 14,836
5.055% 02/24/00 5,000 4,940
5.115% 03/30/00 5,000 4,915
--------
377,284
--------
TREASURY NOTES -- 14.6%
U.S. Treasury Note
5.375% 01/31/00 27,500 27,507
5.875% 02/15/00 30,000 30,034
5.500% 03/31/00 15,000 15,008
--------
72,549
--------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $449,833) 449,833
--------
CASH EQUIVALENTS -- 6.1%
Federated US Treasury Cash Reserve
Money Market Fund 14,969 14,969
Goldman Sachs Financial Square
Treasury Money Market
Fund 15,258 15,258
--------
TOTAL CASH EQUIVALENTS
(Cost $30,227) 30,227
--------
TOTAL INVESTMENTS -- 96.9%
(Cost $480,060) $480,060
========
OTHER ASSETS AND LIABILITIES,
NET -- 3.1% (15,474)
--------
Value
(000)
--------
NET ASSETS:
Portfolio Shares of Class I (unlimited
authorization -- no par value) based
on 386,276,088 outstanding shares
of beneficial interest $386,276
Portfolio Shares of Class A (unlimited
authorization -- no par value) based on
78,303,586 outstanding shares
of beneficial interest 78,304
Accumulated net realized gain on
investments 1
Undistributed net investment income 5
--------
TOTAL NET ASSETS -- 100.0% $464,586
========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SHARE -- CLASS I $1.00
========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SHARE -- CLASS A $1.00
========
- - ------------------------------------------------
+ EFFECTIVE YIELD
See Accompanying Notes
112
<PAGE> 115
[GRAPHIC OMITTED] FINANCIAL HIGHLIGHTS
ARMADA TREASURY MONEY MARKET FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
For the Six Months For the Year Ended May 31,
Ended November 30, 1999 -------------------------------------------
(Unaudited) 1999 1998
---------------------- ------------------- --------------------
Class I Class A Class I Class A Class I Class A
-------- -------- -------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- ------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.02 0.02 0.04 0.04 0.05 0.05
LESS DISTRIBUTIONS
Dividends from net
investment income (0.02) (0.02) (0.04) (0.04) (0.05) (0.05)
-------- -------- -------- -------- -------- ------
Net asset value, end
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ======
TOTAL RETURN 2.15%3 2.08%3 4.39% 4.23% 4.95% 4.82%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's) $386,289 $ 78,297 $346,092 $ 83,020 $359,605 $7,222
Ratio of expenses to
average net assets 0.43%2 0.58%2 0.41% 0.55% 0.39% 0.51%
Ratio of net investment
income to average
net assets 4.25%2 4.10%2 4.35% 4.21% 4.84% 4.71%
Ratio of expenses to
average net assets
before fee waivers 0.48%2 0.63%2 0.46% 0.60% 0.44% 0.56%
Ratio of net investment
income to average net
assets before fee
waivers 4.20%2 4.05%2 4.30% 4.16% 4.79% 4.66%
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended May 31,
-------------------------------------------------------------------
1997 1996 1995
------------------- ------------------- --------------------
Class I Class A Class I Class A Class I1 Class A1
-------- ------ -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- ------ -------- ------- -------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.05 0.05 0.05 0.05 0.05 0.02
LESS DISTRIBUTIONS
Dividends from net
investment income (0.05) (0.05) (0.05) (0.05) (0.05) (0.02)
-------- ------ -------- ------- -------- -------
Net asset value, end
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ====== ======== ======= ======== =======
TOTAL RETURN 4.89% 4.79% 5.07% 4.97% 4.86%2 5.41%2
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's) $276,327 $5,680 $312,255 $ 4,355 $142,877 $ 366
Ratio of expenses to
average net assets 0.37% 0.47% 0.41% 0.52% 0.43%2 0.56%2
Ratio of net investment
income to average
net assets 4.79% 4.68% 4.88% 4.77% 4.78%2 5.35%2
Ratio of expenses to
average net assets
before fee waivers 0.42% 0.52% 0.47% 0.58% 0.49%2 0.63%2
Ratio of net investment
income to average net
assets before fee
waivers 4.74% 4.63% 4.82% 4.71% 4.72%2 5.28%2
</TABLE>
1 CLASS IAND CLASS A COMMENCED OPERATIONS ON JUNE 16, 1994 AND DECEMBER 22,
1994, RESPECTIVELY.
2 ANNUALIZED.
3 TOTAL RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
See Accompanying Notes
113
<PAGE> 116
[GRAPHIC OMITTED] FINANCIAL STATEMENTS
ARMADA FUNDS
STATEMENTS OF OPERATIONS (000)
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Core Equity Equity Equity International
Equity Fund Growth Fund Income Fund Index Fund Equity Fund
--------------- --------------- -------------- -------------- ---------------
INVESTMENT INCOME:
<S> <C> <C> <C> <C> <C>
Dividends $ 758 $ 5,603 $ 7,344 $ 1,994 $ 1,443
Interest 55 1,028 400 425 379
Less: foreign taxes withheld -- (15) (34) (41) (95)
------- -------- --------- --------- --------
Total investment income 813 6,616 7,710 2,378 1,727
------- -------- --------- --------- --------
EXPENSES:
Investment Advisory fees 591 5,458 2,066 585 1,412
Less: Fees waived by Investment Adviser -- -- -- (296) --
Administration fees 55 509 193 117 86
12b-1 fees 35 298 114 -- 49
Transfer Agent fees 30 82 49 30 31
Custodian fees 16 77 55 34 132
Professional fees 4 57 30 15 6
Printing and shareholder reports 6 45 112 18 3
Registration and filing fees 46 36 48 77 6
Trustees' fees 2 18 5 4 2
Miscellaneous 2 4 1 1 2
Amortization of deferred organizational costs -- -- -- -- --
Shareholder servicing fees --
Class A and B Shares 4 209 16 6 2
------- -------- --------- --------- --------
Total expenses 791 6,793 2,689 591 1,731
------- -------- --------- --------- --------
NET INVESTMENT INCOME/(Loss) 22 (177) 5,021 1,787 (4)
------- -------- --------- --------- --------
REALIZED AND UNREALIZED GAIN/(LOSS)
ON INVESTMENTS:
Net realized gain/(loss) on investments sold 5,836 21,447 22,814 (1,182) 11,153
Net realized gain/(loss) on foreign
currency transactions -- -- -- -- (11)
Net realized gain/(loss) on futures -- -- -- 47 558
Net change in unrealized appreciation on
futures -- -- -- 664 1,456
Net change in unrealized appreciation/depreciation
on foreign currency and translation of other
assets and liabilities in foreign currencies -- -- -- -- 783
Net change in unrealized appreciation/
depreciation on investments 6,206 154,244 (67,632) 31,406 59,809
------- -------- --------- --------- --------
Net gain/(loss) on investments 12,042 175,691 (44,818) 30,935 73,748
------- -------- --------- --------- --------
NET INCREASE/(DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $12,064 $175,514 $(39,797) $ 32,722 $73,744
------- -------- --------- --------- --------
</TABLE>
See Accompanying Notes
114
<PAGE> 117
[GRAPHIC OMITTED] FINANCIAL STATEMENTS
ARMADA FUNDS
<TABLE>
<CAPTION>
Small Cap Small Cap Tax Managed Allocation Income Intermediate Advantage
Growth Fund Value Fund Equity Fund Fund Bond Fund Bond Fund GNMA Fund Bond Fund Fund
- - -------------- ------------ -------------- ----------- ------------ ------------ ------------ ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 54 $ 4,806 $ 1,312 $ 187 $ -- $ -- $ -- $ -- $ --
400 602 224 1,016 24,810 2,425 3,364 10,055 10,885
-- -- (19) (6) -- -- -- -- --
-------- ------- -------- --------- --------- --------- ---------- ------- --------
454 5,408 1,517 1,197 24,810 2,425 3,364 10,055 10,885
-------- ------- -------- -------- -------- -------- --------- ------ -------
476 1,421 990 294 2,013 179 278 860 912
-- -- -- -- -- (40) -- (234) (331)
33 99 93 27 256 28 36 109 116
20 59 78 12 149 -- 20 65 1
29 59 40 6 35 18 16 43 29
8 28 26 1 73 8 10 31 33
1 7 7 1 23 4 5 12 17
3 10 9 1 23 2 4 11 10
8 30 12 2 113 3 1 5 6
1 3 3 1 9 1 1 4 2
1 3 3 7 1 1 18 5 13
-- 2 -- -- 2 -- 2 -- --
2 15 22 3 5 2 2 7 7
-------- ------- -------- -------- -------- -------- --------- ------ -------
582 1,736 1,283 355 2,702 206 393 918 815
-------- ------- -------- -------- -------- -------- --------- ------ -------
(128) 3,672 234 842 22,108 2,219 2,971 9,137 10,070
-------- ------- -------- -------- -------- -------- --------- ------ -------
5,978 (6,654) 127 96 (12,128) (352) (602) (4,903) (3,345)
-- -- -- 18 -- -- -- -- --
1,133 (1,468) -- 43 -- -- -- -- --
347 383 -- -- -- -- -- -- --
-- -- -- (1) -- -- -- -- --
18,643 3,411 27,938 5,743 (8,054) (310) (1,406) (348) (6,576)
-------- ------- -------- -------- -------- -------- --------- ------ -------
26,101 (4,328) 28,065 5,899 (20,182) (662) (2,008) (5,251) (9,921)
-------- ------- -------- -------- -------- -------- --------- ------ -------
$25,973 $ (656) $ 28,299 $ 6,741 $ 1,926 $ 1,557 $ 963 $3,886 $ 149
======== ======= ======== ======== ======== ======== ========= ====== =======
</TABLE>
See Accompanying Notes
115
<PAGE> 118
[GRAPHIC OMITTED] FINANCIAL STATEMENTS
ARMADA FUNDS
STATEMENTS OF OPERATIONS (000)
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Ohio Pennsylvania
National Tax Tax Exempt Municipal
Exempt Bond Fund Bond Fund Bond Fund
---------------- ---------- ------------
INVESTMENT INCOME:
<S> <C> <C> <C>
Interest $ 2,165 $ 4,891 $ 976
------- ------- ------
EXPENSES:
Investment Advisory fees 279 556 112
Less: Fees waived by Investment Adviser (144) (288) (57)
Administration fees 36 71 14
12b-1 fees 21 28 --
Transfer Agent fees 24 24 14
Custodian fees 10 31 4
Professional fees 2 7 --
Printing and shareholder reports 3 6 2
Registration and filing fees 6 2 3
Trustees' fees 1 2 1
Miscellaneous 4 -- 1
Amortization of deferred organizational costs -- -- --
Shareholder servicing fees-- Class A and B Shares 2 3 --
------- ------- ------
Total expenses 244 442 94
------- ------- ------
NET INVESTMENT INCOME 1,921 4,449 882
------- ------- ------
REALIZED AND UNREALIZED GAIN/(LOSS)
ON INVESTMENTS:
Net realized gain/(loss) on investments sold (437) (1,483) (102)
Net change in unrealized appreciation/depreciation on investments (2,596) (5,264) (1,052)
------- ------- ------
Net gain/(loss) on investments (3,033) (6,747) (1,154)
------- ------- ------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $(1,112) $(2,298) $ (272)
======= ======= ======
</TABLE>
See Accompanying Notes
116
<PAGE> 119
GRAPHIC OMITTED] FINANCIAL STATEMENTS
ARMADA FUNDS
<TABLE>
<CAPTION>
Pennsylvania
Government Ohio Municipal Tax Exempt Tax Exempt Treasury
Money Market Fund Money Market Fund Money Market Fund Money Market Fund Money Market Fund Money Market Fund
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
$42,974 $97,549 $2,351 $2,225 $9,795 $9,825
------- ------- ------ ------ ------ ------
2,890 6,422 248 267 1,036 631
(826) (1,835) (142) (167) (592) (105)
578 1,434 50 47 207 147
330 736 27 27 118 84
24 22 28 15 15 22
91 367 12 13 54 42
60 115 1 3 23 17
53 75 6 4 16 15
5 5 36 -- 26 1
10 15 1 1 4 3
26 28 27 1 55 31
-- -- -- -- -- 7
435 1,095 15 38 148 57
------- ------- ------ ------ ------ ------
3,676 8,479 309 249 1,110 952
------- ------- ------ ------ ------ ------
39,298 89,070 2,042 1,976 8,685 8,873
------- ------- ------ ------ ------ ------
-- -- -- (5) -- 1
-- -- -- -- -- --
------- ------- ------ ------ ------ ------
-- -- -- -- -- --
------- ------- ------ ------ ------ ------
$39,298 $89,070 $2,042 $1,971 $8,685 $8,874
======= ======= ====== ====== ====== ======
</TABLE>
See Accompanying Notes
117
<PAGE> 120
[GRAPHIC OMITTED] FINANCIAL STATEMENTS
ARMADA FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (000)
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Core Equity Funds Equity Growth Fund
------------------------------- ------------------------------
For the For the For the For the
Six Months Ended Year Ended Six Months Ended Year Ended
November 30, 1999 May 31, 1999 November 30, 1999 May 31, 1999
----------------- ------------ ----------------- ------------
<S> <C> <C> <C> <C>
Investment activities:
Net investment income/(loss) $ 22 $ (167) $ (177) $ (1,632)
Net realized gain/(loss) on investments sold, futures and
foreign currency transactions 5,836 4,677 21,447 (1,100)
Net unrealized appreciation/depreciation on investments,
futures and foreign currency transactions 6,206 25,111 154,244 287,003
-------- -------- ---------- ----------
Net increase/(decrease) in net assets resulting from operations 12,064 29,621 175,514 284,271
-------- -------- ---------- ----------
Distributions to shareholders:
Dividends from net investment income:
Class I (38) (47) (142) --
Class A -- -- -- --
Class B -- -- -- --
Dividends from realized capital gains:
Class I -- (5,032) -- (51,288)
Class A -- (25) -- (4,297)
Class B -- (15) -- (16)
-------- -------- ---------- ----------
Total distributions (38) (5,119) (142) (55,601)
-------- -------- ---------- ----------
Share transactions:
Class I
Proceeds from shares issued 2,462 6,590 60,151 654,266
Proceeds from Common Fund Conversion (note 6) -- -- -- 257,675
Reinvestment of cash distributions 36 4,989 84 44,257
Cost of shares redeemed (1094) (794) (166,326) (256,697)
-------- -------- ---------- ----------
Net Class I share transactions 1,404 10,785 (106,091) 699,501
-------- -------- ---------- ----------
Class A
Proceeds from shares issued 1,285 2,524 12,829 148,499
Reinvestment of cash distributions -- 25 -- 4,243
Cost of shares redeemed (200) (1,360) (15,074) (27,176)
-------- -------- ---------- ----------
Net Class A share transactions 1,085 1,189 (2,245) 125,566
-------- -------- ---------- ----------
Class B
Proceeds from shares issued 448 1,071 773 1,448
Reinvestment of cash distributions -- 15 -- 16
Cost of shares redeemed (362) (36) (93) (108)
-------- -------- ---------- ----------
Net Class B share transactions 86 1,050 680 1,356
-------- -------- ---------- ----------
Increase in net assets from share transactions 2,575 13,024 (107,656) 826,423
-------- -------- ---------- ----------
Total increase/(decrease) in net assets 14,601 37,526 67,716 1,055,093
-------- -------- ---------- ----------
NET ASSETS:
Beginning of period 148,440 110,914 1,419,910 364,817
-------- -------- ---------- ----------
End of period $163,041 $148,440 $1,487,626 $1,419,910
======== ======== ========== ==========
</TABLE>
1 FUND COMMENCED OPERATIONS ON JULY 10, 1998.
See Accompanying Notes
118
<PAGE> 121
[GRAPHIC OMITTED] FINANCIAL STATEMENTS
ARMADA FUNDS
<TABLE>
<CAPTION>
Equity Income Fund Equity Index Fund International Equity Fund Small Cap Growth Fund
------------------------------ ------------------------------ ------------------------------ ------------------------------
For the Six For the For the Six For the For the Six For the For the Six For the
Months Ended Year Ended Months Ended Year Ended Months Ended Year Ended Months Ended Year Ended
November 30, 1999 May 31, 1999 November 30, 1999 May 31, 19991 November 30, 1999 May 31, 1999 November 30, 1999 May 31, 1999
----------------- ------------ ----------------- ------------ ----------------- ------------ ----------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 5,021 $ 8,703 $ 1,787 $ 1,995 $ (4) $ 191 $ (128) $ (180)
22,814 19,671 (1,135) 1,051 11,700 (2,911) 7,111 (10,439)
(67,632) 91,321 32,070 18,732 62,048 5,406 18,990 3,126
-------- -------- ------- -------- -------- -------- ------- --------
(39,797) 119,695 32,722 21,778 73,744 2,686 25,973 (7,493)
-------- -------- ------- -------- -------- -------- ------- --------
(5,755) (6,836) (1,736) (1,309) -- (830) -- (2)
(114) (73) (23) (9) -- (2) -- --
(7) (5) -- -- -- -- -- --
-- (6,668) -- -- -- -- -- (733)
-- (70) -- -- -- -- -- (5)
-- (8) -- -- -- -- -- --
-------- -------- ------- -------- -------- -------- ------- --------
(5,876) (13,660) (1,759) (1,318) -- (832) -- (740)
-------- -------- ------- -------- -------- -------- ------- --------
42,481 98,187 273,955 269,038 45,059 71,205 18,021 48,064
-- 212,347 -- -- -- -- -- --
2,117 7,529 1,533 1,150 -- 42 -- 382
(43,870) (68,381) (79,978) (36,603) (5,071) (9,818) (7,800) (14,596)
-------- -------- ------- -------- -------- -------- ------- --------
728 249,682 195,510 233,585 39,988 61,429 10,221 33,850
-------- -------- ------- -------- -------- -------- ------- --------
4,330 11,058 2,736 4,339 882 2,079 1,669 956
82 114 23 9 -- 2 -- 5
(2,636) (3,429) (982) (647) (358) (1,249) (1,356) (147)
-------- -------- ------- -------- -------- -------- ------- --------
1,776 7,743 1,777 3,701 524 832 313 814
-------- -------- ------- -------- -------- -------- ------- --------
509 1,036 -- -- 70 44 30 807
7 12 -- -- -- -- -- --
(198) (152) -- -- (20) (4) (16) (673)
-------- -------- ------- -------- -------- -------- ------- --------
318 896 -- -- 50 40 14 134
-------- -------- ------- -------- -------- -------- ------- --------
2,822 258,321 197,287 237,286 40,562 62,301 10,548 34,798
-------- -------- ------- -------- -------- -------- ------- --------
(42,851) 364,356 228,250 257,746 114,306 64,155 36,521 26,565
-------- -------- ------- -------- -------- -------- ------- --------
560,433 196,077 257,746 -- 200,374 136,219 81,373 54,808
-------- -------- ------- -------- -------- -------- ------- --------
$517,582 $560,433 $1,485,996 $257,746 $314,680 $200,374 $117,894 $ 81,373
======== ======== ========== ======== ======== ======== ======= ========
</TABLE>
See Accompanying Notes
119
<PAGE> 122
[GRAPHIC OMITTED] FINANCIAL STATEMENTS
ARMADA FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (000)
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Small Cap Value Fund Tax Managed Equity Fund
-------------------------------- ------------------------------
For the For the For the For the
Six Months Ended Year Ended Six Months Ended Year Ended
November 30, 1999 May 31, 1999 November 30, 1999 May 31, 1999
----------------- ------------ ----------------- ------------
<S> <C> <C> <C> <C>
Investment activities:
Net investment income $ 3,672 $ 1,768 $ 234 $ 773
Net realized gain/(loss) on investments sold and futures (8,122) (8,366) 127 312
Net unrealized appreciation/depreciation on
investments and futures 3,794 (5,622) 27,938 58,031
-------- -------- -------- --------
Net increase in net assets resulting
from operations (656) (12,220) 28,299 59,116
-------- -------- -------- --------
Distributions to shareholders:
Dividends from net investment income:
Class I -- (867) (333) (776)
Class A -- (28) (3) (3)
Class B -- -- -- --
Dividends from realized capital gains:
Class I -- (23,595) -- (221)
Class A -- (1,101) -- (2)
Class B -- (31) -- (1)
-------- -------- -------- --------
Total distributions -- (25,622) (336) (1,003)
-------- -------- -------- --------
Share transactions:
Class I
Proceeds from shares issued 31,131 73,379 5,113 4,526
Proceeds from Common Fund Conversion (note 6) -- -- -- 46,522
Reinvestment of cash distributions -- 13,812 1 111
Cost of shares redeemed (30,095) (64,606) (19,659) (26,256)
-------- -------- -------- --------
Net Class I share transactions 1,036 22,585 (14,545) 24,903
-------- -------- -------- --------
Class A
Proceeds from shares issued 1,295 11,093 8,083 7,809
Reinvestment of cash distributions -- 1,030 3 3
Cost of shares redeemed (2,217) (9,865) (1,577) (776)
-------- -------- -------- --------
Net Class A share transactions (922) 2,258 6,509 7,036
-------- -------- -------- --------
Class B
Proceeds from shares issued 113 463 2,852 5,341
Reinvestment of cash distributions -- 30 -- 1
Cost of shares redeemed (24) (45) (304) (125)
-------- -------- -------- --------
Net Class B share transactions 89 448 2,548 5,217
-------- -------- -------- --------
Increase in net assets from share transactions 203 25,291 (5,488) 37,156
-------- -------- -------- --------
Total increase in net assets (453) (12,551) 22,475 95,269
-------- -------- -------- --------
NET ASSETS:
Beginning of period 282,439 294,990 254,231 158,962
-------- -------- -------- --------
End of period $281,986 $282,439 $276,706 $254,231
======== ======== ======== ========
</TABLE>
1 FUND COMMENCED OPERATIONS ON JULY 10, 1998.
See Accompanying Notes
120
<PAGE> 123
[GRAPHIC OMITTED] FINANCIAL STATEMENTS
ARMADA FUNDS
<TABLE>
<CAPTION>
Balanced Allocation Fund Bond Fund Enhanced Income Fund GNMA Fund
- - --------------------------- ------------------------------ ------------------------------- ------------------------------
For the For the For the For the For the For the For the For the
Months Ended Year Ended Six Months Ended Year Ended Six Months Ended Year Ended Six Months Ended Year Ended
mber 30, 1999 May 31, 19991 November 30, 1999 May 31, 1999 November 30, 1999 May 31, 1999 November 30, 1999 May 31, 1999
- - ------------- ------------ ----------------- ------------ ----------------- ------------ ----------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 842 $ 1,267 $ 22,108 $ 35,495 $ 2,219 $ 4,264 $ 2,971 $ 5,291
157 (1,688) (12,128) 6,607 (352) 236 (602) 234
5,742 2,268 (8,054) (15,918) (310) (746) (1,406) (2,090)
- - -------- -------- -------- -------- -------- ------- -------- -------
6,741 1,847 1,926 26,184 1,557 3,754 963 3,435
- - -------- -------- -------- -------- -------- ------- -------- -------
(841) (948) (21,939) (35,439) (2,197) (4,259) (2,953) (5,162)
(21) (7) (93) (67) (15) (23) (39) (61)
(2) (2) (18) (18) -- -- (1) --
-- -- -- (10,610) -- (405) -- (581)
-- -- -- (25) -- (2) -- (8)
-- -- -- (7) -- -- -- --
- - -------- -------- -------- -------- -------- ------- -------- -------
(864) (957) (22,050) (46,166) (2,212) (4,689) (2,993) (5,812)
- - -------- -------- -------- -------- -------- ------- -------- -------
8,833 109,461 28,363 334,224 39,968 58,938 16,957 28,666
-- -- -- 444,085 -- -- -- --
841 929 2,800 11,803 1,106 2,437 304 470
(24,949) (26,260) (74,231) (144,163) (31,967) (60,044) (8,744) (13,612)
- - -------- -------- -------- -------- -------- ------- -------- -------
(15,275) 84,130 (43,068) 645,949 9,107 1,331 8,517 15,524
- - -------- -------- -------- -------- -------- ------- -------- -------
2,904 1,810 2,130 4,207 236 351 358 1,510
21 6 51 56 14 23 30 60
(739) (343) (1,517) (1,526) (267) (376) (627) (585)
- - -------- -------- -------- -------- -------- ------- -------- -------
2,186 1,473 664 2,737 (17) (2) (239) 985
- - -------- -------- -------- -------- -------- ------- -------- -------
95 390 155 845 140 -- 77 --
2 2 17 24 1 -- 1 --
(29) (7) (210) (113) (1) -- -- --
- - -------- -------- -------- -------- -------- ------- -------- -------
68 385 (38) 756 140 -- 78 --
- - -------- -------- -------- -------- -------- ------- -------- -------
(13,021) 85,988 (42,442) 649,442 9,230 1,329 8,356 16,509
- - -------- -------- -------- -------- -------- ------- -------- -------
(7,144) 86,878 (62,566) 629,460 8,575 394 6,326 14,132
- - -------- -------- -------- -------- -------- ------- -------- -------
86,878 -- 762,242 132,782 72,841 72,447 98,305 84,173
- - -------- -------- -------- -------- -------- ------- -------- -------
$ 79,734 $ 86,878 $699,676 $762,242 $781,416 $72,841 $104,631 $98,305
======== ======== ======== ======== ======== ======= ======== =======
</TABLE>
See Accompanying Notes
121
<PAGE> 124
[GRAPHIC OMITTED] FINANCIAL STATEMENTS
ARMADA FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (000)
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Intermediate Bond Fund Total Return Advantage Fund
--------------------------------- ---------------------------------
For the For the For the For the
Six Months Ended Year Ended Six Months Ended Year Ended
November 30, 1999 May 31, 1999 November 30, 1999 May 31, 1999
----------------- ------------ ----------------- ------------
<S> <C> <C> <C> <C>
Investment activities:
Net investment income $ 9,137 $ 13,769 $ 10,070 $ 18,106
Net realized gain/(loss) on investments sold (4,903) 2,105 (3,345) 3,724
Net unrealized appreciation/depreciation
on investments (348) (7,084) (6,576) (11,244)
-------- -------- -------- --------
Net increase in net assets
resulting from operations 3,886 8,790 149 10,586
-------- -------- -------- --------
Distributions to shareholders:
Dividends from net investment income:
Class I (9,022) (13,608) (9,943) (17,916)
Class A (152) (205) (169) (197)
Class B (15) (13) -- --
Dividends from realized capital gains:
Class I -- (1,679) -- (1,326)
Class A -- (20) -- (17)
Class B -- (2) -- --
-------- -------- -------- --------
Total distributions (9,189) (15,527) (10,112) (19,456)
-------- -------- -------- --------
Share Transactions:
Class I
Proceeds from shares issued 43,852 168,983 29,872 74,950
Proceeds from Common Fund Conversion
(note 6) -- 71,602 -- --
Reinvestment of cash distributions 2,658 5,353 6,010 12,191
Cost of shares redeemed (54,753) (92,671) (42,298) (46,083)
-------- -------- -------- --------
Net Class I share transactions (8,243) 153,267 (6,416) 41,058
-------- -------- -------- --------
Class A
Proceeds from shares issued 1,486 3,889 1,857 4,953
Reinvestment of cash distributions 111 190 159 197
Cost of shares redeemed (1,749) (2,127) (265) (950)
-------- -------- -------- --------
Net Class A share transactions (152) 1,952 1,751 4,200
-------- -------- -------- --------
Class B
Proceeds from shares issued 143 742 1 --
Reinvestment of cash distributions 13 12 -- --
Cost of shares redeemed (233) (30) -- --
-------- -------- -------- --------
Net Class B share transactions (77) 724 1 --
-------- -------- -------- --------
Increase in net assets from share transactions (8,472) 155,943 (4,664) 45,258
-------- -------- -------- --------
Total increase in net assets (13,775) 149,206 (14,627) 36,388
-------- -------- -------- --------
NET ASSETS:
Beginning of period 319,206 170,000 333,103 296,715
-------- -------- -------- --------
End of period $305,431 $319,206 $318,476 $333,103
======== ======== ======== ========
</TABLE>
See Accompanying Notes
122
<PAGE> 125
[GRAPHIC OMITTED] FINANCIAL STATEMENTS
ARMADA FUNDS
<TABLE>
<CAPTION>
National Tax Exempt Bond Fund Ohio Tax Exempt Bond Fund Pennsylvania Municipal Bond Fund
- - -------------------------------- --------------------------------- --------------------------------
For the For the For the For the For the For the
Six Months Ended Year Ended Six Months Ended Year Ended Six Months Ended Year Ended
November 30, 1999 May 31, 1999 November 30, 1999 May 31, 1999 November 30, 1999 May 31, 1999
- - ----------------- ------------ ----------------- ------------ ----------------- ------------
<S> <C> <C> <C> <C> <C>
$ 1,921 $ 4,217 $ 4,449 $ 9,813 $ 4,882 $ 1,891
(437) 412 (1,483) 180 (102) 116
(2,596) (581) (5,264) (2,191) (1,052) (433)
--------- -------- -------- -------- -------- -------
(1,112) 4,048 (2,298) 7,802 (272) 1,574
--------- -------- -------- -------- -------- -------
(2,062) (4,193) (4,466) (9,541) (949) (1,807)
(92) (67) (127) (212) (4) (8)
(5) (2) -- -- -- --
-- (257) -- (136) -- (41)
-- (1) -- (3) -- --
-- -- -- -- -- --
--------- -------- -------- -------- -------- -------
(2,159) (4,520) (4,593) (9,892) (953) (1,856)
--------- -------- -------- -------- -------- -------
5,303 20,912 12,254 81,139 10,046 6,378
-- 22,085 -- -- -- --
21 67 128 278 14 38
(11,091) (22,312) (19,190) (39,407) (2,420) (4,718)
--------- -------- -------- -------- -------- -------
(5,767) 20,752 (6,808) 42,010 7,640 1,698
--------- -------- -------- -------- -------- -------
925 8,788 2,325 1,246 4 114
82 63 69 120 -- 1
(797) (4,551) (701) (545) (88) (20)
--------- -------- -------- -------- -------- -------
210 4,300 1,693 821 (84) 95
--------- -------- -------- -------- -------- -------
35 277 -- -- -- --
5 2 -- -- -- --
-- -- -- -- -- --
--------- -------- -------- -------- -------- -------
40 279 -- -- -- --
--------- -------- -------- -------- -------- -------
(5,517) 25,331 (5,115) 42,831 7,556 1,793
--------- -------- -------- -------- -------- -------
(8,788) 24,859 (12,006) 40,741 6,331 1,511
--------- -------- -------- -------- -------- -------
105,118 80,259 210,173 169,432 40,389 38,878
--------- -------- -------- -------- -------- -------
$ 96,330 $105,118 $198,167 $210,173 $ 46,720 $40,389
========= ======== ======== ======== ======== =======
</TABLE>
See Accompanying Notes
123
<PAGE> 126
[GRAPHIC OMITTED] FINANCIAL STATEMENTS
ARMADA FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (000)
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Government Money Market Fund Money Market Fund
------------------------------- ------------------------------
For the For the For the For the
Six Months Ended Year Ended Six Months Ended Year Ended
November 30, 1999 May 31, 1999 November 30, 1999 May 31, 1999
----------------- ------------ ----------------- ------------
<S> <C> <C> <C> <C>
Investment activities:
Net investment income $ 39,298 $ 69,425 $ 89,070 $ 152,635
Net realized gain/(loss) on investments sold -- -- -- (1)
Net unrealized appreciation/depreciation on investments, -- -- -- --
---------- ---------- ---------- ----------
Net increase in net assets resulting from operations 39,298 69,425 88,070 152,634
---------- ---------- ---------- ----------
Distributions to shareholders:
Dividends from net investment income:
Class I (25,780) (48,773) (54,173) (101,961)
Class A (13,533) (20,599) (34,777) (51,163)
Class B -- -- (9) (3)
Dividends from realized capital gains:
Class I -- -- -- --
Class A -- -- -- --
Class B -- -- -- --
---------- ---------- ---------- ----------
Total distributions (39,313) (69,372) (88,959) (153,127)
---------- ---------- ---------- ----------
Share transactions:
Class I
Proceeds from shares issued 2,365,346 3,760,181 2,925,982 6,186,234
Reinvestment of cash distributions 631 873 538 405
Cost of shares redeemed (2,381,087) (3,802,485) (2,840,334) (5,964,073)
---------- ---------- ---------- ----------
Net Class I share transactions (15,110) (41,431) 86,186 222,566
---------- ---------- ---------- ----------
Class A
Proceeds from shares issued 556,936 1,375,632 2,430,586 3,828,467
Reinvestment of cash distributions 2,108 3,639 20,184 32,692
Cost of shares redeemed (541,407) (1,062,178) (2,213,338) (3,197,331)
---------- ---------- ---------- ----------
Net Class A share transactions 17,637 317,093 237,432 663,828
---------- ---------- ---------- ----------
Class B
Proceeds from shares issued -- -- 1,605 162
Reinvestment of cash distributions -- -- 6 2
Cost of shares redeemed -- -- (1,407) (142)
---------- ---------- ---------- ----------
Net Class B share transactions -- -- 204 22
---------- ---------- ---------- ----------
Increase in net assets from share transactions 2,527 275,662 323,933 886,416
---------- ---------- ---------- ----------
Total increase in net assets 2,512 275,715 323,933 885,925
---------- ---------- ---------- ----------
NET ASSETS:
Beginning of period 1,660,074 1,384,359 3,494,510 2,608,587
---------- ---------- ---------- ----------
End of period $1,662,586 $1,660,074 $3,818,443 $3,494,510
========== ========== ========== ==========
</TABLE>
See Accompanying Notes
124
<PAGE> 127
[GRAPHIC OMITTED] FINANCIAL STATEMENTS
ARMADA FUNDS
<TABLE>
<CAPTION>
Ohio Municipal Pennsylvania Tax Exempt Tax-Exempt
Money Market Fund Money Market Fund Money Market Fund Treasury Money Market Fund
----------------------------- ------------------------------ ------------------------------ ------------------------------
For the Six For the For the Six For the For the Six For the For the Six For the
Months Ended Year Ended Months Ended Year Ended Months Ended Year Ended Months Ended Year Ended
November 30, 1999 May 31, 1999 November 30, 1999 May 31, 1999 November 30, 1999 May 31, 1999 November 30, 1999 May 31, 1999
----------------- ------------ ----------------- ------------ ----------------- ------------ ----------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 2,042 $ 2,062 $ 1,976 $ 3,760 $ 8,685 $ 17,732 $ 8,873 $ 16,787
-- -- (5) -- -- (36) 1 85
-- -- -- --
-------- -------- -------- -------- -------- -------- -------- ----------
2,042 2,062 1,971 3,760 8,685 17,696 8,874 16,872
-------- -------- -------- -------- -------- -------- -------- ----------
(1,793) (1,958) (1,235) (2,667) (5,759) (12,418) (7,367) (14,683)
(287) (124) (714) (1,112) (2,843) (5,503) (1,574) (2,138)
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- ----------
(2,080) (2,082) (1,949) (3,779) (8,602) (17,921) (8,941) (16,821)
-------- -------- -------- -------- -------- -------- -------- ----------
133,789 273,577 67,251 176,111 381,535 760,407 684,943 1,602,785
77 27 -- -- 140 98 -- 26
(103,753) (174,242) (66,450) (172,152) (466,343) (745,079) (644,691) (1,616,371)
-------- -------- -------- -------- -------- -------- -------- ----------
30,113 99,362 801 3,959 (84,668) 15,426 40,252 (13,560)
-------- -------- -------- -------- -------- -------- -------- ----------
49,629 30,799 91,335 161,332 252,307 654,175 440,575 647,257
244 98 382 490 2,417 5,196 201 447
(30,919) (19,878) (96,620) (141,365) (259,704) (601,426) (445,487) (571,910)
-------- -------- -------- -------- -------- -------- -------- ----------
18,954 11,019 (4,903) 20,457 (4,980) 57,945 (4,711) 75,794
-------- -------- -------- -------- -------- -------- -------- ----------
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- ----------
-- -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- ----------
49,067 110,381 (4,102) 24,416 (89,648) 73,371 35,541 62,234
-------- -------- -------- -------- -------- -------- -------- ----------
49,029 110,361 (4,080) 24,397 (89,565) 73,146 35,474 62,285
-------- -------- -------- -------- -------- -------- -------- ----------
110,361 -- 131,036 106,639 624,647 551,501 429,112 366,827
-------- -------- -------- -------- -------- -------- -------- ----------
$159,390 $110,361 $126,956 $131,036 $535,082 $624,647 $464,586 $ 429,112
======== ======== ======== ======== ======== ======== ======== ==========
</TABLE>
See Accompanying Notes
125
<PAGE> 128
[GRAPHIC OMITTED] NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. FUND ORGANIZATION
Armada Funds (the "Trust") is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end investment management company.
The Trust was organized as a Massachusetts business trust on January 28, 1986.
The Trust is comprised of twenty four funds each of which is authorized to issue
two classes of shares designated as Class I and Class A shares. Effective
January 1, 1998, all funds except Government Money Market, Ohio Municipal Money
Market, Pennsylvania Tax Exempt Money Market, Tax Exempt MoneyMarket, and
Treasury Money Market were authorized to offer a third class of shares
designated as Class B shares. A fourth class of shares known as Class C Shares
has been registered but not yet effective for all funds except Government Money
Market, Ohio Municipal Money Market, Pennsylvania Tax Exempt Money Market, Tax
Exempt Money Market and Treasury MoneyMarket. Each share class represents an
interest in the same portfolio of investments of the respective Fund and is
substantially the same in all respects, except that the classes are subject to
different distribution and/or shareholder service fees and investment minimums.
Class A shares are sold subject to a front-end sales charge and Class B and
Class C shares are sold with a contingent deferred sales charge, both of which
may be reduced or waived under certain circumstances.
The Trust currently has five Series that consist of the following Funds (each
referred to as a "Fund" or collectively as the "Funds"):
EQUITY SERIES
Core Equity Fund, Equity Growth Fund, Equity Income Fund, Equity Index Fund,
International Equity Fund, Small Cap Growth Fund, Small Cap Value Fund, and
Tax Managed Equity Fund;
ALLOCATION SERIES
Balanced Allocation Fund;
INCOME SERIES
Bond Fund, Enhanced Income Fund, GNMA Fund, Intermediate Bond Fund, Real
Return Advantage Fund, and Total Return Advantage Fund;
TAX EXEMPT SERIES
National Tax Exempt Bond Fund, Ohio Tax Exempt Bond Fund, and Pennsylvania
Municipal Bond Fund;
MONEY MARKET SERIES
Government Money Market Fund, Money Market Fund, Ohio Municipal Money Market
Fund, Pennsylvania Tax Exempt Money Market Fund, Tax Exempt Money Market Fund,
and Treasury Money Market Fund.
As of the date of this report, the Real Return Advantage Fund had not
commenced operations.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Funds.
SECURITY VALUATION: Investments of the money market funds are valued at
either amortized cost, as permitted in accordance with Rule 2a-7 under the 1940
Act, or at original cost, which combined with accrued interest approximates
market value. Under the amortized cost method, discount or premium is amortized
on a constant basis to the maturity of the security.
Portfolio securities, the principal market for which is a securities
exchange, will be valued at the closing sales price on that exchange on the day
of computation. With respect to the Fixed Income Funds, Tax-Free Income Fund and
the fixed income securities of the Balanced Allocation Fund, if there have been
no sales during such day, portfolio securities will be valued at the mean
between the most recent quoted bid and asked prices. Portfolio securities, the
principal market for which is not a securities exchange, will be valued at the
mean between the most recent quoted bid and asked prices in such principal
market. With respect to the Growth Funds, Equity Income Fund, and the equity
securities of the Balanced Allocation Fund, if there have been no sales during
such day, portfolio securities will be valued at the latest bid quotation. In
either case, if no such price is available, then such securities will be valued
in good faith at their respective fair market values using methods determined by
or under the supervision of the Board of Trustees. Portfolio securities with a
remaining maturity of 60 days or less will be valued either at amortized cost
or original cost plus accrued interest, which approximates current value.
All other assets and securities including securities for which market
quotations are not readily available will be valued at their fair market value
as determined in good faith under the general supervision of the Board of
Trustees.
SECURITY TRANSACTIONS AND INVESTMENT INCOME: Security transactions are
recorded on trade date. Realized gains and losses on investments sold are
recorded on the identified cost basis. Interest income is accrued on a daily
basis. Dividends are recorded on the ex-dividend date. Expenses common to all
of the Funds in the Trust are allocated among the Funds on the basis of average
net assets. Original issue discounts and mar-
126
<PAGE> 129
[GRAPHIC OMITTED] NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
ket premiums are amortized to interest income over the lives of the respective
securities.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Dividends from the net
investment income of the Core Equity, Equity Growth, Equity Income, Equity
Index, Tax Managed Equity and Balanced Allocation Funds are declared and paid
quarterly; dividends from net investment income of the International Equity,
Small Cap Growth and Small Cap Value Funds are declared and paid annually. With
respect to the Core Equity, Equity Growth, Equity Income, Equity Index,
International Equity, Small Cap Growth, Small Cap Value, Tax Managed Equity, and
Balanced Allocation Funds, net investment income for dividend purposes consists
of dividends, interest income, and discounts earned (including both original
issue and market discount), less amortization of any market premiums and accrued
expenses. Dividends from the net investment income of the Bond, Enhanced Income,
GNMA, Intermediate Bond, Total Return Advantage, National Tax Exempt Bond, Ohio
Tax Exempt Bond, Pennsylvania Municipal Bond, Government Money Market, Money
Market, Ohio Municipal Money Market, Pennsylvania Tax Exempt Money Market, Tax
Exempt Money Market, and Treasury Money Market Funds are declared daily and paid
no later than six business days after the end of the month. Net investment
income of the Bond, Enhanced Income, GNMA, Intermediate Bond, Total Return
Advantage, Government Money Market, Money Market, and Treasury Money Market
Funds consists of dividend and interest income, discount earned (including both
original issue and market discount), less amortization of any market premiums
and accrued expenses. Net investment income of the National Tax Exempt Bond,
Ohio Tax Exempt Bond, Pennsylvania Municipal Bond, Ohio Municipal Money Market,
Pennsylvania Tax Exempt Money Market, and Tax Exempt Money Market Funds consists
of interest accrued, original issue discount earned, less amortization of any
market premium and accrued expenses. Any net realized capital gains will be
distributed at least annually for all the Funds.
FEDERAL INCOME TAXES: Each of the Funds is classified as a separate taxable
entity for Federal income tax purposes. Each of the Funds intends to qualify or
continue to qualify as a separate "regulated investment company" under the
Internal Revenue Code and make the requisite distributions to shareholders that
will be sufficient to relieve it from Federal income tax and Federal excise tax.
Therefore, no Federal tax provision is required. To the extent that
distributions from net investment income and net realized capital gains exceed
amounts reported in the financial statements, such amounts are reported
separately.
The amounts of distributions from net investment income and net realized
capital gains are determined in accordance with Federal income tax regulations,
which may differ from those amounts determined under generally accepted
accounting principles. These book/tax differences are either temporary or
permanent in nature. These differences are primarily due to wash sales, foreign
currency gains and losses and the "mark to market" of certain Passive Foreign
Investment Companies (PFICs) for tax purposes. The character of distributions
made during the year from net investment income or net realized gains, and the
timing of distributions where the fiscal year in which the amounts are
distributed may differ from the year that the income or realized gains (losses)
were recorded by the Fund. To the extent these differences are permanent,
adjustments are made to the appropriate equity accounts in the period that the
differences arise. On the Statement of Net Assets the following adjustments were
made:
Accumulated Undistributed
Net Realized Net Investment Paid-In-
Gain (Loss) Income Capital
Fund (000) (000) (000)
- - ---- ------------- -------------- ----------
Core Equity $ (22) $ 189 $ (167)
Equity Growth (163) 1,693 (1,530)
Small Cap Growth -- 182 (182)
Bond 10 (1) (9)
Intermediate Bond (80) 84 (4)
Money Market 3 -- (3)
Tax Exempt Money
Market (11) (77) 88
Treasury Money
Market (107) 107 --
ORGANIZATION COSTS: 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 incurred through June 30, 1998, are being amortized on a
straight-line basis over a period of five years from the date of commencement of
operations. In accordance with AICPA Statement of Postion 98-5, "Reporting on
the Costs of Start-up Activities," any organization expenses incurred subsequent
to June 30, 1998, will be expensed as incurred.
FOREIGN CURRENCY TRANSLATION: The books and records of the International
Equity Fund are maintained in U.S. dollars as follows: (1) the foreign currency
mar-
127
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[GRAPHIC OMITTED] NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
ket values of investment securities and other assets and liabilities stated
in foreign currencies are translated at the exchange rates prevailing at the end
of the period; and (2) purchases, sales and income are translated at the rates
of exchange prevailing on the respective dates of such transactions. The
resulting exchange gains and losses are included in the Statement of Operations.
The Fund does not isolate the portion of gains and losses on investments which
is due to fluctuations in foreign exchange rates from that which is due to
fluctuations in the market prices of investments.
FORWARD FOREIGN CURRENCY CONTRACTS: The International Equity Fund enters into
forward foreign currency contracts as hedges against either specific
transactions or portfolio positions. All commitments are "marked-to-market"
daily at the applicable foreign exchange rate and any resulting unrealized gains
or losses are recorded currently. The Fund realizes gains or losses at the time
the forward contracts are extinguished. At November 30, 1999, forward foreign
currency contracts outstanding were as follows:
Contracts to Unrealized
(Deliver)/ In Exchange Appreciation
Receive for Settlement (Depreciation)
(000) (000) Date (000)
----------- ----------- ----------- -------------
INTERNATIONAL EQUITY FUND
Foreign Currency Sales:
EU (40) $ (41) 12/01/99 $ --
JP (2,000,000) (17,495) 04/03/00 (2,521)
Foreign Currency Purchases:
JP 102,102 967 12/07/99 35
JP 975,000 8,483 04/03/00 1,275
JP 1,025,000 9,075 04/03/00 1,183
BALANCED ALLOCATION FUND:
Foreign Currency Sales:
JP (3,584) (34) 12/07/99 1
Foreign Currency Purchases:
SG 35 21 12/07/99 --
EU--Euro SG--Singapore Dollar JP--Japanese Yen
FUTURES CONTRACTS: Certain of the Funds may engage in futures contracts for
the purpose of hedging against the value of the portfolio securities held and in
the value of the securities a Fund intends to purchase, in order to maintain
liquidity. Upon entering into a futures contract, a Fund is required to deposit
with the broker an amount of cash or cash equivalents equal to a certain
percentage of the contract amount. This is known as the "initial margin".
Subsequent payments ("variation margin") are made or received by a Fund each
day, depending on the daily fluctuation of the value of the contract. The daily
changes in the contract are recorded as unrealized gain or loss. The Fund
recognizes a realized gain or loss when the contract is closed. The net
unrealized appreciation/(depreciation), if any, is shown in the financial
statements.
There are several risks in connection with the use of futures contracts as a
hedging device. The change in value of futures contracts primarily corresponds
with the value of their underlying instruments, which may not correlate with the
change in value of the hedged investments. In addition, there is the risk that
the Fund may not be able to enter into a closing transaction because of an
illiquid secondary market.
Financial futures contracts open at November 30, 1999 were as follows:
Number Notional Unrealized
of Cost Amount Expiration Gain/(Loss)
Fund Contracts (000) Date (000)
- - ---- ----------- ----------- ----------- -----------
Equity Index -
S&P 500
Futures 34 $11,164 Dec-99 $664
International Equity-
CAC 40 Index 30 1,410 Dec-99 214
DAX Index 10 1,343 Dec-99 140
FT-SE 100 Index 96 9,163 Dec-99 965
Hang Seng
Index 27 2,621 Dec-99 56
NIKKEI
225 Index 9 1,553 Dec-99 81
Small Cap Growth -
Russell 2000
Futures 21 4,403 Dec-99 347
Small Cap Value -
Russell 2000
Futures 69 15,224 Dec-99 383
MORTGAGE DOLLAR ROLLS: For the purpose of enhancing the Fund's yield, the
GNMA Fund may enter into mortgage dollar rolls (principally in TBA's) in which
the Fund sells mortgage securities for delivery in the current month and
simultaneously contracts to repurchase similar, but not identical, securities at
an agreed-upon price on a fixed date. The Fund accounts for such dollar rolls as
purchases and sales and maintains liquid high-grade securities in an amount at
least equal to its commitment to repurchase.
REPURCHASE AGREEMENTS: Repurchase Agreements are considered loans under the
1940 Act. In connection therewith, the Trust's custodian receives and holds
collateral of not less than 102% of the repurchase price plus accrued interest.
If the value of the collateral falls below this amount, the Trust will require
the seller to deposit additional collateral by the next business day. If the
request for additional collateral is not met or the seller defaults on its
repurchase obligation, the Trust maintains the right to sell the underlying
securities at market value and any remaining loss may be subject to legal
proceedings.
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(UNAUDITED)
3. INVESTMENT ADVISER, DISTRIBUTION FEES AND OTHER RELATED PARTY TRANSACTIONS
Fees paid by the Trust pursuant to the Advisory Agreements with National City
Investment Management Company (the "Adviser"), an indirect wholly owned
subsidiary of National City Corporation, are payable monthly based on an annual
rate, listed in the table below, based on each Fund's average daily net assets.
The Adviser may from time to time waive its fees payable by the Funds. At
November 30, 1999, advisory fees accrued and unpaid amounted to:
Annual
Rate (000)
---------- ----------
Core Equity Fund 0.75% $ 98
Equity Growth Fund 0.75% 887
Equity Income Fund 0.75% 315
Equity Index Fund 0.35% 137
International Equity Fund 1.15% 279
Small Cap Growth Fund 1.00% 88
Small Cap Value Fund 1.00% 226
Tax Managed Equity Fund 0.75% 165
Balanced Allocation Fund 0.75% 47
Bond Fund 0.55% 309
Enhanced Income Fund 0.45% 30
GNMA Fund 0.55% 46
Intermediate Bond Fund 0.55% 134
Total Return Advantage Fund 0.55% 141
National Tax Exempt Bond Fund 0.55% 43
Ohio Tax Exempt Bond Fund 0.55% 87
Pennsylvania Municipal Bond Fund 0.55% 20
Government Money Market Fund 0.35% 470
Money Market Fund 0.35% 1,064
Ohio Municipal Money Market Fund 0.35% 44
Pennsylvania Tax Exempt Money
Market Fund 0.40% 42
Tax Exempt Money Market Fund 0.35% 156
Treasury Money Market Fund 0.30% 100
National Asset Management Corporation serves as investment sub-adviser (the
"Sub Adviser") to the Core Equity and Total Return Advantage Funds. No fees are
paid to the Sub-Adviser directly from the Trust.
Wellington Management Company, LLP served, prior to August 1, 1998, as the
investment sub-adviser to the Small Cap Growth Fund. No fees were paid to the
sub-adviser directly from the Trust.
The Trust maintains a Shareholder Services Plan (the "Services Plan") with
respect to the Class A and B shares in the Funds. Pursuant to the Services Plan,
the Trust enters into shareholder servicing agreements with certain financial
institutions under which they agree to provide shareholder administrative
services to their customers who beneficially own Class A or B shares in
consideration for payment, listed in the table below, on an annual basis of the
net asset value of the Class A or B shares.
Annual Annual
Rate Rate
Class A Class B
---------- ----------
Core Equity Fund 0.25% 0.25%
Equity Growth Fund 0.25% 0.25%
Equity Income Fund 0.25% 0.25%
Equity Index Fund 0.25% 0.25%
International Equity Fund 0.25% 0.25%
Small Cap Growth Fund 0.25% 0.25%
Small Cap Value Fund 0.25% 0.25%
Tax Managed Equity Fund 0.25% 0.25%
Balanced Allocation Fund 0.25% 0.25%
Bond Fund 0.25% 0.25%
Enhanced Income Fund 0.10% 0.25%
GNMA Fund 0.25% 0.25%
Intermediate Bond Fund 0.25% 0.25%
Total Return Advantage Fund 0.25% 0.25%
National Tax Exempt Bond Fund 0.10% 0.10%
Ohio Tax Exempt Bond Fund 0.10% 0.10%
Pennsylvania Municipal Bond Fund 0.10% 0.10%
Government Money Market Fund 0.15% N/A
Money Market Fund 0.15% 0.15%
Ohio Municipal Money Market Fund 0.15% N/A
Pennsylvania Tax Exempt Money
Market Fund 0.15% N/A
Tax Exempt Money Market Fund 0.15% N/A
Treasury Money Market Fund 0.15% N/A
National City Bank serves as the Fund's Custodian.
The Trust and SEI Investments Distribution Co., a wholly-owned subsidiary of
SEI Investments Company ("SEI" or the "Distributor") are parties to a
distribution agreement dated May 1, 1998. The Distributor receives no fees for
its distribution services under this agreement. The Trust reimburses the
Distributor for direct and indirect costs and expenses incurred in connection
with advertising, marketing and other distribution services. The Class I and
Class A shares are subject to a fee not to exceed .10% per annum of the average
net assets of its Class I and Class A shares. Currently the funds pay a fee
equal to .04% per annum, except Equity Index, Enhanced Income, Total Return
Advantage and Pennsylvania Municipal Bond Fund, which are currently waiving
their full fee. The Class B shares of the Trust pays the Distributor up to .75%
per annum of the average net assets for the same services provided to the Class
I and Class A shares.
129
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[GRAPHIC OMITTED] NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Each Trustee receives an annual fee of $15,000 plus $3,000 for each Board
meeting attended and reimbursement of out-of-pocket expenses. The Chairman of
the Board receives an additional $5,000 per annum for services in such capacity.
The Trustees and Chairman expenses are allocated on a prorata basis across
the Armada, Friends, Parkstone Group of Funds and Parkstone Advantage Funds.
Such fees are paid for services rendered to all of the Funds and are allocated
accordingly. No person who is an officer, director, trustee, or employee of the
Investment Adviser, Distributor, or any parent or subsidiary thereof, who serves
as an officer, trustee, or employee of the Trust receives any compensation from
the Trust.
Expenses paid for the period ended November 30, 1999, include legal fees of
$225,894 paid to Drinker, Biddle & Reath LLP. A partner of that firm is
Secretary of the Trust.
The Trust and SEI Investments Mutual Funds Services (the "Administrator")
are parties to an Administration Agreement dated May 1, 1998, under which the
Administrator provides administrative services for an annual fee of 0.07% of
the aggregate average daily net assets of the Funds up to the first eighteen
billion and 0.06% of the aggregate average daily net assets of the Funds over
eighteen billion.
4. INVESTMENTS
During the period ended November 30, 1999, purchases and sales of securities,
other than short-term investments or U.S. government obligations, aggregated:
Purchases (000) Sales (000)
-------------- -------------
Core Equity Fund $ 30,803 $ 28,402
Equity Growth Fund 193,742 294,562
Equity Income Fund 103,186 89,076
Equity Index Fund 218,743 22,640
International Equity Fund 175,667 154,555
Small Cap Growth Fund 79,503 70,437
Small Cap Value Fund 149,293 163,935
Tax Managed Equity Fund 6,920 11,221
Balanced Allocation Fund 35,171 45,215
Bond Fund 269,047 253,074
Enhanced Income Fund 19,069 16,267
GNMA Fund 14,885 16,320
Intermediate Bond Fund 135,004 125,709
Total Return Advantage Fund 59,517 65,318
National Tax Exempt
Bond Fund 11,196 17,310
Ohio Tax Exempt Bond Fund 27,478 32,664
Pennsylvania Municipal
Bond Fund 9,738 3,258
Purchases and sales of long-term U.S. government obligations were:
Purchases (000) Sales (000)
-------------- -------------
Balanced Allocation Fund $ 13,580 $ 17,014
Bond Fund 163,836 218,471
Enhanced Income Fund 27,225 19,953
GNMA Fund 35,453 24,483
Intermediate Bond Fund 105,447 118,854
Total Return Advantage Fund 169,540 160,588
As of November 30, 1999, the following funds have capital loss carryforwards:
Amount Expiration
Fund (000) Date
---------- -------------
Equity Growth $1,032 2007
International Equity 6,578 2006-2007
Small Cap Growth 4,342 2007
Small Cap Value 3,560 2007
Balanced Allocation 821 2007
Government Money Market 2 2002-2006
Money Market 11 2001-2007
Pennsylvania Tax Exempt
Money Market 13 2003-2007
Tax Exempt Money Market 26 2006-2007
The Small Cap Growth, Small Cap Value, Balanced Allocation, Bond, Enhanced
Income and GNMA Funds incurred losses in the amount of $5,454,834, $4,883,790,
$754,303, $1,545,272, $3,893 and $90,861 from November 1, 1998 to May 31, 1999.
As permitted by tax regulations, the funds intend to elect to defer and treat
these losses as arising in the fiscal year ending May 31, 2000.
At November 30, 1999, the total cost of securities for Federal income tax
purposes was not materially different from amounts reported for financial
reporting purposes. The aggregate gross unrealized appreciation and depreciation
for securities held by the Funds at November 30, 1999 is as follows:
Aggregate Aggregate
Gross Gross
Appreciation Depreciation Net
(000) (000) (000)
-------------- ------------ ------------
Core Equity Fund $ 43,008 $ (3,133) $ 39,875
Equity Growth Fund 518,837 (22,307) 496,530
Equity Income Fund 103,167 (32,669) 70,498
Equity Index Fund 68,120 (17,982) 50,138
International Equity Fund 83,582 (4,162) 79,420
Small Cap Growth Fund 28,511 (2,577) 25,934
Small Cap Value Fund 32,451 (15,061) 17,390
Tax Managed Equity Fund 214,375 (105) 214,270
Balanced Allocation Fund 10,846 (2,836) 8,010
Bond Fund 582 (22,972) (22,390)
Enhanced Income Fund 107 (883) (776)
GNMA Fund 224 (2,396) (2,172)
Intermediate Bond Fund 230 (6,305) (6,075)
Total Return Advantage
Fund 484 (12,591) (12,107)
National Tax Exempt
Bond Fund 658 (1,525) (867)
Ohio Tax Exempt
Bond Fund 1,992 (3,197) (1,205)
Pennsylvania Municipal
Bond Fund 643 (442) 201
130
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[GRAPHIC OMITTED] NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
5. SHARES OF BENEFICIAL INTEREST
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 of shares
and to classify or reclassify any class of shares into one or more series of
shares. Transactions in capital shares are summarized on the following pages for
the Funds.
<TABLE>
<CAPTION>
(000)
------------------------------------------------------------------------
Class I Class A Class B
---------------------- -------------------- -------------------
Period Year Period Year Period Year
Ended Ended Ended Ended Ended Ended
11/30/99 5/31/99 11/30/99 5/31/99 11/30/99 5/31/99
-------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
CORE EQUITY FUND
Shares sold 170 521 90 190 31 83
Shares reinvested 3 396 -- 2 -- 1
Shares repurchased (76) (64) (14) (102) (26) (3)
-------- ------- ------- ------ ------- ------
Net increase 97 853 76 90 5 81
======== ======= ======= ====== ======= ======
EQUITY GROWTH FUND
Shares sold 2,304 55,653 496 6,417 30 59
Shares sold from common fund -- 11,713 -- -- -- --
Shares reinvested 3 1,893 -- 182 --
Shares repurchased (6,426) (34,479) (583) (809) (3) (3)
-------- ------- ------- ------ ------- ------
Net increase/(decrease) (4,119) 34,780 (87) 5,790 27 56
======== ======= ======= ====== ======= ======
EQUITY INCOME FUND
Shares sold 2,326 8,741 239 634 28 60
Shares sold from common fund -- 12,893 -- -- -- --
Shares reinvested 14 443 5 7 -- 1
Shares repurchased (2,437) (3,977) (16) (174) (10) (8)
-------- ------- ------- ------ ------- ------
Net increase/(decrease) (97) 18,100 228 467 18 53
======== ======= ======= ====== ======= ======
EQUITY INDEX FUND*
Shares sold 24,113 25,795 237 400 -- --
Shares reinvested 133 113 2 1 -- --
Shares repurchased (6,822) (3,478) (85) (56) -- --
-------- ------- ------- ------ ------- ------
Net increase/(decrease) 17,424 22,430 (154) 345 -- --
======== ======= ======= ====== ======= ======
INTERNATIONAL EQUITY FUND
Shares sold 3,621 6,630 70 189 6 4
Shares reinvested -- 4 -- -- -- --
Shares repurchased (405) (901) (28) (110) (2) --
-------- ------- ------- ------ ------- ------
Net increase 3,216 5,733 42 79 4 4
======== ======= ======= ====== ======= ======
SMALL CAP GROWTH FUND
Shares sold 1,531 4,616 151 93 3 75
Shares reinvested -- 36 -- 1 -- --
Shares repurchased (680) (1,409) (119) (14) (1) (61)
-------- ------- ------- ------ ------- ------
Net increase 851 3,243 32 80 2 14
======== ======= ======= ====== ======= ======
SMALL CAP VALUE FUND
Shares sold 2,279 5,565 97 853 8 36
Shares reinvested -- 1,099 -- 84 -- 3
Shares repurchased (2,198) (4,939) (167) (757) (2) (4)
-------- ------- ------- ------ ------- ------
Net increase/(decrease) 81 1,725 (70) 180 6 35
======== ======= ======= ====== ======= ======
</TABLE>
- - ---------------------
*FUND COMMENCED OPERATIONS ON JULY 10, 1998.
131
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[GRAPHIC OMITTED] NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
(000)
------------------------------------------------------------------------
Class I Class A Class B
------------------------------------------------------------------------
Period Period Period Period Period Period
Ended Ended Ended Ended Ended Ended
11/30/99 5/31/99 11/30/99 5/31/99 11/30/99 5/31/99
-------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
TAX MANAGED EQUITY FUND
Shares sold 402 1,245 627 663 225 444
Shares sold from common fund -- 4,949 -- -- -- --
Shares reinvested -- 10 -- -- -- --
Shares repurchased (1,550) (2,301) (121) (60) (24) (9)
-------- ------- ------- ------ ------- ------
Net increase/(decrease) (1,148) 3,903 506 603 201 435
======== ======= ======= ====== ======= ======
BALANCED ALLOCATION FUND*
Shares sold 850 10,709 276 173 9 38
Shares reinvested 81 90 2 1 -- --
Shares repurchased (2,388) (2,552) (70) (32) (3) (1)
-------- ------- ------- ------ ------- ------
Net increase/(decrease) (1,457) 8,247 208 142 6 37
======== ======= ======= ====== ======= ======
BOND FUND
Shares sold 2,900 54,213 218 407 16 81
Shares sold from common fund -- 42,948 -- -- -- --
Shares reinvested 287 1,144 5 5 2 3
Shares repurchased (7,607) (35,024) (155) (147) (22) (11)
-------- ------- ------- ------ ------- ------
Net increase/(decrease) (4,420) 63,281 68 265 (4) 73
======== ======= ======= ====== ======= ======
ENHANCED INCOME FUND
Shares sold 4,035 5,834 24 35 14 --
Shares reinvested 112 241 1 2 -- --
Shares repurchased (3,229) (5,959) (27) (37) -- --
-------- ------- ------- ------ ------- ------
Net increase/(decrease) 918 116 (2) -- 14 --
======== ======= ======= ====== ======= ======
GNMA FUND
Shares sold 1,709 2,788 36 146 8 --
Shares reinvested 31 46 3 6 -- --
Shares repurchased (880) (1,323) (63) (57) -- --
-------- ------- ------- ------ ------- ------
Net increase/(decrease) 860 1,511 (24) 95 8 --
======== ======= ======= ====== ======= ======
INTERMEDIATE BOND FUND
Shares sold 4,266 15,932 144 363 14 69
Shares sold from common fund -- 6,642 -- -- -- --
Shares reinvested 259 503 11 18 1 1
Shares repurchased (5,329) (8,677) (170) (197) (22) (2)
-------- ------- ------- ------ ------- ------
Net increase/(decrease) (804) 14,400 (15) 184 (7) 68
======== ======= ======= ====== ======= ======
TOTAL RETURN ADVANTAGE FUND
Shares sold 3,053 7,279 189 478 -- --
Shares reinvested 615 1,179 16 19 -- --
Shares repurchased (4,321) (4,461) (27) (90) -- --
-------- ------- ------- ------ ------- ------
Net increase/(decrease) (653) 3,997 178 407 -- --
======== ======= ======= ====== ======= ======
</TABLE>
- - ---------------------
*FUND COMMENCED OPERATIONS ON JULY 10, 1998.
132
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[GRAPHIC OMITTED] NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
(000)
------------------------------------------------------------------------
Class I Class A Class B
------------------------------------------------------------------------
Period Period Period Period Period Period
Ended Ended Ended Ended Ended Ended
11/30/99 5/31/99 11/30/99 5/31/99 11/30/99 5/31/99
-------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
NATIONAL TAX EXEMPT BOND FUND
Shares sold 545 2,135 95 863 4 28
Shares sold from common fund -- 2,165 -- -- -- --
Shares reinvested 2 6 9 6 -- --
Shares repurchased (1,132) (2,210) (82) (447) -- --
-------- ------- -------- ------- -------- -------
Net increase/(decrease) (585) 2,096 22 422 4 28
======== ======= ======= ====== ======= ======
OHIO TAX EXEMPT BOND FUND
Shares sold 1,136 7,248 217 111 -- --
Shares sold from common fund -- -- -- -- -- --
Shares reinvested 12 24 6 11 -- --
Shares repurchased (1,780) (3,518) (66) (49) -- --
-------- ------- -------- ------- -------- -------
Net increase/(decrease) (632) 3,754 157 73 -- --
======== ======= ======= ====== ======= ======
PENNSYLVANIA MUNICIPAL BOND FUND
Shares sold 1,003 605 -- 11 -- --
Shares reinvested 1 4 -- -- -- --
Shares repurchased (237) (449) (8) (2) -- --
-------- ------- -------- ------- -------- -------
Net increase/(decrease) 767 160 (8) 9 -- --
======== ======= ======= ====== ======= ======
</TABLE>
Since Government Money Market, Money Market, Ohio Municipal Money Market,
Pennsylvania Tax Exempt Money Market, Tax Exempt Money Market, and Treasury
Money Market Funds have each sold and redeemed shares only at a constant net
asset value of $1.00 per share, the number of shares represented by such sales,
reinvestments, and redemptions is the same as the amounts shown in the Statement
of Changes in Net Assets.
6. COMMON TRUST FUND CONVERSIONS
On October 9, 1998, the Fort Wayne Large Cap Equity Fund, Fort Wayne Equity
Fund, Fort Wayne Income Fund, and Fort Wayne Tax Free Fund of National City Bank
of Indiana (formerly, Fort Wayne National Bank) were converted into the Armada
Tax Managed Equity Fund, Armada Tax Managed Equity Fund, Armada Intermediate
Bond Fund and Armada National Tax Exempt Fund, respectively. The assets, which
consisted of securities and related receivables, were converted on a tax-free
basis at the respective Armada Fund's current day net asset value. At the time
of the conversion, 3,582,852 of Class I shares of the Armada Tax Managed Equity
Fund, 1,366,366 of Class I shares of the Armada Tax Managed Equity Fund,
6,642,146 of Class I shares of the Armada Intermediate Bond Fund and 2,165,202
of Class I shares of the Armada National Tax Exempt Fund were issued. The net
assets of the Fort Wayne Large Cap Equity Fund, Fort Wayne Equity Fund, Fort
Wayne Income Fund, and Fort Wayne Tax Free Fund immediately before the
conversion were $33,678,806, $12,843,563, $71,602,332 and $22,085,062,
respectively, which included unrealized appreciation of $3,966,820, $5,917,249,
$1,094,445 and $588,915, respectively.
On August 14, 1998, the National City Fixed Income Fund for Personal Trusts
of National City Bank was converted into the Armada Bond Fund. The assets which
consisted of securities and related receivables, were converted on a tax-free
basis at the respective Armada Fund's current day net asset value. At the time
of this conversion, 42,948,272 of Class I shares of the Armada Bond Fund were
issued. The net assets of the National City Fixed Income Fund for Personal
Trusts immediately before the conversion were $444,085,137 which included
unrealized appreciation of $7,241,615.
On August 7, 1998, the National City Equity Fund for Personal Trusts #1 and
the National City Income Equity Fund for Personal Trusts #1 of National City
Bank were converted into the Armada Equity Growth and Armada Equity Income
Funds, respectively. The assets, which consisted of securities and related
receivables, were converted
133
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[GRAPHIC OMITTED] NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
on a tax-free basis at the respective Armada Fund's current day net asset
value. At the time of the conversion, 11,712,500 of Class I shares of the Armada
Equity Growth Fund and 12,892,934 of Class I shares of the Armada Equity Income
Fund were issued. The net assets of the National City Equity Fund for Personal
Trusts #1 and National City Income Equity Fund for Personal Trusts #1
immediately before the conversion were $257,675,010 and $212,346,617,
respectively, which included unrealized appreciation of $102,201,766 and
$51,916,108, respectively.
7. MARKET AND CREDIT RISK
Some countries in which the International Equity Fund may invest require
government approval for the repatriation of investment income, capital or the
proceeds of sales of securities by foreign investors. In addition, if there is a
deterioration in a country's balance of payments or for other reasons, a country
may impose temporary restrictions on foreign capital remittances abroad.
The securities exchanges of certain foreign markets are substantially
smaller, less liquid and more volatile than the major securities in the United
States. Consequently, acquisition and disposition of securities by the Fund may
be inhibited. In addition, a significant proportion of the aggregate market
value of equity securities listed on the major securities exchanges in emerging
markets are held by a smaller number of investors. This may limit the number of
shares available for acquisition or disposition of the Fund.
The Balanced Allocation, Bond, Enhanced Income, GNMA, Intermediate Bond, and
Total Return Advantage Funds may invest in securities whose value is derived
from an underlying pool of mortgages or consumer loans. Prepayment of these
loans may shorten the stated maturity of these respective obligations and may
result in a loss of premium, if any has been paid.
Each Fund, other than Government Money Market, Money Market, Ohio Municipal
Money Market, Pennsylvania Tax Exempt Money Market, Tax Exempt Money Market, and
Treasury Money Market Funds may invest up to 15% of its total assets in illiquid
securities which may include securities with contractual restrictions on resale,
securities exempt from registration under Rule 144A of the Securities Act of
1933, as amended, and other securities which may not be readily marketable. The
Government Money Market, Money Market, Ohio Municipal Money Market, Pennsylvania
Tax Exempt Money Market, Tax Exempt Money Market, and Treasury Money Market
Funds may each invest up to 10% of total assets in illiquid securities. The
relative illiquidity of some of these securities may adversely affect the Fund's
ability to dispose of such securities in a timely manner and at a fair price
when it is necessary to liquidate such securities.
The Ohio Tax Exempt Bond, Pennsylvania Municipal Bond, Ohio Municipal Money
Market and the Pennsylvania Tax Exempt Money Market Funds follow an investment
policy of investing primarily in municipal obligations of one state. The
National Tax Exempt Bond and the Tax Exempt Money Market Funds follow an
investment policy of investing in municipal obligations of various states which
may, at times, comprise concentrations in one or several states. Economic
changes affecting each state and related public bodies and municipalities may
affect the ability of issuers within the state to pay interest on, or repay
principal of, municipal obligations held by the National Tax Exempt Bond, Ohio
Tax Exempt Bond, Pennsylvania Municipal Bond, Ohio Municipal Money Market,
Pennsylvania Tax Exempt Money Market, and the Tax Exempt Money Market Funds.
Many municipalities insure repayment for their obligations. Although bond
insurance reduces the risk of loss due to default by an issuer, such bonds
remain subject to the risk that the market may fluctuate for other reasons and
there is no assurance that the insurance company will meet its obligations.
Insured securities have been identified in the Statement of Net Assets.
The Funds invest in securities that include revenue bonds, tax and revenue
anticipation notes, and general obligation bonds. At November 30, 1999, the
percentage of portfolio investments by each revenue source were as follows:
National Ohio
Tax Tax Pennsylvania
Exempt Exempt Municipal
Bond Bond Bond
Revenue Bonds: -------- ------ ------------
Education 8% 8% 18%
Hospital/Nursing
Homes -- 9 3
Housing 1 3 2
Industrial
Development 2 2 10
Pollution Control 2 1 2
Public Facilities 4 6 --
Transportation 10 4 5
Utilities 18 17 16
Other 10 2 13
General Obligations: 42 48 31
Anticipation Notes: 3 -- --
--- --- ---
100% 100% 100%
134
<PAGE> 137
[GRAPHIC OMITTED] NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
The rating of long-term debt as a percentage of total value of investments at
November 30, 1999, is as follows:
National Ohio
Tax Tax Pennsylvania
Standard & Poor's/ Exempt Exempt Municipal
Moody's Ratings Bond Bond Bond
------------------ -------- ------ ------------
AAA/Aaa 58% 63% 82%
AA/Aa 36 29 11
A/A 4 4 --
BBB/Baa -- 1 --
NR 2 3 7
--- --- ---
100% 100% 100%
Securities rated by only one agency are shown in that category. Securities
rated by both agencies are shown with their lowest rating.
8. SECURITIES LENDING
The Funds may participate in a Securities Lending Agreement ("Lending
Agreement"). Security loans made pursuant to the Lending Agreement are required
at all times to be secured by U.S. Treasury Obligations and/or cash collateral
at least equal to 100% of the market value of securities issued in the U.S. and
105% of the market value of securities issued outside of the U.S. cash
collateral received is invested in fixed-income securities, with a weighted
average maturity not to exceed 90 days, rated in one of the top two tiers by
Standard & Poor's ratings group or Moody's Investors Service, Inc. or repurchase
agreements collateralized by such securities. However, in the event of default
or bankruptcy by the lending agent, realization and/or retention of the
collateral may be subject to legal proceedings. In the event that the borrower
fails to return loaned securities and the collateral received is insufficient to
cover the value of the loaned securities and provided such collateral is not the
result of investment losses, the lending agent has agreed to pay the amount of
the shortfall to the funds, or at the discretion of the lending agent, replace
the loaned securities. The market value of the securities on loan, and related
collateral received at November 30, 1999, and income generated for the period
ended November 30, 1999 were as follows:
Market Value Market
of Securities Value of
on Loan Collateral Income
Fund (000) (000) (000)
---- ------------- ---------- ------
Core Equity Fund $ 7,327 $ 7,601 $ 6
Equity Growth Fund 138,821 143,388 139
Equity Income Fund 56,134 57,818 98
Equity Index Fund 84,714 87,049 32
International Equity 21,844 23,079 1
Small Cap Growth Fund 15,004 15,516 38
Small Cap Value Fund 14,688 15,273 32
Tax Managed Equity Fund 56,779 58,348 23
Balanced Allocation Fund 6,023 6,210 7
Bond Fund 83,124 84,903 95
Enhanced Income Fund 14,173 14,465 6
Intermediate Bond Fund 58,546 59,989 70
Total Return Advantage Fund 85,776 88,399 69
135
<PAGE> 138
[GRAPHIC OMITTED] NOTES
<PAGE> 139
[GRAPHIC OMITTED] NOTES
<PAGE> 140
[GRAPHIC OMITTED] ARMADA FUNDS
BOARD OF TRUSTEES
ROBERT D. NEARY
CHAIRMAN
Retired Co-Chairman, Ernst & Young
Director:
Cold Metal Products, Inc.
Strategic Distribution, Inc.
HERBERT R. MARTENS, JR.
PRESIDENT
Executive Vice President,
National City Corporation
Chairman, President and Chief Executive
Officer, NatCity Investments,Inc.
LEIGH CARTER
Retired President and Chief Operating
Officer, B.F. Goodrich Company
Director:
Kirtland Capital Corporation
Morrison Products
TruSeal Technologies
JOHN F. DURKOTT
President and Chief Operating Officer,
Kittle's Home Furnishings Center, Inc
ROBERT J. FARLING
Retired Chairman, President and Chief Executive Officer, Centerior Energy
RICHARD W. FURST, DEAN
Garvice D. Kincaid Professor of Finance
and Dean, Gatton College of Business and Economics, University of Kentucky
Director:
Foam Design, Inc.
The Seed Corporation
Office Suites Plus, Inc.
ihigh.com.Inc.
GERALD L. GHERLEIN
Executive Vice President and General
Counsel, Eaton Corporatio
J. WILLIAM PULLEN
President and Chief Executive Officer,
Whayne Supply Company
The Armada Trustees also serve as the Trustees of the Parkstone Mutual Funds.
[ARMADA LOGO OMITTED]
<PAGE> 1
Exhibit (17)(j)
Parkstone
FUNDS
[ARTWORK APPEARS HERE]
May 31, 1999
ANNUAL REPORT
<PAGE> 2
The Parkstone Group of Funds
Table of Contents
May 31, 1999
<TABLE>
<S> <C>
A Message From The Chairman................................................. 2
A Message From Your Investment Adviser...................................... 4
Portfolio Performance Overview.............................................. 6
Report of Independent Accountants........................................... 35
Statements of Assets and Liabilities........................................ 36
Statements of Operations.................................................... 41
Statements of Changes in Net Assets......................................... 46
Statements of Cash Flows.................................................... 55
Schedules of Portfolio Investments.......................................... 58
Financial Highlights........................................................ 107
Notes to Financial Statements............................................... 152
</TABLE>
1
<PAGE> 3
The Parkstone Group of Funds
A Message From The Chairman
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .
Dear Shareholder:
The past year was a time of transition for The Parkstone Group of Funds. As
previously reported, due to the merger of National City and First of America,
the investment adviser to the Funds was renamed National City Investment
Management Company ("IMC"), and is now composed of many talented people from
both companies.
Although the Funds have experienced outflows during the past year, much of it
is directly attributable to assets being transferred to the IMC managed Armada
Funds. I am pleased to note that the rate of outflows has slowed significantly
in the last five months.
Investment Performance Leadership
Despite a rather volatile environment in the financial markets during the 12
months ended May 31, 1999, it is a pleasure to report to you that the year was
one of solid performance for many of the Parkstone Mutual Funds. Especially
noteworthy has been the recognition given to the following Parkstone Funds by
industry rating services and publications:
. Parkstone Large Capitalization Fund (Institutional Shares) was recognized by
Morningstar+ for excellent performance with five stars for the period ended
March 31, 1999, and for the month ended May 31, 1999.
. Parkstone Large Capitalization Fund (Institutional Shares) and the National
City Investment Management Large Cap Equity Team were featured in the
Investor's Business Daily on March 29, 1999. Quoting from the article "The
Parkstone Large Capitalization Fund, with $458 million in assets, carries an
A+ performance rating from IBD, as its total return of 119% in the 36 months
ended February 28 beat 99% of all funds."
. Parkstone U.S. Government Income Fund (Institutional Shares) was recognized
by Morningstar+ with five stars for the quarter ended March 31, 1999, and
for the month ended May 31, 1999.
. Parkstone Limited Maturity Bond Fund and Parkstone Bond Fund (Institutional
Shares) were awarded an overall four-star rating by Morningstar+ for the
quarter ended March 31, 1999.
These examples of recognition reinforce and validate the investment management
philosophy and process employed IMC.
In closing . . .
The accompanying report contains each Fund's audited financial statements, its
portfolio of investments and a detailed discussion of its performance during
the 12 months ended May 31, 1999. Also, you will find a commentary from the
investment adviser that includes an economic outlook for the coming months and
a discussion of why the investment adviser believes they will be strong ones
for the financial markets.
As always, if you have questions or require assistance, please call your
account representative or the Parkstone Group of Funds Investor Services line
at 1-800-451-8377, who are available from 8:00 a.m. to 8:00 p.m. Eastern
Standard Time for your convenience. Or, if you would like to know more about
the Armada Funds, please call 1-800-622-FUND (3863).
2
<PAGE> 4
The Parkstone Group of Funds
A Message From The Chairman, continued
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .
Finally, we thank you for your continued confidence in us. We look forward to
providing you with investment management and service to meet your needs now and
in the year ahead.
Sincerely,
/s/ Robert D. Neary
Robert D. Neary
Chairman
Parkstone Group of Funds
Parkstone
FUNDS
3
<PAGE> 5
The Parkstone Group of Funds
A Message From Your Investment Adviser
Economic Overview
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .
Dear Shareholder:
As the past fiscal year came to a close, the U.S. economy continued to act as
if it were in the early stages of an economic recovery rather than completing
the 98th consecutive month of an expansion. After posting a 4.3% gain for
calendar year 1998, the highest rate since 1984, gross domestic product (GDP)
grew by another 4.3% (annualized) in the first quarter of 1999. Encouraged by
low unemployment and large gains in real wages, consumer spending was brisk
throughout the past 12 months, with housing and auto sales particularly strong.
By the end of May, even the moribund manufacturing sector reversed its decline,
as increasing demand, coupled with a relative lack of inventory, pushed
manufacturing output to its fastest growth in over two years.
Large-cap growth stocks continued to enjoy tremendous gains throughout the
year. Their march was interrupted only briefly--though dramatically--during the
third quarter of 1998 by global economic woes that took their toll on all but
the Treasury markets.
The rest of the equity markets did not fare nearly as well. The quest for
liquidity and predictable earnings growth led investors to treat smaller
domestic stocks, as well as international equities, with caution. How wide was
the disparity in returns? The S&P 500 Composite Index, a leading large-cap
indicator, returned a total of 21.05% over the past 12 months. Meanwhile, the
Russell 2000 Index of small-cap stocks lost 2.69% of its value. Even within the
large-cap segment of the market, gains were concentrated in the technology-
heavy growth sector. The S&P 500/BARRA Growth Index returned 28.15%, more than
double the S&P 500/BARRA Value Index.
These inequalities began to reverse themselves only near the end of the
reporting period, as attractive valuations and signs of a genuine recovery in
Asia and Latin America led to renewed interest in small-cap and value stocks.
Huge price gains, especially in energy, basic materials and other cyclical
sectors, helped the S&P BARRA Value Index easily outperform S&P BARRA Growth
during April and May. In April alone, BARRA Value returned 8.62% versus -0.19%
for BARRA Growth Index. The broadening of the market helped the Russell 2000
Index leap 12.28% for the three months ending May 31.
International stocks posted less than stellar gains in U.S. dollars over the
past 12 months, although results could have been much worse given the economic
and monetary problems that plagued many Asian and Latin American countries. The
Morgan Stanley EAFE (Europe, Australasia, and Far East) Equity Index, a leading
international benchmark, returned 4.36% for the period. The European markets as
a whole posted a gain of 2.5% in local currencies, but the strong showing of
the dollar versus the euro sent returns after conversion into negative
territory. Asia performed better, with the Morgan Stanley Asia-Pacific All-
Country Index up 13.45% in local currencies. That return translated to 26.73%
in dollars, thanks largely to the recovery of the Japanese yen.
The fixed income markets faced a difficult 12 months. The Lehman Brothers
Aggregate Bond Index returned a disappointing 4.34%, yet this figure belied a
period of extreme volatility. During the third quarter of 1998, the global
"flight to quality" sent Treasury prices soaring and yields (which move in the
opposite direction) plummeting. At the same time, the "spread" sectors of the
bond market--corporate bonds, asset-backed securities and mortgage-backed-
securities-- suffered a liquidity crisis. This situation continued into the
fourth quarter. Long Treasury yields reached their lows of a generation, with
10-year notes yielding 4.15% and 30-year bonds at 4.70%.
As we entered 1999, the scenario began to reverse itself. The spread sectors
staged a dramatic recovery, due in no small part to an unexpectedly rapid
easing of Brazil's economic crisis. Brazil's recovery is, in many respects, the
arch example of how the developing markets have rebounded so quickly.
Recognizing an attractive risk/return tradeoff, private capital swiftly
returned to these countries, stabilizing their markets and contributing
4
<PAGE> 6
The Parkstone Group of Funds
A Message From Your Investment Adviser
Economic Overview, continued
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .
to liquidity. These events, in turn, led to falling interest rates and a
subsequent improvement in their economies.
Continued evidence of extremely strong domestic growth and the consequent
rekindling of inflation fears sent Treasury yields rising throughout the first
five months of 1999, firmly establishing a bear market for bonds. Interest
rates rose across the yield curve, hitting shorter-term maturities the hardest.
Looking ahead, our outlook for U.S. economic growth remains optimistic.
Consumer demand will likely continue to provide a solid, though lesser, boost
to economic activity. However, we believe future GDP growth may be closer to 3%
rather than the 4% to which we have become accustomed. Incremental gains in
manufacturing rely largely on a continuing global recovery, but we are
confident that many recent trouble spots in Asia and Latin America are taking
the painful, but necessary, steps to enhance their economic prospects.
The major issues facing Asia today are the sustainability of exports and the
viability of Japan's economy after its upcoming national election. Asia is
still relying on exports to build economic momentum and adequate reserve
balances. Japan is making a lot of the right promises but needs to make painful
job cuts to follow through on them. We are mindful of these risks but remain
constructive on Asia. Likewise, Latin America has made great progress in the
wake of Brazil's flotation of their currency, the Real, and the recovery in
commodity prices. In conclusion, global recovery is on more solid footing
today, propelled by emerging market recoveries after two difficult years.
At home, higher-than-expected growth data will likely translate into a
tightening of short-term interest rates by the Fed, but we believe that a
series of successive rate hikes is still highly unlikely and that the federal
funds rate won't increase by more than a total of 50 basis points. The
combination of strong growth, higher headline inflation and a less friendly Fed
likely means that Treasury yields will continue to rise in the short term.
However, assuming growth, and especially inflation, do not accelerate greatly,
we still believe that yields above 6 1/4% on 30-Year Treasury Bonds offer
investors long-term value. On the margin, we're more convinced than the Fed is
that the current pace of growth is noninflationary. Rather, it is the result of
tremendous leaps in productivity, thanks to technology enhancements and
Corporate America's strict cost-control measures.
As for the equity markets, the resurgence in small-cap and large-cap value
stocks is likely to continue. Valuations remain attractive, and investors
finally appear ready to let growth-stock earnings catch up a bit with their
current prices. As long as we see a continuation of global growth, and the
markets indicate that we will, earnings in the cyclical sectors are likely to
follow suit.
Sincerely,
/s/ Donald L. Ross
Donald L. Ross
Chief Investment Officer
National City Investment Management Co.
5
<PAGE> 7
The Parkstone Group of Funds
Portfolio Performance Overview
May 31, 1999
Small Capitalization Fund+
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The past year proved to be a difficult one for the Fund and for small-cap
investors in general. The discrepancy between large-cap and small-cap
performance was the widest we had seen in some time, with the S&P 500 Index
outperforming the Russell 2000 Index by 23.74%. The economic crisis that
rippled through Asia and other emerging markets from late 1997 through 1998
sent investors fleeing from small-cap and mid-cap stocks to the highly liquid
large-cap and U.S. Treasury markets.
For the 12 months ended May 31, 1999, the Parkstone Small Capitalization Fund
produced a total return of -18.92% (before sales charges) for Investor A Shares
and -18.71% for Institutional Shares. During the same period, the Russell 2000
Index returned -2.69%, and the Russell 2000 Growth Index returned 3.93%. The
Fund assumed the latter benchmark on January 1, 1999, to reflect the
portfolio's bias toward growth stocks.
Internet-related companies, led by names like E*Trade (1.4% of the Fund's net
assets), CMGI (1.3%) and DoubleClick (0.6%), accounted for what good news the
small-cap sector offered. Unfortunately, our purchasing criteria--limiting us
to stocks with market capitalizations not exceeding $750 million--effectively
prohibited us from including these companies in the portfolio for most of the
year. Given the tremendous expansion of market values in every sector of the
market, our ceiling left us at the low end of the small-cap market where
stocks, were hit hardest.*
We remedied this situation in January by raising the Fund's market
capitalization ceiling to $3 billion. The Fund can own stocks with even greater
market capitalizations as long as they remain in the benchmark. In keeping with
IMC's overall investment philosophy, the management team also instituted some
risk controls that should reduce the portfolio's overall volatility. For
example, we set minimum and maximum sector weightings and by May 31, 1999 had
increased the number of stocks in the portfolio by approximately 40 percent
year-over-year.
With the easing of the global financial crisis, we believe that the Fund and
the small-cap market in general are poised for a rebound. Indeed, the market
already showed signs of broadening during April and May. Investors seemed
willing to assume some additional risk rather than continue paying a premium
for a handful of large-cap stocks. Small-cap prices should also benefit from
improved earnings-per-share growth expectations for the asset class as a whole.
+ Small-capitalization funds typically carry additional risks since smaller
companies generally have a higher risk of failure and, historically, their
stocks have experienced a greater degree of market volatility than stocks on
average.
* The composition of the portfolio is subject to change.
6
<PAGE> 8
The Parkstone Group of Funds
Portfolio Performance Overview
May 31, 1999
Small Capitalization Fund
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[CHARTS APPEAR HERE]
Value of a $10,000 Investment
Rusell 2000 Russell 2000
Date Index Growth Index Investor A* Institutional
5/89 10,000 10,000 9,452 10,000
5/90 10,040 10,461 11,036 11,676
5/91 10,825 11,356 11,274 11,928
5/92 12,256 12,259 12,591 13,321
5/93 14,622 13,791 16,836 17,813
5/94 15,891 14,569 18,376 19,526
5/95 17,530 16,416 22,333 23,787
5/96 23,822 23,739 38,387 40,917
5/97 25,482 22,457 33,205 35,461
5/98 30,895 26,016 35,026 37,507
5/99 30,065 27,038 28,400 30,488
Investor A* Institutional
1 year -23.38% -18.71%
3 years -11.24% -9.34%
5 years 7.86% 9.32%
10 years 11.00% 11.79%
* Reflects the Maximum Sales Charge of 5.50%.
Value of a $10,000 Investment
Rusell 2000 Russell 2000
Date Index Growth Index Investor B*
2/4/94 10,000 10,000 10,000
5/94 9,387 9,149 8,864
5/95 10,355 10,309 10,745
5/96 14,072 14,908 18,799
5/97 15,053 14,103 16,203
5/98 18,250 16,337 17,093
5/99 17,760 16,979 13,917
Investor B**
1 year -23.07%
3 years -10.81%
5 years 8.32%
Inception (2/4/94) 6.41%
**Reflects the Maximum Applicable Contigent Deferred Sales Charge.
The Small Capitalization Fund's performance is compared to the Russell 2000
Stock Index and the Russell 2000 Growth Index. The Russell 2000 Stock Index
represents the performance of domestically traded common stocks of small to
mid-sized companies. The Russell 2000 Growth Index is comprised of securities
in the Russell 2000 Stock Index with a greater-than-average growth orientation.
The Fund has chosen the Russell 2000 Growth Index as its new benchmark. The
Russell Growth Index will better reflect the portfolio's current bias toward
growth stocks. The indices are unmanaged and do not reflect the deduction of
fees associated with a mutual fund, such as investment management and fund
accounting fees. The performance of the Parkstone Small Capitalization Fund
reflects the deduction of fees for these value-added services. Past performance
is not predictive of future results. The investment return and NAV will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
7
<PAGE> 9
The Parkstone Group of Funds
Portfolio Performance Overview
May 31, 1999
Mid Capitalization Fund
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Growth was heavily concentrated in the large-cap sector of the market over
the past 12 months. Unfortunately, mid-cap and small-cap stocks suffered as
investors sought refuge from global volatility in a handful of the largest,
most dependable names. Internet stocks provided much of the mid-cap sector's
growth during this period. Frankly, the market showed no sensitivity to
earnings in valuing these companies. Investors seemed willing to pay nearly
anything for strong revenue growth despite generally poor earnings and, in many
cases, heavy losses. In this environment, our adherence to prudent valuation
and diversification guidelines accounted for the majority of the Fund's
underperformance.
For the 12 months ended May 31, 1999, the Parkstone Mid Capitalization Fund
returned 8.08% (before sales charges) for Investor A Shares and 8.20% for
Institutional Shares. For the same period, the S&P 400 MidCap Index and the
Russell MidCap Growth Index returned 11.93% and 15.64%, respectively. We
assumed the latter benchmark on January 1, 1999, because it better reflects the
aggressive-growth orientation of the portfolio.
We remain optimistic that the market will reward our emphasis on mid-cap
stocks that consistently deliver above-average earnings growth. The companies
in the portfolio typically hold dominant positions in their markets and also
boast excellent margins and return on equity. As of May 31, the Russell Mid-Cap
Growth Index paid 29 times expected 1999 earnings for 11% growth, while we were
paying an average of 36 times earnings for growth of 40%. Although the
portfolio's price-to-earnings ratio is relatively high, we believe that its
potential justifies these numbers.
Our focus on diversification should serve us well given the likelihood of
rising interest rates. Many of the high-flying internet companies, which
already began to weaken in May, may suffer further in this environment, because
higher rates should push down price-to-earnings ratios. We recently moved the
portfolio into sectors that have been general underperformers over the past few
years, because we believe that they will benefit from an improving global
economy. These investments include companies in the energy, capital goods and
industrial sectors.
The Fund's performance should be helped further by our decision to raise the
market capitalization limit on stocks we can purchase from $5 billion to $10
billion. This increase aligns the Fund with the market's own expanded
definition of mid-cap companies. At the very least, it gives us the freedom to
pursue a larger universe of stocks with above-average growth prospects.
8
<PAGE> 10
The Parkstone Group of Funds
Portfolio Performance Overview
May 31, 1999
Mid Capitalization Fund
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[CHARTS APPEAR HERE]
Value of a $10,000 Investment
S&P Mid Cap Russell Mid Cap
Date 400 Index Growth Index Investor A* Institutional
5/89 10,000 10,000 9,452 10,000
5/90 11,445 11,495 10,930 11,565
5/91 13,661 13,508 11,550 12,220
5/92 15,825 14,767 13,284 14,054
5/93 18,767 17,072 15,248 16,111
5/94 19,523 18,135 16,162 17,112
5/95 22,161 20,986 17,502 18,576
5/96 28,469 27,962 25,159 26,749
5/97 33,638 31,029 24,812 26,352
5/98 43,698 38,457 30,121 32,022
5/99 48,913 44,473 32,553 34,647
Investor A* Institutional
1 year 2.14% 8.20%
3 years 6.94% 9.01%
5 years 13.73% 15.15%
10 years 12.52% 13.23%
*Reflects the Maximum Sales Charge of 5.50%.
Value of a $10,000 Investment
S&P Mid Cap Russell Mid Cap
Date 400 Index Growth Index Investor B*
2/4/94 10,000 10,000 10,000
5/94 9,382 9,437 8,947
5/95 10,649 10,921 9,670
5/96 13,681 14,551 14,044
5/97 16,165 16,148 13,883
5/98 20,999 20,013 16,897
5/99 23,505 23,144 18,296
Investor B**
1 year 2.57%
3 years 7.66%
5 years 14.20%
Inception (2/4/94) 12.03%
**Reflects the Maximum Applicable Contingent Deferred Sales Charge.
The Mid Capitalization Fund's performance is being compared to the Standard &
Poor's Mid-Cap 400 Index and the Russell Midcap Growth Index. The Standard &
Poor's Mid-Cap 400 Index reflects the Fund's focus on the mid-cap sector of the
U.S. stock market. The Russell Midcap Growth Index is comprised of securities
in the Russell Midcap Index with greater than average price-to-book ratios and
higher forecasted growth values. The Fund has chosen the Russell MidCap Growth
Index as its new benchmark. The Russell MidCap Growth Index will better reflect
the portfolio's aggressive growth orientation. The indices are unmanaged and do
not reflect the deduction of fees associated with a mutual fund, such as
investment management and fund accounting fees. The performance of the
Parkstone Mid Capitalization Fund reflects the deduction of fees for these
value-added services. Past performance is not predictive of future results. The
investment return and NAV will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than the original cost.
9
<PAGE> 11
The Parkstone Group of Funds
Portfolio Performance Overview
May 31, 1999
Large Capitalization Fund
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Large-cap stocks again reaped most of the stock market's gains over the past
12 months, and the Fund performed strongly over this period. For the year ended
May 31, 1999, the Parkstone Large Capitalization Fund produced a total return
of 23.42% (before sales charges) for Investor A Shares and 23.67% for
Institutional Shares. During the same period, the Fund's benchmark, the S&P
500/BARRA Growth Index, returned 28.15%.
In particular, we profited from an overweighting in the technology,
communications and consumer cyclical sectors. Such holdings as Cisco Systems
(4.2% of the Fund's net assets) and EMC Corp. (1.9%), more than doubled in
value, while MCI WorldCom (2.6%), Time-Warner (2.2%), Home Depot (2.1%), Wal-
Mart (1.7%), Sun Microsystems (1.5%) and AirTouch (1.1%) also posted excellent
returns.*
An underweighting in basic materials served us well for most of the year, but
we gave back some gains when that sector rebounded in April. A similar story
unfolded in the energy sector, where we were underweighted or market neutral
through April. We increased our energy exposure in May.
Our underperformance relative to the S&P 500/BARRA Growth Index can be
attributed to the outstanding performance of a handful of companies at the high
end of its market capitalization range. The market-weighted nature of the
benchmark means that such companies had the most impact on its returns.
Microsoft and General Electric by themselves account for a combined 13% of S&P
BARRA Growth Index's market capitalization. The Fund owns both stocks, but we
held our percentage weighting in these companies to approximately half that of
the benchmark, due, in part, to our commitment to managing risk.
As long as inflation remains in check, we believe that the Fund will continue
to benefit from the strong earnings growth of our holdings. For example, Cisco
Systems (4.2%), as well as Lucent Technologies (3.3%), another holding, should
thrive as the Internet's infrastructure demands increase. In addition,
improving supply and demand balances in paper and energy are likely to
translate into improved earnings. That belief prompted us to overweight the
portfolio in these sectors at year-end, adding such companies as Schlumberger
Ltd. (1.0%), International Paper (1.0%) and Burlington Resources (1.1%).*
* The composition of the portfolio is subject to change.
10
<PAGE> 12
The Parkstone Group of Funds
Portfolio Performance Overview
May 31, 1999
Large Capitalization Fund
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[CHARTS APPEAR HERE]
Value of a $10,000 Investment
S&P 500 Stock S&P BARRA Growth Index Investor A Investor B
2/1/96 10,000 10,000 9,452 10,000
5/96 10,607 10,621 10,243 10,319
5/97 13,729 14,159 12,629 12,750
5/98 17,938 18,710 16,803 17,107
5/99 21,710 23,977 20,738 21,136
Investor A* Investor B**
1 year 16.64% 17.38%
3 years 24.14% 24.94%
Inception (2/1/96) 24.50% 25.19%
*Reflects the Maximum Sales Charge of 5.50%.
**Reflects the Maximum Applicable Contingent Deferred Sales Charge.
Value of a $10,000 Investment
Institutional S&P 500 Stock Index S&P BARRA Growth Index
12/28/95 10,000 10,000 10,000
5/96 11,221 10,967 11,027
5/97 13,859 14,196 14,700
5/98 18,483 18,547 19,425
5/99 22,859 22,448 24,893
Institutional
1 year 23.67%
3 years 26.77%
Inception (12/28/95) 27.30%
The Large Capitalization Fund's performance is compared to the Standard &
Poor's 500 Stock Index and the Standard & Poor's BARRA Growth Index. The
Standard & Poor's 500 Stock Index represents the performance of the U.S. stock
market as a whole. The Standard & Poor's BARRA Growth Index is comprised of
securities in the Standard & Poor's 500 Stock Index that have a higher than
average price-to-book ratio. The indices are unmanaged and do not reflect the
deduction of fees associated with a mutual fund, such as investment management
and fund accounting fees. The performance of the Parkstone Large Capitalization
Fund reflects the deduction of fees for these value-added services. Past
performance is not predictive of future results. The investment return and NAV
will fluctuate, so that an investor's shares, when redeemed, may be worth more
or less than the original cost.
11
<PAGE> 13
The Parkstone Group of Funds
Portfolio Performance Overview
May 31, 1999
International Discovery Fund+
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
On December 1, 1998, IMC assumed the management of the Fund from Gulfstream
Global Investors Ltd. In the process, we instituted a number of changes that
better reflect IMC's own investment philosophy. We moved the Fund's emphasis
away from mid-capitalization growth stocks to a large-capitalization,
diversified style, imposed time-tested risk control disciplines and shifted the
portfolio's primary focus to country allocation over individual stock
selection. We believe that it is not enough to search the world for good
companies; a country's economic environment must also be conducive to the
creation of wealth.
For the 12 months ended May 31, 1999, the Parkstone International Discovery
Fund produced a total return of -5.20% (before sales charges) for Investor A
Shares and -4.94% for Institutional Shares. Over the same period, the Fund's
benchmark, the Morgan Stanley Europe, Australasia and Far East (EAFE) Index,
returned a total of 4.36%.
Prior to December, investments in emerging markets and in stocks with lower
liquidity detracted from performance. The Fund lagged the EAFE Index by 7.27%
during this period. We closed that gap over the remaining six months, trailing
the benchmark by 1.98%. Still, our bias toward companies with strong and stable
competitive advantages was not rewarded as we had hoped. As the world economy
began showing signs of recovery, investors balked at paying a premium for high-
quality stocks.
Looking ahead, we believe that investors will return in increasing numbers to
the best-managed, most profitable companies as the year progresses. We find the
Hong Kong and Singapore markets attractively valued after impressive returns
year-to-date. Economic conditions are improving as current account balances
have turned positive. These surpluses have allowed central banks to ease
interest rates without causing currency devaluations and permitted governments
to finance fiscal stimulus programs. We believe that the improvement in
economic conditions needs to be followed up by reforms in order for wealth
creation to continue, and we are cautiously optimistic that such reforms will
take place.
Likewise, certain European markets are attractive. The accession rates for
adopting the euro have left some countries with a competitive advantage over
others. Likewise, some countries are simply more sound fiscally. We believe
that these imbalances will have a persistent effect on the differences in
economic growth rates within the region. In particular, it is our opinion that
markets such as France and Ireland are poised to enjoy stronger growth, while
Germany and Italy may suffer.
Japan is in the early stages of structural reform. However, the pace and
timing of reform may lead to episodes of disappointment as earnings struggle to
emerge from the doldrums. Therefore, we limited our holdings in Japan as of May
31, 1999, to 16.4% of the portfolio, a weighting that is 6.7% below the Fund's
benchmark.*
+ International investing is subject to certain risk factors such as currency
exchange-rate volatility, possible political, social or economic instability,
foreign taxation and/or differences in accounting and other financial
standards.
* The composition of the portfolio is subject to change.
12
<PAGE> 14
The Parkstone Group of Funds
Portfolio Performance Overview
May 31, 1999
International Discovery Fund
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[CHARTS APPEAR HERE]
Value of a $10,000 Investment
Institutional Investor A Morgan Stanley EAFE Index
------------- ---------- -------------------------
12/31/92 10,000 9,452 10,000
5/93 11,920 11,238 12,520
5/94 13,248 12,453 14,219
5/95 12,864 12,071 14,921
5/96 14,779 13,843 16,513
5/97 16,748 15,656 17,758
5/98 18,353 17,119 19,731
5/99 17,446 16,228 20,592
Investor A* Institutional
----------- -------------
1 year -10.41% -4.94%
3 years 3.48% 5.69%
5 years 4.26% 5.66%
Inception (12/29/92) 7.83% 9.06%
*Reflects the Maximum Sales Charge of 5.50%.
Value of a $10,000 Investment
Investor B Morgan Stanley EAFE Index
---------- -------------------------
2/4/94 10,000 10,000
5/94 8,861 9,891
5/95 8,524 10,378
5/96 9,766 11,486
5/97 11,090 12,352
5/98 12,168 13,724
5/99 11,693 14,323
Investor B*
-----------
1 year -10.33%
3 years 3.75%
5 years 4.53%
Inception (2/4/94) 2.90%
** Reflects the Maximum Applicable Contingent Deferred Sales Charge.
The International Discovery Fund's performance is compared to the Morgan
Stanley Capital International Europe, Australasia and Far East (EAFE) Index,
which represents the performance of the major stock markets in those regions.
The index is unmanaged and does not reflect the deduction of fees associated
with a mutual fund, such as investment management and fund accounting fees. The
performance of the Parkstone International Discovery Fund reflects the
deduction of fees for these value-added services. Past performance is not
predictive of future results. The investment return and NAV will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than the
original cost.
13
<PAGE> 15
The Parkstone Group of Funds
Portfolio Performance Overview
May 31, 1999
Conservative Allocation Fund
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Over the past 12 months, the Fund made the most of an equity exposure that
consistently hovered around a relatively modest 30% of total assets. Our
predominantly large-cap growth holdings served us well, as those stocks
continued to outperform every other segment of the equity market.
For the fiscal year ended May 31, 1999, the Parkstone Conservative Allocation
Fund produced a total return of 4.78% for Institutional Shares. During the same
period, the Lehman Brothers Intermediate Government/Corporate Bond Index
returned 4.78%, and the Salomon Brothers Broad Bond Index returned 4.32%. The
S&P 500 Composite Index, the Fund's equity benchmark, returned 21.05%.
During the third quarter of 1998, when none of the equity markets were spared
from global economic turmoil, the Fund's heavy exposure to Treasuries kept the
portfolio's volatility to a minimum. Unfortunately, our light equity allocation
hampered performance from the fourth quarter of 1998 onward as large-cap growth
stocks shrugged off Asia's economic troubles and came roaring back.
The Fund's above-index interest rate sensitivity worked well for our fixed-
income holdings during the fourth quarter of 1998, but maintaining this
position hindered performance when rates rose significantly during the first
quarter of 1999. We recouped a portion of our losses through an enlarged
allocation to higher-yielding spread (non-Treasury) securities, all sectors of
which outperformed equivalent-duration Treasury issues.
In keeping with the Fund's emphasis on low volatility and preservation of
capital, 70% of the portfolio remained in bonds at year-end. We allocated 23%
of assets to large-cap stocks and the remaining 7% to small-cap issues, which
showed signs of a resurgence during the last two months of the reporting
period.*
As previously announced, the Fund is scheduled to close in August 1999.
* The composition of the portfolio is subject to change.
14
<PAGE> 16
The Parkstone Group of Funds
Portfolio Performance Overview
May 31, 1999
Conservative Allocation Fund
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[CHART APPEARS HERE]
Value of a $10,000 Investment
Lehman Bros. Inc. Salomon Bros. S&P 500
Institutional Gov't/Corp. Bond Index Broad Index Stock Index
12/30/96 10,000 10,000 10,000 10,000
5/97 10,267 10,190 10,185 11,546
5/98 11,660 11,091 11,305 15,086
5/99 12,218 11,621 11,795 18,259
Institutional
1 year 4.78%
Inception (12/30/96) 8.64%
The Conservative Allocation Fund's performance is compared to the Standard &
Poor's 500 Stock Index, the Lehman Brothers Intermediate Government/Corporate
Bond Index and the Salomon Brothers Broad Index. The S&P 500 Index represents
the performance of the U.S. stock market as a whole. The Lehman Brothers
Intermediate Government/Corporate Bond Index is representative of intermediate-
term bonds. The Salomon Brothers Broad Index represents the performance of the
overall bond market. These indices are unmanaged and do not reflect the
deduction of expenses associated with a mutual fund, such as investment
management and fund accounting fees. The performance of the Parkstone
Conservative Allocation Fund reflects the deduction of fees for these value-
added services. Past performance is not predictive of future results. The
investment return and NAV will fluctuate, so that an investor's share, when
redeemed, may be worth more or less than the original cost.
15
<PAGE> 17
The Parkstone Group of Funds
Portfolio Performance Overview
May 31, 1999
Balanced Allocation Fund
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The management team's decision to keep the portfolio's equity holdings at the
low end of the permitted allocation range initially served us well as global
economic woes sent stock prices tumbling during the third quarter of 1998.
However, better-than-expected corporate earnings and the beginnings of a
turnaround in Asia during the fourth quarter helped the market rebound faster
than we had anticipated. As these events unfolded, the Fund's underexposure to
equities was mitigated somewhat by our preference for large-cap growth stocks.
These stocks again easily outperformed every other segment of the equity market
over the past 12 months.
For the fiscal year ended May 31, 1999, the Parkstone Balanced Allocation
Fund produced a total return of 2.47% (before sales charges) for Investor A
Shares and 2.73% for Institutional Shares. During the same period, the S&P 500
Index returned 21.05%, the Salomon Brothers Broad Index returned 4.34% and the
Lehman Brothers Aggregate Bond Index returned 4.34%.
With respect to the portfolio's fixed income holdings, weighting in
Treasuries benefited the Fund during the "flight to quality" that occurred in
late 1998. Although we began adding back high-quality spread (non-Treasury)
securities incrementally in January, this sector staged a rapid comeback that
cost us some of our earlier gains. By February, we had tilted our fixed-income
allocation firmly toward spread sectors, which we are convinced offer the best
risk/return profile for our investors.
Looking ahead, large-cap growth equities remain richly valued but stand to
benefit from their high degree of liquidity, low inflation and attractive
interest rates. Even if the Fed raises short-term rates, we believe that any
increase is likely to be modest. The current economic climate may prove even
more beneficial to small-cap stocks. This sector finally began to rally in
April and May thanks to improving investor sentiment and a brighter earnings
outlook. The management team is optimistic about the prospects for the small-
cap sector and by May 31 had more than doubled the position we held two months
earlier.
At fiscal year-end, approximately 40% of the Fund was invested in domestic
large-cap stocks, with 14% in domestic small-cap stocks and 6% in international
equities. That allocation places our equity holdings near the high end of their
allocation range. Bonds--in particular mortgage-backed securities--accounted
for the remaining 40% of holdings.*
* The composition of the portfolio is subject to change.
16
<PAGE> 18
The Parkstone Group of Funds
Portfolio Performance Overview
May 31, 1999
Balanced Allocation Fund
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[CHARTS APPEAR HERE]
Value of a $10,000 Investment
<TABLE>
<CAPTION>
Balanced Hybrid S&P 500 Lehman Brothers Salomon Brothers
Investor A Institutional Index Stock Index Aggregate Bond Index Broad Index
<S> <C> <C> <C> <C> <C> <C>
1/31/92 9,524 10,000 10,000 10,000 10,000 10,000
5/92 9,483 9,957 10,274 10,274 10,271 10,272
5/93 10,800 11,331 11,460 11,462 11,433 11,448
5/94 11,171 11,743 11,786 11,944 11,513 11,552
5/95 12,317 12,975 13,748 14,351 12,836 12,884
5/96 15,027 15,869 16,267 18,438 13,397 13,446
5/97 16,346 17,301 19,646 21,218 14,512 14,558
5/98 18,866 20,006 24,102 31,194 16,096 16,159
5/99 19,331 20,552 27,652 37,753 16,795 16,859
</TABLE>
Investor A* Institutional
----------- -------------
1 year -2.40% 2.73%
3 years 7.02% 9.00%
5 years 10.51% 11.84%
Inception (1/31/92) 9.41% 10.32%
*Reflects the Maximum Sales Charge of 4.75%.
Value of a $10,000 Investment
<TABLE>
<CAPTION>
S&P 500 Lehman Brothers Balanced Hybrid Salomon Brothers
Investor B Stock Index Aggregate Bond Index Index Broad Index
<S> <C> <C> <C> <C> <C>
2/4/94 10,000 10,000 10,000 10,000 10,000
5/94 9,026 9,847 9,674 9,779 9,517
5/95 9,894 11,826 10,785 11,407 10,615
5/96 12,195 15,194 11,257 13,497 11,078
5/97 13,281 19,667 12,194 16,301 11,994
5/98 15,361 25,706 13,525 19,998 13,312
5/99 15,829 31,112 14,112 22,944 13,889
</TABLE>
Investor B**
------------
1 year -3.17%
3 years 7.05%
5 years 10.75%
Inception (2/4/94) 9.02%
**Reflects Maximum Applicable Contingent Deferred Sales Charge.
The Balanced Fund's performance is compared to the Standard & Poor's 500 Stock
Index, the Salomon Brothers Broad Index, the Lehman Brothers Aggregate Bond
Index and a Balanced Hybrid Index. The Balanced Hybrid Index is comprised of
60% of the securities in the Standard & Poor's 500 Stock Index and 40% of the
securities in the Lehman Brothers Aggregate Bond Index. The Standard & Poor's
500 Stock Index is a broad measure of the stock market as a whole. The Salomon
Brothers Broad Index represents the performance of the overall bond market. The
Lehman Brothers Aggregate Bond Index is a market value weighted index that
tracks the performance of investment-grade debt issues with maturities of less
than a year. The indices are unmanaged and do not reflect the deduction of fees
associated with a mutual fund, such as investment management and fund
accounting fees. The performance of the Parkstone Balanced Fund reflects the
deduction of fees for these value-added services. Past performance is not
predictive of future results. The investment return and NAV will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than the
original cost.
17
<PAGE> 19
The Parkstone Group of Funds
Portfolio Performance Overview
May 31, 1999
Aggressive Allocation Fund
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Large-cap growth stocks again enjoyed most of the gains in the equity market
over the past 12 months. In this environment, the Fund's initially heavy
exposure to small-cap, mid-cap and international stocks detracted from
performance. Fortunately, an above-average weighting in Treasuries during the
first half of the reporting period cushioned some of the negative impact of our
early equity stance. An increased large-cap position as of January 1, 1999,
served us well during the first quarter of 1999, although remaining concerns
about global economic health kept our aggregate equity weighting to a
relatively modest 65% of assets through the end of the reporting period.
For the fiscal year ended May 31, 1999, the Parkstone Aggressive Allocation
Fund produced a total return of 0.81% for Institutional Shares. During the same
period, the S&P 500 Composite Index returned 21.05%, while the Salomon Brothers
Broad Bond Index returned 4.32%.
With respect to the portfolio's fixed-income holdings, the decision to
maintain an above-index interest rate sensitivity benefited the Fund during the
last half of 1998 and detracted from our performance during the first quarter
of 1999 as rates rose significantly. An enlarged allocation to higher-yielding
spread (non-Treasury) sectors from February forward helped offset the downside
of our long duration position. We have since moved the portfolio to a neutral
position in terms of interest-rate sensitivity.
Our belief that improving earnings and investor sentiment will finally jump-
start the small-cap market led us to increase the portfolio's overall equity
weighting to 70% at year-end. Specifically, 46% of the Fund was invested in
domestic large-cap stocks with 16% in small-caps and 8% in international
equities. The remaining 30% of the portfolio was invested in bonds.*
As previously announced, the Fund is scheduled to close in August 1999.
* The composition of the portfolio is subject to change.
18
<PAGE> 20
The Parkstone Group of Funds
Portfolio Performance Overview
May 31, 1999
Aggressive Allocation Fund
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[CHART APPEARS HERE]
Value of a $10,000 Investment
Institutional S&P 500 Index Salomon Bros. Broad Index
------------- ------------- -------------------------
12/30/96 $10,000 $10,000 $10,000
5/97 $10,244 $11,546 $10,185
5/98 $11,963 $15,086 $11,305
5/99 $12,060 $18,259 $11,795
Institutional
-------------
1 year 0.81%
Inception (12/30/96) 8.06%
The Aggressive Allocation Fund's performance is compared to the Standard &
Poor's 500 Stock Index and the Salomon Brothers Broad Index. The Standard &
Poor's 500 Stock Index is a broad measure of the stock market as a whole. The
Salomon Brothers Broad Index represents the performance of the overall bond
market. The indices are unmanaged and do not reflect the deduction of fees
associated with a mutual fund, such as investment management and fund
accounting fees. The performance of the Parkstone Aggressive Allocation Fund
reflects the deduction of fees for these value-added services. Past performance
is not predictive of future results. The investment return and NAV will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
19
<PAGE> 21
The Parkstone Group of Funds
Portfolio Performance Overview
May 31, 1999
Equity Income Fund
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
During the latter half of 1998 and the first three months of 1999, the market
continued to reward large-cap growth managers far more richly than their value
counterparts. In fact, the S&P 500/BARRA Growth Index/1/ outperformed the S&P
500/BARRA Value Index by 15.06% for the entire fiscal year. Despite this
somewhat hostile environment, the management team remained true to the Fund's
value discipline. As a result, we were eventually rewarded for our patience.
The easing of the global economic crisis led to a broadening of the market in
April, and the Fund was strategically positioned to benefit as investors began
moving money into such undervalued sectors as industrial, energy and basic
materials.
For the year ended May 31, 1999, the Parkstone Equity Income Fund produced a
total return of 12.06% (before sales charges) for Investor A Shares and 12.40%
for Institutional Shares. Over the same period, the S&P 500 Index returned
21.05%, and the S&P 500/BARRA Value Index returned 13.09%. We adopted the
latter benchmark as the reporting period got underway in recognition of the
Fund's value-oriented approach to investing.
We were pleased with the Fund's overall performance, which trailed its
benchmark's only slightly. Superior stock selection served us well as many
long-time holdings showed substantial gains. Strong performers included
Intimate Brands (3.3% of the Fund's net assets), Enron (2.9%), United
Technologies Corp. (2.6%) and Alcoa (2.3%). From a sector standpoint, our
overweighting in health care and underweighting in financials versus the
benchmark contributed to performance, while an overweighting in consumer
noncyclicals detracted. Given the large-cap market's strong performance, our
low-risk profile also contributed to the Fund's modest lag.*
Looking ahead, we believe that the continuing recovery of the world economy
bodes well for value investors in general and for our portfolio in particular.
For example, our overweighting in the U.S. industrial and basic commodities
sectors should prove advantageous if a reduction in pricing pressure leads to
profit margin improvements. In addition, the Fund has significant holdings in
utilities and telecommunications, two traditional value sectors that still
appear overlooked by the market. In sum, the Fund is well positioned as the
market takes a more defensive posture and shifts its focus to undervalued
stocks with cyclical earnings.
/1/ The Standard & Poor's BARRA Growth Index is comprised of securities in the
Standard & Poor's 500 Stock Index that have a higher than average price-to-book
ratio. The index is unmanaged and does not reflect the deduction of fees
associated with a mutual fund, such as investment management and fund
accounting fees.
* The composition of the portfolio is subject to change
20
<PAGE> 22
The Parkstone Group of Funds
Portfolio Performance Overview
May 31, 1999
Equity Income Fund
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[CHARTS APPEAR HERE]
Value of a $10,000 Investment
S&P 500 Stock S&P BARRA Stock Index Investor A Institutional
------------- --------------------- ---------- -------------
5/89 10,000 10,000 9,541 10,000
5/90 11,658 10,904 10,896 11,422
5/91 13,029 11,913 12,141 12,725
5/92 14,310 12,973 13,471 14,119
5/93 15,969 15,047 15,094 15,821
5/94 16,647 16,165 15,873 16,655
5/95 20,003 18,925 16,525 17,373
5/96 25,686 23,912 20,933 22,050
5/97 33,248 30,004 25,007 26,333
5/98 43,440 38,680 30,426 32,115
5/99 52,576 43,743 34,117 36,096
Investor A* Institutional
----------- -------------
1 year 5.92% 12.40%
3 years 15.46% 17,85%
5 years 15.22% 16.73%
10 years 12.95% 13.70%
*Reflects the Maximum Sales Charge of 5.50%
Value of a $10,000 Investment
S&P 500 Stock S&P BARRA Stock Index Investor B
------------- --------------------- ----------
2/4/94 10,000 10,000 10,000
5/94 9,579 9,594 9,042
5/95 11,510 11,231 9,352
5/96 14,780 14,191 11,967
5/97 19,131 17,806 14,364
5/98 24,995 22,955 17,511
5/99 30,252 25,960 19,698
Investor B**
------------
1 year 6.36%
3 years 16.05%
5 years 15.67%
Inception (2/4/94) 13.60%
**Reflects the Maximum Applicable Contingent Deferred Sales Charge.
The Equity Income Fund's performance is compared to the Standard & Poor's 500
Stock Index and the Standard & Poor's BARRA Value Index. The Standard & Poor's
500 Stock Index represents the performance of the U.S. stock market as a whole.
The Standard & Poor's BARRA Value Index is comprised of securities in the
Standard & Poor's 500 Stock Index that have a lower-than-average price-to-book
ratio. The indices are unmanaged and do not reflect the deduction of fees
associated with a mutual fund, such as investment management and fund
accounting fees. The performance of the Parkstone Equity Income Fund reflects
the deduction of fees for these value-added services. Past performance is not
predictive of future results. The investment return and NAV will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than the
original cost.
21
<PAGE> 23
The Parkstone Group of Funds
Portfolio Performance Overview
May 31, 1999
Bond Fund
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The past 12 months were a period of extreme volatility in the fixed income
markets. Overall, the management team was pleased with the performance of the
Fund through the end of 1998 although our results for the first five months of
1999 were less than expected. Our strategy was correct in anticipating that we
would benefit from an overweight in Treasuries going into the third quarter of
1998. A long duration position also contributed to our strong performance, at
least through the end of October.
For the year ended May 31, 1999, the Parkstone Bond Fund produced a total
return of 2.55% (before sales charges) for Investor A Shares and 2.70% for
Institutional Shares. During the same period, the Salomon Brothers Broad Bond
Index returned 4.32% while the Lehman Aggregate Bond Index returned 4.34%.
These two indices are similar in composition. We adopted the latter benchmark
during the year mainly to bring more consistency to the group of indices
against which we measure IMC managed fixed income funds.
The management team began increasing holdings in corporate and mortgage-
backed issues in January, but we approached these moves cautiously. With Brazil
facing economic difficulties and Asia and Russia fresh in our minds, we did not
anticipate that the markets would take the latest crisis in stride. We
continued to increase holdings in these sectors through February, a position
the fund retained to the end of the reporting period.
The Fund currently remains overweighted in spread sectors, slightly favoring
mortgages to corporate bonds. Yields in the corporate market are attractive,
but we prefer to remain defensive in this sector given the current fever for
mergers and acquisitions. AT&T's recent bid to acquire MediaOne, and the amount
of debt it was willing to assume to clinch the deal, points to the event risk
that is part of today's corporate debt market.
As of May 31st, 12% of the Fund's net assets were invested in U.S. Treasury
securities, 44% in mortgage-backed securities, 25% in corporate bonds, and 19%
in asset-backed securities. As of the same date, the average maturity of the
portfolio's holdings was 9.03 years with an average credit quality of triple-
A.*
* The composition of the Portfolio is subject to change.
22
<PAGE> 24
The Parkstone Group of Funds
Portfolio Performance Overview
May 31, 1999
Bond Fund
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[CHARTS APPEAR HERE]
Value of a $10,000 Investment
Salomon Brothers Lehman Brothers
Broad Index Aggregate Bond Index Investor A Institutional
----------- -------------------- ---------- -------------
5/89 10,000 10,000 9,524 10,000
5/90 10,924 10,938 10,235 11,194
5/91 12,306 12,309 11,339 12,402
5/92 13,853 13,840 12,636 13,822
5/93 15,439 15,404 14,095 15,403
5/94 15,579 15,514 14,150 15,482
5/95 17,376 17,295 15,545 17,140
5/96 18,134 18,053 16,141 17,835
5/97 19,634 19,555 17,402 19,277
5/98 21,792 21,689 19,157 21,286
5/99 22,736 22,633 19,646 21,862
Investor A* Institutional
----------- -------------
1 year -2.34% 2.70%
3 years 5.05% 7.02%
5 years 5.74% 7.15%
10 years 6.99% 7.70%
*Reflects the Maximum Sales Charge of 4.75%
Value of a $10,000 Investment
Broad Index Lehman Bros. Aggregate
Investor B** Salomon Brothers Bond Index
------------ ---------------- ----------
2/4/94 10,000 10,000 10,000
5/94 9,070 9,517 9,506
5/95 9,973 10,615 10,598
5/96 10,395 11,078 11,062
5/97 11,249 11,994 11,982
5/98 12,408 13,312 13,290
5/99 12,818 13,889 13,867
Investor B**
------------
1 year -3.18%
3 years 5.06%
5 years 6.09%
Inception (2/4/94) 4.78%
** Reflects Maximum Applicable Contingent Deferred Sales Charge.
The Bond Fund's performance is compared to the Salomon Brothers Broad Index and
the Lehman Brothers Aggregate Bond Index. The Salomon Brothers Broad Index
represents the performance of the overall U.S. bond market. The Lehman Brothers
Aggregate Bond Index is comprised of the Lehman Brothers Government/Corporate
Index and the Lehman Brothers Mortgage-Backed Securities Index. The indices are
unmanaged and do not reflect the deduction of fees associated with a mutual
fund, such as investment management and fund accounting fees. The performance
of the Parkstone Bond Fund reflects the deduction of fees for these value-added
services. Past performance is not predictive of future results. The investment
return and NAV will fluctuate, so that an investor's shares, when redeemed, may
be worth more or less than the original cost.
23
<PAGE> 25
The Parkstone Group of Funds
Portfolio Performance Overview
May 31, 1999
Limited Maturity Bond Fund
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Despite a difficult first half, the past fiscal year proved to be one of
strong performance for the Fund. In late 1998, a global economic crisis
triggered the "flight to quality" that sent Treasury prices soaring and led to
a lack of liquidity in every other sector of the bond market. The subsequent
collapse of some highly leveraged global hedge funds, most notably Long Term
Capital Management, only exacerbated the situation. As a result, the prices of
corporate bonds and other "spread" products, which normally trade somewhat in
tandem with the Treasury market, moved in the opposite direction. Despite this
chain of events, the management team remained committed to the Fund's
traditionally aggressive overweighting in spread sectors throughout the
reporting period. The portfolio was dominated, in particular, by corporate
bonds and asset-backed securities.
For the year ended May 31, 1999, the Parkstone Limited Maturity Bond Fund
produced a total return of 4.84% (before sales charges) for Investor A Shares
and 5.12% for Institutional Shares. During the same period, the Merrill Lynch
1-3 Year Government/Corporate Index returned 5.4%.
Inevitable underperformance during the latter half of 1998 was short-lived
and, as expected, never approached the lows that characterized the intermediate
segment of the spread market. During this period, the Fund's short duration
also helped cushion the blows felt by the corporate and asset-backed sectors.
We continued to increase the portfolio's weighting in spread sectors, pushing
it up to approximately 90% by early January. As a result, investors were
rewarded when the Fund benefited from the subsequent rally in these markets.
As of May 31st, 47% of the Fund's net assets were invested in corporate
bonds, 32% in asset-backed securities, 13% in mortgage-backed securities, and
8% in U.S. Treasury securities. As of the same date, the average maturity of
the portfolio's holdings was 1.69 years with an average credit quality of
double-A.*
* The composition of the Portfolio is subject to change.
24
<PAGE> 26
The Parkstone Group of Funds
Portfolio Performance Overview
May 31, 1999
Limited Maturity Bond Fund
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[CHARTS APPEAR HERE]
Value of a $10,000 Investment
Merrill Lynch 1-3 Yr. Gov't/Corp. Index Investor A Institutional
--------------------------------------- ---------- -------------
5/89 10,000 9,728 10,000
5/90 10,930 10,457 10,749
5/91 12,140 11,475 11,796
5/92 13,325 12,597 12,950
5/93 14,269 13,612 13,994
5/94 14,572 13,782 14,192
5/95 15,674 14,758 15,221
5/96 16,510 15,378 15,901
5/97 17,613 16,334 16,938
5/98 18,852 17,284 17,967
5/99 19,870 18,120 18,887
Investor A* Institutional
----------- -------------
1 year 1.94% 5.12%
3 years 4.63% 5.90%
5 years 5.04% 5.88%
10 years 6.12% 6.57%
* Reflects the Maximum Sales Charge of 2.75%
Value of a $10,000 Investment
Merrill Lynch 1-3 Yr. Gov't/Corp. Index Investor B**
--------------------------------------- ------------
2/4/94 10,000 10,000
5/94 9,865 9,303
5/95 10,611 9,900
5/96 11,177 10,355
5/97 11,924 11,027
5/98 12,762 11,701
5/99 13,452 12,371
Investor B**
------------
1 year -0.93%
3 years 3.93%
5 years 4.81%
Inception (2/4/94) 4.08%
** Reflects the Maximum Applicable Contingent Deferred Sales Charge.
The Limited Maturity Bond Fund's performance is compared to the Merrill Lynch
1-3-Year Government/Corporate Bond Index, which represents the total return of
short-term government and corporate bonds. The index is unmanaged and does not
reflect the deduction of fees associated with a mutual fund, such as investment
management and fund accounting fees. The performance of the Parkstone Limited
Maturity Bond Fund reflects the deduction of fees for these value-added
services. Past performance is not predictive of future results. The investment
return and NAV will fluctuate, so that an investor's shares, when redeemed, may
be worth more or less than the original cost.
25
<PAGE> 27
The Parkstone Group of Funds
Portfolio Performance Overview
May 31, 1999
Intermediate Government Obligations Fund
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
During the second half of 1998, the economic meltdown in Asia and Russia led
investors to flee domestic and international equity markets for the safety of
U.S. Treasuries. This "flight to quality" caused U.S. Treasury prices to
skyrocket, but it led to a lack of liquidity in virtually every other sector of
the bond market.
For the year ended May 31, 1999, the Parkstone Intermediate Government
Obligations Fund produced a total return of 3.83% (before sales charges) for
Investor A Shares and 4.01% for Institutional Shares. During the same period,
the Salomon Brothers 1-10 Year Treasury Index returned 5.04% while the Lehman
Intermediate Government Bond Index returned 4.98%. As we did with the Parkstone
Bond Fund, we switched to a Lehman benchmark during the year to bring more
consistency to the family of indices against which we measure IMC managed fixed
income funds.
The Fund initially benefited from the environment due to its heavy weighting
in Treasuries. The shorter maturities of its holdings also subjected the Fund
to less of the credit curve. Our portfolio was still overweighted in Treasuries
as the global crisis eased in early 1999, erasing some of our gains as Treasury
prices began their descent from stratospheric heights. At the same time,
liquidity returned to the spread sectors. Year-over-year, the portfolio
produced an acceptable return that belied one of the most difficult fixed
income markets of the past 20 years.
Looking ahead, the management team faces an environment of strong domestic
growth and tight labor markets characterized by the Fed's decision to change
its policy bias toward tightening interest rates. We still believe that long
bond yields will stay in a range between 5.5 and 6.5% and have moved the
portfolio to a neutral duration position.
As of May 31st, 78% of the Fund's net assets were invested in U.S. Treasury
and Agency securities and 22% in mortgage-backed securities. As of the same
date, the average maturity of the portfolio's holdings was 4.37 years.*
* The composition of the portfolio is subject to change.
26
<PAGE> 28
The Parkstone Group of Funds
Portfolio Performance Overview
May 31, 1999
Intermediate Government Obligations Fund
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[CHARTS APPEAR HERE]
Value of a $10,000 Investment
Salomon Bros. 1-10 Yr. Lehman Bros. Int.
Treasury Index Gov't Index Investor A Institutional
-------------- ----------- ---------- -------------
5/89 10,000 10,000 9,524 10,000
5/90 10,896 10,903 10,223 10,733
5/91 12,179 12,201 11,329 11,895
5/92 13,565 13,586 12,503 13,128
5/93 14,941 14,949 13,622 14,305
5/94 15,135 15,133 13,673 14,381
5/95 16,494 16,508 14,821 15,608
5/96 17,246 17,256 15,293 16,144
5/97 18,452 18,484 16,224 17,176
5/98 20,047 20,070 17,438 18,507
5/99 21,058 21,070 18,106 19,248
Investor A* Institutional
----------- -------------
1 year -1.08% 4.01%
3 years 4.09% 6.04%
5 years 4.76% 6.00%
10 years 6.11% 6.77%
* Reflects the Maximum Sales Charge of 4.75%
Value of a $10,000 Investment
Salomon Bros. 1-10 Yr. Lehman Bros. Int.
Treasury Index Govt. Index Investor B**
-------------- ----------- ------------
2/4/94 10,000 10,000 10,000
5/94 9,666 9,663 9,189
5/95 10,534 10,540 9,896
5/96 11,014 11,018 10,258
5/97 11,785 11,803 10,912
5/98 12,803 12,815 11,766
5/99 13,448 13,453 12,314
Investor B**
------------
1 year -1.99%
3 years 4.09%
5 years 4.97%
Inception (2/4/94) 3.99%
** Reflects the Maximum Applicable Contingent Deferred Sales Charge.
The Intermediate Government Obligations Fund's performance is compared to the
Salomon Brothers 1-10-Year Treasury Index and the Lehman Brothers Intermediate
Government Index. The Salomon Brothers 1-10-Year Treasury Index represents the
performance of Treasury bonds in that maturity range. The Lehman Brothers
Intermediate Government Index represents the performance of U.S. Government
agencies and Treasuries within a 1-10 year maturity range. The indices are
unmanaged and do not reflect the deduction of fees associated with a mutual
fund, such as investment management and fund accounting fees. The performance
of the Parkstone Intermediate Government Obligations Fund reflects the
deduction of fees for these value-added services. Past performance is not
predictive of future results. The investment return and NAV will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than the
original cost.
27
<PAGE> 29
The Parkstone Group of Funds
Portfolio Performance Overview
May 31, 1999
U.S. Government Income Fund
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Going into the third quarter of 1998, the Fund's overweighting in U.S.
Treasury securities helped performance when mortgage-backed securities were
hurt by the global "flight to quality". At the time, Treasuries accounted for
approximately 25% of the Fund's allocation and Ginnie Maes for another 15%.
Ginnie Maes outperformed both Fannie Maes and Freddie Macs during this period
for essentially the same reason that Treasuries outperformed the spread
sectors. Fannie Maes and Freddie Macs, with their implied U.S. Treasury
guarantees, did not offer the same level of safety as Ginnie Maes, which are
backed by the full faith and credit of the U.S. Treasury.*
For the year ended May 31, 1999, the Parkstone U.S. Government Income Fund
produced a total return of 4.46% (before sales charges) for Investor A Shares
and 4.73% for Institutional Shares. During the same period, the Salomon
Brothers 1-10 Year Treasury Index returned 5.04% while the Lehman Brothers
Mortgage Backed Securities Index returned 4.88%. We switched to the latter
benchmark during the year to reflect the Fund's emphasis on mortgage-backed
securities and to offer our investors a more accurate means of measuring
performance.
We were cautious in scaling back our Treasury holdings due to our ongoing
concerns about economic problems in Asia, Russia, and, in particular, Brazil.
This decision diminished some of our first half gains as a flood of private
capital stabilized Brazil more quickly than we had anticipated--triggering a
rebound in the spread sectors. On balance, though, we gained more from the
Fund's underweighting in mortgage-backed securities than we lost by delaying
our entry back into that market.
With no liquidity issues on the horizon, the Fund currently retains only a
slight exposure to Treasuries. In addition, we anticipate keeping the
portfolio's duration neutral relative to its benchmark, based on our belief
that long bond yields are unlikely to exceed 6.5 percent.
As of May 31st, 95% of the Fund's net assets were invested in mortgage-backed
securities, 3% in U.S. Agency securities, 1% in Treasuries, and 1% in asset-
backed securities. As of the same date, the average maturity of the portfolio's
holdings was 6.37 years.*
* The composition of the portfolio is subject to change.
28
<PAGE> 30
The Parkstone Group of Funds
Portfolio Performance Overview
May 31, 1999
U.S. Government Income Fund
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[CHARTS APPEAR HERE]
Value of a $10,000 Investment
Salomon Bros. 1-10 Yr. Lehman Bros. Int.
Treasury Index Gov't Index Investor A Institutional
-------------- ----------- ---------- -------------
11/12/92 10,000 10,000 9,524 10,000
5/93 10,567 10,920 9,938 10,435
5/94 10,704 10,910 10,117 10,641
5/95 11,666 12,141 10,929 11,514
5/96 12,197 12,750 11,545 12,192
5/97 13,050 13,938 12,331 13,042
5/98 14,178 15,285 13,389 14,196
5/99 14,893 16,032 13,986 14,868
Investor A* Institutional
----------- -------------
1 year -0.48% 4.73%
3 years 4.89% 6.84%
5 years 5.66% 6.92%
Inception (11/12/92) 5.26% 6.24%
* Reflects the Maximum Sales Charge of 4.75%
Value of a $10,000 Investment
Salomon Bros. 1-10 Yr. Lehman Bros. Int.
Treasury Index Govt. Index Investor B**
-------------- ----------- ------------
2/4/94 10,000 10,000 10,000
5/94 9,666 9,992 9,305
5/95 10,534 11,119 10,009
5/96 11,014 11,677 10,627
5/97 11,785 12,765 11,384
5/98 12,803 13,999 12,372
5/99 13,449 14,682 13,031
Investor B**
------------
1 year -1.17%
3 years 4.92%
5 years 5.90%
Inception (2/4/94) 5.10%
** Reflects the Maximum Applicable Contingent Deferred Sales Charge.
The U.S. Government Income Fund's performance is compared to the Salomon
Brothers 1-10-Year Treasury Index and the Lehman Brothers Mortgage-Backed
Securities Index. The Salomon Brothers 1-10-Year Treasury Index represents the
performance of Treasury bonds in that maturity range. The Lehman Brothers
Mortgage-Backed Securities Index covers all fixed-rate securities backed by the
mortgage pools of all Government National Mortgage Associations. The indices
are unmanaged and do not reflect the deduction of fees associated with a mutual
fund, such as investment management and fund accounting fees. The performance
of the Parkstone U.S. Government Income Fund reflects the deduction of fees for
these value-added services. Past performance is not predictive of future
results. The investment return and NAV will fluctuate, so that an investor's
shares, when redeemed, may be worth more or less than the original cost.
29
<PAGE> 31
The Parkstone Group of Funds
Portfolio Performance Overview
May 31, 1999
Municipal Bond Fund
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
At year-end, 47.7% of the Parkstone Municipal Bond Fund was invested in
general obligation, pre-refunded, and escrowed-to-maturity securities, with the
remainder in revenue issues. The Fund retained its historic emphasis on
diversification, with holdings in 25 states. At the same time, we limited our
exposure to New York, California and other states of lesser credit quality to
less than 5% of the portfolio. The average maturity of the securities in the
Fund was 6.81 years as of May 31, 1999.* Because of our concerns about the
potential effect of deregulation on electric utility companies, the Fund holds
only a handful of these issues. All are from dominant players in strong
markets.
For the year ended May 31, 1999, the Parkstone Municipal Bond Fund returned
3.29% (before sales charges) for Investor A Shares and 3.56% for Institutional
Shares. Throughout the year, at least 99% of the Parkstone Municipal Bond Fund
was invested in high quality, triple-A or double-A issues. Frankly, we didn't
feel that the small spread between credit grades that characterized the past 12
months warranted adding any extra risk to the portfolio.
Looking ahead, we expect to see some upward movement in interest rates during
the coming year, but we believe the portfolio is well positioned to withstand
any negative impact this may have. For example, near-record highs in supply
over the past 12 months allowed us to negotiate advantageous terms with a
number of underwriters, increasing our holdings in premium coupon and non-
callable bonds. These will help stabilize the portfolio in adverse market
conditions, as will our high concentration of triple-A rated securities.
We continue to keep a close watch on the political environment as well.
Robust state and local balance sheets have prompted a wave of proposed
election-year tax breaks. Since the economy is unlikely to get much stronger
than it is now, we are wary of the long-term effects such tax breaks might have
on municipal revenues.
* The composition of the portfolio is subject to change.
30
<PAGE> 32
The Parkstone Group of Funds
Portfolio Performance Overview
May 31, 1999
Municipal Bond Fund
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[CHARTS APPEAR HERE]
Value of a $10,000 Investment
Lehman Brothers
Municipal Bond Index Investor A Institutional
-------------------- ---------- -------------
5/89 10,000 9,524 10,000
5/90 10,773 10,019 10,520
5/91 11,814 10,841 11,383
5/92 12,976 11,639 12,221
5/93 14,529 12,762 13,402
5/94 14,888 13,093 13,770
5/95 16,243 14,032 14,793
5/96 16,986 14,438 15,243
5/97 18,395 15,235 16,133
5/98 20,121 16,168 17,180
5/99 21,062 16,700 17,791
Investor A* Institutional
----------- -------------
1 year -1.57% 3.56%
3 years 3.28% 5.29%
5 years 3.97% 5.26%
Inception (11/12/92) 5.27% 5.93%
* Reflects the Maximum Sales Charge of 4.75%
Value of a $10,000 Investment
Lehman Bros.
Municipal Bond Index Investor B**
-------------------- ------------
2/4/94 10,000 10,000
5/94 9,506 9,233
5/95 10,372 9,841
5/96 10,846 10,158
5/97 11,745 10,725
5/98 12,848 11,421
5/99 13,448 11,910
Investor B**
------------
1 year -2.40%
3 years 3.22%
5 years 4.16%
Inception (2/4/94) 3.34%
** Reflects the Maximum Applicable Contingent Deferred Sales Charge.
Until recently the Fund's performance was compared to the Lehman Brothers
Mutual Fund Intermediate Index, due to the fact that the Lehman Brothers Mutual
Fund Intermediate Index has a short performance life, we have switched our
comparison back to the Lehman Brothers Municipal Bond Index, this will now
adequately compare us to a standardized benchmark. The index is unmanaged and
does not reflect the deduction of fees associated with a mutual fund, such as
investment management and fund accounting fees. The performance of the
Parkstone Municipal Bond Fund reflects the deduction of fees for these value-
added services. Past performance is not predictive of future results. The
investment return and NAV will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
31
<PAGE> 33
The Parkstone Group of Funds
Portfolio Performance Overview
May 31, 1999
Michigan Municipal Bond Fund
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supply of new issues is a major factor influencing the performance of state-
specific funds, and supply in Michigan was plentiful over the past 12 months.
This environment allowed us to add new issues to the Parkstone Michigan
Municipal Bond Fund at a very reasonable price. Thanks to strong broker
relationships, we were also able to increase our weightings in non-callable
bonds and bonds with premium coupon payments.
For the year ended May 31, 1999, the Parkstone Michigan Municipal Bond Fund
returned 3.38% (before sales charges) for Investor A Shares and 3.54% for
Institutional Shares. Throughout the year, at least 90% of the Parkstone
Michigan Municipal Bond Fund was invested in high-quality, triple-A or double-A
issues. We didn't feel that the small spread between credit grades that
characterized the past 12 months warranted adding any extra risk to the
portfolio.
At year-end, 31.8% of the portfolio was invested in general obligation, pre-
refunded, and escrowed-to-maturity securities. Of the Fund's revenue bond
holdings, hospitals accounted for 14.3%, utilities 14.1% and agencies 6.0%. No
more than 5% of assets were invested in any single issue. The average maturity
of the securities in the Fund was 7.26 years.*
We continue to keep approximately 26.7% of assets in school district bonds,
focused mainly on districts that participate in the state's School Bond Loan
Fund. Since the State of Michigan has agreed to honor their debt in the
unlikely event that these school districts cannot meet their obligations, these
bonds essentially offer a slightly higher coupon for the same low risk as the
state's double-A-1 general obligations.
We don't expect to witness much change in the Michigan economy in the near
future. The state's fortunes remain tied in part to those of the auto industry,
which continues to perform strongly. In fact, its health has been a key factor
in the two upgrades the state's credit rating has received over the past two
years.
* The composition of the portfolio is subject to change.
32
<PAGE> 34
The Parkstone Group of Funds
Portfolio Performance Overview
May 31, 1999
Michigan Municipal Bond Fund
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[CHARTS APPEAR HERE]
Value of a $10,000 Investment
Lehman Brothers
3-15 Year
Date Institutional Investor A* Municipal Index
- - ---- ------------- ----------- ---------------
7/2/90 10,000 9,524 10,000
5/91 10,714 10,204
6/91 10,884
5/92 11,532 10,982
6/92 12,065
5/93 12,624 12,022
6/93 13,338
5/94 12,993 12,364
6/94 13,487
5/95 13,976 13,257
6/95 14,608
5/96 14,473 13,696
6/96 15,499
5/97 15,368 14,514
6/97 16,684
5/98 16,459 15,491 18,097
5/99 17,042 16,014 18,958
Investor A* Institutional
----------- -------------
1 year -1.53% 3.54%
3 years 3.67% 5.60%
5 years 4.29% 5.57%
Inception (7/2/90) 5.43% 6.16%
* Reflects the Maximum Sales Charge of 4.75%
Value of a $10,000 Investment
Lehman Brothers
3-15 Year
Date Investor B** Municipal Index
- - ---- ------------ ---------------
2/4/94 10,000 10,000
5/94 9,192
6/94 9,566
5/95 9,820
6/95 10,405
5/96 10,189
6/96 11,040
5/97 10,824
6/97 11,884
5/98 11,588 12,891
5/99 12,084 13,505
Investor B**
------------
1 year -2.42%
3 years 3.62%
5 years 4.56%
Inception (2/4/94) 3.62%
** Reflects the Maximum Applicable Contingent Deferred Sales Charge.
Until recently the Fund's performance was compared to the Lehman Brothers
Mutual Fund Intermediate Index, due to the fact that the Lehman Brothers Mutual
Fund Intermediate Index has a short performance life, we have switched our
comparison back to the Shearson 3-15 Year Municipal Index which due to the
merger of Shearson and Lehman is now known as Lehman Brothers 3-15 Year
Municipal Index. The index is unmanaged and does not reflect the deduction of
fees associated with a mutual fund, such as investment management and fund
accounting fees. The performance of the Parkstone Michigan Municipal Bond Fund
reflects the deduction of fees for these value-added services. Past performance
is not predictive of future results. The investment return and NAV will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
33
<PAGE> 35
The Parkstone Group of Funds
Portfolio Performance Overview
May 31, 1999
Money Market Funds
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Parkstone Money Market Funds posted solid results during the year while
offering investors a high degree of safety and liquidity. The Fund's managers
do not predict interest rates. Instead, we continually make purchases
throughout the yield curve, which is positively sloped most of the time, while
maintaining necessary liquidity.
For the 12 months ended May 31, 1999, the Parkstone Prime Obligations Fund
produced a total return of 4.76% for institutional shareholders and 4.66% for
investors A. At year-end, 77.0% of the Fund was allocated to commercial paper,
14.0% to floating notes, 4.0% to certificates of deposit, 3.0% to repurchase
agreements, and 2.0% to government agencies. The average weighted maturity of
the Fund was 50 days.*
For the 12 months ended May 31, 1999, the Parkstone U.S. Government
Obligations Fund produced a total return of 4.64% for institutional
shareholders and 4.53% for retail investor A. At year-end, 68% of the Fund was
allocated to discount notes, 15.0% to floating notes, 11.0% to repurchase
agreements and 6.0% to medium term notes. The average weighted maturity of the
fund was 52 days.*
For the 12 months ended May 31, 1999, the Parkstone Treasury Money Market
Fund produced a total return of 4.61% for institutional shareholders and 4.51%
for investors A. At year-end, 75.0% of the Fund was allocated to repurchase
agreements, 22.0% to Treasury notes and 3.0% to Treasury bills. The average
weighted maturity of the fund was 44 days.*
For the 12 months ended May 31, 1999, the Parkstone Tax-Free Money Market
Fund produced a total return of 2.66% for institutional shareholders and 2.56%
for investors A. The average weighted maturity of the Fund was 36 days.* Tax-
exempt money markets were characterized by two factors: a sharp decrease in the
supply of new issues and unprecedented inflows of cash (i.e., not much supply
and a lot of demand).
* The composition of the portfolio is subject to change.
An investment in the Funds is neither insured nor guaranteed by the U.S.
Government. There can be no assurance that the Funds will be able to maintain a
stable net asset value of $1.00 per share
This material is authorized for distribution to prospective investors only when
accompanied or preceded by a prospectus.
The Parkstone Group of Funds are a family of mutual funds that are distributed
by SEI Investments Distribution Co. (SIDC). For more complete information on
any of The Parkstone Group of Funds, including fees, expenses and sales
charges, please call 1-800-451-8377 for a free prospectus. Please read the
prospectus carefully before investing or sending money.
34
<PAGE> 36
Report of Independent Accountants
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
To the Shareholders and Trustees of the Parkstone Group of Funds
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of portfolio investments, and the related statements of
operations, cash flows and changes in net assets and financial highlights
present fairly, in all material respects, the financial position of the
Parkstone Group of Funds, (comprising, respectively, the Prime Obligations
Fund, U.S. Government Obligations Fund, Tax-Free Fund, Treasury Fund, Small
Capitalization Fund, Mid Capitalization Fund, Large Capitalization Fund,
International Discovery Fund, Limited Maturity Bond Fund, Intermediate
Government Obligations Fund, U.S. Government Income Fund, Bond Fund, Municipal
Bond Fund, Michigan Municipal Bond Fund, Conservative Allocation Fund, Balanced
Allocation Fund, Aggressive Allocation Fund, and Equity Income Fund) at May 31,
1999, the results of each of their operations for the year ended May 31, 1999,
the cash flows of the Small Capitalization Fund, Mid Capitalization Fund, Large
Capitalization Fund, Limited Maturity Bond Fund, Intermediate Government
Obligations Fund, U.S. Government Income Fund, Bond Fund, Conservative
Allocation Fund, Balanced Allocation Fund, Aggressive Allocation Fund, and
Equity Income Fund for the year ended May 31, 1999, the changes in each of
their net assets for the year ended May 31, 1999, the eleven months ended May
31, 1998 and the year ended June 30, 1997 and their financial highlights for
each of the periods presented, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Parkstone
Group of Funds' management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of
these financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at May 31, 1999 by
correspondence with the custodian and brokers provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
Columbus, OH
July 22, 1999
35
<PAGE> 37
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
<TABLE>
<CAPTION>
(Amounts in Thousands, except Per Share Amounts)
Prime U.S. Government
Obligations Obligations Tax-Free Treasury
Fund Fund Fund Fund
------------ ---------------- ------------ ------------
<S> <C> <C> <C> <C>
Assets:
Investments, at
amortized cost (Cost
$625,176; $109,787;
$109,893 and $68,237,
respectively).......... $ 625,176 $ 109,787 $ 109,893 $ 68,237
Repurchase agreements,
at cost................ 21,094 14,014 -- 210,803
------------ ------------ ------------ ------------
Total investments....... 646,270 123,801 109,893 279,040
Cash.................... 1 1 -- 1
Interest and dividends
receivable............. 889 267 962 767
Receivable for capital
shares issued.......... 4 -- -- --
Receivable for
investments sold....... -- -- 1,750 --
Prepaid expenses and
other.................. 8 2 4 12
------------ ------------ ------------ ------------
Total Assets............ 647,172 124,071 112,609 279,820
------------ ------------ ------------ ------------
Liabilities:
Dividends payable....... 2,414 459 265 946
Payable for capital
shares redeemed........ 87 -- -- --
Payable for investments
purchased.............. -- -- 1,500 --
Accrued expenses and
other payables:
Investment advisory
fees.................. 239 46 40 97
Administration fees.... 112 22 19 30
Distribution fees-
Investor A............ 2 -- -- 1
Distribution fees-
Investor B............ 1 -- -- --
Other.................. 76 37 28 51
------------ ------------ ------------ ------------
Total Liabilities....... 2,931 564 1,852 1,125
------------ ------------ ------------ ------------
Net Assets:
Paid-in capital......... 644,241 123,508 110,755 278,694
Undistibuted
(distributions in
excess of) net
investment income...... -- -- -- (1)
Accumulated
undistributed net
realized gains (losses)
on investment
transactions........... -- (1) 2 2
------------ ------------ ------------ ------------
Net Assets.............. $ 644,241 $ 123,507 $ 110,757 $ 278,695
============ ============ ============ ============
Net Assets
Investor A............. $ 14,924 $ 2,032 $ 621 $ 9,161
Investor B............. 764 -- -- --
Institutional.......... 628,553 121,475 110,136 269,534
------------ ------------ ------------ ------------
Total................ $ 644,241 $ 123,507 $ 110,757 $ 278,695
============ ============ ============ ============
Outstanding units of
beneficial interest
(shares)
Investor A............. 14,919 2,029 619 9,151
Investor B............. 764 -- -- --
Institutional.......... 628,552 121,444 110,130 269,541
------------ ------------ ------------ ------------
Total................ 644,235 123,473 110,749 278,692
============ ============ ============ ============
Net asset value
Investor A--offering
and redemption price
per share............. $1.00 $1.00 $1.00 $1.00
===== ===== ===== =====
Investor B--offering
price per share*...... $1.00 $ -- $ -- $ --
===== ===== ===== =====
Institutional--
offering and
redemption price per
share ................ $1.00 $1.00 $1.00 $1.00
===== ===== ===== =====
</TABLE>
- - -------
* Redemption price per share varies by length of time shares are held.
See notes to financial statements.
36
<PAGE> 38
Statements of Assets and Liabilities
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
<TABLE>
<CAPTION>
(Amounts in Thousands, except Per Share Amounts)
Small Mid Large International
Capitalization Capitalization Capitalization Discovery
Fund Fund Fund Fund
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Assets:
Investments, at value
(Cost $286,820;
$346,442; $313,548 and
$254,498,
respectively).......... $321,933 $436,851 $485,359 $299,394
Repurchase agreements,
at cost................ 29,000 30,266 5,660 --
-------- -------- -------- --------
Total investments....... 350,933 467,117 491,019 299,394
Cash.................... 1,414 -- -- --
Interest and dividends
receivable............. 107 143 268 920
Receivable for capital
shares issued.......... 70 32 33 1
Receivable for
investments sold....... 7,045 4,917 4,927 --
Tax reclaim receivable.. -- -- -- 342
Foreign currency (Cost
$0, $0, $0 and $23,
respectively).......... -- -- -- 23
Receivable for foreign
currency contracts..... -- -- -- 414
Net receivable for
variation margin on
futures contracts...... 390 -- -- --
Prepaid expenses and
other.................. 6 1 8 6
-------- -------- -------- --------
Total Assets............ 359,965 472,210 496,255 301,100
-------- -------- -------- --------
Liabilities:
Payable for return of
collateral received for
securities on loan..... 49,997 80,266 45,660 --
Payable for capital
shares redeemed........ 236 156 89 95
Payable for investments
purchased.............. 6,485 4,248 2,236 --
Accrued expenses and
other payables:
Investment advisory
fees.................. 286 361 336 334
Administration fees.... 54 68 79 53
Distribution fees--
Investor A............ 14 11 5 6
Distribution fees--
Investor B............ 18 16 13 7
Other.................. 187 117 89 323
-------- -------- -------- --------
Total Liabilities....... 57,277 85,243 48,507 818
-------- -------- -------- --------
Net Assets:
Paid-in capital......... 267,568 227,539 220,321 214,763
Undistibuted
(distributions in
excess of) net
investment income...... -- -- -- (481)
Net unrealized
appreciation
(depreciation) from
investments and
translation of assets
and liabilities in
foreign currencies..... 37,389 90,409 171,811 45,278
Undistributed net
realized gains (losses)
from investment and
foreign currency
transactions........... (2,269) 69,019 55,616 40,722
-------- -------- -------- --------
Net Assets.............. $302,688 $386,967 $447,748 $300,282
======== ======== ======== ========
Net Assets
Investor A............. $ 57,813 $ 50,605 $ 24,513 $ 24,914
Investor B............. 18,736 16,629 14,128 7,604
Institutional.......... 226,139 319,733 409,107 267,764
-------- -------- -------- --------
Total................ $302,688 $386,967 $447,748 $300,282
======== ======== ======== ========
Outstanding units of
beneficial interest
(shares)
Investor A............. 3,127 3,589 1,246 1,682
Investor B............. 1,054 1,266 735 535
Institutional.......... 11,973 22,401 20,653 17,812
-------- -------- -------- --------
Total................ 16,154 27,256 22,634 20,029
======== ======== ======== ========
Net asset value
Investor A--redemption
price per share....... $18.49 $14.10 $19.67 $14.81
====== ====== ====== ======
Investor B--offering
price per share*...... $17.78 $13.14 $19.21 $14.20
====== ====== ====== ======
Institutional--
offering and
redemption price for
share................. $18.89 $14.27 $19.81 $15.03
====== ====== ====== ======
Maximum Sales Charge--
Investor A............. 5.50% 5.50% 5.50% 5.50%
===== ===== ===== =====
Maximum Offering Price
(100%/(100%--Maximum
Sales Charge) of net
asset value adjusted to
nearest cent) per
share--Investor A...... $19.57 $14.92 $20.81 $15.67
====== ====== ====== ======
</TABLE>
- - -------
* Redemption price per share varies by length of time shares are held.
See notes to financial statements.
37
<PAGE> 39
Statements of Assets and Liabilities
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
<TABLE>
<CAPTION>
(Amounts in Thousands, except Per Share
Amounts)
Intermediate U.S.
Limited Government Government
Maturity Bond Obligations Income Bond
Fund Fund Fund Fund
------------- ------------ ---------- --------
<S> <C> <C> <C> <C>
Assets:
Investments, at value (Cost
$148,734; $145,600; $206,042
and $426,239 respectively)... $147,128 $144,170 $204,140 $417,561
Repurchase agreements, at
cost......................... 8,071 24,143 6,647 13,859
-------- -------- -------- --------
Total investments............. 155,199 168,313 210,787 431,420
Cash.......................... -- -- -- --
Interest and dividends
receivable................... 2,063 1,798 1,593 3,595
Receivable for capital shares
issued....................... 1 7 2 1
Receivable for investments
sold......................... -- 32 310 13,430
Prepaid expenses and other.... 6 8 9 8
-------- -------- -------- --------
Total Assets.................. 157,269 170,158 212,701 448,454
-------- -------- -------- --------
Liabilities:
Payable for return of
collateral received for
securities on loan........... 8,071 24,143 6,647 48,859
Dividends payable............. 705 627 981 1,812
Payable for capital shares
redeemed..................... 138 48 195 91
Payable for investments
purchased.................... -- -- -- 14,611
Accrued expenses and other
payables:
Investment advisory fees..... 75 93 84 247
Administration fees.......... 23 23 32 60
Distribution fees--Investor
A........................... 5 3 8 3
Distribution fees--Investor
B........................... 1 1 15 4
Other........................ 42 43 63 73
-------- -------- -------- --------
Total Liabilities............. 9,060 24,981 8,025 65,760
-------- -------- -------- --------
Net Assets:
Paid-in capital............... 158,819 157,792 212,626 393,584
Undistibuted (distributions in
excess of) net investment
income....................... 1 -- -- 2
Net unrealized appreciation
(depreciation) on
investments.................. (1,606) (1,430) (1,902) (8,678)
Accumulated undistributed net
realized gains (losses) on
investment transactions...... (9,005) (11,185) (6,048) (2,214)
-------- -------- -------- --------
Net Assets.................... $148,209 $145,177 $204,676 $382,694
======== ======== ======== ========
Net Assets
Investor A................... $ 24,246 $ 10,244 $ 38,190 $ 11,916
Investor B................... 826 1,255 16,373 4,548
Institutional................ 123,137 133,678 150,113 366,230
-------- -------- -------- --------
Total...................... $148,209 $145,177 $204,676 $382,694
======== ======== ======== ========
Outstanding units of
beneficial interest (shares)
Investor A................... 2,573 1,049 4,183 1,231
Investor B................... 88 129 1,798 469
Institutional................ 13,067 13,690 16,441 37,636
-------- -------- -------- --------
Total...................... 15,728 14,868 22,422 39,336
======== ======== ======== ========
Net asset value
Investor A--redemption price
per share................... $9.42 $9.77 $9.13 $9.68
===== ===== ===== =====
Investor B--offering price
per share*.................. $9.42 $9.74 $9.11 $9.69
===== ===== ===== =====
Institutional--offering and
redemption price per share.. $9.42 $9.76 $9.13 $9.73
===== ===== ===== =====
Maximum Sales Charge--Investor
A............................ 2.75% 4.75% 4.75% 4.75%
===== ===== ===== =====
Maximum Offering Price
(100%/(100%--Maximum Sales
Charge) of net asset value
adjusted to nearest cent) per
share--Investor A............ $9.69 $10.26 $9.59 $10.16
===== ====== ===== ======
</TABLE>
- - -------
* Redemption price per share varies by length of time shares are held.
See notes to financial statements.
38
<PAGE> 40
Statements of Assets and Liabilities
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
<TABLE>
<CAPTION>
(Amounts in Thousands, except Per Share Amounts)
Michigan
Municipal Municipal Conservative Balanced
Bond Bond Allocation Allocation
Fund Fund Fund Fund
------------ ------------ -------------- ------------
<S> <C> <C> <C> <C>
Assets:
Investments, at value
(Cost $101,827;
$212,214; $18,956 and
$179,906,
respectively).......... $ 104,267 $ 222,548 $ 19,653 $ 205,752
Repurchase agreements,
at cost................ -- -- 7,086 5,235
------------ ------------ ----------- ------------
Total investments....... 104,267 222,548 26,739 210,987
Cash.................... -- -- -- 120
Interest and dividends
receivable............. 1,721 2,626 177 859
Receivable for capital
shares issued.......... -- -- -- 24
Receivable for
investments sold....... -- -- 28 3,463
Tax reclaim receivable.. -- -- -- 22
Foreign currency (Cost
$0, $0, $0 and $1,
respectively).......... -- -- -- 1
Prepaid expenses and
other.................. 9 1 -- 3
------------ ------------ ----------- ------------
Total Assets............ 105,997 225,175 26,944 215,479
------------ ------------ ----------- ------------
Liabilities:
Payable for return of
collateral received for
securities on loan..... -- -- 7,086 15,235
Dividends payable....... 349 813 -- --
Payable for capital
shares redeemed........ 216 105 -- 68
Payable for investments
purchased.............. 1,007 -- -- 1,223
Accrued expenses and
other payables:
Investment advisory
fees.................. 53 113 13 138
Administration fees.... 12 25 3 35
Distribution fees--
Investor A............ 2 6 -- 3
Distribution fees--
Investor B............ -- 3 -- 5
Other.................. 35 52 17 86
------------ ------------ ----------- ------------
Total Liabilities....... 1,674 1,117 7,119 16,793
------------ ------------ ----------- ------------
Net Assets:
Paid-in capital......... 101,616 213,550 19,032 159,886
Undistributed
(distributions in
excess of) net
investment income...... (2) (19) 55 340
Net unrealized
appreciation
(depreciation) from
investments and
translation of assets
and liabilities in
foreign currencies..... 2,440 10,334 697 25,843
Undistributed net
realized gains (losses)
from investment and
foreign currency
transactions........... 269 193 41 12,617
------------ ------------ ----------- ------------
Net Assets.............. $ 104,323 $ 224,058 $ 19,825 $ 198,686
============ ============ =========== ============
Net Assets
Investor A............. $ 6,886 $ 28,305 $ -- $ 15,760
Investor B............. 491 3,217 -- 5,723
Institutional.......... 96,946 192,536 19,825 177,203
------------ ------------ ----------- ------------
Total................ $ 104,323 $ 224,058 $ 19,825 $ 198,686
============ ============ =========== ============
Outstanding units of
beneficial interest
(shares)
Investor A............. 663 2,595 -- 1,166
Investor B............. 47 295 -- 423
Institutional.......... 9,334 17,645 1,829 13,124
------------ ------------ ----------- ------------
Total................ 10,044 20,535 1,829 14,713
============ ============ =========== ============
Net asset value
Investor A--redemption
price per share....... $10.38 $10.91 $ -- $13.52
====== ====== ====== ======
Investor B--offering
price per share*...... $10.36 $10.92 $ -- $13.52
====== ====== ====== ======
Institutional--
offering and
redemption price per
share................. $10.39 $10.91 $10.84 $13.50
====== ====== ====== ======
Maximum Sales Charge--
Investor A............. 4.75% 4.75% -- 4.75%
====== ====== ====== ========
Maximum Offering Price
(100%/(100%--Maximum
Sales Charge) of net
asset value adjusted to
nearest cent) per
share--Investor A...... $10.90 $11.45 $ -- $14.19
====== ====== ====== ======
</TABLE>
- - -------
* Redemption price per share varies by length of time shares are held.
See notes to financial statements.
39
<PAGE> 41
Statements of Assets and Liabilities
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
<TABLE>
<CAPTION>
(Amounts in
Thousands, except
Per Share Amounts)
Aggressive Equity
Allocation Income
Fund Fund
---------- --------
<S> <C> <C>
Assets:
Investments, at value (Cost $22,953 and $280,615,
respectively)............................................ $25,205 $366,017
Repurchase agreements, at cost............................ 3,599 12,423
------- --------
Total investments......................................... 28,804 378,440
Cash...................................................... 10 320
Interest and dividends receivable......................... 100 857
Receivable for capital shares issued...................... -- 4
Receivable for investments sold........................... 410 --
Tax reclaim receivable.................................... 6 --
Prepaid expenses and other................................ -- 8
------- --------
Total Assets.............................................. 29,330 379,629
------- --------
Liabilities:
Payable for return of collateral received for securities
on loan.................................................. 4,147 52,423
Payable for capital shares redeemed....................... -- 103
Accrued expenses and other payables:
Investment advisory fees................................. 20 306
Administration fees...................................... 4 57
Distribution fees-Investor A............................. -- 18
Distribution fees-Investor B............................. -- 21
Other.................................................... 31 113
------- --------
Total Liabilities......................................... 4,202 53,041
------- --------
Net Assets:
Paid-in capital........................................... 19,925 187,319
Undistibuted (distributions in excess of) net investment
income................................................... 43 444
Net unrealized appreciation (depreciation) from
investments and translation of assets and liabilities in
foreign currencies....................................... 2,252 85,402
Undistributed net realized gains (losses) from investment
and foreign currency transactions........................ 2,908 53,423
------- --------
Net Assets................................................ $25,128 $326,588
======= ========
Net Assets
Investor A............................................... $ -- $ 82,733
Investor B............................................... -- 22,456
Institutional............................................ 25,128 221,399
------- --------
Total.................................................. $25,128 $326,588
======= ========
Outstanding units of beneficial interest (shares)
Investor A............................................... -- 4,522
Investor B............................................... -- 1,238
Institutional............................................ 2,186 12,168
------- --------
Total.................................................. 2,186 17,928
======= ========
Net asset value
Investor A--redemption price per share................... $ -- $18.30
====== ======
Investor B--offering price per share*.................... $ -- $18.15
====== ======
Institutional--offeing and redemption price per share.... $ 11.50 $18.20
======= ======
Maximum Sales Charge--Investor A.......................... -- 5.50%
======= ======
Maximum Offering Price (100%/(100%--Maximum Sales Charge)
of net asset value adjusted to nearest cent) per share--
Investor A............................................... $ -- $19.37
====== ======
</TABLE>
- - -------
* Redemption price per share varies by length of time shares are held.
See notes to financial statements.
40
<PAGE> 42
Statements of Operations
- --------------------------------------------------------------------------------
The Parkstone Group of Funds For the Year Ended May 31, 1999
<TABLE>
<CAPTION>
(Amount in Thousands)
Prime U.S. Government
Obligations Obligations Tax-Free Treasury
Fund Fund Fund Fund
----------- --------------- -------- --------
<S> <C> <C> <C> <C>
Investment Income:
Interest income.................. $40,007 $13,111 $4,125 $21,509
Dividend income.................. 14 5 100 3
------- ------- ------ -------
Total Income..................... 40,021 13,116 4,225 21,512
------- ------- ------ -------
Expenses:
Investment advisory fees......... 3,000 986 508 1,657
Administration fees.............. 1,500 493 254 828
Distribution fees--Investor A.... 159 182 54 275
Distribution fees--Investor B.... 7 -- -- --
Custodian fees................... 55 25 17 37
Accounting fees.................. 145 53 34 79
Trustees' fees and expenses...... 15 5 2 9
Transfer agent fees.............. 124 64 33 72
Other............................ 206 64 32 126
------- ------- ------ -------
Total Expenses................... 5,211 1,872 934 3,083
Expenses voluntarily reduced..... (231) (155) (55) (570)
------- ------- ------ -------
Net Expenses..................... 4,980 1,717 879 2,513
------- ------- ------ -------
Net Investment Income............ 35,041 11,399 3,346 18,999
------- ------- ------ -------
Realized/Unrealized Gains
(Losses) on Investments:
Net realized gains (losses) from
investment transactions......... -- -- 3 24
------- ------- ------ -------
Change in net assets resulting
from operations................. $35,041 $11,399 $3,349 $19,023
======= ======= ====== =======
</TABLE>
See notes to financial statements.
41
<PAGE> 43
Statements of Operations
- --------------------------------------------------------------------------------
The Parkstone Group of Funds For the Year Ended May 31, 1999
<TABLE>
<CAPTION>
(Amounts in Thousands)
Small Mid Large International
Capitalization Capitalization Capitalization Discovery
Fund Fund Fund Fund
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Investment Income:
Interest income......... $ 1,028 $ 568 $ 43 $ --
Dividend income......... 1,000 1,967 3,166 5,742
Securities lending
income................. 461 282 127 --
Foreign tax withholding. -- -- -- (483)
--------- --------- ------- --------
Total Income............ 2,489 2,817 3,336 5,259
--------- --------- ------- --------
Expenses:
Investment advisory
fees................... 4,620 4,990 3,460 4,475
Administration fees..... 924 998 865 768
Distribution fees--
Investor A............. 248 166 59 83
Distribution fees--
Investor B............. 287 199 127 102
Distribution fees--
Investor C*............ 31 6 1 2
Custodian fees.......... 34 38 36 293
Accounting fees......... 127 134 120 169
Trustees' fees and
expenses............... 13 11 6 8
Transfer agent fees..... 479 295 167 221
Other................... 103 109 124 95
--------- --------- ------- --------
Total Expenses.......... 6,866 6,946 4,965 6,216
--------- --------- ------- --------
Net Investment Income
(Loss)................. (4,377) (4,129) (1,629) (957)
--------- --------- ------- --------
Realized/Unrealized
Gains (Losses) on
Investments:
Net realized gains
(losses) from
investment and foreign
currency transactions.. (26) 134,749 70,480 55,634
Net change in unrealized
appreciation
(depreciation) from
investments and
translation of assets
and liabilities in
foreign currencies..... (109,493) (104,609) 22,143 (80,335)
--------- --------- ------- --------
Net realized/unrealized
gains (losses) from
investments and foreign
currencies............. (109,519) 30,140 92,623 (24,701)
--------- --------- ------- --------
Change in net assets
resulting from
operations............. $(113,896) $ 26,011 $90,994 $(25,658)
========= ========= ======= ========
</TABLE>
- - -------
* Investor C class of shares closed on August 28, 1998.
See notes to financial statements.
42
<PAGE> 44
Statements of Operations
- --------------------------------------------------------------------------------
The Parkstone Group of Funds For the Year Ended May 31, 1999
<TABLE>
<CAPTION>
(Amounts in Thousands)
Intermediate U.S.
Limited Government Government
Maturity Bond Obligations Income Bond
Fund Fund Fund Fund
------------- ------------ ---------- --------
<S> <C> <C> <C> <C>
Investment Income:
Interest income................ $11,558 $10,314 $15,014 $ 29,741
Dividend income................ 112 -- 161 554
Securities lending income...... 37 46 49 354
------- ------- ------- --------
Total Income................... 11,707 10,360 15,224 30,649
------- ------- ------- --------
Expenses:
Investment advisory fees....... 1,300 1,267 1,631 3,502
Administration fees............ 351 342 441 946
Distribution fees--Investor A.. 80 31 114 36
Distribution fees--Investor B.. 12 16 206 59
Distribution fees--Investor C*. 5 -- 1 1
Custodian fees................. 21 21 24 38
Accounting fees................ 66 76 99 133
Trustees' fees and expenses.... 3 3 4 8
Transfer agent fees............ 77 79 130 124
Other.......................... 66 57 75 121
------- ------- ------- --------
Total Expenses................. 1,981 1,892 2,725 4,968
Expenses voluntarily reduced... (416) (148) (742) (412)
------- ------- ------- --------
Net Expenses................... 1,565 1,744 1,983 4,556
------- ------- ------- --------
Net Investment Income.......... 10,142 8,616 13,241 26,093
------- ------- ------- --------
Realized/Unrealized Gains
(Losses) on Investments:
Net realized gains (losses)
from investment transactions.. 691 653 1,493 2,425
Net change in unrealized
appreciation (depreciation)
from investments.............. (1,757) (1,892) (4,469) (13,814)
------- ------- ------- --------
Net realized/unrealized gains
(losses) on investments....... (1,066) (1,239) (2,976) (11,389)
------- ------- ------- --------
Change in net assets resulting
from operations............... $ 9,076 $ 7,377 $10,265 $ 14,704
======= ======= ======= ========
</TABLE>
- - -------
* Investor C class of shares closed on August 28, 1998.
See notes to financial statements.
43
<PAGE> 45
Statements of Operations
- --------------------------------------------------------------------------------
The Parkstone Group of Funds For the Year Ended May 31, 1999
<TABLE>
<CAPTION>
(Amounts in Thousands)
Michigan
Municipal Municipal Conservative Balanced
Bond Bond Allocation Allocation
Fund Fund Fund Fund
--------- --------- ------------ ----------
<S> <C> <C> <C> <C>
Investment Income:
Interest income.................... $5,531 $11,758 $ 771 $ 7,302
Dividend income.................... 35 71 60 1,248
Securities lending income.......... -- -- 7 103
Foreign tax withholding............ -- -- -- (29)
------ ------- ----- --------
Total Income....................... 5,566 11,829 838 8,624
------ ------- ----- --------
Expenses:
Investment advisory fees........... 909 1,763 186 2,522
Administration fees................ 246 476 37 504
Distribution fees--Investor A...... 20 82 -- 45
Distribution fees--Investor B...... 6 35 -- 72
Distribution fees--Investor C*..... -- -- -- 2
Custodian fees..................... 10 15 1 73
Accounting fees.................... 61 95 12 102
Trustees' fees and expenses........ 3 4 -- 5
Transfer agent fees................ 31 78 8 124
Other.............................. 40 61 10 105
------ ------- ----- --------
Total Expenses..................... 1,326 2,609 254 3,554
Expenses voluntarily reduced....... (353) (683) (56) (630)
------ ------- ----- --------
Net Expenses....................... 973 1,926 198 2,924
------ ------- ----- --------
Net Investment Income.............. 4,593 9,903 640 5,700
------ ------- ----- --------
Realized/Unrealized Gains (Losses)
on Investments:
Net realized gains (losses) from
investment and foreign currency
transactions...................... 428 981 518 15,226
Net change in unrealized
appreciation (depreciation) from
investments and translation of
assets and liabilities in foreign
currencies........................ (438) (2,440) (330) (12,513)
------ ------- ----- --------
Net realized/unrealized gains
(losses) on investments and
foreign currencies................ (10) (1,459) 188 2,713
------ ------- ----- --------
Change in net assets resulting from
operations........................ $4,583 $ 8,444 $ 828 $ 8,413
====== ======= ===== ========
</TABLE>
- - -------
* Investor C class of shares closed on August 28, 1998.
See notes to financial statements.
44
<PAGE> 46
Statements of Operations
- --------------------------------------------------------------------------------
The Parkstone Group of Funds For the Year Ended May 31, 1999
<TABLE>
<CAPTION>
(Amounts in Thousands)
Aggressive Equity
Allocation Income
Fund Fund
------------- -----------
<S> <C> <C>
Investment Income:
Interest income...................................... $ 542 $ 658
Dividend income...................................... 217 9,268
Securities lending income............................ 9 198
Foreign tax withholding.............................. (5) --
---------- -----------
Total Income......................................... 763 10,124
---------- -----------
Expenses:
Investment advisory fees............................. 295 3,577
Administration fees.................................. 59 715
Distribution fees--Investor A........................ -- 226
Distribution fees--Investor B........................ -- 247
Distribution fees--Investor C*....................... -- 3
Custodian fees....................................... 23 30
Accounting fees...................................... 30 103
Trustees' fees and expenses.......................... 1 6
Transfer agent fees.................................. 10 290
Other................................................ 16 87
---------- -----------
Total Expenses....................................... 434 5,284
Expenses voluntarily reduced......................... (44) --
---------- -----------
Net Expenses......................................... 390 5,284
---------- -----------
Net Investment Income................................ 373 4,840
---------- -----------
Realized/Unrealized Gains (Losses) on Investments:
Net realized gains (losses) from investment and
foreign currency transactions....................... 2,971 94,130
Net change in unrealized appreciation (depreciation)
from investments and translation of assets and
liabilities in foreign currencies................... (2,958) (61,914)
---------- -----------
Net realized/unrealized gains (losses) on investments
and foreign currencies.............................. 13 32,216
---------- -----------
Change in net assets resulting from operations....... $ 386 $ 37,056
========== ===========
</TABLE>
- - -------
* Investor C class of shares closed on August 28, 1998.
See notes to financial statements.
45
<PAGE> 47
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
(Amounts in Thousands)
U.S. Government
Prime Obligations Fund Obligations Fund
--------------------------------------- -----------------------------------
For the For the
For the eleven months For the For the eleven months For the
year ended ended year ended year ended ended year ended
May 31, May 31, June 30, May 31, May 31, June 30,
1999 1998 1997 1999 1998 1997
---------- ------------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
From Investment
Activities:
Operations:
Net investment income.. $ 35,041 $ 40,253 $ 42,020 $ 11,399 $ 16,969 $ 20,287
Net realized gains
(losses) from
investment
transactions.......... -- -- 6 -- 7 (3)
---------- ---------- ---------- -------- -------- ----------
Change in net assets
resulting from
operations............. 35,041 40,253 42,026 11,399 16,976 20,284
---------- ---------- ---------- -------- -------- ----------
Distributions to
Investor A
Shareholders:
From net investment
income................ (3,035) (9,052) (8,431) (3,460) (8,537) (9,313)
Distributions to
Investor B
Shareholders:
From net investment
income................ (26) (6)(a) -- -- -- --
Distributions to
Institutional
Shareholders:
From net investment
income................ (31,980) (31,193) (33,589) (7,939) (8,396) (10,974)
---------- ---------- ---------- -------- -------- ----------
Change in net assets
resulting from
distributions.......... (35,041) (40,251) (42,020) (11,399) (16,933) (20,287)
---------- ---------- ---------- -------- -------- ----------
Capital Transactions:
Proceeds from shares
issued................ 1,494,362 2,013,196 1,684,473 535,685 878,515 1,128,455
Dividends reinvested... 3,675 8,892 8,193 569 1,315 1,537
Cost of shares
redeemed.............. (1,763,064) (1,985,192) (1,563,855) (767,341) (947,523) (1,102,140)
---------- ---------- ---------- -------- -------- ----------
Change in net assets
from capital
transactions........... (265,027) 36,896 128,811 (231,087) (67,693) 27,852
---------- ---------- ---------- -------- -------- ----------
Change in net assets.... (265,027) 36,898 128,817 (231,087) (67,650) 27,849
Net Assets:
Beginning of period.... 909,268 872,370 743,553 354,594 422,244 394,395
---------- ---------- ---------- -------- -------- ----------
End of period.......... $ 644,241 $ 909,268 $ 872,370 $123,507 $354,594 $ 422,244
========== ========== ========== ======== ======== ==========
</TABLE>
- - -------
(a)The Fund commenced offering Class B Shares on September 26, 1997.
See notes to financial statements.
46
<PAGE> 48
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
(Amounts in Thousands)
Tax-Free Fund Treasury Fund
----------------------------------- -------------------------------------
For the For the
For the eleven months For the For the eleven months For the
year ended ended year ended year ended ended year ended
May 31, May 31, June 30, May 31, May 31, June 30,
1999 1998 1997 1999 1998 1997
---------- ------------- ---------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
From Investment
Activities:
Operations:
Net investment income.. $ 3,346 $ 4,624 $ 4,686 $ 18,999 $ 23,648 $ 19,396
Net realized gains
(losses) from
investment
transactions.......... 3 (1) (28) 24 31 46
-------- -------- -------- ---------- ---------- ----------
Change in net assets
resulting from
operations............. 3,349 4,623 4,658 19,023 23,679 19,442
-------- -------- -------- ---------- ---------- ----------
Distributions to
Investor A
Shareholders:
From net investment
income................ (584) (1,482) (1,450) (5,234) (8,907) (6,104)
In excess of net
investment income..... -- -- -- (9) -- --
From net realized gains
from investment
transactions.......... -- -- -- -- (20) --
Distributions to
Institutional
Shareholders:
From net investment
income................ (2,762) (3,142) (3,236) (13,765) (14,741) (13,292)
In excess of net
investment income..... -- -- -- (24) -- --
From net realized gains
from investment
transactions.......... -- -- -- -- (32) --
-------- -------- -------- ---------- ---------- ----------
Change in net assets
resulting from
distributions.......... (3,346) (4,624) (4,686) (19,032) (23,700) (19,396)
-------- -------- -------- ---------- ---------- ----------
Capital Transactions:
Proceeds from shares
issued................ 253,902 442,581 407,038 1,827,862 1,682,410 1,723,599
Dividends reinvested... 462 914 824 318 554 627
Cost of shares
redeemed.............. (302,778) (440,676) (399,351) (2,111,268) (1,621,534) (1,606,028)
-------- -------- -------- ---------- ---------- ----------
Change in net assets
from capital
transactions........... (48,414) 2,819 8,511 (283,088) 61,430 118,198
-------- -------- -------- ---------- ---------- ----------
Change in net assets.... (48,411) 2,818 8,483 (283,097) 61,409 118,244
Net Assets:
Beginning of period.... 159,168 156,350 147,867 561,792 500,383 382,139
-------- -------- -------- ---------- ---------- ----------
End of period.......... $110,757 $159,168 $156,350 $ 278,695 $ 561,792 $ 500,383
======== ======== ======== ========== ========== ==========
</TABLE>
See notes to financial statements.
47
<PAGE> 49
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
(Amounts in Thousands)
Small Capitalization Fund Mid Capitalization Fund
------------------------------------ ------------------------------------
For the For the
For the eleven months For the For the eleven months For the
year ended ended year ended year ended ended year ended
May 31, May 31, June 30, May 31, May 31, June 30,
1999 1998 1997 1999 1998 1997
---------- ------------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
From Investment
Activities:
Operations:
Net investment income
(loss)................ $ (4,377) $ (8,901) $ (7,542) $ (4,129) $ (5,117) $ (5,674)
Net realized gains
(losses) from
investment
transactions.......... (26) 124,813 47,197 134,749 108,493 90,985
Net change in
unrealized
appreciation
(depreciation) from
investments........... (109,493) (119,617) (53,844) (104,609) 3,191 (46,690)
--------- --------- --------- --------- --------- ---------
Change in net assets
resulting from
operations............. (113,896) (3,705) (14,189) 26,011 106,567 38,621
--------- --------- --------- --------- --------- ---------
Distributions to
Investor A
Shareholders:
From net realized gains
from investment
transactions.......... (10,802) (8,917) (25,439) (8,203) (15,794) (23,501)
Distributions to
Investor B
Shareholders:
From net realized gains
from investment
transactions.......... (3,334) (2,324) (5,903) (2,657) (4,492) (5,643)
Distributions to
Investor C
Shareholders(a):
From net realized gains
from investment
transactions.......... -- (759) (1,578) -- (409) (458)
Distributions to
Institutional
Shareholders:
From net realized gains
from investment
transactions.......... (36,347) (27,708) (78,723) (52,517) (97,196) (167,629)
--------- --------- --------- --------- --------- ---------
Change in net assets
resulting from
distributions.......... (50,483) (39,708) (111,643) (63,377) (117,891) (197,231)
--------- --------- --------- --------- --------- ---------
Capital Transactions:
Proceeds from shares
issued................ 494,145 901,362 1,051,669 147,939 344,908 344,245
Dividends reinvested... 40,154 31,608 85,417 49,480 87,033 140,424
Cost of shares
redeemed.............. (814,361) (995,717) (909,908) (407,357) (435,074) (411,014)
--------- --------- --------- --------- --------- ---------
Change in net assets
from capital
transactions........... (280,062) (62,747) 227,178 (209,938) (3,133) 73,655
--------- --------- --------- --------- --------- ---------
Change in net assets.... (444,441) (106,160) 101,346 (247,304) (14,457) (84,955)
Net Assets:
Beginning of period.... 747,129 853,289 751,943 634,271 648,728 733,683
--------- --------- --------- --------- --------- ---------
End of period.......... $ 302,688 $ 747,129 $ 853,289 $ 386,967 $ 634,271 $ 648,728
========= ========= ========= ========= ========= =========
</TABLE>
- - -------
(a)Investor C class of shares closed on August 28, 1998.
See notes to financial statements.
48
<PAGE> 50
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
(Amounts in Thousands)
Large Capitalization Fund International Discovery Fund
------------------------------------ ------------------------------------
For the For the
For the eleven months For the For the eleven months For the
year ended ended year ended year ended ended year ended
May 31, May 31, June 30, May 31, May 31, June 30,
1999 1998 1997 1999 1998 1997
---------- ------------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
From Investment
Activities:
Operations:
Net investment income
(loss)................ $ (1,629) $ (751) $ 622 $ (957) $ (1,318) $ (577)
Net realized gains
(losses) from
investment and foreign
currency transactions. 70,480 23,283 16,112 55,634 27,623 12,746
Net change in
unrealized
appreciation
(depreciation) from
investments and
translation of assets
and liabilities in
foreign currencies.... 22,143 63,562 75,519 (80,335) (1,902) 55,463
--------- --------- --------- --------- -------- ---------
Change in net assets
resulting from
operations............. 90,994 86,094 92,253 (25,658) 24,403 67,632
--------- --------- --------- --------- -------- ---------
Distributions to
Investor A
Shareholders:
From net investment
income................ -- -- (4) -- -- --
Tax return of capital.. -- (37) -- -- -- --
From net realized gains
from investment and
foreign currency
transactions.......... (375) (1,885) (19) (1,835) (1,516) --
Distributions to
Investor B
Shareholders:
Tax return of capital.. -- (14) -- -- -- --
From net realized gains
from investment and
foreign currency
transactions.......... (211) (694) (12) (584) (442) --
Distributions to
Investor C
Shareholders(a):
From net realized gains
from investment and
foreign currency
transactions.......... -- (14) -- -- (32) --
Distributions to
Institutional
Shareholders:
From net investment
income................ -- -- (728) -- -- --
In excess of net
investment income..... -- -- -- -- -- (108)
Tax return of capital.. -- (700) -- -- -- --
From net realized gains
from investment and
foreign currency
transactions.......... (6,438) (35,301) (2,346) (18,395) (13,139) --
--------- --------- --------- --------- -------- ---------
Change in net assets
resulting from
distributions.......... (7,024) (38,645) (3,109) (20,814) (15,129) (108)
--------- --------- --------- --------- -------- ---------
Capital Transactions:
Proceeds from shares
issued................ 82,673 87,053 151,936 47,693 68,864 188,198
Dividends reinvested... 4,652 26,512 2,462 12,710 9,533 62
Cost of shares
redeemed.............. (113,833) (125,548) (165,363) (198,705) (91,674) (180,358)
--------- --------- --------- --------- -------- ---------
Change in net assets
from capital
transactions........... (26,508) (11,983) (10,965) (138,302) (13,277) 7,902
--------- --------- --------- --------- -------- ---------
Change in net assets.... 57,462 35,466 78,179 (184,774) (4,003) 75,426
Net Assets:
Beginning of period.... 390,286 354,820 276,641 485,056 489,059 413,633
--------- --------- --------- --------- -------- ---------
End of period.......... $ 447,748 $ 390,286 $ 354,820 $ 300,282 $485,056 $ 489,059
========= ========= ========= ========= ======== =========
</TABLE>
- - -------
(a)Investor C class of shares closed on August 28, 1998.
See notes to financial statements.
49
<PAGE> 51
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
(Amounts in Thousands)
Limited Maturity Intermediate Government
Bond Fund Obligations Fund
----------------------------------- -----------------------------------
For the For the
For the eleven months For the For the eleven months For the
year ended ended year ended year ended ended year ended
May 31, May 31, June 30, May 31, May 31, June 30,
1999 1998 1997 1999 1998 1997
---------- ------------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
From Investment
Activities:
Operations:
Net investment income.. $ 10,142 $ 9,501 $ 9,196 $ 8,616 $ 10,166 $ 12,905
Net realized gains
(losses) from
investment
transactions.......... 691 (546) (256) 653 2,682 1,200
Net change in
unrealized
appreciation
(depreciation) from
investments........... (1,757) 860 467 (1,892) 675 (461)
-------- -------- -------- -------- -------- --------
Change in net assets
resulting from
operations............. 9,076 9,815 9,407 7,377 13,523 13,644
-------- -------- -------- -------- -------- --------
Distributions to
Investor A
Shareholders:
From net investment
income................ (1,778) (1,734) (1,142) (590) (822) (1,130)
In excess of net
investment income..... -- (11) -- -- -- --
Tax return of capital.. -- (4) (6) -- (16) --
Distributions to
Investor B
Shareholders:
From net investment
income................ (59) (62) (78) (65) (87) (90)
Tax return of capital.. -- -- -- -- (2) --
Distributions to
Investor C
Shareholders(a):
From net investment
income................ (22) (61) (1) (3) (10) (7)
Distributions to
Institutional
Shareholders:
From net investment
income................ (8,283) (7,645) (8,051) (7,958) (9,353) (11,898)
In excess of net
investment income..... -- (48) -- -- -- --
Tax return of capital.. -- (16) (29) -- (174) --
-------- -------- -------- -------- -------- --------
Change in net assets
resulting from
distributions.......... (10,142) (9,581) (9,307) (8,616) (10,464) (13,125)
-------- -------- -------- -------- -------- --------
Capital Transactions:
Proceeds from shares
issued................ 40,538 94,826 67,317 14,190 32,342 28,502
Dividends reinvested... 4,082 4,297 4,250 2,456 3,151 3,965
Cost of shares
redeemed.............. (91,178) (68,564) (59,256) (58,259) (59,097) (74,602)
-------- -------- -------- -------- -------- --------
Change in net assets
from capital
transactions........... (46,558) 30,559 12,311 (41,613) (23,604) (42,135)
-------- -------- -------- -------- -------- --------
Change in net assets.... (47,624) 30,793 12,411 (42,852) (20,545) (41,616)
Net Assets:
Beginning of period.... 195,833 165,040 152,629 188,029 208,574 250,190
-------- -------- -------- -------- -------- --------
End of period.......... $148,209 $195,833 $165,040 $145,177 $188,029 $208,574
======== ======== ======== ======== ======== ========
</TABLE>
- - -------
(a)Investor C class of shares closed on August 28, 1998.
See notes to financial statements.
50
<PAGE> 52
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
(Amounts in Thousands)
U.S. Government
Income Fund Bond Fund
----------------------------------- ------------------------------------
For the For the
For the eleven months For the For the eleven months For the
year ended ended year ended year ended ended year ended
May 31, May 31, June 30, May 31, May 31, June 30,
1999 1998 1997 1999 1998 1997
---------- ------------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
From Investment
Activities:
Operations:
Net investment income.. $ 13,241 $ 16,234 $ 16,601 $ 26,093 $ 29,000 $ 33,325
Net realized gains
(losses) from
investment
transactions.......... 1,493 (115) (2,156) 2,425 14,967 5,014
Net change in
unrealized
appreciation
(depreciation) from
investments........... (4,469) 2,119 (99) (13,814) 2,035 4,705
-------- -------- -------- --------- --------- ---------
Change in net assets
resulting from
operations............. 10,265 18,238 14,346 14,704 46,002 43,044
-------- -------- -------- --------- --------- ---------
Distributions to
Investor A
Shareholders:
From net investment
income................ (2,684) (3,394) (3,562) (778) (1,029) (1,195)
Tax return of capital.. -- (266) (661) -- -- --
From net realized gains
from investment
transactions.......... -- -- -- (36) -- --
Distributions to
Investor B
Shareholders:
From net investment
income................ (1,063) (1,251) (1,259) (268) (302) (256)
Tax return of capital.. -- (111) (233) -- -- --
From net realized gains
from investment
transactions.......... -- -- -- (15) -- --
Distributions to
Investor C
Shareholders(a):
From net investment
income................ (3) (8) (4) (7) (26) (17)
Tax return of capital.. -- (1) (1) -- -- --
Distributions to
Institutional
Shareholders:
From net investment
income................ (9,491) (9,477) (9,151) (25,246) (27,889) (31,847)
Tax retun of capital... -- (718) (1,697) -- -- --
From net realized gains
from investment
transactions.......... -- -- -- (1,118) -- --
-------- -------- -------- --------- --------- ---------
Change in net assets
resulting from
distributions.......... (13,241) (15,226) (16,568) (27,468) (29,246) (33,315)
-------- -------- -------- --------- --------- ---------
Capital Transactions:
Proceeds from shares
issued................ 47,892 63,657 72,865 49,058 84,885 99,111
Dividends reinvested... 3,175 4,148 4,289 17,146 19,777 23,608
Cost of shares
redeemed.............. (83,794) (61,398) (46,463) (176,431) (134,070) (188,258)
-------- -------- -------- --------- --------- ---------
Change in net assets
from capital
transactions........... (32,727) 6,407 30,691 (110,227) (29,408) (65,539)
-------- -------- -------- --------- --------- ---------
Change in net assets.... (35,703) 9,419 28,469 (122,991) (12,652) (55,810)
Net Assets:
Beginning of period.... 240,379 230,960 202,491 505,685 518,337 574,147
-------- -------- -------- --------- --------- ---------
End of period.......... $204,676 $240,379 $230,960 $ 382,694 $ 505,685 $ 518,337
======== ======== ======== ========= ========= =========
</TABLE>
- - -------
(a)Investor C class of shares closed on August 28, 1998.
See notes to financial statements.
51
<PAGE> 53
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
(Amounts in Thousands)
Municipal Michigan Municipal
Bond Fund Bond Fund
----------------------------------- -----------------------------------
For the For the
For the eleven months For the For the eleven months For the
year ended ended year ended year ended ended year ended
May 31, May 31, June 30, May 31, May 31, June 30,
1999 1998 1997 1999 1998 1997
---------- ------------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
From Investment
Activities:
Operations:
Net investment income.. $ 4,593 $ 4,984 $ 6,295 $ 9,903 $ 9,887 $ 10,862
Net realized gains
(losses) from
investment
transactions.......... 428 2,879 798 981 1,120 370
Net change in
unrealized
appreciation
(depreciation) from
investments........... (438) (21) 950 (2,440) 3,953 2,487
-------- -------- -------- -------- -------- --------
Change in net assets
resulting from
operations............. 4,583 7,842 8,043 8,444 14,960 13,719
-------- -------- -------- -------- -------- --------
Distributions to
Investor A
Shareholders:
From net investment
income................ (287) (361) (344) (1,303) (1,611) (1,596)
In excess of net
investment income..... -- (5) -- (2) (6) --
From net realized gains
from investment
transactions.......... (90) (172) (42) (212) (112) (125)
Distributions to
Investor B
Shareholders:
From net investment
income................ (18) (25) (28) (112) (127) (118)
In excess of net
investment income..... -- -- -- -- (1) --
From net realized gains
from investment
transactions.......... (7) (13) (5) (22) (10) (11)
Distributions to
Institutional
Shareholders:
From net investment
income................ (4,288) (5,004) (5,598) (8,489) (8,863) (8,576)
In excess of net
investment income..... -- (69) -- (17) (34) --
From net realized gains
from investment
transactions.......... (1,234) (2,220) (635) (1,265) (561) (626)
-------- -------- -------- -------- -------- --------
Change in net assets
resulting from
distributions.......... (5,924) (7,869) (6,652) (11,422) (11,325) (11,052)
-------- -------- -------- -------- -------- --------
Capital Transactions:
Proceeds from shares
issued................ 9,852 17,096 30,200 34,583 49,586 43,600
Dividends reinvested... 713 949 686 2,341 2,688 2,460
Cost of shares
redeemed.............. (38,965) (29,067) (28,261) (58,653) (43,899) (37,409)
-------- -------- -------- -------- -------- --------
Change in net assets
from capital
transactions........... (28,400) (11,022) 2,625 (21,729) 8,375 8,651
-------- -------- -------- -------- -------- --------
Change in net assets.... (29,741) (11,049) 4,016 (24,707) 12,010 11,318
Net Assets:
Beginning of period.... 134,064 145,113 141,097 248,765 236,755 225,437
-------- -------- -------- -------- -------- --------
End of period.......... $104,323 $134,064 $145,113 $224,058 $248,765 $236,755
======== ======== ======== ======== ======== ========
</TABLE>
See notes to financial statements.
52
<PAGE> 54
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
(Amounts in Thousands)
Conservative Balanced
Allocation Fund Allocation Fund
------------------------------------- ------------------------------------
For the For the
For the eleven months December 30, For the eleven months For the
year ended ended 1996 to year ended ended year ended
May 31, May 31, June 30, May 31, May 31, June 30,
1999 1998 1997(a) 1999 1998 1997
---------- ------------- ------------ ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
From Investment
Activities:
Operations:
Net investment income.. $ 640 $ 530 $ 139 $ 5,700 $ 6,604 $ 5,337
Net realized gains
(losses) from
investment and foreign
currency transactions. 518 387 (102) 15,226 8,982 12,043
Net change in
unrealized
appreciation
(depreciation) from
investments and
translation of assets
and liabilities in
foreign currencies.... (330) 692 335 (12,513) 16,238 5,097
------- ------- ------- --------- -------- --------
Change in net assets
resulting from
operations............. 828 1,609 372 8,413 31,824 22,477
------- ------- ------- --------- -------- --------
Distributions to
Investor A
Shareholders:
From net investment
income................ -- -- -- (360) (460) (454)
From net realized gains
from investment and
foreign currency
transactions.......... -- -- -- (472) (504) (1,957)
Distributions to
Investor B
Shareholders:
From net investment
income................ -- -- -- (89) (125) (90)
From net realized gains
from investment and
foreign currency
transactions.......... -- -- -- (192) (192) (547)
Distributions to
Investor C
Shareholders(b):
From net investment
income................ -- -- -- (3) (16) (10)
From net realized gains
from investment and
foreign currency
transactions.......... -- -- -- -- (26) (56)
Distributions to
Institutional
Shareholders:
From net investment
income................ (621) (515) (122) (5,206) (6,660) (4,750)
From net realized gains
from investment and
foreign currency
transactions.......... (660) (98) -- (6,148) (6,807) (13,278)
------- ------- ------- --------- -------- --------
Change in net assets
resulting from
distributions.......... (1,281) (613) (122) (12,470) (14,790) (21,142)
------- ------- ------- --------- -------- --------
Capital Transactions:
Proceeds from shares
issued................ 3,936 9,933 11,873 32,544 72,317 167,477
Dividends reinvested... 995 610 122 11,335 13,392 17,657
Cost of shares
redeemed.............. (1,684) (4,795) (1,958) (131,988) (83,157) (50,433)
------- ------- ------- --------- -------- --------
Change in net assets
from capital
transactions........... 3,247 5,748 10,037 (88,109) 2,552 134,701
------- ------- ------- --------- -------- --------
Change in net assets.... 2,794 6,744 10,287 (92,166) 19,586 136,036
Net Assets:
Beginning of period.... 17,031 10,287 -- 290,852 271,266 135,230
------- ------- ------- --------- -------- --------
End of period.......... $19,825 $17,031 $10,287 $ 198,686 $290,852 $271,266
======= ======= ======= ========= ======== ========
</TABLE>
- - -------
(a)Period from commencement of operations.
(b)Investor C class of shares closed on August 28, 1998.
See notes to financial statements.
53
<PAGE> 55
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
(Amounts in Thousands)
Aggressive Equity
Allocation Fund Income Fund
------------------------------------- ------------------------------------
For the For the
For the eleven months December 30, For the eleven months For the
year ended ended 1996 to year ended ended year ended
May 31, May 31, June 30, May 31, May 31, June 30,
1999 1998 1997(a) 1999 1998 1997
---------- ------------- ------------ ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
From Investment
Activities:
Operations:
Net investment income.. $ 373 $ 412 $ 232 $ 4,840 $ 5,994 $ 7,779
Net realized gains
(losses) from
investment and foreign
currency transactions. 2,971 1,126 (648) 94,130 48,190 49,802
Net change in
unrealized
appreciation
(depreciation) from
investments and
translation of assets
and liabilities in
foreign currencies.... (2,958) 2,816 2,394 (61,914) 13,536 38,267
-------- -------- ------- --------- -------- ---------
Change in net assets
resulting from
operations............. 386 4,354 1,978 37,056 67,720 95,848
-------- -------- ------- --------- -------- ---------
Distributions To
Investor A
Shareholders:
From net investment
income................ -- -- -- (1,152) (1,126) (1,408)
From net realized gains
from investment and
foreign currency
transactions.......... -- -- -- (10,723) (15,973) (8,386)
Distributions to
Investor B
Shareholders:
From net investment
income................ -- -- -- (178) (127) (150)
From net realized gains
from investment and
foreign currency
transactions.......... -- -- -- (3,010) (3,858) (1,419)
Distributions to
Investor C
Shareholders(b):
From net investment
income................ -- -- -- (2) (4) (4)
From net realized gains
from investment and
foreign currency
transactions.......... -- -- -- -- (116) (25)
Distributions to
Institutional
Shareholders:
From net investment
income................ (316) (437) (195) (3,699) (3,961) (6,142)
In excess of net
investment income..... -- (10) -- -- -- --
From net realized gains
from investment and
foreign currency
transactions.......... (557) -- -- (29,940) (48,180) (32,123)
-------- -------- ------- --------- -------- ---------
Change in net assets
resulting from
distributions.......... (873) (447) (195) (48,704) (73,345) (49,657)
-------- -------- ------- --------- -------- ---------
Capital Transactions:
Proceeds from shares
issued................ 7,226 9,513 39,922 34,686 41,683 78,441
Dividends reinvested... 843 446 195 21,572 31,258 18,619
Cost of shares
redeemed.............. (16,270) (19,093) (2,857) (132,781) (89,674) (138,602)
-------- -------- ------- --------- -------- ---------
Change in net assets
from capital
transactions........... (8,201) (9,134) 37,260 (76,523) (16,733) (41,542)
-------- -------- ------- --------- -------- ---------
Change in net assets.... (8,688) (5,227) 39,043 (88,171) (22,358) 4,649
Net Assets:
Beginning of period.... 33,816 39,043 -- 414,759 437,117 432,468
-------- -------- ------- --------- -------- ---------
End of period.......... $ 25,128 $ 33,816 $39,043 $ 326,588 $414,759 $ 437,117
======== ======== ======= ========= ======== =========
</TABLE>
- - -------
(a)Period from commencement of operations.
(b)Investor C class of shares closed on August 28, 1998.
See notes to financial statements.
54
<PAGE> 56
Statements of Cash Flows
- --------------------------------------------------------------------------------
The Parkstone Group of Funds For the Year Ended May 31, 1999
<TABLE>
<CAPTION>
(Amounts in Thousands)
Small Mid Large Limited
Capitalization Capitalization Capitalization Maturity
Fund Fund Fund Bond Fund
-------------- -------------- -------------- ---------
<S> <C> <C> <C> <C>
Cash flows from
operating activities:
Total net investment
income (loss)........ $ (4,377) $ (4,129) $ (1,629) $ 10,142
Adjustments to
reconcile net
investment income to
net cash provided
(used) by operating
activities:
Purchases of
investments.......... (5,385,316) (3,404,391) (498,120) (645,519)
Proceeds from
disposition of
investment
securities........... 5,715,854 3,674,904 532,896 690,278
Decrease (increase)
in investments
purchased with cash
collateral from
securities lending... (49,997) 125,264 67,274 38,911
Decrease (increase)
in dividends and
interest receivable.. 15 34 (41) 716
Increase (decrease)
in payable for
return of collateral
received from
securities lending... 49,997 (125,264) (67,274) (38,911)
Increase (decrease)
in accrued expenses.. 206 346 424 93
Net amortization
(accretion) from
investments.......... (115) (91) (2) (1)
Increase in variation
margin payable....... 5,913 6,791 -- --
----------- ----------- --------- ---------
Net cash provided
(used) by operating
activities......... 332,180 273,464 33,528 55,709
----------- ----------- --------- ---------
Cash flows from
financing activities:
Proceeds from shares
issued............... 494,177 147,976 82,663 40,716
Payment of shares
redeemed............. (814,614) (407,544) (113,819) (91,070)
Cash distributions
paid................. (10,329) (13,897) (2,372) (5,355)
----------- ----------- --------- ---------
Net cash provided
(used) by financing
activities......... (330,766) (273,465) (33,528) (55,709)
----------- ----------- --------- ---------
Net increase (decrease)
in cash............... 1,414 (1) -- --
Cash:
Beginning balance..... -- 1 -- --
----------- ----------- --------- ---------
Ending balance........ $ 1,414 $ -- $ -- $ --
=========== =========== ========= =========
</TABLE>
Non-cash financing activities not included herein consist of reinvestment of
dividends and distributions of $40,154, $49,480, $4,652 and $4,082
respectively.
See notes to financial statements.
55
<PAGE> 57
Statements of Cash Flows
- --------------------------------------------------------------------------------
The Parkstone Group of Funds For the Year Ended May 31, 1999
<TABLE>
<CAPTION>
(Amounts in Thousands)
Intermediate U.S.
Government Government Conservative
Obligations Income Bond Allocation
Fund Fund Fund Fund
------------ ---------- ----------- ------------
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Total net investment
income (loss)............ $ 8,616 $ 13,241 $ 26,093 $ 640
Adjustments to reconcile
net investment income to
net cash provided (used)
by operating activities:
Purchases of investments.. (277,248) (330,099) (2,923,323) (173,829)
Proceeds from disposition
of investment
securities............... 317,614 361,235 3,030,779 171,247
Decrease (increase) in
investments purchased
with cash collateral
from securities lending.. 11,277 24,257 81,413 (4,657)
Decrease (increase) in
dividends and interest
receivable............... 763 776 2,835 (10)
Increase (decrease) in
payable for return of
collateral received from
securities lending....... (11,277) (24,257) (81,413) 4,657
Increase (decrease) in
accrued expenses......... 107 118 255 6
Net amortization
(accretion) from
investments.............. (222) (335) (709) (21)
--------- --------- ----------- ---------
Net cash provided (used)
by operating
activities............. 49,630 44,936 135,930 (1,967)
--------- --------- ----------- ---------
Cash flows from financing
activities:
Proceeds from shares
issued................... 14,183 47,932 49,061 3,936
Payment of shares
redeemed................. (58,280) (83,784) (176,482) (1,684)
Cash distributions paid... (5,533) (9,085) (8,510) (286)
--------- --------- ----------- ---------
Net cash provided (used)
by financing
activities............. (49,630) (44,937) (135,931) 1,966
--------- --------- ----------- ---------
Net increase (decrease) in
cash...................... -- (1) (1) (1)
Cash:
Beginning balance......... -- 1 1 1
--------- --------- ----------- ---------
Ending balance............ $ -- $ -- $ -- $ --
========= ========= =========== =========
</TABLE>
Non-cash financing activities not included herein consist of reinvestment of
dividends and distributions of $2,456, $3,175, $17,146 and $995, respectively.
See notes to financial statements.
56
<PAGE> 58
Statements of Cash Flows
- --------------------------------------------------------------------------------
The Parkstone Group of Funds For the Year Ended May 31, 1999
<TABLE>
<CAPTION>
(Amounts in Thousands)
Balanced Aggressive Equity
Allocation Allocation Income
Fund Fund Fund
----------- ---------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Total net investment income (loss)........ $ 5,700 $ 373 $ 4,840
Adjustments to reconcile net investment
income to net cash provided (used) by
operating activities:
Purchases of investments.................. (1,086,111) (206,301) (668,635)
Proceeds from disposition of investment
securities............................... 1,179,819 214,983 788,498
Decrease (increase) in investments
purchased with cash collateral from
securities lending....................... 34,352 2,776 51,719
Decrease (increase) in dividends and
interest receivable...................... 1,109 16 598
Increase (decrease) in payable for return
of collateral received from securities
lending.................................. (34,352) (2,776) (51,719)
Increase (decrease) in accrued expenses... 171 16 328
Net amortization (accretion) from
investments.............................. (28) (4) --
----------- --------- ---------
Net cash provided (used) by operating
activities............................. 100,660 9,083 125,629
----------- --------- ---------
Cash flows from financing activities:
Proceeds from shares issued............... 32,520 7,226 34,761
Payment of shares redeemed................ (131,926) (16,270) (132,939)
Cash distributions paid................... (1,135) (30) (27,132)
----------- --------- ---------
Net cash provided (used) by financing
activities............................. (100,541) (9,074) (125,310)
----------- --------- ---------
Net increase (decrease) in cash............ 119 9 319
Cash:
Beginning balance......................... 1 1 1
----------- --------- ---------
Ending balance............................ $ 120 $ 10 $ 320
=========== ========= =========
</TABLE>
Non-cash financing activities not included herein consist of reinvestment of
dividends and distributions of $11,335, $843 and $21,572, respectively.
See notes to financial statements.
57
<PAGE> 59
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Prime Obligations Fund
(Amounts in Thousands)
<TABLE>
<CAPTION>
Principal Security Amortized
Amount Description Cost
--------- --------------------------------------------------------- ---------
<C> <S> <C>
Certificates of Deposit - Yankee (3.9%):
Yankee (3.9%):
$ 5,000 ABN--Amro North America Finance, Inc., 4.94%, 11/17/99... $ 4,998
10,000 Bank of Montreal, 5.16%, 5/3/00.......................... 9,996
10,000 Rabobank, 5.13%, 4/27/00................................. 9,996
--------
Total Certificates Of Deposit--Yankee 24,990
--------
Commercial Paper (77.0%):
Agriculture (1.5%):
5,000 Canadian Wheat Board, 4.89%, 9/27/99..................... 4,921
5,000 Canadian Wheat Board, 4.83%, 10/8/99..................... 4,915
--------
9,836
--------
Automotive (6.9%):
5,000 Daimler Benz North America, 4.89%, 7/7/99................ 4,976
5,000 Daimler Benz North America, 4.88%, 8/25/99............... 4,943
5,000 Daimler Benz North America, 4.88%, 9/8/99................ 4,934
5,000 Ford Motor Credit Corp., 4.88%, 6/22/99.................. 4,986
5,000 Ford Motor Credit Corp., 4.86%, 7/21/99.................. 4,967
5,000 Ford Motor Credit Corp., 4.87%, 8/11/99.................. 4,953
5,000 General Motors Acceptance Corp., 4.94%, 6/2/99........... 4,999
10,000 General Motors Acceptance Corp., 4.86%, 7/21/99.......... 9,933
--------
44,691
--------
Banking (2.3%):
5,000 Abbey National North America, 4.89%, 7/8/99.............. 4,975
5,000 Abbey National North America, 4.88%, 7/22/99............. 4,966
5,000 Abbey National North America, 4.87%, 8/9/99.............. 4,954
--------
14,895
--------
Chemicals (11.6%):
4,200 Air Products & Chemicals, 4.84%, 7/22/99................. 4,172
5,000 Akzo Nobel NV, 4.93%, 6/3/99............................. 4,999
5,000 Bayer Corp., 4.85%, 7/27/99.............................. 4,963
5,000 E.I. Dupont De Nemours & Co., 4.88%, 6/7/99.............. 4,996
5,000 E.I. Dupont De Nemours & Co., 4.88%, 7/14/99............. 4,971
5,000 E.I. Dupont De Nemours & Co., 4.87%, 11/10/99............ 4,892
5,000 Great Lakes Chemical Corp., 4.89%, 6/9/99................ 4,995
5,000 Great Lakes Chemical Corp., 4.89%, 7/1/99................ 4,980
5,000 Great Lakes Chemical Corp., 4.88%, 7/7/99................ 4,976
5,000 Great Lakes Chemical Corp., 4.92%, 8/19/99............... 4,947
</TABLE>
<TABLE>
<CAPTION>
Principal Security Amortized
Amount Description Cost
--------- -------------------------------------------------------- ---------
<C> <S> <C>
Commercial Paper, continued:
Chemicals, continued:
$ 5,000 Henkel Corp., 4.84%, 6/3/99............................. $ 4,999
6,000 Henkel Corp., 4.88%, 6/30/99............................ 5,977
5,000 Henkel Corp., 4.88%, 8/18/99............................ 4,948
10,000 Monsanto Co., 4.87%, 7/6/99............................. 9,952
--------
74,767
--------
Computer & Office Equipment (0.8%):
5,000 Xerox Credit Corp., 4.90%, 6/2/99....................... 4,999
--------
Diversified Operation (4.6%):
5,000 General Electric Capital Corp., 4.88%, 8/11/99.......... 4,953
5,000 General Electric Capital Corp., 4.89%, 9/14/99.......... 4,930
5,000 General Electric Capital Corp., 4.90%, 9/15/99.......... 4,929
5,000 General Electric Capital Corp., 5.02%, 2/3/00........... 4,830
5,000 Hasbro, Inc., 4.95%, 9/13/99............................ 4,930
5,000 Minnesota Mining & Manufacturing, 4.87%, 7/19/99........ 4,967
--------
29,539
--------
Electrical & Electronic (5.4%):
5,000 Avnet, Inc., 4.87%, 7/16/99............................. 4,970
5,000 Eaton Corp., 4.94%, 8/17/99............................. 4,948
5,000 Eaton Corp., 4.91%, 9/1/99.............................. 4,938
5,000 Motorola, Inc., 4.88%, 7/1/99........................... 4,980
5,000 Motorola, Inc., 4.86%, 7/29/99.......................... 4,961
5,000 National Rural Utilities Cooperative Finance Corp.,
4.85%, 7/9/99.......................................... 4,975
5,000 National Rural Utilities Cooperative Finance Corp.,
4.86%, 7/12/99......................................... 4,973
--------
34,745
--------
Finance - Conduit (7.7%):
5,000 Ciesco L.P., 4.87%, 6/8/99.............................. 4,995
5,000 Ciesco L.P., 4.85%, 7/19/99............................. 4,968
5,000 Corporate Asset Funding Co., Inc., 4.88%, 6/1/99........ 5,000
5,000 Corporate Asset Funding Co., Inc., 4.94%, 8/19/99....... 4,947
5,000 Corporate Asset Funding Co., Inc., 4.89%, 11/10/99...... 4,892
5,000 Delaware Funding Corp., 4.87%, 6/17/99.................. 4,989
5,000 Delaware Funding Corp., 4.87%, 7/20/99.................. 4,967
5,000 Preferred Receivables Funding Corp., 4.87%, 6/23/99..... 4,985
5,000 Preferred Receivables Funding Corp., 4.88%, 6/25/99..... 4,984
5,000 Preferred Receivables Funding Corp., 4.88%, 7/12/99..... 4,973
--------
49,700
--------
</TABLE>
Continued
58
<PAGE> 60
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Prime Obligations Fund
(Amounts in Thousands)
<TABLE>
<CAPTION>
Principal Security Amortized
Amount Description Cost
--------- --------------------------------------------------------- ---------
<C> <S> <C>
Commercial Paper, continued:
Financial Services (8.5%):
$10,000 American Express Co., 4.88%, 7/7/99...................... $ 9,953
5,000 American Express Co., 4.85%, 7/21/99..................... 4,967
5,000 American Express Co., 4.85%, 10/20/99.................... 4,906
5,000 Associates First Capital Corp.,
4.87%, 6/16/99.......................................... 4,990
5,000 Associates First Capital Corp.,
4.88%, 7/21/99.......................................... 4,967
5,000 Associates First Capital Corp.,
4.87%, 8/25/99.......................................... 4,943
5,000 Household Finance, 4.93%, 8/25/99........................ 4,943
5,000 Paccar Financial Corp., 4.90%, 6/3/99.................... 4,999
5,000 Paccar Financial Corp., 4.86%, 7/20/99................... 4,967
5,000 Transamerica Finance Corp.,
4.90%, 7/7/99........................................... 4,976
--------
54,611
--------
Food Products & Services (6.1%):
5,000 Archer Daniels Midland, 4.92%, 9/9/99.................... 4,933
5,000 Campbell Soup Co., 4.85%, 9/13/99........................ 4,931
5,000 Campbell Soup Co., 4.87%, 9/15/99........................ 4,929
5,000 Campbell Soup Co., 4.87%, 12/1/99........................ 4,878
10,000 Diageo PLC, 4.90%, 6/9/99................................ 9,988
5,000 Diageo PLC, 4.89%, 7/12/99............................... 4,973
5,000 Golden Peanut, 4.89%, 7/12/99............................ 4,973
--------
39,605
--------
Glass Products (0.8%):
5,000 Guardian Industries, 4.88%, 7/14/99...................... 4,971
--------
Insurance (6.2%):
5,000 John Hancock Capital Corp.,
4.89%, 6/29/99.......................................... 4,981
5,000 New York Life Capital Corp.,
4.87%, 6/9/99........................................... 4,995
5,000 New York Life Capital Corp.,
4.88%, 7/21/99.......................................... 4,967
5,000 New York Life Capital Corp.,
4.87%, 8/26/99.......................................... 4,943
5,000 New York Life Capital Corp.,
4.87%, 9/15/99.......................................... 4,929
5,000 Prudential Funding Corp., 4.89%, 6/9/99.................. 4,994
5,000 Prudential Funding Corp., 4.87%, 8/10/99................. 4,953
5,000 Prudential Funding Corp., 4.86%, 8/11/99................. 4,953
--------
39,715
--------
Machinery & Equipment (2.3%):
5,000 Caterpillar Financial, 4.90%, 6/18/99.................... 4,988
5,000 Caterpillar Financial, 4.85%, 7/7/99..................... 4,976
5,000 John Deere Capital Corp., 4.87%, 8/11/99................. 4,953
--------
14,917
--------
Manufacturing (1.5%):
5,000 Stanley Works, 4.88%, 6/2/99............................. 4,999
5,000 Stanley Works, 4.88%, 6/28/99............................ 4,982
--------
9,981
--------
</TABLE>
<TABLE>
<CAPTION>
Principal Security Amortized
Amount Description Cost
--------- --------------------------------------------------------- ---------
<C> <S> <C>
Commercial Paper, continued:
Oil & Exploration, Production & Services (2.3%):
$ 5,000 BP America, Inc., 4.87%, 7/9/99.......................... $ 4,974
5,000 BP America, Inc., 4.86%, 7/12/99......................... 4,973
5,000 BP America, Inc., 4.93%, 1/24/00......................... 4,840
--------
14,787
--------
Pharmaceuticals (4.6%):
5,000 American Home Products, 4.86%, 7/28/99................... 4,962
5,000 American Home Products, 4.87%, 8/17/99................... 4,949
5,000 American Home Products, 4.87%, 8/26/99................... 4,943
5,000 Glaxo Welcome, Inc., 4.89%, 6/11/99...................... 4,994
5,000 Glaxo Welcome, Inc., 4.87%, 8/10/99...................... 4,953
5,000 Glaxo Welcome, Inc., 4.92%, 8/18/99...................... 4,947
--------
29,748
--------
Photography (2.3%):
5,000 Eastman Kodak, 4.89%, 6/1/99............................. 5,000
5,000 Eastman Kodak, 4.88%, 7/14/99............................ 4,971
5,000 Eastman Kodak, 4.86%, 8/18/99............................ 4,948
--------
14,919
--------
Telecommunications (1.6%):
5,000 AT&T Corp., 4.89%, 6/2/99................................ 5,000
5,000 AT&T Corp., 4.89%, 6/8/99................................ 4,995
--------
9,995
--------
Total Commercial Paper 496,421
--------
Corporate Bonds (14.0%):
Financial Services (12.4%):
10,000 Abbey National North America,
5.13%, 5/4/00........................................... 9,994
10,000 All State Funding, 5.05%*, 8/31/99....................... 10,000
5,000 All State Funding Agreement,
5.01%*, 12/1/99......................................... 5,000
5,000 All State Funding Agreement,
5.08%*, 3/31/00......................................... 5,000
10,000 Key Bank North America,
4.98%*, 9/23/99......................................... 9,998
10,000 Merrill Lynch & Co., Inc.,
5.04%*, 9/29/99......................................... 10,000
10,000 Morgan Guarantee Trust,
4.97%*, 11/29/99........................................ 10,000
10,000 Travelers Funding Agreement,
5.03%*, 8/17/99......................................... 10,000
10,000 Travelers Funding Agreement,
5.06%*, 3/31/00......................................... 10,000
--------
79,992
--------
Insurance (1.6%):
10,000 John Hancock Mutual, 5.28%*, 7/22/99..................... 10,000
--------
Total Corporate Bonds 89,992
--------
U.S. Government Agencies (2.1%):
Fannie Mae (0.6%):
3,770 6.03%, 7/2/99............................................ 3,773
--------
Federal Home Loan Bank (1.5%):
10,000 5.07%*, 3/24/00.......................................... 10,000
--------
Total U.S. Government Agencies 13,773
--------
</TABLE>
Continued
59
<PAGE> 61
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Prime Obligations Fund
(Amounts in Thousands)
<TABLE>
<CAPTION>
Principal Security Amortized
Amount Description Cost
--------- ------------------------------------------------------- ---------
<C> <S> <C>
Repurchase Agreements (3.3%):
$21,094 Morgan Stanley, 4.86%, 6/1/99, (Collateralized by
$3,480, Freddie Mac, 6.85%, 3/31/14, market value--
$3,458, and $18,330, Fannie Mae, 5.63%, 4/24/02,
market value--$18,268)................................ $ 21,094
--------
Total Repurchase Agreements 21,094
--------
Total Investments (Cost $646,270)(a)--100.3% 646,270
Liabilities in excess of other assets--(0.3)% (2,029)
--------
Total Net Assets--100.0% $644,241
========
</TABLE>
- - -------
* Variable rate securities having liquidity sources through bank letters of
credit or other credit and/or liquidity agreements. The interest rate, which
will change periodically, is based upon an index of market rates. The rate
reflected on the Schedule of Portfolio Investments is the rate in effect at
May 31,1999.
(a) Cost and value for federal income tax and financial reporting purposes are
the same.
See notes to financial statements.
60
<PAGE> 62
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
U.S. Government Obligations Fund
(Amounts in Thousands)
<TABLE>
<CAPTION>
Principal Security Amortized
Amount Description Cost
--------- --------------------------------------------------------- ---------
<C> <S> <C>
U.S. Government Agencies (88.9%):
Fannie Mae (23.9%):
$ 2,500 4.86%, 6/8/99............................................ $ 2,497
2,000 4.85%, 6/10/99........................................... 1,998
1,500 4.82%, 7/1/99............................................ 1,494
2,500 4.79%, 7/9/99............................................ 2,488
2,500 4.76%, 7/15/99........................................... 2,486
1,000 4.76%, 7/21/99........................................... 993
1,500 5.49%, 8/3/99............................................ 1,501
1,000 4.78%, 8/5/99............................................ 991
2,000 4.80%, 8/10/99........................................... 1,982
3,500 4.76%, 8/11/99........................................... 3,467
1,000 4.80%, 8/12/99........................................... 991
1,000 4.85%, 8/17/99........................................... 990
1,000 4.87%, 8/26/99........................................... 989
1,000 4.77%, 9/7/99............................................ 987
1,500 4.77%, 10/12/99.......................................... 1,474
1,000 4.77%, 10/18/99.......................................... 982
1,000 4.82%, 11/4/99........................................... 979
1,185 8.35%, 11/10/99.......................................... 1,202
1,000 4.89%, 11/12/99.......................................... 978
--------
29,469
--------
Federal Farm Credit Bank (4.9%):
1,501 4.83%, 7/6/99............................................ 1,494
2,500 5.50%, 9/1/99............................................ 2,503
2,000 6.06%, 9/8/99............................................ 2,006
--------
6,003
--------
Federal Home Loan Bank (21.3%):
1,482 4.85%, 6/9/99............................................ 1,480
2,500 4.79%, 6/16/99........................................... 2,495
1,000 4.78%, 7/6/99............................................ 995
1,500 4.75%, 7/14/99........................................... 1,492
1,000 4.84%, 7/21/99........................................... 993
1,000 4.79%, 7/28/99........................................... 993
2,500 4.76%, 8/6/99............................................ 2,479
2,500 4.77%, 8/11/99........................................... 2,477
2,500 4.77%, 8/13/99........................................... 2,476
1,500 4.76%, 10/13/99.......................................... 1,474
1,000 4.81%, 11/5/99........................................... 979
5,000 4.87%*, 11/10/99......................................... 4,999
3,000 5.07%*, 3/24/00.......................................... 3,000
--------
26,332
--------
</TABLE>
<TABLE>
<CAPTION>
Principal Security Amortized
Amount Description Cost
--------- -------------------------------------------------------- ---------
<C> <S> <C>
U.S. Government Agencies, continued:
Freddie Mac (25.0%):
$ 4,100 4.86%, 6/3/99........................................... $ 4,099
1,500 4.77%, 6/16/99.......................................... 1,497
1,188 4.85%, 6/18/99.......................................... 1,185
2,500 4.86%, 6/25/99.......................................... 2,492
1,470 4.82%, 6/29/99.......................................... 1,465
1,000 4.77%, 7/12/99.......................................... 995
1,500 4.78%, 7/13/99.......................................... 1,492
1,500 4.78%, 7/14/99.......................................... 1,492
1,000 4.86%, 8/5/99........................................... 991
2,000 4.84%, 8/16/99.......................................... 1,980
2,000 4.86%, 8/18/99.......................................... 1,979
1,000 4.86%, 8/19/99.......................................... 989
1,000 4.86%, 8/23/99.......................................... 989
1,000 4.81%, 8/25/99.......................................... 989
2,494 4.84%, 8/27/99.......................................... 2,465
1,000 4.81%, 9/3/99........................................... 988
1,000 4.81%, 9/24/99.......................................... 985
1,500 4.77%, 10/5/99.......................................... 1,475
1,000 4.87%, 11/18/99......................................... 977
1,500 4.80%, 11/19/99......................................... 1,466
--------
30,990
--------
Student Loan Marketing Assoc. (13.8%):
2,500 4.78%, 6/3/99........................................... 2,491
5,000 5.37%*, 11/12/99........................................ 4,999
5,000 5.27%*, 1/12/00......................................... 4,999
4,500 5.21%*, 3/8/00.......................................... 4,504
--------
16,993
--------
Total U.S. Government Agencies 109,787
--------
Repurchase Agreements (11.3%):
14,014 Morgan Stanley, 4.86%, 6/1/99, (Collateralized by $100,
Freddie Mac, 5.58%, 1/7/02, market value--$101, and by
$14,480 Fannie Mae, 6.40%, 5/14/09, market value--
$14,246)............................................... 14,014
--------
Total Repurchase Agreements 14,014
--------
Total Investments (Cost
$123,801)(a)--100.2% 123,801
Liabilities in excess of other assets--(0.2)% (294)
--------
Total Net Assets--100.0% $123,507
========
</TABLE>
- - -------
* Variable rate securities having liquidity sources through bank letters of
credit and/or liquidity agreements. The interest rates, which will change
periodically, are based upon bank prime rates or an index of the market
interest rates. The rate reflected on the Schedule of Portfolio Investments
is the rate in effect on May 31, 1999.
(a) Cost for federal income tax and financial reporting purposes are the same.
See notes to financial statements.
61
<PAGE> 63
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Tax-Free Fund
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Amortized
Amount Description Cost
--------- -------------------------------------------------------- ---------
<C> <S> <C>
Municipal Bonds, Notes, & Commercial Paper (99.0%):
Arizona (0.8%):
$ 500 Flagstaff, Arizona, Industrial Development Authority,
3.65%*, 4/1/19......................................... $ 500
400 Phoenix, Arizona, G.O., 6.00%, 7/1/99................... 401
--------
901
--------
California (0.2%):
250 Oakland, California, G.O., 6.00%, 12/15/99.............. 254
--------
Colorado (1.2%):
250 Denver, Colorado, City & County, Series C, 5.10%,
8/1/99................................................. 251
1,055 Water Conservancy District, Colorado Water Revenue Bond,
4.35%, 6/15/99, MBIA................................... 1,055
--------
1,306
--------
Georgia (0.9%):
1,000 Monroe County, Georgia Power, 3.45%*, 7/1/25............ 1,000
--------
Illinois (3.5%):
1,000 Chicago Park District Tax Anticipation Warrants, 4.30%,
9/17/99................................................ 1,002
1,900 Illinois Health Facilities Authority Advocate, Health
Care, Series B, 3.30%*, 8/15/22........................ 1,900
1,000 Lake County, Illinois Certificates of Participation,
7.00%, 6/1/99.......................................... 1,000
--------
3,902
--------
Indiana (4.0%):
1,875 Franklin County, Indiana, Economic Development Revenue,
Bond, 3.50%*, 6/7/10................................... 1,875
1,500 Goshen, Indiana, Industrial Development Revenue Bond,
3.50%*, 3/1/14......................................... 1,500
1,000 Indiana Health Facilities Financing Authority, 3.30%*,
8/1/06................................................. 1,000
--------
4,375
--------
Kentucky (2.0%):
1,140 Bath County, Kentucky, Industrial Building Revenue Bond,
3.50%*, 12/1/13........................................ 1,140
1,035 Lewis County, Kentucky, Industrial Building Revenue
Bond, 3.50%*, 12/1/03.................................. 1,035
--------
2,175
--------
Louisiana (2.1%):
1,300 De Soto Parish, Louisiana, PCR, Central Louisiana
Electric Co., Refunding Bonds, Series A, 3.20%*,
7/1/18................................................. 1,300
1,000 East Baton Rouge, Louisiana, PCR, 3.35%*, 3/1/22........ 1,000
--------
2,300
--------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Amortized
Amount Description Cost
--------- -------------------------------------------------------- ---------
<C> <S> <C>
Municipal Bonds, Notes, & Commercial Paper, continued:
Maine (1.8%):
$ 2,000 Portland, Maine, Revenue Bond, Barber Foods Project,
Series S, 3.50%*, 7/1/03............................... $ 2,000
--------
Maryland (3.7%):
2,235 Harford County, Maryland, 5.00%, 12/1/99................ 2,257
1,800 Montgomery County, Maryland Consolidated Public,
Improvement, Series 1992-A, 5.10%, 7/1/99.............. 1,802
--------
4,059
--------
Michigan (13.2%):
2,000 Detroit, Michigan, 3.25%*, 7/1/23....................... 2,000
400 Kalamazoo County, Michigan, Sanitary Water Disposal
System, 6.00%,
11/1/99................................................ 404
1,500 Michigan Municipal Bond Authority, Series D-2, 4.25%,
8/27/99................................................ 1,502
1,000 Michigan State Recreation Project, 5.50%, 11/1/99....... 1,011
3,100 Michigan Strategic Fund Limited Obligation Revenue,
Consumers Power Co., Series A, 3.35%*, 6/15/10, LOC:
Canadian Imperial Bank................................. 3,100
1,100 Michigan Strategic Fund Limited Obligation Revenue,
Consumers Power Co., Series A, 3.35%*, 6/15/10, LOC:
Canadian Imperial Bank................................. 1,100
1,300 Michigan Strategic Fund, 3.35%*, 9/1/30, LOC: Barclays
PLC.................................................... 1,300
4,300 Monroe County, Michigan, Economic Development Corp.
Limited Obligation, Detroit Edison, Series Cc, 3.35%*,
10/1/24, LOC: Barclays Bank PLC........................ 4,301
--------
14,718
--------
Minnesota (1.8%):
2,000 Minnesota School Districts Tax & Aid Anticipation,
Certificates, Series B, 3.63%, 8/27/99................. 2,000
--------
New York (2.8%):
2,000 Metropolitan Transportation Authority, Bond
Anticipation, Series Cp-1, 2.90%, 7/8/99............... 2,000
1,150 New York, New York G.O., 3.30%*, 8/15/21................ 1,150
--------
3,150
--------
North Carolina (2.3%):
2,500 University of North Carolina Chapel Hill Revenue,
3.35%*, 7/1/12, LOC: Nations Bank...................... 2,500
--------
</TABLE>
Continued
62
<PAGE> 64
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Tax-Free Fund
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Amortized
Amount Description Cost
--------- -------------------------------------------------------- ---------
<C> <S> <C>
Municipal Bonds, Notes, & Commercial Paper, continued:
Ohio (4.8%):
$ 2,000 Columbus, Ohio, Series 1, 3.10%*,
6/1/16................................................. $ 2,000
1,700 Highland Heights, Ohio, 3.95%, 8/19/99.................. 1,701
1,000 Ohio State University Capital Receipts Revenue, 3.15%*,
12/1/06................................................ 1,000
670 Orange Ohio City School District, 3.30%, 12/1/99........ 670
--------
5,371
--------
Oklahoma (2.0%):
1,200 Muskogee, PCR, Oklahoma Gas & Electric Co., Series A,
3.45%*, 1/1/25......................................... 1,200
1,000 Tulsa, Oklahoma, 6.20%, 6/1/99.......................... 1,000
--------
2,200
--------
Pennsylvania (9.8%):
1,500 East Hempfield Township, Pennsylvania, Industrial
Development Authority, 3.37%*, 8/15/17................. 1,500
1,000 Geisinger Authority, Penn State Geisinger Health System,
Series 1998-B, 3.35%*, 8/15/28......................... 1,000
2,000 Montgomery County, Pennsylvania, PCR, Peco Energy,
3.40%, 6/8/99.......................................... 2,000
2,000 Montgomery County, Pennsylvania, PCR, Series 1994-A,
2.95%, 6/10/99......................................... 2,000
2,100 Quakertown, Pennsylvania, Hospital Authority Revenue,
3.45%*, 7/1/05......................................... 2,100
1,000 Sayre, Pennsylvania, Healthcare Facilities Hospital,
Series M, 3.30%*, 12/1/20.............................. 1,000
1,300 Washington County Higher Education, Pooled Equipment
Lease Revenue, 3.25%*, 11/1/05......................... 1,300
--------
10,900
--------
South Carolina (2.7%):
3,000 South Carolina Public Service Notice, 2.95%*, 6/10/99... 3,000
--------
Tennessee (3.2%):
3,500 Tennessee State School Bond Authority, 3.00%, 6/17/99... 3,500
--------
Texas (10.1%):
1,140 Dallas County, Texas, 7.00%, 8/15/99.................... 1,149
1,500 Fort Worth, Texas, 3.10%, 9/14/99....................... 1,500
2,000 Houston, Texas, 2.85%, 6/24/99.......................... 2,000
1,000 Houston, Texas, Series C, G.O., 2.95%, 7/30/99.......... 1,000
3,000 San Antonio, Texas Water System, 2.85%, 6/17/99......... 3,000
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Amortized
Amount Description Cost
--------- -------------------------------------------------------- ---------
<C> <S> <C>
Municipal Bonds, Notes, & Commercial Paper, continued:
Texas, continued:
$ 520 Texas State Public Finance Authority, Parks & Wildlife
Department, Series B, 6.00%, 2/1/00, AMBAC............. $ 530
2,000 University of Texas, Permanent University Fund, 3.15%,
9/15/99................................................ 2,000
--------
11,179
--------
Utah (10.6%):
1,500 Intermountain Power Agency, Utah Power Supply, Revenue
Bond, 2.90%, 6/11/99................................... 1,500
3,000 Intermountain Power Agency, Utah Power Supply Revenue
Bond, 3.10%, 8/12/99................................... 3,000
1,200 Provo, Utah City School District, G.O., 3.15%*, 6/15/99. 1,201
3,500 Utah County, Utah, PCR, USX Corp., 3.10%*, 11/1/17, LOC:
Wachovia............................................... 3,500
2,500 Utah Highway, G.O., 3.15%, 8/16/99...................... 2,500
--------
11,701
--------
Virginia (2.7%):
1,000 Viginia Commonwealth, G.O., 3.10%, 7/21/99.............. 1,000
2,000 Virginia Public School Authority, Putters Series 109,
3.37%*, 5/20/00........................................ 2,000
--------
3,000
--------
Washington (9.0%):
2,000 King County, Washington, 3.10%,
6/16/99................................................ 2,000
3,000 King County, Washington, 3.10%,
6/15/99................................................ 3,000
930 Port Angeles, Washington, Port Industrial Development,
Admiral Marine Project, 3.50%*, 4/1/22................. 930
2,000 Washington State, G.O., 3.30%*, 6/1/20.................. 2,000
2,000 Washington State Health Care Facilities Authority,
Revenue, 3.50%*, 1/1/23, LOC: Morgan Guarantee Trust,
Fred Hutchinson Cancer Research Center................. 2,000
--------
9,930
--------
Wisconsin (3.8%):
1,250 Milwaukee, Wisconsin, Metropolitan Sewer District,
7.00%, 9/1/99.......................................... 1,260
325 Wisconsin State G.O., 5.00%, 5/1/00..................... 330
1,640 Wisconsin State Clean Water Revenue Bond, Series 1,
4.50%, 6/1/99.......................................... 1,640
1,000 Wisconsin State, G.O., 3.15%, 9/13/99................... 1,000
--------
4,230
--------
Total Municipal Bonds, Notes, & Commercial Paper 109,651
--------
</TABLE>
Continued
63
<PAGE> 65
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Tax-Free Fund
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Amortized
Amount Description Cost
--------- --------------------------------------------------------- ---------
<C> <S> <C>
Investment Companies (0.1%):
100,000 Provident Municipal Cash Mutual Fund..................... $ 100
--------
Total Investment Companies 100
--------
Cash Equivalents (0.1%):
$ 142 Goldman Sachs Financial Square Tax Exempt................ 142
--------
Total Cash Equivalents 142
--------
Total Investments (Cost
$109,893)(a)--99.2% 109,893
Other assets in excess of liabilities--0.8% 864
--------
Total Net Assets--100.0% $110,757
========
</TABLE>
- - -------
* Variable rate securities having liquidity sources through bank letters of
credit or other credit and/or liquidity agreements. The interest rate, which
will change periodically, is based upon an index of market rates. The rate
reflected on the Schedule of Portfolio Investments is the rate in effect at
May 31, 1999.
(a) Cost and value for federal income tax and financial reporting purposes are
the same.
AMBAC--American Municipal Bond Assurance Corp.
G.O.--General Obligation
LOC--Letter of Credit
MBIA--Municipal Bond Insurance Association
PCR--Pollution Control Revenue
See notes to financial statements.
64
<PAGE> 66
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Treasury Fund
(Amounts in Thousands)
<TABLE>
<CAPTION>
Principal Security Market
Amount Description Value
--------- --------------------------------------------------------- --------
<C> <S> <C>
U.S. Treasury Bills (2.7%):
$ 2,500 6/24/99.................................................. $ 2,493
5,000 7/1/99................................................... 4,981
--------
Total U.S. Treasury Bills 7,474
--------
U.S. Treasury Notes (21.8%):
12,500 5.88%, 8/31/99........................................... 12,532
4,500 5.75%, 9/30/99........................................... 4,515
8,000 6.00%, 10/15/99.......................................... 8,036
7,000 5.88%, 11/15/99.......................................... 7,032
7,000 5.63%, 11/30/99.......................................... 7,030
7,500 5.38%, 1/31/00........................................... 7,526
10,000 5.88%, 2/15/00........................................... 10,072
4,000 5.50%, 3/31/00........................................... 4,020
--------
Total U.S. Treasury Notes 60,763
--------
Repurchase Agreements (75.6%):
13,000 BA Securities, 4.78%, 6/1/99, (Collateralized by $12,980,
U.S. Treasury Note, 5.88%, 2/15/00, market value--
$13,495)................................................ 13,000
6,000 Chase Securities, 4.40%, 6/1/99, (Collateralized by
$6,015, U.S. Treasury Note, 7.13%, 9/30/99, market
value--$6,072).......................................... 6,000
13,000 Dresdner Securities, 4.80%, 6/1/99, (Collateralized by
$11,766, U.S. Treasury Note, 7.50%, 2/15/05, market
value--$13,257)......................................... 13,000
</TABLE>
- - -------
(a) Cost and value for federal income tax and financial reporting purposes are
the same.
<TABLE>
<CAPTION>
Principal Security Market
Amount Description Value
--------- --------------------------------------------------------- --------
<C> <S> <C>
$ 69,500 Greenwich Capital, 4.80%, 6/1/99, (Collateralized by
$61,835, U.S. Treasury Note, 5.75%, 11/30/02, market
value--$63,777, and by $22,980, U.S. Treasury Strip,
9.13%, 5/15/18, market value--$7,113)................... $ 69,500
13,000 JP Morgan, 4.79%, 6/1/99, (Collateralized by $11,581,
U.S. Treasury Note, 7.50%, 11/15/16, market value--
$13,036)................................................ 13,000
13,900 Lehman Brothers, 4.80%, 6/1/99, (Collateralized by
$24,045, U.S. Treasury Strip, 5.68%, 5/15/08, market
value--$14,178)......................................... 13,900
12,903 Merrill Lynch, 4.75%, 6/1/99, (Collateralized by $44,465,
U.S. Treasury Strip, 8.88%, 2/15/19, market value--
$13,162)................................................ 12,903
69,500 Morgan Stanley, 4.80%, 6/1/99, (Collateralized by
$68,600, U.S. Treasury Note, 6.50%, 5/15/05, market
value--$71,301)......................................... 69,500
--------
Total Repurchase Agreements 210,803
--------
Total Investments (Cost $279,040) (a)--100.1% 279,040
Liabilities in excess of other assets--(0.1)% (345)
--------
Total Net Assets--100.0% $278,695
========
</TABLE>
See notes to financial statements.
65
<PAGE> 67
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Small Capitalization Fund
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<C> <S> <C>
Common Stocks (89.1%):
Advertising (1.6%):
17,700 Doubleclick Inc.(b)(c).................................... $ 1,725
92,550 Valassis Communications, Inc.(b).......................... 3,222
--------
4,947
--------
Apparel/Shoes (0.9%):
23,300 K-Swiss Inc., Class A..................................... 1,337
42,300 Tarrant Apparel Group(b)(c)............................... 1,282
--------
2,619
--------
Banking (1.8%):
37,900 Cullen/Frost Bankers, Inc. ............................... 2,132
400,900 Republic Security Financial Corp. ........................ 3,357
--------
5,489
--------
Business Services (5.5%):
35,885 Corporate Executive Board Corp.(b)........................ 1,052
91,100 Diamond Technology Partners, Inc.(b)...................... 2,186
95,900 FYI, Inc.(b).............................................. 2,637
56,300 Iron Mountain, Inc.(b).................................... 1,555
76,000 NOVA Corp.(b)(c).......................................... 1,691
85,400 Onesource Information Services, Inc.(b)(c)................ 806
53,800 QRS Corp.(b).............................................. 3,982
91,000 Sykes Enterprises, Inc.(b)................................ 2,832
--------
16,741
--------
Chemicals (1.3%):
94,700 Macdermid, Inc. .......................................... 3,812
--------
Computer Services (7.3%):
45,000 Checkfree Holdings Corp.(b)............................... 2,118
37,000 CMGI Inc.(b).............................................. 3,834
98,600 E*Trade Group Inc.(b)(c).................................. 4,387
48,100 Infospace.com, Inc.(b)(c)................................. 2,261
45,200 Intervu, Inc.(b).......................................... 1,565
105,000 National Data Corp.(c).................................... 4,941
39,100 Pegasus Systems, Inc.(b).................................. 1,364
24,200 Safeguard Scientifics, Inc.(b)............................ 1,770
--------
22,240
--------
Computer Software & Peripherals (6.3%):
105,000 Ardent Software, Inc.(b).................................. 2,100
171,200 INSpire Insurance Solutions(b)............................ 2,985
69,800 Macrovision Corp.(b)...................................... 3,176
40,000 Mercury Interactive Corp.(b).............................. 1,315
59,000 Micromuse, Inc.(b)(c)..................................... 2,353
68,900 National Computer Systems, Inc............................ 2,153
59,000 Platinum Technology(b).................................... 1,718
110,600 Smart Modular Technologies(b)............................. 1,666
95,700 Unigraphics Solutions, Inc.(b)............................ 1,525
--------
18,991
--------
Consumer Goods & Services (1.0%):
105,300 JAKKS Pacific, Inc.(b).................................... 2,915
--------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<C> <S> <C>
Common Stocks, continued:
Educational Services (0.5%):
105,400 School Specialty, Inc.(b)................................. $ 1,568
--------
Electric Utilities (1.1%):
64,100 Calpine Corp.(b).......................................... 3,473
--------
Electronic Components/Instruments (5.4%):
85,700 CTS Corp. ................................................ 4,799
125,800 DII Group, Inc.(b)........................................ 4,144
176,700 Gentex Corp.(b)(c)........................................ 5,307
33,500 Optical Coating Laboratory, Inc. ......................... 2,173
--------
16,423
--------
Environmental Services (0.7%):
100,700 Casella Waste Systems, Inc., Series A(b).................. 1,983
--------
Financial Services (3.4%):
100,086 Affiliated Managers Group(b).............................. 2,928
220,000 Amresco, Inc.(b).......................................... 1,513
78,800 Metris Cos., Inc. ........................................ 4,594
57,200 Prism Financial Corp., Inc.(b)............................ 1,266
--------
10,301
--------
Health Care - Services (6.8%):
155,100 American Retirement Corp.(b)(c)........................... 2,627
224,700 Hooper Holmes, Inc. ...................................... 4,073
87,700 Laser Vision Centers, Inc.(b)............................. 4,998
90,000 Medquist, Inc.(b)......................................... 3,308
58,885 NCS HealthCare, Inc., Class A(b)(c)....................... 810
139,800 Priority Healthcare Corp. Class B(b)...................... 4,770
--------
20,586
--------
Home Building (0.5%):
124,400 Standard Pacific Corp. ................................... 1,633
--------
Home Furnishings (1.7%):
104,100 Ethan Allen Interiors, Inc. .............................. 3,318
77,400 Trex Company, Inc.(b)..................................... 1,698
--------
5,016
--------
Insurance (2.3%):
186,700 Annuity & Life Re......................................... 4,807
218,000 Scottish Annuity & Life Holdings.......................... 2,126
--------
6,933
--------
Leisure (0.6%):
57,400 Cheap Tickets, Inc.(b).................................... 1,808
--------
Machinery & Equipment (1.1%):
188,803 MotivePower Industries, Inc.(b)........................... 3,198
--------
Manufacturing - Capital Goods (1.6%):
63,900 Astec Industries, Inc.(b)................................. 2,388
123,000 Wabash National Corp.(c).................................. 2,345
--------
4,733
--------
Manufacturing - Consumer Goods (1.0%):
100,000 Monaco Coach Corp.(b)..................................... 3,000
--------
</TABLE>
Continued
66
<PAGE> 68
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Small Capitalization Fund
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<C> <S> <C>
Common Stocks, continued:
Medical Equipment & Supplies (2.3%):
98,600 Biomatrix, Inc.(b)(c)..................................... $ 3,021
70,300 Gliatech, Inc.(b)......................................... 1,801
14,500 Minimed, Inc.(b).......................................... 856
27,400 Visx, Inc.(b)............................................. 1,423
--------
7,101
--------
Metals & Mining (0.8%):
72,700 Stillwater Mining Co.(b).................................. 2,322
--------
Oilfield Services & Equipment (0.5%):
64,700 Cal Dive International, Inc.(b)........................... 1,585
--------
Pharmaceuticals (2.3%):
53,400 Alpharma, Inc., Class A(c)................................ 1,425
101,200 Geltex Pharmaceuticals, Inc.(b)(c)........................ 1,720
157,200 King Pharmaceuticals, Inc.(b)(c).......................... 3,734
--------
6,879
--------
Radio (1.1%):
124,900 Citadel Communications(b)................................. 3,450
--------
Resorts & Entertainment (1.4%):
115,700 Premier Parks, Inc.(b)(c)................................. 4,122
--------
Restaurants (1.0%):
113,900 Foodmaker, Inc.(b)........................................ 3,075
--------
Retail (3.6%):
61,000 Ames Department Stores, Inc.(b)........................... 2,501
80,600 BJ's Wholesale Club, Inc.(b).............................. 2,096
90,900 The Children's Place(b)(c)................................ 3,539
108,000 The Men's Warehouse, Inc.(b)(c)........................... 2,757
--------
10,893
--------
Semiconductors (8.3%):
189,900 Aeroflex, Inc.(b)......................................... 2,765
84,200 ATMI, Inc.(b)............................................. 1,852
75,000 Burr-Brown Corp.(b)....................................... 2,400
92,200 Credence Systems Corp.(b)(c).............................. 2,731
129,200 Cymer, Inc.(b)(c)......................................... 2,366
55,000 Photronics, Inc.(b)(c).................................... 1,086
112,200 PMC-Sierra, Inc.(b)....................................... 5,450
51,700 PRI Automation(b)(c)...................................... 1,267
57,300 SDL, Inc.(b).............................................. 5,329
--------
25,246
--------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- --------------------------------------------------------- --------
<C> <S> <C>
Common Stocks, continued:
Technology (2.4%):
92,300 Electronics For Imaging, Inc.(b)......................... $ 4,528
135,000 Mercury Computer Systems, Inc.(b)........................ 2,675
--------
7,203
--------
Telecommunications - Services & Equipment (11.2%):
104,400 Antec Corp.(b)(c)........................................ 3,060
45,700 Applied Micro Circuits Corp.(b).......................... 2,702
156,600 Commscope, Inc.(b)....................................... 4,111
124,500 Dycom(b)................................................. 6,007
50,200 Gilat Satellite Networks Ltd.(b)......................... 2,648
90,300 Intermedia Communications of Florida(b)(c)............... 2,286
91,000 Mastec, Inc.(b).......................................... 2,207
130,700 Microwave Power Devices, Inc.(b)......................... 1,993
96,500 Sawtek, Inc.(b).......................................... 3,824
147,400 Skytel Communications, Inc.(b)........................... 2,994
64,000 Worldgate Communications, Inc.(b)........................ 2,368
--------
34,200
--------
Transportation & Shipping (1.3%):
100,700 Atlas Air, Inc.(b)....................................... 2,707
20,300 Expeditors International of Washington, Inc.............. 1,129
--------
3,836
--------
Wholesale Distribution (0.5%):
75,900 Wesco International, Inc.(b)............................. 1,504
--------
Total Common Stocks 269,825
--------
Repurchase Agreements (6.3%):
$ 19,000 Prudential Securities, 4.78%, 6/1/99, (Collateralized by
$19,000, Freddie Mac, 7.00%, 3/15/24, market value--
$19,842)................................................ 19,000
--------
Total Repurchase Agreements 19,000
--------
Cash Equivalents (4.0%):
12,111 Goldman Sachs Financial Square Premium................... 12,111
--------
Total Cash Equivalents 12,111
--------
Short Term Securities Purchased with Collateral (16.5%):
Floating Rate Note (13.2%):
25,000 Bankers Trust Corp., 5.03%, 8/6/99....................... 24,997
15,000 Sigma Finance Inc., 4.91%, 9/15/99....................... 15,000
--------
39,997
--------
</TABLE>
Continued
67
<PAGE> 69
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Small Capitalization Fund
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ------------------------------------------------------- --------
<C> <S> <C>
Short Term Securities Purchased with Collateral, continued:
Repurchase Agreements (3.3%):
$10,000 Bear Stearns Triparty Agreement, 5.04%, 6/1/99, (See
Significant Accounting Policies, Lending Portfolio
Securities in the Notes to Financial Statements for
collateral description)............................... $ 10,000
--------
Total Short Term Securities Purchased with Collateral 49,997
--------
Total Investments (Cost $315,820)(a)--115.9% 350,933
Other assets in excess of liabilities--(15.9)% (48,245)
--------
Total Net Assets--100.0% $302,688
========
</TABLE>
- - -------
<TABLE>
<CAPTION>
Open Futures Contracts
----------------------------------
Number of Contracts Contract Value Expiration Date Unrealized Gain/Loss
------------------- -------------- --------------- --------------------
<S> <C> <C> <C> <C>
Russell 2000 Stock Index
Futures................ 114 $22,851 6/17/99 $2,276
</TABLE>
The aggregate market value of cash pledged to cover margin requirements for
open futures positions at May 31, 1999 was $1,026.
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax purposes
of $3. Cost for federal income tax purposes differs from value by net
unrealized appreciation as follows:
<TABLE>
<S> <C>
Unrealized appreciation..................................... $ 49,714
Unrealized depreciation..................................... (14,604)
--------
Net unrealized appreciation................................. 35,110
========
</TABLE>
(b) Represents non-income producing securities.
(c) All or part of the security has been loaned at May 31, 1999.
See notes to financial statements.
68
<PAGE> 70
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Mid Capitalization Fund
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<C> <S> <C>
Common Stocks (95.7%):
Advertising (1.0%):
111,000 Valassis Communications, Inc.(b).......................... $ 3,864
--------
Air Transportation (1.5%):
186,750 Comair Holdings, Inc. .................................... 3,536
39,300 Gulfstream Aerospace Corp.(b)............................. 2,427
--------
5,963
--------
Appliances & Household Products (0.6%):
34,200 Maytag.................................................... 2,413
--------
Banking (2.7%):
83,400 First Tennessee National Corp.(c)......................... 3,435
70,000 Old Kent Financial Corp.(c)............................... 3,146
59,300 Zions Bancorporation...................................... 3,780
--------
10,361
--------
Beverages & Tobacco (2.1%):
79,900 Canandaigua Wine Co., Class A(b).......................... 3,975
86,800 Coors (Adolph), Class B................................... 4,123
--------
8,098
--------
Broadcasting & Publishing (6.0%):
97,600 Cablevision Systems(b)(c)................................. 7,698
79,100 Chancellor Media Corp.(b)(c).............................. 4,019
134,400 Clear Channel Communications, Inc.(b)(c).................. 8,879
47,200 Univision Communications, Inc.(b)(c)...................... 2,800
--------
23,396
--------
Business Services (2.8%):
58,200 Cintas Corp.(c)........................................... 3,696
27,300 Northpoint Communications(b)(c)........................... 1,162
71,718 Paychex, Inc. ............................................ 2,125
109,100 SunGard Data Systems, Inc.(b)(c).......................... 3,818
--------
10,801
--------
Computer Hardware (1.7%):
47,500 Lexmark International Group(b)............................ 6,466
--------
Computer Services (1.9%):
17,200 Excite, Inc.(b)(c)........................................ 2,288
48,900 Geocities(b).............................................. 4,896
--------
7,184
--------
Computer Software & Peripherals (3.3%):
47,300 Citrix Systems, Inc.(b)................................... 2,338
16,800 Inktomi Corp.(b)(c)....................................... 1,726
76,800 International Network Services(b)......................... 2,870
59,200 Legato Systems, Inc.(b)(c)................................ 3,242
30,250 VERITAS Software Corp.(b)(c).............................. 2,670
--------
12,846
--------
Consumer Goods & Services (1.4%):
52,200 Clorox.................................................... 5,269
--------
Data Processing & Reproduction (1.8%):
186,862 Fiserv, Inc.(b)........................................... 7,007
--------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- --------------------------------------------------------- --------
<C> <S> <C>
Common Stocks, continued:
Diversified Operations (0.8%):
55,800 Corning, Inc. ........................................... $ 3,048
--------
Electric Utility (1.4%):
107,400 AES Corp.(b)............................................. 5,343
--------
Electrical & Electronic (3.4%):
95,900 Gentex Corp.(b).......................................... 2,880
47,800 Jabil Circuit, Inc.(b)(c)................................ 2,306
48,800 Sanmina Corp.(b)(c)...................................... 3,659
80,400 Solectron Corp.(b)....................................... 4,402
--------
13,247
--------
Environmental Services (0.5%):
43,000 Browning-Ferris Industries, Inc. ........................ 1,785
--------
Financial Services (4.6%):
36,800 Capital One Financial Corp. ............................. 5,545
51,500 Charles Schwab Corp.(c).................................. 5,449
71,300 Providian Financial...................................... 6,841
--------
17,835
--------
Food Products & Services (3.7%):
137,000 Tricon Global Restaurants, Inc.(b)....................... 7,980
142,700 U.S. Foodservice(b)...................................... 6,350
--------
14,330
--------
Health Care - Services (3.7%):
117,800 Medquist, Inc.(b)........................................ 4,329
263,800 Oxford Health(b)......................................... 5,029
54 U.S. Surgical-Rights..................................... (d)
60,100 Wellpoint Health Networks(b)............................. 4,954
--------
14,312
--------
Industrial Goods & Services (2.1%):
142,200 Ecolab, Inc. ............................................ 6,043
35,600 Nordson.................................................. 2,092
--------
8,135
--------
Industrial Supplies (0.7%):
141,100 MSC Industrial Direct Co., Inc.(b)....................... 2,663
--------
Insurance (4.6%):
113,000 AFLAC, Inc. ............................................. 5,763
130,000 Nationwide Financial Services, Inc. ..................... 5,614
45,400 Progressive Corp. ....................................... 6,373
--------
17,750
--------
Motorcycles (0.6%):
42,800 Harley-Davidson, Inc. ................................... 2,185
--------
Oil & Gas Exploration, Production & Services (2.0%):
52,400 Anadarko Petroleum Corp. ................................ 1,965
65,700 Apache Corp. ............................................ 2,365
104,200 Baker Hughes............................................. 3,243
--------
7,573
--------
</TABLE>
Continued
69
<PAGE> 71
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Mid Capitalization Fund
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<C> <S> <C>
Common Stocks, continued:
Pharmaceuticals (5.2%):
21,800 Allergan, Inc. ........................................... $ 2,027
69,600 Biogen(b)................................................. 7,595
169,100 Forest Laboratories(b).................................... 8,054
36,200 Medimmune, Inc.(b)........................................ 2,303
--------
19,979
--------
Retail (12.5%):
91,600 Abercrombie & Fitch(b).................................... 7,707
49,400 American Eagle Outfitters(b).............................. 2,016
110,400 Best Buy Co., Inc.(b)..................................... 5,023
150,100 BJ's Wholesale Club, Inc.(b).............................. 3,903
9,400 EToys, Inc.(b)(c)......................................... 570
401,000 Family Dollar Stores...................................... 8,948
99,100 Linens 'N Things, Inc.(b)................................. 3,952
181,900 Office Depot, Inc.(b)..................................... 3,797
122,300 Ross Stores, Inc.(c)...................................... 5,618
61,100 Tandy, Inc. .............................................. 5,041
51,400 The Children's Place(b)................................... 2,001
--------
48,576
--------
Semiconductors (7.4%):
157,400 Altera Corp.(b)........................................... 5,479
82,000 KLA-Tenor Corp.(b)(c)..................................... 3,731
83,600 PMC-Sierra, Inc.(b)....................................... 4,060
83,200 Teradyne, Inc.(b)......................................... 4,394
107,600 Vitesse Semiconductor Corp.(b)(c)......................... 5,912
117,600 Xilinx, Inc.(b)........................................... 5,226
--------
28,802
--------
Technology (5.5%):
52,500 Electronics for Imaging, Inc.(b).......................... 2,576
162,100 Gemstar International Group Ltd.(b)(c).................... 10,019
128,700 Symbol Technologies, Inc. ................................ 6,435
18,200 Uniphase Corp.(b)(c)...................................... 2,439
--------
21,469
--------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- -------------------------------------------------------- --------
<C> <S> <C>
Common Stocks, continued:
Telecommunications - Services & Equipment (10.2%):
270,550 Centurytel, Inc. ....................................... $ 10,366
108,050 Comverse Technology, Inc.(b)(c)......................... 7,300
95,000 Frontier Corp. ......................................... 4,999
83,000 Global Crossing Ltd.(b)(c).............................. 3,937
45,700 Plantronics, Inc.(b).................................... 2,799
239,800 Qwest Communications International, Inc.(b)(c).......... 10,178
--------
39,579
--------
Total Common Stocks 370,279
--------
Cash Equivalents (4.3%):
$16,572 Goldman Sachs Financial Square Premium.................. 16,572
--------
Total Cash Equivalents 16,572
--------
Short Term Securities Purchased with Collateral (20.7%):
Floating Rate Note (12.9%):
15,000 Household CCMT ABT 96 Series A4, 4.96%, 1/18/00......... 15,000
10,000 Merrill Lynch, 5.05%, 10/4/99........................... 10,000
10,000 Merrill Lynch, 5.04%, 9/29/99........................... 10,000
15,000 Sigma Finance Inc., 4.91%, 9/15/99...................... 15,000
--------
50,000
--------
Repurchase Agreements (7.8%):
30,266 Bear Stearns Triparty Agreement, 5.04%, 6/1/99, (See
Significant Accounting Policies, Lending Portfolio
Securities in the Notes to Financial Statements for
collateral description) 30,266
--------
Total Short Term Securities Purchased with Collateral 80,266
--------
Total Investments (Cost $376,708) (a)--120.7% 467,117
Other assets in excess of liabilities--(20.7)% (80,150)
--------
Total Net Assets--100.0% $386,967
========
</TABLE>
- - -------
(a) Cost for federal income tax purposes differs from value by net unrealized
appreciation as follows:
<TABLE>
<S> <C>
Unrealized appreciation...................................... $97,611
Unrealized depreciation...................................... (7,202)
-------
Net unrealized appreciation.................................. 90,409
=======
</TABLE>
(b) Represents non-income producing securities.
(c) All or part of this security has been loaned at May 31, 1999.
(d) Market value is less than $1,000.
See notes to financial statements.
70
<PAGE> 72
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Large Capitalization Fund
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
--------- --------------------------------------------------------- ---------
<C> <S> <C>
Common Stocks (97.7%):
Advertising (1.2%):
75,000 Omnicom Group, Inc.(c)................................... $ 5,250
---------
Banking (1.3%):
78,100 State Street Corp. ...................................... 5,955
---------
Broadcasting/Cable (2.3%):
137,000 Comcast Corp.--Class A................................... 5,275
120,000 USA Networks, Inc.(b).................................... 4,800
---------
10,075
---------
Business Services (2.1%):
134,200 Automatic Data Processing, Inc. ......................... 5,527
118,000 Ceridian Corp.(b)(c)..................................... 3,894
---------
9,421
---------
Chemicals (0.7%):
80,300 Monsanto Co. ............................................ 3,332
---------
Computer Hardware (6.6%):
110,000 Dell Computer Corp.(b)................................... 3,788
83,300 EMC Corp.(b)............................................. 8,299
94,000 IBM...................................................... 10,933
111,200 Sun Microsystems, Inc.(b)................................ 6,644
---------
29,664
---------
Computer Software & Peripherals (3.8%):
210,200 Microsoft, Inc.(b)....................................... 16,961
---------
Consumer Goods & Services (3.9%):
51,600 Colgate Palmolive Co.(c)................................. 5,154
43,000 Gillette Co. ............................................ 2,193
108,200 Procter & Gamble Co. .................................... 10,103
---------
17,450
---------
Diversified Operations (3.1%):
159,800 Tyco International Ltd. ................................. 13,963
---------
Electrical & Electronic (3.6%):
60,000 Applied Materials, Inc.(b)............................... 3,296
126,900 General Electric Co. .................................... 12,904
---------
16,200
---------
Environmental Services (1.4%):
120,000 Waste Management, Inc.(c)................................ 6,345
---------
Financial Services (5.7%):
30,000 American Express Co. .................................... 3,636
32,000 Charles Schwab Corp. .................................... 3,386
5,000 DLJ Direct(b)............................................ 206
123,200 Freddie Mac.............................................. 7,184
33,000 J.P. Morgan.............................................. 4,597
189,000 MBNA Corp. .............................................. 5,221
15,000 Providian Financial...................................... 1,439
---------
25,669
---------
Food & Beverage (1.1%):
71,300 The Coca-Cola Co. ....................................... 4,871
---------
</TABLE>
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
--------- --------------------------------------------------------- ---------
<C> <S> <C>
Common Stocks, continued:
Food Products & Services (2.0%):
48,000 Kroger Co.(b)............................................ $ 2,811
128,000 Safeway, Inc.(b)......................................... 5,952
---------
8,763
---------
Industrial Goods & Services (1.1%):
82,000 United Technologies Corp.(c)............................. 5,089
---------
Insurance (2.9%):
112,763 American International Group, Inc. ...................... 12,890
---------
Manufacturing - Consumer Goods (1.3%):
43,000 Lexmark International Group(b)........................... 5,853
---------
Medical Equipment & Supplies (1.5%):
28,800 Guidant Corp. ........................................... 1,440
73,800 Medtronic, Inc. ......................................... 5,240
---------
6,680
---------
Office Equipment & Services (3.2%):
49,300 Hewlett-Packard Co. ..................................... 4,650
39,100 Pitney Bowes, Inc. ...................................... 2,493
130,800 Xerox Corp. ............................................. 7,349
---------
14,492
---------
Oil & Gas (2.0%):
100,000 Burlington Resources Inc. ............................... 4,294
75,000 Schlumberger Ltd. ....................................... 4,514
---------
8,808
---------
Paper Products (1.0%):
88,000 International Paper Co. ................................. 4,400
---------
Pharmaceuticals (12.0%):
112,000 Bristol Myers Squibb Co. ................................ 7,686
116,800 Eli Lilly & Co. ......................................... 8,344
78,000 Johnson & Johnson........................................ 7,225
124,000 Merck & Co., Inc. ....................................... 8,370
98,200 Pfizer, Inc. ............................................ 10,507
127,600 Schering Plough Corp. ................................... 5,750
94,000 Warner-Lambert Co. ...................................... 5,828
---------
53,710
---------
Resorts & Entertainment (3.1%):
90,000 Carnival Cruise Lines.................................... 3,690
148,000 Time Warner Inc. ........................................ 10,073
---------
13,763
---------
Retail (11.6%):
118,000 CVS Corp. ............................................... 5,428
150,000 Dayton Hudson Corp. ..................................... 9,451
165,000 Home Depot, Inc. ........................................ 9,384
148,000 Staples(b)(c)............................................ 4,255
84,000 Tandy, Inc. ............................................. 6,930
143,000 TJX Companies, Inc. ..................................... 4,290
182,600 Wal-Mart................................................. 7,783
188,000 Walgreen Co.(c).......................................... 4,371
---------
51,892
---------
</TABLE>
Continued
71
<PAGE> 73
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Large Capitalization Fund
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
--------- --------------------------------------------------------- ---------
<C> <S> <C>
Common Stocks, continued:
Semiconductors (2.8%):
150,000 Intel Corp. ............................................. $ 8,110
39,600 Texas Instruments........................................ 4,331
---------
12,441
---------
Telecommunications - Services & Equipment (15.5%):
51,000 AirTouch Communications, Inc.(b)......................... 5,126
95,700 Alltel Corp. ............................................ 6,860
173,700 Cisco Systems, Inc.(b)................................... 18,911
261,800 Lucent Technologies, Inc.(c)............................. 14,890
133,000 MCI WorldCom, Inc.(b).................................... 11,488
38,000 Motorola, Inc. .......................................... 3,147
55,000 Nortel Networks Corp. ................................... 4,125
90,000 SBC Communications, Inc. ................................ 4,601
---------
69,148
---------
Wholesale Distribution - Pharmaceuticals (0.9%):
67,000 Cardinal Health, Inc.(c)................................. 4,045
---------
Total Common Stocks 437,130
---------
Cash Equivalents (1.8%):
$ 8,229 Goldman Sachs Financial Square Premium................... 8,229
---------
Total Cash Equivalents 8,229
---------
</TABLE>
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
--------- ------------------------------------------------------- ---------
<C> <S> <C>
Short Term Securities Purchased with Collateral (10.2%)
Floating Rate Note (8.9%):
$10,000 Amex Centurion, 4.95%, 4/24/00......................... $ 10,000
20,000 Merrill Lynch, 5.04%, 9/29/99.......................... 20,000
10,000 Sigma Finance Inc., 4.91%, 9/15/99..................... 10,000
---------
40,000
---------
Repurchase Agreements (1.3%):
5,660 Bear Stearns Triparty Agreement, 5.04%, 6/1/99, (See
Significant Accounting Policies, Lending Portfolio
Securities in the Notes to Financial Statements for
collateral description) .............................. 5,660
---------
Total Short Term Securities Purchased with Collateral 45,660
---------
Total Investments (Cost $319,208)(a)--109.7% 491,019
Other assets in excess of liabilities--(9.7)% (43,271)
---------
Total Net Assets--100.0% $ 447,748
=========
</TABLE>
- - -------
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax purposes
of $62. Cost for federal income tax purposes differs from value by net
unrealized appreciation as follows:
<TABLE>
<S> <C>
Unrealized appreciation..................................... $177,216
Unrealized depreciation..................................... (5,467)
--------
Net unrealized appreciation................................. 171,749
========
</TABLE>
(b) Represents non-income producing securities.
(c) All or part of this security has been loaned at May 31, 1999.
See notes to financial statements.
72
<PAGE> 74
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
International Discovery Fund
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
---------- --------------------------------------------------------- --------
<C> <S> <C>
Common Stocks (96.6%):
Australia (1.2%):
Banking (1.2%):
223,000 National Australia Bank Ltd. ............................ $ 3,618
--------
Belgium (0.9%):
Retail Stores/Catalog (0.9%):
4,100 Colruyt NV............................................... 2,673
--------
Brazil (0.4%):
Telecommunications (0.4%):
13,000 Telebras ADR............................................. 1,085
13,000 Telebras - Rights........................................ 1
--------
1,086
--------
Finland (4.2%):
Computer Software (1.5%):
129,000 TT Tieto Corp. .......................................... 4,519
--------
Paper Products (0.4%):
42,000 Upm-Kymmene.............................................. 1,234
--------
Telecommunications - Services & Equipment (2.3%):
95,170 Nokia AB, Class A, ADR................................... 6,757
--------
12,510
--------
France (10.7%):
Commercial Services (1.2%):
15,400 Altran Technologies...................................... 3,496
--------
Energy (1.7%):
41,300 Total SA, B Shares....................................... 5,031
--------
Engineering (0.4%):
8,000 Compagnie De Saint-Gobain................................ 1,259
--------
Health & Personal Care (2.0%):
9,850 L'Oreal.................................................. 5,948
--------
Industrial Goods & Services (0.9%):
35,700 Vivendi.................................................. 2,650
35,700 Vivendi Rights........................................... 37
--------
2,687
--------
Insurance (2.0%):
54,000 AXA...................................................... 6,240
--------
Machinery & Equipment (1.6%):
35,000 Sidel SA................................................. 4,867
--------
Telecommunications - Services & Equipment (0.9%):
33,900 France Telecom SA........................................ 2,605
--------
32,133
--------
Germany (7.6%):
Banking (1.0%):
90,000 BHF Bank AG.............................................. 2,931
--------
Electrical & Electronic (1.3%):
58,000 Siemens AG............................................... 3,912
--------
Energy (1.1%):
55,700 Veba AG.................................................. 3,186
--------
</TABLE>
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
---------- --------------------------------------------------------- --------
<C> <S> <C>
Common Stocks, continued:
Germany, continued:
Insurance (1.5%):
16,000 Allianz AG............................................... $ 4,383
--------
Telecommunications (2.7%):
61,400 Mannesmann AG............................................ 8,410
--------
22,822
--------
Hong Kong (3.6%):
Banking (1.3%):
118,000 HSBC Holdings PLC........................................ 3,866
--------
Electrical & Electronic (1.0%):
813,000 Johnson Electric Holdings Ltd............................ 2,998
--------
Gas & Electric Utility (0.7%):
1,466,796 Hong Kong & China Gas Co. Ltd............................ 2,071
--------
Industrial Holding Company (0.6%):
228,500 Hutchison Whampoa........................................ 1,908
--------
10,843
--------
Ireland (1.0%):
Banking (1.0%):
165,000 Bank of Ireland.......................................... 3,107
--------
Italy (2.2%):
Insurance (1.2%):
95,000 Assicurazioni Generali................................... 3,387
--------
Jewelry (0.5%):
262,200 Bulgari SpA.............................................. 1,587
--------
Telecommunications--Services & Equipment (0.5%):
265,000 Telecom Italia Mobile SpA................................ 1,563
--------
6,537
--------
Japan (16.5%):
Banking (1.1%):
237,000 Bank of Tokyo-Mitsubishi Ltd.(b)......................... 3,178
--------
Computer Hardware (1.2%):
42,000 TDK Corp.(b)............................................. 3,608
--------
Computer Software (2.7%):
222,000 Nihon Unisys............................................. 4,135
5,500 Softbank Corp............................................ 633
16 Yahoo Japan Corp.(b)..................................... 3,284
--------
8,052
--------
Consumer Electronics (1.1%):
36,000 Sony Corp.(b)............................................ 3,385
--------
Electronic Components/Instruments (1.5%):
101,000 Fanuc Co. Ltd.(b)........................................ 4,355
--------
Financial Services (0.5%):
149,000 Nomura Securities Co.(b)................................. 1,487
--------
Food & Household Products (1.1%):
124,000 Kao Corp................................................. 3,407
--------
</TABLE>
Continued
73
<PAGE> 75
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
International Discovery Fund
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
---------- --------------------------------------------------------- --------
<C> <S> <C>
Common Stocks, continued:
Japan, continued:
Manufacturing - Consumer Goods (2.3%):
161,000 Canon, Inc............................................... $ 4,064
78,000 Fuji Photo Film Ltd.(b).................................. 2,789
--------
6,853
--------
Pharmaceuticals (2.4%):
162,000 Takeda Chemical Industries(b)............................ 7,201
--------
Retail Stores/Catalog (1.4%):
36,785 Ito Yokado............................................... 2,195
24,000 Seven-Eleven Japan Ltd................................... 2,084
--------
4,279
--------
Telecommunications (1.2%):
367 Nippon Telegraph & Telephone Corp. (b)................... 3,584
--------
49,389
--------
Korea (1.0%):
Metals (1.0%):
113,100 Pohang Iron & Steel ADR.................................. 2,863
--------
Mexico (1.4%):
Beverages & Tobacco (0.5%):
85,000 Coca-Cola Femsa SA--ADR.................................. 1,535
--------
Entertainment (0.5%):
33,000 Grupo Televisa SA--ADR(b)................................ 1,380
--------
Telecommunications (0.4%):
16,000 Telefonos De Mexico--ADR................................. 1,279
--------
4,194
--------
Netherlands (9.0%):
Broadcasting & Publishing (1.9%):
137,892 Wolters Kluwer NV........................................ 5,558
--------
Consumer Goods & Services (0.5%):
24,554 Unilever NV.............................................. 1,637
--------
Energy (2.3%):
127,800 Royal Dutch Petroleum.................................... 7,136
--------
Financial Services (0.7%):
60,000 Fortis NV................................................ 1,954
--------
Insurance (1.8%):
34,600 Aegon NV................................................. 2,804
47,500 ING Groep NV............................................. 2,545
--------
5,349
--------
Retail Stores/Catalog (1.8%):
153,900 Kon Ahold NV............................................. 5,383
--------
27,017
--------
Portugal (1.0%):
Telecommunications (1.0%):
65,500 Portugal Telecom SA...................................... 2,964
--------
Singapore (3.8%):
Banking (0.7%):
214,000 Development Bank of Singapore............................ 2,209
--------
</TABLE>
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
---------- --------------------------------------------------------- --------
<C> <S> <C>
Common Stocks, continued:
Singapore, continued:
Electrical & Electronic (0.7%):
647,000 Natsteel Electronics Ltd................................. $ 2,157
--------
Real Estate (0.9%):
475,000 City Developments........................................ 2,837
--------
Transportation & Shipping (1.5%):
470,000 Singapore International Airlines......................... 4,196
--------
11,399
--------
Spain (2.7%):
Gas & Electric Utility (1.0%):
140,000 Endesa-Empresa Nac Electric.............................. 2,988
--------
Telecommunications (1.7%):
106,080 Telefonica SA............................................ 5,100
--------
8,088
--------
Switzerland (8.0%):
Banking (2.1%):
18,900 Credit Suisse Group...................................... 3,288
10,000 UBS AG-Registered........................................ 2,901
--------
6,189
--------
Food Products & Services (1.2%):
1,930 Nestle SA................................................ 3,477
--------
Insurance (1.3%):
1,996 Swiss Reinsurance Co..................................... 3,795
--------
Pharmaceuticals (3.4%):
2,000 Novartis AG.............................................. 2,909
709 Roche Holdings AG........................................ 7,521
--------
10,430
--------
23,891
--------
United Kingdom (19.2%):
Aerospace/Defense (0.7%):
300,392 British Aerospace PLC(b)................................. 1,969
--------
Banking (3.9%):
240,000 Abbey National PLC....................................... 4,937
224,000 Allied Zurich PLC........................................ 2,818
243,500 Standard Chartered PLC................................... 3,685
--------
11,440
--------
Beverages & Tobacco (1.1%):
226,600 Bass PLC................................................. 3,344
--------
Commercial Services (0.5%):
175,285 Logica PLC (b)........................................... 1,626
--------
Electric Utility (1.5%):
660,000 National Grid Group PLC.................................. 4,466
--------
Electrical & Electronic (1.0%):
320,000 General Electric PLC..................................... 3,023
--------
Energy (1.8%):
301,000 BP Amoco PLC............................................. 5,383
--------
</TABLE>
Continued
74
<PAGE> 76
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
International Discovery Fund
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
---------- --------------------------------------------------------- --------
<C> <S> <C>
Common Stocks, continued:
United Kingdom, continued:
Engineering (1.0%):
686,000 Invensys PLC............................................. $ 3,125
--------
Food Products & Services (0.5%):
148,000 Compass Group PLC........................................ 1,502
--------
Industrial Goods & Services (1.9%):
137,800 Boc Group PLC............................................ 2,358
301,800 Imperial Chemical Industries PLC......................... 3,326
--------
5,684
--------
Leisure (1.1%):
162,000 Granada Group PLC........................................ 3,375
--------
Media and Entertainment (1.5%):
240,400 Pearson PLC.............................................. 4,584
--------
Pharmaceuticals (1.8%):
193,900 Glaxo Holdings PLC....................................... 5,459
Telecommunications (0.9%):
147,700 Vodafone................................................. 2,826
--------
57,806
--------
United States (2.2%):
Pharmaceuticals (1.0%):
53,000 Pharmacia & Upjohn, Inc.................................. 2,938
--------
Telecommunications (1.2%):
19,100 Airtouch Communications, Inc. (b)........................ 1,919
34,500 Frontier Corp............................................ 1,816
--------
3,735
--------
6,673
--------
Total Common Stocks 289,613
--------
</TABLE>
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
---------- --------------------------------------------------------- --------
<C> <S> <C>
Preferred Stocks (1.2%):
Germany (0.3%):
Business Services (0.3%):
2,010 SAP AG................................................... $ 806
--------
United Kingdom (0.9%):
Telecommunications (0.9%):
233,600 Cable & Wireless PLC..................................... 2,864
--------
Total Preferred Stocks 3,670
--------
Cash Equivalents (2.0%):
$ 6,111 Goldman Sachs Financial Square Premium................... 6,111
--------
Total Cash Equivalents 6,111
--------
Total Investments (Cost $254,498) (a)--99.8% 299,394
Other assets in excess of liabilities--0.2% 888
--------
Total Net Assets--100.0% $300,282
========
</TABLE>
- - -------
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax purposes
of $7. Cost for federal income tax purposes differs from value by net
unrealized appreciation as follows:
<TABLE>
<S> <C>
Unrealized appreciation...................................... $53,584
Unrealized depreciation...................................... (8,695)
-------
Net unrealized appreciation.................................. 44,889
=======
</TABLE>
(b) Represents non-income producing securities.
See notes to financial statements.
75
<PAGE> 77
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Limited Maturity Bond Fund
(Amounts in Thousands)
<TABLE>
<CAPTION>
Principal Security Market
Amount Description Value
--------- --------------------------------------------------------- --------
<C> <S> <C>
U.S. Treasury Notes (5.3%):
$ 2,800 5.75%, 11/15/00(b)....................................... $ 2,817
5,000 5.75%, 8/15/03(b)........................................ 5,010
--------
Total U.S. Treasury Notes 7,827
--------
Corporate Bonds (48.1%):
Euro Dollar (9.4%):
3,750 British Gas & Finance, 8.38%, 9/8/99..................... 3,770
5,000 National Power Co. PLC, 7.12%, 7/11/01................... 5,029
5,000 SNCB Belgium Rail, 8.25%, 2/2/00......................... 5,077
--------
13,876
--------
Financial Services (16.4%):
4,000 ERAC USA Finance Co, 7.00%, 6/15/00...................... 4,034
5,300 Fannie Mae Whole Loan, Series 1999-W4, Class A2, 6.25%,
10/25/08................................................ 5,281
5,000 Franchise Financial Corporation of America, 7.00%,....... 4,987
5,000 Lehman Brothers Holdings, 6.89%, 10/10/00................ 5,036
5,000 Main Place Real Estate Investment, 5.65%, 3/25/00........ 5,000
--------
24,338
--------
Gas & Electric Utility (1.6%):
2,350 Enserch Corp., 7.00%, 8/15/99............................ 2,356
--------
Industrial Goods & Services (10.2%):
3,300 Browning Ferris, 6.08%, 1/18/00.......................... 3,273
1,500 Champion International Corp., 9.70%, 5/1/01.............. 1,583
2,975 Computer Assoc. International, 6.25%, 4/15/03............ 2,886
1,500 Dial Corp., 6.63, 6/15/03................................ 1,485
4,700 Ingersoll-Rand, 6.34%, 12/3/01........................... 4,728
1,000 Trans Ocean Container Corp., 12.25%, 7/1/04.............. 1,090
--------
15,045
--------
Industrials (2.0%):
3,000 Occidental Petroleum, 6.02%, 11/24/99.................... 3,000
--------
Manufacturing-Capital Goods (2.0%):
3,000 Comdisco, Inc., 6.00%, 1/30/02........................... 2,965
--------
Retail Stores/Catalog (1.4%):
2,000 Dillards, Inc., 9.50%, 10/15/01.......................... 2,128
--------
Telecommunications (3.6%):
2,400 Cable & Wire Communications, 6.38%, 3/6/03............... 2,370
3,000 US West Communications, 6.13%, 11/21/00.................. 3,000
--------
5,370
--------
Transportation & Shipping (1.5%):
2,250 JB Hunt Transport Services, 6.00%, 12/12/00.............. 2,230
--------
Total Corporate Bonds 71,308
--------
</TABLE>
<TABLE>
<CAPTION>
Principal Security Market
Amount Description Value
--------- --------------------------------------------------------- --------
<C> <S> <C>
Asset Backed Securities (35.4%):
$ 5,153 Amresco Snimt, 7.55%, 9/26/27............................ $ 5,132
4,000 Case Credit, 6.12%, 8/1/01............................... 3,985
15,000 Champion Home Equity Loan Trust, Series 1998-1, Class A2,
Interest Only, 8.12%, 9/25/01........................... 2,501
5,000 Copelco Capital Funding Corp, Series 1997-A, Class A4,
6.47%, 4/20/05 ......................................... 5,027
2,500 Empire Funding, Series 99-1, Class A3, 6.44%, 4/25/13.... 2,491
3,000 EQCC Home Equity Loan Trust, 1998-1, A3f, 6.23%,......... 3,009
2,880 GE Capital Mortgage Services, Inc., Series 1997-He4,
Class A4, 6.77%, 4/25/15 ............................... 2,904
6,040 General Electric Corp., Series A3, 6.18%, 6/25/15........ 6,045
2,509 Green Tree Financial Corp., 6.55%, 7/15/28............... 2,535
751 Green Tree Home Improvement Loan Trust, 7.85%, 7/15/09... 746
4,989 Oakwood Mortgage Investors, Inc., 6.95%, 8/15/27......... 5,022
2,927 PALS, Series 99-1, Class A1, 6.30%, 3/25/29.............. 2,882
4,150 Saxon Asset Securities Trust, Series 1997-1, Class Af3,
7.38%, 11/25/23......................................... 4,228
41 Structured Asset Securities Co., 7.50%, 8/25/26.......... 41
6,000 WFS Financial Owner Trust, 5.70%, 11/20/03............... 5,906
--------
Total Asset Backed Securities 52,454
--------
Mortgage Backed Securities (3.8%):
2,415 Merrill Lynch Mortgage Investors, Inc., 7.15%, 4/25/28... 2,463
3,215 Residential Asset Securitization Trust, Series 1997-A1,
Class A1, 7.00%, 3/25/27................................ 3,227
--------
Total Mortgage Backed Securities 5,690
--------
U.S. Government Agencies (3.8%):
Fannie Mae (3.8%):
5,654 5.00%, 11/18/20.......................................... 5,592
--------
Total U.S. Government Agencies 5,592
--------
Cash Equivalents (2.9%):
4,257 Goldman Sachs Financial Square Premium................... 4,257
--------
Total Cash Equivalents 4,257
--------
</TABLE>
Continued
76
<PAGE> 78
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Limited Maturity Bond Fund
(Amounts in Thousands)
<TABLE>
<CAPTION>
Principal Security Market
Amount Description Value
--------- ------------------------------------------------------- --------
<C> <S> <C>
Short Term Securities Purchased with Collateral (5.4%)
Repurchase Agreements (5.4%):
$ 8,071 Lehman Brothers Triparty Agreement, 5.04%, 6/1/99, (See
Significant Accounting Policies, Lending Portfolio
Securities in the Notes to Financial Statements for
collateral description)............................... $ 8,071
--------
Total Short Term Securities Purchased with Collateral 8,071
--------
Total Investments (Cost $156,805) (a)--104.7% 155,199
Other assets in excess of liabilities--(4.7)% (6,990)
--------
Total Net Assets--100.0% $148,209
========
</TABLE>
- - -------
* Variable rate securities having liquidity sources through bank letters of
credit and/or liquidity agreements. The interest rates, which will change
periodically, are based upon bank prime rates or an index of the market
interest rates. The rate reflected on the Schedule of Portfolio Investments
is the rate in effect on May 31, 1999.
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax purposes
of $88. Cost for federal income tax purposes differs from value by net
unrealized depreciation as follows:
<TABLE>
<S> <C>
Unrealized appreciation..................................... $ 220
Unrealized depreciation..................................... (1,914)
-------
Net unrealized depreciation................................. $(1,694)
=======
</TABLE>
(b) All or a portion of this security has been loaned at May 31, 1999.
See notes to financial statements.
77
<PAGE> 79
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Intermediate Government Obligations Fund
(Amounts in Thousands)
<TABLE>
<CAPTION>
Principal Security Market
Amount Description Value
--------- ----------------------------------------------------------- --------
<C> <S> <C>
U.S. Treasury Notes (44.9%):
$ 5,106 3.63%, 1/15/08(c).......................................... $ 5,012
12,450 5.75%, 11/15/00(b)......................................... 12,523
7,000 5.75%, 8/15/03(b).......................................... 7,015
5,780 6.13%, 12/31/01............................................ 5,863
6,400 6.13%, 8/15/07(b).......................................... 6,529
13,800 6.25%, 8/31/02............................................. 14,054
9,015 6.63%, 3/31/02............................................. 9,260
4,480 7.00%, 7/15/06............................................. 4,787
--------
Total U.S. Treasury Notes 65,043
--------
U.S. Government Agencies (38.4%):
Fannie Mae (23.6%):
10,000 5.63%, 3/15/01(b).......................................... 9,997
1,496 6.00%, 2/1/29.............................................. 1,423
14,000 6.39%, 9/24/07............................................. 14,107
1,000 6.50%, 2/1/28.............................................. 978
945 8.25%, 7/1/17.............................................. 987
1,015 8.50%, 2/1/25.............................................. 1,067
514 8.75%, 8/1/09.............................................. 543
2,066 9.00%, 08/01/09-01/01/10................................... 2,192
823 11.50%, 5/1/10............................................. 890
1,949 13.00%, 8/15/15............................................ 2,167
--------
34,351
--------
Federal Home Loan Bank (10.3%):
5,000 5.53%, 1/15/03............................................. 4,935
10,000 5.63%, 3/19/01(b).......................................... 9,997
--------
14,932
--------
Freddie Mac (4.4%):
5,000 7.44%, 9/20/06, Callable 9/20/01 @ 100..................... 5,159
409 8.00%, 5/1/17.............................................. 429
734 8.75%, 4/1/17.............................................. 781
--------
6,369
--------
Guaranteed Export Trust (0.1%):
157 6.61%, 6/15/99, Series 94-D................................ 157
--------
Total U.S. Government Agencies 55,809
--------
</TABLE>
<TABLE>
<CAPTION>
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<C> <S> <C>
U.S. Government Obligations (4.8%):
Government National Mortgage Assoc. (4.8%):
$ 1,476 7.00%, 8/15/28............................................ $ 1,478
1,897 9.00%, 9/15/04-7/15/09.................................... 2,024
3,302 9.50%, 12/20/13-12/20/22.................................. 3,519
--------
7,021
--------
Total U.S. Government Obligations 7,021
--------
Collateralized Mortgage Obligations (10.3%):
Fannie Mae (7.9%):
1,646 7.50%, 3/25/21, Series 1992-171 ZC........................ 1,675
7,000 7.50%, 8/25/22, Series 1994-93............................ 7,250
2,471 7.75%, 3/25/21, Series 1992-1............................. 2,522
--------
11,447
--------
Residential Funding Mortgage Inc. (0.9%):
1,370 6.75%, 6/25/28 Series 1998-S13, Class A-21................ 1,334
--------
Ryland Acceptance Corp. (1.5%):
2,076 9.00%, 7/1/16............................................. 2,211
--------
Total Collateralized Mortgage Obligations 14,992
--------
Cash Equivalents (0.9%):
1,305 Goldman Sachs Financial Square Government................. 1,305
--------
Total Cash Equivalents 1,305
--------
Short Term Securities Purchased with Collateral (16.6%):
Repurchase Agreements (16.6%):
24,143 Paine Webber Triparty Agreement, 4.85%, 6/1/99, (See
Significant Accounting Policies, Lending Portfolio
Securities in the Notes to Financial Statements for
collateral description).................................. 24,143
--------
Total Short Term Securities Purchased with Collateral 24,143
--------
Total Investments (Cost $169,743)(a)--115.9% 168,313
Other assets in excess of liabilities--(15.9)% (23,136)
--------
Total Net Assets--100.0% $145,177
========
</TABLE>
- - -------
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax purposes
of $10. Cost for federal income tax purposes differs from value by net
unrealized depreciation as follows:
<TABLE>
<S> <C>
Unrealized appreciation..................................... $ 251
Unrealized depreciation..................................... (1,691)
-------
Net unrealized depreciation................................. $(1,440)
=======
</TABLE>
(b) All or a portion of this security has been loaned at May 31, 1999.
(c) Inflation indexed note.
See notes to financial statements.
78
<PAGE> 80
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
U.S. Government Income Fund
(Amounts in Thousands)
<TABLE>
<CAPTION>
Principal Security Market
Amount Description Value
--------- --------------------------------------------------------- --------
<C> <S> <C>
U.S. Government Obligations (37.8%):
Government National Mortgage Association (37.3%):
$18,420 6.00%, 11/15/28-4/15/29.................................. $ 17,481
383 6.50%, 11/15/23-12/15/23................................. 375
7,272 7.00%, 10/15/22-3/15/29.................................. 7,296
751 7.50%, 5/15/22-12/15/23.................................. 774
2,191 8.00%, 4/15/17-5/20/24................................... 2,289
1,296 8.25%, 1/15/05-6/15/16................................... 1,370
694 8.50%, 3/20/17-9/15/24................................... 733
519 8.75%, 8/15/08-6/15/17................................... 556
5,006 9.00%, 10/15/04-12/15/22................................. 5,328
1,486 9.25%, 5/15/16-5/15/21................................... 1,599
14,164 9.50%, 6/15/09-5/15/22................................... 15,272
321 10.50%, 9/15/00-12/20/04................................. 338
312 11.00%, 4/15/00-3/20/01.................................. 329
629 11.50%, 9/15/99-12/15/15................................. 703
2,630 12.00%, 7/20/99-5/15/18.................................. 3,014
4,554 12.50%, 4/15/10-1/20/16.................................. 5,282
229 12.75%, 9/20/13-12/20/14................................. 261
2,323 13.00%, 11/15/10-6/20/15................................. 2,701
2,242 13.50%, 5/15/10-6/20/15.................................. 2,658
1,874 14.00%, 5/15/11-2/15/15.................................. 2,258
40 14.50%, 9/15/12-8/15/14.................................. 48
4,453 15.00%, 6/15/11-4/15/13.................................. 5,512
50 16.00%, 11/15/11-4/15/12................................. 59
115 17.00%, 11/15/11......................................... 137
--------
76,373
--------
U.S. Treasury Bonds (0.5%):
1,000 6.25%, 8/15/23 (b)....................................... 1,020
--------
Total U.S. Government Obligations 77,393
--------
Collateralized Mortgage Obligations (38.7%):
4,621 BA Mortgage Securities, Inc., 7.25%, 10/25/27............ 4,660
210 CityFed Mortgage Trust, Series 1, Class D, 10.00%,
1/1/18.................................................. 221
2,200 Credit Suisse First Boston Mortgage, 7.24%, 4/20/07...... 2,230
1,900 Drexel Burnham Lambert, Series H, Class 4, 8.50%, 4/1/17. 1,963
5,588 Fannie Mae, 5.13%, 2/13/04 (b)........................... 5,381
12,500 Fannie Mae, 6.50%, 12/18/27.............................. 11,956
3,100 Fannie Mae, Series 1992-214 Pl, 7.50%, 5/25/21........... 3,200
2,190 Fannie Mae, Series 1992-158z, 7.75%, 3/25/21............. 2,235
3,856 Fannie Mae, Series 1992-171 Class ZD, 8.00%, 6/25/21..... 4,052
9,039 Fannie Mae, Series 1992-171z, 7.50%, 3/25/21............. 9,196
1,771 Fannie Mae, Series 1992-29z, 8.00%, 2/25/22.............. 1,854
5,000 Fannie Mae, Series 1993, Class 2, 7.35%, 3/25/21......... 5,073
3,000 Fannie Mae, Series 1994-93ph, 7.50%, 8/25/22............. 3,107
</TABLE>
<TABLE>
<CAPTION>
Principal Security Market
Amount Description Value
--------- --------------------------------------------------------- --------
<C> <S> <C>
Collateralized Mortgage Obligations, continued:
$3,000 Freddie Mac, Series 1265, Class J, 7.00%, 6/15/21........ $ 2,998
1,688 Freddie Mac, Series 1273, Class Z, 7.50%, 5/15/22........ 1,706
6,003 Freddie Mac, Series 1311, Class J, 7.50%, 9/15/21........ 6,026
1,939 General Electric Capital Mortgage Services, Inc., 6.50%,
1/25/29................................................. 1,857
629 MDC Asset Investors Trust, Series 6, Class 8, 7.00%,..... 630
1,662 Merrill Lynch Mortgage Investors, Inc., 7.15%, 4/25/28... 1,696
3,000 Morgan Stanley Capital Inc., Series 1999-Rm1, 6.71%,
12/15/31................................................ 2,998
845 Prudential Bache, Series 12, Class F, 8.49%, 10/20/20.... 900
1,690 Residential Funding Mortgage, Inc., 6.75%, 6/25/28....... 1,646
3,000 Security Mortgage Acceptance Corp.,
Series II, 9.00%, 12/1/16............................... 3,045
558 Structured Mortgage Residential Trust, 8.25%, 6/25/19.... 590
--------
Total Collateralized Mortgage Obligations 79,220
--------
U.S. Government Agencies (21.8%):
Fannie Mae (14.6%):
22,125 6.00%, 8/1/28-2/1/29..................................... 21,054
2,866 6.50%, 2/1/28-11/1/28.................................... 2,807
611 7.50%, 9/1/22-11/1/22.................................... 631
724 8.00%, 12/1/17-3/1/23.................................... 759
661 8.50%, 11/1/21-9/1/23.................................... 701
545 9.00%, 6/1/09-10/1/19.................................... 583
996 9.50%, 9/1/11............................................ 1,051
132 10.00%, 6/1/21........................................... 144
242 10.50%, 9/1/00-5/1/04.................................... 257
237 11.00%, 8/1/00-9/1/06.................................... 252
194 11.25%, 6/1/13-12/1/15................................... 217
57 11.50%, 11/1/99-2/1/01................................... 60
69 12.00%, 10/1/99-9/1/00................................... 73
841 12.50%, 2/1/00-5/1/15.................................... 971
215 14.00%, 11/1/12.......................................... 239
--------
29,799
--------
Freddie Mac (7.2%):
2,275 8.00%, 9/1/03-3/1/22..................................... 2,409
2,485 8.50%, 3/1/06-1/1/22..................................... 2,651
878 8.75%, 6/1/16-7/1/17..................................... 935
2,732 9.00%, 9/1/01-9/1/20..................................... 2,939
207 9.25%, 8/1/13-11/1/19.................................... 223
536 9.75%, 11/1/08-4/1/09.................................... 581
3,132 10.00%, 7/1/00-9/1/16.................................... 3,328
403 10.50%, 7/1/00-11/1/02................................... 427
97 11.50%, 1/1/00-1/1/01.................................... 103
127 12.00%, 11/1/99-11/1/00.................................. 137
</TABLE>
Continued
79
<PAGE> 81
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
U.S. Government Income Fund
(Amounts in Thousands)
<TABLE>
<CAPTION>
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<C> <S> <C>
U.S. Government Agencies, continued:
Freddie Mac, continued:
$ 911 12.25%, 8/1/15............................................ $ 1,053
20 12.50%, 8/1/99-4/1/01..................................... 21
--------
14,807
--------
Total U.S. Government Agencies 44,606
--------
Cash Equivalents (1.4%):
2,921 Goldman Sachs Financial Square Government................. 2,921
--------
Total Cash Equivalents 2,921
--------
</TABLE>
<TABLE>
<CAPTION>
Principal Security Market
Amount Description Value
--------- ------------------------------------------------------- --------
<C> <S> <C>
Short Term Securities Purchased with Collateral (3.2%):
Repurchase Agreements (3.2%):
$6,647 Lehman Brothers Triparty Agreement, 5.04%, 6/1/99, (See
Significant Accounting Policies, Lending Portfolio
Securities in the Notes to Financial Statements for
collateral description)............................... $ 6,647
--------
Total Short Term Securities Purchased with Collateral 6,647
--------
Total Investments (Cost $212,689) (a)--103.0% 210,787
Other assets in excess of liabilities--(3.0)% (6,111)
--------
Total Net Assets--100.0% $204,676
========
</TABLE>
- - -------
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax purposes
of $1. Cost for federal income tax purposes differs from value by net
unrealized depreciation as follows:
<TABLE>
<S> <C>
Unrealized appreciation...................................... $ 1,333
Unrealized depreciation...................................... (3,236)
-------
Net unrealized depreciation.................................. $(1,903)
=======
</TABLE>
(b) All or part of this security has been loaned at May 31, 1999.
See notes to financial statements.
80
<PAGE> 82
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Bond Fund
(Amounts in Thousands)
<TABLE>
<CAPTION>
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- ---------
<C> <S> <C>
U.S. Treasury Notes (4.1%):
$ 12,555 5.75%, 11/15/00(b)........................................ $ 12,630
2,890 6.13%, 8/15/07(b)......................................... 2,948
---------
Total U.S. Treasury Notes 15,578
---------
U.S. Treasury Bonds (7.0%):
16,790 6.25%, 8/15/23(b)......................................... 17,126
10,201 3.63%, 4/15/28(b)(c)...................................... 9,745
---------
Total U.S. Treasury Bonds 26,871
---------
U.S. Government Obligations (10.9%):
Government National Mortgage Assoc. (10.9%):
4,731 7.50%, 4/15/23............................................ 4,854
2,853 6.50%, 9/15/23............................................ 2,806
10,913 7.50%, 8/15/25............................................ 11,177
5,925 6.50%, 11/15/28........................................... 5,789
5,915 6.50%, 11/15/28........................................... 5,780
2,780 6.50%, 4/1/29(d).......................................... 2,715
8,992 6.50%, 4/15/29............................................ 8,781
---------
Total U.S. Government Obligations 41,902
---------
U.S. Government Agencies (16.3%):
Fannie Mae (14.6%):
1,392 9.00%, 8/1/09............................................. 1,477
2,236 9.00%, 11/1/24............................................ 2,372
1,920 8.50%, 7/1/25............................................. 2,017
730 6.50%, 8/1/27............................................. 714
107 6.50%, 9/1/27............................................. 104
105 6.50%, 10/1/27............................................ 103
694 6.50%, 10/1/27............................................ 678
784 6.50%, 12/1/27............................................ 767
33 6.50%, 12/1/27............................................ 32
741 6.50%, 12/1/27............................................ 725
122 6.50%, 12/1/27............................................ 120
2,100 6.50%, 2/1/28............................................. 2,054
10 6.00%, 7/1/28............................................. 9
13,488 6.50%, 11/1/28............................................ 13,203
5,883 6.00%, 12/1/28............................................ 5,598
49 6.50%, 12/1/28............................................ 48
584 6.00%, 3/1/29............................................. 555
11,996 6.00%, 3/1/29............................................. 11,416
6,404 6.00%, 3/1/29............................................. 6,094
4,510 6.00%, 5/1/29............................................. 4,292
3,820 6.50%, 5/1/29............................................. 3,737
---------
56,115
---------
Freddie Mac (1.7%):
825 9.00%, 5/15/20............................................ 887
1,890 9.50%, 10/1/20............................................ 2,034
3,460 7.00%, 4/1/29(d).......................................... 3,470
---------
6,391
---------
Total U.S. Government Agencies 62,506
---------
</TABLE>
<TABLE>
<CAPTION>
Principal Security Market
Amount Description Value
--------- --------------------------------------------------------- ---------
<C> <S> <C>
Corporate Bonds (27.1%)
Banking (3.5%):
$ 3,460 Advanta Mortgage Loan Trust, Series 1999-2, Class A4,
6.89%, 5/25/29.......................................... $ 3,451
5,610 Citicorp, 6.38%, 11/15/08................................ 5,491
2,000 First Maryland Bancorp, 7.20%, 7/1/07.................... 2,058
2,410 First Union National Bank, Series 1999-1, Class A2,
6.65%, 4/14/09.......................................... 2,391
---------
13,391
---------
Consumer Goods & Services (1.9%):
7,700 American Greetings, 6.10%, 8/1/28........................ 7,382
---------
Financial (3.7%):
3,820 Associates Corporation, 6.25%, 11/1/08................... 3,705
5,000 Ford Motor Credit Co., 6.00%, 1/14/03.................... 4,944
64,756 General Motors Acceptance Corp., Interest Only, 1.64%*,
7/15/27................................................. 5,415
---------
14,064
---------
Food Products & Services (1.0%):
3,700 Dean Foods Co., 6.63%, 5/15/09........................... 3,670
---------
Industrials (12.0%):
5,000 Archer Daniels Midland Co.,
7.50%, 3/15/27.......................................... 5,269
4,950 Brunswick Corp., 6.75%, 12/15/06......................... 4,789
9,000 Computer Assoc. International,
6.25%, 4/15/03.......................................... 8,730
2,000 Cummins Engine, Inc., 6.45%, 3/1/05...................... 1,920
5,095 Halliburton Co., 5.63%, 12/1/08.......................... 4,789
4,810 Lubrizol Corp., 5.88%, 12/1/08........................... 4,467
5,800 Monsanto Co., 5.38%, 12/1/01............................. 5,699
2,875 Motorola, Inc., 7.50%, 5/15/25........................... 2,997
7,500 Williams Cos., Inc., 6.20%, 8/1/02....................... 7,434
---------
46,094
---------
Real Estate Investment Trust (1.5%):
1,325 Avalon Bay Communities, 6.58%, 2/15/04................... 1,294
3,650 Simon Debartolo Property Group, Inc., 6.63%, 6/15/03..... 3,476
950 Simon Debartolo Property Group, Inc., 6.75%, 2/9/04...... 923
---------
5,693
---------
Telecommunications (3.5%):
4,515 AT&T Corp., 6.50%, 3/15/29............................... 4,205
4,350 Cable & Wireless Communication, Inc., 6.75%, 12/8/08..... 4,241
5,200 Sprint Capital, 6.88%, 11/15/28.......................... 4,894
---------
13,340
---------
Total Corporate Bonds 103,634
---------
</TABLE>
Continued
81
<PAGE> 83
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Bond Fund
(Amounts in Thousands)
<TABLE>
<CAPTION>
Principal Security Market
Amount Description Value
--------- --------------------------------------------------------- ---------
<C> <S> <C>
Asset Backed Securities (18.3%):
$ 5,363 Amresco Securitized Net Interest Margin, Series 1999-1a,
Class A, 9.10%, 9/27/29................................. $ 5,296
3,222 EQCC Home Equity Loan Trust,
5.73%, 12/15/08......................................... 3,170
6,000 Equivantage Home Equity Loan Trust, 7.05%, 12/25/28...... 5,870
5,260 First Security Auto Owner Trust,
5.74%, 6/15/04.......................................... 5,200
6,090 General Electric Capital Mortgage Services, Inc., 6.19%,
1/25/23................................................. 6,056
14,300 General Electric Corp., 6.18%, 6/25/15................... 14,311
1,450 Green Tree Home Improvement Loan Trust, 7.85%, 7/15/09... 1,440
7,790 IMC Home Equity Loan Trust,
6.76%, 10/20/20......................................... 7,848
8,140 Newcourt Receivables Asset Trust,
6.19%, 5/20/05.......................................... 8,110
4,780 PALS, 6.30%, 3/25/29..................................... 4,707
8,000 Residential Asset Securities Corp.,
5.91%, 8/25/22.......................................... 7,903
---------
Total Asset Backed Securities 69,911
---------
Mortgage Backed Securities (15.9%):
9,000 Credit Suisse First Boston, 7.24%, 4/20/07............... 9,121
3,608 General Electric Capital Mortgage Services, Inc., 6.50%,
1/25/29................................................. 3,456
3,460 Heller Financial Commercial Mortgage Asset, Series 1999-
Ph1, Class A-1, 6.50%, 5/15/31.......................... 3,447
4,841 Housing Securities, Inc., 7.50%, 1/25/09................. 4,913
1,200 Housing Securities, Inc., 7.50%, 3/25/09................. 1,221
19,430 JP Morgan Commercial Mortgage Finance Corp., Interest
Only, 1.38%*, 12/26/28.................................. 1,161
4,852 Morgan Stanley Capital, Inc.,
6.71%, 12/15/31......................................... 4,848
</TABLE>
<TABLE>
<CAPTION>
Principal Security Market
Amount Description Value
--------- --------------------------------------------------------- ---------
<C> <S> <C>
Mortgage Backed Securities, continued:
$ 6,000 Morgan Stanley Capital, Inc.,
6.53%, 3/15/32.......................................... $ 5,919
6,418 PNC, Series 98-7, Class A5, 6.75%, 9/25/28............... 6,244
6,934 Prudential Securities Secured Financing Corp., 6.07%,
1/15/08................................................. 6,798
10,355 Residential Accredit Loans, Inc.,
6.50%, 3/25/29.......................................... 9,916
3,750 Residential Funding Mortgage, Inc.,
6.75%, 6/25/28.......................................... 3,652
---------
Total Mortgage Backed Securities 60,696
---------
Cash Equivalents (0.4%):
1,463 Goldman Sachs Financial Square Premium................... 1,463
---------
Total Cash Equivalents 1,463
---------
Short Term Securities Purchased with Collateral (12.8%):
Floating Rate Note (9.2%):
10,000 Merrill Lynch, 5.05%, 10/4/99............................ 10,000
10,000 Merrill Lynch, 5.21%, 2/28/00............................ 10,000
15,000 Salomon Smith Barney Holding Co.,
5.00%, 10/28/99......................................... 15,000
---------
35,000
---------
Repurchase Agreements (3.6%):
13,859 Lehman Brothers Triparty Agreement, 5.04%, 6/1/99, (See
Significant Accounting Policies, Lending Portfolio
Securities in the Notes to Financial Statements for
collateral description)................................. 13,859
---------
Total Short Term Securities Purchased with Collateral 48,859
---------
Total Investments (Cost $440,098)(a)--112.7% 431,420
Other assets in excess of liabilities--(12.7)% (48,726)
---------
Total Net Assets--100.0% $ 382,694
=========
</TABLE>
- - -------
* Variable rate securities having liquidity sources through bank letters of
credit or other credit and/or liquidity agreements. The interest rate, which
will change periodically, is based upon an index of market rates. The rate
reflected on the Schedule of Portfolio Investments is the rate in effect at
May 31, 1999.
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax purposes
of $587. Cost for federal income tax purposes differs from value by net
unrealized depreciation as follows:
<TABLE>
<S> <C>
Unrealized appreciation.................................... $ 967
Unrealized depreciation.................................... (10,232)
--------
Net unrealized depreciation................................ $ (9,265)
========
</TABLE>
(b) All or a portion of this security has been loaned at May 31, 1999.
(c) Inflation indexed bond.
(d) On May 31, 1999, the total cost of investments purchased on a when-issued
basis was $6,205.
See notes to financial statements.
82
<PAGE> 84
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Municipal Bond Fund
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<C> <S> <C>
Municipal Bonds (98.6%):
Arizona (2.0%):
$ 2,000 Tempe, 5.00%, 7/1/04...................................... $ 2,088
--------
Colorado (1.0%):
1,000 Jefferson County School District, 5.25%, 12/15/05, MBIA... 1,060
--------
Connecticut (8.0%):
1,000 Connecticut, 5.50%, 3/15/11............................... 1,074
1,880 Connecticut, 5.00%, 3/15/07............................... 1,967
2,000 Connecticut Special Tax Obligation, 5.38%, 9/1/08......... 2,134
1,770 Connecticut Clean Water Fund, 6.38%, 6/1/05............... 1,986
1,000 Stamford, 5.00%, 7/15/08.................................. 1,049
--------
8,210
--------
Delaware (2.4%):
1,000 Delaware Transportation Authority, 7.80%, 7/1/04, ETM..... 1,118
1,250 Delaware Transportation Authority, 6.00%, 7/1/06, AMBAC... 1,373
--------
2,491
--------
Florida (7.0%):
1,630 Dade County School District, 6.50%, 2/15/06, MBIA......... 1,836
1,000 Florida State Department of Transportation G.O., 6.00%,
7/1/07................................................... 1,108
135 Florida Board of Education Capital Outlay, 9.13%, 6/1/14,
ETM...................................................... 188
2,000 Florida Board of Education, Series G, 6.90%, 5/1/03, ETM.. 2,209
1,000 Gulf Breeze, Revenue, 3.39%*, 12/1/17..................... 905
1,000 Tampa Sports Authority Revenue, 6.00%, 1/1/06, MBIA....... 1,099
--------
7,345
--------
Georgia (3.4%):
1,200 Fayette County School District, G.O., 6.25%, 3/1/04....... 1,308
2,000 Georgia, 6.60%, 4/1/05.................................... 2,250
--------
3,558
--------
Guam (1.5%):
1,505 Government Highway Revenue, Series A, 5.90%, 5/1/02, CGIC. 1,592
--------
Idaho (1.7%):
1,560 Canyon County School District, G.O., 8.13%, 7/30/03, MBIA. 1,810
--------
Kansas (1.1%):
1,000 Kansas State Department of Transportation & Highway,
7.25%, 3/1/04............................................ 1,135
--------
Kentucky (3.3%):
3,000 Kentucky Turnpike Authority, 6.50%, 7/1/07, AMBAC......... 3,424
--------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<C> <S> <C>
Municipal Bonds, continued:
Maryland (5.2%):
$ 1,150 Howard County, Series A, G.O., 5.00%, 2/15/08............. $ 1,200
1,000 Montgomery County, G.O., 5.70%, 7/1/05.................... 1,084
3,000 Montgomery County, G.O., 4.88%, 5/1/09.................... 3,098
--------
5,382
--------
Massachusetts (1.1%):
1,000 Massachusettes G.O., 5.75%, 8/1/08, FGIC.................. 1,099
--------
Minnesota (4.1%):
2,000 Minnesota Public Facilities Water & Pollution, 5.00%,..... 2,091
1,000 Minnesota, 6.00%, 5/1/06.................................. 1,101
1,000 North Saint Paul Maplewood, 6.88%, 2/1/15, Prerefunded
2/1/05 @ 100, MBIA....................................... 1,131
--------
4,323
--------
Missouri (4.7%):
1,535 Kansas City, G.O., 6.00%, 2/1/04.......................... 1,656
1,000 Missouri G.O., Series A, 6.00%, 4/1/02.................... 1,059
1,545 Missouri State Environmental Authority Water Revenue,
6.00%, 1/1/07............................................ 1,703
495 Missouri State Environment Authority Revolving Fund, Water
Pollution Control, 7.00%, 10/1/10........................ 523
--------
4,941
--------
New Mexico (2.1%):
1,000 Albuquerque Water & Sewer, 6.00%, 7/1/05.................. 1,089
1,000 Albuquerque Water & Sewer, 6.00%, 7/1/07.................. 1,104
--------
2,193
--------
New York (4.6%):
1,000 Municipal Assistance Corp. for New York City, 6.00%,
7/1/04................................................... 1,086
995 New York City G.O., 8.00%, 4/1/03, AMBAC, ETM............. 1,136
1,005 New York City G.O., 8.00%, 4/1/03, AMBAC.................. 1,143
1,365 New York City, Transitional Financial Authority Revenue,
5.50%, 8/15/07........................................... 1,464
--------
4,829
--------
North Carolina (4.0%):
3,000 Mecklenburg County, G.O., 5.10%, 3/1/05................... 3,131
1,000 North Carolina G.O., 5.10%, 3/1/05........................ 1,050
--------
4,181
--------
Ohio (5.5%):
795 Cleveland City School District, 8.00%, 12/1/01, ETM....... 875
820 Cleveland, OH, 0.00%, 12/1/12, Capital Appreciation....... 386
820 Cleveland, OH, 0.00%, 12/1/15, Capital Appreciation....... 321
</TABLE>
Continued
83
<PAGE> 85
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Municipal Bond Fund
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ----------------------------------------------------------- --------
<C> <S> <C>
Municipal Bonds, continued:
Ohio, continued:
$ 815 Cleveland, OH, 0.00%, 12/1/16, Capital Appreciation........ $ 301
1,920 Ohio Housing Financial Agency Single Family, Mortgage
Revenue, 0.00%, 1/15/15, Prerefunded 1/15/13 @ 81.879..... 799
1,715 Ohio State Water Development Authority, 6.00%, 6/1/07...... 1,894
1,110 University of Cincinnati, General Receipts, Series T,
5.50%, 6/1/11............................................. 1,188
--------
5,764
--------
Oregon (7.6%):
1,000 Deschutes & Jefferson School District, G.O., 6.00%, 6/1/03,
MBIA...................................................... 1,078
1,435 Lane County School District, G.O., 6.00%, 1/1/04........... 1,546
1,500 Portland Sewer Revenue, 5.00%, 6/1/04, FGIC................ 1,563
1,220 Washington County School District G.O., 7.80%, 6/1/04...... 1,420
2,000 Washington County Sewer Revenue, 5.75%, 10/1/08, FGIC...... 2,197
--------
7,804
--------
Puerto Rico (6.5%):
5,000 Puerto Rico Electric Power Authority, 6.50%, 7/1/06, MBIA.. 5,687
1,000 University of Puerto Rico, 6.25%, 6/1/07, MBIA............. 1,128
--------
6,815
--------
Rhode Island (1.1%):
1,130 Rhode Island G.O., 5.00%, 8/1/06........................... 1,178
--------
South Carolina (2.1%):
2,095 Cherokee County School District G.O., 5.50%, 3/1/05, MBIA.. 2,239
--------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<C> <S> <C>
Municipal Bonds, continued:
Tennessee (6.9%):
$ 1,290 Memphis, G.O., 6.00%, 11/1/03............................. $ 1,396
1,435 Metro Government Nashville and Davidson County, 5.25%,
5/15/07.................................................. 1,514
2,000 Shelby County, G.O., 5.00%, 8/1/06........................ 2,088
2,000 Tennessee, G.O., 6.00%, 5/1/05............................ 2,190
--------
7,188
--------
Texas (2.0%):
1,000 Dallas County G.O., 5.00%, 8/15/04........................ 1,044
1,000 Dallas, G.O., 6.13%, 2/15/07, Prerefunded 2/15/03 @ 100... 1,072
--------
2,116
--------
Utah (2.0%):
2,000 Utah State G.O., 5.50%, 7/1/04............................ 2,135
--------
Vermont (1.4%):
1,355 Burlington Electric Revenue Bond, 6.00%, 7/1/07, MBIA..... 1,497
--------
Virginia (1.0%):
1,000 Newport News G.O., 5.00%, 3/1/05.......................... 1,044
--------
Washington (2.0%):
1,000 King County G.O., 6.10%, 12/1/01.......................... 1,002
1,000 Seattle Water Revenue, 5.00%, 12/1/03..................... 1,041
--------
2,043
--------
Wisconsin (3.3%):
2,000 Milwaukee G.O., 6.00%, 2/1/07............................. 2,220
1,170 Wisconsin G.O., 5.25%, 5/1/07............................. 1,236
--------
3,456
--------
Total Municipal Bonds 102,940
--------
Investment Companies (1.3%):
1,327,364 Provident Institutional Muni Cash Fund.................... 1,327
--------
Total Investment Companies 1,327
--------
Total Investments (Cost $101,827)(a)--99.9% 104,267
Other assets in excess of liabilities--0.1% 56
--------
Total Net Assets--100.0% $104,323
========
</TABLE>
- - -------
* Variable rate security. Interest rate changes every six months based on
percentage change in the Consumer Price Index plus a predetermined spread.
(a) Cost for federal income tax purposes differs from value by net unrealized
appreciation as follows:
<TABLE>
<S> <C>
Unrealized appreciation....................................... $2,611
Unrealized depreciation....................................... (171)
------
Net unrealized appreciation................................... 2,440
======
</TABLE>
AMBAC--American Municipal Bond Assurance Corp.
CGIC--Capital Guarantee Insurance Corp.
ETM--Escrowed to Maturity
FGIC--Federal Guarantee Insurance Corp.
G.O.--General Obligation
MBIA--Municipal Bond Insurance Association
See notes to financial statements.
84
<PAGE> 86
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Michigan Municipal Bond Fund
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<C> <S> <C>
Municipal Bonds (98.2%):
Michigan (90.6%):
$ 2,000 Brighton School District, Series II, 0.00%, 5/1/11, AMBAC. $ 1,115
1,380 Byron Center Public Schools, G.O., 8.25%, 5/1/08, MBIA.... 1,751
1,380 Byron Center Public Schools, G.O., 8.25%, 5/1/09, MBIA.... 1,765
1,000 Chippewa Valley School District, 7.00%, 5/1/11,
Prerefunded 5/1/01 @ 102 ................................ 1,078
2,375 Chippewa Valley School District, G.O., 7.80%, 5/1/01...... 2,547
1,285 Chippewa Valley School District, Refunding Bonds, 6.00%,
5/1/08, AMBAC ........................................... 1,425
1,000 Clarkston Community Schools, 6.25%, 5/1/05, FGIC.......... 1,105
1,000 Clarkston Community Schools, Refunding Bonds, 5.00%,
5/1/08, AMBAC ........................................... 1,036
1,150 Clinton Township Building Authority, 4.80%, 11/1/13....... 1,140
1,100 Dearborn School District, 8.38%, 5/1/01, Prerefunded
5/1/00 @ 102 ............................................ 1,171
2,000 Detroit Revenue Bonds, G.O., 5.25%, 5/1/08, AMBAC......... 2,095
1,600 Detroit, 6.25%, 7/15/11, AMBAC............................ 1,798
1,000 Detroit, 5.50%, 4/1/08, MBIA.............................. 1,065
1,415 Detroit, Refunding Bonds, 5.50%, 4/1/07, MBIA............. 1,505
1,000 Detroit Michigan City School District, 5.00%, 5/1/10,
FGIC..................................................... 1,028
1,065 Detroit Local Development Financing Authority, 5.50%...... 1,110
1,000 Detroit Sewage Disposal Revenue, Series B, 6.00%, 7/1/09,
MBIA .................................................... 1,114
1,380 Detroit Sewage Disposal Revenue, 6.00%, 7/1/10, MBIA...... 1,528
2,500 Detroit Sewage Disposal Revenue, 6.00%, 7/1/07, MBIA...... 2,769
1,000 Detroit Water, 6.50%, 7/1/15, FGIC........................ 1,168
2,000 Detroit Water Supply Systems, 5.40%, 7/1/10, MBIA......... 2,123
2,250 Detroit Water Supply Systems, Series B, 5.55%, 7/1/12..... 2,405
1,000 Detroit Water Supply Systems, Series A, 6.00%, 7/1/13..... 1,111
1,375 East Lansing Building Authority, 6.90%, 10/1/11........... 1,417
1,350 Ecorse Public School, 6.50%, 5/1/07, FGIC................. 1,534
2,000 Farmington School District, 5.00%, 5/1/03................. 2,075
1,000 Farmington School District, 5.00%, 5/1/06................. 1,043
1,110 Flint, 6.00%, 11/1/04, MBIA............................... 1,210
1,000 Forest Hills School District, G.O., 5.00%, 5/1/12......... 1,025
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<C> <S> <C>
Municipal Bonds, continued:
Michigan, continued:
$ 1,125 Goodrich Area School District, G.O., 7.65%, 5/1/11,
Prerefunded 5/1/05 @ 102, AMBAC.......................... $ 1,342
1,235 Grand Haven Public Schools, G.O., 7.00%, 5/1/07, MBIA..... 1,440
1,000 Grand Haven Electric, 5.20%, 7/1/06, MBIA................. 1,054
2,655 Grand Ledge Public School District, 5.25%, 5/1/09, MBIA... 2,791
1,250 Grand Ledge Public School District, G.O., 5.45%, 5/1/11,
MBIA .................................................... 1,325
1,570 Grand Rapids Building Authority, 5.00%, 4/1/15............ 1,580
1,925 Grand Rapids School District, G.O., 5.00%, 5/1/06,
Callable 5/1/01 @ 102 ................................... 1,985
1,535 Grand Rapids Sanitation Sewer System, Series A, 5.38%,
1/1/16, FGIC ............................................ 1,585
500 Grand Rapids Water Supply, 7.00%, 1/1/12, Callable 1/1/00
@ 102 ................................................... 521
210 Grand Valley, Michigan State, 7.88%, 10/1/08.............. 215
1,500 Greater Detroit Resources Recovery, 6.25%, 12/13/08, AMBAC
......................................................... 1,691
600 Holt School District, G.O., 8.75%, 5/1/00................. 629
600 Holt School District, G.O., 8.75%, 5/1/01................. 655
1,000 Huron Valley School District, 5.75%, 5/1/06, FGIC......... 1,084
1,000 Jenison Public Schools G.O., 5.25%, 5/1/12, FGIC.......... 1,041
1,650 Kalamazoo, G.O., 6.20%, 10/1/06, Callable 10/1/02 @ 101.5. 1,780
2,000 Kalamazoo Hospital Authority, 6.25%, 7/1/04, Callable
7/1/99 @ 100, FGIC ...................................... 2,004
2,000 Kalamazoo Hospital Finance Authority, Borgess Medical
Center, 6.13%, 7/1/07, FGIC ............................. 2,140
1,440 Kalamazoo Hospital Finance Authority, Bronson Hospital,
5.88%, 5/15/03 .......................................... 1,535
2,000 Kalamazoo Hospital Finance Authority, Borgess Medical
Center, Series A, 6.00%, 6/1/03, FGIC ................... 2,143
1,000 Kalamazoo Public Library, 5.20%, 5/1/11, MBIA............. 1,038
3,000 Kent County, G.O., 5.00%, 11/1/06......................... 3,134
1,000 Kent Hospital Finance Authority, Revenue Bonds, 5.10%,
1/15/07 ................................................. 1,036
5,000 Kent County Hospital Authority, Butterworth Hospital,
Series A, 7.25%, 1/15/13 ................................ 6,099
500 Kentwood School District, 5.90%, 5/1/04, Prerefunded
5/1/02 @ 102 ............................................ 536
500 Kentwood School District, 5.90%, 5/1/04................... 534
2,000 Lake Orion County School District, G.O., 7.00%, 5/1/20,
Prerefunded 5/1/05 @ 101, AMBAC ......................... 2,303
</TABLE>
Continued
85
<PAGE> 87
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Michigan Municipal Bond Fund
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<C> <S> <C>
Municipal Bonds, continued:
Michigan, continued:
$ 1,335 Lansing, G.O., 6.00%, 1/1/07.............................. $ 1,469
1,000 Lansing Building Authority, 6.00%, 6/1/04, Callable 6/1/00
@ 102, ETM .............................................. 1,040
2,000 Lansing School District, G.O., 6.88%, 5/1/09, Prefunded
5/1/05 @ 100 ............................................ 2,275
1,000 Lansing, G.O., 6.00%, 10/1/02............................. 1,065
1,000 Livonia School District, G.O., 6.35%, 5/1/04, Callable
5/01/02 @ 102 ........................................... 1,081
1,000 Municipal Bond Authority, Local Government Program, 6.90%,
5/1/99 .................................................. 1,014
1,000 Local Government Loan Program, 6.20%, 5/1/04, AMBAC....... 1,094
2,000 State Recreation Program, G.O., 5.75%, 11/1/01............ 2,093
1,000 State Environmental Protection Program, G.O., 6.25%,
11/1/07, Prerefunded 11/1/02 @ 102 ...................... 1,091
3,250 State Environmental Protection Program, G.O., 6.25%,
11/1/12 ................................................. 3,700
3,000 State Environmental Protection Program, G.O., 5.50%,
11/1/05 ................................................. 3,213
1,500 State, G.O., 5.00%, 12/1/03............................... 1,564
1,000 State Building Authority, Series II, 6.40%, 10/1/04,
Callable 10/1/01 @ 102 .................................. 1,071
3,475 State Building Authority, 6.25%, 10/1/03, AMBAC........... 3,782
1,000 State Building Authority, 7.25%, 10/1/08, Prerefunded
10/1/99 @ 100 ........................................... 1,013
1,020 State Building Authority, Michigan University Adult
General Hospital, 7.00%, 12/1/08, Prerefunded 12/1/02 @
100 ..................................................... 1,125
1,000 State Building Authority, 6.25%, 10/1/00, AMBAC........... 1,036
300 Michigan State Building Authority Revenue, 4.10%, 10/1/00. 302
2,000 State Building Authority Revenue, 5.50%, 10/15/05......... 2,143
1,000 Michigan State Building Authority Revenue, Series 2,
5.00%, 10/15/14, Callable ............................... 1,001
1,600 Comprehensive Transportation, Series B, 5.40%, 5/15/01.... 1,650
1,135 State Hospital Finance Authority, Harper Grace Hospital,
7.12%, 5/1/09, ETM ...................................... 1,285
1,000 Housing Development Authority, Series A, 6.45%, 6/1/04,
Callable 6/1/02 @ 102 ................................... 1,055
1,200 State Hospital Finance Authority, Oakwood Hospital, Series
A, 5.00%, 11/1/03, FGIC ................................. 1,247
5,000 State Hospital Finance Authority, Sisters of Mercy, 5.38%,
8/15/14, MBIA ........................................... 5,268
500 State Hospital Authority, Henry Ford, 6.00%, 9/1/11,
AMBAC.................................................... 558
2,000 State Hospital Authority, Henry Ford, 6.00%, 9/1/12,
AMBAC.................................................... 2,228
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<C> <S> <C>
Municipal Bonds, continued:
Michigan, continued:
$ 1,000 State Hospital Revenue Bonds, 6.00%, 8/15/02.............. $ 1,061
1,000 State Housing Development, 6.63%, 10/15/06, Callable
10/15/02 @ 103, FSA ..................................... 1,083
1,525 Housing Development Authority, AMT, 5.75%, 10/1/04, AMBAC
......................................................... 1,620
1,055 State South Central Power Agency, 5.70%, 11/1/04, MBIA.... 1,137
2,000 State South Central Power Agency, 5.80%, 11/1/05, MBIA.... 2,175
5,950 Strategic Fund (Ford), 7.10%, 2/1/06...................... 6,842
3,000 Strategic Fund (Detroit Edison), 7.00%, 7/15/08, MBIA..... 3,554
2,000 Strategic Fund (Detroit Edison), 6.95%, 5/1/11, FGIC...... 2,398
500 State Trunk Line, 6.80%, 8/15/02, Prerefunded 8/15/99 @
102...................................................... 513
1,005 State Trunk Line, 6.25%, 11/1/03, FGIC.................... 1,095
1,000 Michigan State Trunk Line, Series A, 5.25%, 11/1/12....... 1,043
2,000 State Underground Storage, 6.00%, 5/1/04, AMBAC........... 2,170
1,000 State Underground Storage, 6.00%, 5/1/05, AMBAC........... 1,093
1,000 Michigan State University, Series A, 5.70%, 8/15/03,
Callable 8/15/02 @ 101 .................................. 1,063
2,075 Mona Shores School District, G.O., 6.75%, 5/1/09, FGIC.... 2,428
1,000 Oakland, University of Michigan, 5.00%, 5/15/05, AMBAC.... 1,041
1,000 Oakland County Community College, 6.65%, 5/1/11........... 1,093
1,000 Paw Paw Public School District, G.O., 6.50%, 5/1/09, FGIC. 1,150
1,000 Plymouth-Canton School District, 6.50%, 5/1/05,
Prerefunded 5/1/01 @ 101 ................................ 1,060
2,000 Rochester School District, 6.30%, 5/1/04, Prerefunded
5/1/02 @ 100 ............................................ 2,130
1,000 Rochester School District, 6.50%, 5/1/07, Prerefunded
5/1/02 @ 100 ............................................ 1,071
1,000 Rochester Community School District, 5.25%, 5/1/04, FGIC.. 1,049
1,000 Rochester, 5.75%, 5/1/08, MBIA............................ 1,091
1,135 Rockford School District, 5.75%, 5/1/07, Callable 5/1/02 @
102 ..................................................... 1,207
400 Rockford School District, Refunding Bonds, 6.00%, 5/1/07,
FGIC .................................................... 442
2,260 Romeo Community School District, 5.25%, 5/1/06, FGIC...... 2,384
2,120 Royal Oak Hospital Financial Authority, William Beaumont
Hospital, Series G, 6.00%, 11/15/02 ..................... 2,266
</TABLE>
Continued
86
<PAGE> 88
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Michigan Municipal Bond Fund
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<C> <S> <C>
Municipal Bonds, continued:
Michigan, continued:
$ 955 St. Johns Public Schools, 5.00%, 5/1/21, FGIC............. $ 937
1,000 Traverse City Public Schools, 7.00%, 5/1/05, Prerefunded
5/1/01 @ 101.5 .......................................... 1,074
1,000 Troy School District, 7.75%, 5/1/01, Prerefunded 5/1/00 @
102 ..................................................... 1,060
1,000 University of Michigan, Student Fees, 5.00%, 4/1/02....... 1,034
2,000 University of Michigan, Student Fees, Series B, 5.60%,
4/1/08, Callable 4/1/03 @ 102 ........................... 2,130
2,000 University of Michigan Hospital Revenue Bonds, 7.00%,
12/1/21, Prerefunded 12/1/00 @ 102 ...................... 2,140
500 University of Michigan, 6.00%, 4/1/05..................... 547
1,315 University of Michigan, Student Fees, Series A, 6.00%,.... 1,453
1,975 Utica School District, 5.60%, 5/1/05...................... 2,121
285 Wayne County Airport Revenue, AMT, 7.25%, 12/1/10, AMBAC . 302
2,000 Wayne County Building Authority, 6.00%, 6/1/07, Callable
6/1/06 @ 102, MBIA ...................................... 2,210
1,985 West Ottawa, 6.00%, 5/1/06, FGIC.......................... 2,181
1,500 Western Michigan University, Series A, 5.40%, 7/15/08,
Callable 7/15/03 @ 105, FGIC ............................ 1,573
1,680 Western Michigan School District, 5.90%, 5/1/10, MBIA..... 1,854
1,000 Western Township Utilities Authority, 6.00%, 1/1/00, FSA.. 1,015
1,000 Wyandotte City School District, G.O., 6.90%, 5/1/16,
Prerefunded 5/1/01 @ 102 ................................ 1,076
3,000 Wyandotte Electric Revenue, 6.25%, 10/1/08, MBIA.......... 3,359
--------
203,264
--------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<C> <S> <C>
Municipal Bonds, continued:
Puerto Rico (6.9%):
$ 500 Commonwealth, G.O., 6.25%, 7/1/12,
MBIA..................................................... $ 574
4,000 Commonwealth, G.O., 6.25%, 7/1/09,
MBIA..................................................... 4,559
2,000 Commonwealth, G.O., 6.25%, 7/1/10,
MBIA..................................................... 2,283
1,000 Commonwealth, Aqueduct & Sewer Authority, 6.00%, 7/1/07,
MBIA .................................................... 1,113
4,000 Public Buildings Authority, 5.50%, 7/1/07, FSA............ 4,315
1,250 Electric Power Authority, Series W, 6.50%, 7/1/05, MBIA... 1,408
1,000 University of Puerto Rico, 6.25%, 6/1/07, MBIA............ 1,128
--------
15,380
--------
Virgin Islands (0.7%):
1,340 Public Finance Authority, 7.00%, 10/1/04, ETM............. 1,472
--------
Total Municipal Bonds 220,116
--------
Investment Companies (1.1%):
2,431,778 Federated Michigan Tax Free Money Market.................. 2,432
--------
Total Investment Companies 2,432
--------
Total Investments (Cost $212,214) (a)--99.3% 222,548
--------
Other assets in excess of liabilities--0.7% 1,510
--------
Total Net Assets--100.0% $224,058
========
</TABLE>
- - -------
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax purposes
of $19. Cost for federal income tax purposes differs from value by net
unrealized appreciation as follows:
<TABLE>
<S> <C>
Unrealized appreciation...................................... $10,578
Unrealized depreciation...................................... (263)
-------
Net unrealized appreciation.................................. 10,315
=======
</TABLE>
AMBAC--American Municipal Bond Assurance Corp.
AMT--Alternative Minimum Tax
ETM--Escrowed to Maturity
FGIC--Federal Guarantee Insurance Corp.
FSA--Financial Securities Assurance, Inc.
G.O.--General Obligation
MBIA--Municipal Bond Insurance Association
See notes to financial statements.
87
<PAGE> 89
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Conservative Allocation Fund
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<C> <S> <C>
Common Stocks (28.8%):
Advertising (0.1%):
75 Doubleclick, Inc.(b)...................................... $ 7
500 Valassis Communications, Inc.(b).......................... 18
--------
25
--------
Apparel/Shoes (0.0%):
300 Tarrant Apparel Group(b).................................. 9
--------
Banking (0.5%):
100 Cullen/Frost Bankers, Inc................................. 6
2,000 Republic Security Financial Corp. ........................ 17
900 State Street Corp......................................... 68
--------
91
--------
Broadcasting/Cable (0.3%):
1,300 Comcast Corp.--Class A.................................... 50
--------
Business Services (1.0%):
1,800 Automatic Data Processing, Inc............................ 74
1,600 Ceridian Corp............................................. 53
150 Corporate Executive Board Corp.(b)........................ 4
500 Diamond Technology Partners, Inc.(b)(c)................... 12
300 FYI, Inc.(b).............................................. 8
400 NOVA Corp.(b)............................................. 9
400 Onesource Information Services, Inc.(b)................... 4
300 QRS Corp.(b).............................................. 22
500 Sykes Enterprises, Inc.(b)................................ 16
--------
202
--------
Chemicals (0.4%):
500 Macdermid, Inc. .......................................... 20
1,200 Monsanto Co............................................... 50
--------
70
--------
Commercial Services (0.1%):
500 Iron Mountain, Inc.(b).................................... 14
--------
Computer Hardware (1.2%):
1,200 Dell Computer Corp.(b).................................... 41
700 EMC Corp.................................................. 69
400 IBM....................................................... 47
700 Mercury Computer Systems, Inc.(b)......................... 14
1,000 Sun Microsystems, Inc.(b)................................. 60
--------
231
--------
Computer Services (0.6%):
200 Checkfree Holdings Corp.(b)............................... 9
200 CMGI, Inc.(b)............................................. 21
500 Credence Systems Corp.(b)................................. 15
300 E*Trade Group, Inc.(b).................................... 13
200 Infospace.com, Inc.(b).................................... 9
500 National Data Corp........................................ 24
200 Pegasus Systems, Inc.(b).................................. 7
100 Safeguard Scientifics, Inc.(b)............................ 7
500 Unigraphics Solutions, Inc.(b)............................ 8
--------
113
--------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<C> <S> <C>
Common Stocks, continued:
Computer Software & Peripherals (1.3%):
500 Ardent Software, Inc.(b).................................. $ 10
900 INSpire Insurance Solutions(b)............................ 16
200 Intervu, Inc.(b).......................................... 7
200 Mercury Interactive Corp.(b).............................. 7
300 Micromuse, Inc.(b)........................................ 12
2,100 Microsoft, Inc.(b)........................................ 169
300 National Computer Systems, Inc............................ 9
600 Smart Modular Technologies(b)............................. 9
400 Worldgate Communications, Inc.(b)......................... 15
--------
254
--------
Consumer Goods & Services (1.1%):
400 Colgate Palmolive Co...................................... 40
800 Gillette Co............................................... 41
500 JAKKS Pacific, Inc.(b).................................... 14
1,300 Procter & Gamble Co....................................... 121
--------
216
--------
Diversified Operations (0.8%):
1,800 Tyco International Ltd. .................................. 157
--------
Educational Services (0.0%):
500 School Specialty, Inc.(b)................................. 7
--------
Electric Utilities (0.1%):
300 Calpine Corp.(b).......................................... 16
--------
Electronic Components/Instruments (1.3%):
400 Burr-Brown Corp.(b)....................................... 13
400 CTS Corp.................................................. 22
600 DII Group, Inc.(b)........................................ 20
1,300 General Electric Co....................................... 132
900 Gentex Corp.(b)........................................... 27
200 Optical Coating Laboratory, Inc. ......................... 13
300 SDL, Inc.(b).............................................. 28
--------
255
--------
Environmental Services (0.4%):
500 Casella Waste Systems, Inc., Series A(b).................. 10
1,500 Waste Management, Inc.(c)................................. 79
--------
89
--------
Financial Services (1.6%):
500 Affiliated Managers Group(b).............................. 15
800 American Express Co. ..................................... 98
1,050 Amresco, Inc.(b).......................................... 7
1,500 Freddie Mac............................................... 87
3,050 MBNA Corp................................................. 84
400 Metris Cos., Inc.......................................... 23
--------
314
--------
Food & Beverage (0.3%):
800 The Coca-Cola Co.......................................... 55
--------
</TABLE>
Continued
88
<PAGE> 90
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Conservative Allocation Fund
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<C> <S> <C>
Common Stocks, continued:
Food Products & Services (0.6%):
400 Kroger Co.(b)............................................. $ 23
2,200 Safeway, Inc.(b).......................................... 103
--------
126
--------
Health Care - Services (0.5%):
800 American Retirement Corp.(b)(c)........................... 14
1,050 Hooper Holmes, Inc........................................ 19
400 Laser Vision Centers, Inc.(b)............................. 23
400 Medquist, Inc.(b)......................................... 15
100 Minimed, Inc.(b).......................................... 6
300 NCS Healthcare, Inc.(b)................................... 4
700 Priority Healthcare Corp., Class B(b)..................... 23
--------
104
--------
Home Building (0.0%):
600 Standard Pacific Corp..................................... 8
--------
Home Furnishings (0.1%):
375 Ethan Allen Interiors, Inc................................ 12
--------
Industrial Goods & Services (0.4%):
1,200 United Technologies Corp.................................. 74
--------
Insurance (0.9%):
1,196 American International Group, Inc......................... 137
900 Annuity & Life Re......................................... 23
1,050 Scottish Annuity & Life Holdings.......................... 10
--------
170
--------
Leisure (0.0%):
250 Cheap Tickets, Inc.(b).................................... 8
--------
Manufacturing - Consumer Goods (0.1%):
500 Monaco Coach Corp.(b)..................................... 15
--------
Manufacturing - Capital Goods (0.2%):
300 Astec Industries, Inc.(b)................................. 11
900 Motivepower Industries, Inc.(b)........................... 16
600 Wabash National Corp...................................... 11
--------
38
--------
Medical Equipment & Supplies (0.5%):
500 Biomatrix, Inc.(b)........................................ 15
400 Gliatech, Inc.(b)......................................... 10
300 Guidant Corp.............................................. 15
900 Medtronic, Inc............................................ 64
--------
104
--------
Metals & Mining (0.1%):
400 Stillwater Mining Co.(b).................................. 13
--------
Office Equipment & Services (0.7%):
600 Hewlett-Packard Co........................................ 57
300 Pitney Bowes, Inc......................................... 19
1,200 Xerox Corp................................................ 67
--------
143
--------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<C> <S> <C>
Common Stocks, continued:
Oilfield Services & Equipment (0.2%):
300 Cal Dive International, Inc.(b)........................... $ 7
500 Schlumberger Ltd.......................................... 30
--------
37
--------
Pharmaceuticals (3.0%):
300 Alpharma, Inc., Class A................................... 8
500 Bristol Myers Squibb Co................................... 34
1,600 Eli Lilly & Co............................................ 114
500 Geltex Pharmaceuticals, Inc.(b)........................... 9
650 Johnson & Johnson......................................... 60
750 King Pharmaceuticals, Inc.(b)............................. 18
200 Merck & Co., Inc. ........................................ 14
1,250 Pfizer, Inc. ............................................. 133
1,800 Schering Plough Corp...................................... 81
1,950 Warner-Lambert Co. ....................................... 121
--------
592
--------
Radio (0.1%):
600 Citadel Communications(b)................................. 17
--------
Resorts & Entertainment (1.1%):
2,000 Carnival Cruise Lines..................................... 82
550 Premier Parks, Inc.(b)(c)................................. 20
1,800 Time Warner, Inc. ........................................ 122
--------
224
--------
Restaurants (0.1%):
600 Foodmaker, Inc.(b)........................................ 16
--------
Retail (3.0%):
300 Ames Department Stores, Inc.(b)........................... 12
300 BJ's Wholesale Club, Inc.(b).............................. 8
750 Costco Companies, Inc.(b)................................. 54
1,600 CVS Corp.................................................. 74
1,500 Dayton Hudson Corp........................................ 95
2,750 Home Depot, Inc........................................... 157
500 The Children's Place(b)................................... 19
500 The Men's Wearhouse, Inc.(b).............................. 13
2,000 Wal-Mart.................................................. 85
4,200 Walgreen Co............................................... 98
--------
615
--------
Semiconductors (1.0%):
900 Aeroflex, Inc.(b)......................................... 13
400 ATMI, Inc.(b)............................................. 9
600 Cymer, Inc.(b)............................................ 11
1,800 Intel Corp................................................ 97
200 Photronics, Inc.(b)....................................... 4
450 PMC-Sierra, Inc.(b)....................................... 22
300 PRI Automation(b)......................................... 7
300 Texas Instruments......................................... 33
--------
196
--------
</TABLE>
Continued
89
<PAGE> 91
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Conservative Allocation Fund
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- -------------------------------------------------------- --------
<C> <S> <C>
Common Stocks, continued:
Technology (0.3%):
500 Electronics for Imaging, Inc.(b)........................ $ 25
400 Macrovision Corp.(b).................................... 18
150 Platinum Technology(b).................................. 4
200 Visx, Inc.(b)........................................... 10
--------
57
--------
Telecommunications - Services & Equipment (4.5%):
500 AirTouch Communications, Inc.(b)........................ 50
600 Alltel Corp............................................. 43
500 Antec Corp.(b).......................................... 15
200 Applied Micro Circuits Corp.(b)......................... 12
2,400 Cisco Systems, Inc.(b).................................. 262
750 Commscope, Inc.(b)...................................... 20
600 Dycom(b)................................................ 29
2 Genesys Telecomm Labs, Inc.(b).......................... (d)
300 Gilat Satellite Networks Ltd.(b)........................ 16
250 GTE Corp................................................ 16
400 Intermedia Communications of Florida(b)................. 10
3,100 Lucent Technologies, Inc................................ 176
500 Mastec, Inc.(b)......................................... 12
1,500 MCI WorldCom, Inc.(b) 130
500 Microwave Power Devices, Inc............................ 8
300 Nextel Communications, Inc., Series A(b)................ 11
500 Sawtek, Inc.(b)......................................... 20
1,200 SBC Communications, Inc.(c)............................. 61
700 Skytel Communications, Inc.(b).......................... 14
--------
905
--------
Transportation & Shipping (0.1%):
500 Atlas Air, Inc.(b)...................................... 13
100 Expeditors International of Washington, Inc............. 6
--------
19
--------
Wholesale Distribution - Pharmaceuticals (0.2%):
675 Cardinal Health, Inc.................................... 41
--------
Total Common Stocks 5,702
--------
Corporate Bonds (26.2%):
Automotive (1.5%):
$ 300 Arca Series 97-C, Class A4, 6.38%, 1/15/03.............. 304
--------
Financial Services (5.2%):
200 Associates Corp., 5.75%, 11/1/03........................ 195
110 Chrysler Financial, 5.69%, 11/15/01..................... 109
200 Countrywide Home, 6.84%, 10/22/04....................... 199
30 Ford Motor Credit Co., 6.00%, 1/14/03................... 30
260 Norwest Securities Corp., 6.25%, 8/25/28................ 242
260 Residential Funding Mortgage Securities, 6.31%,
9/25/29 ............................................... 259
--------
1,034
--------
Food Products & Services (1.0%):
200 Dean Foods Co., 6.63%, 5/15/09.......................... 198
--------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- --------------------------------------------------------- --------
<C> <S> <C>
Corporate Bonds, continued:
Funeral Services (0.6%):
$ 110 Service Corp. International, 6.38%, 10/1/00.............. $ 110
--------
Industrial (1.3%):
249 Amoco Canada, 6.75%, 2/15/05............................. 256
--------
Industrial Goods & Services (10.0%):
125 Brunswick Corp., 6.75%, 12/15/06......................... 121
320 Case Equipment Loan Trust, 5.61%, 4/15/05................ 316
130 Comdisco, Inc., 6.00%, 1/30/02........................... 128
230 Computer Assoc. International, 6.25%, 4/15/03............ 223
85 Cummins Engine, Inc., 6.45%, 3/1/05...................... 82
150 Guidant Corp., 6.15%, 2/15/06............................ 143
140 Lubrizol Corp., 5.88%, 12/1/08........................... 130
300 Monsanto Co., 5.38%, 12/1/01............................. 295
125 Ryder Systems, 6.60%, 11/15/05........................... 122
250 Security Capital Group, 7.80%, 1/12/05................... 247
120 UCFC Manufactured Housing Contract, 6.36%, 2/15/11....... 121
80 Williams Cos., Inc., 6.20%, 8/1/02....................... 79
--------
2,007
--------
Printing & Publishing (0.8%):
150 Scholastic Corp., 7.00%, 12/15/03........................ 152
--------
Real Estate Investment Trust (2.5%):
125 Avalon Bay Communities, 6.58%, 2/15/04................... 122
125 Mack-Cali Realty L.P., 7.00%, 3/15/04.................... 123
135 New Plan Excel Realty Trust, 6.88%, 10/15/04............. 134
45 Simon Debartolo Property Group, Inc., 6.63%, 6/15/03..... 43
80 Simon Debartolo Property Group, Inc., 6.75%, 2/9/04...... 78
--------
500
--------
Resorts & Entertainment (0.6%):
105 Time Warner Entertainment, 9.63%, 5/1/02................. 114
--------
Telecommunications - Services & Equipment (2.0%):
135 AT & T Corp., 5.63%, 3/15/04............................. 132
15 Cable & Wireless Communication, 6.63%, 3/6/05............ 15
250 Sprint Capital, 5.70%, 11/15/03.......................... 241
--------
388
--------
Transportation & Shipping (0.7%):
130 JB Hunt Transport Services, 6.00%, 12/12/00.............. 129
--------
Total Corporate Bonds 5,192
--------
Asset Backed Securities (4.7%):
57 Banc One Auto Grantor Trust, 6.27%, 11/20/03............. 57
200 Discover Card Master Trust, 6.05%, 8/18/08............... 197
500 EQCC Home Equity Loan Trust, 1998-1, A3F, 6.23%,
12/15/12................................................ 502
</TABLE>
Continued
90
<PAGE> 92
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Conservative Allocation Fund
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- --------------------------------------------------------- --------
<C> <S> <C>
Asset Backed Securities, continued:
$ 170 IMC Home Equity Loan Trust, 6.76%, 10/20/20.............. $ 171
--------
Total Asset Backed Securities 927
--------
Mortgage Backed Securities (1.6%):
80 Credit Suisse First Boston, 7.24%, 4/20/07............... 81
80 General Electric Capital Mortgage Services, Inc., 6.50%,
1/25/29................................................. 76
153 Merrill Lynch Mortgage Investors, Inc., 7.15%, 4/25/28... 156
--------
Total Mortgage Backed Securities 313
--------
U.S. Government Agencies (1.0%):
Fannie Mae (1.0%):
208 6.50%, 11/1/28........................................... 203
--------
Total U.S. Government Agencies 203
--------
U.S. Treasury Notes (33.7%):
1,175 5.75%, 11/15/00(c)....................................... 1,182
4,855 5.75%, 8/15/03(c)........................................ 4,866
635 6.13%, 8/15/07(c)........................................ 648
--------
Total U.S. Treasury Notes 6,696
--------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- -------------------------------------------------------- --------
<C> <S> <C>
Cash Equivalents (3.1%):
$ 620 Goldman Sachs Financial Square Premium.................. $ 620
--------
Total Cash Equivalents 620
--------
Short Term Securities Purchased with Collateral (35.7%):
Repurchase Agreements (35.7%):
7,086 Lehman Brothers Triparty Agreement, 5.04%, 6/1/99, (See
Significant Accounting Policies, Lending Portfolio
Securities in the Notes to Financial Statements for
collateral description) ............................... 7,086
--------
Total Short Term Securities Purchased with Collateral 7,086
--------
Total Investments (Cost $26,042)(a)--134.9% 26,739
Other assets in excess of liabilities--(34.9)% (6,914)
--------
Total Net Assets--100.0% $ 19,825
========
</TABLE>
- - -------
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax purposes
of $20. Cost for federal income tax purposes differs from value by net
unrealized appreciation as follows:
<TABLE>
<S> <C>
Unrealized appreciation....................................... $1,139
Unrealized depreciation....................................... (462)
------
Net unrealized appreciation................................... $ 677
======
</TABLE>
(b) Represents non-income producing securities.
(c) All or part of this security has been loaned at May 31, 1999.
(d) Market value is less than $1,000.
See notes to financial statements.
91
<PAGE> 93
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Balanced Allocation Fund
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<C> <S> <C>
Common Stocks (53.0%):
Advertising (0.7%):
2,100 Doubleclick, Inc.(b)...................................... $ 205
13,000 Omnicom Group............................................. 909
9,500 Valassis Communications, Inc.(b).......................... 331
--------
1,445
--------
Apparel/Shoes (0.1%):
6,500 Tarrant Apparel Group(b).................................. 197
--------
Banking (0.8%)
2,400 Cullen/Frost Bankers, Inc. ............................... 135
40,450 Republic Security Financial Corp. ........................ 339
13,500 State Street Corp. ....................................... 1,029
--------
1,503
--------
Broadcasting/Cable (0.9%):
23,700 Comcast Corp., Class A.................................... 912
20,700 USA Networks, Inc.(b)..................................... 828
--------
1,740
--------
Business Services (1.6%):
23,200 Automatic Data Processing, Inc. .......................... 955
20,400 Ceridian Corp.(b)(c)...................................... 673
3,800 Corporate Executive Board Corp.(b)........................ 111
9,400 Diamond Technology Partners, Inc.(b)(c)................... 226
5,950 FYI, Inc.(b).............................................. 164
8,000 NOVA Corp.(b)(c).......................................... 178
9,400 Onesource Information Services, Inc.(b)................... 89
5,700 QRS Corp.(b).............................................. 422
9,200 Sykes Enterprises, Inc.(b)................................ 286
--------
3,104
--------
Chemicals (0.2%):
9,550 Macdermid, Inc. .......................................... 384
--------
Commercial Services (0.2%):
12,500 Iron Mountain, Inc.(b).................................... 345
--------
Computer Hardware (2.8%):
22,500 Dell Computer Corp.(b).................................... 775
14,400 EMC Corp.(b).............................................. 1,435
16,200 IBM....................................................... 1,884
13,800 Mercury Computer Systems, Inc.(b)......................... 273
19,200 Sun Microsystems, Inc.(b)................................. 1,147
--------
5,514
--------
Computer Services (1.2%):
4,700 Checkfree Holdings Corp.(b)............................... 221
2,900 CMGI, Inc.(b)............................................. 301
9,350 Credence Systems Corp.(b)................................. 277
8,000 E*Trade Group, Inc.(b).................................... 356
4,800 Infospace.com, Inc.(b).................................... 226
10,750 National Data Corp. ...................................... 505
4,350 Pegasus Systems, Inc.(b).................................. 152
1,900 Safeguard Scientifics, Inc.(b)............................ 139
10,100 Unigraphics Solutions, Inc.(b)............................ 161
--------
2,338
--------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<C> <S> <C>
Common Stocks, continued:
Computer Software & Peripherals (3.1%):
10,650 Ardent Software, Inc.(b).................................. $ 213
17,250 INSpire Insurance Solutions(b)............................ 301
4,300 Intervu, Inc.(b).......................................... 149
7,400 Lexmark International Group(b)............................ 1,007
4,050 Mercury Interactive Corp.(b).............................. 133
5,900 Micromuse, Inc.(b)........................................ 235
36,300 Microsoft, Inc.(b)........................................ 2,929
6,950 National Computer Systems, Inc. .......................... 217
18,700 Oracle Corp.(b)........................................... 464
11,100 Smart Modular Technologies(b)............................. 167
7,800 Worldgate Communications, Inc.(b)......................... 289
--------
6,104
--------
Consumer Goods & Services (1.7%):
8,900 Colgate Palmolive Co. .................................... 889
7,400 Gillette Co. ............................................. 377
10,500 JAKKS Pacific, Inc.(b).................................... 291
18,700 Procter & Gamble Co. ..................................... 1,746
--------
3,303
--------
Diversified Operations (1.2%):
27,602 Tyco International Ltd. .................................. 2,412
--------
Educational Services (0.1%):
11,200 School Specialty, Inc.(b)................................. 167
--------
Electric Utilities (0.2%):
7,050 Calpine Corp.(b).......................................... 382
--------
Electronic Components/Instruments (2.9%):
7,550 Burr-Brown Corp.(b)....................................... 242
8,650 CTS Corp. ................................................ 484
12,550 DII Group, Inc.(b)........................................ 413
21,900 General Electric Co. ..................................... 2,227
17,850 Gentex Corp.(b)........................................... 536
3,200 Optical Coating Laboratory, Inc. ......................... 208
5,900 SDL, Inc.(b).............................................. 549
14,500 Tandy, Inc. .............................................. 1,196
--------
5,855
--------
Environmental Services (0.7%):
10,150 Casella Waste Systems, Inc., Series A(b).................. 200
20,700 Waste Management, Inc. ................................... 1,094
--------
1,294
--------
Financial Services (3.5%):
10,100 Affiliated Managers Group(b).............................. 295
6,400 American Express Co. ..................................... 776
22,200 Amresco, Inc.(b).......................................... 153
42,100 Associates First Capital Corp. ........................... 1,726
5,500 Charles Schwab Corp. ..................................... 582
21,300 Freddie Mac............................................... 1,242
5,700 J.P. Morgan............................................... 794
32,700 MBNA Corp. ............................................... 903
9,350 Metris Cos., Inc. ........................................ 545
--------
7,016
--------
</TABLE>
Continued
92
<PAGE> 94
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Balanced Allocation Fund
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<C> <S> <C>
Common Stocks, continued:
Food & Beverage (0.4%):
12,300 The Coca-Cola Co. ........................................ $ 840
--------
Food & Household Products (0.4%):
13,400 Albertsons, Inc.(c)....................................... 717
--------
Food Products & Services (0.8%):
8,300 Kroger Co.(b)............................................. 486
22,100 Safeway, Inc.(b).......................................... 1,028
--------
1,514
--------
Health Care - Services (0.9%):
15,650 American Retirement Corp.(b)(c)........................... 265
22,950 Hooper Holmes, Inc. ...................................... 416
8,900 Laser Vision Centers, Inc.(b)............................. 507
9,250 Medquist, Inc.(b)......................................... 340
1,400 Minimed, Inc.(b).......................................... 83
5,900 NCS Healthcare, Inc.(b)(c)................................ 81
--------
1,692
--------
Home Building (0.1%):
12,800 Standard Pacific Corp. ................................... 168
--------
Home Furnishings (0.1%):
8,600 Ethan Allen Interiors, Inc. .............................. 274
--------
Industrial Goods & Services (0.8%):
17,700 Monsanto Co.(c)........................................... 735
14,200 United Technologies Corp.(c).............................. 881
--------
1,616
--------
Insurance (1.5%):
19,485 American International Group, Inc. ....................... 2,227
19,150 Annuity & Life Re......................................... 493
22,000 Scottish Annuity & Life Holdings.......................... 215
--------
2,935
--------
Leisure (0.1%):
6,100 Cheap Tickets, Inc.(b).................................... 192
--------
Manufacturing - Consumer Goods (0.1%):
9,500 Monaco Coach Corp.(b)..................................... 285
--------
Manufacturing - Capital Goods (0.4%):
6,400 Astec Industries, Inc.(b)................................. 239
19,000 Motivepower Industries, Inc.(b)........................... 322
12,350 Wabash National Corp. .................................... 235
--------
796
--------
Medical Equipment & Supplies (0.8%):
10,200 Biomatrix, Inc.(b)(c)..................................... 312
7,050 Gliatech, Inc.(b)......................................... 181
5,000 Guidant Corp. ............................................ 250
12,800 Medtronic, Inc. .......................................... 909
--------
1,652
--------
Metals & Mining (0.1%):
6,900 Stillwater Mining Co.(b).................................. 220
--------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<C> <S> <C>
Common Stocks, continued:
Office Equipment & Services (1.3%):
8,500 Hewlett-Packard Co. ...................................... $ 802
6,800 Pitney Bowes, Inc. ....................................... 434
22,600 Xerox Corp. .............................................. 1,269
--------
2,505
--------
Oilfield Services & Equipment (0.8%):
17,300 Burlington Resources, Inc. ............................... 743
6,100 Cal Dive International, Inc.(b)........................... 149
13,000 Schlumberger Ltd. ........................................ 783
--------
1,675
--------
Paper Products (0.4%):
15,200 International Paper Co. .................................. 760
--------
Pharmaceuticals (5.2%):
5,350 Alpharma, Inc., Class A................................... 143
19,400 Bristol Myers Squibb Co. ................................. 1,331
20,200 Eli Lilly & Co. .......................................... 1,443
10,250 Geltex Pharmaceuticals, Inc.(b)(c)........................ 174
13,500 Johnson & Johnson......................................... 1,250
15,850 King Pharmaceuticals, Inc.(b)............................. 376
21,400 Merck & Co., Inc. ........................................ 1,445
17,000 Pfizer, Inc. ............................................. 1,820
1,649 Pharmacia & Upjohn, Inc. ................................. 91
14,300 Priority Healthcare Corp., Class B(b)..................... 488
22,100 Schering Plough Corp. .................................... 996
16,300 Warner-Lambert Co. ....................................... 1,011
--------
10,568
--------
Radio (0.2%):
12,550 Citadel Communications(b)................................. 347
--------
Resorts & Entertainment (1.4%):
15,600 Carnival Cruise Lines..................................... 640
11,250 Premier Parks, Inc.(b)(c)................................. 401
25,600 Time Warner, Inc. ........................................ 1,742
--------
2,783
--------
Restaurants (0.2%):
11,300 Foodmaker, Inc.(b)........................................ 305
--------
Retail (4.3%):
5,900 Ames Department Stores, Inc.(b)........................... 242
5,700 BJ's Wholesale Club, Inc.(b).............................. 148
20,400 CVS Corp. ................................................ 938
25,900 Dayton Hudson Corp. ...................................... 1,632
28,550 Home Depot, Inc. ......................................... 1,624
25,600 Staples(b)................................................ 736
9,200 The Children's Place(b)(c)................................ 358
10,850 The Men's Wearhouse, Inc.(b).............................. 277
24,700 TJX Companies, Inc. ...................................... 741
31,600 Wal-Mart(c)............................................... 1,347
32,500 Walgreen Co. ............................................. 756
--------
8,799
--------
</TABLE>
Continued
93
<PAGE> 95
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Balanced Allocation Fund
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<C> <S> <C>
Common Stocks, continued:
Semiconductors (2.1%):
19,150 Aeroflex, Inc.(b)......................................... $ 279
10,400 Applied Materials(b)...................................... 571
8,450 ATMI, Inc.(b)............................................. 186
13,050 Cymer, Inc.(b)(c)......................................... 239
25,900 Intel Corp. .............................................. 1,400
4,900 Photronics, Inc.(b)(c).................................... 97
10,500 PMC-Sierra, Inc.(b)....................................... 510
4,900 PRI Automation(b)......................................... 120
6,800 Texas Instruments......................................... 744
--------
4,146
--------
Technology (0.6%):
9,150 Electronics for Imaging, Inc.(b).......................... 449
8,800 Macrovision Corp.(b)...................................... 400
5,900 Platinum Technology(b).................................... 172
3,700 Visx, Inc.(b)............................................. 192
--------
1,213
--------
Telecommunications - Services & Equipment (7.5%):
9,715 AirTouch Communications, Inc.(b).......................... 976
16,500 Alltel Corp. ............................................. 1,183
10,600 Antec Corp.(b)(c)......................................... 311
4,600 Applied Micro Circuits Corp.(b)........................... 272
30,050 Cisco Systems, Inc.(b).................................... 3,272
15,300 Commscope, Inc.(b)........................................ 402
12,700 Dycom(b).................................................. 613
2,000 Frontier Corp. ........................................... 105
5,100 Gilat Satellite Networks Ltd.(b).......................... 269
9,350 Intermedia Communications of Florida(b)(c)................ 237
45,300 Lucent Technologies(c).................................... 2,576
9,050 Mastec, Inc.(b)........................................... 219
23,000 MCI WorldCom, Inc.(b)..................................... 1,987
10,300 Microwave Power Devices, Inc. ............................ 157
4,700 Motorola, Inc. ........................................... 389
9,500 Nortel Networks Corp. .................................... 713
9,800 Sawtek, Inc.(b)........................................... 388
15,600 SBC Communications, Inc.(c)............................... 798
14,800 Skytel Communications, Inc.(b)............................ 301
--------
15,168
--------
Transportation & Shipping (0.2%):
10,150 Atlas Air, Inc.(b)........................................ 273
2,300 Expeditors International of Washington, Inc. ............. 128
--------
401
--------
Wholesale Distribution - Pharmaceuticals (0.4%):
11,600 Cardinal Health, Inc.(c).................................. 700
--------
Total Common Stocks 105,374
--------
Foreign Common Stocks (4.5%):
Australia (0.1%):
Banking (0.1%):
6,947 National Australia Bank Ltd. ............................. 113
--------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<C> <S> <C>
Foreign Common Stocks, continued:
Belgium (0.0%):
Retail Stores/Catalog (0.0%):
143 Colruyt NV................................................ $ 93
--------
Brazil (0.0%):
Telecommunications (0.0%):
570 Telebras, ADR............................................. 48
570 Telebras-Rights........................................... (d)
--------
48
--------
Finland (0.1%):
Computer Software (0.1%):
4,542 TT Tieto B Shares......................................... 159
--------
Paper Products (0.0%):
1,425 Upm-Kymmene............................................... 42
--------
201
--------
France (0.5%):
Energy (0.1%):
1,770 Veba AG................................................... 101
--------
Engineering (0.0%):
505 Altran Technologies....................................... 114
342 Compagnie De Saint-Gobain................................. 54
--------
168
--------
Health & Personal Care (0.1%):
228 L'Oreal................................................... 138
--------
Industrial Goods & Services (0.0%):
1,200 Vivendi................................................... 89
2,100 Vivendi Rights............................................ 2
--------
91
--------
Insurance (0.1%):
1,268 AXA....................................................... 147
--------
Machinery & Equipment (0.1%):
1,107 Sidel SA(b)............................................... 154
--------
Telecommunications - Services & Equipment (0.0%):
1,255 France Telecom SA......................................... 96
--------
Utilities - Electrical & Gas (0.1%):
1,229 Total SA, B Shares........................................ 150
--------
1,045
--------
Germany (0.3%):
Banking (0.0%):
2,889 BHF Bank AG............................................... 94
--------
Electrical & Electronic (0.0%):
1,390 Siemens AG................................................ 94
--------
Insurance (0.1%):
377 Allianz AG................................................ 103
--------
Telecommunications (0.2%):
1,974 Mannesmann AG............................................. 271
--------
562
--------
</TABLE>
Continued
94
<PAGE> 96
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Balanced Allocation Fund
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<C> <S> <C>
Foreign Common Stocks, continued:
Hong Kong (0.2%):
Banking (0.0%):
2,874 HSBC Holdings PLC......................................... $ 94
--------
Electrical & Electronic (0.2%):
29,081 Johnson Electric Holdings Ltd. ........................... 108
--------
Gas & Electric Utility (0.0%):
58,768 Hong Kong & China Gas Co. Ltd. ........................... 83
--------
Industrial Holding Company (0.0%):
5,195 Hutchison Whampoa......................................... 43
--------
328
--------
Ireland (0.1%):
Banking (0.1%):
5,673 Bank of Ireland........................................... 107
--------
Italy (0.1%):
Insurance (0.1%):
3,600 Assicurazioni Generali.................................... 129
--------
Jewelry (0.0%):
6,484 Bulgari SpA............................................... 39
--------
Telecommunications (0.0%):
9,323 Telecom Italia Mobile SpA................................. 55
--------
223
--------
Japan (0.8%):
Banking (0.1%):
10,474 Bank of Tokyo-Mitsubishi Ltd. ............................ 140
--------
Computer Hardware (0.0%):
318 TDK Corp. ................................................ 27
--------
Computer Software (0.2%):
8,947 Nihon Unisys.............................................. 167
225 Softbank Corp. ........................................... 26
1 Yahoo Japan Corp.(b)...................................... 206
--------
399
--------
Consumer Electronics (0.1%):
1,219 Sony Corp. ............................................... 115
--------
Electronic Components/Instruments (0.1%):
2,333 Fanuc Co. Ltd. ........................................... 101
--------
Financial Services (0.0%):
6,945 Nomura Securities Co. .................................... 69
--------
Food & Household Products (0.0%):
2,474 Kao Corp. ................................................ 68
--------
Industrial Goods & Services (0.0%):
400 Bridgestone Corp. ........................................ 10
--------
Manufacturing - Consumer Goods (0.1%):
5,566 Canon..................................................... 140
3,130 Fuji Photo Film Ltd. ..................................... 112
--------
252
--------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<C> <S> <C>
Foreign Common Stocks, continued:
Japan, continued:
Pharmaceuticals (0.1%):
13 Sankyo Co. Ltd. .......................................... $ (d)
5,811 Takeda Chemical Industries................................ 259
--------
259
--------
Retail - Food & Drug (0.0%):
18 Matsumotokiyoshi.......................................... 1
--------
Retail Stores/Catalog (0.1%):
528 Ito Yokado................................................ 32
1,000 Seven-Eleven Japan Ltd. .................................. 86
--------
118
--------
Telecommunications (0.0%):
7 Nippon Telegraph & Telephone Corp. ....................... 68
--------
1,627
--------
Korea (0.0%):
Metals (0.0%):
3,600 Pohang Iron & Steel, ADR.................................. 91
--------
Mexico (0.1%):
Beverages & Tobacco (0.0%):
2,850 Coca-Cola Femsa SA, ADR................................... 51
--------
Entertainment (0.1%):
1,425 Grupo Televisa SA, ADR(b)................................. 60
--------
Telecommunications (0.0%):
685 Telefonos De Mexico, ADR.................................. 55
--------
166
--------
Netherlands (0.4%):
Broadcasting & Publishing (0.1%):
3,076 Wolters Kluwer CVA........................................ 124
--------
Consumer Goods & Services (0.0%):
787 Unilever NV............................................... 52
--------
Energy (0.0%):
4,283 Royal Dutch Petroleum..................................... 240
--------
Financial Services (0.1%):
2,000 Fortis NV................................................. 65
2,000 Fortis, Series B.......................................... 64
--------
129
--------
Insurance (0.1%):
906 Aegon NV.................................................. 73
1,493 ING Groep NV.............................................. 80
--------
153
--------
Retail Stores/Catalog (0.1%):
3,455 Kon Ahold NV.............................................. 121
--------
819
--------
Portugal (0.1%):
Telecommunications (0.1%):
2,463 Portugal Telecom, SA ADR.................................. 111
--------
</TABLE>
Continued
95
<PAGE> 97
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Balanced Allocation Fund
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<C> <S> <C>
Foreign Common Stocks, continued:
Singapore (0.2%):
Banking (0.0%):
8,420 Development Bank of Singapore............................. $ 87
--------
Electrical & Electronic (0.0%):
22,842 Natsteel Electronics Ltd. ................................ 76
--------
Real Estate (0.1%):
14,895 City Developments......................................... 89
--------
Transportation & Shipping (0.1%):
9,895 Singapore International Airlines.......................... 88
--------
340
--------
Spain (0.1%):
Gas & Electric Utility (0.0%):
4,351 Endesa-Empresa Nac Electric............................... 93
--------
Telecommunications (0.1%):
3,526 Telefonica SA............................................. 169
--------
262
--------
Sweden (0.1%):
Telecommunications (0.1%):
3,202 Nokia Corp., ADR.......................................... 227
--------
Switzerland (0.4%):
Banking (0.1%):
630 Credit Suisse Group....................................... 110
370 UBS AG.................................................... 107
--------
217
--------
Food Products & Services (0.1%):
66 Nestle SA................................................. 119
--------
Insurance (0.1%):
60 Swiss Reinsurance Co. .................................... 114
--------
Pharmaceuticals (0.1%):
60 Novartis AG............................................... 87
18 Roche Holdings AG......................................... 191
--------
278
--------
728
--------
United Kingdom (0.9%):
Aerospace/Defense (0.0%):
10,854 British Aerospace PLC..................................... 71
--------
Banking (0.3%):
7,477 Abbey National PLC........................................ 154
5,885 Allied Zurich PLC......................................... 74
9,125 Standard Chartered PLC.................................... 138
--------
366
--------
Beverages & Tobacco (0.0%):
5,700 Bass PLC.................................................. 84
--------
Computer Software (0.0%):
5,401 Logica PLC................................................ 50
--------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- --------------------------------------------------------- --------
<C> <S> <C>
Foreign Common Stocks, continued:
United Kingdom, continued:
Electrical & Electronic (0.0%):
9,700 General Electric PLC..................................... $ 92
--------
Energy (0.1%):
8,923 BP Amoco PLC............................................. 160
--------
Engineering (0.0%):
21,561 Siebe PLC................................................ 98
--------
Food Products & Services (0.0%):
4,561 Compass Group............................................ 46
--------
Industrial Goods & Services (0.1%):
5,637 Boc Group PLC............................................ 96
9,300 Imperial Chemical Industries PLC......................... 103
--------
199
--------
Leisure (0.1%):
5,135 Granada Group PLC........................................ 107
--------
Media and Entertainment (0.1%):
8,194 Pearson PLC.............................................. 156
--------
Pharmaceuticals (0.1%):
6,209 Glaxo Wellcome PLC....................................... 175
--------
Telecommunications (0.0%):
2,721 Vodafone................................................. 52
--------
Utilities - Electrical & Gas (0.1%):
22,270 National Grid Group PLC.................................. 151
--------
1,807
--------
Total Foreign Common Stocks 8,898
--------
Preferred Stocks (0.1%):
Germany (0.0%):
Computer Software (0.0%):
76 SAP AG................................................... 30
--------
United Kingdom (0.1%):
Telecommunications (0.1%):
16,935 Cable & Wireless PLC..................................... 208
--------
Total Preferred Stocks 238
--------
Corporate Bonds (13.2%):
Appliances & Household Products (1.2%):
$ 715 Advanta Mortgage Loan Trust, Series 1999-2, Class A4,
6.89%, 5/25/29 ......................................... 713
1,600 IMC Home Equity Loan Trust, 6.76%, 10/20/20.............. 1,612
--------
2,325
--------
Banking (0.6%):
765 Citicorp, 6.38%, 11/15/08................................ 749
470 First Union National Bank, Series 1999-1, Class A2,
6.65%, 4/14/09 ......................................... 466
--------
1,215
--------
</TABLE>
Continued
96
<PAGE> 98
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Balanced Allocation Fund
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<C> <S> <C>
Corporate Bonds, continued:
Consumer Goods & Services (0.6%):
$ 1,325 American Greetings, 6.10%, 8/1/28......................... $ 1,270
--------
Financial Services (2.1%):
650 Associates Corp., 6.25%, 11/1/08.......................... 631
2,065 Countrywide Home, 6.84%, 10/22/04......................... 2,057
350 ERAC USA Finance Co., 6.35%, 1/15/01...................... 350
950 Ford Motor Credit Co., 6.00%, 1/14/03..................... 939
18 Sasco 1996, Series 6 C, 7.50%, 8/25/26.................... 18
--------
3,995
--------
Food Products & Services (0.7%):
1,375 Dean Foods Co., 6.63%, 5/15/09............................ 1,364
--------
Foreign Governments (1.1%):
2,100 Providence of Saskatchewan, 8.00%, 7/15/04................ 2,258
--------
Industrial Goods & Services (3.8%):
785 Brunswick Corp., 6.75%, 12/15/06.......................... 759
1,825 Computer Assoc. International, 6.25%, 4/15/03............. 1,770
650 Cummins Engine, Inc., 6.45%, 3/1/05....................... 624
860 Monsanto Co., 5.38%, 12/1/01.............................. 845
600 Motorola, Inc., 7.50%, 5/15/25............................ 626
2,050 Security Capital Group, 7.80%, 1/12/05.................... 2,022
800 Williams Cos., Inc., 6.20%, 8/1/02........................ 793
--------
7,439
--------
Real Estate Investment Trust (0.6%):
350 Avalon Bay Communities, 6.58%, 2/15/04.................... 342
485 Simon Debartolo Property Group, Inc., 6.63%, 6/15/03...... 461
460 Simon Debartolo Property Group, Inc., 6.75%, 2/9/04....... 447
--------
1,250
--------
Resorts & Entertainment (0.9%):
1,700 Time Warner Entertainment, 9.63%, 5/1/02.................. 1,845
--------
Telecommunications - Services & Equipment (1.6%):
930 AT & T Corp., 6.50%, 3/15/29.............................. 866
1,050 Cable & Wireless Communication, Inc., 6.75%, 12/8/08...... 1,024
1,410 Sprint Capital, 6.88%, 11/15/28........................... 1,327
--------
3,217
--------
Total Corporate Bonds 26,178
--------
Convertible Bonds (0.5%):
Financial Services (0.5%):
1,100 EOP Operating LP, 6.63%, 2/15/05.......................... 1,067
--------
Total Convertible Bonds 1,067
--------
Asset Backed Securities (4.9%):
1,321 Banc One Auto Grantor Trust, 6.27%, 11/20/03.............. 1,333
1,950 Discover Card Master Trust, 6.05%, 8/18/08................ 1,924
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- --------------------------------------------------------- --------
<C> <S> <C>
Asset Backed Securities, continued:
$ 1,180 First Security Auto Owner Trust, 5.74%, 6/15/04.......... $ 1,167
840 General Electric Capital Mortgage Services, Inc., 6.19%,
1/25/23................................................. 835
2,420 General Electric Corp., Series A3, 6.18%, 6/25/15........ 2,423
2,070 Newcourt Receivables Asset Trust, 6.19%, 5/20/05......... 2,062
--------
Total Asset Backed Securities 9,744
--------
Mortgage Backed Securities (5.6%):
1,200 Credit Suisse First Boston, Series 1997-C1, Class A1c,
7.24%, 4/20/07.......................................... 1,216
827 General Electric Capital Mortgage Services, Inc., 6.50%,
1/25/29................................................. 792
715 Heller Financial Commercial Mortgage Asset, Series 1999-
Ph1, Class A-1, 6.50%, 5/15/31.......................... 712
1,500 Morgan Stanley Capital, Inc., 6.53%, 3/15/32............. 1,480
940 Morgan Stanley Capital, Inc., Series 1999-Rm1, 6.71%,
12/15/31................................................ 939
1,748 PNC, Series 98-7, Class A5, 6.75%, 9/25/28............... 1,701
991 Prudential Securities Secured Financing Corp., 6.07%,
1/15/08................................................. 971
2,666 Residential Accredit Loans, Inc., 6.50%, 3/25/29......... 2,553
770 Residential Funding Mortgage, Inc., 6.75%, 6/25/28....... 750
--------
Total Mortgage Backed Securities 11,114
--------
U.S. Government Agencies (8.4%):
Fannie Mae (8.4%):
3,263 7.00%, 9/1/27............................................ 3,267
515 6.50%, 2/1/28............................................ 504
3,743 6.00%, 7/1/28............................................ 3,562
976 6.00%, 8/1/28............................................ 929
495 6.00%, 8/1/28............................................ 471
625 6.50%, 8/1/28............................................ 611
2,126 6.50%, 11/1/28........................................... 2,080
3,902 6.00%, 3/1/29............................................ 3,713
1,550 6.50%, 5/1/29............................................ 1,516
--------
Total U.S. Government Agencies 16,653
--------
U.S. Government Obligations (4.4%):
Government National Mortgage Association (4.4%):
689 6.50%, 9/15/23........................................... 672
766 6.50%, 12/15/23.......................................... 748
3,863 7.50%, 8/15/25........................................... 3,956
520 6.50%, 4/1/29(e)......................................... 508
2,848 6.50%, 4/15/29........................................... 2,781
--------
Total U.S. Government Obligations 8,665
--------
</TABLE>
Continued
97
<PAGE> 99
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Balanced Allocation Fund
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<C> <S> <C>
U.S. Treasury Notes (1.6%):
$ 2,995 5.75%, 11/15/00(c)........................................ $ 3,013
210 6.13%, 8/15/07(c)......................................... 214
--------
Total U.S. Treasury Notes 3,227
--------
U.S. Treasury Bonds (1.7%):
3,380 6.25%, 8/15/23(c)......................................... 3,448
--------
Total U.S. Treasury Bonds 3,448
--------
Cash Equivalents (0.6%):
1,146 Goldman Sachs Financial Square Premium.................... 1,146
--------
Total Cash Equivalents 1,146
--------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- -------------------------------------------------------- --------
<C> <S> <C>
Short Term Securities Purchased with Collateral (7.7%):
Floating Rate Note (5.0%):
$ 10,000 Merrill Lynch, 5.05%, 10/4/99........................... $ 10,000
--------
Repurchase Agreements (2.7%):
5,235 Lehman Brothers Triparty Agreement, 5.04%, 6/1/99, (See
Significant Accounting Policies, Lending Portfolio
Securities in the Notes to Financial Statements for
collateral description) 5,235
--------
Total Short Term Securities Purchased with Collateral 15,235
--------
Total Investments (Cost $185,141)(a)--106.2% 210,987
Other assets in excess of liabilities--(6.2)% (12,301)
--------
Total Net Assets--100.0% $198,686
========
</TABLE>
- - -------
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax purposes
of $51. Cost for federal income tax purposes differs from value by net
unrealized appreciation as follows:
<TABLE>
<S> <C>
Unrealized appreciation...................................... $29,518
Unrealized depreciation...................................... (3,723)
-------
Net unrealized appreciation.................................. $25,795
=======
</TABLE>
(b) Represents non-income producing securities.
(c) All or part of this security has been loaned at May 31, 1999.
(d) Market value is less than $1,000.
(e) On May 31, 1999, the total cost of investments purchased on a when-issued
basis was $510.
See notes to financial statements.
98
<PAGE> 100
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Aggressive Allocation Fund
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ------------------------------------------------------------ -------
<C> <S> <C>
Common Stocks (62.4%):
Advertising (1.0%):
350 Doubleclick, Inc.(b)........................................ $ 34
2,300 Omnicom Group............................................... 161
1,500 Valassis Communications, Inc.(b)............................ 52
-------
247
-------
Apparel/Shoes (0.1%):
1,000 Tarrant Apparel Group(b).................................... 30
-------
Banking (1.0%):
400 Cullen/Frost Bankers, Inc. ................................. 23
6,378 Republic Security Financial Corp. .......................... 53
2,400 State Street Corp. ......................................... 183
-------
259
-------
Broadcasting/Cable (0.6%):
4,200 Comcast Corp. .............................................. 162
-------
Business Services (2.1%):
4,100 Automatic Data Processing, Inc. ............................ 169
3,600 Ceridian Corp.(b)........................................... 119
750 Corporate Executive Board Corp.(b).......................... 22
1,400 Diamond Technology Partners, Inc.(b)........................ 34
996 FYI, Inc.(b)................................................ 27
1,211 NOVA Corp.(b)............................................... 27
1,800 Onesource Information Services, Inc.(b)..................... 17
775 QRS Corp.(b)................................................ 57
1,500 Sykes Enterprises, Inc.(b).................................. 47
-------
519
-------
Chemicals (0.8%):
1,522 Macdermid, Inc. ............................................ 61
3,100 Monsanto Co. ............................................... 129
-------
190
-------
Commercial Services (0.2%):
1,845 Iron Mountain, Inc.(b)...................................... 51
-------
Computer Hardware (3.7%):
4,000 Dell Computer Corp.(b)...................................... 138
2,700 EMC Corp.(b)................................................ 269
2,800 IBM Corp. .................................................. 326
3,400 Sun Microsystems, Inc.(b)................................... 203
-------
936
-------
Computer Services (1.6%):
725 Checkfree Holdings Corp.(b)................................. 34
300 CMGI, Inc.(b)............................................... 31
1,486 Credence Systems Corp.(b)................................... 44
1,100 E*Trade Group, Inc.(b)...................................... 49
800 Infospace.Com, Inc.(b)...................................... 38
1,675 National Data Corp. ........................................ 78
564 Pegasus Systems, Inc.(b).................................... 20
1,500 PMC-Sierra, Inc.(b)......................................... 73
200 Safeguard Scientifics, Inc.(b).............................. 15
1,535 Unigraphics Solutions, Inc.(b).............................. 24
-------
406
-------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ------------------------------------------------------------ -------
<C> <S> <C>
Common Stocks, continued:
Computer Software & Peripherals (3.2%):
1,706 Ardent Software, Inc.(b).................................... $ 34
25 BMC Software(b)............................................. 1
2,735 INSpire Insurance Solutions(b).............................. 48
700 Intervu, Inc.(b)............................................ 24
600 Mercury Interactive Corp.(b)................................ 20
900 Micromuse, Inc.(b).......................................... 36
5,500 Microsoft, Inc.(b).......................................... 444
1,100 National Computer Systems, Inc. ............................ 34
3,300 Oracle Corp.(b)............................................. 82
1,815 Smart Modular Technologies(b)............................... 27
1,700 Worldgate Communications, Inc.(b)........................... 63
-------
813
-------
Consumer Goods & Services (2.3%):
1,600 Colgate Palmolive Co. ...................................... 160
1,100 Gillette Co. ............................................... 56
1,700 JAKKS Pacific, Inc.(b)...................................... 47
3,300 Procter & Gamble Co. ....................................... 308
-------
571
-------
Diversified Operations (1.7%):
4,900 Tyco International Ltd. .................................... 428
-------
Educational Services (0.1%):
1,652 School Specialty, Inc.(b)................................... 25
-------
Electric Utilities (0.3%):
1,200 Calpine Corp.(b)............................................ 65
-------
Electronic Components/Instruments (2.8%):
1,202 Burr-Brown Corp.(b)......................................... 38
1,370 CTS Corp. .................................................. 77
2,000 DII Group, Inc.(b).......................................... 66
3,200 General Electric Co. ....................................... 326
2,834 Gentex Corp.(b)............................................. 85
500 Optical Coating Laboratory, Inc. ........................... 32
874 SDL, Inc.(b)................................................ 81
-------
705
-------
Environmental Services (0.9%):
1,613 Casella Waste Systems, Inc., Series A(b).................... 32
3,600 Waste Management, Inc.(c)................................... 190
-------
222
-------
Financial Services (2.7%):
1,610 Affiliated Managers Group(b)................................ 47
1,400 American Express Co. ....................................... 170
3,482 Amresco, Inc.(b)............................................ 24
3,700 Freddie Mac................................................. 216
5,700 MBNA Corp. ................................................. 157
1,300 Metris Cos., Inc. .......................................... 76
-------
690
-------
Food & Beverage (0.6%):
2,200 The Coca-Cola Co. .......................................... 150
-------
</TABLE>
Continued
99
<PAGE> 101
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Aggressive Allocation Fund
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ------------------------------------------------------------ -------
<C> <S> <C>
Common Stocks, continued:
Food Products & Services (1.3%):
1,500 Kroger Co.(b)............................................... $ 88
5,000 Safeway, Inc.(b)............................................ 232
-------
320
-------
Health Care - Services (1.1%):
2,479 American Retirement Corp.(b)(c)............................. 42
524 Carematrix Corp.(b)......................................... 8
3,628 Hooper Holmes, Inc. ........................................ 66
1,400 Laser Vision Centers, Inc.(b)............................... 79
1,398 Medquist, Inc.(b)........................................... 51
200 Minimed, Inc.(b)............................................ 12
856 NCS Healthcare, Inc.(b)..................................... 12
-------
270
-------
Home Building (0.1%):
1,987 Standard Pacific Corp. ..................................... 26
-------
Home Furnishings (0.2%):
1,214 Ethan Allen Interiors, Inc. ................................ 39
-------
Industrial Goods & Services (0.6%):
2,400 United Technologies Corp.(c)................................ 149
-------
Insurance (2.0%):
3,411 American International Group, Inc. ......................... 390
2,958 Annuity & Life Re........................................... 76
3,500 Scottish Annuity & Life Holdings............................ 34
-------
500
-------
Leisure (0.2%):
1,200 Cheap Tickets, Inc.(b)...................................... 38
-------
Manufacturing - Consumer Goods (0.2%):
1,600 Monaco Coach Corp.(b)....................................... 48
-------
Manufacturing - Capital Goods (0.5%):
1,000 Astec Industries, Inc.(b)................................... 37
2,985 Motivepower Industries, Inc.(b)............................. 51
2,011 Wabash National Corp........................................ 38
-------
126
-------
Medical Equipment & Supplies (1.1%):
1,642 Biomatrix, Inc.(b).......................................... 50
1,058 Gliatech, Inc.(b)........................................... 27
900 Guidant Corp. .............................................. 45
2,200 Medtronic, Inc. ............................................ 157
-------
279
-------
Metals & Mining (0.2%):
1,200 Stillwater Mining Co.(b).................................... 38
-------
Office Equipment & Services (1.5%):
1,500 Hewlett-Packard Co. ........................................ 141
1,200 Pitney Bowes, Inc. ......................................... 77
2,900 Xerox Corp. ................................................ 163
-------
381
-------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ------------------------------------------------------------ -------
<C> <S> <C>
Common Stocks, continued:
Oilfield Services & Equipment (0.1%):
1,000 Cal Dive International, Inc.(b)............................. $ 25
-------
Pharmaceuticals (7.6%):
800 Alpharma, Inc., Class A..................................... 21
3,400 Bristol Myers Squibb Co. ................................... 233
3,900 Eli Lilly & Co. ............................................ 279
1,564 Geltex Pharmaceuticals, Inc.(b)............................. 27
2,400 Johnson & Johnson........................................... 222
2,476 King Pharmaceuticals, Inc.(b)............................... 59
3,800 Merck & Co., Inc. .......................................... 257
3,800 Pfizer, Inc. ............................................... 406
251 Pharmacia & Upjohn, Inc. ................................... 14
2,201 Priority Healthcare Corp., Class B(b)....................... 75
4,800 Schering Plough Corp........................................ 216
1,900 Warner-Lambert Co........................................... 118
-------
1,927
-------
Radio (0.2%):
1,962 Citadel Communications(b)................................... 54
-------
Resorts & Entertainment (2.0%):
2,400 Carnival Cruise Lines....................................... 98
1,800 Premier Parks, Inc.(b)...................................... 64
4,900 Time Warner, Inc............................................ 334
-------
496
-------
Restaurants (0.2%):
1,900 Foodmaker, Inc.(b).......................................... 51
-------
Retail (5.0%):
1,000 Ames Department Stores, Inc.(b)............................. 41
900 BJ's Wholesale Club, Inc.(b)................................ 23
3,600 CVS Corp. .................................................. 166
4,600 Dayton Hudson Corp. ........................................ 289
5,000 Home Depot, Inc. ........................................... 284
1,400 The Children's Place(b)..................................... 55
1,746 The Men's Wearhouse, Inc.(b)................................ 45
5,600 Wal-Mart.................................................... 239
4,900 Walgreen Co. ............................................... 114
-------
1,256
-------
Semiconductors (1.9%):
2,989 Aeroflex, Inc.(b)........................................... 44
1,349 ATMI, Inc.(b)............................................... 30
1,990 Cymer, Inc.(b).............................................. 36
3,900 Intel Corp. ................................................ 211
678 Photronics, Inc.(b)......................................... 13
800 PRI Automation(b)........................................... 20
1,200 Texas Instruments........................................... 131
-------
485
-------
Technology (0.9%):
1,500 Electronics for Imaging, Inc.(b)............................ 73
1,445 Macrovision Corp.(b)........................................ 66
2,115 Mercury Computer Systems, Inc.(b)........................... 42
</TABLE>
Continued
100
<PAGE> 102
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Aggressive Allocation Fund
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ----------------------------------------------------------- -------
<C> <S> <C>
Common Stocks, continued:
Technology (0.9%):
300 Platinum Technology(b)..................................... $ 9
500 Visx, Inc.(b).............................................. 26
-------
216
-------
Telecommunications - Services & Equipment (9.2%):
1,405 AirTouch Communications, Inc.(b)........................... 141
2,900 Alltel Corp. .............................................. 208
1,660 Antec Corp.(b)............................................. 49
700 Applied Micro Circuits Corp.(b)............................ 41
4,550 Cisco Systems, Inc.(b)..................................... 495
2,500 Commscope, Inc.(b)......................................... 66
1,995 Dycom(b)................................................... 96
300 Frontier Corp. ............................................ 16
822 Gilat Satellite Networks Ltd.(b)........................... 43
1,500 Intermedia Communications of Florida(b).................... 38
9,200 Lucent Technologies(c)..................................... 524
1,500 Mastec, Inc.(b)............................................ 36
3,700 MCI WorldCom, Inc.(b)...................................... 320
1,700 Microwave Power Devices, Inc. ............................. 26
1,561 Sawtek, Inc.(b)............................................ 62
2,700 SBC Communications, Inc.(c)................................ 138
2,300 Skytel Communications, Inc.(b)............................. 47
-------
2,346
-------
Transportation & Shipping (0.2%):
1,599 Atlas Air, Inc.(b)......................................... 43
300 Expeditors International of Washington, Inc. .............. 17
-------
60
-------
Wholesale Distribution - Pharmaceuticals (0.4%):
1,775 Cardinal Health, Inc. ..................................... 107
-------
Total Common Stocks 15,706
-------
Foreign Common Stocks (5.3%):
Australia (0.1%):
Banking (0.1%):
998 National Australia Bank Ltd. .............................. 16
-------
Belgium (0.0%):
Retail Stores/Catalog (0.0%):
19 Colrayt NV................................................. 12
-------
Brazil (0.0%):
Telecommunications (0.0%):
105 Telebras, ADR.............................................. 9
105 Telebras-Rights............................................ (d)
-------
9
-------
9
-------
Finland (0.2%):
Computer Software (0.1%):
542 TT Tieto B Shares.......................................... 19
-------
Paper Products (0.0%):
185 Upm-Kymmene................................................ 5
-------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ----------------------------------------------------------- -------
<C> <S> <C>
Foreign Common Stocks, continued:
Finland, continued:
Telecommunications (0.1%):
436 Nokia AB, Class A, ADR..................................... $ 31
-------
55
-------
France (0.5%):
Commercial Services (0.0%):
52 Altran Technologies........................................ 12
-------
Energy (0.1%):
176 Total SA................................................... 21
-------
Engineering (0.0%):
53 Compagnie De Saint-Gobain.................................. 8
-------
Health & Personal Care (0.2%):
42 L'Oreal.................................................... 26
-------
Industrial Goods & Services (0.0%):
158 Vivendi.................................................... 12
300 Vivendi Rights............................................. (d)
-------
12
-------
Insurance (0.1%):
211 AXA........................................................ 25
-------
Machinery & Equipment (0.1%):
158 Sidel SA................................................... 22
-------
Telecommunications - Services & Equipment (0.0%):
158 France Telecom SA.......................................... 12
-------
138
-------
Germany (0.4%):
Banking (0.0%):
376 BHF Bank AG................................................ 12
-------
Electrical & Electronic (0.1%):
261 Siemens AG................................................. 18
-------
Energy (0.0%):
26 Veba AG.................................................... 1
-------
Insurance (0.1%):
70 Allianz AG................................................. 19
-------
Telecommunications (0.2%):
277 Mannesmann AG.............................................. 38
-------
88
-------
Hong Kong (0.2%):
Banking (0.1%):
526 HSBC Holdings PLC.......................................... 17
-------
Electronic Components/Instruments (0.1%):
3,571 Johnson Electronic Holdings................................ 13
-------
Industrial Holding Company (0.0%):
1,105 Hutchison Whampoa.......................................... 9
-------
Utilities - Electrical & Gas (0.0%):
7,513 Hong Kong & China Gas Co. Ltd.............................. 11
-------
50
-------
</TABLE>
Continued
101
<PAGE> 103
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Aggressive Allocation Fund
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ----------------------------------------------------------- -------
<C> <S> <C>
Foreign Common Stocks, continued:
Ireland (0.1%):
Banking (0.1%):
675 Bank of Ireland............................................ $ 13
-------
Italy (0.2%):
Insurance (0.1%):
421 Assicurazioni Generali..................................... 15
-------
Jewelry (0.1%):
3,721 Bulgari SpA................................................ 22
-------
Telecommunications - Services & Equipment (0.0%):
1,135 Telecom Italia Mobile SpA.................................. 7
-------
44
-------
Japan (0.9%):
Banking (0.0%):
526 Bank of Tokyo-Mitsubishi Ltd............................... 7
-------
Computer Hardware (0.1%):
313 TDK Corp................................................... 27
-------
Computer Software (0.1%):
1,053 Nihon Unisys............................................... 19
25 Softbank Corp.............................................. 3
-------
22
-------
Consumer Electronics (0.1%):
163 Sony Corp.................................................. 15
-------
Electronic Components/Instruments (0.1%):
411 Fanuc Co. Ltd.............................................. 18
-------
Financial Services (0.0%):
1,055 Nomura Securities Co....................................... 11
-------
Food Products & Services (0.1%):
526 Kao Corp................................................... 14
-------
Manufacturing - Consumer Goods (0.1%):
1,087 Canon, Inc................................................. 28
331 Fuji Photo Film Ltd........................................ 12
-------
40
-------
Pharmaceuticals (0.2%):
52 Sankyo Co.................................................. 1
818 Takeda Chemical Industries................................. 37
-------
38
-------
Retail - Food and Drug (0.0%):
32 Matsumotokiyoshi........................................... 1
-------
Retail Stores/Catalog (0.1%):
387 Ito Yokado................................................. 23
-------
Telecommunications (0.0%):
1 Nippon Telegraph & Telephone Corp.......................... 10
-------
226
-------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ----------------------------------------------------------- -------
<C> <S> <C>
Foreign Common Stocks, continued:
Korea (0.1%):
Metals (0.1%):
526 Pohang Iron & Steel, ADR................................... $ 13
-------
Mexico (0.1%):
Beverages & Tobacco (0.0%):
525 Coca-Cola Femsa SA, ADR.................................... 9
-------
Entertainment (0.0%):
263 Grupo Televisa SA, ADR (b)................................. 11
-------
Telecommunications (0.1%):
160 Telefonos De Mexico, ADR................................... 13
-------
33
-------
Netherlands (0.5%):
Broadcasting & Publishing (0.1%):
720 Wolters Kluwer NV.......................................... 29
-------
Consumer Goods & Services (0.0%):
157 Unilever NV................................................ 10
-------
Energy (0.2%):
519 Royal Dutch Petroleum...................................... 30
-------
Financial Services (0.0%):
250 Fortis NV.................................................. 8
-------
Insurance (0.1%):
167 Aegon NV................................................... 13
204 ING Groep NV............................................... 11
-------
24
-------
Retail Stores/Catalog (0.1%):
650 Kon Ahold NV............................................... 23
-------
124
-------
Portugal (0.1%):
Telecommunications (0.1%):
311 Portugal Telecom, SA ADR................................... 14
-------
Singapore (0.2%):
Banking (0.1%):
1,580 Development Bank of Singapore.............................. 16
-------
Electrical & Electronic (0.0%):
3,158 Natsteel Electronics Ltd................................... 11
-------
Real Estate (0.1%):
2,105 City Developments.......................................... 13
-------
Transportation & Shipping (0.0%):
2,105 Singapore International Airlines........................... 18
-------
58
-------
Spain (0.1%):
Gas & Electric Utility (0.1%):
678 Endesa-Empresa Nac Electric SA............................. 14
-------
Telecommunications (0.0%):
449 Telefonica SA.............................................. 22
-------
36
-------
</TABLE>
Continued
102
<PAGE> 104
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Aggressive Allocation Fund
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ----------------------------------------------------------- -------
<C> <S> <C>
Foreign Common Stocks, continued:
Switzerland (0.5%):
Banking (0.1%):
105 Credit Suisse Group........................................ $ 19
53 UBS AG-Registered.......................................... 15
-------
34
-------
Food Products & Services (0.1%):
10 Nestle SA.................................................. 18
-------
Insurance (0.1%):
9 Swiss Reinsurance Co....................................... 17
-------
Pharmaceuticals (0.2%):
10 Novartis AG................................................ 15
3 Roche Holdings AG.......................................... 31
-------
46
-------
115
-------
United Kingdom (1.1%):
Aerospace/Defense (0.0%):
1,621 British Aerospace PLC...................................... 11
-------
Banking (0.2%):
1,167 Abbey National PLC......................................... 24
1,103 Allied Zurich PLC.......................................... 14
1,105 Standard Chartered PLC..................................... 17
-------
55
-------
Beverages & Tobacco (0.1%):
1,105 Bass PLC................................................... 16
-------
Commercial Services (0.0%):
830 Logica PLC................................................. 8
-------
Electric Utility (0.1%):
2,805 National Grid Group PLC.................................... 19
-------
Electrical & Electronic (0.1%):
1,580 General Electric PLC....................................... 15
-------
Energy (0.1%):
1,623 BP Amoco PLC............................................... 29
-------
Engineering (0.1%):
3,215 Invensys PLC............................................... 15
-------
Food Products & Services (0.0%):
689 Compass Group PLC.......................................... 7
-------
Industrial Goods & Services (0.1%):
710 Boc Group PLC.............................................. 12
1,370 Imperial Chemical Industries PLC........................... 15
-------
27
-------
Leisure (0.1%):
740 Granada Group PLC.......................................... 15
-------
Media and Entertainment (0.1%):
1,532 Pearson PLC................................................ 29
-------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ----------------------------------------------------------- -------
<C> <S> <C>
Foreign Common Stocks, continued:
Pharmaceuticals (0.1%):
1,029 Glaxo Holdings PLC......................................... $ 29
-------
Telecommunications (0.0%):
607 Vodafone................................................... 12
-------
287
-------
Total Foreign Common Stocks 1,331
-------
Preferred Stocks (0.1%):
Germany (0.0%):
Computer Software (0.0%):
9 SAP AG..................................................... 4
-------
United Kingdom (0.1%):
Telecommunications (0.1%):
810 Cable & Wireless PLC....................................... 10
-------
Total Preferred Stocks 14
-------
Corporate Bonds (8.9%):
Appliances & Household Products (0.4%):
$ 90 IMC Home Equity Loan Trust, 6.76%, 10/20/20................ 91
-------
Banking (0.3%):
75 Citicorp, 6.38%, 11/15/08.................................. 73
-------
Consumer Goods & Services (0.4%):
100 American Greetings, 6.10%, 8/1/28.......................... 96
-------
Electrical & Electronic (1.1%):
270 General Electric Corp., Series A3, 6.18%, 6/25/15.......... 270
-------
Financial Services (1.9%):
250 Associates Corp., 5.75%, 11/1/03........................... 243
250 Countrywide Home, 6.84%, 10/22/04.......................... 250
-------
493
-------
Foreign Governments (1.2%):
270 Providence of Saskatchewan, 8.00%, 7/15/04................. 290
-------
Industrial Goods & Services (1.9%):
60 Brunswick Corp., 6.75%, 12/15/06........................... 58
40 Cummins Engine, Inc., 6.45%, 3/1/05........................ 38
80 Lubrizol Corp, 5.88%, 12/01/08............................. 74
75 Monsanto Co., 5.38%, 12/1/01............................... 74
50 Motorola, Inc., 7.50%, 5/15/25............................. 52
200 Security Capital Group, 7.80%, 1/12/05..................... 198
-------
494
-------
Real Estate Investment Trust (0.2%):
25 Avalon Bay Communities, 6.58%, 2/15/04..................... 24
20 Simon Debartolo Property Group, Inc., 6.63%, 6/15/03....... 19
-------
43
-------
</TABLE>
Continued
103
<PAGE> 105
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Aggressive Allocation Fund
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- -------
<C> <S> <C>
Corporate Bonds, continued:
Resorts & Entertainment (0.6%):
$130 Time Warner Entertainment, 9.63%, 5/1/02.................. $ 141
-------
Telecommunications - Services & Equipment (0.9%):
75 AT&T Corp., 6.50%, 3/15/29................................ 70
80 Cable & Wireless Communication, Inc., 6.75%, 12/8/08...... 78
90 Sprint Capital, 6.88%, 11/15/28........................... 85
-------
233
-------
Total Corporate Bonds 2,224
-------
Asset Backed Securities (1.9%):
76 Banc One Auto Grantor Trust, 6.27%, 11/20/03.............. 76
250 Discover Card Master Trust, 6.05%, 8/18/08................ 247
150 Newcourt Receivables Asset Trust, 6.19%, 5/20/05.......... 149
-------
Total Asset Backed Securities 472
-------
Mortgage Backed Securities (2.2%):
165 Credit Suisse First Boston, 7.24%, 4/20/07................ 167
55 General Electric Capital Mortgage Services, Inc., 6.50%,
1/25/29.................................................. 53
125 PNC, Series 98-7, Class A5, 6.75%, 9/25/28................ 121
190 Residential Accredit Loans, Inc., 6.50%, 3/25/29.......... 182
40 Residential Funding Mortgage, Inc., 6.75%, 6/25/28........ 39
-------
Total Mortgage Backed Securities 562
-------
U.S. Government Agencies (1.8%):
Fannie Mae (1.8%):
189 6.00%, 8/1/28............................................. 180
113 6.50%, 8/1/28............................................. 111
159 6.50%, 11/1/28............................................ 156
-------
Total U.S. Government Agencies 447
-------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- --------------------------------------------------------- -------
<C> <S> <C>
U.S. Treasury Notes (10.4%):
$ 850 5.75%, 11/15/00(c)....................................... $ 855
1,560 5.75%, 8/15/03(c)........................................ 1,563
200 6.13%, 8/15/07(c)........................................ 204
-------
Total U.S. Treasury Notes 2,622
-------
U.S. Treasury Bonds (1.9%):
465 6.25%, 8/15/23(c)........................................ 474
-------
Total U.S. Treasury Bonds 474
-------
Cash Equivalents (3.2%):
805 Goldman Sachs Financial Square Premium................... 805
-------
Total Cash Equivalents 805
-------
Short Term Securities Purchased with Collateral (16.5%):
Commercial Paper (2.2%):
548 Oyster Creek Fuel Corp., 5.05%, 6/1/99................... 548
-------
Repurchase Agreements (14.3%):
3,599 Lehman Brothers Triparty Agreement, 5.04%, 6/1/99, (See
Significant Accounting Policies, Lending Portfolio
Securities in the Notes to Financial Statements for
collateral description)................................. 3,599
-------
Total Short Term Securities Purchased with Collateral 4,147
-------
Total Investments (Cost $26,552)(a)--114.6% 28,804
Other assets in excess of liabilities--(14.6)% (3,676)
-------
Total Net Assets--100.0% $25,128
=======
</TABLE>
- - -------
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax purposes
of $10. Cost for federal income tax purposes differs from value by net
unrealized appreciation as follows:
<TABLE>
<S> <C>
Unrealized appreciation....................................... $2,732
Unrealized depreciation....................................... (490)
------
Net unrealized appreciation................................... $2,242
======
</TABLE>
(b) Represents non-income producing securities.
(c) All or part of this security has been loaned at May 31, 1999.
(d) Market value is less than $1,000.
See notes to financial statements.
104
<PAGE> 106
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Equity Income Fund
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<C> <S> <C>
Common Stocks (96.8%):
Aerospace & Military Technology (0.4%):
19,600 General Dynamics Corp.(b)................................. $ 1,289
--------
Apparel (3.3%):
210,600 Intimate Brands, Inc.(b).................................. 10,912
--------
Automotive (1.2%):
48,800 Ford Motor Co............................................. 2,784
28,900 Genuine Parts Co.......................................... 974
--------
3,758
--------
Banking (9.4%):
121,079 Bank of America Corp...................................... 7,833
22,600 Bank One Corp.(b)......................................... 1,278
88,500 First Tennessee National Corp.(b)......................... 3,645
60,900 First Union Corp.......................................... 2,805
80,900 Fleet Financial Group, Inc................................ 3,327
39,700 J.P. Morgan & Co.......................................... 5,531
107,500 PNC Financial Corp.(b).................................... 6,154
--------
30,573
--------
Beverages & Tobacco (0.5%):
51,900 UST, Inc.................................................. 1,583
--------
Building Products (3.2%):
14,600 Armstrong World Industries, Inc........................... 850
331,600 Masco Corp................................................ 9,472
--------
10,322
--------
Commercial Services (1.5%):
139,500 Dun & Bradstreet Corp..................................... 4,883
--------
Consumer Goods & Services (5.2%):
378,000 Flowers Industries, Inc................................... 8,410
31,700 Fortune Brands, Inc....................................... 1,296
36,800 Kimberly-Clark Corp....................................... 2,160
71,800 Maytag Corp............................................... 5,066
--------
16,932
--------
Electrical & Electronic (1.9%):
94,600 Emerson Electric Co.(b)................................... 6,043
--------
Financial Services (2.6%):
84,600 Fannie Mae................................................ 5,752
73,000 Washington Mutual, Inc.................................... 2,788
--------
8,540
--------
Food Products & Services (0.4%):
16,300 General Mills, Inc........................................ 1,310
--------
Forest & Paper Products (1.0%):
55,000 Weyerhaeuser Co........................................... 3,413
--------
Industrial Goods & Services (8.6%):
38,500 Cooper Industries, Inc.................................... 1,908
42,000 Dow Chemical Co........................................... 5,103
51,800 E. I. Du Pont de Nemours.................................. 3,390
259,600 RPM, Inc.................................................. 3,602
99,000 Snap-On, Inc.............................................. 3,583
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<C> <S> <C>
Common Stocks, continued:
Industrial Goods & Services, continued:
137,000 United Technologies Corp.(b).............................. $ 8,502
74,500 USX-United States Steel Group, Inc........................ 2,007
--------
28,095
--------
Insurance (4.6%):
40,966 Allstate Corp............................................. 1,493
47,900 Chubb Corp................................................ 3,356
53,500 Cigna Corp................................................ 4,989
73,200 Marsh & Mclennan.......................................... 5,325
--------
15,163
--------
Metals (2.4%):
141,300 Alcoa, Inc................................................ 7,772
--------
Office Equipment & Services (5.7%):
141,400 Pitney Bowes, Inc......................................... 9,014
170,100 Xerox Corp................................................ 9,558
--------
18,572
--------
Oil & Gas (13.6%):
97,900 Atlantic Richfield Co..................................... 8,192
83,800 Chevron Corp.............................................. 7,766
75,000 Exxon Corp................................................ 5,991
73,400 Mobil Corp................................................ 7,432
125,100 Royal Dutch Petroleum Co.(b).............................. 7,076
96,500 Texaco, Inc............................................... 6,321
81,000 Ultramar Diamond Shamrock Corp............................ 1,782
--------
44,560
--------
Pharmaceuticals (3.1%):
71,900 American Home Products Corp............................... 4,143
89,200 Bristol-Myers Squibb Co................................... 6,122
--------
10,265
--------
Real Estate Investment Trust (3.4%):
128,800 Arden Realty, Inc......................................... 3,292
189,700 Duke Realty Investments, Inc.(b).......................... 4,387
48,900 Kimco Realty.............................................. 1,953
43,600 Mack Cali Realty Corp..................................... 1,412
--------
11,044
--------
Retail (3.9%):
72,400 J.C. Penney & Co., Inc.(b)................................ 3,742
123,150 May Department Stores Co.................................. 5,334
75,050 Sears, Roebuck & Co.(b)................................... 3,588
--------
12,664
--------
Telecommunications - Services & Equipment (9.4%):
103,500 Ameritech Corp............................................ 6,812
168,450 AT&T Corp................................................. 9,348
56,200 Bell Atlantic Corp........................................ 3,077
73,000 Frontier Corp............................................. 3,842
119,500 GTE Corp.................................................. 7,536
--------
30,615
--------
</TABLE>
Continued
105
<PAGE> 107
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Equity Income Fund
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<C> <S> <C>
Common Stocks, continued:
Utilities - Electric (5.2%):
17,200 Consolidated Edison, Inc.................................. $ 835
114,600 Duke Power Co............................................. 6,913
66,000 Florida Power & Light, Inc................................ 3,840
127,000 General Public Utility Corp............................... 5,532
--------
17,120
--------
Utilities - Gas (5.2%):
124,300 Consolidated Natural Gas Co............................... 7,388
136,500 Enron Corp................................................ 9,743
--------
17,131
--------
Utilities - Water (1.1%):
116,300 American Water Works, Inc................................. 3,605
--------
Total Common Stocks 316,164
--------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- -------------------------------------------------------- --------
<C> <S> <C>
Preferred Stocks (1.1%):
Insurance (1.1%):
41,000 American General Delaware, L.L.C........................ $ 3,695
--------
Total Preferred Stocks 3,695
--------
Cash Equivalents (1.9%):
$6,158 Goldman Sachs Financial Square Premium.................. 6,158
--------
Total Cash Equivalents 6,158
--------
Short Term Securities Purchased with Collateral (16.1%):
Floating Rate Note (12.2%):
10,000 Amex Centurion, 4.95%, 4/24/00.......................... 10,000
10,000 Merrill Lynch, 5.04%, 9/29/99........................... 10,000
10,000 Salomon Smith Barney Holding Co., 5.00%, 10/28/99....... 10,000
10,000 Sigma Finance Inc., 4.91%, 9/15/99...................... 10,000
--------
40,000
--------
Repurchase Agreements (3.8%):
1,915 Bear Stearns Triparty Agreement, 5.04%, 6/1/99, (See
Significant Accounting Policies, Lending Portfolio
Securities in the Notes to Financial Statements for
collateral description)................................ 1,915
10,508 Lehman Brothers Triparty Agreement, 5.04%, 6/1/99, (See
Significant Accounting Policies, Lending Portfolio
Securities in the Notes to Financial Statements for
collateral description)................................ 10,508
--------
12,423
--------
Total Short Term Securities Purchased with Collateral 52,423
--------
Total Investments (Cost $293,038)(a)--115.9% 378,440
Other assets in excess of liabilities--(15.9)% (51,852)
--------
Total Net Assets--100.0% $326,588
========
</TABLE>
- - -------
(a) Cost for federal tax purposes differs from value by net unrealized
appreciation as follows:
<TABLE>
<S> <C>
Unrealized appreciation............................. $89,129
Unrealized depreciation............................. (3,727)
-------
Net unrealized appreciation......................... $85,402
=======
</TABLE>
(b) All or a portion of this security has been loaned at May 31, 1999.
See notes to financial statements.
106
<PAGE> 108
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Prime Obligations Fund
---------------------------------------------------------------------------------------------------------
Year Ended May 31, 1999 Eleven Months Ended May 31, 1998 Year Ended June 30, 1997
----------------------------------- ------------------------------------------ ------------------------
Investor A Investor B Institutional Investor A Investor B(a) Institutional Investor A Institutional
---------- ---------- ------------- ---------- ------------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period............. $ 1.000 $1.000 $ 1.000 $ 1.000 $1.000 $ 1.000 $ 1.000 $ 1.000
------- ------ -------- -------- ------ -------- -------- --------
Investment
Activities
Net investment
income............ 0.046 0.037 0.047 0.045 0.027 0.046 0.048 0.049
Distributions
Net investment
income............ (0.046) (0.037) (0.047) (0.045) (0.027) (0.046) (0.048) (0.049)
------- ------ -------- -------- ------ -------- -------- --------
Net Asset Value, End
of Period.......... $ 1.000 $1.000 $ 1.000 $ 1.000 $1.000 $ 1.000 $ 1.000 $ 1.000
======= ====== ======== ======== ====== ======== ======== ========
Total Return........ 4.66% 3.73% 4.76% 4.63%(b) 2.75%(b) 4.73%(b) 4.91% 5.01%
Ratios/Supplemetary
Data
Net Assets at end of
period (000)....... $14,924 $ 764 $628,553 $217,934 $ 387 $690,947 $195,046 $677,324
Ratio of expenses to
average net assets. 0.76% 1.66% 0.65% 0.76%(c) 1.66%(c) 0.66%(c) 0.73% 0.63%
Ratio of net
investment income
to average net
assets............. 4.76% 3.59% 4.67% 4.93%(c) 4.01%(c) 5.04%(c) 4.80% 4.90%
Ratio of expenses to
average net
assets*............ 0.93% 1.67% 0.67% 0.93%(c) 1.68%(c) 0.68%(c) 0.90% 0.65%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) For the period September 30, 1997 (commencement of offering Investor B
shares) to May 31, 1998.
(b) Not annualized.
(c) Annualized.
See notes to financial statements.
107
<PAGE> 109
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Prime Obligations Fund
--------------------------------------------------------------------------
Year ended June 30, 1996 Year ended June 30, 1995 Year ended June 30, 1994
------------------------ ------------------------ ------------------------
Investor A Institutional Investor A Institutional Investor A Institutional
---------- ------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- -------- --------
Investment Activities
Net investment income.. 0.050 0.051 0.047 0.048 0.027 0.028
Distributions
Net investment income.. (0.050) (0.051) (0.047) (0.048) (0.027) (0.028)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of
Period................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ======== ========
Total Return............ 5.07% 5.17% 4.81% 4.91% 2.75% 2.85%
Ratios/Supplemetary Data
Net Assets at end of
period (000)........... $147,478 $596,075 $108,565 $640,380 $105,611 $561,697
Ratio of expenses to
average net assets..... 0.74% 0.64% 0.75% 0.65% 0.74% 0.64%
Ratio of net investment
income to average net
assets................. 4.93% 5.05% 4.71% 4.83% 2.71% 2.84%
Ratio of expenses to
average net assets*.... 0.91% 0.66% 0.92% 0.67% 0.91% 0.66%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
See notes to financial statements.
108
<PAGE> 110
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- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
U.S. Government Obligations Fund
-------------------------------------------------------------------------------
Year Ended Eleven Months Year Ended
May 31, 1999 Ended May 31, 1998 June 30, 1997
------------------------ --------------------------- ------------------------
Investor A Institutional Investor A Institutional Investor A Institutional
---------- ------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- -------- -------- -------- -------- --------
Investment Activities
Net investment income.. 0.044 0.045 0.044 0.045 0.047 0.048
Distributions
Net investment income.. (0.044) (0.045) (0.044) (0.045) (0.047) (0.048)
------- -------- -------- -------- -------- --------
Net Asset Value, End of
Period................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======== ======== ======== ======== ========
Total Return............ 4.53% 4.64% 4.53%(a) 4.62%(a) 4.79% 4.89%
Ratios/Supplementary
Data
Net Assets at end of
period (000)........... $ 2,032 $121,475 $169,210 $185,384 $212,082 $210,162
Ratio of expenses to
average net assets..... 0.75% 0.67% 0.76%(b) 0.66%(b) 0.74% 0.64%
Ratio of net investment
income to average net
assets................. 4.75% 4.57% 4.83%(b) 4.93%(b) 4.69% 4.79%
Ratio of expenses to
average net assets*.... 0.92% 0.69% 0.93%(b) 0.68%(b) 0.91% 0.66%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Not annualized.
(b) Annualized.
See notes to financial statements.
109
<PAGE> 111
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
U.S. Government Obligations Fund
--------------------------------------------------------------------------
Year Ended Year Ended Year Ended
June 30, 1996 June 30, 1995 June 30, 1994
------------------------ ------------------------ ------------------------
Investor A Institutional Investor A Institutional Investor A Institutional
---------- ------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- -------- --------
Investment Activities
Net investment income.. 0.049 0.050 0.047 0.048 0.027 0.028
Distributions
Net investment income.. (0.049) (0.050) (0.047) (0.048) (0.027) (0.028)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of
Period................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ======== ========
Total Return............ 4.99% 5.10% 4.76% 4.87% 2.69% 2.79%
Ratios/Supplementary
Data
Net Assets at end of
period (000)........... $186,944 $207,451 $169,179 $227,565 $172,482 $192,612
Ratio of expenses to
average net assets..... 0.74% 0.64% 0.77% 0.67% 0.77% 0.67%
Ratio of net investment
income to average net
assets................. 4.88% 4.99% 4.62% 4.76% 2.64% 2.74%
Ratio of expenses to
average net assets*.... 0.91% 0.66% 0.94% 0.69% 0.94% 0.69%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
See notes to financial statements.
110
<PAGE> 112
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Tax-Free Fund
-------------------------------------------------------------------------------
Year Ended Eleven Months Year Ended
May 31, 1999 Ended May 31, 1998 June 30, 1997
------------------------ --------------------------- ------------------------
Investor A Institutional Investor A Institutional Investor A Institutional
---------- ------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- -------- ------- -------- ------- --------
Investment Activities
Net investment income.. 0.025 0.026 0.026 0.027 0.028 0.029
Distributions
Net investment income.. (0.025) (0.026) (0.026) (0.027) (0.028) (0.029)
------- -------- ------- -------- ------- --------
Net Asset Value, End of
Period................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======== ======= ======== ======= ========
Total Return............ 2.56% 2.66% 2.66%(a) 2.75%(a) 2.83% 2.94%
Ratios/Supplementary
Data
Net Assets at end of
period (000)........... $ 621 $110,136 $55,106 $104,062 $47,466 $108,884
Ratio of expenses to
average net assets..... 0.77% 0.68% 0.76%(b) 0.66%(b) 0.78% 0.68%
Ratio of net investment
income to average net
assets................. 2.71% 2.62% 2.86%(b) 2.96%(b) 2.82% 2.90%
Ratio of expenses to
average net assets*.... 0.94% 0.70% 0.93%(b) 0.68%(b) 0.95% 0.70%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Not annualized.
(b) Annualized.
See notes to financial statements.
111
<PAGE> 113
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Tax-Free Fund
--------------------------------------------------------------------------
Year Ended Year Ended Year Ended
June 30, 1996 June 30, 1995 June 30, 1994
------------------------ ------------------------ ------------------------
Investor A Institutional Investor A Institutional Investor A Institutional
---------- ------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- -------- ------- ------- ------- -------
Investment Activities
Net investment income.. 0.029 0.030 0.029 0.030 0.018 0.019
Distributions
Net investment income.. (0.029) (0.030) (0.029) (0.030) (0.018) (0.019)
------- -------- ------- ------- ------- -------
Net Asset Value, End of
Period................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======== ======= ======= ======= =======
Total Return............ 2.91% 3.02% 2.90% 3.00% 1.81% 1.92%
Ratios/Supplementary
Data
Net Assets at end of
period (000)........... $41,713 $106,154 $45,102 $98,489 $48,256 $84,465
Ratio of expenses to
average net assets..... 0.76% 0.66% 0.74% 0.64% 0.68% 0.58%
Ratio of net investment
income to average net
assets................. 2.89% 2.97% 2.88% 2.97% 1.81% 1.90%
Ratio of expenses to
average net assets*.... 0.93% 0.68% 0.95% 0.70% 0.93% 0.68%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
See notes to financial statements.
112
<PAGE> 114
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Treasury Fund
-------------------------------------------------------------------------------
Year Ended Eleven Months Ended May Year Ended
May 31, 1999 31, 1998 June 30, 1997
------------------------ --------------------------- ------------------------
Investor A Institutional Investor A Institutional Investor A Institutional
---------- ------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- -------- -------- -------- -------- --------
Investment Activities
Net investment income.. 0.044 0.045 0.045 0.046 0.047 0.048
Distributions
Net investment income.. (0.044) (0.045) (0.045) (0.046) (0.047) (0.048)
------- -------- -------- -------- -------- --------
Net Asset Value, End of
Period................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======== ======== ======== ======== ========
Total Return............ 4.51% 4.61% 4.61%(a) 4.70%(a) 4.82% 4.93%
Ratios/Supplementary
Data
Net Assets at end of
period (000)........... $ 9,161 $269,534 $240,208 $321,584 $176,006 $324,377
Ratio of expenses to
average net assets..... 0.67% 0.58% 0.67%(b) 0.57%(b) 0.67% 0.57%
Ratio of net investment
income to average net
assets................. 4.77% 4.52% 4.90%(b) 5.00%(b) 4.72% 4.83%
Ratio of expenses to
average net assets*.... 0.91% 0.68% 0.92%(b) 0.67%(b) 0.92% 0.67%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Not annualized.
(b) Annualized.
See notes to financial statements.
113
<PAGE> 115
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Treasury Fund
-----------------------------------------------------------------------------
Year Ended Year Ended December 1, 1993 to
June 30, 1996 June 30, 1995 June 30, 1994 (a)
------------------------ ------------------------ ---------------------------
Investor A Institutional Investor A Institutional Investor A Institutional
---------- ------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- ------- -------
Investment Activities
Net investment income.. 0.049 0.050 0.047 0.048 0.016 0.017
Distributions
Net investment income.. (0.049) (0.050) (0.047) (0.048) (0.016) (0.017)
-------- -------- -------- -------- ------- -------
Net Asset Value, End of
Period................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ======= =======
Total Return............ 5.04% 5.14% 4.81% 4.91% 1.66%(b) 1.72%(b)
Ratios/Supplementary
Data
Net Assets at end of
period (000)........... $158,723 $223,416 $105,391 $192,232 $56,535 $76,035
Ratio of expenses to
average net assets..... 0.70% 0.60% 0.75% 0.64% 0.64%(c) 0.54%(c)
Ratio of net investment
income to average net
assets................. 4.87% 4.98% 4.82% 4.95% 2.84%(c) 3.15%(c)
Ratio of expenses to
average net assets*.... 0.95% 0.70% 1.04% 0.78% 0.99%(c) 0.74%(c)
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
See notes to financial statements.
114
<PAGE> 116
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Small Capitalization Fund
------------------------------------------------------------------------------------------------
Year Ended May 31, 1999 Eleven Months Ended May 31, 1998
------------------------------------- ----------------------------------------------------------
Investor A Investor B Institutional Investor A Investor B Investor C Institutional
---------- ---------- ------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 25.72 $ 25.02 $ 26.15 $ 27.55 $ 26.99 $ 27.05 $ 27.91
------- ------- -------- -------- ------- ------- --------
Investment Activities
Net investment income
(loss)................ (0.34) (0.50) (0.23) (0.35) (0.53) (0.49) (0.27)
Net realized and
unrealized gains
(losses) from
investments........... (4.36) (4.21) (4.50) (0.18) (0.14) (0.18) (0.19)
------- ------- -------- -------- ------- ------- --------
Total from Investment
Activities............ (4.70) (4.71) (4.73) (0.53) (0.67) (0.67) (0.46)
------- ------- -------- -------- ------- ------- --------
Distributions
Net realized gains..... (2.53) (2.53) (2.53) (1.30) (1.30) (1.30) (1.30)
------- ------- -------- -------- ------- ------- --------
Total Distributions.... (2.53) (2.53) (2.53) (1.30) (1.30) (1.30) (1.30)
------- ------- -------- -------- ------- ------- --------
Net Asset Value, End of
Period................. $ 18.49 $ 17.78 $ 18.89 $ 25.72 $ 25.02 $ 25.08 $ 26.15
======= ======= ======== ======== ======= ======= ========
Total Return (excludes
sales and redemption
charges)............... (18.92)% (19.52)% (18.71)% (1.90)%(a) (2.470)%(a) (2.43)%(a) (1.62)%(a)
Ratios/Supplementary
Data:
Net Assets at end of
period (000)........... $57,813 $18,736 $226,139 $163,178 $41,399 $14,747 $527,805
Ratio of expenses to
average net assets..... 1.61% 2.37% 1.36% 1.60%(b) 2.35%(b) 2.35%(b) 1.35%(b)
Ratio of net investment
income (loss) to
average net assets..... (1.07)% (1.82)% (0.82)% (1.23)%(b) (1.99)%(b) (1.99)%(b) (0.99)%(b)
Portfolio turnover (c).. 99.86% 99.86% 99.86% 46.17% 46.17% 46.17% 46.17%
</TABLE>
- - -------
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
115
<PAGE> 117
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Small Capitalization Fund
--------------------------------------------------------------------------------------------------
Year Ended June 30, 1997 Year Ended June 30, 1996
------------------------------------------------- ------------------------------------------------
Investor A Investor B Investor C Institutional Investor A Investor B Investor C Institutional
---------- ---------- ---------- ------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period... $ 34.17 $ 33.78 $ 33.83 $ 34.50 $ 25.88 $ 25.79 $25.91 $ 26.08
-------- ------- ------- -------- -------- ------- ------ --------
Investment Activities
Net investment income
(loss)............... (0.29) (0.41) (0.34) (0.22) (0.23) (0.39) (0.20) (0.27)
Net realized and
unrealized gains
(losses) from
investments.......... (1.08) (1.13) (1.19) (1.12) 12.17 12.03 11.77 12.34
-------- ------- ------- -------- -------- ------- ------ --------
Total from Investment
Activities........... (1.37) (1.54) (1.53) (1.34) 11.94 11.64 11.57 12.07
-------- ------- ------- -------- -------- ------- ------ --------
Distributions
Net realized gains.... (5.25) (5.25) (5.25) (5.25) (3.65) (3.65) (3.65) (3.65)
-------- ------- ------- -------- -------- ------- ------ --------
Total Distributions... (5.25) (5.25) (5.25) (5.25) (3.65) (3.65) (3.65) (3.65)
-------- ------- ------- -------- -------- ------- ------ --------
Net Asset Value, End of
Period................ $ 27.55 $ 26.99 $ 27.05 $ 27.91 $ 34.17 $ 33.78 $33.83 $ 34.50
======== ======= ======= ======== ======== ======= ====== ========
Total Return (excludes
sales and redemption
charges).............. (4.53)% (5.13)% (5.08)% (4.39)% 49.93% 48.87% 48.32% 50.03%
Ratios/Supplementary
Data:
Net Assets at end of
period (000).......... $188,645 $46,895 $14,962 $602,787 $187,016 $30,310 $5,751 $528,866
Ratio of expenses to
average net assets.... 1.57% 2.32% 2.32% 1.32% 1.54% 2.29% 2.29% 1.29%
Ratio of net investment
income (loss) to
average net assets.... (1.19)% (1.94)% (1.94)% (0.94)% (1.18)% (1.93)% (1.94)% (0.93)%
Portfolio turnover (a). 48.45% 48.45% 48.45% 48.45% 67.22% 67.22% 67.22% 67.22%
</TABLE>
- - -------
(a) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
116
<PAGE> 118
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Small Capitalization Fund
----------------------------------------------------------------------------------------------
Year Ended June 30, 1995 Year Ended June 30, 1994
---------------------------------------------------- -----------------------------------------
Investor A Investor B Investor C (a) Institutional Investor A Investor B (b) Institutional
---------- ---------- -------------- ------------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 19.75 $19.83 $24.17 $ 19.83 $ 20.31 $22.71 $ 20.31
------- ------ ------ -------- ------- ------ --------
Investment Activities
Net investment income
(loss)................ (0.18) (0.19) (0.05) (0.25) (0.15) (0.09) (0.28)
Net realized and
unrealized gains
(losses) from
investments........... 8.46 8.30 3.94 8.65 0.09 (2.79) 0.30
------- ------ ------ -------- ------- ------ --------
Total from Investment
Activities............ 8.28 8.11 3.89 8.40 (0.06) (2.88) 0.02
------- ------ ------ -------- ------- ------ --------
Distributions
Net realized gains..... (2.15) (2.15) (2.15) (2.15) (0.50) -- (0.50)
------- ------ ------ -------- ------- ------ --------
Total Distributions.... (2.15) (2.15) (2.15) (2.15) (0.50) -- (0.50)
------- ------ ------ -------- ------- ------ --------
Net Asset Value, End of
Period................. $ 25.88 $25.79 $25.91 $ 26.08 $ 19.75 $19.83 $ 19.83
======= ====== ====== ======== ======= ====== ========
Total Return (excludes
sales and redemption
charges)............... 44.88% 43.78% 44.37%(e) 45.32% (0.55)% (12.68)%(c) (0.15)%
Ratios/Supplementary
Data:
Net Assets at end of
period (000)........... $71,894 $9,990 $ 224 $354,825 $42,791 $2,130 $271,425
Ratio of expenses to
average net assets..... 1.55% 2.32% 3.53%(d) 1.33% 1.40% 2.35%(d) 1.30%
Ratio of net investment
income (loss) to
average net assets..... (1.27)% (2.03)% (3.06)%(d) 1.06% (1.24)% (2.19)%(d) (1.14)%
Ratio of expenses to
average net assets*.... 1.58% 2.55% 3.53%(d) 1.33% 1.55% 2.61%(d) 1.30%
Portfolio turnover (f).. 50.53% 50.53% 50.53% 50.53% 72.64% 72.64% 72.64%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from November 16, 1994 (commencement of offering of Investor C
shares) to June 30, 1995.
(b) Period from February 4, 1994 (commencement of offering of Investor B
shares) to June 30, 1994.
(c) Not annualized.
(d) Annualized.
(e) Represents total return for the Institutional shares for the period from
July 1, 1994 to November 15, 1994 plus the total return for the Investor C
shares for the period from November 16, 1994 to June 30, 1995.
(f) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
117
<PAGE> 119
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Mid Capitalization Fund
-----------------------------------------------------------------------------------------------
Year Ended May 31, 1999 Eleven Months Ended May 31, 1998
------------------------------------- ---------------------------------------------------------
Investor A Investor B Institutional Investor A Investor B Investor C Institutional
---------- ---------- ------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period..... $ 14.98 $ 14.20 $ 15.12 $ 15.72 $ 15.12 $15.24 $ 15.82
------- ------- -------- ------- ------- ------ --------
Investment Activities
Net investment income
(loss)................. (0.19) (0.28) (0.14) (0.14) (0.23) (0.23) (0.11)
Net realized and
unrealized gains
(losses) from
investments............ 1.15 1.06 1.13 2.51 2.42 2.46 2.52
------- ------- -------- ------- ------- ------ --------
Total from Investment
Activities............. 0.96 0.78 0.99 2.37 2.19 2.23 2.41
------- ------- -------- ------- ------- ------ --------
Distributions
Net realized gains...... (1.84) (1.84) (1.84) (3.11) (3.11) (3.11) (3.11)
------- ------- -------- ------- ------- ------ --------
Total Distributions..... (1.84) (1.84) (1.84) (3.11) (3.11) (3.11) (3.11)
------- ------- -------- ------- ------- ------ --------
Net Asset Value, End of
Period.................. $ 14.10 $ 13.14 $ 14.27 $ 14.98 $ 14.20 $14.36 $ 15.12
======= ======= ======== ======= ======= ====== ========
Total Return (excludes
sales and redemption
charges)................ 8.08% 7.19% 8.20% 16.84%(a) 16.27%(a) 16.44%(a) 16.98%(a)
Ratios/Supplementary Da-
ta:
Net Assets at end of
period (000)............ $50,605 $16,629 $319,733 $90,183 $23,780 $2,228 $518,080
Ratio of expenses to
average net assets...... 1.57% 2.32% 1.32% 1.55%(b) 2.30%(b) 2.30%(b) 1.30%(b)
Ratio of net investment
income (loss) to average
net assets.............. (1.00)% (1.75)% (0.75)% (1.02)%(b) (1.77)%(b) (1.77)%(b) (0.77)%(b)
Portfolio turnover (c)... 100.19% 100.19% 100.19% 38.41% 38.41% 38.41% 38.41%
</TABLE>
- - -------
(a)Not annualized.
(b)Annualized.
(c)Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between classes of shares issued.
See notes to financial statements.
118
<PAGE> 120
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Mid Capitalization Fund
-------------------------------------------------------------------------------------------------
Year Ended June 30, 1997 Year Ended June 30, 1996
------------------------------------------------ ------------------------------------------------
Investor A Investor B Investor C Institutional Investor A Investor B Investor C Institutional
---------- ---------- ---------- ------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period... $ 20.71 $ 20.28 $20.36 $ 20.83 $ 16.56 $ 16.35 $16.40 $ 16.62
------- ------- ------ -------- ------- ------- ------ --------
Investment Activities
Net investment income
(loss)............... (0.16) (0.24) (0.21) (0.13) (0.16) (0.23) (0.17) (0.16)
Net realized and
unrealized gains
(losses) from
investments.......... 1.30 1.21 1.22 1.25 4.97 4.82 4.79 5.03
------- ------- ------ -------- ------- ------- ------ --------
Total from Investment
Activities........... 1.14 0.97 1.01 1.12 4.81 4.59 4.62 4.87
------- ------- ------ -------- ------- ------- ------ --------
Distributions
Net realized gains.... (6.13) (6.13) (6.13) (6.13) (0.66) (0.66) (0.66) (0.66)
------- ------- ------ -------- ------- ------- ------ --------
Total Distributions... (6.13) (6.13) (6.13) (6.13) (0.66) (0.66) (0.66) (0.66)
------- ------- ------ -------- ------- ------- ------ --------
Net Asset Value, End of
Period................ $ 15.72 $ 15.12 $15.24 $ 15.82 $ 20.71 $ 20.28 $20.36 $ 20.83
======= ======= ====== ======== ======= ======= ====== ========
Total Return (excludes
sales and redemption
charges).............. 5.78% 4.94% 5.17% 5.58% 29.57% 28.59% 28.69% 29.83%
Ratios/Supplementary
Data:
Net Assets at end of
period (000).......... $80,634 $21,994 $2,018 $544,082 $66,260 $15,840 $1,088 $650,495
Ratio of expenses to
average net assets.... 1.56% 2.31% 2.31% 1.31% 1.54% 2.29% 2.29% 1.29%
Ratio of net investment
income (loss) to
average net assets.... (1.05)% (1.80)% (1.80)% (0.80)% (0.94)% (1.70)% (1.73)% (0.68)%
Portfolio turnover (a). 38.47% 38.47% 38.47% 38.47% 49.27% 49.27% 49.27% 49.27%
</TABLE>
- - -------
(a) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
119
<PAGE> 121
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Mid Capitalization Fund
----------------------------------------------------------------------------------------------
Year Ended June 30, 1995 Year Ended June 30, 1994
---------------------------------------------------- -----------------------------------------
Investor A Investor B Investor C (a) Institutional Investor A Investor B (b) Institutional
---------- ---------- -------------- ------------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 14.69 $14.63 $16.29 $ 14.70 $ 15.11 $16.66 $ 15.10
------- ------ ------ -------- ------- ------ --------
Investment Activities
Net investment income
(loss)................ (0.12) (0.11) (0.02) (0.08) (0.10) (0.05) (0.11)
Net realized and
unrealized gains
(losses) from
investments........... 3.46 3.30 1.60 3.47 (0.28) (1.98) (0.25)
------- ------ ------ -------- ------- ------ --------
Total from Investment
Activities............ 3.34 3.19 1.58 3.39 (0.38) (2.03) (0.36)
------- ------ ------ -------- ------- ------ --------
Distributions
Net realized gains..... (0.48) (0.48) -- (0.49) (0.04) -- (0.04)
In excess of net
realized gains........ (0.99) (0.99) (1.47) (0.98) -- -- --
------- ------ ------ -------- ------- ------ --------
Total Distributions.... (1.47) (1.47) (1.47) (1.47) (0.04) -- (0.04)
------- ------ ------ -------- ------- ------ --------
Net Asset Value, End of
Period................. $ 16.56 $16.35 $16.40 $ 16.62 $ 14.69 $14.63 $ 14.70
======= ====== ====== ======== ======= ====== ========
Total Return (excludes
sales and redemption
charges)............... 24.85% 23.88% 23.56%(e) 25.20% (2.57)% (12.18)%(c) (2.44)%
Ratios/Supplementary
Data:
Net Assets at end of
period (000)........... $43,803 $6,073 $ 153 $683,320 $36,108 $1,616 $533,260
Ratio of expenses to
average net assets..... 1.51% 2.29% 2.27%(d) 1.29% 1.38% 2.30%(d) 1.28%
Ratio of net investment
income (loss) to
average net assets..... (0.87)% (1.61)% (1.43)%(d) (0.64)% (0.75)% (1.57)%(d) (0.65)%
Ratio of expenses to
average net assets*.... 1.54% 2.54% 2.53%(d) 1.29% 1.53% 2.56%(d) 1.28%
Ratio of net investment
income (loss) to
average net assets*.... (0.90)% (1.87)% (1.70)%(d) (0.65)% (0.90)% (1.83)%(d) (0.65)%
Portfolio turnover (f).. 46.39% 46.39% 46.39% 46.39% 70.87% 70.87% 70.87%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from November 16, 1994 (commencement of offering of Investor C
shares) to June 30, 1995.
(b) Period from February 4, 1994 (commencement of offering of Investor B
shares) to June 30, 1994.
(c) Not annualized.
(d) Annualized.
(e) Represents total return for the Institutional shares for the period from
July 1, 1994 to November 15, 1994 plus the total return for the Investor C
shares for the period from November 16, 1994 to June 30, 1995.
(f) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
120
<PAGE> 122
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Large Capitalization Fund
-----------------------------------------------------------------------------------------------
Year Ended May 31, 1999 Eleven Months Ended May 31, 1998
------------------------------------- ---------------------------------------------------------
Investor A Investor B Institutional Investor A Investor B Investor C Institutional
---------- ---------- ------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Begin-
ning of Period......... $ 16.19 $ 15.95 $ 16.27 $ 14.44 $ 14.34 $14.28 $ 14.48
------- ------- -------- ------- ------- ------ --------
Investment Activities
Net investment income
(loss)................ (0.11) (0.23) (0.06) (0.06) (0.12) (0.06) (0.03)
Net realized and
unrealized gains
(losses) from
investments........... 3.89 3.79 3.90 3.51 3.43 3.32 3.52
------- ------- -------- ------- ------- ------ --------
Total from Investment
Activities............ 3.78 3.56 3.84 3.45 3.31 3.26 3.49
------- ------- -------- ------- ------- ------ --------
Distributions
Net realized gains..... (0.30) (0.30) (0.30) (1.67) (1.67) (1.67) (1.67)
Tax return of capital.. -- -- -- (0.03) (0.03) (0.03) (0.03)
------- ------- -------- ------- ------- ------ --------
Total Distributions.... (0.30) (0.30) (0.30) (1.70) (1.70) (1.70) (1.70)
------- ------- -------- ------- ------- ------ --------
Net Asset Value, End of
Period................. $ 19.67 $ 19.21 $ 19.81 $ 16.19 $ 15.95 $15.84 $ 16.27
======= ======= ======== ======= ======= ====== ========
Total Return (excludes
sales and redemption
charges)............... 23.42% 22.38% 23.67% 25.95%(a) 25.12%(a) 24.87%(a) 26.18%(a)
Ratios/Supplementary Da-
ta:
Net Assets at end of
period (000)........... $24,513 $14,128 $409,107 $21,628 $10,169 $ 268 $358,221
Ratio of expenses to
average net assets..... 1.35% 2.11% 1.10% 1.35%(b) 2.09%(b) 2.09%(b) 1.10%(b)
Ratio of net investment
income (loss) to
average net assets..... (0.59)% (1.34)% (0.33)% (0.45)%(b) (1.21)%(b) (1.24)%(b) (0.19)%(b)
Portfolio turnover (c).. 50.51% 50.51% 50.51% 24.74% 24.74% 24.74% 24.74%
</TABLE>
- - -------
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
121
<PAGE> 123
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Large Capitalization Fund
------------------------------------------------------------------------------------------------------
Year Ended June 30, 1997 December 28, 1995 to June 30, 1996 (a)
----------------------------------------------- ------------------------------------------------------
Investor A Investor B Investor C Institutional Investor A Investor B Investor C Institutional
---------- ---------- ---------- ------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period... $ 11.23 $11.22 $11.16 $ 11.25 $10.00 $10.00 $10.00 $ 10.00
------- ------ ------ -------- ------ ------ ------ --------
Investment Activities
Net investment income
(loss)............... -- (0.05) (0.06) 0.03 0.03 0.01 -- 0.03
Net realized and
unrealized gains
(losses) from
investments.......... 3.30 3.25 3.27 3.31 1.23 1.23 1.17 1.25
------- ------ ------ -------- ------ ------ ------ --------
Total from Investment
Activities........... 3.30 3.20 3.21 3.34 1.26 1.24 1.17 1.28
------- ------ ------ -------- ------ ------ ------ --------
Distributions
Net investment income. (0.01) -- (0.01) (0.03) (0.03) (0.02) -- (0.03)
Net realized gains.... (0.08) (0.08) (0.08) (0.08) -- -- -- --
Tax return of capital. -- -- -- -- -- -- (0.01) --
------- ------ ------ -------- ------ ------ ------ --------
Total Distributions... (0.09) (0.08) (0.09) (0.11) (0.03) (0.02) (0.01) (0.03)
------- ------ ------ -------- ------ ------ ------ --------
Net Asset Value, End of
Period................ $ 14.44 $14.34 $14.28 $ 14.48 $11.23 $11.22 $11.16 $ 11.25
======= ====== ====== ======== ====== ====== ====== ========
Total Return (excludes
sales and redemption
charges).............. 29.52% 28.62% 28.82% 29.81% 8.99%(b) 8.77%(b) 8.14%(b) 12.86%(b)
Ratios/Supplementary
Data:
Net Assets at end of
period (000).......... $12,260 $4,130 $ 42 $338,388 $1,657 $ 832 $ 2 $274,150
Ratio of expenses to
average net assets.... 1.37% 2.12% 2.12% 1.12% 1.40%(c) 1.78%(c) 2.24%(c) 2.19%(c)
Ratio of net investment
income (loss) to
average net assets.... (0.14)% (0.88)% (0.91)% 0.19% 0.31%(c) (0.32)%(c) (0.45)%(c) 1.26%(c)
Ratio of expenses to
average net assets*... (d) (d) (d) (d) 2.62%(c) 4.07%(c) 4.25%(c) 2.26%(c)
Portfolio turnover (e). 48.44% 48.44% 48.44% 48.44% 0.86% 0.86% 0.86% 0.86%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) No fees were waived during this period.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
See notes to financial statements.
122
<PAGE> 124
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
International Discovery Fund
----------------------------------------------------------------------------------------------
Year Ended May 31, 1999 Eleven Months Ended May 31, 1998
------------------------------------ ---------------------------------------------------------
Investor A Investor B Institutional Investor A Investor B Investor C Institutional
---------- ---------- ------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period..... $ 16.51 $15.98 $ 16.70 $ 16.25 $ 15.85 $16.21 $ 16.41
------- ------ -------- ------- ------- ------ --------
Investment Activities
Net investment income
(loss)................. (0.15) (0.27) (0.10) (0.09) (0.19) (0.17) (0.04)
Net realized and
unrealized gains
(losses) from
investments and foreign
currencies............. (0.68) (0.64) (0.70) 0.86 0.83 0.83 0.84
------- ------ -------- ------- ------- ------ --------
Total from Investment
Activities............. (0.83) (0.91) (0.80) 0.77 0.64 0.66 0.80
------- ------ -------- ------- ------- ------ --------
Distributions
Net realized gains...... (0.87) (0.87) (0.87) (0.51) (0.51) (0.51) (0.51)
------- ------ -------- ------- ------- ------ --------
Total Distributions..... (0.87) (0.87) (0.87) (0.51) (0.51) (0.51) (0.51)
------- ------ -------- ------- ------- ------ --------
Net Asset Value, End of
Period.................. $ 14.81 $14.20 $ 15.03 $ 16.51 $ 15.98 $16.36 $ 16.70
======= ====== ======== ======= ======= ====== ========
Total Return (excludes
sales and redemption
charges)................ (5.20)% (5.89)% (4.94)% 5.17%(a) 4.47%(a) 4.49%(a) 5.31%(a)
Ratios/Supplementary
Data:
Net Assets at end of
period (000)............ $24,914 $7,604 $267,764 $43,268 $12,840 $1,026 $427,922
Ratio of expenses to
average net assets...... 1.82% 2.57% 1.57% 1.82%(b) 2.56%(b) 2.56%(b) 1.56%(b)
Ratio of net investment
income (loss) to average
net assets.............. (0.45)% (1.21)% (0.20)% (0.75)%(b) (1.49)%(b) (1.48)%(b) (0.47)%(b)
Portfolio turnover (c)... 84.66% 84.66% 84.66% 34.15% 34.15% 34.15% 34.15%
</TABLE>
- - -------
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
123
<PAGE> 125
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
International Discovery Fund
------------------------------------------------------------------------------------------------
Year Ended June 30, 1997 Year Ended June 30, 1996
------------------------------------------------ -----------------------------------------------
Investor A Investor B Investor C Institutional Investor A Investor B Investor C Institutional
---------- ---------- ---------- ------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period... $ 14.01 $ 13.77 $14.08 $ 14.11 $ 12.23 $12.15 $12.42 $ 12.33
------- ------- ------ -------- ------- ------ ------ --------
Investment Activities
Net investment income
(loss)............... (0.07) (0.16) (0.15) (0.05) (0.02) (0.08) (0.10) 0.02
Net realized and
unrealized gains
(losses) from
investments and
foreign currencies... 2.31 2.24 2.28 2.35 1.81 1.70 1.79 1.80
------- ------- ------ -------- ------- ------ ------ --------
Total from Investment
Activities........... 2.24 2.08 2.13 2.30 1.79 1.62 1.69 1.82
------- ------- ------ -------- ------- ------ ------ --------
Distributions
Net investment income. -- -- -- -- -- -- -- (0.02)
Net realized gains.... -- -- -- -- (0.01) -- (0.03) (0.02)
------- ------- ------ -------- ------- ------ ------ --------
Total Distributions... -- -- -- -- (0.01) -- (0.03) (0.04)
------- ------- ------ -------- ------- ------ ------ --------
Net Asset Value, End of
Period................ $ 16.25 $ 15.85 $16.21 $ 16.41 $ 14.01 $13.77 $14.08 $ 14.11
======= ======= ====== ======== ======= ====== ====== ========
Total Return (excludes
sales and
redemption charges)... 15.99% 15.11% 15.13% 16.34% 14.65% 13.33% 13.62% 14.76%
Ratios/Supplementary
Data:
Net Assets at end of
period (000).......... $48,557 $13,516 $ 875 $426,111 $39,575 $9,489 $ 474 $364,095
Ratio of expenses to
average net assets.... 1.80% 2.55% 2.56% 1.55% 1.80% 2.55% 2.50% 1.55%
Ratio of net investment
income (loss) to
average net assets.... (0.54)% (1.29)% (1.28)% (0.29)% (0.11)% (0.86)% (0.84)% 0.12%
Ratio of expenses to
average net assets*... (a) (a) (a) (a) 1.88% 2.63% 2.62% 1.55%
Portfolio turnover (b). 45.18% 45.18% 45.18% 45.18% 54.47% 54.47% 54.47% 54.47%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) No fees were waived during this period.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
124
<PAGE> 126
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
International Discovery Fund
----------------------------------------------------------------------------------------------
Year Ended June 30, 1995 Year Ended June 30, 1994
---------------------------------------------------- -----------------------------------------
Investor A Investor B Investor C (a) Institutional Investor A Investor B (b) Institutional
---------- ---------- -------------- ------------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 13.18 $13.21 $12.97 $ 13.24 $ 11.50 $14.12 $ 11.54
------- ------ ------ -------- ------- ------ --------
Investment Activities
Net investment income
(loss)................ 0.03 (0.04) 0.03 0.04 (0.02) (0.01) (0.01)
Net realized and
unrealized gains
(losses) from
investments and
foreign currencies.... (0.36) (0.40) 0.04 (0.33) 1.74 (0.90) 1.75
------- ------ ------ -------- ------- ------ --------
Total from Investment
Activities............ (0.33) (0.44) 0.07 (0.29) 1.72 (0.91) 1.74
------- ------ ------ -------- ------- ------ --------
Distributions
Net investment income.. -- -- -- -- (0.02) -- (0.02)
Net realized gains..... (0.62) (0.62) (0.62) (0.62) (0.02) -- (0.02)
------- ------ ------ -------- ------- ------ --------
Total Distributions.... (0.62) (0.62) (0.62) (0.62) (0.04) 0.00 (0.04)
------- ------ ------ -------- ------- ------ --------
Net Asset Value, End of
Period................. $ 12.23 $12.15 $12.42 $ 12.33 $ 13.18 $13.21 $ 13.24
======= ====== ====== ======== ======= ====== ========
Total Return (excludes
sales and redemption
charges)............... (2.19)% (3.03)% (1.15)%(e) (1.86)% 14.99% (6.44)%(c) 15.12%
Ratios/Supplementary
Data:
Net Assets at end of
period (000)........... $34,228 $5,469 $ 82 $264,759 $36,297 $2,680 $261,798
Ratio of expenses to
average net assets..... 1.78% 2.57% 2.32%(d) 1.56% 1.63% 2.56%(d) 1.52%
Ratio of net investment
income (loss) to
average net assets..... 0.08% (0.49)% 1.74%(d) 0.31% (0.29)% (0.22)%(d) (0.30)%
Ratio of expenses to
average net assets*.... 1.91% 2.92% 3.27%(d) 1.59% 1.84% 2.61%(d) 1.57%
Portfolio turnover (f).. 104.39% 104.39% 104.39% 104.39% 37.23% 37.23% 37.23%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from November 16, 1994 (commencement of offering of Investor C
shares) to June 30, 1995.
(b) Period from February 4, 1994 (commencement of offering of Investor B
shares) to June 30, 1994.
(c) Not annualized.
(d) Annualized.
(e) Represents total return for the Institutional shares for the period from
July 1, 1994 to November 15, 1994 plus the total return for the Investor C
shares for the period from November 16, 1994 to June 30, 1995.
(f) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
125
<PAGE> 127
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Limited Maturity Bond Fund
-----------------------------------------------------------------------------------------
Year Ended May 31, 1999 Eleven Months Ended May 31, 1998
----------------------------------- -----------------------------------------------------
Investor A Investor B Institutional Investor A Investor B Investor C Institutional
---------- ---------- ------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 9.50 $ 9.50 $ 9.50 $ 9.49 $ 9.49 $ 9.29 $ 9.49
------- ------ -------- ------- ------ ------ --------
Investment Activities
Net investment income
(loss)................ 0.53 0.46 0.56 0.47 0.40 0.42 0.50
Net realized and
unrealized gains
(losses) from
investments........... (0.08) (0.08) (0.08) 0.01 0.02 (0.01) 0.01
------- ------ -------- ------- ------ ------ --------
Total from Investment
Activities............ 0.45 0.38 0.48 0.48 0.42 0.41 0.51
------- ------ -------- ------- ------ ------ --------
Distributions
Net investment income.. (0.53) (0.46) (0.56) (0.47) (0.41) (0.42) (0.50)
------- ------ -------- ------- ------ ------ --------
Total Distributions.... (0.53) (0.46) (0.56) (0.47) (0.41) (0.42) (0.50)
------- ------ -------- ------- ------ ------ --------
Net Asset Value, End of
Period................. $ 9.42 $ 9.42 $ 9.42 $ 9.50 $ 9.50 $ 9.28 $ 9.50
======= ====== ======== ======= ====== ====== ========
Total Return (excludes
sales and redemption
charges)............... 4.84% 4.03% 5.12% 5.23%(a) 4.50%(a) 4.48%(a) 5.46%(a)
Ratios/Supplementary
Data:
Net Assets at end of
period (000)........... $24,246 $ 826 $123,137 $41,571 $1,553 $2,199 $150,510
Ratio of expenses to
average net assets..... 1.08% 1.83% 0.84% 1.07%(b) 1.82%(b) 1.80%(b) 0.82%(b)
Ratio of net investment
income (loss) to
average net assets..... 5.55% 4.81% 5.83% 5.37%(b) 4.63%(b) 4.60%(b) 5.63%(b)
Ratio of expenses to
average net assets*.... 1.32% 2.07% 1.07% 1.31%(b) 2.06%(b) 2.04%(b) 1.06%(b)
Portfolio turnover (c).. 126.98% 126.98% 126.98% 225.88% 225.88% 225.88% 225.88%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
126
<PAGE> 128
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Limited Maturity Bond Fund
---------------------------------------------------------------------------------------------
Year Ended June 30, 1997 Year Ended June 30, 1996
---------------------------------------------- ----------------------------------------------
Investor A Investor B Investor C Institutional Investor A Investor B Investor C Institutional
---------- ---------- ---------- ------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period... $ 9.48 $ 9.46 $ 9.29 $ 9.48 $ 9.71 $ 9.70 $ 9.53 $ 9.71
------- ------ ------ -------- ------- ------ ------ --------
Investment Activities
Net investment income
(loss)............... 0.55 0.48 0.48 0.57 0.62 0.55 0.58 0.65
Net realized and
unrealized gains
(losses) from
investments.......... 0.01 0.02 -- 0.02 (0.21) (0.22) (0.23) (0.21)
------- ------ ------ -------- ------- ------ ------ --------
Total from Investment
Activities........... 0.56 0.50 0.48 0.59 0.41 0.33 0.35 0.44
------- ------ ------ -------- ------- ------ ------ --------
Distributions
Net investment income. (0.55) (0.47) (0.48) (0.58) (0.62) (0.55) (0.58) (0.65)
Net realized gains.... -- -- -- -- (0.01) -- -- (0.01)
Tax return of capital. -- -- -- -- (0.01) (0.02) -- (0.01)
------- ------ ------ -------- ------- ------ ------ --------
Total Distributions... (0.55) (0.47) (0.48) (0.58) (0.64) (0.57) (0.59) (0.67)
------- ------ ------ -------- ------- ------ ------ --------
Net Asset Value, End of
Period................ $ 9.49 $ 9.49 $ 9.29 $ 9.49 $ 9.48 $ 9.46 $ 9.29 $ 9.48
======= ====== ====== ======== ======= ====== ====== ========
Total Return (excludes
sales and redemption
charges).............. 6.11% 5.39% 5.26% 6.42% 4.37% 3.43% 3.71% 4.65%
Ratios/Supplementary
Data:
Net Assets at end of
period (000).......... $27,381 $1,492 $ 41 $136,126 $14,390 $1,547 $ 11 $136,681
Ratio of expenses to
average net assets.... 1.11% 1.86% 1.86% 0.85% 1.09% 1.84% 1.82% 0.84%
Ratio of net investment
income (loss) to
average net assets.... 5.76% 5.02% 4.97% 6.03% 6.09% 5.35% 5.34% 6.32%
Ratio of expenses to
average net assets*... 1.35% 2.10% 2.10% 1.10% 1.33% 2.08% 2.02% 1.08%
Portfolio turnover (a). 607.84% 607.84% 607.84% 607.84% 618.60% 618.60% 618.60% 618.60%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
127
<PAGE> 129
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Limited Maturity Bond Fund
-------------------------------------------------------------------------------------------
Year Ended June 30, 1995 Year Ended June 30, 1994
-------------------------------------------------- ----------------------------------------
Investor A Investor B Investor C (a) Institutional Investor A Investor B (b) Institutional
---------- ---------- -------------- ------------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 9.57 $ 9.56 $ 9.35 $ 9.57 $ 10.18 $ 9.99 $ 10.18
------- ------ ------ -------- ------- ------ --------
Investment Activities
Net investment income
(loss)................ 0.56 0.49 0.20 0.58 0.62 0.23 0.64
Net realized and
unrealized gains
(losses) from
investments........... 0.13 0.12 0.17 0.13 (0.58) (0.44) (0.59)
------- ------ ------ -------- ------- ------ --------
Total from Investment
Activities............ 0.69 0.61 0.37 0.71 0.04 (0.21) 0.05
------- ------ ------ -------- ------- ------ --------
Distributions
Net investment income.. (0.55) (0.47) (0.19) (0.57) (0.61) (0.22) (0.62)
In excess of net
realized gains........ -- -- -- -- (0.04) -- (0.04)
------- ------ ------ -------- ------- ------ --------
Total Distributions.... (0.55) (0.47) (0.19) (0.57) (0.65) (0.22) (0.66)
------- ------ ------ -------- ------- ------ --------
Net Asset Value, End of
Period................. $ 9.71 $ 9.70 $ 9.53 $ 9.71 $ 9.57 $ 9.56 $ 9.57
======= ====== ====== ======== ======= ====== ========
Total Return (excludes
sales and redemption
charges)............... 7.53% 6.68% 3.58%(e) 7.76% 0.32% (2.09)%(c) 0.43%
Ratios/Supplementary
Data:
Net Assets at end of
period (000)........... $18,930 $ 892 -- $141,781 $24,907 $ 629 $156,678
Ratio of expenses to
average net assets..... 1.05% 1.85% 1.18%(d) 0.84% 0.86% 1.78%(d) 0.76%
Ratio of net investment
income (loss) to
average net assets..... 5.89% 5.14% 5.61%(d) 6.11% 6.22% 5.36%(d) 6.32%
Ratio of expenses to
average net assets*.... 1.36% 2.36% 1.18%(d) 1.11% 1.30% 2.33%(d) 1.05%
Portfolio turnover (f).. 397.97% 397.97% 397.97% 397.97% 353.28% 353.28% 353.28%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from November 16, 1994 (commencement of offering of Investor C
shares) to June 30, 1995.
(b) Period from February 4, 1994 (commencement of offering of Investor B
shares) to June 30, 1994.
(c) Not annualized.
(d) Annualized.
(e) Represents total return for the Institutional shares for the period from
July 1, 1994 to November 15, 1994 plus the total return for the Investor C
shares for the period from November 16, 1994 to June 30, 1995.
(f) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
128
<PAGE> 130
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Intermediate Government Obligations Fund
-----------------------------------------------------------------------------------------
Year Ended May 31, 1999 Eleven Months Ended May 31, 1998
----------------------------------- -----------------------------------------------------
Investor A Investor B Institutional Investor A Investor B Investor C Institutional
---------- ---------- ------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 9.88 $ 9.85 $ 9.88 $ 9.73 $ 9.71 $ 9.54 $ 9.73
------- ------ -------- ------- ------ ------ --------
Investment Activities
Net investment income
(loss)................ 0.48 0.40 0.50 0.49 0.43 0.40 0.52
Net realized and
unrealized gains
(losses) from
investments........... (0.11) (0.11) (0.12) 0.16 0.15 0.18 0.16
------- ------ -------- ------- ------ ------ --------
Total from Investment
Activities............ 0.37 0.29 0.38 0.65 0.58 0.58 0.68
------- ------ -------- ------- ------ ------ --------
Distributions
Net investment income.. (0.48) (0.40) (0.50) (0.49) (0.43) (0.43) (0.52)
Tax return of capital.. -- -- -- (0.01) (0.01) (0.01) (0.01)
------- ------ -------- ------- ------ ------ --------
Total Distributions.... (0.48) (0.40) (0.50) (0.50) (0.44) (0.44) (0.53)
------- ------ -------- ------- ------ ------ --------
Net Asset Value, End of
Period................. $ 9.77 $ 9.74 $ 9.76 $ 9.88 $ 9.85 $ 9.68 $ 9.88
======= ====== ======== ======= ====== ====== ========
Total Return (excludes
sales and redemption
charges)............... 3.83% 2.96% 4.01% 6.78%(a) 6.07%(a) 6.19%(a) 7.03%(a)
Ratios/Supplementary
Data:
Net Assets at end of
period (000)........... $10,244 $1,255 $133,678 $14,461 $1,852 $ 235 $171,481
Ratio of expenses to
average net assets..... 1.24% 1.99% 0.99% 1.22%(b) 1.97%(b) 1.96%(b) 0.97%(b)
Ratio of net investment
income (loss) to
average net assets..... 4.81% 4.05% 5.06% 5.42%(b) 4.67%(b) 4.67%(b) 5.67%(b)
Ratio of expenses to
average net assets*.... 1.33% 2.08% 1.08% 1.31%(b) 2.06%(b) 2.05%(b) 1.06%(b)
Portfolio turnover(c)... 53.07% 53.07% 53.07% 774.28% 774.28% 774.28% 774.28%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
129
<PAGE> 131
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Intermediate Government Obligations Fund
---------------------------------------------------------------------------------------------
Year Ended June 30, 1997 Year Ended June 30, 1996
---------------------------------------------- ----------------------------------------------
Investor A Investor B Investor C Institutional Investor A Investor B Investor C Institutional
---------- ---------- ---------- ------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period... $ 9.70 $ 9.67 $ 9.52 $ 9.71 $ 9.93 $ 9.89 $ 9.76 $ 9.93
------- ------- ------- -------- ------- ------ ------ --------
Investment Activities
Net investment income
(loss)............... 0.52 0.45 0.45 0.55 0.60 0.53 0.53 0.62
Net realized and
unrealized gains
(losses) from
investments.......... 0.04 0.03 0.02 0.03 (0.25) (0.24) (0.25) (0.24)
------- ------- ------- -------- ------- ------ ------ --------
Total from Investment
Activities........... 0.56 0.48 0.47 0.58 0.35 0.29 0.28 0.38
------- ------- ------- -------- ------- ------ ------ --------
Distributions
Net investment income. (0.53) (0.44) (0.45) (0.56) (0.58) (0.51) (0.52) (0.60)
------- ------- ------- -------- ------- ------ ------ --------
Total Distributions... (0.53) (0.44) (0.45) (0.56) (0.58) (0.51) (0.52) (0.60)
------- ------- ------- -------- ------- ------ ------ --------
Net Asset Value, End of
Period................ $ 9.73 $ 9.71 $ 9.54 $ 9.73 $ 9.70 $ 9.67 $ 9.52 $ 9.71
======= ======= ======= ======== ======= ====== ====== ========
Total Return (excludes
sales and redemption
charges).............. 5.91% 5.09% 5.03% 6.11% 3.69% 2.93% 2.86% 3.95%
Ratios/Supplementary
Data:
Net Assets at end of
period (000).......... $18,552 $ 1,972 $ 194 $187,856 $22,954 $1,843 $ 80 $225,313
Ratio of expenses to
average net assets.... 1.23% 1.98% 1.99% 0.98% 1.21% 1.96% 1.96% 0.96%
Ratio of net investment
income (loss) to
average net assets.... 5.41% 4.67% 4.69% 5.66% 5.51% 4.78% 4.83% 5.76%
Ratio of expenses to
average net assets*... 1.32% 2.07% 2.07% 1.07% 1.30% 2.05% 2.05% 1.05%
Portfolio turnover (a). 1516.78% 1516.78% 1516.78% 1516.78% 916.39% 916.39% 916.39% 916.39%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
130
<PAGE> 132
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Intermediate Government Obligations Fund
--------------------------------------------------------------------------------------------
Year Ended June 30, 1995 Year Ended June 30, 1994
-------------------------------------------------- -----------------------------------------
Investor A Investor B Investor C (a) Institutional Investor A Investor B (b) Institutional
---------- ---------- -------------- ------------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 9.62 $ 9.60 $ 9.42 $ 9.62 $ 10.53 $10.14 $ 10.53
------- ------ ------ -------- ------- ------ --------
Investment Activities
Net investment income
(loss)................ 0.50 0.43 0.18 0.52 0.59 0.21 0.60
Net realized and
unrealized gains
(losses) from
investments........... 0.31 0.30 0.33 0.31 (0.66) (0.54) (0.66)
------- ------ ------ -------- ------- ------ --------
Total from Investment
Activities............ 0.81 0.73 0.51 0.83 (0.07) (0.33) (0.06)
------- ------ ------ -------- ------- ------ --------
Distributions
Net investment income.. (0.50) (0.44) (0.17) (0.52) (0.59) (0.21) (0.60)
In excess of net
realized gains........ -- -- -- -- (0.25) -- (0.25)
------- ------ ------ -------- ------- ------ --------
Total Distributions.... (0.50) (0.44) (0.17) (0.52) (0.84) (0.21) (0.85)
------- ------ ------ -------- ------- ------ --------
Net Asset Value, End of
Period................. $ 9.93 $ 9.89 $ 9.76 $ 9.93 $ 9.62 $ 9.60 $ 9.62
======= ====== ====== ======== ======= ====== ========
Total Return (excludes
sales and redemption
charges)............... 8.69% 7.84% 5.21%(e) 9.02% (0.90)% (3.31)%(c) (0.80)%
Ratios/Supplementary
Data:
Net Assets at end of
period (000)........... $27,521 $ 977 $ 9 $249,169 $36,106 $ 531 $281,232
Ratio of expenses to
average net assets..... 1.25% 2.06% 2.09%(d) 1.04% 1.00% 1.92%(d) 0.90%
Ratio of net investment
income (loss) to
average net assets..... 5.22% 4.41% 4.24%(d) 5.43% 5.80% 4.80%(d) 5.90%
Ratio of expenses to
average net assets*.... 1.41% 2.42% 2.36%(d) 1.16% 1.29% 2.32%(d) 1.04%
Portfolio turnover (f).. 549.13% 549.13% 549.13% 549.13% 546.06% 546.06% 546.06%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from November 16, 1994 (commencement of offering of Investor C
shares) to June 30, 1995.
(b) Period from February 4, 1994 (commencement of offering of Investor B
shares) to June 30, 1994.
(c) Not annualized.
(d) Annualized.
(e) Represents total return for the Institutional shares for the period from
July 1, 1994 to November 15, 1994 plus the total return for the Investor C
shares for the period from November 16, 1994 to June 30, 1995.
(f) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
131
<PAGE> 133
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
U.S. Government Income Fund
------------------------------------------------------------------------------------------
Year Ended May 31, 1999 Eleven Months Ended May 31, 1998
----------------------------------- ------------------------------------------------------
Investor A Investor B Institutional Investor A Investor B Investor C Institutional
---------- ---------- ------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 9.27 $ 9.24 $ 9.27 $ 9.15 $ 9.13 $ 9.10 $ 9.15
------- ------- -------- ------- ------- ------ --------
Investment Activities
Net investment income
(loss)................ 0.55 0.47 0.57 0.61 0.55 0.54 0.63
Net realized and
unrealized gains
(losses) from
investments........... (0.14) (0.13) (0.14) 0.08 0.07 0.08 0.08
------- ------- -------- ------- ------- ------ --------
Total from Investment
Activities............ 0.41 0.34 0.43 0.69 0.62 0.62 0.71
------- ------- -------- ------- ------- ------ --------
Distributions
Net investment income.. (0.55) (0.47) (0.57) (0.53) (0.47) (0.47) (0.55)
Tax return of capital.. -- -- -- (0.04) (0.04) (0.04) (0.04)
------- ------- -------- ------- ------- ------ --------
Total Distributions.... (0.55) (0.47) (0.57) (0.57) (0.51) (0.51) (0.59)
------- ------- -------- ------- ------- ------ --------
Net Asset Value, End of
Period................. $ 9.13 $ 9.11 $ 9.13 $ 9.27 $ 9.24 $ 9.21 $ 9.27
======= ======= ======== ======= ======= ====== ========
Total Return (excludes
sales and redemption
charges)............... 4.46% 3.76% 4.73% 7.80%(a) 6.98%(a) 7.03%(a) 8.04%(a)
Ratios/Supplementary
Data:
Net Assets at end of
period (000)........... $38,190 $16,373 $150,113 $54,710 $23,739 $ 363 $161,567
Ratio of expenses to
average net assets..... 1.00% 1.75% 0.75% 1.00%(b) 1.75%(b) 1.74%(b) 0.75%(b)
Ratio of net investment
income (loss) to
average net assets..... 5.92% 5.15% 6.15% 7.20%(b) 6.45%(b) 6.34%(b) 7.44%(b)
Ratio of expenses to
average net assets*.... 1.34% 2.09% 1.09% 1.34%(b) 2.09%(b) 2.08%(b) 1.09%(b)
Portfolio turnover (c).. 52.60% 52.60% 52.60% 278.94% 278.94% 278.94% 278.94%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
132
<PAGE> 134
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
U.S. Government Income Fund
---------------------------------------------------------------------------------------------
Year Ended June 30, 1997 Year Ended June 30, 1996
---------------------------------------------- ----------------------------------------------
Investor A Investor B Investor C Institutional Investor A Investor B Investor C Institutional
---------- ---------- ---------- ------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period... $ 9.25 $ 9.21 $ 9.19 $ 9.25 $ 9.42 $ 9.39 $ 9.36 $ 9.42
------- ------- ------ -------- ------- ------- ------ --------
Investment Activities
Net investment income
(loss)............... 0.70 0.63 0.64 0.72 0.73 0.66 0.66 0.75
Net realized and
unrealized gains
(losses) from
investments.......... (0.10) (0.09) (0.11) (0.10) (0.17) (0.18) (0.17) (0.17)
------- ------- ------ -------- ------- ------- ------ --------
Total from Investment
Activities........... 0.60 0.54 0.53 0.62 0.56 0.48 0.49 0.58
------- ------- ------ -------- ------- ------- ------ --------
Distributions
Net investment income. (0.59) (0.52) (0.50) (0.61) (0.65) (0.59) (0.66) (0.67)
Tax return of capital. (0.11) (0.10) (0.12) (0.11) (0.08) (0.07) -- (0.08)
------- ------- ------ -------- ------- ------- ------ --------
Total Distributions... (0.70) (0.62) (0.62) (0.72) (0.73) (0.66) (0.66) (0.75)
------- ------- ------ -------- ------- ------- ------ --------
Net Asset Value, End of
Period................ $ 9.15 $ 9.13 $ 9.10 $ 9.15 $ 9.25 $ 9.21 $ 9.19 $ 9.25
======= ======= ====== ======== ======= ======= ====== ========
Total Return (excludes
sales and redemption
charges).............. 6.86% 6.06% 6.07% 6.91% 5.97% 5.22% 5.25% 6.34%
Ratios/Supplementary
Data:
Net Assets at end of
period (000).......... $58,589 $23,448 $ 69 $148,854 $52,250 $19,556 $ 70 $130,615
Ratio of expenses to
average net assets.... 1.02% 1.77% 1.77% 0.77% 1.01% 1.76% 1.76% 0.76%
Ratio of net investment
income (loss) to
average net assets.... 7.64% 6.89% 6.89% 7.90% 7.70% 6.92% 6.92% 7.94%
Ratio of expenses to
average net assets*... 1.36% 2.11% 2.11% 1.11% 1.35% 2.10% 2.10% 1.10%
Portfolio turnover (a). 499.53% 499.53% 499.53% 499.53% 348.01% 348.01% 348.01% 348.01%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
133
<PAGE> 135
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
U.S. Government Income Fund
-------------------------------------------------------------------------------------------
Year Ended June 30, 1995 Year Ended June 30, 1994
-------------------------------------------------- ----------------------------------------
Investor A Investor B Investor C (a) Institutional Investor A Investor B (b) Institutional
---------- ---------- -------------- ------------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Begin-
ning of Period......... $ 9.41 $ 9.38 $ 9.12 $ 9.41 $ 10.04 $ 9.88 $ 10.04
------- ------ ------ -------- ------- ------ --------
Investment Activities
Net investment income
(loss)................ 0.75 0.68 0.28 0.76 0.74 0.28 0.74
Net realized and
unrealized gains
(losses) from
investments........... -- 0.01 0.24 0.01 (0.64) (0.50) (0.63)
------- ------ ------ -------- ------- ------ --------
Total from Investment
Activities............ 0.75 0.69 0.52 0.77 0.10 (0.22) 0.11
------- ------ ------ -------- ------- ------ --------
Distributions
Net investment income.. (0.66) (0.61) (0.25) (0.68) (0.72) (0.27) (0.73)
Tax return of capital.. (0.08) (0.07) (0.03) (0.08) (0.01) (0.01) (0.01)
------- ------ ------ -------- ------- ------ --------
Total Distributions.... (0.74) (0.68) (0.28) (0.76) (0.73) (0.28) (0.74)
------- ------ ------ -------- ------- ------ --------
Net Asset Value, End of
Period................. $ 9.42 $ 9.39 $ 9.36 $ 9.42 $ 9.41 $ 9.38 $ 9.41
======= ====== ====== ======== ======= ====== ========
Total Return (excludes
sales and redemption
charges)............... 8.46% 7.71% 5.26%(e) 8.70% 0.94% (2.26)%(c) 1.04%
Ratios/Supplementary Da-
ta:
Net Assets at end of pe-
riod (000)............. $50,931 $8,478 $ 29 $110,190 $54,027 $2,787 $101,506
Ratio of expenses to av-
erage net assets....... 1.04% 1.83% 2.88%(d) 0.83% 0.82% 1.77%(d) 0.72%
Ratio of net investment
income (loss) to
average net assets..... 8.03% 7.28% 11.54%(d) 8.25% 7.42% 6.72%(d) 7.51%
Ratio of expenses to av-
erage net assets*...... 1.44% 2.44% 2.88%(d) 1.19% 1.36% 2.42%(d) 1.11%
Portfolio turnover (f).. 114.71% 114.71% 114.71% 114.71% 102.24% 102.24% 102.24%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from November 16, 1994 (commencement of offering of Investor C
shares) to June 30, 1995.
(b) Period from February 4, 1994 (commencement of offering of Investor B
shares) to June 30, 1994.
(c) Not annualized.
(d) Annualized.
(e) Represents total return for the Institutional shares for the period from
July 1, 1994 to November 15, 1994 plus the total return for the Investor C
shares for the period from November 16, 1994 to June 30, 1995.
(f) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
134
<PAGE> 136
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Bond Fund
------------------------------------------------------------------------------------------
Year Ended May 31, 1999 Eleven Months Ended May 31, 1998
----------------------------------- ------------------------------------------------------
Investor A Investor B Institutional Investor A Investor B Investor C Institutional
---------- ---------- ------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 9.99 $10.00 $ 10.04 $ 9.68 $ 9.69 $ 9.65 $ 9.73
------- ------ -------- ------- ------ ------- --------
Investment Activities
Net investment income
(loss)................ 0.52 0.46 0.56 0.52 0.46 0.47 0.56
Net realized and
unrealized gains
(losses) from
investments........... (0.28) (0.29) (0.29) 0.32 0.32 0.31 0.31
------- ------ -------- ------- ------ ------- --------
Total from Investment
Activities............ 0.24 0.17 0.27 0.84 0.78 0.78 0.87
------- ------ -------- ------- ------ ------- --------
Distributions
Net investment income.. (0.53) (0.46) (0.56) (0.53) (0.47) (0.47) (0.56)
Net realized gains..... (0.02) (0.02) (0.02) -- -- -- --
------- ------ -------- ------- ------ ------- --------
Total Distributions.... (0.55) (0.48) (0.58) (0.53) (0.47) (0.47) (0.56)
------- ------ -------- ------- ------ ------- --------
Net Asset Value, End of
Period................. $ 9.68 $ 9.69 $ 9.73 $ 9.99 $10.00 $ 9.96 $ 10.04
======= ====== ======== ======= ====== ======= ========
Total Return (excludes
sales and redemption
charges)............... 2.55% 1.66% 2.70% 8.83%(a) 8.18%(a) 8.11%(a) 9.15%(a)
Ratios/Supplementary
Data:
Net Assets at end of
period (000)........... $11,916 $4,548 $366,230 $16,669 $6,423 $ 595 $481,998
Ratio of expenses to
average net assets..... 1.19% 1.94% 0.94% 1.19%(b) 1.94%(b) 1.94%(b) 0.94%(b)
Ratio of net investment
income (loss) to
average net assets..... 5.29% 4.53% 5.53% 5.81%(b) 5.07%(b) 5.06%(b) 6.06%(b)
Ratio of expenses to
average net assets*.... 1.28% 2.03% 1.03% 1.28%(b) 2.03%(b) 2.03%(b) 1.04%(b)
Portfolio turnover (c).. 268.66% 268.66% 268.66% 545.68% 545.68% 545.68% 545.68%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
135
<PAGE> 137
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Bond Fund
---------------------------------------------------------------------------------------------
Year Ended June 30, 1997 Year Ended June 30, 1996
---------------------------------------------- ----------------------------------------------
Investor A Investor B Investor C Institutional Investor A Investor B Investor C Institutional
---------- ---------- ---------- ------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period... $ 9.51 $ 9.51 $ 9.47 $ 9.56 $ 9.67 $ 9.68 $ 9.64 $ 9.72
------- ------ ------ -------- ------- ------- ------- --------
Investment Activities
Net investment income
(loss)............... 0.56 0.50 0.49 0.59 0.57 0.50 0.50 0.59
Net realized and
unrealized gains
(losses) from
investments.......... 0.17 0.16 0.17 0.17 (0.16) (0.17) (0.17) (0.16)
------- ------ ------ -------- ------- ------- ------- --------
Total from Investment
Activities........... 0.73 0.66 0.66 0.76 0.41 0.33 0.33 0.43
------- ------ ------ -------- ------- ------- ------- --------
Distributions
Net investment income. (0.56) (0.48) (0.48) (0.59) (0.57) (0.50) (0.50) (0.59)
------- ------ ------ -------- ------- ------- ------- --------
Total Distributions... (0.56) (0.48) (0.48) (0.59) (0.57) (0.50) (0.50) (0.59)
------- ------ ------ -------- ------- ------- ------- --------
Net Asset Value, End of
Period................ $ 9.68 $ 9.69 $ 9.65 $ 9.73 $ 9.51 $ 9.51 $ 9.47 $ 9.56
======= ====== ====== ======== ======= ======= ======= ========
Total Return (excludes
sales and redemption
charges).............. 7.92% 7.09% 7.15% 8.20% 4.27% 3.46% 3.50% 4.49%
Ratios/Supplementary
Data:
Net Assets at end of
period (000).......... $19,760 $5,967 $ 508 $492,102 $20,175 $ 4,426 $ 210 $549,336
Ratio of expenses to
average net assets.... 1.19% 1.94% 1.94% 0.94% 1.19% 1.94% 1.91% 0.94%
Ratio of net investment
income (loss) to
average net assets.... 5.88% 5.15% 5.18% 6.13% 5.71% 4.97% 5.00% 5.96%
Ratio of expenses to
average net assets*... 1.28% 2.03% 2.03% 1.03% 1.28% 2.03% 2.03% 1.03%
Portfolio turnover
(a).................. 827.00% 827.00% 827.00% 827.00% 1189.27% 1189.27% 1189.27% 1189.27%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
136
<PAGE> 138
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Bond Fund
---------------------------------------------------------------------------------------------
Year Ended June 30, 1995 Year Ended June 30, 1994
--------------------------------------------------- -----------------------------------------
Investor A Investor B Investor C (a) Institutional Investor A Investor B (b) Institutional
---------- ---------- -------------- ------------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period................. $ 9.30 $ 9.26 $ 9.02 $ 9.29 $ 10.54 $ 9.95 $ 10.53
------- ------- ------- -------- ------- ------ --------
Investment Activities
Net investment income
(loss)................ 0.58 0.52 0.22 0.61 0.59 0.22 0.60
Net realized and
unrealized gains
(losses) from
investments........... 0.38 0.42 0.62 0.43 (0.72) (0.70) (0.72)
------- ------- ------- -------- ------- ------ --------
Total from Investment
Activities............ 0.96 0.94 0.84 1.04 (0.13) (0.48) (0.12)
------- ------- ------- -------- ------- ------ --------
Distributions
Net investment income.. (0.58) (0.52) (0.22) (0.61) (0.57) (0.21) (0.58)
In excess of net
realized gains........ (0.01) -- -- -- (0.54) -- (0.54)
------- ------- ------- -------- ------- ------ --------
Total Distributions.... (0.59) (0.52) (0.22) (0.61) (1.11) (0.21) (1.12)
------- ------- ------- -------- ------- ------ --------
Net Asset Value, End of
Period................. $ 9.67 $ 9.68 $ 9.64 $ 9.72 $ 9.30 $ 9.26 $ 9.29
======= ======= ======= ======== ======= ====== ========
Total Return (excludes
sales and redemption
charges)............... 10.85% 10.62% 8.41%(e) 11.78% (1.62)% (4.84)%(c) (1.52)%
Ratios/Supplementary
Data:
Net Assets at end of
period (000)........... $17,572 $ 1,330 $ 28 $509,189 $18,391 $ 485 $469,903
Ratio of expenses to
average net assets..... 1.24% 2.03% 1.99%(d) 1.02% 0.98% 1.89%(d) 0.88%
Ratio of net investment
income (loss) to
average net assets..... 6.32% 5.54% 5.62%(d) 6.54% 5.86% 5.34%(d) 5.97%
Ratio of expenses to
average net assets*.... 1.39% 2.39% 2.26%(d) 1.14% 1.27% 2.29%(d) 1.02%
Portfolio turnover (f).. 1010.64% 1010.64% 1010.64% 1010.64% 893.27% 893.27% 893.27%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from November 16, 1994 (commencement of offering of Investor C
shares) to June 30, 1995.
(b) Period from February 4, 1994 (commencement of offering of Investor B
shares) to June 30, 1994.
(c) Not annualized.
(d) Annualized.
(e) Represents total return for the Institutional shares for the period from
July 1, 1994 to November 15, 1994 plus the total return for the Investor C
shares for the period from November 16, 1994 to June 30, 1995.
(f) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
137
<PAGE> 139
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Municipal Bond Fund
---------------------------------------------------------------------------
Year Ended May 31, 1999 Eleven Months Ended May 31, 1998
----------------------------------- ---------------------------------------
Investor A Investor B Institutional Investor A Investor B Institutional
---------- ---------- ------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $10.53 $10.50 $ 10.53 $10.53 $10.51 $ 10.54
------ ------ ------- ------ ------ --------
Investment Activities
Net investment income
(loss)................ 0.37 0.29 0.40 0.35 0.28 0.37
Net realized and
unrealized gains
(losses) from
investments........... (0.03) (0.02) (0.02) 0.22 0.21 0.21
------ ------ ------- ------ ------ --------
Total from Investment
Activities............ 0.34 0.27 0.38 0.57 0.49 0.58
------ ------ ------- ------ ------ --------
Distributions
Net investment income.. (0.37) (0.29) (0.40) (0.39) (0.32) (0.41)
Net realized gains..... (0.12) (0.12) (0.12) (0.18) (0.18) (0.18)
------ ------ ------- ------ ------ --------
Total Distributions.... (0.49) (0.41) (0.52) (0.57) (0.50) (0.59)
------ ------ ------- ------ ------ --------
Net Asset Value, End of
Period................. $10.38 $10.36 $ 10.39 $10.53 $10.50 $ 10.53
====== ====== ======= ====== ====== ========
Total Return (excludes
sales and redemption
charges)............... 3.29% 2.53% 3.56% 5.46%(a) 4.75%(a) 5.71%(a)
Ratios/Supplementary
Data:
Net Assets at end of
period (000)........... $6,886 $ 491 $96,946 $9,502 $ 706 $123,856
Ratio of expenses to
average net assets..... 1.02% 1.77% 0.77% 1.02%(b) 1.77%(b) 0.77%(b)
Ratio of net investment
income (loss) to
average net assets..... 3.51% 2.76% 3.76% 3.64%(b) 2.89%(b) 3.89%(b)
Ratio of expenses to
average net assets*.... 1.31% 2.06% 1.06% 1.31%(b) 2.06%(b) 1.07%(b)
Portfolio turnover (c).. 6.67% 6.67% 6.67% 85.56% 85.56% 85.56%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
138
<PAGE> 140
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Municipal Bond Fund
-----------------------------------------------------------------------
Year Ended June 30, 1997 Year Ended June 30, 1996
----------------------------------- -----------------------------------
Investor A Investor B Institutional Investor A Investor B Institutional
---------- ---------- ------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $10.43 $10.39 $ 10.43 $10.39 $10.36 $ 10.39
------ ------ -------- ------ ------ --------
Investment Activities
Net investment income
(loss)................ 0.44 0.36 0.46 0.41 0.33 0.43
Net realized and
unrealized gains
(losses) from
investments........... 0.12 0.13 0.14 0.03 0.03 0.04
------ ------ -------- ------ ------ --------
Total from Investment
Activities............ 0.56 0.49 0.60 0.44 0.36 0.47
------ ------ -------- ------ ------ --------
Distributions
Net investment income.. (0.41) (0.32) (0.44) (0.40) (0.33) (0.43)
------ ------ -------- ------ ------ --------
Net realized gains..... (0.05) (0.05) (0.05) -- -- --
------ ------ -------- ------ ------ --------
Total Distributions.... (0.46) (0.37) (0.49) (0.40) (0.33) (0.43)
------ ------ -------- ------ ------ --------
Net Asset Value, End of
Period................. $10.53 $10.51 $ 10.54 $10.43 $10.39 $ 10.43
====== ====== ======== ====== ====== ========
Total Return (excludes
sales and redemption
charges)............... 5.47% 4.81% 5.89% 4.29% 3.48% 4.55%
Ratios/Supplementary
Data:
Net Assets at end of
period (000)........... $9,601 $ 993 $134,579 $7,835 $ 735 $132,527
Ratio of expenses to
average net assets..... 1.06% 1.81% 0.81% 1.05% 1.80% 0.80%
Ratio of net investment
income (loss) to
average net assets..... 4.19% 3.43% 4.41% 3.85% 3.11% 4.10%
Ratio of expenses to
average net assets*.... 1.35% 2.10% 1.10% 1.34% 2.09% 1.09%
Portfolio turnover (a).. 48.83% 48.83% 48.83% 47.46% 47.46% 47.46%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
139
<PAGE> 141
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Municipal Bond Fund
----------------------------------------------------------------------------------------------
Year Ended June 30, 1995 Year Ended June 30, 1994
----------------------------------------------------- ----------------------------------------
Investor A Investor B Investor C (a)(b) Institutional Investor A Investor B (c) Institutional
---------- ---------- ----------------- ------------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 10.29 $10.26 $ 9.88 $ 10.29 $ 10.92 $10.76 $ 10.92
------- ------ ------ -------- ------- ------ --------
Investment Activities
Net investment income
(loss)................ 0.41 0.33 (0.03) 0.46 0.40 0.13 0.41
Net realized and
unrealized gains
(losses) from
investments........... 0.27 0.27 0.65 0.27 (0.31) (0.50) (0.31)
------- ------ ------ -------- ------- ------ --------
Total from Investment
Activities............ 0.68 0.60 0.62 0.73 0.09 (0.37) 0.10
------- ------ ------ -------- ------- ------ --------
Distributions
Net investment income.. (0.41) (0.33) (0.14) (0.46) (0.39) (0.13) (0.40)
Net realized gains..... -- -- -- -- (0.21) -- (0.21)
In excess of net
realized gains........ (0.17) (0.17) (0.16) (0.17) (0.12) -- (0.12)
------- ------ ------ -------- ------- ------ --------
Total Distributions.... (0.58) (0.50) (0.30) (0.63) (0.72) (0.13) (0.73)
------- ------ ------ -------- ------- ------ --------
Net Asset Value, End of
Period................. $ 10.39 $10.36 $10.20 $ 10.39 $ 10.29 $10.26 $ 10.29
======= ====== ====== ======== ======= ====== ========
Total Return (excludes
sales and redemption
charges)............... 7.02% 6.17% 3.47%(f) 7.25% 0.71% (3.41)%(d) 0.81%
Ratios/Supplementary
Data:
Net Assets at end of
period (000)........... $11,378 $ 447 -- $134,784 $13,123 $ 359 $147,687
Ratio of expenses to
average net assets..... 1.02% 1.80% 0.71%(e) 0.80% 0.87% 1.80%(e) 0.77%
Ratio of net investment
income (loss) to
average net assets..... 4.00% 3.22% (0.54)%(e) 4.21% 3.72% 2.88%(e) 3.83%
Ratio of expenses to
average net assets*.... 1.33% 2.33% 0.71%(e) 1.08% 1.32% 2.37%(e) 1.06%
Portfolio turnover (g).. 35.15% 35.15% 35.15% 35.15% 44.39% 44.39% 44.39%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) There was only one share outstanding for the Investor C shares at June 30,
1995.
(b) Period from November 16, 1994 (commencement of offering of Investor C
shares) to June 30, 1995.
(c) Period from February 4, 1994 (commencement of offering of Investor B
shares) to June 30, 1994.
(d) Not annualized.
(e) Annualized.
(f) Represents total return for the Institutional shares for the period from
July 1, 1994 to November 15, 1994 plus the total return for the Investor C
shares for the period from November 16, 1994 to June 30, 1995.
(g) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
140
<PAGE> 142
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Michigan Municipal Bond Fund
----------------------------------------------------------------------------
Year Ended May 31, 1999 Eleven Months Ended May 31, 1998
----------------------------------- ----------------------------------------
Investor A Investor B Institutional Investor A Investor B Institutional
---------- ---------- ------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 11.06 $11.07 $ 11.06 $ 10.89 $10.90 $ 10.89
------- ------ -------- ------- ------ --------
Investment Activities
Net investment income
(loss)................ 0.44 0.36 0.47 0.42 0.34 0.44
Net realized and
unrealized gains
(losses) from
investments........... (0.08) (0.08) (0.08) 0.23 0.23 0.23
------- ------ -------- ------- ------ --------
Total from Investment
Activities............ 0.36 0.28 0.39 0.65 0.57 0.67
------- ------ -------- ------- ------ --------
Distributions
Net investment income.. (0.44) (0.36) (0.47) (0.45) (0.37) (0.47)
Net realized gains..... (0.07) (0.07) (0.07) (0.03) (0.03) (0.03)
------- ------ -------- ------- ------ --------
Total Distributions.... (0.51) (0.43) (0.54) (0.48) (0.40) (0.50)
------- ------ -------- ------- ------ --------
Net Asset Value, End of
Period................. $ 10.91 $10.92 $ 10.91 $ 11.06 $11.07 $ 11.06
======= ====== ======== ======= ====== ========
Total Return (excludes
sales and redemption
charges)............... 3.38% 2.52% 3.54% 5.96%(a) 5.32%(a) 6.30%(a)
Ratios/Supplementary
Data:
Net Assets at end of
period (000)........... $28,305 $3,217 $192,536 $38,536 $3,983 $206,246
Ratio of expenses to
average net assets..... 1.01% 1.76% 0.76% 0.99%(b) 1.74%(b) 0.74%(b)
Ratio of net investment
income (loss) to
average net assets..... 3.96% 3.21% 4.21% 4.09%(b) 3.34%(b) 4.34%(b)
Ratio of expenses to
average net assets*.... 1.29% 2.05% 1.05% 1.28%(b) 2.03%(b) 1.03%(b)
Portfolio turnover (c).. 6.52% 6.52% 6.52% 26.24% 26.24% 26.24%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
141
<PAGE> 143
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Michigan Municipal Bond Fund
-----------------------------------------------------------------------
Year Ended June 30, 1997 Year Ended June 30, 1996
----------------------------------- -----------------------------------
Investor A Investor B Institutional Investor A Investor B Institutional
---------- ---------- ------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 10.76 $10.76 $ 10.77 $ 10.75 $10.75 $ 10.76
------- ------ -------- ------- ------ --------
Investment Activities
Net investment income
(loss)................ 0.49 0.41 0.51 0.47 0.40 0.50
Net realized and
unrealized gains
(losses) from
investments........... 0.14 0.13 0.14 0.04 0.04 0.04
------- ------ -------- ------- ------ --------
Total from Investment
Activities............ 0.63 0.54 0.65 0.51 0.44 0.54
------- ------ -------- ------- ------ --------
Distributions
Net investment income.. (0.46) (0.36) (0.49) (0.47) (0.40) (0.50)
Net realized gains..... (0.04) (0.04) (0.04) (0.03) (0.03) (0.03)
------- ------ -------- ------- ------ --------
Total Distributions.... (0.50) (0.40) (0.53) (0.50) (0.43) (0.53)
------- ------ -------- ------- ------ --------
Net Asset Value, End of
Period................. $ 10.89 $10.90 $ 10.89 $ 10.76 $10.76 $ 10.77
======= ====== ======== ======= ====== ========
Total Return (excludes
sales and redemption
charges)............... 5.89% 5.05% 6.11% 4.87% 4.13% 5.12%
Ratios/Supplementary
Data:
Net Assets at end of
period (000)........... $38,302 $3,503 $194,950 $36,681 $3,565 $185,191
Ratio of expenses to
average net assets..... 1.01% 1.76% 0.76% 1.02% 1.77% 0.77%
Ratio of net investment
income (loss) to
average net assets..... 4.48% 3.73% 4.73% 4.32% 3.57% 4.57%
Ratio of expenses to
average net assets*.... 1.30% 2.05% 1.05% 1.31% 2.06% 1.06%
Portfolio turnover (a).. 28.48% 28.48% 28.48% 27.66% 27.66% 27.66%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
142
<PAGE> 144
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Michigan Municipal Bond Fund
----------------------------------------------------------------------------------------------
Year Ended June 30, 1995 Year Ended June 30, 1994
----------------------------------------------------- ----------------------------------------
Investor A Investor B Investor C (a)(b) Institutional Investor A Investor B (c) Institutional
---------- ---------- ----------------- ------------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 10.53 $10.52 $10.11 $ 10.53 $ 10.97 $11.09 $ 10.97
------- ------ ------ -------- ------- ------ --------
Investment Activities
Net investment income
(loss)................ 0.48 0.40 (0.02) 0.50 0.47 0.16 0.48
Net realized and
unrealized gains
(losses) from
investments........... 0.23 0.24 0.62 0.25 (0.36) (0.57) (0.36)
------- ------ ------ -------- ------- ------ --------
Total from Investment
Activities............ 0.71 0.64 0.60 0.75 0.11 (0.41) 0.12
------- ------ ------ -------- ------- ------ --------
Distributions
Net investment income.. (0.48) (0.40) -- (0.50) (0.45) (0.16) (0.46)
Net realized gains..... (0.01) (0.01) (0.17) (0.02) (0.01) -- (0.01)
In excess of net
realized gains........ -- -- -- -- (0.09) -- (0.09)
------- ------ ------ -------- ------- ------ --------
Total Distributions.... (0.49) (0.41) (0.17) (0.52) (0.55) (0.16) (0.56)
------- ------ ------ -------- ------- ------ --------
Net Asset Value, End of
Period................. $ 10.75 $10.75 $10.54 $ 10.76 $ 10.53 $10.52 $ 10.53
======= ====== ====== ======== ======= ====== ========
Total Return (excludes
sales and redemption
charges)............... 6.99% 6.28% 3.39%(f) 7.33% 0.92% (3.69)%(d) 1.02%
Ratios/Supplementary
Data:
Net Assets at end of
period (000)........... $37,874 $2,270 -- $176,068 $42,204 $1,302 $181,051
Ratio of expenses to
average net assets..... 1.00% 1.78% 0.48%(e) 0.78% 0.85% 1.77%(e) 0.75%
Ratio of net investment
income (loss) to
average net assets..... 4.57% 3.80% (0.32)%(e) 4.79% 4.25% 3.51%(e) 4.35%
Ratio of expenses to
average net assets*.... 1.32% 2.32% 0.48%(e) 1.07% 1.29% 2.32%(e) 1.04%
Portfolio turnover (g).. 26.06% 26.06% 26.06% 26.06% 6.69% 6.69% 6.69%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) There was only one share outstanding for the Investor C shares at June 30,
1995.
(b) Period from November 16, 1994 (commencement of offering of Investor C
shares) to June 30, 1995.
(c) Period from February 4, 1994 (commencement of offering of Investor B
shares) to June 30, 1994.
(d) Not annualized.
(e) Annualized.
(f) Represents total return for the Institutional shares for the period from
July 1, 1994 to November 15, 1994 plus the total return for the Investor C
shares for the period from November 16, 1994 to June 30, 1995.
(g) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
143
<PAGE> 145
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Conservative Allocation Fund
-----------------------------------------------------------------
Eleven Months Ended December 30, 1996 to
Year Ended May 31, 1999 May 31, 1998 June 30, 1997 (a)
------------------------ ------------------- --------------------
Institutional Institutional Institutional
------------------------ ------------------- --------------------
<S> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 11.08 $ 10.36 $ 10.00
------- ------- -------
Investment Activities
Net investment income
(loss)................ 0.38 0.35 0.14
Net realized and
unrealized gains
(losses) from
investments........... 0.14 0.79 0.34
------- ------- -------
Total from Investment
Activities............ 0.52 1.14 0.48
------- ------- -------
Distributions
Net investment income.. (0.37) (0.35) (0.12)
Net realized gains..... (0.39) (0.07) --
------- ------- -------
Total Distributions.... (0.76) (0.42) (0.12)
------- ------- -------
Net Asset Value, End of
Period................. $ 10.84 $ 11.08 $ 10.36
======= ======= =======
Total Return (excludes
sales and redemption
charges)............... 4.78% 11.18%(b) 4.87%(b)
Ratios/Supplementary
Data:
Net Assets at end of
period (000)........... $19,825 $17,031 $10,287
Ratio of expenses to
average net assets..... 1.06% 1.07%(c) 1.64%(c)
Ratio of net investment
income (loss) to
average net assets..... 3.44% 3.69%(c) 3.12%(c)
Ratio of expenses to
average net assets*.... 1.36% 1.37%(c) 1.94%(c)
Portfolio turnover...... 194.19% 99.41% 62.11%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
See notes to financial statements.
144
<PAGE> 146
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Balanced Allocation Fund
-------------------------------------------------------------------------------------------
Year Ended May 31, 1999 Eleven Months Ended May 31, 1998
----------------------------------- -------------------------------------------------------
Investor A Investor B Institutional Investor A Investor B Inverstor C Institutional
---------- ---------- ------------- ---------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 13.82 $13.81 $ 13.80 $ 13.00 $ 13.00 $ 12.92 $ 12.99
------- ------ -------- ------- ------- ------- --------
Investment Activities
Net investment income
(loss)................ 0.27 0.18 0.31 0.29 0.19 0.18 0.32
Net realized and
unrealized gains
(losses) from
investmentsand foreign
currencies............ 0.07 0.07 0.07 1.21 1.21 1.21 1.20
------- ------ -------- ------- ------- ------- --------
Total from Investment
Activities............ 0.34 0.25 0.38 1.50 1.40 1.39 1.52
------- ------ -------- ------- ------- ------- --------
Distributions
Net investment income.. (0.27) (0.17) (0.31) (0.32) (0.23) (0.23) (0.35)
Net realized gains..... (0.37) (0.37) (0.37) (0.36) (0.36) (0.36) (0.36)
------- ------ -------- ------- ------- ------- --------
Total Distributions.... (0.64) (0.54) (0.68) (0.68) (0.59) (0.59) (0.71)
------- ------ -------- ------- ------- ------- --------
Net Asset Value, End of
Period................. $ 13.52 $13.52 $ 13.50 $ 13.82 $ 13.81 $ 13.72 $ 13.80
======= ====== ======== ======= ======= ======= ========
Total Return (excludes
sales and redemption
charges)............... 2.47% 1.72% 2.73% 11.87%(a) 11.05%(a) 11.04%(a) 12.06%(a)
Ratios/Supplementary
Data:
Net Assets at end of
period (000)........... $15,760 $5,723 $177,203 $19,404 $ 7,988 $ 927 $262,533
Ratio of expenses to
average net assets..... 1.36% 2.11% 1.11% 1.36%(b) 2.11%(b) 2.11%(b) 1.12%(b)
Ratio of net investment
income (loss) to
average net assets..... 2.05% 1.30% 2.31% 2.32%(b) 1.57%(b) 1.56%(b) 2.57%(b)
Ratio of expenses to
average net assets*.... 1.61% 2.36% 1.36% 1.62%(b) 2.37%(b) 2.37%(b) 1.37%(b)
Portfolio turnover (c).. 158.56% 158.56% 158.56% 117.80% 117.80% 117.80% 117.80%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
145
<PAGE> 147
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Balanced Allocation Fund
---------------------------------------------------------------------------------------------
Year Ended June 30, 1997 Year Ended June 30, 1996
---------------------------------------------- ----------------------------------------------
Investor A Investor B Investor C Institutional Investor A Investor B Investor C Institutional
---------- ---------- ---------- ------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period... $ 13.37 $13.36 $13.28 $ 13.37 $ 12.19 $12.18 $12.12 $ 12.19
------- ------ ------ -------- ------- ------ ------ --------
Investment Activities
Net investment income
(loss)............... 0.32 0.21 0.21 0.35 0.32 0.23 0.24 0.36
Net realized and
unrealized gains
(losses) from
investments and
foreign currencies... 1.12 1.13 1.14 1.12 1.74 1.74 1.71 1.74
------- ------ ------ -------- ------- ------ ------ --------
Total from Investment
Activities........... 1.44 1.34 1.35 1.47 2.06 1.97 1.95 2.10
------- ------ ------ -------- ------- ------ ------ --------
Distributions
Net investment income. (0.33) (0.22) (0.23) (0.37) (0.31) (0.22) (0.22) (0.35)
Net realized gains.... (1.48) (1.48) (1.48) (1.48) (0.57) (0.57) (0.57) (0.57)
------- ------ ------ -------- ------- ------ ------ --------
Total Distributions... (1.81) (1.70) (1.71) (1.85) (0.88) (0.79) (0.79) (0.92)
------- ------ ------ -------- ------- ------ ------ --------
Net Asset Value, End of
Period................ $ 13.00 $13.00 $12.92 $ 12.99 $ 13.37 $13.36 $13.28 $ 13.37
======= ====== ====== ======== ======= ====== ====== ========
Total Return (excludes
sales and redemption
charges).............. 11.61% 10.82% 10.90% 11.86% 17.51% 16.71% 16.61% 17.81%
Ratios/Supplementary
Data:
Net Assets at end of
period (000).......... $18,826 $6,299 $ 795 $245,347 $17,097 $4,278 $ 362 $113,493
Ratio of expenses to
average net assets.... 1.36% 2.11% 2.11% 1.10% 1.41% 2.16% 2.16% 1.16%
Ratio of net investment
income (loss) to
average net assets.... 2.47% 1.73% 1.75% 2.77% 2.37% 1.64% 1.65% 2.62%
Ratio of expenses to
average net assets*... 1.61% 2.36% 2.36% 1.36% 1.66% 2.45% 2.41% 1.41%
Portfolio turnover (a). 425.05% 425.05% 425.05% 425.05% 437.90% 437.90% 437.90% 437.90%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
146
<PAGE> 148
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Balanced Allocation Fund
--------------------------------------------------------------------------------------------
Year Ended June 30, 1995 Year Ended June 30, 1994
-------------------------------------------------- -----------------------------------------
Investor A Investor B Investor C (a) Institutional Investor A Investor B (b) Institutional
---------- ---------- -------------- ------------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 10.67 $10.67 $11.13 $ 10.67 $ 11.09 $11.71 $ 11.08
------- ------ ------ ------- ------- ------ -------
Investment Activities
Net investment income
(loss)................ 0.28 0.20 0.09 0.31 0.26 0.10 0.27
Net realized and
unrealized gains
(losses) from
investments and
foreign currencies.... 1.69 1.67 1.16 1.68 (0.43) (1.05) (0.41)
------- ------ ------ ------- ------- ------ -------
Total from Investment
Activities............ 1.97 1.87 1.25 1.99 (0.17) (0.95) (0.14)
------- ------ ------ ------- ------- ------ -------
Distributions
Net investment income.. (0.29) (0.20) (0.10) (0.31) (0.25) (0.09) (0.27)
Net realized gains..... (0.01) (0.06) -- (0.03) -- -- --
In excess of net
realized gains........ (0.15) (0.10) (0.16) (0.13) -- -- --
------- ------ ------ ------- ------- ------ -------
Total Distributions.... (0.45) (0.36) (0.26) (0.47) (0.25) (0.09) (0.27)
------- ------ ------ ------- ------- ------ -------
Net Asset Value, End of
Period................. $ 12.19 $12.18 $12.12 $ 12.19 $ 10.67 $10.67 $ 10.67
======= ====== ====== ======= ======= ====== =======
Total Return (excludes
sales and redemption
charges)............... 18.96% 17.96% 17.53%(e) 19.22% (1.63)% (8.16)%(c) (1.44)%
Ratios/Supplementary
Data:
Net Assets at end of
period (000)........... $12,849 $1,291 $ 114 $89,294 $11,901 $ 744 $71,427
Ratio of expenses to
average net assets..... 1.47% 2.25% 2.16%(d) 1.25% 1.18% 2.05%(d) 1.09%
Ratio of net investment
income (loss) to
average net assets..... 2.54% 1.74% 1.65%(d) 2.75% 2.38% 1.94%(d) 2.49%
Ratio of expenses to
average net assets*.... 1.78% 2.77% 2.68%(d) 1.52% 1.63% 2.61%(d) 1.39%
Portfolio turnover (f).. 250.66% 250.66% 250.66% 250.66% 192.39% 192.39% 192.39%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from November 16, 1994 (commencement of offering of Investor C
shares) to June 30, 1995.
(b) Period from February 4, 1994 (commencement of offering of Investor B
shares) to June 30, 1994.
(c) Not annualized.
(d) Annualized.
(e) Represents total return for the Institutional shares for the period from
July 1, 1994 to November 15, 1994 plus the total return for the Investor C
shares for the period from November 16, 1994 to June 30, 1995.
(f) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
147
<PAGE> 149
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Aggressive Allocation Fund
------------------------------------------------------
Year Ended Eleven Months Ended December 30, 1996
May 31, 1999 May 31, 1998 to June 30, 1997 (a)
------------- ------------------- --------------------
Institutional Institutional Institutional
------------- ------------------- --------------------
<S> <C> <C> <C>
Net Asset Value, Begin-
ning of Period......... $ 11.75 $ 10.57 $ 10.00
------- ------- -------
Investment Activities
Net investment income
(loss)................ 0.16 0.12 0.07
Net realized and
unrealized gains
(losses) from
investments and
foreign
currencies ........... (0.06) 1.19 0.56
------- ------- -------
Total from Investment
Activities............ 0.10 1.31 0.63
------- ------- -------
Distributions
Net investment income.. (0.13) (0.13) (0.06)
Realized gain.......... (0.22) -- --
------- ------- -------
Total Distributions.... (0.35) (0.13) (0.06)
------- ------- -------
Net Asset Value, End of
Period................. $ 11.50 $ 11.75 $ 10.57
======= ======= =======
Total Return (excludes
sales and redemption
charges)............... 0.81% 12.45%(b) 6.38%(b)
Ratios/Supplementary
Data:
Net Assets at end of
period (000)........... $25,128 $33,816 $39,043
Ratio of expenses to
average net assets..... 1.32% 1.30%(c) 1.32%(c)
Ratio of net investment
income (loss) to
average net assets..... 1.27% 1.11%(c) 1.61%(c)
Ratio of expenses to
average net assets*.... 1.47% 1.45%(c) 1.47%(c)
Portfolio turnover...... 168.63% 76.47% 44.68%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
See notes to financial statements.
148
<PAGE> 150
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Equity Income Fund
------------------------------------------------------------------------------------------
Year Ended May 31, 1999 Eleven Months Ended May 31, 1998
----------------------------------- ------------------------------------------------------
Investor A Investor B Institutional Investor A Investor B Investor C Institutional
---------- ---------- ------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 18.78 $ 18.68 $ 18.69 $ 19.20 $ 19.14 $19.23 $ 19.13
------- ------- -------- -------- ------- ------ --------
Investment Activities
Net investment income
(loss)................ 0.22 0.09 0.27 0.25 0.11 0.11 0.29
Net realized and
unrealized gains
(losses) from
investments........... 1.76 1.75 1.75 2.72 2.71 2.72 2.70
------- ------- -------- -------- ------- ------ --------
Total from Investment
Activities............ 1.98 1.84 2.02 2.97 2.82 2.83 2.99
------- ------- -------- -------- ------- ------ --------
Distributions
Net investment income.. (0.22) (0.13) (0.27) (0.21) (0.10) (0.09) (0.25)
Net realized gains..... (2.24) (2.24) (2.24) (3.18) (3.18) (3.18) (3.18)
------- ------- -------- -------- ------- ------ --------
Total Distributions.... (2.46) (2.37) (2.51) (3.39) (3.28) (3.27) (3.43)
------- ------- -------- -------- ------- ------ --------
Net Asset Value, End of
Period................. $ 18.30 $ 18.15 $ 18.20 $ 18.78 $ 18.68 $18.79 $ 18.69
======= ======= ======== ======== ======= ====== ========
Total Return (excludes
sales and redemption
charges)............... 12.06% 11.22% 12.40% 17.08%(a) 16.28%(a) 16.22%(a) 17.31%(a)
Ratios/Supplementary
Data:
Net Assets at end of
period (000)........... $82,733 $22,456 $221,399 $104,503 $27,767 $1,094 $281,395
Ratio of expenses to
average net assets..... 1.59% 2.34% 1.34% 1.58%(b) 2.33%(b) 2.33%(b) 1.33%(b)
Ratio of net investment
income (loss) to
average net assets..... 1.23% 0.48% 1.49% 1.39%(b) 0.64%(b) 0.63%(b) 1.65%(b)
Portfolio turnover (c).. 51.09% 51.09% 51.09% 18.62% 18.62% 18.62% 18.62%
</TABLE>
- - -------
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
149
<PAGE> 151
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Equity Income Fund
---------------------------------------------------------------------------------------------
Year Ended June 30, 1997 Year Ended June 30, 1996
---------------------------------------------- ----------------------------------------------
Investor A Investor B Investor C Institutional Investor A Investor B Investor C Institutional
---------- ---------- ---------- ------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period... $ 17.31 $ 17.27 $17.36 $ 17.30 $ 14.49 $ 14.47 $14.54 $ 14.49
------- ------- ------ -------- ------- ------- ------ --------
Investment Activities
Net investment income
(loss)............... 0.29 0.16 0.15 0.34 0.30 0.19 0.19 0.34
Net realized and
unrealized gains
(losses) from
investments.......... 3.57 3.57 3.58 3.51 3.27 3.25 3.27 3.26
------- ------- ------ -------- ------- ------- ------ --------
Total from Investment
Activities........... 3.86 3.73 3.73 3.85 3.57 3.44 3.46 3.60
------- ------- ------ -------- ------- ------- ------ --------
Distributions
Net investment income. (0.28) (0.17) (0.17) (0.33) (0.30) (0.19) (0.19) (0.34)
Net realized gains.... (1.69) (1.69) (1.69) (1.69) (0.45) (0.45) (0.45) (0.45)
------- ------- ------ -------- ------- ------- ------ --------
Total Distributions... (1.97) (1.86) (1.86) (2.02) (0.75) (0.64) (0.64) (0.79)
------- ------- ------ -------- ------- ------- ------ --------
Net Asset Value, End of
Period................ $ 19.20 $ 19.14 $19.23 $ 19.13 $ 17.31 $ 17.27 $17.36 $ 17.30
======= ======= ====== ======== ======= ======= ====== ========
Total Return (excludes
sales and redemption
charges).............. 23.81% 22.96% 22.86% 23.80% 25.05% 24.11% 24.17% 25.30%
Ratios/Supplementary
Data:
Net Assets at end of
period (000).......... $99,423 $21,038 $ 778 $315,878 $82,396 $12,590 $ 164 $337,318
Ratio of expenses to
average net assets.... 1.58% 2.33% 2.33% 1.33% 1.57% 2.32% 2.32% 1.32%
Ratio of net investment
income (loss) to
average net assets.... 1.62% 0.88% 0.88% 1.89% 1.86% 1.11% 1.11% 2.11%
Portfolio turnover (a). 20.14% 20.14% 20.14% 20.14% 40.75% 40.75% 40.75% 40.75%
</TABLE>
- - -------
(a) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
150
<PAGE> 152
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Equity Income Fund
--------------------------------------------------------------------------------------------
Year Ended June 30, 1995 Year Ended June 30, 1994
-------------------------------------------------- -----------------------------------------
Investor A Investor B Investor C (a) Institutional Investor A Investor B (b) Institutional
---------- ---------- -------------- ------------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 13.50 $13.49 $13.38 $ 13.50 $ 14.69 $14.92 $ 14.69
------- ------ ------ -------- ------- ------ --------
Investment Activities
Net investment income
(loss)................ 0.36 0.26 0.11 0.39 0.37 0.13 0.39
Net realized and
unrealized gains
(losses) from
investments........... 1.00 0.99 1.17 1.00 (0.56) (1.43) (0.56)
------- ------ ------ -------- ------- ------ --------
Total from Investment
Activities............ 1.36 1.25 1.28 1.39 (0.19) (1.30) (0.17)
------- ------ ------ -------- ------- ------ --------
Distributions
Net investment income.. (0.36) (0.26) (0.11) (0.39) (0.37) (0.13) (0.39)
In excess of net
investment income..... (0.01) (0.01) (0.01) (0.01) -- -- --
Net realized gains..... -- -- -- -- (0.24) -- (0.24)
In excess of net
realized gains........ -- -- -- -- (0.39) -- (0.39)
------- ------ ------ -------- ------- ------ --------
Total Distributions.... (0.37) (0.27) (0.12) (0.40) (1.00) (0.13) (1.02)
------- ------ ------ -------- ------- ------ --------
Net Asset Value, End of
Period................. $ 14.49 $14.47 $14.54 $ 14.49 $ 13.50 $13.49 $ 13.50
======= ====== ====== ======== ======= ====== ========
Total Return (excludes
sales and redemption
charges)............... 10.32% 9.41% 9.71%(e) 10.55% (1.63)% (8.76)%(c) (1.53)%
Ratios/Supplementary
Data:
Net Assets at end of
period (000)........... $71,063 $7,131 $ 25 $346,164 $76,108 $3,836 $355,538
Ratio of expenses to
average net assets..... 1.54% 2.32% 2.30%(d) 1.32% 1.40% 2.33%(d) 1.30%
Ratio of net investment
income (loss) to
average net assets..... 2.65% 1.86% 1.88%(d) 2.86% 2.56% 1.87%(d) 2.64%
Ratio of expenses to
average net assets*.... 1.57% 2.57% 2.55%(d) 1.32% 1.55% 2.59%(d) 1.30%
Portfolio turnover (f).. 77.70% 77.70% 77.70% 77.70% 69.35% 69.35% 69.35%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from November 16, 1994 (commencement of offering of Investor C
shares) to June 30, 1995.
(b) Period from February 4, 1994 (commencement of offering of Investor B
shares) to June 30, 1994.
(c) Not annualized.
(d) Annualized.
(e) Represents total return for the Institutional shares for the period from
July 1, 1994 to November 15, 1994 plus the total return for the Investor C
shares for the period from November 16, 1994 to June 30, 1995.
(f) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
151
<PAGE> 153
Notes to Financial Statements
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
1. Organization:
The Parkstone Group of Funds (the "Group") was organized on March 27, 1987,
and is registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), as an open-end investment company established as a Massachusetts
business trust.
The Group is authorized to issue an unlimited number of shares without par
value. The Group presently offers shares of the Prime Obligations Fund, the
U.S. Government Obligations Fund, the Tax-Free Fund, the Treasury Fund
(collectively, "the money market funds"), the Small Capitalization Fund, the
Mid Capitalization Fund, the Large Capitalization Fund, the International
Discovery Fund, the Limited Maturity Bond Fund, the Intermediate Government
Obligations Fund, the U.S. Government Income Fund, the Bond Fund, the
Municipal Bond Fund, the Michigan Municipal Bond Fund, the Conservative
Allocation Fund, the Balanced Allocation Fund, the Aggressive Allocation
Fund, and the Equity Income Fund (collectively, "the variable net asset value
funds") (collectively, "the Funds" and individually, a "Fund").
<TABLE>
<CAPTION>
Fund Objective
---- ---------
<S> <C>
Prime Obligations Fund..... To seek current income with liquidity and
stability of principal.
U.S. Government Obligations
Fund....................... To seek current income with liquidity and
stability of principal.
Tax-Free Fund.............. To seek as high a level of current interest
income free from federal income taxes as is
consistent with the preservation of capital and
relative stability of principal.
Treasury Fund.............. To seek current income with liquidity and
stability of principal.
Small Capitalization Fund.. To seek growth of capital by investing primarily
in a diversified portfolio of common stock and
securities convertible into common stock of
small- to medium-sized companies.
Mid Capitalization Fund.... To seek growth of capital by investing primarily
in a diversified portfolio of common stocks and
securities convertible into common stocks.
Large Capitalization Fund.. To seek growth of capital by investing in a
diversified portfolio of common stocks and
securities convertible into common stocks of
companies with large market capitalization.
International Discovery
Fund....................... To seek long-term growth of capital.
Limited Maturity Bond Fund. To seek current income as well as preservation
of capital by investing in a portfolio of high-
and medium-grade fixed-income securities with
remaining maturities of six years or less.
Intermediate Government
Obligations Fund........... To seek current income with preservation of
capital by investing in U.S. Government
securities with remaining maturities of twelve
years or less.
U.S. Government Income
Fund....................... To provide shareholders with a high level of
current income consistent with prudent
investment risk.
Bond Fund.................. To seek current income as well as preservation
of capital by investing in a portfolio of high-
and medium-grade fixed-income securities.
Municipal Bond Fund........ To seek current interest income which is exempt
from federal income taxes and preservation of
capital.
Michigan Municipal Bond
Fund....................... To seek income which is exempt from federal
income tax and Michigan state income and
intangibles tax when received by certain
shareholders, and to seek preservation of
capital.
Conservative Allocation
Fund....................... To seek current income and conservation of
capital, with a secondary objective of long-term
capital growth.
</TABLE>
Continued
152
<PAGE> 154
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
<TABLE>
<CAPTION>
Fund Objective
---- ---------
<S> <C>
Balanced Allocation
Fund.................... To seek current income, long-term capital growth
and conservation of capital.
Aggressive Allocation
Fund.................... To seek capital appreciation and income growth.
Equity Income Fund...... To seek current income by investing in a
diversified portfolio of high quality, dividend-
paying common stocks and securities convertible
into common stocks; growth of capital is a
secondary objective.
</TABLE>
2. Significant Accounting Policies:
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements. The policies are in
conformity with generally accepted accounting principles (GAAP). The
preparation of financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of income and
expenses for the period. Actual results could differ from those estimates.
Securities Valuation:
Investments of the money market funds are valued at either amortized cost,
as permitted in accordance with Rule 2a-7 under the 1940 Act, or at
original cost, which combined with accrued interest approximates market
value. Under the amortized cost method, discount or premium is amortized on
a constant basis to the maturity of the security.
Investments in common and preferred stocks, corporate bonds, commercial
paper, municipal and foreign government bonds and U.S. Government
securities of the variable net asset value funds are valued at their market
values determined on the basis of the mean between the latest available bid
and asked prices in the principal market (closing sales prices if the
principal market is an exchange) in which such securities are normally
traded. Investments in foreign securities in the International Discovery
Fund, the Balanced Allocation Fund, and the Aggressive Allocation Fund are
valued based on quotations from the primary market in which they are
traded. Repurchase Agreements held by the variable net assets funds are
shown at original cost, which, combined with accrued interest, approximates
market value. The differences between the cost and market values of
investments held by the variable net asset value funds are reflected as
either unrealized appreciation or depreciation.
Security Transactions and Related Income:
Security transactions are accounted for on the date the security is
purchased or sold (trade date). Interest income is recognized on the
accrual basis and includes, where applicable, the pro rata amortization of
premium or discount. Dividend income is recorded on the ex-dividend date.
Gains or losses realized from sales of securities are determined by
comparing the identified cost of the security lot sold with the net sales
proceeds.
Foreign Currency Translation:
The market value of investment securities, other assets and liabilities of
the International Discovery Fund, the Balanced Allocation Fund, and the
Aggressive Allocation Fund denominated in a foreign currency are translated
into U.S. dollars at the current exchange rate. Purchases and sales of
securities, income receipts and expense payments are translated into U.S.
dollars at the exchange rate on the dates of the transactions.
The International Discovery Fund, the Balanced Allocation Fund, and the
Aggressive Allocation Fund do not isolate that portion of the results of
operations resulting from changes in foreign exchange rates on investments
from the fluctuations arising from changes in market prices of securities
held. Such fluctuations are included with the net realized and unrealized
gains or losses from investments.
Continued
153
<PAGE> 155
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Reported net realized foreign exchange gains or losses arise from sales and
maturities of portfolio securities, sales of foreign currencies, currency
exchange fluctuations between the trade and settlement dates of securities
transactions, and the difference between the amounts of assets and
liabilities recorded and the U.S. dollar equivalent of the amounts actually
received or paid. Net unrealized foreign exchange gains and losses arise
from changes in the value of assets and liabilities, including investments
in securities, resulting from changes in currency exchange rates.
Repurchase Agreements:
The Funds may purchase instruments from financial institutions, such as
banks and broker-dealers approved by the Board of Trustees, subject to the
seller's agreement to repurchase them at an agreed upon time and price
("repurchase agreements"). The seller under a repurchase agreement is
required to maintain the value of the collateral, in a segregated account,
at not less than the repurchase price. Default by the seller would,
however, expose the relevant Funds to possible loss because of adverse
market action or delay in connection with the disposition of the underlying
obligations. Risks may arise from the potential inability of counterparties
to honor the terms of the repurchase agreements. Accordingly, the Funds
could receive less than the carrying value upon the sale of the underlying
collateral securities.
Forward Currency Contracts:
The Funds may enter into a forward currency contract ("forward") which is
an agreement between two parties to buy and sell a currency at a set price
on a future date. The market value of the forward fluctuates with changes
in currency exchange rates. The forward is marked-to-market daily and the
change in market value is recorded by a Fund as unrealized appreciation or
depreciation. When the forward is closed the Fund records a realized gain
or loss equal to the difference between the value at the time it was opened
and the value at the time it was closed. A Fund could be exposed to risk if
a counterparty is unable to meet the terms of a forward or if the value of
the currency changes unfavorably.
Forwards may involve market or credit risk in excess of the amounts
reflected on the Fund's statement of assets and liabilities. The gain or
loss from the difference between the cost of original contracts and the
amount realized upon the closing of such contracts is included in net
realized gains/losses from investment and foreign currency transactions.
Fluctuations in the value of forwards held at May 31, 1999 are recorded for
financial reporting purposes as unrealized gains and losses by the Funds.
The following forwards were open at May 31, 1999.
Continued
154
<PAGE> 156
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
<TABLE>
<CAPTION>
Contract
Amount Contract Value Appreciation Delivery
Forward Currency Contracts (local currency) U.S. Dollar (Depreciation) Date
-------------------------- ---------------- -------------- -------------- --------
<S> <C> <C> <C> <C>
International Discovery
Fund
Short Contracts
Euro Dollars........... 17,349 $ 18,095 $ (45) 6/1/99
Japanese Yen........... 3,000,000,000 26,242,127 414,017 4/3/00
Singapore Dollars...... 3,351 1,802 (142) 6/1/99
Long Contracts
U.S. Dollars........... 18,095 18,095 -- 6/1/99
U.S. Dollars........... 1,802 1,802 -- 6/1/99
--------
Net receivable for
forward currency con-
tracts............... $413,830
========
Balanced Allocation Fund
Short Contracts
British Pounds......... 266,447 $ 426,208 $ (747) 6/2/99
British Pounds......... 742,741 1,188,089 (2,081) 6/2/99
Euro Dollars........... 160,479 170,188 2,389 6/1/99
Euro Dollars........... 798 832 (2) 6/1/99
Singapore Dollars...... 91,395 53,013 22 6/1/99
Singapore Dollars...... 207 111 (9) 6/1/99
Singapore Dollars...... 302,852 175,668 74 6/1/99
Long Contracts
U.S. Dollars........... 426,208 426,208 -- 6/2/99
U.S. Dollars........... 1,188,089 1,188,089 -- 6/2/99
U.S. Dollars........... 175,668 175,668 -- 6/1/99
U.S. Dollars........... 53,013 53,013 -- 6/1/99
U.S. Dollars........... 170,188 170,188 -- 6/1/99
U.S. Dollars........... 832 832 -- 6/1/99
U.S. Dollars........... 111 111 -- 6/1/99
--------
Net payable for for-
ward currency con-
tracts............... $ (354)
========
Aggressive Allocation
Fund
Short Contracts
British Pounds......... 48,951 $ 78,302 $ (137) 6/2/99
British Pounds......... 125,617 $ 200,937 $ (352) 6/2/99
Euro Dollars........... 37,894 $ 40,187 $ 564 6/1/99
Euro Dollars........... 159 $ 166 $ (0) 6/1/99
Singapore Dollars...... 15,138 $ 8,781 $ 4 6/1/99
Singapore Dollars...... 31 $ 17 $ (1) 6/1/99
Singapore Dollars...... 71,709 $ 41,594 $ 17 6/1/99
Long Contracts
U.S. Dollars........... 78,302 78,302 -- 6/2/99
U.S. Dollars........... 200,937 200,937 -- 6/2/99
U.S. Dollars........... 41,594 41,594 -- 6/1/99
U.S. Dollars........... 8,781 8,781 -- 6/1/99
U.S. Dollars........... 40,187 40,187 -- 6/1/99
U.S. Dollars........... 166 166 -- 6/1/99
U.S. Dollars........... 17 17 -- 6/1/99
--------
Net receivable for
forward currency con-
tracts............... $ 95
========
</TABLE>
Continued
155
<PAGE> 157
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Lending Portfolio Securities:
To generate additional income, each Fund, except the Treasury Fund, may
lend up to 33 and 1/3% of securities in which they are invested pursuant to
agreements requiring that the loan be continuously secured by cash, U.S.
Government or U.S. Government Agency securities, shares of an investment
trust or mutual fund, or any combination of cash and such securities as
collateral equal at all times to at least 100% of the market value plus
accrued interest on the securities loaned. The Funds continue to earn
interest and dividends on securities loaned while simultaneously seeking to
earn interest on the investment of collateral.
When cash is received as collateral for securities loaned, the Funds may
invest such cash in short-term U.S. government securities, repurchase
agreements, or other short-term corporate securities. The cash or
subsequent short-term investments are recorded as assets of the Funds,
offset by a corresponding liability to repay the cash at the termination of
the loan. In addition, the short-term securities purchased with the cash
collateral are included in the accompanying schedules of portfolio
investments. Fixed income securities received as collateral are not
recorded as an asset or liability of the Fund because the Fund does not
have effective control of such securities.
There may be risks of delay in recovery of the securities or even loss of
rights in the collateral should the borrower of the securities fail
financially. However, loans will be made only to borrowers deemed by
National City Investment Management Co. (IMC) to be of good standing and
creditworthy under guidelines established by the Board of Trustees and
when, in the judgment of IMC, the consideration which can be earned
currently from such securities loans justifies the attendant risks. Loans
are subject to termination by the Funds or the borrower at any time, and
are, therefore, considered to be liquid investments. According to GAAP, a
statement of cash flows is presented if the Fund lent out, on average, more
than 10% of net assets during the year and received cash as collateral for
these loans. Under this guideline, a statement of cash flows is presented
for each of the Funds listed below. As of May 31, 1999, the following Funds
had securities on loan with the following market values (amounts in
thousands):
<TABLE>
<CAPTION>
Market Market Value
Value of of Loaned
Collateral Securities
---------- ------------
<S> <C> <C>
Small Capitalization Fund............................ $49,997 $48,125
Mid Capitalization Fund.............................. 80,266 78,280
Large Capitalization Fund............................ 45,660 44,689
Limited Maturity Bond Fund........................... 8,071 7,827
Intermediate Government Obligations Fund............. 24,143 23,194
U.S. Government Income Fund.......................... 6,647 6,401
Bond Fund............................................ 48,859 47,311
Conservative Allocation Fund......................... 7,086 6,849
Balanced Allocation Fund............................. 15,235 14,822
Aggressive Allocation Fund........................... 4,147 4,031
Equity Income Fund................................... 52,423 51,694
</TABLE>
The loaned securities were fully collateralized by cash, U.S. Government
securities, short-term corporate notes and repurchase agreements as of May
31, 1999.
Continued
156
<PAGE> 158
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
As disclosed in the schedules of portfolio investments the Small
Capitalization, Mid Capitalization, Large Capitalization and Equity Income
Funds collectively invested cash collateral in a Bear Stearns Repurchase
Agreement with an interest rate of 5.04% and a maturity of 6/1/99 which was
collateralized by the following securities (amounts in thousands):
<TABLE>
<CAPTION>
Principal Description Market Value
--------- ----------- ------------
<C> <S> <C> <C> <C>
$23,330 PNC Mortgage Securities Corp. 6.15% 6/25/99 $22,942
14,272 Structured Asset Mortgage Investments 0.01% 5/25/99 14,324
Inc.
29,049 Freddie Mac Strip 0.00% 7/1/26 13,746
</TABLE>
As disclosed in the schedules of portfolio investments the Limited Maturity
Bond, U.S. Government Income, Bond, Conservative Allocation, Balanced
Allocation, Aggressive Allocation and Equity Income Funds collectively
invested cash collateral in a Lehman Brothers Repurchase Agreement with an
interest rate of 5.04% and a maturity of 6/1/99 which was collateralized by
the following securities:
<TABLE>
<CAPTION>
Principal Description Market Value
--------- ----------- ------------
<C> <S> <C> <C> <C>
$66,015 PNC Mortgage Securities Corp. 0.00% 6/25/99 $62,715
</TABLE>
As disclosed in the schedules of portfolio investments the Intermediate
Government Obligations Fund invested cash collateral in a Paine Webber
Repurchase Agreement with an interest rate of 4.85% and a maturity of
6/1/99 which was collateralized by the following securities:
<TABLE>
<CAPTION>
Principal Description Market Value
--------- ----------- ------------
<C> <S> <C> <C> <C>
$ 915 Various Federal Farm Credit Bank 4.33-6.32% 10/26/00-6/18/03 $ 906
8,415 Various Federal Home Loan Bank 4.45-7.26% 6/2/00-3/23/04 8,540
3,994 Various Fannie Mae 4.75-6.85% 7/6/00-4/23/04 4,073
9,080 Various Freddie Mac 4.45-6.95% 5/16/00-4/20/04 9,075
1,670 Various Sallie Mae 4.80-6.05% 9/14/00-12/18/00 1,682
67 Various International Bank
Reconciliation and Development 0.00% 8/15/99-2/15/04 55
292 Various Tennessee Valley Authority 5.28-6.13% 9/14/01-7/15/03 296
</TABLE>
Financial Futures Contracts:
Each Fund may invest in financial futures contracts for the purpose of
hedging their existing portfolio securities or securities it intends to
purchase against fluctuations in fair value caused by changes in prevailing
market interest rates. Upon entering into a financial futures contract, the
Fund is required to pledge to the broker an amount of cash and/or other
assets equal to a certain percentage of the contract amount (initial margin
deposit). Subsequent payments, known as "variation margin", are made or
received by the Fund each day, depending on the daily fluctuations in the
fair value of the underlying security. The Fund recognizes a gain or loss
equal to the daily variation margin. Should market conditions move
unexpectedly, the Fund may not achieve the anticipated benefits of the
financial futures contracts and may realize a loss. The use of futures
transactions involves the risk of imperfect correlation in movements in the
price of futures contracts, interest rates and the underlying hedged
assets.
Mortgage Rolls:
The Funds may enter into mortgage "dollar rolls" in which the Fund sells
mortgage-backed securities for delivery in the current month and
simultaneously contracts to repurchase substantially similar securities on
a specified future date. During the roll period, the Fund forgoes principal
and interest paid on the mortgage-backed securities. The Fund is
compensated by fee income or the difference between the current sales price
and the lower forward price for the future purchase.
Continued
157
<PAGE> 159
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Dividends to Shareholders:
Dividends from net investment income are declared daily and paid monthly
for the money market funds. Dividends from net investment income are
declared and paid monthly for the variable net asset value funds.
Distributable net realized capital gains, if any, are declared and
distributed at least annually. Effective December 1, 1998, the Limited
Maturity Bond Fund, Intermediate Government Income Fund, U.S. Government
Income Fund,Bond Fund, Municipal Bond Fund and the Michigan Municipal Bond
Fund changed from declaring and paying dividends from net investment income
monthly to declaring dividends from net investment income daily and paying
monthly.
Dividends from net investment income and from net realized capital gains
are determined in accordance with income tax regulations which may differ
from GAAP. These "book/tax" differences are primarily due to differing
treatments for mortgage-backed securities and deferrals of certain losses.
These "book/tax" differences are either considered temporary or permanent
in nature. To the extent these differences are permanent in nature, such
amounts are reclassified within the composition of net assets based on
their federal tax-basis treatment; temporary differences do not require
reclassifications. Dividends and distributions to shareholders which exceed
net investment income and net realized gains for financial reporting
purposes but not for tax purposes are reported as dividends in excess of
net investment income or distributions in excess of net realized gains. To
the extent they exceed net investment income and net realized gains for tax
purposes, they are reported as distributions of capital.
As of May 31, 1999, the following reclassifications have been made to
increase (decrease) such accounts with offsetting adjustments made to paid-
in-capital (amounts in thousands):
<TABLE>
<CAPTION>
Undistributed
Undistributed Net Net Realized
Investment Gain/(Loss)
Income on Investments
----------------- --------------
<S> <C> <C>
U.S. Treasury Fund.......................... 32 (32)
Small Capitalization Fund................... 4,377 (44,566)
Mid Capitalization Fund..................... 4,129 (47,211)
Large Capitalization Fund................... 1,629 (6,062)
International Discovery Fund................ 1,220 (9,001)
Bond Fund................................... 2 (2)
Conservative Allocation Fund................ 1 (1)
Balanced Allocation Fund.................... (18) 17
Aggressive Allocation Fund.................. (13) 13
Equity Income Fund.......................... (141) (16,988)
</TABLE>
Federal Income Taxes:
It is the policy of each of the Funds to continue to qualify as a regulated
investment company by complying with the provisions available to certain
investment companies, as defined in applicable sections of the Internal
Revenue Code, and to make distributions of net investment income and net
realized capital gains sufficient to relieve it from all, or substantially
all, federal income taxes.
Expenses:
Expenses directly attributable to a Fund are charged to the Fund, while
expenses which are attributable to more than one Fund of the Group are
allocated among the respective Funds based upon relative net assets or
another appropriate basis. In addition, expenses that are directly
attributable to a specific class are charged only to that class.
Continued
158
<PAGE> 160
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
The investment income and expenses of a Fund (other than class specific
expenses) and realized and unrealized gains and losses on investments of a
Fund are allocated to each class of shares based upon their relative net
asset value on the date income is earned or expenses are recognized and
realized and unrealized gains and losses are incurred.
3. Purchases and Sales of Securities:
Purchases and sales of securities (excluding short-term securities) for the
year ended May 31, 1999 were as follows (amounts in thousands):
<TABLE>
<CAPTION>
Purchases Sales
--------- ---------
<S> <C> <C>
Small Capitalization Fund................................ $ 432,572 $ 747,200
Mid Capitalization Fund.................................. 471,462 738,459
Large Capitalization Fund................................ 210,941 250,558
International Discovery Fund............................. 318,397 463,430
Limited Maturity Bond Fund............................... 213,808 254,936
Intermediate Government Obligations Fund................. 89,602 124,841
U.S. Government Income Fund.............................. 113,536 140,543
Bond Fund................................................ 1,239,048 1,361,115
Municipal Bond Fund...................................... 8,028 35,929
Michigan Municipal Bond Fund............................. 15,240 38,743
Conservative Allocation Fund............................. 35,759 33,273
Balanced Allocation Fund................................. 386,228 469,256
Aggressive Allocation Fund............................... 47,870 56,923
Equity Income Fund....................................... 177,804 291,812
</TABLE>
4. Capital Share Transactions:
The Group has issued three classes of Fund shares in the Prime Obligations
Fund, the Small Capitalization Fund, the Mid Capitalization Fund, the Large
Capitalization Fund, the International Discovery Fund, the Limited Maturity
Bond Fund, the Intermediate Government Obligations Fund, the Municipal Bond
Fund and the Michigan Municipal Bond Fund, the U.S. Government Income Fund,
the Bond Fund, the Balanced Allocation Fund, and the Equity Income Fund:
Investor A Shares, Investor B Shares and Institutional Shares; and two
classes of Fund shares in each of the U.S. Government Obligations Fund, the
Tax-Free Fund and the Treasury Fund: Investor A Shares and Institutional
Shares; and one class of Fund shares in each of the Conservative Allocation
Fund and the Aggressive Allocation Fund: Institutional Shares. Investor C
Shares closed on August 28, 1998.
The Investor A Shares of the variable net asset value funds are subject to
initial sales charges imposed at the time of purchase, in accordance with the
Funds' prospectuses. Certain redemptions of Investor B Shares made within
five years of purchase (four years if purchased before January 1, 1997) are
subject to contingent deferred sales charges in accordance with the Funds'
prospectuses. Each class of shares for each Fund has identical rights and
privileges except with respect to distribution (12b-1) fees paid by the
Investor A Shares and Investor B and shareholder service fees paid by the
Investor B Shares, voting rights on matters affecting a single class of
shares and the exchange privileges of each class of shares.
Continued
159
<PAGE> 161
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
<TABLE>
<CAPTION>
(Amounts in Thousands)
Prime U.S. Government
Obligations Fund Obligations Fund
------------------------------------ ------------------------------------
For the For the For the For the For the For the
year ended eleven months year ended year ended eleven months year ended
May 31, ended May 31, June 30, May 31, ended May 31, June 30,
1999 1998 (a) 1997 1999 1998 1997
---------- ------------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
Investor A Shares:
Proceeds from shares
issued................ $ 605,433 $ 1,090,813 $ 621,672 $ 307,020 $ 561,666 $ 730,447
Dividends reinvested... 3,607 8,884 8,181 546 1,315 1,537
Cost of shares re-
deemed................ (812,049) (1,076,810) (582,286) (474,744) (605,875) (706,845)
--------- ----------- ---------- --------- --------- ---------
Change in net assets
from Investor A Share
transactions.......... $(203,009) $ 22,887 $ 47,567 $(167,178) $ (42,894) $ 25,139
========= =========== ========== ========= ========= =========
Investor B Shares:
Proceeds from shares
issued................ $ 1,445 $ 730 $ -- $ -- $ -- $ --
Dividends reinvested... 19 4 -- -- -- --
Cost of shares re-
deemed................ (1,086) (347) -- -- -- --
--------- ----------- ---------- --------- --------- ---------
Change in net assets
from Investor B Share
transactions.......... $ 378 $ 387 $ -- $ -- $ -- $ --
========= =========== ========== ========= ========= =========
Institutional Shares:
Proceeds from shares
issued................ $ 887,484 $ 921,653 $1,062,801 $ 228,665 $ 316,849 $ 398,008
Dividends reinvested... 49 4 12 23 -- --
Cost of shares re-
deemed................ (949,929) (908,035) (981,569) (292,597) (341,648) (395,295)
--------- ----------- ---------- --------- --------- ---------
Change in net assets
from Institutional
Share transactions.... $ (62,396) $ 13,622 $ 81,244 $ (63,909) $ (24,799) $ 2,713
========= =========== ========== ========= ========= =========
SHARE TRANSACTIONS:
Investor A Shares:
Issued................. 605,433 1,090,780 621,672 307,020 561,666 730,448
Reinvested............. 3,607 8,891 8,181 546 1,315 1,536
Redeemed............... (812,058) (1,076,776) (582,286) (474,730) (605,875) (706,845)
--------- ----------- ---------- --------- --------- ---------
Change in Investor A
Shares................ (203,018) 22,895 47,567 (167,164) (42,894) 25,139
========= =========== ========== ========= ========= =========
Investor B Shares:
Issued................. 1,445 729 -- -- -- --
Reinvested............. 19 4 -- -- -- --
Redeemed............... (1,086) (347) -- -- -- --
--------- ----------- ---------- --------- --------- ---------
Change in Investor B
Shares................ 378 386 -- -- -- --
========= =========== ========== ========= ========= =========
Institutional Shares:
Issued................. 887,484 921,653 1,062,797 228,665 316,849 398,008
Reinvested............. 49 4 12 23 -- --
Redeemed............... (949,928) (908,035) (981,569) (292,613) (341,648) (395,295)
--------- ----------- ---------- --------- --------- ---------
Change in Institutional
Shares................ (62,395) 13,622 81,240 (63,925) (24,799) 2,713
========= =========== ========== ========= ========= =========
</TABLE>
- - -------
(a) Fund commenced offering of Investor B shares on September 26, 1997.
Continued
160
<PAGE> 162
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
<TABLE>
<CAPTION>
(Amounts in Thousands)
Tax-Free Treasury
Fund Fund
------------------------------------ --------------------------------------
For the For the For the For the For the For the
year ended eleven months year ended year ended eleven months year ended
May 31, ended May 31, June 30, May 31, ended May 31, June 30,
1999 1998 1997 1999 1998 1997
---------- ------------- ---------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
Investor A Shares:
Proceeds from shares
issued................ $ 86,470 $ 293,914 $ 280,908 $ 835,457 $ 915,653 $ 1,034,231
Dividends reinvested... 462 914 824 318 554 627
Cost of shares re-
deemed................ (141,417) (287,187) (275,968) (1,066,829) (851,996) (1,017,589)
--------- --------- --------- ----------- --------- -----------
Change in net assets
from Investor A Share
transactions.......... $ (54,485) $ 7,641 $ 5,764 $ (231,054) $ 64,211 $ 17,269
========= ========= ========= =========== ========= ===========
Institutional Shares:
Proceeds from shares
issued................ $ 167,432 $ 148,667 $ 126,130 $ 992,405 $ 766,757 $ 689,368
Dividends reinvested... -- -- -- -- -- --
Cost of shares re-
deemed................ (161,361) (153,489) (123,383) (1,044,439) (769,538) (588,439)
--------- --------- --------- ----------- --------- -----------
Change in net assets
from Institutional
Share transactions.... $ 6,071 $ (4,822) $ 2,747 $ (52,034) $ (2,781) $ 100,929
========= ========= ========= =========== ========= ===========
SHARE TRANSACTIONS:
Investor A Shares:
Issued................. 86,469 293,912 280,908 835,456 915,653 1,034,232
Reinvested............. 462 914 824 318 554 627
Redeemed............... (141,418) (287,188) (275,968) (1,066,829) (851,997) (1,017,589)
--------- --------- --------- ----------- --------- -----------
Change in Investor A
Shares................ (54,487) 7,638 5,764 (231,055) 64,210 17,270
========= ========= ========= =========== ========= ===========
Institutional Shares:
Issued................. 167,432 148,667 126,130 992,405 766,757 689,368
Reinvested............. -- -- -- -- -- --
Redeemed............... (161,361) (153,489) (123,383) (1,044,439) (769,538) (588,439)
--------- --------- --------- ----------- --------- -----------
Change in Institutional
Shares................ 6,071 (4,822) 2,747 (52,034) (2,781) 100,929
========= ========= ========= =========== ========= ===========
</TABLE>
Continued
161
<PAGE> 163
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
<TABLE>
<CAPTION>
(Amounts in Thousands)
Small Mid
Capitalization Capitalization
Fund Fund
------------------------------------ ------------------------------------
For the For the For the For the For the For the
year ended eleven months year ended year ended eleven months year ended
May 31, ended May 31, June 30, May 31, ended May 31, June 30,
1999 1998 1997 1999 1998 1997
---------- ------------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
Investor A Shares:
Proceeds from shares
issued................ $ 448,789 $ 742,080 $ 749,582 $ 112,759 $ 255,877 $ 188,598
Dividends reinvested... 10,457 8,345 23,998 7,986 15,034 22,250
Cost of shares re-
deemed................ (530,608) (771,128) (748,306) (156,097) (261,402) (177,354)
--------- --------- --------- --------- --------- ---------
Change in net assets
from Investor A Share
transactions.......... $ (71,362) $ (20,703) $ 25,274 $ (35,352) $ 9,509 $ 33,494
========= ========= ========= ========= ========= =========
Investor B Shares:
Proceeds from shares
issued................ $ 1,307 $ 8,110 $ 22,151 $ 916 $ 2,794 $ 7,531
Dividends reinvested... 3,253 2,254 5,725 2,600 4,415 5,491
Cost of shares re-
deemed................ (16,532) (12,631) (4,442) (9,069) (4,478) (2,176)
--------- --------- --------- --------- --------- ---------
Change in net assets
from Investor B Share
transactions.......... $ (11,972) $ (2,267) $ 23,434 $ (5,553) $ 2,731 $ 10,846
========= ========= ========= ========= ========= =========
Investor C Shares*:
Proceeds from shares
issued................ $ 365 $ 3,920 $ 9,826 $ 181 $ 877 $ 1,303
Dividends reinvested... -- 742 1,584 -- 407 458
Cost of shares re-
deemed................ (12,866) (3,708) (759) (2,183) (987) (456)
--------- --------- --------- --------- --------- ---------
Change in net assets
from Investor B Share
transactions.......... $ (12,501) $ 954 $ 10,651 $ (2,002) $ 297 $ 1,305
========= ========= ========= ========= ========= =========
Institutional Shares:
Proceeds from shares
issued................ $ 43,684 $ 147,252 $ 270,110 $ 34,083 $ 85,360 $ 146,813
Dividends reinvested... 26,444 20,267 54,110 38,894 67,177 112,225
Cost of shares re-
deemed................ (254,355) (208,250) (156,401) (240,008) (168,207) (231,028)
--------- --------- --------- --------- --------- ---------
Change in net assets
from Institutional
Share transactions.... $(184,227) $ (40,731) $ 167,819 $(167,031) $ (15,670) $ 28,010
========= ========= ========= ========= ========= =========
SHARE TRANSACTIONS:
Investor A Shares:
Issued................. 20,256 27,212 25,792 7,624 16,378 11,587
Reinvested............. 530 326 841 644 1,093 1,428
Redeemed............... (24,004) (28,041) (25,258) (10,699) (16,582) (11,083)
--------- --------- --------- --------- --------- ---------
Change in Investor A
Shares................ (3,218) (503) 1,375 (2,431) 889 1,932
========= ========= ========= ========= ========= =========
Investor B Shares:
Issued................. 62 299 806 66 185 443
Reinvested............. 171 90 205 224 338 365
Redeemed............... (834) (472) (170) (699) (302) (135)
--------- --------- --------- --------- --------- ---------
Change in Investor B
Shares................ (601) (83) 841 (409) 221 673
========= ========= ========= ========= ========= =========
Investor C Shares*:
Issued................. 14 145 356 13 58 79
Reinvested............. -- 30 56 -- 31 30
Redeemed............... (602) (140) (29) (168) (66) (29)
--------- --------- --------- --------- --------- ---------
Change in Investor C
Shares................ (588) 35 383 (155) 23 80
========= ========= ========= ========= ========= =========
Institutional Shares:
Issued................. 1,959 5,320 9,653 2,425 5,577 8,771
Reinvested............. 1,312 780 1,873 3,097 4,836 7,139
Redeemed............... (11,483) (7,510) (5,260) (17,388) (10,548) (12,739)
--------- --------- --------- --------- --------- ---------
Change in Institutional
Shares................ (8,212) (1,410) 6,266 (11,866) (135) 3,171
========= ========= ========= ========= ========= =========
</TABLE>
- - -------
* Investor C class of shares closed on August 28, 1998.
Continued
162
<PAGE> 164
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
<TABLE>
<CAPTION>
(Amounts in Thousands)
Large International
Capitalization Discovery
Fund Fund
----------------------------------- ------------------------------------
For the For the For the For the For the For the
year ended eleven months year ended year ended eleven months year ended
May 31, ended May 31, June 30, May 31, ended May 31, June 30,
1999 1998 1997 1999 1998 1997
---------- ------------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
Investor A Shares:
Proceeds from shares
issued................ $ 11,843 $ 10,407 $ 11,465 $ 11,371 $ 6,427 $ 63,853
Dividends reinvested... 357 1,848 20 1,766 1,402 --
Cost of shares re-
deemed................ (13,766) (5,105) (2,540) (27,594) (13,589) (61,621)
-------- --------- --------- --------- -------- ---------
Change in net assets
from Investor A Share
transactions.......... $ (1,566) $ 7,150 $ 8,945 $ (14,457) $ (5,760) $ 2,232
======== ========= ========= ========= ======== =========
Investor B Shares:
Proceeds from shares
issued................ $ 4,942 $ 5,300 $ 3,029 $ 360 $ 1,492 $ 3,979
Dividends reinvested... 206 685 11 568 434 --
Cost of shares re-
deemed................ (3,437) (748) (341) (4,826) (2,654) (1,688)
-------- --------- --------- --------- -------- ---------
Change in net assets
from Investor B Share
transactions.......... $ 1,711 $ 5,237 $ 2,699 $ (3,898) $ (728) $ 2,291
======== ========= ========= ========= ======== =========
Investor C Shares*:
Proceeds from shares
issued................ $ 100 $ 282 $ 43 $ 81 $ 449 $ 532
Dividends reinvested... -- 9 -- -- 32 --
Cost of shares re-
deemed................ (368) (73) (10) (964) (340) (241)
-------- --------- --------- --------- -------- ---------
Change in net assets
from Investor B Share
transactions.......... $ (268) $ 218 $ 33 $ (883) $ 141 $ 291
======== ========= ========= ========= ======== =========
Institutional Shares:
Proceeds from shares
issued................ $ 65,788 $ 71,064 $ 137,399 $ 35,881 $ 60,496 $ 119,834
Dividends reinvested... 4,089 23,970 2,431 10,376 7,665 62
Cost of shares re-
deemed................ (96,262) (119,622) (162,472) (165,321) (75,091) (116,808)
-------- --------- --------- --------- -------- ---------
Change in net assets
from Institutional
Share transactions.... $(26,385) $ (24,588) $ (22,642) $(119,064) $ (6,930) $ 3,088
======== ========= ========= ========= ======== =========
SHARE TRANSACTIONS:
Investor A Shares:
Issued................. 636 682 899 763 410 4,588
Reinvested............. 19 134 2 118 96 --
Redeemed............... (745) (329) (199) (1,820) (872) (4,425)
-------- --------- --------- --------- -------- ---------
Change in Investor A
Shares................ (90) 487 702 (939) (366) 163
======== ========= ========= ========= ======== =========
Investor B Shares:
Issued................. 273 349 241 25 97 282
Reinvested............. 11 50 1 39 31 --
Redeemed............... (186) (49) (28) (332) (178) (118)
-------- --------- --------- --------- -------- ---------
Change in Investor B
Shares................ 98 350 214 (268) (50) 164
======== ========= ========= ========= ======== =========
Investor C Shares*:
Issued................. 6 19 4 5 29 36
Reinvested............. -- 1 -- -- 2 --
Redeemed............... (23) (6) (1) (68) (22) (16)
-------- --------- --------- --------- -------- ---------
Change in Investor C
Shares................ (17) 14 3 (63) 9 20
======== ========= ========= ========= ======== =========
Institutional Shares:
Issued................. 3,587 4,704 11,403 2,327 3,912 8,149
Reinvested............. 214 1,731 198 681 519 4
Redeemed............... (5,165) (7,791) (12,606) (10,816) (4,781) (7,985)
-------- --------- --------- --------- -------- ---------
Change in Institutional
Shares................ (1,364) (1,356) (1,005) (7,808) (350) 168
======== ========= ========= ========= ======== =========
</TABLE>
- - -------
* Investor C class of shares closed on August 28, 1998.
Continued
163
<PAGE> 165
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
<TABLE>
<CAPTION>
(Amounts in Thousands)
Intermediate Government
Limited Maturity Bond Fund Obligations Fund
----------------------------------- -----------------------------------
For the For the For the For the For the For the
year ended eleven months year ended year ended eleven months year ended
May 31, ended May 31, June 30, May 31, ended May 31, June 30,
1999 1998 1997 1999 1998 1997
---------- ------------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
Investor A Shares:
Proceeds from shares
issued................ $ 11,765 $ 24,130 $ 17,211 $ 1,179 $ 520 $ 1,090
Dividends reinvested... 1,546 1,606 903 376 581 759
Cost of shares
redeemed.............. (30,528) (11,582) (5,131) (5,691) (5,456) (6,308)
-------- -------- -------- -------- -------- --------
Change in net assets
from Investor A Share
transactions.......... $(17,217) $ 14,154 $ 12,983 $ (4,136) $ (4,355) $ (4,459)
======== ======== ======== ======== ======== ========
Investor B Shares:
Proceeds from shares
issued................ $ 87 $ 520 $ 457 $ 85 $ 169 $ 238
Dividends reinvested... 44 48 68 56 78 79
Cost of shares
redeemed.............. (854) (509) (583) (727) (396) (195)
-------- -------- -------- -------- -------- --------
Change in net assets
from Investor B Share
transactions.......... $ (723) $ 59 $ (58) $ (586) $ (149) $ 122
======== ======== ======== ======== ======== ========
Investor C Shares*:
Proceeds from shares
issued................ $ 5 $ 3,813 $ 40 $ 11 $ 71 $ 119
Dividends reinvested... 19 52 1 3 10 7
Cost of shares
redeemed.............. (2,235) (1,705) (11) (252) (42) (13)
-------- -------- -------- -------- -------- --------
Change in net assets
from Investor B Share
transactions.......... $ (2,211) $ 2,160 $ 30 $ (238) $ 39 $ 113
======== ======== ======== ======== ======== ========
Institutional Shares:
Proceeds from shares
issued................ $ 28,681 $ 66,363 $ 49,609 $ 12,915 $ 31,582 $ 27,055
Dividends reinvested... 2,473 2,591 3,278 2,021 2,482 3,120
Cost of shares
redeemed.............. (57,561) (54,768) (53,531) (51,589) (53,203) (68,086)
-------- -------- -------- -------- -------- --------
Change in net assets
from Institutional
Share transactions.... $(26,407) $ 14,186 $ (644) $(36,653) $(19,139) $(37,911)
======== ======== ======== ======== ======== ========
SHARE TRANSACTIONS:
Investor A Shares:
Issued................. 1,233 2,540 1,814 119 54 113
Reinvested............. 162 169 95 38 59 78
Redeemed............... (3,197) (1,219) (541) (572) (555) (649)
-------- -------- -------- -------- -------- --------
Change in Investor A
Shares................ (1,802) 1,490 1,368 (415) (442) (458)
======== ======== ======== ======== ======== ========
Investor B Shares:
Issued................. 10 55 48 9 17 24
Reinvested............. 5 5 7 6 8 8
Redeemed............... (90) (54) (61) (74) (41) (20)
-------- -------- -------- -------- -------- --------
Change in Investor B
Shares................ (75) 6 (6) (59) (16) 12
======== ======== ======== ======== ======== ========
Investor C Shares*:
Issued................. -- 410 4 2 8 12
Reinvested............. 2 6 -- -- 1 1
Redeemed............... (239) (184) (1) (26) (5) (1)
-------- -------- -------- -------- -------- --------
Change in Investor C
Shares................ (237) 232 3 (24) 4 12
======== ======== ======== ======== ======== ========
Institutional Shares:
Issued................. 3,008 6,981 5,230 1,296 3,209 2,785
Reinvested............. 260 273 346 203 253 322
Redeemed............... (6,037) (5,764) (5,641) (5,174) (5,405) (7,009)
-------- -------- -------- -------- -------- --------
Change in Institutional
Shares................ (2,769) 1,490 (65) (3,675) (1,943) (3,902)
======== ======== ======== ======== ======== ========
</TABLE>
- - -------
* Investor C class of shares closed on August 28, 1998.
Continued
164
<PAGE> 166
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
<TABLE>
<CAPTION>
(Amounts in Thousands)
U.S. Government Income Fund Bond Fund
----------------------------------- ------------------------------------
For the For the For the For the For the For the
year ended eleven months year ended year ended eleven months year ended
May 31, ended May 31, June 30, May 31, ended May 31, June 30,
1999 1998 1997 1999 1998 1997
---------- ------------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
Investor A Shares:
Proceeds from shares
issued................ $ 12,842 $ 13,553 $ 18,605 $ 4,227 $ 1,553 $ 4,657
Dividends reinvested... 1,787 2,471 2,469 621 830 938
Cost of shares
redeemed.............. (30,609) (20,652) (14,174) (9,208) (6,086) (6,371)
-------- -------- -------- --------- --------- ---------
Change in net assets
from Investor A Share
transactions.......... $(15,980) $ (4,628) $ 6,900 $ (4,360) $ (3,703) $ (776)
======== ======== ======== ========= ========= =========
Investor B Shares:
Proceeds from shares
issued................ $ 979 $ 4,184 $ 6,266 $ 228 $ 1,078 $ 1,973
Dividends reinvested... 567 772 867 224 259 221
Cost of shares
redeemed.............. (8,668) (4,962) (3,041) (2,173) (1,076) (752)
-------- -------- -------- --------- --------- ---------
Change in net assets
from Investor B Share
transactions.......... $ (7,122) $ (6) $ 4,092 $ (1,721) $ 261 $ 1,442
======== ======== ======== ========= ========= =========
Investor C Shares*:
Proceeds from shares
issued................ $ 7 $ 379 $ 66 $ 62 $ 387 $ 336
Dividends reinvested... 3 8 5 7 26 17
Cost of shares
redeemed.............. (376) (94) (71) (670) (342) (62)
-------- -------- -------- --------- --------- ---------
Change in net assets
from Investor B Share
transactions.......... $ (366) $ 293 $ -- $ (601) $ 71 $ 291
======== ======== ======== ========= ========= =========
Institutional Shares:
Proceeds from shares
issued................ $ 34,064 $ 45,541 $ 47,928 $ 44,541 $ 81,867 $ 92,145
Dividends reinvested... 818 897 948 16,294 18,662 22,432
Cost of shares
redeemed.............. (44,141) (35,690) (29,177) (164,380) (126,566) (181,073)
-------- -------- -------- --------- --------- ---------
Change in net assets
from Institutional
Share transactions.... $ (9,259) $ 10,748 $ 19,699 $(103,545) $ (26,037) $ (66,496)
======== ======== ======== ========= ========= =========
SHARE TRANSACTIONS:
Investor A Shares:
Issued................. 1,387 1,471 2,020 421 158 488
Reinvested............. 193 269 269 62 84 98
Redeemed............... (3,300) (2,238) (1,540) (921) (615) (666)
-------- -------- -------- --------- --------- ---------
Change in Investor A
Shares................ (1,720) (498) 749 (438) (373) (80)
======== ======== ======== ========= ========= =========
Investor B Shares:
Issued................. 105 456 681 23 109 205
Reinvested............. 62 84 95 22 26 23
Redeemed............... (937) (539) (331) (218) (108) (78)
-------- -------- -------- --------- --------- ---------
Change in Investor B
Shares................ (770) 1 445 (173) 27 150
======== ======== ======== ========= ========= =========
Investor C Shares*:
Issued................. 1 41 7 6 39 35
Reinvested............. -- 1 1 1 3 2
Redeemed............... (40) (10) (8) (67) (35) (6)
-------- -------- -------- --------- --------- ---------
Change in Investor C
Shares................ (39) 32 -- (60) 7 31
======== ======== ======== ========= ========= =========
Institutional Shares:
Issued................. 3,676 4,942 5,204 4,422 8,245 9,555
Reinvested............. 88 97 103 1,621 1,884 2,332
Redeemed............... (4,755) (3,871) (3,165) (16,419) (12,716) (18,764)
-------- -------- -------- --------- --------- ---------
Change in Institutional
Shares................ (991) 1,168 2,142 (10,376) (2,587) (6,877)
======== ======== ======== ========= ========= =========
</TABLE>
- - -------
* Investor C class of shares closed on August 28, 1998.
Continued
165
<PAGE> 167
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
<TABLE>
<CAPTION>
(Amounts in Thousands)
Municipal Bond Fund Michigan Municipal Bond Fund
----------------------------------- -----------------------------------
For the For the For the For the For the For the
year ended eleven months year ended year ended eleven months year ended
May 31, ended May 31, June 30, May 31, ended May 31, June 30,
1999 1998 1997 1999 1998 1997
---------- ------------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
Investor A Shares:
Proceeds from shares
issued................ $ 2,525 $ 1,862 $ 8,560 $ 3,633 $ 7,990 $ 7,107
Dividends reinvested... 275 406 270 1,127 1,275 1,238
Cost of shares
redeemed.............. (5,310) (2,351) (7,155) (14,623) (9,650) (7,170)
-------- -------- -------- -------- -------- --------
Change in net assets
from Investor A Share
transactions.......... $ (2,510) $ (83) $ 1,675 $ (9,863) $ (385) $ 1,175
======== ======== ======== ======== ======== ========
Investor B Shares:
Proceeds from shares
issued................ $ 25 $ 80 $ 341 $ 93 $ 996 $ 590
Dividends reinvested... 14 29 23 96 105 104
Cost of shares
redeemed.............. (248) (336) (177) (914) (676) (806)
-------- -------- -------- -------- -------- --------
Change in net assets
from Investor B Share
transactions.......... $ (209) $ (227) $ 187 $ (725) $ 425 $ (112)
======== ======== ======== ======== ======== ========
Institutional Shares:
Proceeds from shares
issued................ $ 7,302 $ 15,154 $ 21,299 $ 30,857 $ 40,600 $ 35,903
Dividends reinvested... 424 514 393 1,118 1,308 1,118
Cost of shares
redeemed.............. (33,407) (26,380) (20,929) (43,116) (33,573) (29,433)
-------- -------- -------- -------- -------- --------
Change in net assets
from Institutional
Share transactions.... $(25,681) $(10,712) $ 763 $(11,141) $ 8,335 $ 7,588
======== ======== ======== ======== ======== ========
SHARE TRANSACTIONS:
Investor A Shares:
Issued................. 237 175 822 328 725 656
Reinvested............. 26 39 26 102 116 114
Redeemed............... (503) (223) (688) (1,320) (872) (662)
-------- -------- -------- -------- -------- --------
Change in Investor A
Shares................ (240) (9) 160 (890) (31) 108
======== ======== ======== ======== ======== ========
Investor B Shares:
Issued................. 2 8 33 8 90 54
Reinvested............. 1 3 2 9 9 10
Redeemed............... (23) (32) (17) (82) (61) (74)
-------- -------- -------- -------- -------- --------
Change in Investor B
Shares................ (20) (21) 18 (65) 38 (10)
======== ======== ======== ======== ======== ========
Institutional Shares:
Issued................. 691 1,434 2,027 2,782 3,678 3,317
Reinvested............. 40 49 37 101 119 103
Redeemed............... (3,163) (2,491) (1,994) (3,888) (3,042) (2,720)
-------- -------- -------- -------- -------- --------
Change in Institutional
Shares................ (2,432) (1,008) 70 (1,005) 755 700
======== ======== ======== ======== ======== ========
</TABLE>
Continued
166
<PAGE> 168
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
<TABLE>
<CAPTION>
(Amounts in Thousands)
Conservative Allocation Fund Balanced Allocation Fund
------------------------------------- ------------------------------------
For the For the December 30, For the For the For the
year ended eleven months 1996 to year ended eleven months year ended
May 31, ended May 31, June 30, May 31, ended May 31, June 30,
1999 1998 1997 (a) 1999 1998 1997
---------- ------------- ------------ ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
Investor A Shares:
Proceeds from shares
issued................ $ -- $ -- $ -- $ 2,309 $ 2,097 $ 3,121
Dividends reinvested... -- -- -- 796 923 2,336
Cost of shares
redeemed.............. -- -- -- (6,419) (3,637) (3,299)
------ ------ ------- --------- -------- --------
Change in net assets
from Investor A Share
transactions.......... $ -- $ -- $ -- $ (3,314) $ (617) $ 2,158
====== ====== ======= ========= ======== ========
Investor B Shares:
Proceeds from shares
issued................ $ -- $ -- $ -- $ 329 $ 1,900 $ 2,041
Dividends reinvested... -- -- -- 268 305 613
Cost of shares
redeemed.............. -- -- -- (2,724) (959) (558)
------ ------ ------- --------- -------- --------
Change in net assets
from Investor B Share
transactions.......... $ -- $ -- $ -- $ (2,127) $ 1,246 $ 2,096
====== ====== ======= ========= ======== ========
Investor C Shares*:
Proceeds from shares
issued................ $ -- $ -- $ -- $ 94 $ 458 $ 501
Dividends reinvested... -- -- -- 3 41 66
Cost of shares
redeemed.............. -- -- -- (986) (417) (132)
------ ------ ------- --------- -------- --------
Change in net assets
from Investor B Share
transactions.......... $ -- $ -- $ -- $ (889) $ 82 $ 435
====== ====== ======= ========= ======== ========
Institutional Shares:
Proceeds from shares
issued................ $3,936 $9,933 $11,873 $ 29,812 $ 67,862 $161,814
Dividends reinvested... 995 610 122 10,268 12,123 14,642
Cost of shares
redeemed.............. (1,684) (4,795) (1,958) (121,859) (78,144) (46,444)
------ ------ ------- --------- -------- --------
Change in net assets
from Institutional
Share transactions.... $3,247 $5,748 $10,037 $ (81,779) $ 1,841 $130,012
====== ====== ======= ========= ======== ========
SHARE TRANSACTIONS:
Investor A Shares:
Issued................. -- -- -- 170 156 242
Reinvested............. -- -- -- 58 70 187
Redeemed............... -- -- -- (466) (270) (260)
------ ------ ------- --------- -------- --------
Change in Investor A
Shares................ -- -- -- (238) (44) 169
====== ====== ======= ========= ======== ========
Investor B Shares:
Issued................. -- -- -- 24 142 160
Reinvested............. -- -- -- 20 23 49
Redeemed............... -- -- -- (199) (71) (44)
------ ------ ------- --------- -------- --------
Change in Investor B
Shares................ -- -- -- (155) 94 165
====== ====== ======= ========= ======== ========
Investor C Shares*:
Issued................. -- -- -- 7 34 39
Reinvested............. -- -- -- -- 3 5
Redeemed............... -- -- -- (75) (31) (10)
------ ------ ------- --------- -------- --------
Change in Investor C
Shares................ -- -- -- (68) 6 34
====== ====== ======= ========= ======== ========
Institutional Shares:
Issued................. 354 931 1,175 2,170 5,034 12,910
Reinvested............. 90 57 12 750 922 1,172
Redeemed............... (152) (445) (194) (8,814) (5,827) (3,683)
------ ------ ------- --------- -------- --------
Change in Institutional
Shares................ 292 543 993 (5,894) 129 10,399
====== ====== ======= ========= ======== ========
</TABLE>
- - -------
* Investor C class of shares closed on August 28, 1998.
(a) Period from commencement of operations.
Continued
167
<PAGE> 169
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
<TABLE>
<CAPTION>
(Amounts in Thousands)
Aggressive Allocation Fund Equity Income Fund
------------------------------------- -----------------------------------
For the For the December 30, For the For the For the
year ended eleven months 1996 to year ended eleven months year ended
May 31, ended May 31, June 30, May 31, ended May 31, June 30,
1999 1998 1997 (a) 1999 1998 1997
---------- ------------- ------------ ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
Investor A Shares:
Proceeds from shares
issued................ $ -- $ -- $ -- $ 6,299 $ 10,194 $ 17,476
Dividends reinvested... -- -- -- 11,212 16,166 9,217
Cost of shares re-
deemed................ -- -- -- (36,843) (20,575) (19,770)
-------- -------- ------- -------- -------- ---------
Change in net assets
from Investor A Share
transactions.......... $ -- $ -- $ -- $(19,332) $ 5,785 $ 6,923
======== ======== ======= ======== ======== =========
Investor B Shares:
Proceeds from shares
issued................ $ -- $ -- $ -- $ 1,162 $ 6,379 $ 6,794
Dividends reinvested... -- -- -- 3,079 3,856 1,506
Cost of shares re-
deemed................ -- -- -- (8,817) (3,200) (1,807)
-------- -------- ------- -------- -------- ---------
Change in net assets
from Investor B Share
transactions.......... $ -- $ -- $ -- $ (4,576) $ 7,035 $ 6,493
======== ======== ======= ======== ======== =========
Investor C Shares*:
Proceeds from shares
issued................ $ -- $ -- $ -- $ 175 $ 628 $ 608
Dividends reinvested... -- -- -- 2 120 28
Cost of shares re-
deemed................ -- -- -- (1,168) (438) (94)
-------- -------- ------- -------- -------- ---------
Change in net assets
from Investor B Share
transactions.......... $ -- $ -- $ -- $ (991) $ 310 $ 542
======== ======== ======= ======== ======== =========
Institutional Shares:
Proceeds from shares
issued................ $ 7,226 $ 9,513 $39,922 $ 27,050 $ 24,482 $ 53,563
Dividends reinvested... 843 446 195 7,279 11,116 7,868
Cost of shares re-
deemed................ (16,270) (19,093) (2,857) (85,953) (65,461) (116,931)
-------- -------- ------- -------- -------- ---------
Change in net assets
from Institutional
Share transactions.... $ (8,201) $ (9,134) $37,260 $(51,624) $(29,863) $ (55,500)
======== ======== ======= ======== ======== =========
SHARE TRANSACTIONS:
Investor A Shares:
Issued................. -- -- -- 360 534 991
Reinvested............. -- -- -- 678 928 539
Redeemed............... -- -- -- (2,082) (1,074) (1,112)
-------- -------- ------- -------- -------- ---------
Change in Investor A
Shares................ -- -- -- (1,044) 388 418
======== ======== ======= ======== ======== =========
Investor B Shares:
Issued................. -- -- -- 65 334 385
Reinvested............. -- -- -- 188 223 88
Redeemed............... -- -- -- (501) (170) (103)
-------- -------- ------- -------- -------- ---------
Change in Investor B
Shares................ -- -- -- (248) 387 370
======== ======== ======= ======== ======== =========
Investor C Shares*:
Issued................. -- -- -- 10 34 35
Reinvested............. -- -- -- -- 7 1
Redeemed............... -- -- -- (68) (23) (5)
-------- -------- ------- -------- -------- ---------
Change in Investor C
Shares................ -- -- -- (58) 18 31
======== ======== ======= ======== ======== =========
Institutional Shares:
Issued................. 621 858 3,954 1,560 1,317 3,180
Reinvested............. 73 40 19 442 640 460
Redeemed............... (1,386) (1,712) (281) (4,892) (3,413) (6,623)
-------- -------- ------- -------- -------- ---------
Change in Institutional
Shares................ (692) (814) 3,692 (2,890) (1,456) (2,983)
======== ======== ======= ======== ======== =========
</TABLE>
- - -------
* Investor C class of shares closed on August 28, 1998.
(a) Period from commencement of operations.
Continued
168
<PAGE> 170
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
5. Related Party Transactions:
Investment advisory services are provided to the Group by IMC. Gulfstream
Global Investors, Ltd. ("Gulfstream") served as sub-investment adviser to the
Conservative Allocation Fund, the Balanced Allocation Fund, the Aggressive
Allocation Fund and the International Discovery Fund until November 30, 1998
when the agreement was terminated and IMC assumed the day-to-day management.
Under the terms of the investment advisory agreement, IMC is entitled to
receive fees based on a percentage of the average daily net assets of the
Funds. Under the terms of the sub-investment advisory agreement, Gulfstream was
entitled to receive fees from IMC based on a percentage of the average daily
net assets of the International Discovery Fund, and based on a percentage of
the average daily net assets of the Conservative Allocation Fund, the Balanced
Allocation Fund, and the Aggressive Allocation Fund assets invested in foreign
securities. National City Bank serves as the Group's Custodian.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS"),
and BISYS Fund Services Ohio, Inc. (BISYS Ohio) are wholly-owned subsidiaries
of The BISYS Group, Inc. BISYS, with whom certain officers of the Group are
affiliated, serves the Group as Administrator. Such officers are paid no fees
directly by the Funds for serving as officers of the Group. Under the terms of
the administration agreement, BISYS's fees are computed at an annual fee not to
exceed 0.20% of the average daily net assets of each Fund. Until September 18,
1998, BISYS served as the distributor. For the period June 1, 1998 to September
18, 1998 Bisys received $142,333 in commissions from sales of shares of the
variable net asset value funds of which $36,161 was reallowed to non-affiliated
brokers and dealers. BISYS received no fees for providing distribution services
to the money market funds. Effective September 19, 1998, SEI Investments
Distribution Co. (SEI) became the Group's distributor. For the period September
19, 1998 to May 31, 1999, SEI received $134,838 in commissions from sales of
shares of the variable net asset value funds of which $45,793 was reallowed to
non-affiliated brokers and dealers. BISYS Ohio serves the Group as mutual fund
accountant. Until September 11, 1998, BISYS Ohio also served the Group as
Transfer Agent. Effective September 12, 1998, Boston Financial Data Services
became the Transfer Agent.
The Group has adopted an Investor A Distribution and Shareholder Service Plan
(the "Investor A Plan"), an Investor B Distribution and Shareholder Service
Plan (the "Investor B Plan"), and an Investor C Distribution and Shareholder
Service Plan (the "Investor C Plan"), each in accordance with Rule 12b-1 under
the 1940 Act. Pursuant to the Investor A Plan, each Fund is authorized to pay
or reimburse the distributor of Investor A shares, a periodic distribution
and/or service fee, calculated at an annual rate not to exceed 0.25% of the
average daily net asset value of Investor A shares of that Fund. Pursuant to
the Investor B and Investor C Plans, each Fund is authorized to pay or
reimburse the distributor of Investor B and Investor C shares, (a) a
distribution fee in an amount not to exceed on an annual basis 0.75% of the
average daily net assets of Investor B or Investor C shares of that Fund and
(b) a service fee in an amount not to exceed on an annual basis 0.25% of the
average daily net assets of the Investor B or Investor C shares of that Fund.
These fees may be used by the distributor to pay banks, including the IMC,
broker dealers and other institutions, or to reimburse the distributor or its
affiliates for administration, distribution, and shareholder service assistance
in connection with the distribution of Fund shares. On August 28, 1998, the
Investor C Plan was terminated in connection with the closing of such share
class.
Continued
169
<PAGE> 171
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
Fees may be voluntarily reduced to assist the Funds in maintaining competitive
expense ratios. Information regarding these transactions is as follows for the
year ended May 31, 1999 (amounts in thousands):
<TABLE>
<CAPTION>
U.S.
Prime Government Tax-
Obligations Obligations Free Treasury
Fund Fund Fund Fund
----------- ----------- ---- --------
<S> <C> <C> <C> <C>
Investment Advisory Fees:
Annual fee
(percentage of average net assets)... 0.40% 0.40% 0.40% 0.40%
Administration Fees:
Annual fee before voluntary fee
reductions
(percentage of average net assets)... 0.20% 0.20% 0.20% 0.20%
Voluntary fee reductions.............. $135 $ 46 $ 23 $405
12b-1 Fees Investor A:
Annual fee before voluntary fee
reductions
(percentage of average net assets)... 0.25% 0.25% 0.25% 0.25%
Voluntary fee reductions.............. $ 96 $109 $ 32 $165
12b-1 Fees Investor B:
Annual fee
(percentage of average net assets)... 0.75% -- -- --
Shareholder Service Fees Investor B:
Annual fee
(percentage of average net assets)... 0.25% -- -- --
Transfer Agent Fees(a):............... $ 25 $ 11 $ 8 $ 14
Fund Accountant Fees:................. 145 53 34 79
</TABLE>
- - -------
(a) Represents transfer agent fees paid to BISYS Ohio for the period June 1,
1998 to September 11, 1998.
Continued
170
<PAGE> 172
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
<TABLE>
<CAPTION>
Small Mid Large International
Capitalization Capitalization Capitalization Discovery
Fund Fund Fund Fund
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Investment Advisory
Fees:
Annual fee
(percentage of average
net assets)............ 1.00% 1.00% 0.80% 1.17%(a)
Administration Fees:
Annual fee
(percentage of average
net assets)............ 0.20% 0.20% 0.20% 0.20%
12b-1 Fees Investor A:
Annual fee
(percentage of average
net assets)............ 0.25% 0.25% 0.25% 0.25%
12b-1 Fees Investor B:
Annual fee
(percentage of average
net assets)............ 0.75% 0.75% 0.75% 0.75%
12b-1 Fees Investor C:
Annual fee
(percentage of average
net assets)............ 0.75% 0.75% 0.75% 0.75%
Shareholder Service Fees
Investor B:
Annual fee
(percentage of average
net assets)............ 0.25% 0.25% 0.25% 0.25%
Shareholder Service Fees
Investor C:
Annual fee
(percentage of average
net assets)............ 0.25% 0.25% 0.25% 0.25%
Transfer Agent(b):...... $ 139 $ 82 $ 40 $ 67
Fund Accountant Fees:... 127 134 120 169
</TABLE>
- - -------
(a) Investment advisory fees for the International Discovery Fund are
calculated as 1.25% of the first $50 million, 1.20% of the next $50
million, 1.15% of the next $300 million, and 1.05% over $400 million.
(b) Represents transfer agent fees paid to BISYS Ohio for the period June 1,
1998 to September 11, 1998.
Continued
171
<PAGE> 173
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
<TABLE>
<CAPTION>
Limited Intermediate U.S.
Maturity Government Government
Bond Obligations Income Bond
Fund Fund Fund Fund
-------- ------------ ---------- -----
<S> <C> <C> <C> <C>
Investment Advisory Fees:
Annual fee before voluntary fee
reductions
(percentage of average net assets).. 0.74% 0.74% 0.74% 0.74%
Voluntary fee reduction.............. $ 333 $ 68 $ 639 $ 189
Administration Fees:
Annual fee before voluntary fee
reductions
(percentage of average net assets).. 0.20% 0.20% 0.20% 0.20%
Voluntary fee reductions............. $ 83 $ 80 $ 103 $ 223
12b-1 Fees Investor A:
Annual fee
(percentage of average net assets).. 0.25% 0.25% 0.25% 0.25%
12b-1 Fees Investor B:
Annual fee
(percentage of average net assets).. 0.75% 0.75% 0.75% 0.75%
12b-1 Fees Investor C:
Annual fee
(percentage of average net assets).. 0.75% 0.75% 0.75% 0.75%
Shareholder Service Fees Investor B:
Annual fee
(percentage of average net assets).. 0.25% 0.25% 0.25% 0.25%
Shareholder Service Fees Investor C:
Annual fee
(percentage of average net assets).. 0.25% 0.25% 0.25% 0.25%
Transfer Agent(a): .................. $ 24 $ 26 $ 41 $ 37
Fund Accountant Fees: ............... 66 76 99 133
</TABLE>
- - -------
(a) Represents transfer agent fees paid to BISYS Ohio for the period June 1,
1998 to September 11, 1998.
Continued
172
<PAGE> 174
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
<TABLE>
<CAPTION>
Michigan
Municipal Municipal Conservative Balanced
Bond Bond Allocation Allocation
Fund Fund Fund Fund
--------- --------- ------------ ----------
<S> <C> <C> <C> <C>
Investment Advisory Fees:
Annual fee before voluntary fee
reductions
(percentage of average net
assets)......................... 0.74% 0.74% 1.00% 1.00%
Voluntary fee reduction.......... $234 $453 $ 56 $630
Administration Fees:
Annual fee before voluntary fee
reductions
(percentage of average net
assets)......................... 0.20% 0.20% 0.20% 0.20%
Voluntary fee reductions......... $119 $230 -- --
12b-1 Fees Investor A:
Annual fee
(percentage of average net
assets) ........................ 0.25% 0.25% -- 0.25%
12b-1 Fees Investor B:
Annual fee
(percentage of average net
assets) ........................ 0.75% 0.75% -- 0.75%
12b-1 Fees Investor C:
Annual fee
(percentage of average net
assets) ........................ -- -- -- 0.75%
Shareholder Service Fees Investor
B:
Annual fee
(percentage of average net
assets) ........................ 0.25% 0.25% -- 0.25%
Shareholder Service Fees Investor
C:
Annual fee
(percentage of average net
assets) ........................ -- -- -- 0.25%
Transfer Agent(a): .............. $ 16 $ 24 $ 2 $ 38
Fund Accountant Fees: ........... 61 95 12 102
</TABLE>
- - -------
(a) Represents transfer agent fees paid to BISYS Ohio for the period June 1,
1998 to September 11, 1998.
Continued
173
<PAGE> 175
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
<TABLE>
<CAPTION>
Aggressive Equity
Allocation Income
Fund Fund
---------- ------
<S> <C> <C>
Investment Advisory Fees:
Annual fee before voluntary fee reductions
(percentage of average net assets)........................ 1.00% 1.00%
Voluntary fee reduction.................................... $ 44 --
Administration Fees:
Annual fee
(percentage of average net assets)........................ 0.20% 0.20%
12b-1 Fees Investor A:
Annual fee
(percentage of average net assets)........................ -- 0.25%
12b-1 Fees Investor B:
Annual fee
(percentage of average net assets)........................ -- 0.75%
12b-1 Fees Investor C:
Annual fee
(percentage of average net assets)........................ -- 0.75%
Shareholder Service Fees Investor B:
Annual fee
(percentage of average net assets)........................ -- 0.25%
Shareholder Service Fees Investor C:
Annual fee
(percentage of average net assets)........................ -- 0.25%
Transfer Agent(a): ........................................ $ 2 $ 84
Fund Accountant Fees: ..................................... 30 103
</TABLE>
- - -------
(a) Represents transfer agent fees paid to BISYS Ohio for the period June 1,
1998 to September 11, 1998.
6. Concentration of Credit Risk
The Michigan Municipal Bond Fund invests a substantial proportion of its
assets in debt obligations issued by the State of Michigan and its political
subdivisions, agencies and public authorities. This Fund is more susceptible
to factors adversely affecting issuers of Michigan municipal securities than
a fund that is not concentrated in these issuers to the same extent.
7. Common Trust Conversion:
On October 10, 1998, the Mid Capitalization Fund issued shares to acquire all
the assets and liabilities of a certain common trust fund of National City
Bank. The following is a summary of shares issued, net assets converted, net
asset value per share and unrealized appreciation as of the conversion date
(amounts in thousands, except per share amount):
<TABLE>
<CAPTION>
Net
Asset
Value
Net per Unrealized
Shares Assets Share Appreciation
------ ------ ------ ------------
<S> <C> <C> <C> <C>
Mid Capitalization Fund..................... 323 $3,548 $10.99 $641
</TABLE>
Continued
174
<PAGE> 176
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
8. Federal Income Tax Information (unaudited):
For the taxable year ended May 31, 1999, the following percentages of income
dividends paid by the Funds qualify for the dividends received deduction
available to corporations:
<TABLE>
<CAPTION>
Qualified
Dividend Income
---------------
<S> <C>
Mid Capitalization Fund....................................... 10.63%
Bond Fund..................................................... 0.02%
Conservative Allocation Fund.................................. 4.16%
Balanced Allocation Fund...................................... 8.77%
Aggressive Allocation Fund.................................... 20.65%
Equity Income Fund............................................ 100.00%
</TABLE>
For federal income tax purposes, the following Funds have capital loss
carryforwards as of May 31, 1999, which are available to offset future
capital gains, if any (amounts in thousands):
<TABLE>
<CAPTION>
Amount Expires
------ -------
<S> <C> <C>
U.S. Government Obligations Fund............................... $ 1 2002
Limited Maturity Bond Fund..................................... 4,114 2002
2,458 2003
479 2004
1,140 2005
724 2006
Intermediate Government Obligations Fund....................... 4,741 2002
2,891 2003
2,923 2005
U.S. Government Income Fund.................................... 1,455 2003
1,271 2004
2,853 2005
</TABLE>
Under current tax law, operating losses, capital losses and foreign currency
losses realized after October 31, may be deferred and treated as occurring on
the first day of the next fiscal year. As of May 31, 1999, the following
funds have deferred losses of (amounts in thousands):
<TABLE>
<S> <C>
International Discovery Fund .......................................... $ 68
Intermediate Government Obligations Fund............................... 620
U.S. Government Income Fund............................................ 468
Bond Fund.............................................................. 1,629
Balanced Allocation Fund .............................................. 54
Aggressive Allocation Fund............................................. 11
</TABLE>
During the year ended May 31, 1999, the Tax-Free Fund, the Municipal Bond
Fund and the Michigan Municipal Bond Fund declared $3,510,893, $4,244,160 and
$9,105,098, respectively, of tax-exempt income distributions.
Continued
175
<PAGE> 177
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds May 31, 1999
During the year ended May 31, 1999, the Funds declared long-term capital gain
distributions in the following amounts (amounts in thousands):
<TABLE>
<CAPTION>
20% Capital
Gains
-----------
<S> <C>
Small Capitalization Fund......................................... $52,717
Mid Capitalization Fund........................................... 90,991
Large Capitalization Fund......................................... 13,085
International Discovery Fund...................................... 30,803
Municipal Bond Fund............................................... 912
Michigan Municipal Bond Fund...................................... 1,480
Conservative Allocation Fund...................................... 604
Balanced Allocation Fund.......................................... 5,739
Aggressive Allocation Fund........................................ 557
Equity Income Fund................................................ 59,332
</TABLE>
9. Subsequent Event:
On August 6, 1999, the Conservative Allocation and Aggressive Allocation
Funds will liquidate their net assets to the outstanding shareholders.
Continued
176
<PAGE> 178
Parkstone Funds
Board of Trustees
Robert D. Neary
Chairman
Retired Co-Chairman, Ernst & Young
Director:
Cold Metal Products, Inc.
Strategic Distribution, Inc.
Herbert R. Martens, Jr.
President
Executive Vice President,
National City Corporation
Chairman, President and Chief Executive
Officer, NatCity Investments, Inc.
Leigh Carter
Retired President and Chief Operating
Officer, B.F. Goodrich Company
Director:
Kirtland Capital Corporation
Morrison Products
TruSeal Technologies
John F. Durkott
President and Chief Operating Officer,
Kittle's Home Furnishings Center, Inc.
Robert J. Farling
Retired Chairman, President and Chief Executive Officer, Centerior Energy
Richard W. Furst, Dean
Garvice D. Kincaid Professor of Finance
and Dean, Carol Martin Gatton College of Business and Economics,
University of Kentucky
Director:
Foam Design, Inc.
The Seed Corporation
Gerald L. Gherlein
Executive Vice President and General
Counsel, Eaton Corporation
Trustee:
WVIZ Educational Television
J. William Pullen
President and Chief Executive Officer,
Whayne Supply Company
The Parkstone Trustees also serve as the Trustees of the Armada Funds and
Parkstone Advantage Funds.
[LOGO OF PARKSTONE FUNDS APPEARS HERE]
<PAGE> 179
Parkstone offers investors:
. Expert money management
. Low initial investment
. An automatic investment program
. The opportunity to change investments when personal needs change
. 24-hour access to information about investments through FUNDATA(R) at
1-800-355-4555
The Parkstone Mutual Funds
Growth Funds
Parkstone Small Capitalization Fund
Parkstone Mid Capitalization Fund
Parkstone Large Capitalization Fund
Parkstone International Discovery Fund
Growth and Income Funds
Parkstone Conservative Allocation Fund
Parkstone Balanced Allocation Fund
Parkstone Aggressive Allocation Fund
Parkstone Equity Income Fund
Income Funds
Parkstone Bond Fund
Parkstone Limited Maturity Bond Fund
Parkstone Intermediate Government Obligations Fund
Parkstone U.S. Government Income Fund
Tax-Free Income Funds
Parkstone Municipal Bond Fund
Parkstone Michigan Municipal Bond Fund
Money Market Funds
Parkstone Prime Obligations Funds [LOGO APPEARS HERE]
Parkstone U.S. Government Obligations Fund
Parkstone Tax-Free Fund
Parkstone Treasury Fund
--------------------
BULK RATE
U.S. POSTAGE
PAID
LANCASTER, PA
PERMIT NO. 1793
--------------------
PAR-F-007-0100
<PAGE> 1
Exhibit (17)(k)
Parkstone(TM)
FUNDS
November 30, 1999
SEMI-ANNUAL REPORT
[GRAPHIC]
<PAGE> 2
Parkstone Funds
Semi-Annual Report -- November 30, 1999
(Unaudited)
Parkstone Prime Obligations Fund
Parkstone U.S. Government Obligations Fund
Parkstone Tax-Free Fund
Parkstone Treasury Fund
Parkstone Small Capitalization Fund
Parkstone Mid Capitalization Fund
Parkstone Large Capitalization Fund
Parkstone International Discovery Fund
Parkstone Limited Maturity Bond Fund
Parkstone Intermediate Government Obligations Fund
Parkstone U.S. Government Income Fund
Parkstone Bond Fund
Parkstone National Tax Exempt Bond Fund
Parkstone Michigan Municipal Bond Fund
Parkstone Equity Income Fund
Parkstone Balanced Allocation Fund
<TABLE>
<CAPTION>
Table of Contents
<S> <C>
A Message From The Chairman................................................. 2
Financial Statements
Statement of Assets and Liabilities........................................ 3
Statements of Operations................................................... 7
Statements of Changes in Net Assets........................................ 11
Schedules of Portfolio Investments......................................... 19
Financial Highlights....................................................... 59
Notes to Financial Statements............................................... 106
</TABLE>
- --------------------------------------------------------------------------------
Not FDIC Insured Not Bank Guaranteed May Lose Value
An investment in money market funds is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the
money market fund(s) seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the fund(s).
National City Investment Management Company serves as investment adviser to
Parkstone Funds for which it receives an investment advisory fee. For more
complete information about Parkstone Funds, including charges and expenses,
please contact your investment specialist or call 1-800-451-8377 for a
prospectus. Read it carefully before you invest or send money. Parkstone Funds
are distributed by SEI Investments Distribution Co. (SIDC), Oaks, PA 19456.
SIDC is not affiliated with National City Bank and is not a bank.
1
<PAGE> 3
The Parkstone Group of Funds
A Message From The Chairman
Dear Shareholders:
The past New Year's Eve was a memorable moment around the globe, as we
celebrated a new millennium. While 1999 was filled with a great deal of
anticipation and Y2K uncertainty, we can now greet the future with confidence
having addressed the challenges of this once in a lifetime event.
We continued to see strong performance in the equity sector, with exceptional
performance from the International Discovery Fund for the eleven months ended
November 30, 1999. With a return of 28.93% (institutional shares) and 21.98% (A
shares), the fund was able to outperform its benchmark, the EAFE, by 12.42% and
5.47%, respectively, in a period when EAFE had outperformed the S&P 500 by
2.2%. The solid performance of our funds this period was due in part to global
economic recovery, as well as the experience of our portfolio management teams.
Looking Ahead
On November 17, 1999, the Board of Trustees of the Parkstone Group of Funds
approved an Agreement and Plan of Reorganization (the "Reorganization") between
the Parkstone Funds and Armada Funds. Both fund complexes are advised by the
National City Investment Management Company, a pool of talented investment
professionals from the former First of America Investment Co. and National
City's Asset Management Group.
The proposed Reorganization is subject to approval by shareholders of each
Parkstone Fund, and proxy materials will be sent for your review during the
second quarter. The Board of Trustees has unanimously approved the proposal.
The Reorganization would merge the portfolios of the Parkstone Group of Funds
into corresponding portfolios of Armada Funds.
The Benefits of Change
By consolidating substantially similar portfolios, the funds may be able to
achieve economies of scale that will lead to lower costs and expenses. In
addition, a merger of these fund families is expected to be a tax-free event
for Parkstone shareholders.
We value your relationship with the Parkstone Funds and hope you will vote
affirmatively on the proposed Reorganization. If you would like to learn more
about Armada Funds, you can visit their Web site at www.armadafunds.com.
As always, thank you for your continued investment, and may you enjoy health
and prosperity in the year ahead. If you have any questions regarding the
funds, please call our Investor Services line at 800-451-8377.
Sincerely,
/s/ Robert D. Neary
Robert D. Neary
Chairman
Parkstone
FUNDS
2
<PAGE> 4
Statements of Assets and Liabilities
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in Thousands, except Per Share Amounts)
Prime
Obligations U.S. Government Tax-Free Treasury
Fund Obligations Fund Fund Fund
----------- ---------------- -------- --------
<S> <C> <C> <C> <C>
Assets:
Investments, at
amortized cost (Cost
$580,347; $91,362;
$88,795 and $84,847,
respectively).......... $ 580,347 $ 91,362 $ 88,795 $ 84,847
Repurchase agreements,
at cost................ 33,072 9,153 -- 180,543
------------ ------------ ----------- ------------
Total investments....... 613,419 100,515 88,795 265,390
Cash.................... 52 1 -- --
Interest and dividends
receivable............. 1,790 152 479 943
Receivable for capital
shares issued.......... 24 -- -- --
Prepaid expenses and
other.................. 14 3 5 25
------------ ------------ ----------- ------------
Total Assets............ 615,299 100,671 89,279 266,358
------------ ------------ ----------- ------------
Liabilities:
Dividends payable....... 2,492 404 216 967
Payable for capital
shares redeemed........ 418 -- 2 --
Payable for investments
purchased.............. 4,926 -- -- 19,876
Accrued expenses and
other payables:
Investment advisory
fees.................. 189 32 28 67
Administration fees.... 98 17 15 41
Distribution fees--
Investor A............ 1 -- -- 3
Other.................. 86 41 28 169
------------ ------------ ----------- ------------
Total Liabilities....... 8,210 494 289 21,123
------------ ------------ ----------- ------------
Net Assets:
Paid-in Capital......... 607,089 100,179 88,988 245,232
Undistributed
(distributions in
excess of) net
investment income...... -- -- -- (1)
Accumulated
undistributed net
realized gains (losses)
on investment
transactions........... -- (2) 2 4
------------ ------------ ----------- ------------
Net Assets.............. $ 607,089 $ 100,177 $ 88,990 $ 245,235
============ ============ =========== ============
Net Assets
Investor A............. $ 16,782 $ 975 $ 685 $ 9,573
Investor B............. 589 -- -- --
Institutional.......... 589,718 99,202 88,305 235,662
------------ ------------ ----------- ------------
Total................ $ 607,089 $ 100,177 $ 88,990 $ 245,235
============ ============ =========== ============
Outstanding units of
beneficial interest
(shares)
Investor A............. 16,776 972 683 9,563
Investor B............. 589 -- -- --
Institutional.......... 589,717 99,171 88,300 235,667
------------ ------------ ----------- ------------
Total................ 607,082 100,143 88,983 245,230
============ ============ =========== ============
Net asset value
Investor A--redemption
price per share....... $1.00 $1.00 $1.00 $1.00
===== ===== ===== =====
Investor B--offering
price per share*...... $1.00 $ -- $ -- $ --
===== ===== ===== =====
Institutional.......... $1.00 $1.00 $1.00 $1.00
===== ===== ===== =====
</TABLE>
- - -------
* Redemption price per share varies by length of time shares are held.
See notes to financial statements.
3
<PAGE> 5
Statements of Assets and Liabilities
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in Thousands, except Per Share Amounts)
Small Mid Large International
Capitalization Capitalization Capitalization Discovery
Fund Fund Fund Fund
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Assets:
Investments, at value
(Cost $221,067;
$301,260; $297,955 and
$247,412,
respectively).......... $294,831 $414,634 $494,093 $347,463
Repurchase agreements,
at cost................ 24,011 48,138 14,188 17,851
-------- -------- -------- --------
Total investments....... 318,842 462,772 508,281 365,314
Cash.................... 149 700 -- 610
Interest and dividends
receivable............. 96 118 329 248
Receivable for capital
shares issued.......... 109 54 1 70
Receivable for
investments sold....... 12,465 -- -- 1,744
Tax reclaim receivable.. -- -- -- 259
Foreign currency (Cost
$0, $0, $0 and $4,
respectively).......... -- -- -- 4
Prepaid expenses and
other.................. 29 1 3 6
-------- -------- -------- --------
Total Assets............ 331,690 463,645 508,614 368,255
-------- -------- -------- --------
Liabilities:
Payable for return of
collateral received for
securities on loan..... 39,011 71,138 29,183 22,845
Payable for capital
shares redeemed........ 165 166 144 101
Payable for investments
purchased.............. 1,519 1,571 -- 1,096
Net payable for
variation margin on
future contracts....... -- -- -- 29
Accrued expenses and
other payables:
Investment advisory
fees.................. 254 353 324 339
Administration fees.... 46 65 79 54
Distribution fees--
Investor A............ 5 4 2 2
Distribution fees--
Investor B............ 15 13 11 6
Other.................. 255 206 78 418
-------- -------- -------- --------
Total Liabilities....... 41,270 73,516 29,821 24,890
-------- -------- -------- --------
Net Assets:
Paid-in Capital......... 176,958 163,494 178,015 166,836
Undistributed
(distributions in
excess of) net
investment income...... (1,298) (1,770) (879) (1,228)
Net unrealized
appreciation from
investments and
translation of assets
and liabilities in
foreign currencies..... 73,978 113,633 196,138 100,473
Undistributed net
realized gains (losses)
from investment and
foreign currency
transactions........... 40,782 114,772 105,519 77,284
-------- -------- -------- --------
Net Assets.............. $290,420 $390,129 $478,793 $343,365
======== ======== ======== ========
Net Assets
Investor A............. $ 48,547 $ 44,315 $ 24,363 $ 24,305
Investor B............. 19,243 16,585 15,935 8,406
Institutional.......... 222,630 329,229 438,495 310,654
-------- -------- -------- --------
Total................ $290,420 $390,129 $478,793 $343,365
======== ======== ======== ========
Outstanding units of
beneficial interest
(shares)
Investor A............. 1,996 2,636 1,057 1,230
Investor B............. 827 1,063 711 447
Institutional.......... 8,957 19,324 18,867 15,524
-------- -------- -------- --------
Total................ 11,780 23,023 20,635 17,201
======== ======== ======== ========
Net asset value
Investor A--redemption
price per share....... $24.32 $16.81 $23.04 $19.76
====== ====== ====== ======
Investor B--offering
price per share*...... $23.28 $15.60 $22.42 $18.81
====== ====== ====== ======
Institutional.......... $24.86 $17.04 $23.24 $20.01
====== ====== ====== ======
Maximum Sales Charge--
Investor A............. 5.50% 5.50% 5.50% 5.50%
====== ====== ====== ======
Maximum Offering Price
(100%/(100%--Maximum
Sales Charge) of net
asset value adjusted to
nearest cent) per
share--Investor A...... $25.74 $17.79 $24.38 $20.91
====== ====== ====== ======
</TABLE>
- - -------
* Redemption price per share varies by length of time shares are held.
See notes to financial statements.
4
<PAGE> 6
Statements of Assets and Liabilities
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in Thousands, except Per Share Amounts)
Intermediate
Limited Government
Maturity Bond Obligations U.S. Government Bond
Fund Fund Income Fund Fund
------------- ------------ --------------- --------
<S> <C> <C> <C> <C>
Assets:
Investments, at value
(Cost $126,832; $112,776;
$188,704 and $379,798
respectively)............ $124,693 $110,334 $184,238 $367,430
Repurchase agreements, at
cost..................... 2,572 36,656 800 6,756
-------- -------- -------- --------
Total investments......... 127,265 146,990 185,038 374,186
Interest and dividends
receivable............... 1,409 1,497 1,255 3,290
Receivable for capital
shares issued............ 1 -- 1 1
Receivable for investments
sold..................... -- 15 149 --
Other Income Receivable... 270 7 121 58
Prepaid expenses and
other.................... 8 10 8 11
-------- -------- -------- --------
Total Assets.............. 128,953 148,519 186,572 377,546
-------- -------- -------- --------
Liabilities:
Payable for return of
collateral received for
securities on loan....... 2,572 36,656 800 27,485
Dividends payable......... 612 529 930 1,804
Payable for capital shares
redeemed................. 232 13 140 10
Accrued expenses and other
payables:
Investment advisory
fees.................... 52 56 93 174
Administration fees...... 21 18 31 58
Distribution fees--
Investor A.............. 1 1 2 1
Distribution fees--
Investor B.............. 1 1 9 2
Other.................... 40 44 67 76
-------- -------- -------- --------
Total Liabilities......... 3,531 37,318 2,072 29,610
-------- -------- -------- --------
Net Assets:
Paid-in Capital........... 137,259 125,876 196,197 368,038
Undistributed
(distributions in excess
of) net investment
income................... -- -- -- 2
Net unrealized
appreciation
(depreciation) on
investments.............. (2,139) (2,441) (4,466) (12,368)
Accumulated undistributed
net realized gains
(losses) on investment
transactions............. (9,698) (12,234) (7,231) (7,736)
-------- -------- -------- --------
Net Assets................ $125,422 $111,201 $184,500 $347,936
======== ======== ======== ========
Net Assets
Investor A............... $ 13,317 $ 7,680 $ 25,093 $ 8,191
Investor B............... 839 796 11,839 3,272
Institutional............ 111,266 102,725 147,568 336,473
-------- -------- -------- --------
Total.................. $125,422 $111,201 $184,500 $347,936
======== ======== ======== ========
Outstanding units of
beneficial interest
(shares)
Investor A............... 1,426 799 2,800 867
Investor B............... 90 83 1,325 346
Institutional............ 11,913 10,683 16,470 35,445
-------- -------- -------- --------
Total.................. 13,429 11,565 20,595 36,658
======== ======== ======== ========
Net asset value
Investor A--redemption
price per share......... $9.34 $9.62 $8.96 $9.44
===== ===== ===== =====
Investor B--offering
price per share*........ $9.34 $9.59 $8.94 $9.46
===== ===== ===== =====
Institutional............ $9.34 $9.62 $8.96 $9.49
===== ===== ===== =====
Maximum Sales Charge--
Investor A............... 2.75% 4.75% 4.75% 4.75%
===== ===== ===== =====
Maximum Offering Price
(100%/(100%--Maximum
Sales Charge) of net
asset value adjusted to
nearest cent) per share--
Investor A............... $9.60 $10.10 $9.41 $9.91
===== ====== ===== =====
</TABLE>
- - -------
* Redemption price per share varies by length of time shares are held.
See notes to financial statements.
5
<PAGE> 7
Statements of Assets and Liabilities
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in Thousands, except Per Share Amounts)
National Tax Michigan Equity Balanced
Exempt Bond Municipal Income Allocation
Fund Bond Fund Fund Fund
-------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Assets:
Investments, at value
(Cost $84,905;
$192,319; $234,898 and
$134,780,
respectively).......... $ 84,998 $ 195,878 $ 256,817 $ 166,939
Repurchase agreements,
at cost................ -- -- 27,109 13,187
----------- ------------ ------------ ------------
Total investments....... 84,998 195,878 283,926 180,126
Interest and dividends
receivable............. 1,591 2,426 720 630
Receivable for capital
shares issued.......... -- -- 1 2
Receivable for
investments sold....... -- -- 3,229 2,065
Tax reclaim receivable.. -- -- -- 14
Net receivable for
variation margin on
future contracts....... -- -- -- 2
Other Income Receivable. -- -- -- 12
Prepaid expenses and
other.................. 11 1 7 3
----------- ------------ ------------ ------------
Total Assets............ 86,600 198,305 287,883 182,854
----------- ------------ ------------ ------------
Liabilities:
Payable for return of
collateral received for
securities on loan..... -- -- 32,109 13,187
Dividends payable....... 278 706 -- --
Payable for capital
shares redeemed........ 12 106 480 9
Payable for investments
purchased.............. -- -- -- 789
Accrued expenses and
other payables:
Investment advisory
fees.................. 44 99 181 113
Administration fees.... 14 33 44 28
Distribution fees--
Investor A............ -- 2 5 1
Distribution fees--
Investor B............ -- 2 14 4
Other.................. 32 59 120 92
----------- ------------ ------------ ------------
Total Liabilities....... 380 1,007 32,953 14,223
----------- ------------ ------------ ------------
Net Assets:
Paid-in Capital......... 86,299 193,744 143,078 110,532
Undistributed
(distributions in
excess of) net
investment income...... (2) (20) 512 172
Net unrealized
appreciation
(depreciation) from
investments and
translation of assets
and liabilities in
foreign currencies..... 93 3,559 21,919 32,177
Undistributed net
realized gains (losses)
from investment and
foreign currency
transactions........... (170) 15 89,421 25,750
----------- ------------ ------------ ------------
Net Assets.............. $ 86,220 $ 197,298 $ 254,930 $ 168,631
=========== ============ ============ ============
Net Assets
Investor A............. $ 4,060 $ 21,274 $ 59,675 $ 14,370
Investor B............. 441 2,236 17,749 5,248
Institutional.......... 81,719 173,788 177,506 149,013
----------- ------------ ------------ ------------
Total................ $ 86,220 $ 197,298 $ 254,930 $ 168,631
=========== ============ ============ ============
Outstanding units of
beneficial interest
(shares)
Investor A............. 402 2,014 3,585 954
Investor B............. 43 211 1,076 348
Institutional.......... 8,088 16,449 10,722 9,905
----------- ------------ ------------ ------------
Total................ 8,533 18,674 15,383 11,207
=========== ============ ============ ============
Net asset value
Investor A--redemption
price per share....... $10.10 $10.56 $16.65 $15.06
====== ====== ====== ======
Investor B--offering
price per share*...... $10.07 $10.57 $16.50 $15.06
====== ====== ====== ======
Institutional.......... $10.10 $10.57 $16.55 $15.04
====== ====== ====== ======
Maximum Sales Charge--
Investor A............. 4.75% 4.75% 5.50% 4.75%
====== ====== ====== ======
Maximum Offering Price
(100%/(100%--Maximum
Sales Charge) of net
asset value adjusted to
nearest cent) per
share--Investor A...... $10.60 $11.09 $17.62 $15.81
====== ====== ====== ======
</TABLE>
- - -------
* Redemption price per share varies by length of time shares are held.
See notes to financial statements.
6
<PAGE> 8
Statements of Operations
- --------------------------------------------------------------------------------
The Parkstone Group of Funds For the Six Months Ended November 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in Thousands)
U.S.
Prime Government
Obligations Obligations Tax-Free Treasury
Fund Fund Fund Fund
----------- ----------- -------- --------
<S> <C> <C> <C> <C>
Investment Income:
Interest income...................... $16,325 $2,981 $1,589 $6,825
------- ------ ------ ------
Total Income......................... 16,325 2,981 1,589 6,825
------- ------ ------ ------
Expenses:
Investment advisory fees............. 1,176 220 182 501
Administration fees.................. 613 114 95 271
Distribution fees--Investor A........ 22 3 1 12
Distribution fees--Investor B........ 3 -- -- --
Custodian fees....................... 37 11 10 19
Accounting fees...................... 61 15 14 28
Legal fees........................... 12 2 2 6
Audit fees........................... 12 5 5 6
Trustees' fees and expenses.......... 5 1 1 2
Transfer agent fees.................. 61 34 19 24
Registration and filing fees......... 17 8 7 8
Printing costs....................... 32 8 7 13
Insurance............................ 2 1 -- 1
Other................................ 6 1 1 25
------- ------ ------ ------
Total Expenses....................... 2,059 423 344 916
Expenses voluntarily reduced......... (13) (2) (1) (102)
------- ------ ------ ------
Net Expenses......................... 2,046 421 343 814
------- ------ ------ ------
Net Investment Income................ 14,279 2,560 1,246 6,011
------- ------ ------ ------
Realized/Unrealized Gains (Losses) On
Investments:
Net realized gains (losses) from
investment transactions............. -- (1) -- 2
------- ------ ------ ------
Change in net assets resulting from
operations.......................... $14,279 $2,559 $1,246 $6,013
------- ------ ------ ------
</TABLE>
See notes to financial statements.
7
<PAGE> 9
Statements of Operations
- --------------------------------------------------------------------------------
The Parkstone Group of Funds For the Six Months Ended November 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in Thousands)
Small Mid Large International
Capitalization Capitalization Capitalization Discovery
Fund Fund Fund Fund
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Investment Income:
Interest income......... $ 336 $ 126 $ -- $ --
Dividend income......... 514 695 1,705 1,891
Securities Lending
Income................. 113 117 35 4
Foreign tax withholding. -- -- -- (72)
------- ------- ------- -------
Total Income............ 963 938 1,740 1,823
------- ------- ------- -------
Expenses:
Investment advisory
fees................... 1,445 1,898 1,810 1,836
Administration fees..... 289 380 462 315
Distribution fees--
Investor A............. 66 58 32 31
Distribution fees--
Investor B............. 92 81 76 39
Custodian fees.......... 20 24 28 104
Accounting fees......... 44 53 63 72
Legal fees.............. 6 8 10 7
Audit fees.............. 7 9 10 8
Trustees' fees and
expenses............... 2 3 3 2
Transfer agent fees..... 254 152 83 119
Registration and filing
fees................... 15 15 13 14
Printing costs.......... 17 21 24 17
Insurance............... 1 1 1 1
Other................... 3 5 4 5
------- ------- ------- -------
Total Expenses.......... 2,261 2,708 2,619 2,570
------- ------- ------- -------
Net Investment Income
(Loss)................. (1,298) (1,770) (879) (747)
------- ------- ------- -------
Realized/Unrealized
Gains (Losses) On
Investments:
Net realized gains from
investment and foreign
currency transactions.. 43,051 45,753 49,903 36,562
Net change in unrealized
appreciation from
investments and
translation of assets
and liabilities in
foreign currencies..... 36,589 23,224 24,327 55,195
------- ------- ------- -------
Net realized/unrealized
gains from investments
and foreign currencies. 79,640 68,977 74,230 91,757
------- ------- ------- -------
Change in net assets
resulting from
operations............. $78,342 $67,207 $73,351 $91,010
======= ======= ======= =======
</TABLE>
See notes to financial statements.
8
<PAGE> 10
Statements of Operations
- --------------------------------------------------------------------------------
The Parkstone Group of Funds For the Six Months Ended November 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in Thousands)
Intermediate U.S.
Limited Government Government
Maturity Bond Obligations Income Bond
Fund Fund Fund Fund
------------- ------------ ----------- --------
<S> <C> <C> <C> <C>
Investment Income:
Interest income............... $ 4,382 $ 4,061 $ 6,601 $ 12,332
Dividend income............... 35 34 68 79
Securities Lending Income..... 6 13 3 37
------- ------- ------- --------
Total Income.................. 4,423 4,108 6,672 12,448
------- ------- ------- --------
Expenses:
Investment advisory fees...... 440 443 661 1,228
Administration fees........... 136 130 195 362
Distribution fees--Investor A. 24 11 40 12
Distribution fees--Investor B. 4 5 69 19
Custodian fees................ 12 12 14 23
Accounting fees............... 28 31 43 56
Legal fees.................... 3 3 4 8
Audit fees.................... 5 6 6 8
Trustees' fees and expenses... 1 1 2 3
Transfer agent fees........... 37 40 66 60
Registration and filing fees.. 12 12 14 15
Printing costs................ 9 9 12 20
Insurance..................... -- -- -- 1
Other......................... 2 1 4 5
------- ------- ------- --------
Total Expenses................ 713 704 1,130 1,820
Expenses voluntarily reduced.. (99) (29) (207) (85)
------- ------- ------- --------
Net Expenses.................. 614 675 923 1,735
------- ------- ------- --------
Net Investment Income......... 3,809 3,433 5,749 10,713
------- ------- ------- --------
Realized/Unrealized Gains
(Losses) On Investments:
Net realized gains (losses)
from investment transactions. (693) (1,049) (1,183) (5,522)
Net change in unrealized
appreciation (depreciation)
from investments............. (533) (1,011) (2,564) (3,690)
------- ------- ------- --------
Net realized/unrealized gains
(losses) on investments...... (1,226) (2,060) (3,747) (9,212)
------- ------- ------- --------
Change in net assets resulting
from operations.............. $ 2,583 $ 1,373 $ 2,002 $ 1,501
======= ======= ======= ========
</TABLE>
See notes to financial statements.
9
<PAGE> 11
Statements of Operations
- --------------------------------------------------------------------------------
The Parkstone Group of Funds For the Six Months Ended November 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in Thousands)
National Tax Michigan Equity Balanced
Exempt Bond Municipal Income Allocation
Fund Bond Fund Fund Fund
------------ --------- -------- ----------
<S> <C> <C> <C> <C>
Investment Income:
Interest income.................... $ 2,271 $ 5,380 $ -- $ 2,322
Dividend income.................... 25 33 3,895 446
Securities Lending Income.......... -- -- 49 23
Foreign tax withholding............ -- -- -- (3)
------- ------- -------- -------
Total Income....................... 2,296 5,413 3,944 2,788
------- ------- -------- -------
Expenses:
Investment advisory fees........... 327 710 1,365 831
Administration fees................ 96 209 295 180
Distribution fees--Investor A...... 7 31 91 19
Distribution fees--Investor B...... 3 13 103 27
Custodian fees..................... 10 15 21 30
Accounting fees.................... 27 44 44 44
Legal fees......................... 2 5 6 4
Audit fees......................... 5 6 8 6
Trustees' fees and expenses........ 1 2 2 1
Transfer agent fees................ 26 47 157 60
Registration and filing fees....... 11 1 15 13
Printing costs..................... 7 13 17 11
Insurance.......................... -- 1 1 1
Other.............................. 1 3 5 3
------- ------- -------- -------
Total Expenses..................... 523 1,100 2,130 1,230
------- ------- -------- -------
Expenses voluntarily reduced....... (92) (197) -- (156)
------- ------- -------- -------
Net Expenses....................... 431 903 2,130 1,074
------- ------- -------- -------
Net Investment Income.............. 1,865 4,510 1,814 1,714
------- ------- -------- -------
Realized/Unrealized Gains (Losses)
On Investments:
Net realized gains (losses) from
investment and foreign currency
transactions...................... (439) (178) 35,998 13,133
Net change in unrealized
appreciation (depreciation) from
investments and translation of
assets and liabilities in foreign
currencies........................ (2,347) (6,775) (63,483) 6,334
------- ------- -------- -------
Net realized/unrealized gains
(losses) on investments and
foreign currencies................ (2,786) (6,953) (27,485) 19,467
------- ------- -------- -------
Change in net assets resulting from
operations........................ $ (921) $(2,443) $(25,671) $21,181
======= ======= ======== =======
</TABLE>
- - -------
* Investor C class of shares closed on August 28, 1998.
See notes to financial statements.
10
<PAGE> 12
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in Thousands)
U.S. Government
Prime Obligations Fund Obligations Fund
------------------------ -----------------------
For the For the
Six Months For the Six Months For the
Ended Year Ended Ended Year Ended
November 30, May 31, November 30, May 31,
1999 1999 1999 1999
------------ ----------- ------------ ----------
<S> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income...... $ 14,279 $ 35,041 $ 2,560 $ 11,399
Net realized gains (losses)
from investment
transactions.............. -- -- (1) --
--------- ----------- --------- ---------
Change in net assets
resulting from operations.. 14,279 35,041 2,559 11,399
--------- ----------- --------- ---------
Distributions to Investor A
Shareholders:
From net investment income. (403) (3,035) (54) (3,460)
Distributions to Investor B
Shareholders:
From net investment income. (12) (26) -- --
Distributions to
Institutional Class
Shareholders:
From net investment income. (13,864) (31,980) (2,506) (7,939)
--------- ----------- --------- ---------
Change in net assets
resulting from
distributions.............. (14,279) (35,041) (2,560) (11,399)
--------- ----------- --------- ---------
Capital Transactions:
Proceeds from shares
issued.................... 405,597 1,494,362 77,836 535,685
Dividends reinvested....... 181 3,675 12 569
Cost of shares redeemed.... (442,930) (1,763,064) (101,177) (767,341)
--------- ----------- --------- ---------
Change in net assets from
capital transactions....... (37,152) (265,027) (23,329) (231,087)
--------- ----------- --------- ---------
Change in net assets........ (37,152) (265,027) (23,330) (231,087)
Net Assets:
Beginning of period........ 644,241 909,268 123,507 354,594
--------- ----------- --------- ---------
End of period.............. $ 607,089 $ 644,241 $ 100,177 $ 123,507
========= =========== ========= =========
</TABLE>
See notes to financial statements.
11
<PAGE> 13
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in Thousands)
Tax-Free Fund Treasury Fund
----------------------- ------------------------
For the For the
Six Months For the Six Months For the
Ended Year Ended Ended Year Ended
November 30, May 31, November 30, May 31,
1999 1999 1999 1999
------------ ---------- ------------ -----------
<S> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income...... $ 1,246 $ 3,346 $ 6,011 $ 18,999
Net realized gains (losses)
from investment
transactions.............. -- 3 2 24
--------- --------- --------- -----------
Change in net assets
resulting from operations... 1,246 3,349 6,013 19,023
--------- --------- --------- -----------
Distributions to Investor A
Shareholders:
From net investment income. (12) (584) (216) (5,234)
In excess of net investment
income.................... -- -- -- (9)
Distributions to
Institutional Class
Shareholders:
From net investment income. (1,234) (2,762) (5,795) (13,765)
In excess of net investment
income.................... -- -- -- (24)
--------- --------- --------- -----------
Change in net assets
resulting from
distributions............... (1,246) (3,346) (6,011) (19,032)
--------- --------- --------- -----------
Capital Transactions:
Proceeds from shares
issued.................... 82,081 253,902 485,945 1,827,862
Dividends reinvested....... 11 462 83 318
Cost of shares redeemed.... (103,859) (302,778) (519,490) (2,111,268)
--------- --------- --------- -----------
Change in net assets from
capital transactions........ (21,767) (48,414) (33,462) (283,088)
--------- --------- --------- -----------
Change in net assets......... (21,767) (48,411) (33,460) (283,097)
Net Assets:
Beginning of period........ 110,757 159,168 278,695 561,792
--------- --------- --------- -----------
End of period.............. $ 88,990 $ 110,757 $ 245,235 $ 278,695
========= ========= ========= ===========
</TABLE>
See notes to financial statements.
12
<PAGE> 14
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in Thousands)
Small Capitalization Fund Mid Capitalization Fund
---------------------------- -----------------------
For the For the
Six Months For the Six Months For the
Ended Year Ended Ended Year Ended
November 30, May 31, November 30, May 31,
1999 1999 1999 1999
------------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
From Investment
Activities:
Operations:
Net investment income
(loss)................. $ (1,298) $ (4,377) $ (1,770) $ (4,129)
Net realized gains
(losses) from
investment
transactions........... 43,051 (26) 45,753 134,749
Net change in unrealized
appreciation
(depreciation) from
investments............ 36,589 (109,493) 23,224 (104,609)
------------ ------------ -------- ---------
Change in net assets
resulting from
operations............... 78,342 (113,896) 67,207 26,011
------------ ------------ -------- ---------
Distributions to Investor
A Shareholders:
From net realized gains
from investment
transactions........... -- (10,802) -- (8,203)
Distributions to Investor
B Shareholders:
From net realized gains
from investment
transactions........... -- (3,334) -- (2,657)
Distributions to
Institutional Class
Shareholders:
From net realized gains
from investment
transactions........... -- (36,347) -- (52,517)
------------ ------------ -------- ---------
Change in net assets
resulting from
distributions............ -- (50,483) -- (63,377)
------------ ------------ -------- ---------
Capital Transactions:
Proceeds from shares
issued................. 29,807 494,145 8,792 147,939
Dividends reinvested.... -- 40,154 -- 49,480
Cost of shares redeemed. (120,417) (814,361) (72,837) (407,357)
------------ ------------ -------- ---------
Change in net assets from
capital transactions..... (90,610) (280,062) (64,045) (209,938)
------------ ------------ -------- ---------
Change in net assets...... (12,268) (444,441) 3,162 (247,304)
Net Assets:
Beginning of period..... 302,688 747,129 386,967 634,271
------------ ------------ -------- ---------
End of period........... $ 290,420 $ 302,688 $390,129 $ 386,967
============ ============ ======== =========
</TABLE>
See notes to financial statements.
13
<PAGE> 15
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in Thousands)
Large Capitalization Fund International Discovery Fund
----------------------------- -------------------------------
For the For the
Six Months For the Six Months
Ended Year Ended Ended For the
November 30, May 31, November 30, Year Ended
1999 1999 1999 May 31, 1999
------------- ------------- --------------- --------------
<S> <C> <C> <C> <C>
From Investment
Activities:
Operations:
Net investment income
(loss)............... $ (879) $ (1,629) $ (747) $ (957)
Net realized gains
(losses) from
investment and
foreign currency
transactions......... 49,903 70,480 36,562 55,634
Net change in
unrealized
appreciation
(depreciation) from
investments and
translation of assets
and liabilities in
foreign currencies... 24,327 22,143 55,195 (80,335)
------------ ------------- ------------- --------------
Change in net assets
resulting from
operations............. 73,351 90,994 91,010 (25,658)
------------ ------------- ------------- --------------
Distributions to
Investor A
Shareholders:
From net realized
gains from investment
and foreign currency
transactions......... -- (375) -- (1,835)
Distributions to
Investor B
Shareholders:
From net realized
gains from investment
and foreign currency
transactions......... -- (211) -- (584)
Distributions to
Institutional Class
Shareholders:
From net realized
gains from investment
and foreign currency
transactions......... -- (6,438) -- (18,395)
------------ ------------- ------------- --------------
Change in net assets
resulting from
distributions.......... -- (7,024) -- (20,814)
------------ ------------- ------------- --------------
Capital Transactions:
Proceeds from shares
issued............... 17,529 82,673 45,250 47,693
Dividends reinvested.. -- 4,652 -- 12,710
Cost of shares
redeemed............. (59,835) (113,833) (93,177) (198,705)
------------ ------------- ------------- --------------
Change in net assets
from capital
transactions........... (42,306) (26,508) (47,927) (138,302)
------------ ------------- ------------- --------------
Change in net assets.... 31,045 57,462 43,083 (184,774)
Net Assets:
Beginning of period... 447,748 390,286 300,282 485,056
------------ ------------- ------------- --------------
End of period......... $ 478,793 $ 447,748 $ 343,365 $ 300,282
============ ============= ============= ==============
</TABLE>
See notes to financial statements.
14
<PAGE> 16
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in Thousands)
Limited Maturity Intermediate Government
Bond Fund Obligations Fund
----------------------- -----------------------
For the For the
Six Months For the Six Months For the
Ended Year Ended Ended Year Ended
November 30, May 31, November 30, May 31,
1999 1999 1999 1999
------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income........ $ 3,809 $ 10,142 $ 3,433 $ 8,616
Net realized gains (losses)
from investment
transactions................ (693) 691 (1,049) 653
Net change in unrealized
appreciation (depreciation)
from investments............ (533) (1,757) (1,011) (1,892)
-------- -------- -------- --------
Change in net assets resulting
from operations............... 2,583 9,076 1,373 7,377
-------- -------- -------- --------
Distributions to Investor A
Shareholders:
From net investment income... (506) (1,778) (223) (590)
Distributions to Investor B
Shareholders:
From net investment income... (20) (59) (24) (65)
Distributions to Investor C
Shareholders:(a)
From net investment income... -- (22) -- (3)
Distributions to Institutional
Class Shareholders:
From net investment income... (3,284) (8,283) (3,186) (7,958)
-------- -------- -------- --------
Change in net assets resulting
from distributions............ (3,810) (10,142) (3,433) (8,616)
-------- -------- -------- --------
Capital Transactions:
Proceeds from shares issued.. 8,478 40,538 2,239 14,190
Dividends reinvested......... 1,537 4,082 1,016 2,456
Cost of shares redeemed...... (31,575) (91,178) (35,171) (58,259)
-------- -------- -------- --------
Change in net assets from
capital transactions.......... (21,560) (46,558) (31,916) (41,613)
-------- -------- -------- --------
Change in net assets........... (22,787) (47,624) (33,976) (42,852)
Net Assets:
Beginning of period.......... 148,209 195,833 145,177 188,029
-------- -------- -------- --------
End of period................ $125,422 $148,209 $111,201 $145,177
======== ======== ======== ========
</TABLE>
- - -------
(a)Investor C class of shares closed on August 28, 1998.
See notes to financial statements.
15
<PAGE> 17
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in Thousands)
U.S. Government
Income Fund Bond Fund
----------------------- -----------------------
For the For the
Six Months For the Six Months For the
Ended Year Ended Ended Year Ended
November 30, May 31, November 30, May 31,
1999 1999 1999 1999
------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income........ $ 5,749 $ 13,241 $ 10,713 $ 26,093
Net realized gains (losses)
from investment
transactions................ (1,183) 1,493 (5,522) 2,425
Net change in unrealized
appreciation (depreciation)
from investments............ (2,564) (4,469) (3,690) (13,814)
-------- -------- -------- ---------
Change in net assets resulting
from operations............... 2,002 10,265 1,501 14,704
-------- -------- -------- ---------
Distributions to Investor A
Shareholders:
From net investment income... (921) (2,684) (276) (778)
From net realized gains from
investment transactions..... -- -- -- (36)
Distributions to Investor B
Shareholders:
From net investment income... (350) (1,063) (94) (268)
From net realized gains from
investment transactions..... -- -- -- (15)
Distributions to Investor C
Shareholders:(a)
From net investment income... -- (3) -- (7)
Distributions to Institutional
Class Shareholders:
From net investment income... (4,478) (9,491) (10,343) (25,246)
From net realized gains from
investment transactions..... -- -- -- (1,118)
-------- -------- -------- ---------
Change in net assets resulting
from distributions............ (5,749) (13,241) (10,713) (27,468)
-------- -------- -------- ---------
Capital Transactions:
Proceeds from shares issued.. 32,975 47,892 19,375 49,058
Dividends reinvested......... 1,379 3,175 6,680 17,146
Cost of shares redeemed...... (50,783) (83,794) (51,601) (176,431)
-------- -------- -------- ---------
Change in net assets from
capital transactions.......... (16,429) (32,727) (25,546) (110,227)
-------- -------- -------- ---------
Change in net assets........... (20,176) (35,703) (34,758) (122,991)
Net Assets:
Beginning of period.......... 204,676 240,379 382,694 505,685
-------- -------- -------- ---------
End of period................ $184,500 $204,676 $347,936 $ 382,694
======== ======== ======== =========
</TABLE>
- - -------
(a)Investor C class of shares closed on August 28, 1998.
See notes to financial statements.
16
<PAGE> 18
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in Thousands)
National Tax Exempt Michigan Municipal
Bond Fund Bond Fund
----------------------- -----------------------
For the For the
Six Months For the Six Months For the
Ended Year Ended Ended Year Ended
November 30, May 31, November 30, May 31,
1999 1999 1999 1999
------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income........ $ 1,865 $ 4,593 $ 4,510 $ 9,903
Net realized gains (losses)
from investment
transactions................ (439) 428 (178) 981
Net change in unrealized
appreciation (depreciation)
from investments............ (2,347) (438) (6,775) (2,440)
-------- -------- -------- --------
Change in net assets resulting
from operations............... (921) 4,583 (2,443) 8,444
Distributions to Investor A
Shareholders:
From net investment income... (105) (287) (508) (1,300)
In excess of net investment
income...................... -- -- (2) (2)
From net realized gains from
investment transactions..... -- (90) -- (212)
Distributions to Investor B
Shareholders:
From net investment income... (7) (18) (47) (112)
From net realized gains from
investment transactions..... -- (7) -- (22)
Distributions to Institutional
Class Shareholders:
From net investment income... (1,753) (4,288) (3,937) (8,489)
In excess of net investment
income...................... -- -- (17) (17)
From net realized gains from
investment transactions..... -- (1,234) -- (1,265)
-------- -------- -------- --------
Change in net assets resulting
from distributions............ (1,865) (5,924) (4,511) (11,422)
-------- -------- -------- --------
Capital Transactions:
Proceeds from shares issued.. 2,404 9,852 6,185 34,583
Dividends reinvested......... 238 713 882 2,341
Cost of shares redeemed...... (17,959) (38,965) (26,873) (58,653)
-------- -------- -------- --------
Change in net assets from
capital transactions.......... (15,317) (28,400) (19,806) (21,729)
-------- -------- -------- --------
Change in net assets........... (18,103) (29,741) (26,760) (24,707)
Net Assets:
Beginning of period.......... 104,323 134,064 224,058 248,765
-------- -------- -------- --------
End of period................ $ 86,220 $104,323 $197,298 $224,058
======== ======== ======== ========
</TABLE>
See notes to financial statements.
17
<PAGE> 19
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in Thousands)
Balanced Allocation
Equity Income Fund Fund
----------------------- -----------------------
For the For the
Six Months For the Six Months For the
Ended Year Ended Ended Year Ended
November 30, May 31, November 30, May 31,
1999 1999 1999 1999
------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income........ $ 1,814 $ 4,840 $ 1,714 $ 5,700
Net realized gains (losses)
from investment and foreign
currency transactions....... 35,998 94,130 13,133 15,226
Net change in unrealized
appreciation (depreciation)
from investments and
translation of assets and
liabilities in foreign
currencies.................. (63,483) (61,914) 6,334 (12,513)
-------- --------- -------- ---------
Change in net assets resulting
from operations............... (25,671) 37,056 21,181 8,413
-------- --------- -------- ---------
Distributions to Investor A
Shareholders:
From net investment income... (383) (1,152) (138) (360)
From net realized gains from
investment and foreign
currency transactions....... -- (10,723) -- (472)
Distributions to Investor B
Shareholders:
From net investment income... (43) (178) (30) (89)
From net realized gains from
investment and foreign
currency transactions....... -- (3,010) -- (192)
Distributions to Investor C
Shareholders:(a)
From net investment income... -- (2) -- (3)
Distributions to Institutional
Class Shareholders:
From net investment income... (1,320) (3,699) (1,714) (5,206)
From net realized gains from
investment and foreign
currency transactions....... -- (29,940) -- (6,148)
-------- --------- -------- ---------
Change in net assets resulting
from distributions............ (1,746) (48,704) (1,882) (12,470)
-------- --------- -------- ---------
Capital Transactions:
Proceeds from shares issued.. 8,405 34,686 12,772 32,544
Dividends reinvested......... 674 21,572 1,722 11,335
Cost of shares redeemed...... (53,320) (132,781) (63,848) (131,988)
Change in net assets from
capital transactions.......... (44,241) (76,523) (49,354) (88,109)
-------- --------- -------- ---------
Change in net assets........... (71,658) (88,171) (30,055) (92,166)
Net Assets:
Beginning of period.......... 326,588 414,759 198,686 290,852
-------- --------- -------- ---------
End of period................ $254,930 $ 326,588 $168,631 $ 198,686
======== ========= ======== =========
</TABLE>
- - -------
(a)Investor C class of shares closed on August 28, 1998.
See notes to financial statements.
18
<PAGE> 20
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
Prime Obligations Fund
(Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
Principal Security Amortized
Amount Description Cost
--------- --------------------------------------------------------- ---------
<S> <C> <C>
Certificates of Deposit - Yankee (5.8%):
Yankee (5.8%):
$10,000 Bank of Montreal, 5.16%, 5/3/00.......................... $ 9,998
5,000 Bayerische Landisbank, 5.40%, 12/8/99.................... 5,000
5,000 Bayerische Landisbank, 5.94%, 1/5/00..................... 5,000
10,000 Rabobank, 5.13%, 4/27/00................................. 9,998
5,000 Union Bank of Switzerland, 5.60%, 6/14/00................ 4,999
--------
Total Certificates Of Deposit--Yankee 34,995
--------
Commercial Paper (73.3%):
Agriculture (0.8%):
5,000 Cargill, Inc., 5.42%, 1/19/00............................ 4,963
--------
Automotive (5.7%):
5,000 DaimlerChrysler North America, 5.31%, 12/8/99............ 4,995
5,000 DaimlerChrysler North America, 5.31%, 12/15/99........... 4,990
5,000 Ford Motor Credit Corp., 5.81%, 1/4/00................... 4,973
5,000 Ford Motor Credit Corp., 5.83%, 4/19/00.................. 4,887
10,000 General Motors Acceptance Corp., 5.71%, 1/26/00.......... 9,910
5,000 General Motors Acceptance Corp., 5.38%, 3/22/00.......... 4,916
--------
34,671
--------
Banking (8.2%):
5,000 Abbey National North America, 5.35%, 12/3/99............. 4,998
5,000 Abbey National North America, 5.34%, 12/10/99............ 4,993
5,000 Deutsche Bank, 5.34%, 12/15/99........................... 4,990
5,000 Deutsche Bank, 5.74%, 1/19/00............................ 4,961
5,000 Dresdner Bank, 5.35%, 12/15/99........................... 4,990
5,000 Dresdner Bank, 5.81%, 1/10/00............................ 4,968
5,000 Royal Bank of Canada, 5.30%, 12/29/99.................... 4,979
5,000 Svenska Handelsbanken, Inc., 5.33%, 12/21/99............. 4,985
5,000 Svenska Handelsbanken, Inc., 5.34%, 12/29/99............. 4,979
5,000 Svenska Handelsbanken, Inc., 5.88%, 3/1/00............... 4,926
--------
49,769
--------
Chemicals (5.6%):
5,000 Akzo Nobel NV, 5.80%, 3/7/00............................. 4,922
5,000 Akzo Nobel NV, 5.84%, 3/9/00............................. 4,920
5,000 Akzo Nobel NV, 5.85%, 3/21/00............................ 4,910
5,000 Great Lakes Chemical Corp., 5.93%, 1/19/00............... 4,960
5,000 Henkel Corp., 6.00%, 1/13/00............................. 4,963
4,500 Monsanto Co., 5.40%, 1/18/00............................. 4,468
5,000 Monsanto Co., 5.77%, 3/22/00............................. 4,910
--------
34,053
--------
</TABLE>
<TABLE>
<CAPTION>
Principal Security Amortized
Amount Description Cost
--------- --------------------------------------------------------- ---------
<S> <C> <C>
Commercial Paper, continued:
Diversified Operation (6.5%):
$ 5,000 Bass Finance Ltd., 5.31%, 12/6/99........................ $ 4,997
4,915 Bass Finance Ltd., 5.87%, 2/10/00........................ 4,858
5,000 Bass Finance Ltd., 5.87%, 2/22/00........................ 4,932
5,000 Bass Finance Ltd., 5.88%, 2/23/00........................ 4,931
5,000 General Electric Capital Corp., 4.95%, 2/3/00............ 4,957
5,000 General Electric Capital Corp., 5.76%, 2/16/00........... 4,938
5,000 General Electric Capital Corp., 5.73%, 2/23/00........... 4,933
5,000 General Electric Capital Corp., 5.83%, 4/5/00............ 4,898
--------
39,444
--------
Electric Utility (1.6%):
5,000 Southern Co., 5.85%, 2/10/00............................. 4,942
5,000 Southern Co., 5.70%, 2/23/00............................. 4,934
--------
9,876
--------
Electrical & Electronic (0.8%):
5,000 Eaton Corp., 5.53%, 1/19/00.............................. 4,962
--------
Finance - Conduit (11.6%):
5,000 Ciesco L.P., 5.33%, 12/1/99.............................. 5,000
5,000 Ciesco L.P., 5.35%, 12/13/99............................. 4,991
5,000 Ciesco L.P., 5.80%, 1/26/00.............................. 4,955
5,000 Corporate Asset Funding Co., Inc., 5.30%, 12/13/99....... 4,991
5,000 Corporate Asset Funding Co., Inc., 6.05%, 1/20/00........ 4,958
5,000 Corporate Asset Funding Co., Inc., 6.03%, 1/26/00........ 4,953
5,000 Corporate Asset Funding Co., Inc., 6.00%, 2/10/00........ 4,941
5,000 Delaware Funding Corp., 5.58%, 1/18/00................... 4,961
5,000 Delaware Funding Corp., 5.83%, 1/21/00................... 4,959
5,000 Delaware Funding Corp., 5.82%, 2/22/00................... 4,933
5,000 Pemex, 5.32%, 12/6/99.................................... 4,996
4,490 Preferred Receivables Funding Corp., 5.40%, 1/12/00...... 4,462
5,000 Preferred Receivables Funding Corp., 6.00%, 1/13/00...... 4,964
5,735 Preferred Receivables Funding Corp., 6.07%, 1/18/00...... 5,688
--------
69,752
--------
Financial Services (9.8%):
5,000 American Express Co., 5.38%, 1/19/00..................... 4,963
5,000 American Express Co., 5.98%, 1/26/00..................... 4,953
5,000 American Express Credit Corp., 5.82%, 1/31/00............ 4,951
5,000 American Express Credit Corp., 5.90%, 2/2/00............. 4,948
5,000 Den Danske Bank, 5.34%, 12/14/99......................... 4,990
</TABLE>
Continued
19
<PAGE> 21
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
Prime Obligations Fund
(Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
Principal Security Amortized
Amount Description Cost
--------- --------------------------------------------------------- ---------
<S> <C> <C>
Commercial Paper, continued:
Financial Services, continued:
$ 5,000 Den Danske Bank, 5.70%, 5/12/00.......................... $ 4,871
5,000 Household Finance, 5.30%, 12/2/99........................ 4,999
5,000 Household Finance, 5.70%, 1/12/00........................ 4,967
5,000 Household Finance, 5.96%, 2/2/00......................... 4,948
10,000 Transamerica Finance Corp., 5.99%, 1/26/00............... 9,908
5,000 Transamerica Finance Corp., 5.85%, 4/12/00............... 4,892
--------
59,390
--------
Food Products & Services (4.1%):
5,000 Campbell Soup Co., 4.80%, 12/1/99........................ 5,000
5,000 Diageo PLC, 5.55%, 1/12/00............................... 4,968
5,000 Diageo PLC, 5.95%, 1/18/00............................... 4,960
5,000 Diageo PLC, 5.50%, 2/9/00................................ 4,947
5,000 Diageo PLC, 5.80%, 4/4/00................................ 4,899
--------
24,774
--------
Glass Products (1.6%):
5,000 Guardian Industries, 6.03%, 1/14/00...................... 4,964
5,000 Guardian Industries, 5.90%, 1/28/00...................... 4,952
--------
9,916
--------
Insurance (6.5%):
5,000 American General Corp., 5.81%, 3/15/99................... 4,915
5,000 New York Life Capital Corp., 5.30%, 12/8/99.............. 4,996
5,000 Prudential Funding Corp., 5.75%, 1/12/00................. 4,966
5,000 Prudential Funding Corp., 5.75%, 1/19/00................. 4,961
5,000 Prudential Funding Corp., 5.86%, 1/26/00................. 4,954
5,000 Prudential Funding Corp., 5.77%, 4/5/00.................. 4,899
5,000 St. Paul Cos., Inc., 5.63%, 2/9/00....................... 4,945
5,000 St. Paul Cos., Inc., 5.70%, 2/23/00...................... 4,934
--------
39,570
--------
Machinery & Equipment (1.6%):
5,000 Caterpillar Financial, 5.78%, 2/28/00.................... 4,928
5,000 Caterpillar Financial, 5.80%, 3/16/00.................... 4,915
--------
9,843
--------
Manufacturing (1.6%):
5,000 Stanley Works, 5.65%, 2/9/00............................. 4,945
5,000 Stanley Works, 5.72%, 3/1/00............................. 4,928
--------
9,873
--------
Oil & Exploration, Production & Services (1.6%):
5,000 Atlantic Richfield, 5.30%, 12/2/99....................... 4,999
5,000 BP America, Inc., 4.86%, 1/24/00......................... 4,964
--------
9,963
--------
Paper Products (0.8%):
5,000 Sonoco Products Co., 5.75%, 3/14/00...................... 4,917
--------
</TABLE>
<TABLE>
<CAPTION>
Principal Security Amortized
Amount Description Cost
--------- --------------------------------------------------------- ---------
<S> <C> <C>
Commercial Paper, continued:
Pharmaceuticals (4.1%):
$ 5,000 American Home Products, 5.42%, 1/25/00................... $ 4,958
5,000 American Home Products, 5.72%, 2/16/00................... 4,939
5,000 American Home Products, 5.70%, 3/6/00.................... 4,924
5,000 Glaxo Welcome, Inc., 5.92%, 2/17/00...................... 4,936
5,000 Glaxo Welcome, Inc., 5.85%, 3/10/00...................... 4,919
--------
24,676
--------
Photography (0.8%):
5,000 Eastman Kodak, 5.89%, 1/19/00............................ 4,960
--------
Total Commercial Paper 445,372
--------
Corporate Bonds (10.7%):
Automotive (0.8%):
5,000 DaimlerChrysler North America, 5.28%*, 7/6/00............ 4,996
--------
Banking (2.5%):
10,000 Abbey National North America, 5.13%, 5/4/00.............. 9,997
5,000 Comerica, Inc., 5.43%*, 9/1/00........................... 4,998
--------
14,995
--------
Financial Services (6.6%):
5,000 AllState Funding Agreement, 5.49%*, 12/1/99.............. 5,000
5,000 AllState Funding Agreement, 5.25%*, 3/31/00.............. 5,000
10,000 AllState Funding Agreement, 5.57%*, 9/1/00............... 10,000
10,000 Travelers Funding Agreement, 6.14%*, 3/31/00............. 10,000
10,000 Travelers Funding Agreement, 5.51%*, 8/17/00............. 10,000
--------
40,000
--------
Telecommunications (0.8%):
5,000 AT&T Corp., 6.14%*, 1/13/00.............................. 4,999
--------
Total Corporate Bonds 64,990
--------
U.S. Government Agencies (5.8%):
Fannie Mae (0.8%):
5,000 5.27%, 12/6/99........................................... 4,996
--------
Federal Home Loan Bank (1.6%):
10,000 5.71%*, 3/24/00.......................................... 10,000
--------
Student Loan Marketing Assoc. (3.4%):
10,000 6.05%*, 8/10/00.......................................... 9,999
10,000 6.05%*, 11/15/00......................................... 9,995
--------
19,994
--------
Total U.S. Government Agencies 34,990
--------
</TABLE>
Continued
20
<PAGE> 22
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
Prime Obligations Fund
(Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
Principal Security Amortized
Amount Description Cost
--------- -------------------------------------------------------- ---------
<S> <C> <C>
Repurchase Agreements (5.4%):
$33,072 JP Morgan, 5.72%, 12/1/99, (Collateralized by $35,005,
Fannie Mae, 6.43%, 2/6/08, market value--$34,446)... $ 33,072
--------
Total Repurchase Agreements 33,072
--------
Total Investments (Amortized Cost $613,419)(a)--101.0% 613,419
Liabilities in excess of other assets--(1.0)% (6,330)
--------
Total Net Assets--100.0% $607,089
========
</TABLE>
- - -------
* Variable rate securities having liquidity sources through bank letters of
credit or other credit and/or liquidity agreements. The interest rate,
which will change periodically, is based upon an index of market rates. The
rate reflected on the Schedule of Portfolio Investments is the rate in
effect at November 30, 1999.
(a) Cost and value for federal income tax and financial reporting purposes are
the same.
See notes to financial statements.
21
<PAGE> 23
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
U.S. Government Obligations Fund
(Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
Principal Security Amortized
Amount Description Cost
--------- --------------------------------------------------------- ---------
<S> <C> <C>
U.S. Government Agencies (91.2%):
Fannie Mae (24.9%):
$1,000 5.27%, 12/2/99........................................... $ 1,000
2,000 5.27%, 12/6/99........................................... 1,999
1,000 5.26%, 12/7/99........................................... 999
1,000 5.26%, 12/8/99........................................... 999
1,000 5.25%, 12/10/99.......................................... 999
1,000 5.24%, 12/15/99.......................................... 998
2,100 5.36%, 1/18/00........................................... 2,085
3,000 5.26%, 1/20/00........................................... 2,977
1,000 5.52%, 1/24/00........................................... 992
1,000 5.24%, 1/26/00........................................... 992
3,100 5.46%, 2/2/00............................................ 3,069
2,000 5.51%, 2/8/00............................................ 1,979
1,000 5.53%, 2/17/00........................................... 988
1,000 5.23%, 3/15/00........................................... 985
1,000 5.50%, 3/16/00........................................... 984
1,000 5.60%, 4/10/00........................................... 980
1,000 5.48%, 4/25/00........................................... 978
1,000 5.51%, 5/18/00........................................... 974
--------
24,977
--------
Federal Farm Credit Bank (3.0%):
1,000 5.33%, 12/29/99.......................................... 996
1,000 5.55%, 1/24/00........................................... 992
1,000 5.55%, 2/15/00........................................... 988
--------
2,976
--------
Federal Home Loan Bank (25.7%):
1,000 5.53%, 1/12/00........................................... 994
1,000 5.56%, 1/14/00........................................... 993
2,000 5.51%, 1/26/00........................................... 1,983
1,000 5.17%, 1/31/00........................................... 991
1,000 5.52%, 2/1/00............................................ 990
1,000 5.48%, 2/2/00............................................ 990
1,000 5.53%, 2/3/00............................................ 990
1,000 5.53%, 2/11/00........................................... 989
1,000 5.51%, 2/16/00........................................... 988
1,000 5.52%, 2/22/00........................................... 987
2,000 5.54%, 2/23/00........................................... 1,974
1,000 5.57%, 3/2/00............................................ 986
1,000 5.51%, 3/8/00............................................ 985
3,000 5.71%*, 3/24/00.......................................... 3,001
1,000 5.57%, 4/12/00........................................... 979
1,000 5.58%, 4/19/00........................................... 978
1,000 5.59%, 4/26/00........................................... 977
2,000 5.51%, 5/10/00........................................... 1,951
1,000 5.55%, 5/24/00........................................... 973
2,000 5.67%*, 6/9/00........................................... 2,001
--------
25,700
--------
</TABLE>
<TABLE>
<CAPTION>
Principal Security Amortized
Amount Description Cost
--------- -------------------------------------------------------- ---------
<S> <C> <C>
U.S. Government Agencies, continued:
Freddie Mac (26.8%):
$1,075 5.27%, 12/1/99.......................................... $ 1,075
1,000 5.15%, 12/2/99.......................................... 1,000
1,000 5.11%, 12/9/99.......................................... 999
1,000 5.14%, 12/10/99......................................... 999
1,000 5.12%, 12/14/99......................................... 998
1,000 5.25%, 12/17/99......................................... 998
1,000 5.22%, 12/22/99......................................... 997
2,073 5.55%, 1/10/00.......................................... 2,061
1,000 5.47%, 1/12/00.......................................... 994
1,000 5.54%, 1/13/00.......................................... 993
1,000 5.53%, 1/21/00.......................................... 992
2,000 5.22%, 1/27/99.......................................... 1,983
1,000 5.53%, 1/28/00.......................................... 991
1,000 5.40%, 2/3/00........................................... 990
1,000 5.47%, 2/4/00........................................... 990
1,000 5.47%, 2/7/00........................................... 990
1,000 5.48%, 2/9/00........................................... 989
1,000 5.53%, 2/15/00.......................................... 988
1,000 5.47%, 2/17/00.......................................... 988
1,000 5.52%, 2/23/00.......................................... 987
1,000 5.54%, 3/1/00........................................... 986
1,000 5.52%, 3/9/00........................................... 985
1,000 5.52%, 3/16/00.......................................... 984
1,000 5.47%, 3/23/00.......................................... 983
1,000 5.59%, 4/13/00.......................................... 979
--------
26,919
--------
Student Loan Marketing Assoc. (10.8%):
5,000 6.01%*, 1/12/00......................................... 5,000
1,300 5.18%, 1/27/00.......................................... 1,289
4,500 5.95%*, 3/8/00.......................................... 4,501
--------
10,790
--------
Total U.S. Government Agencies 91,362
--------
Repurchase Agreements (9.1%):
9,153 JP Morgan, 5.72%, 12/1/99, (Collateralized by $9,010,
Fannie Mae, 7.16%, 5/11/05, market value-$9,370)....... 9,153
--------
Total Repurchase Agreements 9,153
--------
Total Investments (Amortized
Cost $100,515)(a)--100.3% 100,515
Liabilities in excess of other assets--(0.3)% (338)
--------
Total Net Assets--100.0% $100,177
========
</TABLE>
- - -------
* Variable rate securities having liquidity sources through bank letters of
credit and/or liquidity agreements. The interest rates, which will change
periodically, are based upon bank prime rates or an index of the market
interest rates. The rate reflected on the Schedule of Portfolio Investments
is the rate in effect on November 30, 1999.
(a) Cost for federal income tax and financial reporting purposes are the same.
See notes to financial statements.
22
<PAGE> 24
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
Tax-Free Fund
(Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
Shares
or
Principal Security Amortized
Amount Description Cost
--------- -------------------------------------------------------- ---------
<S> <C> <C>
Municipal Bonds, Notes, & Commercial Paper (96.9%):
Arizona (6.3%):
$ 1,000 Maricopa County, Arizona, Southern California Edison,
3.50%, 1/21/00......................................... $ 1,000
2,600 Maricopa County, Arizona, Southern California Edison,
3.80%, 2/16/00......................................... 2,600
1,000 Salt River, Arizona, Agricultural Improvement, Series B,
3.75%, 2/23/00......................................... 1,000
1,000 Salt River, Arizona, Agricultural Improvement, Series B,
3.85%, 1/24/00......................................... 1,000
-------
5,600
-------
California (0.3%):
250 Oakland, California, G.O., 6.00%, 12/15/99, MBIA........ 250
-------
Illinois (7.7%):
2,000 Illinois Development Financial Authority Revenue, Series
A, 3.90%*, 10/1/27, LOC: Northern Trust Co............. 2,000
1,000 Illinois Health Facilities Authority, Series B, 3.90%*,
8/15/23, LOC: First National Bank...................... 1,000
1,845 Illinois Health Facilities Authority Advocate, Health
Care, Series B, 3.95%*, 8/15/22........................ 1,845
2,000 Illinois Health Facilities Authority Revenue Bond,
Series B, 3.90%*, 5/1/29, FSA.......................... 2,000
-------
6,845
-------
Indiana (9.4%):
1,850 Franklin County, Indiana, Economic Development Revenue
Bond, 4.10%*, 6/7/10, LOC: Fifth Third Bank............ 1,850
1,470 Goshen, Indiana, Industrial Development Revenue Bond,
4.10%*, 3/1/14, LOC: Key Bank.......................... 1,470
900 Indiana Health Facilities Financing Authority, 3.90%*,
8/1/06, LOC: Comerica Bank............................. 900
1,050 Indiana State Industrial Development Revenue Bond,
4.10%*, 4/1/17, LOC: Key Bank.......................... 1,050
1,000 Indiana Development Financial Authority, 3.45%, 3/2/00,
LOC: Scotia Bank....................................... 1,000
1,100 Indiana State Development Financial Authority, 3.90%*,
8/1/31, LOC: Bank One.................................. 1,100
1,000 Purdue University Student Fee, 3.80%*, 7/1/19........... 1,000
-------
8,370
-------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Amortized
Amount Description Cost
--------- -------------------------------------------------------- ---------
<S> <C> <C>
Municipal Bonds, Notes, & Commercial Paper, continued:
Kentucky (4.8%):
$ 1,270 Bath County, Kentucky, Industrial Building Revenue Bond,
4.10%*, 12/1/13........................................ $ 1,270
2,000 Jefferson County, Kentucky, Louisville Gas & Electric,
3.40%, 1/28/00......................................... 2,000
1,035 Lewis County, Kentucky, Industrial Building Revenue
Bond, 4.10%*, 12/1/03, LOC: Fifth Third Bank........... 1,035
-------
4,305
-------
Maine (2.2%):
2,000 Portland, Maine, Revenue Bond, Barber Foods Project,
Series S, 4.10%*, 7/1/03, LOC: Key Bank................ 2,000
-------
Maryland (2.5%):
2,235 Harford County, Maryland, 5.00%, 12/1/99................ 2,235
-------
Massachusetts (3.0%):
2,700 Somerville, Massachusetts Bond Anticipation Note, 3.50%,
5/18/00................................................ 2,700
-------
Michigan (9.9%):
2,000 Jackson County, Michigan, Economic Development Corp.,
3.50%*, 10/1/19, LOC: NBD Bank......................... 2,000
1,450 Michigan State, Building Authority, Series 1, 3.90%,
1/12/00................................................ 1,450
4,300 Michigan Strategic Fund Limited Obligation Revenue,
Series A, 3.70%*, 6/15/10, LOC: Canadian Imperial Bank. 4,301
1,000 Michigan Technological University, Board of Control,
3.90%*, 10/1/18, AMBAC................................. 1,000
-------
8,751
-------
Minnesota (7.1%):
2,000 Minneapolis, Minnesota, G.O., 3.75%*, 12/1/06........... 2,000
2,140 Olmsted County, Minnesota, 3.80%*, 8/1/05............... 2,140
2,200 Rochester, Minnesota, Healthcare Foundation, Series A,
3.80%, 3/7/00.......................................... 2,200
-------
6,340
-------
Missouri (3.0%):
2,700 Missouri Higher Educational Loan Authority, 4.00%*,
3/1/20, MBIA........................................... 2,700
-------
North Carolina (2.6%):
2,300 University of North Carolina Chapel Hill Revenue,
3.90%*, 7/1/12, LOC: Nations Bank...................... 2,300
-------
</TABLE>
Continued
23
<PAGE> 25
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
Tax-Free Fund
(Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
Shares
or
Principal Security Amortized
Amount Description Cost
--------- -------------------------------------------------------- ---------
<S> <C> <C>
Municipal Bonds, Notes, & Commercial Paper, continued:
Ohio (5.6%):
$ 3,000 Columbus, Ohio, Revenue Bond, 3.70%*, 12/1/17........... $ 3,000
1,300 Coshocton County, Ohio, Hospital Facilities Revenue
Bond, 3.90%*, 3/1/19, LOC: Bank One.................... 1,300
670 Orange, Ohio, City School District, 3.30%, 12/1/99...... 670
-------
4,970
-------
Oregon (2.2%):
2,000 Portland, Oregon, Bond Anticipation Note, Series A,
3.75%, 12/15/99........................................ 2,000
-------
Pennsylvania (4.5%):
1,000 Delaware County, Pennsylvania, 3.50%, 12/9/99........... 1,000
3,000 Pennsylvania State Higher Educational Facilities,
Revenue Bond, 3.85%*, 1/1/26........................... 3,000
-------
4,000
-------
Tennessee (2.8%):
1,145 Rutherford County, Tennessee, G.O., 4.25%, 4/1/00....... 1,148
1,300 Tennessee State School Bond Authority, Series A, 3.70%,
3/9/00................................................. 1,300
-------
2,448
-------
Texas (6.2%):
2,000 Fort Worth, Texas, Series B, 3.70%, 4/12/00............. 2,000
1,500 Fort Worth, Texas, Series B, 3.80%, 2/22/00............. 1,500
1,500 San Antonio, Texas, Water System, 3.85%, 1/20/00........ 1,500
520 Texas State Public Finance Authority, Parks & Wildlife
Department, Series B, 6.00%, 2/1/00, AMBAC............. 522
-------
5,522
-------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Amortized
Amount Description Cost
--------- -------------------------------------------------------- ---------
<S> <C> <C>
Municipal Bonds, Notes, & Commercial Paper, continued:
Utah (5.1%):
$ 1,500 Intermountain Power Agency, Utah Power Supply, Revenue
Bond, 3.75%, 1/19/00................................... $ 1,500
3,000 Utah County, Utah, PCR, USX Corp., 3.10%*, 11/1/17, LOC:
Wachovia Bank.......................................... 3,000
-------
4,500
-------
Virginia (2.6%):
2,300 Hampton, Virginia, Hospital Facilities Revenue Bond,
Sentara Health System, 3.80%, 2/17/00.................. 2,300
-------
Washington (8.7%):
2,405 Grant County, Washington, Port Industrial Development,
4.00%*, 12/1/13, LOC: Key Bank......................... 2,405
2,000 King County, Washington, Sewer Revenue Ban, 3.80%,
1/25/00................................................ 2,000
845 Port Angeles, Washington, Port Industrial Development,
Admiral Marine Project, 4.10%*, 4/1/22, LOC: Key Bank.. 845
2,500 Washington State Health Care Facilities Authority,
Revenue Bond, 4.00%*, 1/1/18, LOC: Morgan Guaranty
Trust.................................................. 2,500
-------
7,750
-------
Wisconsin (0.4%):
325 Wisconsin State, G.O., 5.00%, 5/1/00.................... 327
-------
Total Municipal Bonds, Notes, & Commercial Paper 86,213
-------
Investment Companies (1.6%):
1,403,397 Municipal Cash Mutual Fund.............................. 1,403
-------
Total Investment Companies 1,403
-------
Cash Equivalents (1.3%):
$ 1,179 Goldman Sachs Financial Square Tax Exempt............... 1,179
-------
Total Cash Equivalents 1,179
-------
Total Investments (Amortized
Cost $88,795)(a)--99.8% 88,795
Other assets in excess of liabilities--0.2% 195
-------
Total Net Assets--100.0% $88,990
=======
</TABLE>
- - -------
* Variable rate securities having liquidity sources through bank letters of
credit or other credit and/or liquidity agreements. The interest rate, which
will change periodically, is based upon an index of market rates. The rate
reflected on the Schedule of Portfolio Investments is the rate in effect at
November 30, 1999.
(a) Cost and value for federal income tax and financial reporting purposes are
the same.
AMBAC--American Municipal Bond Assurance Corp.
FSA--Federal Security Assurance
G.O.--General Obligation
LOC--Letter of Credit
MBIA--Municipal Bond Insurance Association
PCR--Pollution Control Revenue
See notes to financial statements.
24
<PAGE> 26
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
Treasury Fund
(Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
Principal Security Market
Amount Description Value
--------- --------------------------------------------------------- --------
<S> <C> <C>
U.S. Treasury Bills (12.2%):
$20,000 1/13/00.................................................. $ 19,876
10,000 1/20/00.................................................. 9,928
--------
Total U.S. Treasury Bills 29,804
--------
U.S. Treasury Notes (22.4%):
10,000 5.38%, 1/31/00........................................... 10,007
12,000 5.88%, 2/15/00........................................... 12,025
10,000 5.50%, 3/31/00........................................... 10,014
6,500 6.38%, 5/15/00........................................... 6,528
5,500 5.38%, 6/30/00........................................... 5,499
5,000 5.38%, 7/31/00........................................... 4,993
6,000 5.13%, 8/31/00........................................... 5,977
--------
Total U.S. Treasury Notes 55,043
--------
Repurchase Agreements (73.6%):
12,200 BA Securities, 5.60%, 12/1/99, (Collateralized by
$12,690, U.S. Treasury Bill, 4/6/00, market value--
$12,452)................................................ 12,200
12,200 Chase Securities, 5.63%, 12/1/99, (Collateralized by
$12,100, U.S. Treasury Bond, 7.75%, 1/31/00, market
value--$12,518)......................................... 12,200
</TABLE>
<TABLE>
<CAPTION>
Principal Security Market
Amount Description Value
--------- ------------------------------------------------------- ---------
<S> <C> <C>
$12,200 Dresdner Securities, 5.60%, 12/1/99, (Collateralized by
$12,114, U.S. Treasury Note, 6.50%, 5/31/01, market
value--$12,594)....................................... $ 12,200
9,343 Goldman Sachs, 5.45%, 12/1/99, (Collateralized by
$6,556, U.S. Treasury Bond, 12.50%, 8/15/14, market
value--$9,531)........................................ 9,343
61,200 Greenwich Capital, 5.66%, 12/1/99, (Collateralized by
$65,190, U.S. Treasury Note, 5.63%, 5/15/08, market
value--$62,428)....................................... 61,200
12,200 JP Morgan, 5.63%, 12/1/99, (Collateralized by $10,682,
U.S. Treasury Bond, 8.00%, 11/15/21, market value--
$12,482).............................................. 12,200
61,200 Morgan Stanley, 5.65%, 12/1/99, (Collateralized by
$51,688, U.S. Treasury Bond, 8.75%, 5/15/17, market
value--$62,881)....................................... 61,200
---------
Total Repurchase Agreements 180,543
---------
Total Investments (Cost $265,390)(a)--108.2% 265,390
Liabilities in excess of other assets--(8.2)% (20,155)
---------
Total Net Assets--100.0% $ 245,235
=========
</TABLE>
- - -------
(a) Cost and value for federal income tax and financial reporting purposes are
the same.
See notes to financial statements.
25
<PAGE> 27
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
Small Capitalization Fund
(Unaudited)
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Security Market
Shares Description Value
------- ------------------------------------------------------------ --------
<S> <C> <C>
Common Stocks (92.2%):
Advertising (0.8%):
59,700 Valassis Communications, Inc.(b)............................ $ 2,351
--------
Aerospace & Military Technology (0.9%):
100,000 Titan Corp.(b)(c)........................................... 2,706
--------
Banking (2.6%):
75,800 Cullen/Frost Bankers, Inc. ................................. 2,160
113,400 Imperial Bancorp(b)......................................... 2,722
346,700 Republic Security Financial Corp. .......................... 2,784
--------
7,666
--------
Business Services (3.2%):
35,885 Corporate Executive Board Corp.(b).......................... 1,669
37,200 Diamond Technology Partners, Inc.(b)........................ 1,953
55,500 FYI, Inc.(b)................................................ 1,776
163,370 Online Resources & Communications Corp.(b).................. 2,001
30,400 QRS Corp.(b)................................................ 1,767
--------
9,166
--------
Computer Integrated System Design (2.2%):
65,200 Digital River, Inc.(b)...................................... 1,989
75,900 Visual Networks, Inc.(b).................................... 4,478
--------
6,467
--------
Computer Services (0.5%):
34,500 eGain Communications Corp.(b)............................... 1,449
--------
Computer Software & Peripherals (17.7%):
54,400 Advanced Digital Information Corp.(b)....................... 2,445
9,700 Affymetrix, Inc.(b)......................................... 951
17,000 Allaire Corp.(b)............................................ 2,582
32,300 Business Objects SA, ADR.................................... 2,859
43,900 Clarify, Inc.(b)............................................ 4,091
20,000 Digex, Inc.(b).............................................. 670
60,000 Macrovision Corp.(b)........................................ 3,832
40,000 Mercury Interactive Corp.(b)................................ 3,325
35,400 Micromuse, Inc.(b).......................................... 4,048
13,500 MicroStrategy, Inc.(b)(c)................................... 1,654
84,600 National Computer Systems, Inc. ............................ 3,247
91,300 National Information Consortium, Inc.(b)(c)................. 2,408
138,500 NetObjects, Inc.(b)......................................... 1,878
85,700 ONYX Software Corp.(b)...................................... 2,764
57,600 Remedy Corp.(b)............................................. 2,009
100,000 Sapiens International Corp. NV, ADR(b)...................... 1,388
42,450 SonicWall, Inc.(b)(c)....................................... 1,451
93,000 Symantec Corp.(b)........................................... 4,341
166,720 The 3DO Co.(b).............................................. 1,579
89,000 Zoran Corp.(b)(c)........................................... 3,549
--------
51,071
--------
Data Processing & Reproduction (0.9%):
158,000 Novadigm, Inc.(b)........................................... 2,745
--------
</TABLE>
<TABLE>
<CAPTION>
Security Market
Shares Description Value
------- ------------------------------------------------------------ --------
<S> <C> <C>
Common Stocks, continued:
Electrical Equipment (1.0%):
85,500 SBS Technologies, Inc.(b)................................... $ 2,886
--------
Electronic Components/Instruments (7.4%):
107,900 Audiovox Corp., Class A(b).................................. 3,210
87,800 CTS Corp. .................................................. 7,040
87,400 DII Group, Inc.(b).......................................... 5,517
159,600 Gentex Corp.(b)............................................. 2,983
13,000 Optical Coating Laboratory, Inc. ........................... 2,558
--------
21,308
--------
Financial Services (0.9%):
83,000 Metris Cos., Inc. .......................................... 2,625
--------
Gaming (0.5%):
28,300 Anchor Gaming............................................... 1,558
--------
Health Care--Services (1.9%):
179,600 Hooper Holmes, Inc. ........................................ 4,243
56,400 Priority Healthcare Corp., Class B(b)....................... 1,396
--------
5,639
--------
Home Furnishings (0.9%):
104,200 Trex Company, Inc.(b)....................................... 2,683
--------
Industrial Goods & Services (0.4%):
41,900 Church & Dwight Co., Inc. .................................. 1,173
--------
Insurance (1.5%):
91,400 Annuity & Life Re Holdings Ltd. ............................ 2,605
189,600 Scottish Annuity & Life Holdings............................ 1,612
--------
4,217
--------
Leisure (0.5%):
93,700 Cheap Tickets, Inc.(b)(c)................................... 1,564
--------
Machinery & Equipment (2.0%):
60,200 Helix Technology Corp. ..................................... 2,437
106,500 Optimal Robotics Corp.(b)................................... 3,461
--------
5,898
--------
Manufacturing-Consumer Goods (1.2%):
165,300 Monaco Coach Corp.(b)....................................... 3,554
--------
Medical Equipment & Supplies (3.6%):
20,330 ArthroCare Corp.(b)......................................... 1,230
71,500 Biomatrix, Inc.(b)(c)....................................... 1,680
133,600 Datascope Corp.(b).......................................... 4,956
145,600 PolyMedica Corp.(b)......................................... 2,548
--------
10,414
--------
Oil & Gas Exploration, Production & Services (1.0%):
89,300 Forest Oil Corp.(b)......................................... 1,021
53,800 Louis Dreyfus Natural Gas Corp.(b).......................... 968
67,300 Tesoro Petroleum Corp.(b)................................... 808
--------
2,797
--------
</TABLE>
Continued
26
<PAGE> 28
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
Small Capitalization Fund
(Unaudited)
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Security Market
Shares Description Value
------- ------------------------------------------------------------ --------
<S> <C> <C>
Common Stocks, continued:
Oil & Gas Utility (1.2%):
56,000 Nicor, Inc ................................................. $ 1,943
63,800 Southwest Gas Corp. ........................................ 1,495
--------
3,438
--------
Oilfield Services & Equipment (0.4%):
32,750 Cal Dive International, Inc.(b)............................. 1,191
--------
Pharmaceuticals (4.6%):
61,600 ChiRex, Inc.(b)............................................. 2,141
42,700 Enzon, Inc.(b).............................................. 1,441
107,050 King Pharmaceuticals, Inc.(b)(c)............................ 4,938
15,300 Millennium Pharmaceuticals, Inc.(b)......................... 1,489
134,900 Theragenics Corp.(b)........................................ 1,290
153,000 Titan Pharmaceuticals, Inc. ................................ 2,199
--------
13,498
--------
Radio (3.2%):
45,400 Citadel Communications Corp.(b)............................. 2,273
101,400 Cumulus Media, Inc., Class A(b)............................. 4,056
92,400 Spanish Broadcasting System, Inc.(b)........................ 2,934
--------
9,263
--------
Resorts & Entertainment (1.6%):
86,600 Station Casinos, Inc.(b).................................... 2,078
50,400 THQ, Inc.(b)(c)............................................. 2,709
--------
4,787
--------
Restaurants (1.0%):
142,000 Jack in the Box, Inc.(b).................................... 2,991
--------
Retail (4.0%):
80,600 BJ's Wholesale Club, Inc.(b)................................ 3,012
116,900 REX Stores Corp.(b)......................................... 4,362
75,900 The Children's Place Retail Stores, Inc.(b)(c).............. 1,874
124,750 Too, Inc.(b)................................................ 2,308
--------
11,556
--------
Semiconductors (8.8%):
27,800 Ancor Communications, Inc.(b)(c)............................ 1,685
221,000 ASM International NV(b)(c).................................. 3,591
50,000 Burr-Brown Corp.(b)......................................... 2,216
40,300 Credence Systems Corp.(b)................................... 2,335
</TABLE>
<TABLE>
<CAPTION>
Security Market
Shares Description Value
------- ------------------------------------------------------------ --------
<S> <C> <C>
Common Stocks, continued:
Semiconductors, continued:
70,500 Cymer, Inc.(b)(c)........................................... $ 2,820
63,500 Fairchild Semiconductor International, Inc., Class A(b)..... 1,778
62,000 Integrated Device Technology, Inc.(b)....................... 1,461
242,000 NETsilicon, Inc.(b)......................................... 3,207
40,100 PRI Automation, Inc.(b)(c).................................. 1,900
91,300 Silicon Storage Technology, Inc.(b)......................... 2,419
41,000 TranSwitch Corp.(b)......................................... 1,927
--------
25,339
--------
Technology (2.4%):
107,100 ACT Manufacturing, Inc.(b).................................. 3,273
66,600 Mercury Computer Systems, Inc.(b)........................... 3,801
--------
7,074
--------
Telecommunications - Services & Equipment (11.4%):
62,500 Adelphia Business Solutions, Inc.(b)........................ 1,953
59,300 Antec Corp.(b)(c)........................................... 3,321
39,550 C-COR.net Corp.(b).......................................... 2,020
156,600 Commscope, Inc.(b).......................................... 6,597
70,500 Exar Corp.(b)............................................... 3,428
155,000 ICG Communications, Inc.(b)(c).............................. 2,935
61,700 Intermedia Communications, Inc.(b)(c)....................... 1,720
46,400 Mastec, Inc.(b)............................................. 1,911
3,050 Next Level Communications, Inc.(b)(c)....................... 197
31,500 Proxim, Inc.(b)............................................. 1,764
88,600 Sawtek, Inc.(b)............................................. 4,042
264,900 SBA Communications Corp.(b)................................. 3,046
--------
32,934
--------
Transportation & Shipping (2.0%):
88,600 Atlas Air, Inc.(b).......................................... 2,232
85,700 Expeditors International of Washington, Inc. ............... 3,492
--------
5,724
--------
Total Common Stocks 267,732
--------
Cash Equivalents (4.2%):
$12,099 Goldman Sachs Financial Square Premium...................... 12,099
--------
Total Cash Equivalents 12,099
--------
</TABLE>
Continued
27
<PAGE> 29
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
Small Capitalization Fund
(Unaudited)
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Security Market
Shares Description Value
------- ---------------------------------------------------------- ---------
<S> <C> <C>
Short Term Securities Purchased with Collateral (13.4%):
Commercial Paper (5.1%):
15,000 Federal Signal Corp., 5.88%, 12/1/99...................... $ 15,000
---------
Repurchase Agreement (8.3%):
24,011 Bear Stearns & Co. Triparty Agreement, 5.83%, 12/1/99,
(See Significant Accounting Policies, Lending Portfolio
Securities in the Notes to Financial Statements for
collateral description).................................. 24,011
---------
Total Short Term Securities Purchased with Collateral $ 39,011
---------
Total Investments (Cost $245,078)(a)--109.8% 318,842
Other assets in excess of liabilities--(9.8)% (28,422)
---------
Total Net Assets--100.0% $ 290,420
=========
</TABLE>
- - -------
<TABLE>
<CAPTION>
Open Futures Contracts
----------------------------------
Number of Contracts Contract Value Expiration Date Unrealized Gain/Loss
------------------- -------------- --------------- --------------------
<S> <C> <C> <C> <C>
Russell 2000 Stock Index
Futures................ 13 $2,941 12/16/99 $214
</TABLE>
The aggregate market value of cash pledged to cover margin requirements for
open futures positions at November 30, 1999 was $150.
(a) Cost for federal income tax purposes differs from value by net unrealized
appreciation as follows:
<TABLE>
<S> <C>
Unrealized appreciation.................................. $81,379
Unrealized depreciation.................................. (7,401)
-------
Net unrealized appreciation.............................. $73,978
=======
</TABLE>
(b) Represents non-income producing securities.
(c) All or part of the security has been loaned at November 30, 1999.
See notes to financial statements.
28
<PAGE> 30
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
Mid Capitalization Fund
(Unaudited)
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<S> <C> <C>
Common Stocks (91.9%):
Advertising (1.9%):
45,000 Interpublic Group of Companies, Inc. ..................... $ 2,115
76,800 Valassis Communications, Inc.(b).......................... 3,024
42,000 Young & Rubicam, Inc. .................................... 2,192
--------
7,331
--------
Air Transportation (0.5%):
123,000 Southwest Airlines Co. ................................... 2,006
--------
Beverages & Tobacco (0.6%):
48,000 Coors (Adolph), Class B................................... 2,388
--------
Broadcasting & Publishing (2.8%):
79,100 AMFM, Inc.(b)............................................. 5,591
21,400 Univision Communications, Inc.(b)......................... 1,873
58,800 Westwood One, Inc.(b)..................................... 3,366
--------
10,830
--------
Business Services (1.4%):
142,200 Paychex, Inc. ............................................ 5,679
--------
Computer Hardware (1.6%):
76,600 Lexmark International Group, Inc.(b)...................... 6,358
--------
Computer Software & Peripherals (19.3%):
90,000 Adobe Systems Inc. ....................................... 6,182
100,000 Citrix Systems, Inc.(b)(c)................................ 9,489
19,200 DoubleClick, Inc.(b)(c)................................... 3,073
34,400 Exodus Communications, Inc.(b)(c)......................... 3,709
69,700 J.D. Edwards & Co.(b)..................................... 2,056
50,000 Legato Systems, Inc.(b)................................... 3,377
75,000 Mercury Interactive Corp.(b).............................. 6,234
190,000 Novell, Inc.(b)........................................... 3,717
158,300 Rational Software Corp. .................................. 8,093
25,800 RealNetworks, Inc.(b)..................................... 3,599
126,800 Siebel Systems, Inc.(b)(c)................................ 8,892
156,000 Symantec Corp. ........................................... 7,283
68,400 Unisys Corp.(b)........................................... 1,967
16,400 VeriSign, Inc.(b)......................................... 3,047
49,500 VERITAS Software Corp.(b)(c).............................. 4,532
--------
75,250
--------
Data Processing & Reproduction (0.6%):
64,000 Fiserv, Inc.(b)........................................... 2,272
--------
Electric Utility (2.7%):
107,400 AES Corp.(b)(c)........................................... 6,222
76,000 Calpine Corp.(b).......................................... 4,484
--------
10,706
--------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<S> <C> <C>
Common Stocks, continued:
Electrical & Electronic (5.7%):
82,700 Analog Devices, Inc.(b)................................... $ 4,750
60,600 CTS Corp. ................................................ 4,859
142,000 Gentex Corp.(b)........................................... 2,654
47,800 Jabil Circuit, Inc.(b).................................... 3,056
26,500 Maxim Integrated Products, Inc.(b)........................ 2,128
48,800 Sanmina Corp.(b)(c)....................................... 4,691
--------
22,138
--------
Financial Services (2.0%):
42,100 Capital One Financial Corp. .............................. 1,960
220,000 Concord EFS, Inc.(b)(c)................................... 5,830
--------
7,790
--------
Health Care - Services (0.0%):
54 U.S. Surgical Corp. - Rights.............................. (d)
--------
Insurance (3.0%):
173,000 AFLAC, Inc. .............................................. 8,283
92,000 Nationwide Financial Services, Inc. ...................... 3,306
--------
11,589
--------
Medical Equipment & Supplies (0.5%):
24,200 VISX, Inc.(b)............................................. 1,877
--------
Oil & Gas Exploration, Production & Services (2.1%):
154,000 Apache Corp. ............................................. 5,515
104,200 Baker Hughes, Inc. ....................................... 2,631
--------
8,146
--------
Pharmaceuticals (5.3%):
51,200 Biogen, Inc.(b)........................................... 3,741
169,100 Forest Laboratories, Inc.(b).............................. 8,656
70,400 Medimmune, Inc.(b)(c)..................................... 8,461
--------
20,858
--------
Restaurants (1.0%):
186,100 Jack in the Box, Inc.(b).................................. 3,920
--------
Retail (7.8%):
110,400 Best Buy Co., Inc.(b)..................................... 6,899
125,500 BJ's Wholesale Club, Inc.(b).............................. 4,691
135,000 Cheap Tickets, Inc.(b).................................... 2,253
61,400 Circuit City Stores, Inc. ................................ 2,978
227,800 Family Dollar Stores, Inc. ............................... 4,086
64,000 Tandy, Inc. .............................................. 4,904
180,000 The Children's Place Retail Stores, Inc.(b)(c)............ 4,444
--------
30,255
--------
</TABLE>
Continued
29
<PAGE> 31
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
Mid Capitalization Fund
(Unaudited)
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<S> <C> <C>
Common Stocks, continued:
Semiconductors (15.0%):
125,000 Altera Corp.(b)........................................... $ 6,734
67,200 KLA-Tenor Corp.(b)........................................ 5,683
28,000 Linear Technology Corp. .................................. 1,990
51,500 LSI Logic Corp.(b)........................................ 3,113
70,300 Novellus Systems, Inc.(b)................................. 5,773
61,400 PMC-Sierra, Inc.(b)....................................... 6,328
51,600 SDL, Inc.(b).............................................. 8,398
130,900 Teradyne, Inc.(b)......................................... 5,702
123,200 Vitesse Semiconductor Corp.(b)............................ 5,552
103,000 Xilinx, Inc.(b)........................................... 9,218
--------
58,491
--------
Technology (4.6%):
70,600 Electronics for Imaging, Inc.(b).......................... 3,146
79,000 Gemstar International Group Ltd.(b)(c).................... 8,907
122,000 Symbol Technologies, Inc. ................................ 5,818
--------
17,871
--------
Telecommunications - Services & Equipment (13.0%):
73,000 Broadwing, Inc.(b)........................................ 2,126
182,000 CenturyTel, Inc. ......................................... 8,372
79,000 Comverse Technology, Inc.(b)(c)........................... 9,549
28,500 EchoStar Communications Corp., Class A(b)................. 1,883
21,200 JDS Uniphase Corp.(b)..................................... 4,850
121,000 McLeodUSA, Inc.(b)(c)..................................... 5,203
72,800 Nextel Communications, Inc., Class A(b)(c)................ 7,216
58,000 RCN Corp.(b).............................................. 2,617
86,000 RF Micro Devices, Inc.(b)................................. 5,843
33,000 VoiceStream Wireless Corp.(b)(c).......................... 3,044
--------
50,703
--------
Transportation & Shipping (0.5%):
50,000 Expeditors International of Washington, Inc. ............. 2,038
--------
Total Common Stocks 358,496
--------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- -------------------------------------------------------- ---------
<S> <C> <C>
Repurchase Agreements (4.4%):
$17,000 Prudential Securities, 5.53%, 12/1/99, (Collateralized
by $19,000, Freddie Mac, 6.50%, 11/15/27, market value-
$17,436)................................................ $ 17,000
---------
Total Repurchase Agreements 17,000
---------
Cash Equivalents (4.1%):
16,138 Goldman Sachs Financial Square Premium.................. 16,138
---------
Total Cash Equivalents 16,138
---------
Short Term Securities Purchased with Collateral (18.2%)
Commercial Paper (3.8%):
$15,000 Federal Signal Corp., 5.88%, 12/1/99.................... $ 15,000
---------
Floating Rate Note (3.8%):
15,000 Household CCMT ABT 96 Series A4, 5.49%, 1/18/00......... 15,000
---------
Investment Companies (2.6%):
10,000 AIM Liquid Asset Money Fund, 5.69%, 12/1/99............. 10,000
---------
Repurchase Agreement (8.0%):
31,138 Bear Stearns Triparty Agreement, 5.83%, 12/1/99, (See
Significant Accounting Policies, Lending Portfolio
Securities in the Notes to Financial Statements for
collateral description)................................. 31,138
---------
Total Short Term Securities Purchased with Collateral 71,138
---------
Total Investments (Cost $349,398)(a)--118.6% 462,772
Liabilities in excess of other assets--(18.6)% (72,643)
---------
Total Net Assets--100.0% $ 390,129
=========
</TABLE>
- - -------
<TABLE>
<CAPTION>
Open Futures Contracts
----------------------------------
Number of Contracts Contract Value Expiration Date Unrealized Gain/Loss
------------------- -------------- --------------- --------------------
<S> <C> <C> <C> <C>
S&P400 MidCap Index
Futures................ 70 $14,691 12/16/99 $259
</TABLE>
The aggregate market value of cash pledged to cover margin requirements for
open futures positions at November 30, 1999 was $700.
(a) Cost for federal income tax purposes differs from value by net unrealized
appreciation as follows:
<TABLE>
<S> <C>
Unrealized appreciation................................. $122,228
Unrealized depreciation................................. (8,596)
--------
Net unrealized appreciation............................. $113,632
========
</TABLE>
(b) Represents non-income producing securities.
(c) All or part of this security has been loaned at November 30, 1999.
(d) Market value is less than $1,000.
See notes to financial statements.
30
<PAGE> 32
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
Large Capitalization Fund
(Unaudited)
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Security Market
Shares Description Value
------- ------------------------------------------------------------ --------
<S> <C> <C>
Common Stocks (97.3%):
Advertising (1.3%):
60,000 Omnicom Group, Inc. ........................................ $ 5,288
18,500 Young & Rubicam, Inc. ...................................... 965
--------
6,253
--------
Broadcasting/Cable (1.6%):
85,000 Comcast Corp., Class A...................................... 3,841
100,000 USA Networks, Inc.(b)....................................... 4,000
--------
7,841
--------
Computer Hardware (5.3%):
110,000 Dell Computer Corp.(b)(c)................................... 4,737
70,600 EMC Corp.(b)................................................ 5,900
79,000 IBM Corp. .................................................. 8,141
50,200 Sun Microsystems, Inc.(b)................................... 6,639
--------
25,417
--------
Computer Software & Peripherals (8.3%):
90,000 BMC Software, Inc.(b)....................................... 6,553
79,400 Charter Communication, Inc., Class A(b)..................... 1,841
20,000 Citrix Systems, Inc.(b)..................................... 1,898
240,200 Microsoft, Inc.(b).......................................... 21,869
75,000 Oracle Corp.(b)............................................. 5,086
45,000 Rational Software Corp.(b).................................. 2,301
--------
39,548
--------
Consumer Goods & Services (3.8%):
83,200 Colgate Palmolive Co. ...................................... 4,566
128,200 Procter & Gamble Co. ....................................... 13,845
--------
18,411
--------
Diversified Operations (2.0%):
239,600 Tyco International Ltd. .................................... 9,599
--------
Electrical & Electronic (7.7%):
110,000 Analog Devices, Inc.(b)..................................... 6,318
75,000 Applied Materials, Inc.(b).................................. 7,308
141,900 General Electric Co. ....................................... 18,446
60,000 Solectron Corp.(b).......................................... 4,943
--------
37,015
--------
Financial Services (1.4%):
160,000 Concord EFS, Inc.(b)........................................ 4,240
104,000 MBNA Corp. ................................................. 2,626
--------
6,866
--------
Food & Beverage (0.7%):
51,300 The Coca-Cola Co. .......................................... 3,453
--------
Food Products & Services (1.3%):
86,000 Kroger Co.(b)............................................... 1,833
118,000 Safeway, Inc.(b)............................................ 4,351
--------
6,184
--------
Industrial Goods & Services (0.5%):
40,000 United Technologies Corp. .................................. 2,260
--------
</TABLE>
<TABLE>
<CAPTION>
Security Market
Shares Description Value
------- ------------------------------------------------------------ --------
<S> <C> <C>
Common Stocks, continued:
Insurance (2.2%):
100,703 American International Group, Inc. ......................... $ 10,398
--------
Manufacturing - Consumer Goods (1.6%):
95,000 Lexmark International Group, Inc.(b)........................ 7,885
--------
Medical Equipment & Supplies (1.5%):
70,800 Guidant Corp. .............................................. 3,540
95,600 Medtronic, Inc. ............................................ 3,716
--------
7,256
--------
Office Equipment & Services (0.8%):
35,000 Honeywell, Inc. ............................................ 3,918
--------
Oil & Gas (1.9%):
140,000 Burlington Resources, Inc.(c)............................... 4,708
70,000 Schlumberger Ltd. .......................................... 4,204
--------
8,912
--------
Paper Products (1.2%):
108,000 International Paper Co. .................................... 5,636
--------
Pharmaceuticals (16.1%):
40,000 American Home Products Corp. ............................... 2,080
205,000 Bristol Myers Squibb Co. ................................... 14,977
110,200 Eli Lilly & Co. ............................................ 7,907
78,000 Johnson & Johnson........................................... 8,093
124,000 Merck & Co., Inc. .......................................... 9,734
294,600 Pfizer, Inc. ............................................... 10,661
207,600 Schering Plough Corp. ...................................... 10,614
144,000 Warner-Lambert Co. ......................................... 12,915
--------
76,981
--------
Resorts & Entertainment (1.4%):
108,000 Time Warner, Inc.(c)........................................ 6,662
--------
Retail (8.2%):
65,000 Dayton Hudson Corp. ........................................ 4,587
110,000 Home Depot, Inc. ........................................... 8,697
50,000 Kohls Corp. (b)............................................. 3,609
83,000 Tandy, Inc. ................................................ 6,360
182,600 Wal-Mart Stores, Inc. ...................................... 10,522
188,000 Walgreen Co.(c)............................................. 5,476
--------
39,251
--------
Semiconductors (7.0%):
110,000 Altera Corp.(b)............................................. 5,926
150,000 Intel Corp. ................................................ 11,503
50,000 KLA-Tencor Corp.(b)......................................... 4,228
121,200 Texas Instruments, Inc. .................................... 11,643
--------
33,300
--------
Telecommunications - Services & Equipment (21.5%):
80,700 Alltel Corp. ............................................... 6,981
80,000 Amdocs Ltd.(b).............................................. 2,815
327,400 Cisco Systems, Inc.(b)...................................... 29,201
125,000 GTE Corp. .................................................. 9,125
171,800 Lucent Technologies, Inc.(c)................................ 12,552
</TABLE>
Continued
31
<PAGE> 33
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
Large Capitalization Fund
(Unaudited)
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Security Market
Shares Description Value
------- ------------------------------------------------------------ --------
<S> <C> <C>
Common Stocks, continued:
Telecommunications - Services & Equipment, continued:
113,000 MCI WorldCom, Inc.(b)....................................... $ 9,344
40,000 Motorola, Inc.(c)........................................... 4,570
110,000 Nortel Networks Corp. ...................................... 8,140
33,000 QUALCOMM, Inc.(b)........................................... 11,956
148,700 SBC Communications, Inc. ................................... 7,723
--------
102,407
--------
Total Common Stocks 465,453
--------
Cash Equivalents (2.8%):
13,645 Goldman Sachs Financial Square Premium...................... 13,645
--------
Total Cash Equivalents 13,645
--------
</TABLE>
<TABLE>
<CAPTION>
Security Market
Shares Description Value
------- ---------------------------------------------------------- --------
<S> <C> <C>
Short Term Securities Purchased with Collateral (6.1%)
Commercial Paper (1.0%):
$ 5,000 OGE Energy Corp., 5.81%, 12/6/99.......................... $ 4,995
--------
Floating Rate Note ( 2.1%):
10,000 Amex Centurion, 5.70%, 4/24/00............................ 10,000
--------
Repurchase Agreement (3.0%):
14,188 Bear Stearns & Co. Triparty Agreement, 5.83%, 12/1/99,
(See Significant Accounting Policies, Lending Portfolio
Securities in the Notes to Financial Statements for
collateral description).................................. 14,188
--------
Total Short Term Securities Purchased with Collateral $ 29,183
--------
Total Investments (Cost $312,143)(a)--106.2% 508,281
Liabilities in excess of other assets--(6.2)% (29,488)
--------
Total Net Assets--100.0% $478,793
========
</TABLE>
- - -------
(a) Cost for federal income tax purposes differs from value by net unrealized
appreciation as follows:
<TABLE>
<S> <C>
Unrealized appreciation................................. $201,061
Unrealized depreciation................................. (4,923)
--------
Net unrealized appreciation............................. $196,138
========
</TABLE>
(b) Represents non-income producing securities.
(c) All or part of this security has been loaned at November 30, 1999.
See notes to financial statements.
32
<PAGE> 34
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
International Discovery Fund
(Unaudited)
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<S> <C> <C>
Common Stocks (94.7%):
Australia (0.8%):
Banking (0.8%):
198,993 National Australia Bank Ltd. ............................. $ 2,871
--------
Austria (0.4%):
Manufacturing - Capital Goods (0.4%):
36,544 Mayr-Melnhof Karton AG.................................... 1,523
--------
Canada (1.0%):
Telecommunications (1.0%):
27,252 BCE, Inc. ................................................ 1,837
25,530 BCE, Inc., ADR............................................ 1,726
--------
3,563
--------
3,563
--------
Finland (2.9%):
Paper Products (0.4%):
36,399 Upm-Kymmene............................................... 1,217
--------
Telecommunications - Services & Equipment (2.5%):
41,394 Nokia AB, Class A, ADR.................................... 5,720
77,018 Sonera Oyj................................................ 3,180
--------
8,900
--------
10,117
--------
France (9.5%):
Commercial Services (1.5%):
10,861 Altran Technologies....................................... 5,168
--------
Computer Hardware (0.5%):
16,803 Equant NV(b).............................................. 1,624
--------
Energy (1.5%):
38,466 Total SA, B Shares........................................ 5,116
--------
Engineering (0.4%):
8,336 Compagnie De Saint-Gobain................................. 1,418
--------
Home Furnishings (0.1%):
7,377 Thomson Multimedia SA(b).................................. 319
--------
Industrial Goods & Services (1.7%):
64,493 Rhone-Poulenc SA.......................................... 3,994
26,594 Vivendi................................................... 2,129
--------
6,123
--------
Insurance (1.4%):
34,619 AXA....................................................... 4,667
--------
Retail (1.2%):
16,240 Castorama Dubois Investissements.......................... 4,219
--------
Telecommunications - Services & Equipment (1.2%):
34,701 France Telecom SA......................................... 4,022
--------
32,676
--------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<S> <C> <C>
Common Stocks, continued:
Germany (8.2%):
Banking (1.6%):
54,536 Deutsche Bank AG(c)....................................... $ 3,594
31,380 HypoVereinsbank AG(c)..................................... 1,946
--------
5,540
--------
Conglomerates (0.5%):
99,974 Viag AG................................................... 1,651
--------
Electrical & Electronic (1.6%):
56,483 Siemens AG(c)............................................. 5,693
--------
Electronic Components/Instruments (0.7%):
37,047 Epcos AG(b)............................................... 2,275
--------
Engineering (0.7%):
47,835 Linde AG.................................................. 2,384
--------
Insurance (0.7%):
8,177 Allianz AG................................................ 2,394
--------
Telecommunications (1.8%):
30,591 Mannesmann AG(c).......................................... 6,358
--------
Telecommunications - Services & Equipment (0.6%):
34,794 Deutsche Telekom(c)....................................... 1,992
--------
28,287
--------
Hong Kong (5.6%):
Banking (0.8%):
196,156 HSBC Holdings PLC......................................... 2,601
--------
Conglomerates (0.5%):
306,357 Swire Pacific Ltd., Class A............................... 1,759
--------
Distribution (0.3%):
475,002 LI & Fung Ltd. ........................................... 1,092
--------
Electrical & Electronic (1.4%):
678,443 Johnson Electric Holdings Ltd............................. 4,848
--------
Industrial Holding Company (0.9%):
264,762 Hutchison Whampoa......................................... 3,256
--------
Telecommunications - Services & Equipment (1.7%):
1,066,265 China Telecom (Hong Kong) Ltd.(b)......................... 5,725
--------
19,281
--------
Ireland (0.6%):
Banking (0.6%):
241,947 Bank of Ireland........................................... 1,995
--------
Israel (0.4%):
Computer Hardware (0.4%):
22,443 BATM Advanced Communications Ltd. ........................ 1,466
--------
Italy (2.4%):
Insurance (0.3%):
38,089 Assicurazioni Generali.................................... 1,097
--------
</TABLE>
Continued
33
<PAGE> 35
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
International Discovery Fund
(Unaudited)
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<S> <C> <C>
Common Stocks, continued:
Italy, continued:
Jewelry (0.5%):
231,976 Bulgari SpA............................................... $ 1,787
--------
Telecommunications - Services & Equipment (1.6%):
318,260 Telecom Italia Mobile SpA(c).............................. 2,500
266,416 Telecom Italia SpA........................................ 2,934
--------
5,434
--------
8,318
--------
Japan (26.9%):
Automobiles (0.3%):
26,475 Honda Motor............................................... 1,088
--------
Banking (1.1%):
71,148 Bank of Tokyo-Mitsubishi Ltd. ............................ 1,028
101,819 Sanwa Bank Ltd. .......................................... 1,236
89,094 Sumitomo Bank Ltd. ....................................... 1,364
--------
3,628
--------
Commercial Services (1.6%):
23,218 Benesse Corp. ............................................ 5,562
--------
Computer Software (5.6%):
10,398 Internet Initiative Japan, Inc., ADR(b)................... 993
67,545 Nihon Unisys.............................................. 2,585
8,775 Softbank Corp. ........................................... 6,329
13 Yahoo Japan Corp(b)....................................... 9,159
--------
19,066
--------
Consumer Electronics (2.1%):
38,782 Sony Corp. ............................................... 7,173
--------
Cosmetics/Personal Care (0.4%):
3,406 Fancl Corp. .............................................. 1,207
--------
Data Processing & Reproduction (0.8%):
81,460 Fujitsu Ltd. ............................................. 2,886
--------
Electronic Components/Instruments (3.4%):
64,805 Fanuc Co. Ltd. ........................................... 5,390
126,851 NEC Corp. ................................................ 2,961
31,655 Tokyo Electron Ltd. ...................................... 3,284
--------
11,635
--------
Financial Services (1.2%):
189,827 Nikko Securities Co., Ltd. ............................... 2,359
11,196 Takefuji Corp. ........................................... 1,600
--------
3,959
--------
Manufacturing - Consumer Goods (0.8%):
15,231 SMC Corp. ................................................ 2,686
--------
Pharmaceuticals (1.4%):
81,810 Takeda Chemical Industries................................ 4,820
--------
Retail (1.7%):
36,786 Seven-Eleven Japan Ltd.(c)................................ 5,976
--------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<S> <C> <C>
Common Stocks, continued:
Japan, continued:
Telecommunications - Services & Equipment (4.3%):
2,233 Hikari Tsushin, Inc. ..................................... $ 3,496
66 Nippon Telegraph & Telephone Corp. ....................... 1,182
292 NTT Mobile Communications................................. 10,230
--------
14,908
--------
Toys (0.5%):
10,059 Nintendo Co., Ltd. ....................................... 1,674
--------
Wholesale & International Trade (1.7%):
513,000 Itochu Corp.(b)........................................... 3,052
713,000 Marubeni Corp. ........................................... 2,770
--------
5,822
--------
92,090
--------
Korea (1.0%):
Metals (1.0%):
99,078 Pohang Iron & Steel, ADR.................................. 3,561
--------
Mexico (0.9%):
Telecommunications (0.9%):
33,100 Telefonos de Mexico SA, ADR............................... 3,064
--------
Netherlands (5.0%):
Beverages & Tobacco (0.5%):
33,027 Heineken NV............................................... 1,596
--------
Broadcasting & Publishing (0.7%):
74,412 Wolters Kluwer NV......................................... 2,244
--------
Energy (1.2%):
73,579 Royal Dutch Petroleum..................................... 4,329
--------
Insurance (0.9%):
56,315 ING Groep NV.............................................. 3,167
--------
Retail (0.5%):
48,596 Kon Ahold NV.............................................. 1,547
--------
Semiconductors (1.2%):
32,783 STMicroelectronics NV..................................... 4,456
--------
17,339
--------
Poland (0.1%):
Oil & Gas Exploration, Production & Services (0.1%):
25,023 Polski Koncern Naftowy, ADR(b)............................ 258
--------
Singapore (3.2%):
Banking (1.2%):
317,515 DBS Group Holdings Ltd. .................................. 4,121
--------
Electrical & Electronic (0.5%):
407,332 Natsteel Electronics Ltd. ................................ 1,685
--------
Printing & Publishing (0.4%):
81,168 Singapore Press Holdings.................................. 1,522
--------
</TABLE>
Continued
34
<PAGE> 36
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
International Discovery Fund
(Unaudited)
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<S> <C> <C>
Common Stocks, continued:
Singapore, continued:
Transportation & Shipping (1.1%):
362,523 Singapore Airlines Ltd. .................................. $ 3,668
--------
10,996
--------
Spain (1.2%):
Telecommunications - Services & Equipment (1.2%):
179,738 Telefonica SA(b).......................................... 3,742
7,450 Terra Networks SA(b)...................................... 257
--------
3,999
--------
3,999
--------
Sweden (2.7%):
Paper Products (0.4%):
53,143 Svenska Cellulosa AB, Class A............................. 1,469
--------
Retail (1.0%):
109,917 Hennes & Mauritz AB....................................... 3,491
--------
Telecommunications (1.3%):
88,170 Telefonaktiebolager LM Ericsson, ADR...................... 4,249
--------
9,209
--------
Switzerland (6.3%):
Banking (1.7%):
14,305 Credit Suisse Group....................................... 2,675
11,953 UBS AG.................................................... 3,268
--------
5,943
--------
Business Services (0.5%):
2,560 Adecco SA................................................. 1,637
--------
Food Products & Services (0.6%):
1,150 Nestle SA................................................. 2,069
--------
Insurance (0.9%):
1,448 Swiss Reinsurance Co. .................................... 2,954
--------
Pharmaceuticals (2.6%):
3,045 Novartis AG............................................... 4,744
342 Roche Holdings AG......................................... 4,128
--------
8,872
--------
21,475
--------
Taiwan (1.0%):
Semiconductors (1.0%):
92,411 Taiwan Semiconductor, ADR(b).............................. 3,309
--------
United Kingdom (14.2%):
Advertising (0.7%):
152,303 WPP Group PLC............................................. 2,254
--------
Aerospace/Defense (0.2%):
118,529 British Aerospace PLC(b).................................. 677
--------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<S> <C> <C>
Common Stocks, continued:
United Kingdom, continued:
Banking (1.3%):
250,626 Allied Zurich PLC......................................... $ 3,044
108,190 Standard Chartered PLC.................................... 1,466
--------
4,510
--------
Beverages & Tobacco (0.4%):
127,362 Bass PLC.................................................. 1,434
--------
Commercial Services (1.1%):
151,611 Logica PLC................................................ 3,804
--------
Electric Utility (0.9%):
398,199 National Grid Group PLC................................... 3,063
--------
Energy (1.2%):
401,158 BP Amoco PLC.............................................. 4,092
--------
Engineering (0.8%):
599,579 Invensys PLC.............................................. 2,769
--------
Food Products & Services (0.7%):
191,189 Compass Group PLC......................................... 2,319
--------
Industrial Goods & Services (1.0%):
166,393 Boc Group PLC............................................. 3,429
--------
Media and Entertainment (1.3%):
189,261 Pearson PLC............................................... 4,517
--------
Pharmaceuticals (0.4%):
106,270 Smithkline Beecham PLC.................................... 1,418
--------
Retail (0.4%):
207,000 QXL.com PLC(b)............................................ 1,434
--------
Telecommunications (0.9%):
151,285 British Telecom PLC ...................................... 3,041
--------
Telecommunications - Services & Equipment (2.9%):
54,525 Colt Telecom Group PLC(b)................................. 2,057
56,083 Energis PLC(b)............................................ 2,300
276,425 Marconi PLC(b)............................................ 3,530
291,450 Thus PLC(b)............................................... 1,824
--------
9,711
--------
48,472
--------
United States (0.4%):
Computer Software (0.0%):
971 OpenTV Corp.(b)........................................... $ 75
--------
Pharmaceuticals (0.4%):
23,274 Pharmacia & Upjohn, Inc. ................................. 1,273
--------
1,348
--------
Total Common Stocks 325,217
--------
</TABLE>
Continued
35
<PAGE> 37
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
International Discovery Fund
(Unaudited)
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
----------- -------------------------------------------------------- --------
<S> <C> <C>
Commercial Paper (0.4%):
Diversified Operations (0.4%):
$ 1,500,000 General Electric International, 5.48%, 12/2/99.......... $ 1,500
--------
Total Commercial Paper 1,500
--------
Convertible Bonds (0.0%):
United Kingdom (0.0%):
Aerospace/Defense (0.0%):
37,436 British Aerospace PLC, 7.45%, 11/29/03, Loan Stock...... 56
--------
Total Convertible Bonds 56
--------
Cash Equivalents (4.6%):
15,696,416 Goldman Sachs Financial Square Premium.................. 15,696
--------
Total Cash Equivalents 15,696
--------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- -------------------------------------------------------- --------
<S> <C> <C>
Short Term Securities Purchased with Collateral (6.7%)
Commercial Paper (1.5%):
$ 5,000 OGE Energy Corp., 5.81%, 12/6/99........................ $ 4,994
--------
Repurchase Agreements (5.2):
182 Bear Stearns & Co. Triparty Agreement, 5.83%, 12/1/99,
(See Significant Accounting Policies, Lending Portfolio
Securities in the Notes to Financial Statements for
collateral description)................................ 182
17,669 Lehman Brothers Triparty Agreement, 5.83%, 12/1/99, (See
Significant Accounting Policies, Lending Portfolio
Securities in the Notes to Financial Statements for
collateral description)................................ 17,669
--------
17,851
--------
Total Short Term Securities Purchased with Collateral 22,845
--------
Total Investments (Cost $265,263)(a)--106.4% 365,314
Liabilities in excess of other assets--(6.4)% (21,949)
--------
Total Net Assets--100.0% $343,365
========
</TABLE>
- - -------
<TABLE>
<CAPTION>
Open Futures Contracts
----------------------------------
Number of Contracts Contract Value Expiration Date Unrealized Gain/Loss
------------------- -------------- --------------- --------------------
<S> <C> <C> <C> <C>
CAC40 Index Futures..... 30 $1,583 12/30/99 $ 42
DAX Index Futures....... 10 $1,483 12/17/99 $(20)
FTSE100 Index Futures... 45 $4,748 12/17/99 $203
Hang Seng Index Futures. 22 $2,181 12/29/99 $ 48
Nikkei Index Futures.... 4 $ 726 12/09/99 $ 30
</TABLE>
The aggregate market value of cash pledged to cover margin requirements for
open futures positions at November 30, 1999 was $580.
(a) Cost for Federal income tax purposes differs from value by net unrealized
appreciation as follows:
<TABLE>
<S> <C>
Unrealized appreciation................................. $104,904
Unrealized depreciation................................. (4,852)
--------
Net unrealized appreciation............................. $100,052
========
</TABLE>
(b) Represents non-income producing securities.
(c) All or a portion of this security has been loaned at November 30, 1999.
See notes to financial statements.
36
<PAGE> 38
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
Limited Maturity Bond Fund
(Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
Principal Security Amortized
Amount Description Cost
--------- -------------------------------------------------------- ---------
<S> <C> <C>
U.S. Treasury Notes (9.1%):
$ 2,500 6.25%, 10/31/01(b)...................................... $ 2,512
9,000 5.75%, 8/15/03.......................................... 8,896
--------
Total U.S. Treasury Notes 11,408
--------
Corporate Bonds (47.6%):
Asset Backed Securities (4.8%):
6,000 Flagship Auto Receivables Owner Trust, 6.84%, 11/18/04.. 5,987
--------
Computer Rental & Leasing (2.0%):
2,600 Comdisco, Inc., 5.95%, 4/30/02.......................... 2,515
--------
Euro Dollar (8.0%):
5,000 National Power Co. PLC, 7.12%, 7/11/01.................. 4,985
5,000 SNCB Belgium Rail, 8.25%, 2/2/00........................ 5,014
--------
9,999
--------
Financial Services (11.7%):
3,600 First Chicago Corp., 10.26%, 5/1/01..................... 3,767
5,000 Franchise Financial Corporation of America, 7.00%,
11/30/00............................................... 4,974
5,000 Lehman Brothers Holdings, 6.89%, 10/10/00............... 5,023
125 Prime Property Funding, 6.80%, 8/15/02.................. 120
920 Prime Property Funding II, 7.00%, 8/15/04............... 899
--------
14,783
--------
Industrial Goods & Services (10.9%):
3,300 Browning Ferris, 6.08%, 1/18/00......................... 3,289
1,500 Champion International Corp., 9.70%, 5/1/01............. 1,551
2,975 Computer Assoc. International, 6.25%, 4/15/03........... 2,871
1,500 Dial Corp., 6.63%, 6/15/03.............................. 1,468
4,700 Ingersoll-Rand, 6.34%, 12/3/01.......................... 4,653
--------
13,832
--------
Railroads (2.2%):
2,600 General American Transportation, 10.13%, 3/15/02........ 2,757
--------
Retail Stores/Catalog (3.8%):
2,000 Dillards, Inc., 9.50%, 10/15/01......................... 2,070
2,700 Limited, Inc., 7.00%*, 5/22/01.......................... 2,693
--------
4,763
--------
Telecommunications (2.4%):
3,000 US West, Inc., 6.13%, 11/21/00.......................... 2,985
--------
Transportation & Shipping (1.8%):
2,250 JB Hunt Transport Services, 6.00%, 12/12/00............. 2,225
--------
Total Corporate Bonds 59,846
--------
</TABLE>
<TABLE>
<CAPTION>
Principal Security Amortized
Amount Description Cost
--------- -------------------------------------------------------- ---------
<S> <C> <C>
Asset Backed Securities (30.3%):
$ 4,554 Amresco Snimt, 7.55%, 9/26/27........................... $ 4,521
4,000 Case Credit, 6.12%, 8/1/01.............................. 3,955
15,000 Champion Home Equity Loan Trust, Series 1998-1, Class
A2, Interest Only, 8.12%, 9/25/01...................... 1,966
5,000 Copelco Capital Funding Corp., Series 1997-A, Class A4,
6.47%, 4/20/05......................................... 4,953
2,500 Empire Funding, Series 99-1, Class A3, 6.44%, 4/25/13... 2,439
2,001 Green Tree Financial Corp., 6.55%, 7/15/28.............. 2,009
598 Green Tree Home Improvement Loan Trust, 7.85%, 7/15/09.. 588
4,989 Oakwood Mortgage Investors, Inc., 6.95%, 8/15/27........ 4,968
2,735 PALS, Series 99-1, Class A1, 6.30%, 3/25/29............. 2,652
4,150 Saxon Asset Securities Trust, Series 1997-1, Class AF3,
7.38%, 11/25/23........................................ 4,154
6,000 WFS Financial Owner Trust, 5.70%, 11/20/03.............. 5,857
--------
Total Asset Backed Securities 38,062
--------
Mortgage Backed Securities (9.2%):
2,100 Bombardier Capital Mortgage Securitization, 7.18%,
12/15/15............................................... 2,103
2,091 Merrill Lynch Mortgage Investors, Inc., 7.15%, 4/25/28.. 2,083
3,000 New Century Home Equity Loan Trust, 7.01%, 5/25/26...... 2,964
1,308 Residential Asset Securitization Trust, Series 1997-A1,
Class A1, 7.00%, 3/25/27............................... 1,305
3,100 Vendee, 6.50%, 1/15/06.................................. 3,025
--------
Total Mortgage Backed Securities 11,480
--------
U.S. Government Agencies (2.7%):
Fannie Mae (2.7%):
3,360 5.00%, 11/18/20......................................... 3,324
--------
Total U.S. Government Agencies 3,324
--------
Cash Equivalents (0.5%):
573 Goldman Sachs Financial Square Premium.................. 573
--------
Total Cash Equivalents 573
--------
</TABLE>
Continued
37
<PAGE> 39
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
Limited Maturity Bond Fund
(Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
Principal Security Amortized
Amount Description Cost
--------- -------------------------------------------------------- ---------
<S> <C> <C>
Short Term Securities Purchased with Collateral (2.1%):
Repurchase Agreement (2.1%):
$ 2,572 Bear Stearns & Co. Triparty Agreement, 5.83%, 12/1/99,
(See Significant Accounting Policies, Lending Portfolio
Securities in the Notes to Financial Statements for
collateral description) $ 2,572
--------
Total Short Term Securities Purchased with Collateral 2,572
--------
Total Investments (Cost $129,404)(a)--101.5% 127,265
Liabilities in excess of other assets--(1.5)% (1,843)
--------
Total Net Assets--100.0% $125,422
========
</TABLE>
- - -------
* Variable rate securities having liquidity sources through bank letters of
credit and/or liquidity agreements. The interest rates, which will change
periodically, are based upon bank prime rates or an index of the market
interest rates. The rate reflected on the Schedule of Portfolio Investments
is the rate in effect on November 30, 1999.
(a) Cost for federal income tax purposes differs from value by net unrealized
depreciation as follows:
<TABLE>
<S> <C>
Unrealized appreciation $ 94
Unrealized depreciation................................. (2,233)
-------
Net unrealized depreciation............................. $(2,139)
=======
</TABLE>
(b) All or a portion of this security has been loaned at November 30, 1999.
See notes to financial statements.
38
<PAGE> 40
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
Intermediate Government Obligations Fund
(Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<S> <C> <C>
U.S. Treasury Notes (23.8%):
$ 5,196 3.63%, 1/15/08(c)......................................... $ 5,009
3,071 3.88%, 1/15/09(b)(c)...................................... 3,008
4,000 5.75%, 11/15/00(b)........................................ 3,997
3,500 5.75%, 8/15/03............................................ 3,460
3,300 6.13%, 12/31/01(b)........................................ 3,308
1,580 6.13%, 8/15/07(b)......................................... 1,565
6,015 6.63%, 3/31/02............................................ 6,092
--------
Total U.S. Treasury Notes 26,439
--------
U.S. Government Agencies (52.8%):
Fannie Mae (34.1%):
10,000 5.63%, 3/15/01(b)......................................... 9,932
1,473 6.00%, 2/1/29............................................. 1,367
5,000 6.25%, 11/15/02(b)........................................ 4,980
14,219 6.38%, 6/15/09(b)......................................... 13,798
946 6.50%, 2/1/28............................................. 903
822 8.25%, 7/1/17............................................. 841
898 8.50%, 2/1/25............................................. 926
473 8.75%, 8/1/09............................................. 492
835 9.00%, 08/01/09-01/01/10.................................. 874
1,017 9.00%, 1/1/10............................................. 1,064
628 11.50%, 5/1/10............................................ 676
1,773 13.00%, 8/15/15........................................... 2,008
--------
37,861
--------
Federal Home Loan Bank (13.3%):
5,000 5.53%, 1/15/03............................................ 4,872
10,000 5.63%, 3/15/01............................................ 9,930
--------
14,802
--------
Freddie Mac (5.4%):
5,000 7.44%, 9/20/06, Callable 9/20/01 @ 100.................... 4,991
384 8.00%, 5/1/17............................................. 394
632 8.75%, 4/1/17............................................. 662
--------
6,047
--------
Total U.S. Government Agencies 58,710
--------
</TABLE>
<TABLE>
<CAPTION>
Principal Security Market
Amount Description Value
--------- --------------------------------------------------------- --------
<S> <C> <C>
Government Obligations (12.0%):
Government National Mortgage Association (12.0%):
$ 1,988 6.00%, 7/20/29........................................... $ 1,826
5,970 6.50%, 4/15/29........................................... 5,685
1,432 7.00%, 8/15/28........................................... 1,400
1,553 9.00%, 9/15/04-7/15/09................................... 1,633
2,617 9.50%, 12/20/13-12/20/22................................. 2,762
--------
Total Government Obligations 13,306
--------
Collateralized Mortgage Obligations (10.0%):
Fannie Mae (6.4%):
7,000 7.50%, 8/25/22, Series 1994-93........................... 7,115
--------
Residential Funding Mortgage, Inc. (1.1%):
1,370 6.75%, 6/25/28, Series 1998-S13, Class A-21.............. 1,259
--------
Ryland Acceptance Corp. (1.3%):
1,400 9.00%, 7/1/16............................................ 1,466
--------
Vendee Mortgage Trust (1.2%):
1,420 6.50%, 6/15/25........................................... 1,329
--------
Total Collateralized Mortgage Obligations 11,169
--------
Cash Equivalents (0.6%):
710 Goldman Sachs Financial Square Government................ 710
--------
Total Cash Equivalents 710
--------
Short Term Securities Purchased with Collateral (33.0%):
Repurchase Agreements (33.0%):
36,656 Paine Webber Triparty Agreement, 5.70%, 12/1/99, (See
Significant Accounting Policies, Lending Portfolio
Securities in the Notes to Financial Statements for
collateral description)................................. 36,656
--------
Total Short Term Securities Purchased with Collateral 36,656
--------
Total Investments (Cost $149,432)(a)--132.2% 146,990
Liabilities in excess of other assets--(32.2)% (35,789)
--------
Total Net Assets--100.0% $111,201
========
</TABLE>
- - -------
(a) Cost for federal tax income purposes differs from value by net unrealized
depreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation................................. $ 27
Unrealized depreciation................................. (2,469)
-------
Net unrealized depreciation............................. $(2,442)
=======
</TABLE>
(b) All or a portion of this security has been loaned at November 30, 1999.
(c) Inflation indexed note.
See notes to financial statements.
39
<PAGE> 41
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
U.S. Government Income Fund
(Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
Principal Security Market
Amount Description Value
--------- --------------------------------------------------------- --------
<S> <C> <C>
U.S. Government Obligations (49.7%):
Government National Mortgage Association (49.3%):
$36,983 6.00%, 11/15/28-7/20/29.................................. $ 34,106
6,779 6.50%, 11/15/23-6/15/29.................................. 6,456
6,810 7.00%, 10/15/22-3/15/29.................................. 6,675
673 7.50%, 5/15/22-12/15/23.................................. 678
1,932 8.00%, 4/15/17-5/20/24................................... 1,979
994 8.25%, 1/15/05-6/15/16................................... 1,029
578 8.50%, 3/20/17-9/15/24................................... 597
486 8.75%, 8/15/08-6/15/17................................... 511
4,279 9.00%, 10/15/04-12/15/22................................. 4,491
1,305 9.25%, 5/15/16-5/15/21................................... 1,390
12,170 9.50%, 6/15/09-5/15/22................................... 12,992
238 10.50%, 9/15/00-12/20/04................................. 250
166 11.00%, 4/15/00-3/20/01.................................. 175
484 11.50%, 3/15/00-12/15/15................................. 541
2,234 12.00%, 5/15/00-5/15/18.................................. 2,555
4,081 12.50%, 4/15/10-1/20/16.................................. 4,718
186 12.75%, 9/20/13-12/20/14................................. 212
1,938 13.00%, 11/15/10-6/20/15................................. 2,246
1,939 13.50%, 5/15/10-6/20/15.................................. 2,292
1,612 14.00%, 5/15/11-2/15/15.................................. 1,937
28 14.50%, 9/15/12-8/15/14.................................. 34
3,809 15.00%, 6/15/11-1/15/13.................................. 4,703
11 16.00%, 11/15/11-12/15/11................................ 13
91 17.00%, 11/15/11......................................... 107
--------
90,687
--------
U.S. Treasury Bonds (0.4%):
800 6.25%, 8/15/23(b)........................................ 774
--------
Total U.S. Government Obligations 91,461
--------
Collateralized Mortgage Obligations (23.1%):
4,598 BA Mortgage Securities, Inc., Series 1997-2, Class 1A6,
7.25%, 10/25/27......................................... 4,485
129 CityFed Mortgage Trust, Series 1, Class D, 10.00%,
1/1/18.................................................. 135
2,200 Credit Suisse First Boston Mortgage, Series 1997-C1,
Class A1C, 7.24%, 4/20/07............................... 2,163
1,605 Drexel Burnham Lambert, Series H, Class 4, 8.50%, 4/1/17. 1,636
3,100 Fannie Mae, Series 1992-214PL, Series 1992-214 Pl, 7.50%,
5/25/21................................................. 3,131
1,843 Fannie Mae, Series 1992-29Z, 8.00%, 2/25/22.............. 1,860
3,000 Fannie Mae, Series 1994-93PH, 7.50%, 8/25/22............. 3,049
12,500 Fannie Mae, Series 1998-50, Class CD, 6.00%, 5/25/14..... 11,339
1,607 Freddie Mac, Series 1273, Class Z, Series 1273, Class Z,
7.50%, 5/15/22.......................................... 1,593
1,928 General Electric Capital Mortgage Services, Inc., Series
1999-1, Class A1, 6.50%, 1/25/29........................ 1,764
483 MDC Asset Investors Trust, Series 6, Class 8, 7.00%,..... 478
</TABLE>
<TABLE>
<CAPTION>
Principal Security Market
Amount Description Value
--------- --------------------------------------------------------- --------
<S> <C> <C>
Collateralized Mortgage Obligations, continued:
$ 1,439 Merrill Lynch Mortgage Investors, Inc., Series 1996-C1,
Class A1, 7.15%, 4/25/28................................ $ 1,434
4,864 Norwest Asset Securities Corp., Series 1999-5, Class A5,
6.50%, 3/25/14.......................................... 4,623
1,690 Residential Funding Mortgage, Inc., Series 1998-S13,
Class A21, 6.75%, 6/25/28............................... 1,553
2,810 Security Mortgage Acceptance Corp., Series II, 9.00%,
12/1/16................................................. 2,850
552 Structured Mortgage Residential Trust, 8.25%, 6/25/19.... 566
--------
Total Collateralized Mortgage Obligations 42,659
--------
U.S. Government Agencies (26.7%):
Fannie Mae (20.2%):
21,306 6.00%, 12/1/28-2/1/29.................................... 19,767
9,417 6.50%, 2/1/28-7/1/29..................................... 8,993
525 7.50%, 9/1/22-11/1/22.................................... 530
4,639 8.00%, 12/1/17-3/1/23.................................... 4,698
552 8.50%, 11/1/21-9/1/23.................................... 575
455 9.00%, 6/1/09-10/1/19.................................... 479
671 9.50%, 9/1/11............................................ 706
119 10.00%, 6/1/21........................................... 129
152 10.50%, 9/1/00-5/1/04.................................... 161
124 11.00%, 8/1/00-9/1/06.................................... 131
68 11.25%, 6/1/13-12/1/15................................... 75
22 11.50%, 2/1/00-1/1/01.................................... 24
31 12.00%, 4/1/00-9/1/00.................................... 34
744 12.50%, 8/1/03-5/15/15................................... 858
188 14.00%, 11/1/12.......................................... 209
--------
37,369
--------
Freddie Mac (6.5%):
1,990 8.00%, 9/1/03-3/1/22..................................... 2,060
2,151 8.50%, 3/1/06-1/1/22..................................... 2,257
693 8.75%, 6/1/16-7/1/17..................................... 726
2,279 9.00%, 9/1/01-9/1/20..................................... 2,419
188 9.25%, 8/1/13-11/1/19.................................... 201
462 9.75%, 11/1/08-4/1/09.................................... 500
2,442 10.00%, 6/1/05-9/1/16.................................... 2,587
231 10.50%, 7/1/00-11/1/02................................... 243
47 11.50%, 1/1/00-1/1/01.................................... 50
42 12.00%, 3/1/00-11/1/00................................... 45
726 12.25%, 8/1/15........................................... 836
6 12.50%, 6/1/00-4/1/01.................................... 6
--------
11,930
--------
Total U.S. Government Agencies 49,299
--------
Cash Equivalents (0.4%):
819 Goldman Sachs Financial Square Government................ 819
--------
Total Cash Equivalents 819
--------
</TABLE>
Continued
40
<PAGE> 42
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
U.S. Government Income Fund
(Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
Principal Security Market
Amount Description Value
--------- -------------------------------------------------------- --------
<S> <C> <C>
Short Term Securities Purchased with Collateral (0.4%):
Repurchase Agreement (0.4%):
$ 800 Bear Stearns & Co. Triparty Agreement, 5.83%, 12/1/99,
(See Significant Accounting Policies, Lending Portfolio
Securities in the Notes to Financial Statements for
collateral description)................................ $ 800
--------
Total Short Term Securities Purchased with Collateral 800
--------
Total Investments (Cost $189,504)(a)--100.3% 185,038
Liabilities in excess of other assets --(0.3)% (538)
--------
Total Net Assets--100.0% $184,500
========
</TABLE>
- - -------
(a) Cost for federal income tax purposes differs from value by net unrealized
depreciation as follows:
<TABLE>
<S> <C>
Unrealized appreciation................................. $ 529
Unrealized depreciation................................. (4,995)
-------
Net unrealized depreciation............................. $(4,466)
=======
</TABLE>
(b) All or part of this security has been loaned at November 30, 1999.
See notes to financial statements.
41
<PAGE> 43
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
Bond Fund
(Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<S> <C> <C>
U.S. Treasury Notes (1.7%):
$ 955 6.13%, 8/15/07(b)......................................... $ 946
5,118 3.88%, 1/15/09(b)(c)...................................... 5,014
--------
Total U.S. Treasury Notes 5,960
--------
U.S. Treasury Bonds (6.1%):
13,140 6.25%, 8/15/23(b)......................................... 12,713
9,340 3.63%, 4/15/28(b)(c)...................................... 8,553
--------
Total U.S. Treasury Bonds 21,266
--------
U.S. Government Obligations (10.7%):
Government National Mortgage Assoc. (10.7%):
4,286 7.50%, 4/15/23............................................ 4,295
2,799 6.50%, 9/15/23............................................ 2,689
9,708 7.50%, 8/15/25............................................ 9,705
5,600 6.50%, 11/15/28........................................... 5,328
5,658 6.50%, 11/15/28........................................... 5,383
8,539 6.50%, 4/15/29............................................ 8,131
1,825 7.50%, 11/15/29........................................... 1,823
--------
37,354
--------
Total U.S. Government Obligations 37,354
--------
U.S. Government Agencies (14.9%):
Fannie Mae (13.3%):
1,252 9.00%, 8/1/09............................................. 1,310
1,789 9.00%, 11/1/24............................................ 1,873
1,560 8.50%, 7/1/25............................................. 1,608
682 6.50%, 8/1/27............................................. 650
103 6.50%, 9/1/27............................................. 98
689 6.50%, 10/1/27............................................ 657
104 6.50%, 10/1/27............................................ 99
732 6.50%, 12/1/27............................................ 699
27 6.50%, 12/1/27............................................ 26
721 6.50%, 12/1/27............................................ 688
122 6.50%, 12/1/27............................................ 116
9 6.00%, 7/1/28............................................. 9
9,991 6.50%, 11/1/28............................................ 9,535
5,640 6.00%, 12/1/28............................................ 5,232
569 6.00%, 3/1/29............................................. 528
11,748 6.00%, 3/1/29............................................. 10,900
6,275 6.00%, 3/1/29............................................. 5,822
4,452 6.00%, 5/1/29............................................. 4,130
2,145 6.50%, 8/1/29............................................. 2,047
--------
46,027
--------
Freddie Mac (1.6%):
715 9.00%, 5/15/20............................................ 755
1,564 9.50%, 10/1/20............................................ 1,675
3,318 7.00%, 11/1/28............................................ 3,248
--------
5,678
--------
Total U.S. Government Agencies 51,705
--------
</TABLE>
<TABLE>
<CAPTION>
Principal Security Market
Amount Description Value
--------- --------------------------------------------------------- --------
<S> <C> <C>
Corporate Bonds (29.4%):
Automotive (1.4%):
$ 1,325 DaimlerChrysler, 6.90%, 9/1/04........................... $ 1,323
3,650 Ford Motor Credit Co., 7.38%, 10/28/09................... 3,673
--------
4,996
--------
Banking (5.9%):
5,610 Citicorp, 6.38%, 11/15/08................................ 5,246
3,370 First Chicago Corp., 6.88%, 6/15/03...................... 3,362
2,000 First Maryland Bancorp, 7.20%, 7/1/07.................... 1,970
4,375 First Union Capital II, 7.95%, 11/15/29.................. 4,260
3,945 First Union Corp., 6.95%, 11/1/04........................ 3,920
1,850 HSBC Holding PLC, 7.50%, 7/15/09......................... 1,858
--------
20,616
--------
Consumer Goods & Services (1.8%):
6,700 American Greetings, 6.10%, 8/1/28........................ 6,114
--------
Electrical & Electronic (0.8%):
3,000 Arrow Electronic, Inc., 6.88%, 6/1/18.................... 2,655
--------
Financial (3.8%):
2,145 Bradley Operating LP, 7.00%, 11/15/04.................... 2,040
2,500 Ford Motor Credit Co., 6.70%, 7/16/04.................... 2,472
63,461 General Motors Acceptance Corp., Interest Only, 1.64%*,
7/15/27................................................. 5,018
4,000 Susa Partnership LP, 7.00%, 12/1/07...................... 3,630
--------
13,160
--------
Industrials (11.1%):
5,000 Archer Daniels Midland Co., 7.50%,
3/15/27................................................. 4,906
4,950 Brunswick Corp., 6.75%, 12/15/06......................... 4,690
6,500 Computer Assoc. International, 6.25%, 4/15/03............ 6,273
2,000 Cummins Engine, Inc., 6.45%, 3/1/05...................... 1,890
1,095 Halliburton Co., 5.63%, 12/1/08.......................... 984
4,810 Lubrizol Corp., 5.88%, 12/1/08........................... 4,305
2,800 Monsanto Co., 5.38%, 12/1/01............................. 2,734
4,090 Motorola, Inc., 7.50%, 5/15/25........................... 4,059
2,665 Pentair, Inc., 7.85%, 10/15/09........................... 2,635
6,600 Worthington Industries, Inc., 7.13%,
5/15/06................................................. 6,411
--------
38,887
--------
Real Estate Investment Trust (4.6%):
3,000 Commercial Net Lease Realty Trust, 8.13%, 6/15/04........ 2,944
4,050 Federal Realty Investment Trust, 8.75%, 12/1/09.......... 4,005
3,650 Gables Realty Trust, 6.80%, 3/15/05...................... 3,448
5,845 New Plan Excel Realty Trust, 6.88%, 10/15/04............. 5,720
--------
16,117
--------
Total Corporate Bonds 102,545
--------
</TABLE>
Continued
42
<PAGE> 44
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
Bond Fund
(Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
Principal Security Market
Amount Description Value
--------- --------------------------------------------------------- --------
<S> <C> <C>
Asset Backed Securities (16.0%):
$ 4,578 Amresco Securitized Net Interest Margin, Series 1999-1A,
Class A, 9.10%, 9/27/29................................. $ 4,475
2,664 EQCC Home Equity Loan Trust, 5.73%, 12/15/08............. 2,596
6,000 Equivantage Home Equity Loan Trust, 7.05%, 12/25/28...... 5,893
5,260 First Security Auto Owner Trust, 5.74%, 6/15/04.......... 5,154
1,600 Flagship Auto Receivables Owner Trust, Series 1999-2,
Class A3, 6.84%, 11/18/04............................... 1,597
6,090 General Electric Capital Mortgage Services, Inc., 6.19%,
1/25/23................................................. 5,920
1,154 Green Tree Home Improvement Loan Trust, 7.85%, 7/15/09... 1,135
7,790 IMC Home Equity Loan Trust, 6.76%, 10/20/20.............. 7,701
4,467 PALS, 6.30%, 3/25/29..................................... 4,331
2,300 Residential Asset Securities Corp., 7.18%, 1/25/25....... 2,295
3,460 Saxon Asset Securities Trust, 7.53%,
6/25/14................................................. 3,442
8,010 Saxon Asset Securities Trust, 7.55%, 10/25/26............ 8,019
3,135 Vanderbilt Mortgage Finance Trust, Series 1999-C, Class
1A3, 7.39%, 1/7/20...................................... 3,133
--------
Total Asset Backed Securities 55,691
--------
Mortgage Backed Securities (20.3%):
1,965 Champion Home Equity Loan Trust, Series 1997-2, Class A5,
6.71%, 9/25/29.......................................... 1,914
9,000 Credit Suisse First Boston, 7.24%, 4/20/07............... 8,850
3,589 General Electric Capital Mortgage
Services, Inc., 6.50%, 1/25/29.......................... 3,284
3,245 Greenpoint Manufactured Housing, Series 1999-1, Class A3,
6.11%, 11/15/18......................................... 3,059
4,084 Housing Securities, Inc., 7.50%, 1/25/09................. 4,117
1,069 Housing Securities, Inc., 7.50%, 3/25/09................. 1,079
6,000 Morgan Stanley Capital, Inc., 6.53%,
3/15/32................................................. 5,688
4,550 New Century Home Equity Loan Trust, Series 1997-NC6,
Class A6, 7.01%, 5/25/26................................ 4,495
</TABLE>
<TABLE>
<CAPTION>
Principal Security Market
Amount Description Value
--------- -------------------------------------------------------- --------
<S> <C> <C>
Mortgage Backed Securities, continued:
$ 3,469 New Century Home Equity Loan Trust, 7.22%, 11/25/27..... $ 3,399
3,645 New Century Home Equity Loan Trust, 7.53%, 9/25/28...... 3,632
6,418 PNC, Series 98-7, Class A5, 6.75%, 9/25/28.............. 6,003
4,960 Prudential Securities Secured Financing Corp., 6.35%,
9/15/07................................................ 4,701
3,640 Prudential Securities Secured Financing Corp., 6.48%,
1/15/09................................................ 3,446
10,309 Residential Accredit Loans, Inc., 6.50%, 3/25/29........ 9,493
3,750 Residential Funding Mortgage, Inc., 6.75%, 6/25/28...... 3,446
4,225 Vendee Mortgage Trust, 6.50%, 6/15/25................... 3,954
--------
Total Mortgage Backed Securities 70,560
--------
Cash Equivalents (0.5%):
1,620 Goldman Sachs Financial Square Premium.................. 1,620
--------
Total Cash Equivalents 1,620
--------
Short Term Securities Purchased with Collateral (7.9%):
Commercial Paper (3.1%):
10,729 Federal Signal Corp., 5.88%, 12/1/99.................... 10,729
--------
Floating Rate Note (2.9%):
10,000 Merrill Lynch & Co., 6.02%, 2/28/00..................... 10,000
--------
Repurchase Agreement (1.9%):
6,756 Lehman Brothers Triparty Agreement, 5.83%, 12/1/99, (See
Significant Accounting Policies, Lending Portfolio
Securities in the Notes to Financial Statements for
collateral description)................................ 6,756
--------
Total Short Term Securities Purchased with Collateral 27,485
--------
Total Investments (Cost $386,554)(a)--107.5% 374,186
Liabilities in excess of other assets--(7.5)% (26,250)
--------
Total Net Assets--100.0% $347,936
========
</TABLE>
- - -------
* Variable rate securities having liquidity sources through bank letters of
credit or other credit and/or liquidity agreements. The interest rate, which
will change periodically, is based upon an index of market rates. The rate
reflected on the Schedule of Portfolio Investments is the rate in effect at
November 30, 1999.
(a) Cost for federal income tax purposes differs from value by net unrealized
depreciation as follows:
<TABLE>
<S> <C>
Unrealized appreciation................................ $ 494
Unrealized depreciation................................ (12,861)
--------
Net unrealized depreciation............................ $(12,367)
========
</TABLE>
(b) All or a portion of this security has been loaned at November 30, 1999.
(c) Inflation indexed bond.
See notes to financial statements.
43
<PAGE> 45
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
National Tax Exempt Bond Fund
(Unaudited)
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- -------
<S> <C> <C>
Municipal Bonds (97.3%):
Colorado (1.2%):
$ 1,000 Jefferson County School District, 5.25%, 12/15/05, MBIA... $ 1,025
-------
Connecticut (4.6%):
2,000 Connecticut Special Tax Obligation, 5.38%, 9/1/08......... 2,053
1,770 Connecticut Clean Water Fund, 6.38%, 6/1/05............... 1,920
-------
3,973
-------
Delaware (2.8%):
1,000 Delaware Transportation Authority, 7.80%, 7/1/04, ETM..... 1,086
1,250 Delaware Transportation Authority, 6.00%, 7/1/06, AMBAC... 1,333
-------
2,419
-------
Florida (8.3%):
1,630 Dade County School District, 6.50%, 2/15/06, MBIA......... 1,774
1,000 Florida State Department of Transportation G.O., 6.00%,
7/1/07................................................... 1,071
135 Florida Board of Education Capital Outlay, 9.13%, 6/1/14,
ETM...................................................... 178
2,000 Florida Board of Education, Series G, 6.90%, 5/1/03, ETM.. 2,152
1,000 Gulf Breeze, Revenue, 3.39%*, 12/1/17..................... 980
1,000 Tampa Sports Authority Revenue, 6.00%, 1/1/06, MBIA....... 1,064
-------
7,219
-------
Georgia (6.6%):
1,200 Fayette County School District, G.O., 6.25%, 3/1/04....... 1,275
2,000 Georgia, 6.60%, 4/1/05.................................... 2,180
2,000 Georgia Municipal Electric Power Revenue, Series X, 6.50%,
1/1/12, MBIA............................................. 2,203
-------
5,658
-------
Guam (1.8%):
1,505 Government Highway Revenue, Series A, 5.90%, 5/1/02, CGIC. 1,560
-------
Idaho (2.0%):
1,560 Canyon County School District, G.O., 8.13%, 7/30/03,...... 1,741
-------
Kansas (1.3%):
1,000 Kansas State Department of Transportation & Highway,
7.25%, 3/1/04............................................ 1,100
-------
Kentucky (3.8%):
3,000 Kentucky Turnpike Authority, 6.50%, 7/1/07, AMBAC......... 3,293
-------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- -------
<S> <C> <C>
Municipal Bonds, continued:
Maryland (1.2%):
$ 1,000 Montgomery County, G.O., 5.70%, 7/1/05.................... $ 1,051
-------
Massachusetts (1.2%):
1,000 Massachusetts G.O., 5.75%, 8/1/08, FGIC................... 1,054
-------
Minnesota (2.5%):
1,000 Minnesota, 6.00%, 5/1/06.................................. 1,069
1,000 North Saint Paul Maplewood, 6.88%, 2/1/15, Prerefunded
2/1/05 @ 100, MBIA....................................... 1,097
-------
2,166
-------
Missouri (5.6%):
1,535 Kansas City, G.O., 6.00%, 2/1/04.......................... 1,615
1,000 Missouri G.O., Series A, 6.00%, 4/1/02.................... 1,038
1,545 Missouri State Environmental Authority Water Revenue,
6.00%, 1/1/07............................................ 1,641
495 Missouri State Environment Authority Revolving Fund, Water
Pollution Control, 7.00%, 10/1/10........................ 515
-------
4,809
-------
New Mexico (2.5%):
1,000 Albuquerque Water & Sewer, 6.00%, 7/1/05.................. 1,063
1,000 Albuquerque Water & Sewer, 6.00%, 7/1/07.................. 1,067
-------
2,130
-------
New York (7.0%):
1,300 Buffalo Sewer Authority Revenue, Series F, 6.00%, 7/1/13,
FGIC..................................................... 1,381
1,000 Municipal Assistance Corp. for New York City, 6.00%,...... 1,055
995 New York City G.O., 8.00%, 4/1/03, AMBAC, ETM............. 1,102
1,005 New York City G.O., 8.00%, 4/1/03,
AMBAC.................................................... 1,107
1,365 New York City, Transitional Financial Authority Revenue,
5.50%, 8/15/07........................................... 1,411
-------
6,056
-------
Ohio (5.2%):
795 Cleveland City School District, 8.00%, 12/1/01, ETM....... 852
820 Cleveland, OH, 0.00%, 12/1/12, Capital Appreciation....... 396
820 Cleveland, OH, 0.00%, 12/1/15, Capital Appreciation....... 320
815 Cleveland, OH, 0.00%, 12/1/16, Capital Appreciation....... 296
1,920 Ohio Housing Financial Agency Single Family, Mortgage,
Revenue, 0.00%, 1/15/15, Prerefunded 1/15/13 @ 81.879.... 763
1,715 Ohio State Water Development Authority, 6.00%, 6/1/07..... 1,835
-------
4,462
-------
</TABLE>
Continued
44
<PAGE> 46
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
National Tax Exempt Bond Fund
(Unaudited)
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- -------
<S> <C> <C>
Municipal Bonds, continued:
Oregon (7.0%):
$ 1,000 Deschutes & Jefferson School District, G.O., 6.00%,
6/1/03, MBIA............................................. $ 1,049
1,435 Lane County School District, G.O., 6.00%, 1/1/04.......... 1,503
1,220 Washington County School District G.O., 7.80%, 6/1/04..... 1,374
2,000 Washington County Sewer Revenue, 5.75%, 10/1/08, FGIC..... 2,105
-------
6,031
-------
Puerto Rico (6.4%):
4,000 Puerto Rico Electric Power Authority, 6.50%, 7/1/06, MBIA. 4,405
1,000 University of Puerto Rico, 6.25%, 6/1/07, MBIA............ 1,093
-------
5,498
-------
Rhode Island (1.3%):
1,130 Rhode Island G.O., 5.00%, 8/1/06.......................... 1,143
-------
South Carolina (2.5%):
2,095 Cherokee County School District G.O., 5.50%, 3/1/05,...... 2,171
-------
Tennessee (8.1%):
1,290 Memphis, G.O., 6.00%, 11/1/03............................. 1,359
1,435 Metro Government Nashville and Davidson County, 5.25%,
5/15/07.................................................. 1,465
2,000 Shelby County, G.O., Series B, 5.20%, 12/1/09............. 2,018
2,000 Tennessee, G.O., 6.00%, 5/1/05............................ 2,125
-------
6,967
-------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- -------
<S> <C> <C>
Municipal Bonds, continued:
Texas (6.6%):
$ 2,500 Conroe Independent School District, G.O., 5.50%, 2/15/15,
PSFG..................................................... $ 2,469
1,000 Dallas, G.O., 6.13%, 2/15/07, Prerefunded 2/15/03 @ 100... 1,048
1,540 Harris County G.O., 6.50%, 8/15/15........................ 1,617
575 Robinson Independent School District G.O., 5.75%, 8/15/12,
PSFG..................................................... 589
-------
5,723
-------
Utah (2.4%):
2,000 Utah State G.O., 5.50%, 7/1/04............................ 2,075
-------
Vermont (1.7%):
1,355 Burlington Electric Revenue Bond, 6.00%, 7/1/07, MBIA..... 1,438
-------
Washington (1.2%):
1,000 Seattle Water Revenue, 5.00%, 12/1/03..................... 1,021
-------
Wisconsin (2.5%):
2,000 Milwaukee G.O., 6.00%, 2/1/07............................. 2,125
-------
Total Municipal Bonds 83,908
-------
Investment Companies (1.3%):
1,090,119 Provident Institutional Muni Cash Fund.................... 1,090
-------
Total Investment Companies 1,090
-------
Total Investments (Cost $84,905)(a)--98.6% 84,998
Other assets in excess of liabilities--1.4% 1,222
-------
Total Net Assets--100.0% $86,220
=======
</TABLE>
- - -------
* Variable rate security. Interest rate changes every six months based on
percentage change in the Consumer Price Index plus a predetermined spread.
(a) Cost for federal income tax purposes differs from value by net unrealized
appreciation as follows:
<TABLE>
<S> <C>
Unrealized appreciation................................... $ 787
Unrealized depreciation................................... (694)
-----
Net unrealized appreciation............................... $ 93
=====
</TABLE>
AMBAC--American Municipal Bond Assurance Corp.
CGIC--Capital Guarantee Insurance Corp.
ETM--Escrowed to Maturity
FGIC--Federal Guarantee Insurance Corp.
G.O.--General Obligation
MBIA--Municipal Bond Insurance Association
PSFG--Permanent School Fund Guarantee
See notes to financial statements.
45
<PAGE> 47
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
Michigan Municipal Bond Fund
(Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<S> <C> <C>
Municipal Bonds (98.1%):
Michigan (90.1%):
$ 2,000 Brighton School District, Series II, 0.00%, 5/1/11, AMBAC. $ 1,083
1,380 Byron Center Public Schools, G.O., 8.25%, 5/1/08, MBIA.... 1,668
1,380 Byron Center Public Schools, G.O., 8.25%, 5/1/09, MBIA.... 1,689
1,000 Chippewa Valley School District, 7.00%, 5/1/11,
Prerefunded 5/1/01 @ 102................................. 1,056
2,375 Chippewa Valley School District, G.O., 7.80%, 5/1/01...... 2,488
1,285 Chippewa Valley School District, Refunding Bonds, 6.00%,
5/1/08, AMBAC............................................ 1,367
1,000 Clarkston Community Schools, 6.25%, 5/1/05, FGIC.......... 1,070
1,150 Clinton Township Building Authority, 4.80%, 11/1/13,...... 1,071
1,100 Dearborn School District, 8.38%, 5/1/01, Prerefunded
5/1/00 @ 102............................................. 1,141
2,000 Detroit Revenue Bonds, G.O., 5.25%, 5/1/08, AMBAC......... 2,025
1,600 Detroit, 6.25%, 7/15/11, AMBAC............................ 1,730
1,000 Detroit, 5.50%, 4/1/08, MBIA.............................. 1,030
1,065 Detroit Local Development Financing Authority, 5.50%,..... 1,088
1,000 Detroit Sewage Disposal Revenue, Series B, 6.00%, 7/1/09,
MBIA..................................................... 1,066
1,380 Detroit Sewage Disposal Revenue, 6.00%, 7/1/10, MBIA...... 1,465
2,500 Detroit Sewage Disposal Revenue, 6.00%, 7/1/07, MBIA...... 2,656
1,000 Detroit Water, 6.50%, 7/1/15, FGIC........................ 1,096
2,000 Detroit Water Supply Systems, 5.40%, 7/1/10, MBIA......... 2,035
2,250 Detroit Water Supply Systems, Series B, 5.55%, 7/1/12,.... 2,298
1,000 Detroit Water Supply Systems, Series A, 6.00%, 7/1/13,.... 1,050
1,350 Ecorse Public School, 6.50%, 5/1/07, FGIC................. 1,478
1,110 Flint, 6.00%, 11/1/04, MBIA............................... 1,178
1,125 Goodrich Area School District, G.O., 7.65%, 5/1/11,
Prerefunded 5/1/05 @ 102, AMBAC.......................... 1,298
1,235 Grand Haven Public Schools, G.O., 7.00%, 5/1/07, MBIA..... 1,386
1,000 Grand Haven Electric, 5.20%, 7/1/06, MBIA................. 1,019
2,655 Grand Ledge Public School District, 5.25%, 5/1/09, MBIA... 2,682
1,250 Grand Ledge Public School District, G.O., 5.45%, 5/1/11,
MBIA..................................................... 1,266
1,570 Grand Rapids Building Authority, 5.00%, 4/1/15............ 1,474
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<S> <C> <C>
Municipal Bonds, continued:
Michigan, continued:
$ 1,925 Grand Rapids School District, G.O., 5.00%, 5/1/06,
Callable 5/1/01 @ 102.................................... $ 1,937
1,535 Grand Rapids Sanitation Sewer System, Series A, 5.38%,
1/1/16, FGIC............................................. 1,487
500 Grand Rapids Water Supply, 7.00%, 1/1/12, Callable 1/1/00
@ 102.................................................... 511
1,500 Greater Detroit Resources Recovery, 6.25%, 12/13/08,
AMBAC.................................................... 1,616
600 Holt School District, G.O., 8.75%, 5/1/00................. 611
600 Holt School District, G.O., 8.75%, 5/1/01................. 636
1,000 Huron Valley School District, 5.75%, 5/1/06, FGIC......... 1,049
1,000 Jenison Public School District, G.O., 5.25%, 5/1/12, FGIC,
FGIC..................................................... 991
1,650 Kalamazoo, G.O., 6.20%, 10/1/06, Callable 10/1/02 @....... 1,735
675 Kalamazoo Hospital Authority, 6.25%, 7/1/04, Callable
7/1/99 @ 100, FGIC....................................... 676
2,000 Kalamazoo Hospital Finance Authority, Borgess Medical
Center, 6.13%, 7/1/07, FGIC.............................. 2,105
1,440 Kalamazoo Hospital Finance Authority, Bronson Hospital,
5.88%, 5/15/03........................................... 1,499
2,000 Kalamazoo Hospital Finance Authority, Borgess Medical
Center, Series A, 6.00%, 6/1/03, FGIC.................... 2,095
1,000 Kalamazoo Public Library, 5.20%, 5/1/11, MBIA............. 991
5,000 Kent County Hospital Authority, Butterworth Hospital,
Series A, 7.25%, 1/15/13................................. 5,687
500 Kentwood School District, 5.90%, 5/1/04, Prerefunded
5/1/02 @ 102............................................. 525
500 Kentwood School District, 5.90%, 5/1/04................... 523
2,000 Lake Orion County School District, G.O., 7.00%, 5/1/20,
Prerefunded 5/1/05 @ 101, AMBAC.......................... 2,230
1,335 Lansing, G.O., 6.00%, 1/1/07.............................. 1,418
1,000 Lansing Building Authority, 6.00%, 6/1/04, Callable 6/1/00
@ 102, ETM............................................... 1,028
2,000 Lansing School District, G.O., 6.88%, 5/1/09, Prefunded
5/1/05 @ 100............................................. 2,203
1,000 Lansing, G.O., 6.00%, 10/1/02............................. 1,040
1,000 Livonia School District, G.O., 6.35%, 5/1/04, Callable
5/01/02 @ 102............................................ 1,056
1,000 Municipal Bond Authority, 5.15%, 10/1/08.................. 1,009
1,000 Local Government Loan Program, 6.20%, 5/1/04, AMBAC....... 1,063
2,000 State Recreation Program, G.O., 5.75%, 11/1/01............ 2,055
</TABLE>
Continued
46
<PAGE> 48
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
Michigan Municipal Bond Fund
(Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<S> <C> <C>
Municipal Bonds, continued:
Michigan, continued:
$ 1,000 State Environmental Protection Program, G.O., 6.25%,
11/1/07, Prerefunded 11/1/02 @ 102....................... $ 1,068
3,250 State Environmental Protection Program, G.O., 6.25%,
11/1/12.................................................. 3,537
3,000 State Environmental Protection Program, G.O., 5.50%,
11/1/05.................................................. 3,120
1,000 State Building Authority, Series II, 6.40%, 10/1/04,
Callable 10/1/01 @ 102................................... 1,051
1,020 State Building Authority, Michigan University Adult
General Hospital, 7.00%, 12/1/08, Prerefunded 12/1/02 @
100...................................................... 1,094
1,000 State Building Authority, 6.25%, 10/1/00, AMBAC........... 1,019
300 State Building Authority Revenue, 4.10%, 10/1/00.......... 301
1,000 State Building Authority Revenue, 5.38%, 10/15/10,
Callable................................................. 1,011
1,000 State Building Authority Revenue, Series 2, 5.00%,
10/15/14, Callable....................................... 938
1,600 Comprehensive Transportation, Series B, 5.40%, 5/15/01.... 1,626
1,135 State Hospital Finance Authority, Harper Grace Hospital,
7.12%, 5/1/09, ETM....................................... 1,231
1,000 Housing Development Authority, Series A, 6.45%, 6/1/04,
Callable 6/1/02 @ 102.................................... 1,040
1,200 State Hospital Finance Authority, Oakwood Hospital, Series
A, 5.00%, 11/1/03, FGIC.................................. 1,218
5,000 State Hospital Finance Authority, Sisters of Mercy, 5.38%,
8/15/14, MBIA............................................ 4,949
500 State Hospital Authority, Henry Ford, 6.00%, 9/1/11....... 533
2,000 State Hospital Authority, Henry Ford, 6.00%, 9/1/12....... 2,125
3,500 State Hopital Financial Authority, Genesys Health System,
Series A, 8.10%, 10/1/13, Prerefunded 10/1/05 @ 102...... 4,147
1,000 State Hospital Revenue Bonds, 6.00%, 8/15/02.............. 1,031
1,000 State Housing Development, 6.63%, 10/15/06, Callable
10/15/02 @ 103, FSA...................................... 1,063
1,525 Housing Development Authority, AMT, 5.75%, 10/1/04, AMBAC. 1,576
1,055 State South Central Power Agency, 5.70%, 11/1/04, MBIA.... 1,105
2,000 State South Central Power Agency, 5.80%, 11/1/05, MBIA.... 2,105
5,950 Strategic Fund (Ford), 7.10%, 2/1/06...................... 6,581
3,000 Strategic Fund (Detroit Edison), 7.00%, 7/15/08, MBIA..... 3,398
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<S> <C> <C>
Municipal Bonds, continued:
Michigan, continued:
$ 2,000 Strategic Fund (Detroit Edison), 6.95%, 5/1/11, FGIC...... $ 2,290
1,000 Strategic Fund (General Motors Corp.), 6.20%, 9/1/20...... 1,041
1,005 State Trunk Line, 6.25%, 11/1/03, FGIC.................... 1,067
1,000 State Trunk Line, Series A, 5.25%, 11/1/12................ 995
2,000 State Underground Storage, 6.00%, 5/1/04, AMBAC........... 2,110
1,000 State Underground Storage, 6.00%, 5/1/05, AMBAC........... 1,058
1,000 Michigan State University, Series A, 5.70%, 8/15/03,
Callable 8/15/02 @ 101................................... 1,040
2,075 Mona Shores School District, G.O., 6.75%, 5/1/09, FGIC.... 2,327
1,000 Oakland County Community College, 6.65%, 5/1/11........... 1,068
1,000 Paw Paw Public School District, G.O., 6.50%, 5/1/09,...... 1,103
1,000 Plymouth-Canton School District, 6.50%, 5/1/05,
Prerefunded 5/1/01 @ 101................................. 1,040
2,000 Rochester School District, 6.30%, 5/1/04, Prerefunded
5/1/02 @ 100............................................. 2,083
1,000 Rochester School District, 6.50%, 5/1/07, Prerefunded
5/1/02 @ 100............................................. 1,046
1,000 Rochester Community School District, 5.25%, 5/1/04, FGIC.. 1,026
1,000 Rochester, 5.75%, 5/1/08, MBIA............................ 1,046
1,135 Rockford School District, 5.75%, 5/1/07, Callable 5/1/02 @
102...................................................... 1,176
400 Rockford School District, Refunding Bonds, 6.00%, 5/1/07,
FGIC..................................................... 426
2,120 Royal Oak Hospital Financial Authority, William Beaumont
Hospital, Series G, 6.00%, 11/15/02...................... 2,194
955 St. Johns Public Schools, 5.00%, 5/1/21, FGIC............. 855
1,665 Southgate Community School District, G.O., 5.75%, 5/1/11,
FGIC..................................................... 1,719
1,000 Traverse City Public Schools, 7.00%, 5/1/05, Prerefunded
5/1/01 @ 101.5........................................... 1,051
1,000 Troy School District, 7.75%, 5/1/01, Prerefunded 5/1/00 @
102...................................................... 1,035
1,000 University of Michigan, Student Fees, 5.00%, 4/1/02....... 1,016
2,000 University of Michigan, Student Fees, Series B, 5.60%,
4/1/08, Callable 4/1/03 @ 102............................ 2,075
2,000 University of Michigan Hospital Revenue Bonds, 7.00%,
12/1/21, Prerefunded 12/1/00 @ 102....................... 2,097
500 University of Michigan, 6.00%, 4/1/05..................... 531
</TABLE>
Continued
47
<PAGE> 49
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
Michigan Municipal Bond Fund
(Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- --------------------------------------------------------- --------
<S> <C> <C>
Municipal Bonds, continued:
Michigan, continued:
$ 1,315 University of Michigan, Student Fees, Series A, 6.00%,... $ 1,400
1,975 Utica School District, 5.60%, 5/1/05..................... 2,054
285 Wayne County Airport Revenue, AMT, 7.25%, 12/1/10, AMBAC. 297
2,000 Wayne County Building Authority, 6.00%, 6/1/07, Callable
6/1/06 @ 102, MBIA...................................... 2,130
1,985 West Ottawa, 6.00%, 5/1/06, FGIC......................... 2,109
1,500 Western Michigan University, Series A, 5.40%, 7/15/08,
Callable 7/15/03 @ 105, FGIC............................ 1,524
1,680 Western Michigan School District, 5.90%, 5/1/10, MBIA.... 1,775
1,000 Western Township Utilities Authority, 6.00%, 1/1/00, FSA. 1,002
1,000 Wyandotte City School District, G.O., 6.90%, 5/1/16,
Prerefunded 5/1/01 @ 102................................ 1,055
3,000 Wyandotte Electric Revenue, 6.25%, 10/1/08, MBIA......... 3,221
--------
177,678
--------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- --------------------------------------------------------- --------
<S> <C> <C>
Municipal Bonds, continued:
Puerto Rico (7.3%):
$ 4,000 Commonwealth, G.O., 6.25%, 7/1/09, MBIA.................. $ 4,404
2,000 Commonwealth, G.O., 6.25%, 7/1/10, MBIA.................. 2,203
1,000 Commonwealth, Aqueduct & Sewer Authority, 6.00%, 7/1/07,
MBIA.................................................... 1,078
4,000 Public Buildings Authority, 5.50%, 7/1/07, FSA........... 4,185
1,250 Electric Power Authority, Series W, 6.50%, 7/1/05, MBIA.. 1,367
1,000 University of Puerto Rico, 6.25%, 6/1/07, MBIA........... 1,093
--------
14,330
--------
Virgin Islands (0.7%):
1,340 Public Finance Authority, 7.00%, 10/1/04, ETM............ 1,432
--------
Total Municipal Bonds 193,440
--------
Investment Companies (1.2%):
Investment Companies (1.2%):
2,437,812 Federated Michigan Tax Free Money Market................. 2,438
--------
Total Investment Companies 2,438
--------
Total Investments (Cost $192,319)(a)--99.3% 195,878
Other assets in excess of liabilities--0.7% 1,420
--------
Total Net Assets--100.0% $197,298
========
</TABLE>
- - -------
(a) Cost for federal income tax purposes differs from value by net unrealized
appreciation as follows:
<TABLE>
<S> <C>
Unrealized appreciation................................. $ 4,752
Unrealized depreciation................................. (1,193)
-------
Net unrealized appreciation............................. $ 3,559
=======
</TABLE>
AMBAC--American Municipal Bond Assurance Corp.
AMT--Alternative Minimum Tax
ETM--Escrowed to Maturity
FGIC--Federal Guarantee Insurance Corp.
FSA--Financial Securities Assurance, Inc.
G.O.--General Obligation
MBIA--Municipal Bond Insurance Association
See notes to financial statements.
48
<PAGE> 50
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
Equity Income Fund
(Unaudited)
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Security Market
Shares Description Value
-------- ----------------------------------------------------------- --------
<S> <C> <C>
Common Stocks (94.4%):
Aerospace (2.7%):
31,300 General Dynamics Corp...................................... $ 1,614
53,200 Northrop Grumman Corp...................................... 2,989
41,400 United Technologies Corp................................... 2,339
--------
6,942
--------
Automotive (2.5%):
48,800 Ford Motor Co.............................................. 2,464
35,800 General Motors Corp........................................ 2,578
53,200 Genuine Parts Co........................................... 1,370
--------
6,412
--------
Banks (11.9%):
88,679 Bank of America Corp....................................... 5,187
29,600 Chase Manhattan Corp....................................... 2,287
53,700 Comerica, Inc.............................................. 2,846
76,700 First Tennessee National Corp.............................. 2,522
74,000 FleetBoston Financial Corp................................. 2,798
85,400 PNC Financial Corp......................................... 4,761
84,100 SouthTrust Corp............................................ 3,264
102,600 UnionBanCal Corp........................................... 4,521
73,000 Washington Mutual, Inc..................................... 2,117
--------
30,303
--------
Building & Building Supplies (1.8%):
42,400 Armstrong World Industries, Inc............................ 1,420
121,800 Masco Corp................................................. 3,076
--------
4,496
--------
Chemicals (3.4%):
30,600 Dow Chemical Co............................................ 3,584
39,000 E. I. Du Pont de Nemours................................... 2,318
237,500 RPM, Inc................................................... 2,791
--------
8,693
--------
Computers (1.6%):
38,500 IBM Corp................................................... 3,968
--------
Diversified Manufacturing (0.8%):
8,600 Minnesota Mining and Manufacturing Co...................... 822
18,600 Textron, Inc............................................... 1,322
--------
2,144
--------
Drugs & Health Care (0.3%):
15,600 American Home Products Corp................................ 811
--------
Electrical Services (2.3%):
17,200 Consolidated Edison, Inc................................... 593
32,100 Duke Power Co.............................................. 1,627
49,500 FPL Group, Inc............................................. 2,166
26,600 General Public Utility Corp................................ 851
36,500 LG&E Energy Corp........................................... 730
--------
5,967
--------
</TABLE>
<TABLE>
<CAPTION>
Security Market
Shares Description Value
-------- ----------------------------------------------------------- --------
<S> <C> <C>
Common Stocks, continued:
Financial (4.6%):
40,966 Allstate Corp.............................................. $ 1,073
47,900 Chubb Corp................................................. 2,566
35,500 Cigna Corp................................................. 2,920
66,500 Marsh & McLennan Cos., Inc................................. 5,228
--------
11,787
--------
Financial Services (4.6%):
68,400 Fannie Mae................................................. 4,558
55,700 Freddie Mac................................................ 2,750
32,800 J.P. Morgan & Co........................................... 4,313
--------
11,621
--------
Food & Beverage (3.7%):
112,500 Flowers Industries, Inc.................................... 1,842
102,800 General Mills, Inc......................................... 3,874
156,900 Sara Lee, Inc.............................................. 3,805
--------
9,521
--------
Games, Toys & Children's Vehicles (0.4%):
64,200 Mattel, Inc................................................ 919
--------
Gas & Natural Gas (3.9%):
78,100 Consolidated Natural Gas Co................................ 5,008
130,100 Enron Corp................................................. 4,952
--------
9,960
--------
Handtools & General Hardware (1.7%):
75,600 Fortune Brands, Inc........................................ 2,585
61,600 Snap-On, Inc............................................... 1,863
--------
4,448
--------
Household Appliances (0.7%):
35,400 Maytag Corp................................................ 1,688
--------
Machinery (0.5%):
13,200 Caterpillar, Inc........................................... 612
18,400 Deere & Co................................................. 790
--------
1,402
--------
Medical & Medical Services (0.3%):
11,200 Baxter International, Inc.................................. 757
--------
Metals & Mining (3.8%):
120,800 Alcoa, Inc................................................. 7,912
74,500 USX-United States Steel Group, Inc......................... 1,886
--------
9,798
--------
Office & Business Equipment (1.9%):
74,700 Pitney Bowes, Inc.......................................... 3,581
47,800 Xerox Corp................................................. 1,294
--------
4,875
--------
</TABLE>
Continued
49
<PAGE> 51
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
Equity Income Fund
(Unaudited)
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Security Market
Shares Description Value
-------- ----------------------------------------------------------- --------
<S> <C> <C>
Common Stocks, continued:
Paper & Forest Products (2.4%):
36,800 Kimberly-Clark Corp........................................ $ 2,351
10,700 Temple-Inland, Inc......................................... 613
50,500 Weyerhaeuser Co............................................ 3,092
--------
6,056
--------
Petroleum Integrated (14.6%):
65,500 Atlantic Richfield Co...................................... 6,313
65,800 Chevron Corp............................................... 5,827
101,000 Mobil Corp................................................. 10,535
94,100 Royal Dutch Petroleum Co................................... 5,458
96,500 Texaco, Inc................................................ 5,880
120,800 Ultramar Diamond Shamrock Corp............................. 3,058
--------
37,071
--------
Printing & Publishing (0.4%):
27,200 New York Times Co., Class A................................ 1,046
--------
Professional Services (2.2%):
85,900 Dun & Bradstreet Corp...................................... 2,319
77,700 H&R Block, Inc............................................. 3,341
--------
5,660
--------
Real Estate Investment Trust (3.3%):
115,500 Arden Realty, Inc.......................................... 2,223
49,100 Developers Diversified Realty Corp......................... 684
161,800 Duke Realty Investments, Inc............................... 2,994
41,100 Kimco Realty Corp.......................................... 1,367
43,600 Mack-Cali Realty Corp...................................... 1,076
--------
8,344
--------
Retail (4.0%):
51,790 Intimate Brands, Inc....................................... 2,220
72,400 J.C. Penney Co., Inc....................................... 1,615
123,150 May Department Stores Co. ................................. 4,142
66,850 Sears, Roebuck & Co. ...................................... 2,285
--------
10,262
--------
Specialty Machinery (3.2%):
38,500 Cooper Industries, Inc..................................... 1,653
55,800 Emerson Electric Co........................................ 3,181
39,200 Hubbell, Inc., Class B..................................... 1,093
53,400 Thomas & Betts Corp........................................ 2,189
--------
8,116
--------
</TABLE>
<TABLE>
<CAPTION>
Security Market
Shares Description Value
-------- --------------------------------------------------------- --------
<S> <C> <C>
Common Stocks, continued:
Telephone & Telecommunication (9.3%):
148,550 AT&T Corp. .............................................. $ 8,301
43,600 Bell Atlantic Corp. ..................................... 2,760
87,100 GTE Corp. ............................................... 6,358
119,061 SBC Communications, Inc. ................................ 6,184
--------
23,603
--------
Tobacco (1.0%):
96,800 UST, Inc. ............................................... 2,577
--------
Utilities (0.6%):
58,600 American Water Works, Inc................................ 1,498
--------
Total Common Stocks 240,745
--------
Preferred Stocks (1.8%):
Financial (1.5%):
41,000 American General Delaware, L.L.C......................... 3,731
--------
Paper & Forest Products (0.3%):
15,000 International Paper Capital Trust........................ 774
--------
Total Preferred Stocks 4,505
--------
Cash Equivalents (2.6%):
6,567 Goldman Sachs Financial Square Premium................... 6,567
--------
Total Cash Equivalents 6,567
--------
Short Term Securities Purchased with Collateral (12.6%)
Commercial Paper (2.0%):
$5,000 OGE Energy Corp., 5.81%, 12/6/99......................... $ 5,000
--------
Repurchase Agreements (10.6%):
27,109 Bear Stearns & Co. Triparty Agreement, 5.83%, 12/1/99,
(See Significant Accounting Policies, Lending Portfolio
Securities in the Notes to Financial Statements for
collateral description)................................. 27,109
--------
Total Short Term Securities Purchased with Collateral 32,109
--------
Total Investments (Cost $262,007) (a)--111.4% 283,926
Liabilities in excess of other assets--(11.4)% (28,996)
--------
Total Net Assets--100.0% $254,930
========
</TABLE>
- - -------
(a) Cost for federal tax purposes differs from value by net unrealized
appreciation as follows:
<TABLE>
<S> <C>
Unrealized appreciation................................. $40,139
Unrealized depreciation................................. (18,220)
-------
Net unrealized appreciation............................. $21,919
=======
</TABLE>
(b) All or a portion of this security has been loaned at November 30, 1999.
See notes to financial statements.
50
<PAGE> 52
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
Balanced Allocation Fund
(Unaudited)
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<S> <C> <C>
Common Stocks (48.3%):
Advertising (0.5%):
6,600 Omnicom Group............................................. $ 582
7,850 Valassis Communications, Inc.(b).......................... 309
--------
891
--------
Aerospace & Defense (0.2%):
11,300 Titan Corp.(b)............................................ 306
--------
Banking (1.0%):
6,100 Comerica, Inc............................................. 323
8,550 Cullen/Frost Bankers, Inc................................. 244
12,800 Imperial Bancorp(b)....................................... 307
39,200 Republic Security Financial Corp. ........................ 315
7,800 State Street Corp......................................... 573
--------
1,762
--------
Broadcasting/Cable (0.6%):
23,900 Comcast Corp., Class A.................................... 1,080
--------
Building Products (0.2%):
11,800 Trex Co., Inc.(b)......................................... 304
--------
Business Services (0.9%):
11,100 Automatic Data Processing, Inc............................ 547
4,050 Corporate Executive Board Corp.(b)........................ 188
4,200 Diamond Technology Partners, Inc.(b)...................... 221
6,300 FYI, Inc.(b).............................................. 202
18,450 Online Resources & Communications Corp.(b)................ 226
3,250 QRS Corp.(b).............................................. 189
--------
1,573
--------
Computer Hardware (1.7%):
8,900 EMC Corp.(b).............................................. 744
8,100 IBM Corp.................................................. 835
7,550 Mercury Computer Systems, Inc.(b)......................... 431
10,300 Silicon Storage Technology, Inc.(b)....................... 273
8,600 Visual Networks, Inc.(b).................................. 507
--------
2,790
--------
Computer Services (0.4%):
4,550 Credence Systems Corp.(b)................................. 264
3,900 eGain Communications Corp.(b)............................. 164
2,700 InfoSpace.com, Inc.(b).................................... 274
--------
702
--------
Computer Software & Peripherals (5.0%):
6,150 Advanced Digital Information Corp.(b)..................... 276
1,900 Allaire Corp.(b).......................................... 289
3,150 Ancor Communications, Inc.(b)............................. 191
7,550 Business Objects SA(b).................................... 668
4,950 Clarify, Inc.(b).......................................... 461
2,250 Digex, Inc.(b)............................................ 75
7,350 Digital River, Inc.(b).................................... 224
8,700 Lexmark International Group, Inc.(b)...................... 723
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<S> <C> <C>
Common Stocks, continued:
Computer Software & Peripherals, continued:
4,500 Mercury Interactive Corp.(b).............................. $ 374
4,000 Micromuse, Inc.(b)........................................ 458
18,600 Microsoft, Inc.(b)........................................ 1,694
1,550 MicroStrategy, Inc.(b)(c)................................. 190
9,550 National Computer Systems, Inc............................ 366
10,300 National Information Consortium, Inc.(b)(c)............... 272
15,650 NetObjects, Inc.(b)....................................... 212
17,850 Novadigm, Inc.(b)......................................... 310
9,700 ONYX Software Corp.(b).................................... 313
58 OpenTV Corp.(b)........................................... 4
6,500 Remedy Corp.(b)........................................... 227
10,500 Symantec Corp.(b)......................................... 490
18,850 The 3DO Co.(b)............................................ 178
10,050 Zoran Corp.(b)............................................ 401
--------
8,396
--------
Consumer Goods & Services (0.9%):
12,200 Gillette Co............................................... 490
9,800 Procter & Gamble Co....................................... 1,059
--------
1,549
--------
Diversified Operations (0.7%):
28,400 Tyco International Ltd. .................................. 1,138
--------
Electric Utilities (0.2%):
5,450 Calpine Corp.(b).......................................... 322
--------
Electrical & Electronic (0.2%):
5,900 Analog Devices, Inc.(b)................................... 339
--------
Electrical Equipment (0.5%):
9,300 Emerson Electric Co. ..................................... 530
9,650 SBS Technologies, Inc.(b)................................. 326
--------
856
--------
Electronic Components/Instruments (3.4%):
12,200 Audiovox Corp., Class A(b)................................ 363
5,650 Burr-Brown Corp.(b)....................................... 250
11,100 CTS Corp.................................................. 890
10,800 DII Group, Inc.(b)........................................ 682
11,500 General Electric Co....................................... 1,495
18,050 Gentex Corp.(b)........................................... 337
2,700 Optical Coating Laboratory, Inc. ......................... 531
14,600 Tandy, Inc. .............................................. 1,119
--------
5,667
--------
Financial Services (2.1%):
17,700 Concord EFS, Inc.(b)...................................... 469
13,100 Fannie Mae................................................ 873
14,600 Freddie Mac............................................... 721
3,800 J.P. Morgan & Co., Inc.................................... 500
24,200 MBNA Corp................................................. 611
9,400 Metris Cos., Inc.......................................... 297
--------
3,471
--------
</TABLE>
Continued
51
<PAGE> 53
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
Balanced Allocation Fund
(Unaudited)
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<S> <C> <C>
Common Stocks, continued:
Food & Beverage (0.4%):
9,300 The Coca-Cola Co.......................................... $ 626
--------
Food Products & Services (0.3%):
15,700 Safeway, Inc.(b).......................................... 579
--------
Gaming (0.1%):
3,200 Anchor Gaming(b).......................................... 176
--------
Health Care - Services (0.3%):
22,300 Hooper Holmes, Inc. ...................................... 527
--------
Industrial Goods & Services (0.6%):
4,750 Church & Dwight Co., Inc. ................................ 133
12,000 Monsanto Co............................................... 506
7,500 United Technologies Corp.................................. 424
--------
1,063
--------
Insurance (1.0%):
12,125 American International Group, Inc......................... 1,251
10,350 Annuity & Life Re Holdings Ltd............................ 295
24,650 Scottish Annuity & Life Holdings Ltd...................... 210
--------
1,756
--------
Leisure (0.1%):
10,600 Cheap Tickets, Inc.(b).................................... 177
--------
Machinery & Equipment (0.4%):
6,800 Helix Technology Corp..................................... 275
12,050 Optimal Robotics Corp.(b)................................. 392
--------
667
--------
Manufacturing - Consumer Goods (0.2%):
18,700 Monaco Coach Corp.(b)..................................... 402
--------
Medical Equipment & Supplies (1.1%):
2,300 ArthroCare Corp.(b)....................................... 139
8,100 Biomatrix, Inc.(b)(c)..................................... 190
3,750 Colorado MEDtech, Inc.(b)................................. 48
15,100 Datascope Corp.(b)........................................ 560
14,200 Medtronic, Inc............................................ 552
16,450 PolyMedica Corp.(b)....................................... 288
--------
1,777
--------
Motorcycles (0.4%):
10,100 Harley-Davidson, Inc...................................... 616
--------
Office Equipment & Services (0.6%):
9,900 Avery Dennison Corp....................................... 588
5,100 Hewlett-Packard Co........................................ 484
--------
1,072
--------
Oil & Gas (2.0%):
8,500 Chevron Corp. ............................................ 753
10,500 Coastal Corp. ............................................ 370
16,300 Conoco, Inc. ............................................. 427
14,400 Exxon Mobil Corp.......................................... 1,141
10,100 Forest Oil Corp.(b)....................................... 116
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<S> <C> <C>
Common Stocks, continued:
Oil & Gas, continued:
6,100 Louis Dreyfus Natural Gas Corp.(b)........................ $ 110
6,350 Nicor, Inc................................................ 220
7,200 Southwest Gas Corp. ...................................... 169
7,600 Tesoro Petroleum Corp.(b)................................. 91
--------
3,397
--------
Oilfield Services & Equipment (0.4%):
3,700 Cal Dive International, Inc.(b)........................... 135
7,700 Schlumberger Ltd.......................................... 462
--------
597
--------
Paper Products (0.3%):
10,700 International Paper Co.................................... 558
--------
Pharmaceuticals (4.1%):
1,100 Affymetrix, Inc.(b)....................................... 108
4,000 Bristol Myers Squibb Co................................... 292
6,950 ChiRex, Inc.(b)........................................... 242
4,900 Eli Lilly & Co............................................ 352
4,850 Enzon, Inc.(b)............................................ 164
12,450 Geltex Pharmaceuticals, Inc.(b)........................... 132
6,600 Johnson & Johnson......................................... 685
12,100 King Pharmaceuticals, Inc.(b)(c).......................... 558
11,500 Merck & Co., Inc. ........................................ 903
1,750 Millennium Pharmaceuticals, Inc.(b)....................... 170
37,700 Pfizer, Inc. ............................................. 1,364
1,610 Pharmacia & Upjohn, Inc. ................................. 88
6,400 Priority Healthcare Corp., Class B(b)..................... 158
10,800 Schering Plough Corp...................................... 552
15,250 Theragenics Corp.(b)...................................... 146
17,300 Titan Pharmaceuticals, Inc.(b)............................ 249
8,200 Warner-Lambert Co. ....................................... 735
--------
6,898
--------
Radio (0.4%):
5,150 Citadel Communications Corp.(b)........................... 258
11,450 Cumulus Media, Inc., Class A(b)........................... 458
--------
716
--------
Resorts & Entertainment (0.9%):
9,800 Station Casinos, Inc.(b).................................. 235
5,700 THQ, Inc.(b)(c)........................................... 306
14,900 Time Warner, Inc. ........................................ 920
--------
1,461
--------
Restaurants (0.2%):
16,050 Jack in the Box, Inc.(b).................................. 338
--------
Retail (3.8%):
9,100 BJ's Wholesale Club, Inc.(b).............................. 340
7,200 Costco Companies, Inc.(b)................................. 660
10,500 Dayton Hudson Corp. ...................................... 741
14,525 Home Depot, Inc........................................... 1,148
13,200 REX Stores Corp.(b)....................................... 493
</TABLE>
Continued
52
<PAGE> 54
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
Balanced Allocation Fund
(Unaudited)
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<S> <C> <C>
Common Stocks, continued:
Retail, continued:
8,600 The Children's Place Retail Stores, Inc.(b)(c)............ $ 212
12,700 The Gap, Inc.............................................. 514
14,900 TJX Companies, Inc........................................ 390
14,100 Too, Inc.(b).............................................. 261
18,600 Wal-Mart Stores, Inc.(c).................................. 1,072
18,800 Walgreen Co.(c)........................................... 548
--------
6,379
--------
Semiconductors (2.5%):
12,000 Altera Corp.(b)........................................... 647
7,950 Cymer, Inc.(b)(c)......................................... 318
7,200 Fairchild Semiconductor International, Inc.(b)............ 202
7,000 Integrated Device Technology, Inc.(b)..................... 165
13,400 Intel Corp................................................ 1,027
27,350 NETsilicon, Inc.(b)....................................... 362
4,550 PRI Automation, Inc.(b)(c)................................ 216
10,900 Texas Instruments, Inc.................................... 1,046
4,650 TranSwitch Corp.(b)....................................... 219
--------
4,202
--------
Technology (0.5%):
12,100 ACT Manufacturing, Inc.(b)................................ 370
7,600 Macrovision Corp.(b)...................................... 485
--------
855
--------
Telecommunications - Services & Equipment (8.3%):
7,050 Adelphia Business Solutions, Inc.(b)...................... 220
7,200 Alltel Corp............................................... 623
6,700 Antec Corp.(b)(c)......................................... 375
4,450 C-COR.net Corp.(b)........................................ 227
44,400 Cisco Systems, Inc.(b).................................... 3,959
17,700 Commscope, Inc.(b)........................................ 746
7,950 Exar Corp.(b)............................................. 387
12,400 GTE Corp.................................................. 905
17,550 ICG Communications, Inc.(b)(c)............................ 332
7,000 Intermedia Communications, Inc.(b)(c)..................... 195
24,300 Lucent Technologies, Inc.................................. 1,775
5,250 Mastec, Inc.(b)........................................... 216
11,800 MCI WorldCom, Inc.(b)..................................... 976
3,550 Proxim, Inc.(b)........................................... 199
3,200 QUALCOMM, Inc.(b)......................................... 1,159
11,200 Sawtek, Inc.(b)........................................... 511
25,450 SBA Communications Corp.(b)............................... 293
19,728 SBC Communications, Inc................................... 1,025
--------
14,123
--------
Transportation & Shipping (0.4%):
10,000 Atlas Air, Inc.(b)........................................ 252
9,700 Expeditors International of Washington, Inc............... 395
--------
647
--------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<S> <C> <C>
Common Stocks, continued:
Utilities - Electric (0.2%):
10,400 Texas Utilities Co........................................ $ 372
--------
Wholesale Distribution - Pharmaceuticals (0.3%):
8,300 Cardinal Health, Inc...................................... 434
--------
Total Common Stocks 81,561
--------
Foreign Common Stocks (13.1%):
Australia (0.1%):
Banking (0.1%):
13,573 National Australia Bank Ltd.(c)........................... 196
--------
Austria (0.1%):
Paper Products (0.1%):
2,496 Mayr-Melnhof Karton AG.................................... 104
--------
Canada (0.1%):
Telecommunications - Services & Equipment (0.1%):
1,099 BCE, Inc.................................................. 74
2,205 BCE, Inc., ADR............................................ 149
--------
223
--------
Finland (0.2%):
Paper Products (0.0%):
2,476 Upm-Kymmene............................................... 83
--------
Telecommunications - Services & Equipment (0.2%):
4,909 Sonera Oyj................................................ 202
--------
285
--------
France (1.2%):
Engineering (0.2%):
753 Altran Technologies....................................... 358
519 Compagnie De Saint-Gobain................................. 88
--------
446
--------
Home Furnishings (0.0%):
457 Thomson Multimedia SA(b).................................. 20
--------
Industrial Goods & Services (0.2%):
4,371 Rhone-Poulenc SA.......................................... 271
1,750 Vivendi................................................... 140
--------
411
--------
Insurance (0.2%):
2,326 AXA....................................................... 314
--------
Retail (0.2%):
1,110 Castorama Dubois Investissements.......................... 288
--------
Telecommunications - Services & Equipment (0.2%):
2,328 France Telecom SA......................................... 270
--------
Utilities - Electrical & Gas (0.2%):
2,588 Total SA, B Shares........................................ 344
--------
2,093
--------
</TABLE>
Continued
53
<PAGE> 55
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
Balanced Allocation Fund
(Unaudited)
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<S> <C> <C>
Foreign Common Stocks, continued:
Germany (1.1%):
Banking (0.2%):
3,676 Deutsche Bank AG.......................................... $ 242
2,156 HypoVereinsbank AG........................................ 134
--------
376
--------
Conglomerates (0.1%):
6,158 Viag AG................................................... 102
--------
Electrical & Electronic (0.2%):
3,732 Siemens AG................................................ 376
--------
Electronic Components/Instruments (0.1%):
2,320 Epcos AG(b)............................................... 142
--------
Engineering (0.1%):
3,261 Linde AG.................................................. 163
--------
Insurance (0.1%):
586 Allianz AG................................................ 172
--------
Telecommunications (0.2%):
2,100 Mannesmann AG(c).......................................... 436
--------
Telecommunications - Services & Equipment (0.1%):
2,378 Deutsche Telekom.......................................... 136
--------
1,903
--------
Hong Kong (0.8%):
Banking (0.1%):
13,645 HSBC Holdings PLC......................................... 181
--------
Conglomerates (0.1%):
20,699 Swire Pacific Ltd., Class A............................... 119
--------
Distribution (0.1%):
42,099 LI & Fung Ltd............................................. 97
--------
Electrical & Electronic (0.2%):
45,539 Johnson Electric Holdings Ltd............................. 325
--------
Industrial Holding Company (0.1%):
16,299 Hutchison Whampoa......................................... 200
--------
Telecommunications - Services & Equipment (0.2%):
64,529 China Telecom (Hong Kong) Ltd.(b)......................... 347
--------
1,269
--------
Ireland (0.1%):
Banking (0.1%):
17,564 Bank of Ireland........................................... 145
--------
Italy (0.3%):
Insurance (0.0%):
2,598 Assicurazioni Generali.................................... 75
--------
Jewelry (0.1%):
13,827 Bulgari SpA............................................... 107
--------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<S> <C> <C>
Foreign Common Stocks, continued:
Italy, continued:
Telecommunications (0.2%):
21,054 Telecom Italia Mobile SpA(c).............................. $ 165
21,782 Telecom Italia SpA........................................ 240
--------
405
--------
587
--------
Japan (3.8%):
Automobiles (0.0%):
1,998 Honda Motor Co., Ltd...................................... 82
--------
Banking (0.1%):
4,265 Bank of Tokyo-Mitsubishi Ltd.............................. 62
5,214 Sanwa Bank Ltd............................................ 63
4,562 Sumitomo Bank Ltd......................................... 70
--------
195
--------
Commercial Services (0.2%):
1,515 Benesse Corp.............................................. 363
--------
Computer - Integrated Systems (0.1%):
5,706 Fujitsu Ltd.(c)........................................... 202
--------
Computer Software (0.9%):
752 Internet Initiative Japan, Inc., ADR(b)................... 72
4,410 Nihon Unisys.............................................. 169
579 Softbank Corp............................................. 418
1 Yahoo Japan Corp.(b)...................................... 704
--------
1,363
--------
Consumer Electronics (0.3%):
2,679 Sony Corp. ............................................... 496
--------
Cosmetics/Personal Care (0.0%):
199 Fancl Corp. .............................................. 70
--------
Electrical & Electronic (0.1%):
8,959 NEC Corp.(c).............................................. 209
--------
Electronic Components/Instruments (0.6%):
4,437 Fanuc Co. Ltd. ........................................... 369
3,794 Tokyo Electron Ltd. ...................................... 394
--------
763
--------
Financial Services (0.2%):
12,265 Nikko Securities Co., Ltd. ............................... 153
708 Takefuji Corp. ........................................... 101
--------
254
--------
Manufacturing - Consumer Goods (0.1%):
997 SMC Corp. ................................................ 176
--------
Pharmaceuticals (0.2%):
6,031 Takeda Chemical Industries................................ 355
--------
Retail (0.2%):
2,241 Seven-Eleven Japan Ltd. .................................. 364
--------
</TABLE>
Continued
54
<PAGE> 56
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
Balanced Allocation Fund
(Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<S> <C> <C>
Foreign Common Stocks, continued:
Japan, continued:
Telecommunications (0.0%):
3 Nippon Telegraph & Telephone Corp. ....................... $ 54
--------
Telecommunications - Services & Equipment (0.6%):
139 Hikari Tsushin, Inc. ..................................... 218
20 NTT Mobile Communications Network, Inc. .................. 700
--------
918
--------
Toys (0.1%):
926 Nintendo Co., Ltd. ....................................... 154
--------
Wholesale & International Trade (0.1%):
21,998 Itochu Corp.(b)........................................... 131
31,180 Marubeni Corp. ........................................... 121
--------
252
--------
6,270
--------
Korea (0.1%):
Metals (0.1%):
6,616 Pohang Iron & Steel, ADR.................................. 238
--------
Mexico (0.1%):
Telecommunications (0.1%):
1,291 Telefonos de Mexico SA, ADR............................... 119
--------
Netherlands (1.0%):
Beverages & Tobacco (0.1%):
2,354 Heineken NV............................................... 114
--------
Broadcasting & Publishing (0.1%):
4,990 Wolters Kluwer CVA........................................ 150
--------
Computer - Integrated Systems (0.1%):
1,022 Equant NV(b).............................................. 99
--------
Energy (0.2%):
5,002 Royal Dutch Petroleum..................................... 294
--------
Insurance (0.1%):
4,124 ING Groep NV.............................................. 232
--------
Retail (0.1%):
3,506 Kon Ahold NV.............................................. 112
--------
Semiconductors (0.3%):
25,000 ASM International NV(b)(c)................................ 406
2,248 STMicroelectronics NV..................................... 306
--------
712
--------
1,713
--------
Poland (0.0%):
Oil & Gas Exploration, Production & Services (0.0%):
1,522 Polski Koncern Naftowy, GDR(b)............................ 16
--------
Singapore (0.4%):
Banking (0.1%):
20,862 DBS Group Holdings Ltd. .................................. 270
--------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<S> <C> <C>
Foreign Common Stocks, continued:
Singapore, continued:
Electrical & Electronic (0.1%):
30,006 Natsteel Electronics Ltd. ................................ $ 124
--------
Printing & Publishing (0.1%):
5,810 Singapore Press Holdings.................................. 109
--------
Transportation & Shipping (0.1%):
24,174 Singapore Airlines Ltd. .................................. 245
--------
748
--------
Spain (0.2%):
Telecommunications - Services & Equipment (0.2%):
11,870 Telefonica SA(b).......................................... 247
431 Terra Networks SA(b)...................................... 15
--------
262
--------
262
--------
Sweden (0.6%):
Paper Products (0.1%):
1,953 Svenska Cellulosa AB, Class A............................. 54
1,692 Svenska Cellulosa AB, Class B............................. 47
--------
101
--------
Retail (0.1%):
7,516 Hennes & Mauritz AB....................................... 239
--------
Telecommunications (0.4%):
2,789 Nokia Corp., ADR.......................................... 385
5,990 Telefonaktiebolager LM Ericsson, ADR...................... 289
--------
674
--------
1,014
--------
Switzerland (0.8%):
Banking (0.2%):
977 Credit Suisse Group....................................... 183
862 UBS AG.................................................... 235
--------
418
--------
Business Services (0.1%):
177 Adecco SA................................................. 113
--------
Food Products & Services (0.1%):
79 Nestle SA................................................. 142
--------
Insurance (0.1%):
98 Swiss Reinsurance Co. .................................... 200
--------
Pharmaceuticals (0.3%):
155 Novartis AG............................................... 242
20 Roche Holdings AG......................................... 241
--------
483
--------
1,356
--------
</TABLE>
Continued
55
<PAGE> 57
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
Balanced Allocation Fund
(Unaudited)
(Amounts in Thousands, except Shares)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<S> <C> <C>
Foreign Common Stocks, continued:
Taiwan (0.1%):
Semiconductors (0.1%):
6,354 Taiwan Semiconductor, ADR(b).............................. $ 228
--------
United Kingdom (2.0%):
Advertising (0.1%):
8,264 WPP Group PLC............................................. 122
--------
Aerospace/Defense (0.0%):
8,177 British Aerospace PLC(b).................................. 47
--------
Banking (0.2%):
18,230 Allied Zurich PLC......................................... 221
7,379 Standard Chartered PLC.................................... 100
--------
321
--------
Beverages & Tobacco (0.1%):
9,198 Bass PLC.................................................. 104
--------
Computer Hardware (0.0%):
1,288 Batm Advanced Communications.............................. 84
--------
Computer Software (0.2%):
10,267 Logica PLC................................................ 258
--------
Energy (0.2%):
26,705 BP Amoco PLC.............................................. 272
--------
Engineering (0.1%):
40,429 Siebe PLC................................................. 187
--------
Food Products & Services (0.1%):
12,613 Compass Group............................................. 153
--------
Industrial Goods & Services (0.1%):
10,045 Boc Group PLC............................................. 207
--------
Media and Entertainment (0.2%):
12,994 Pearson PLC............................................... 310
--------
Pharmaceuticals (0.1%):
7,329 Smithkline Beecham PLC.................................... 98
--------
Retail (0.1%):
14,700 QXL.com PLC(b)............................................ 102
--------
Telecommunications (0.1%):
10,307 British Telecom PLC....................................... 207
--------
Telecommunications - Services & Equipment (0.3%):
3,150 Colt Telecom Group PLC(b)................................. 119
3,326 Energis PLC(b)............................................ 136
19,069 Marconi PLC(b)............................................ 243
17,120 Thus PLC(b)............................................... 107
--------
605
--------
Utilities - Electrical & Gas (0.1%):
26,739 National Grid Group PLC................................... 206
--------
3,283
--------
Total Foreign Common Stocks 22,052
--------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- --------------------------------------------------------- --------
<S> <C> <C>
Corporate Bonds (10.9%):
Banking (1.9%):
$ 765 Citicorp, 6.38%, 11/15/08................................ $ 715
600 First Chicago Corp., 6.88%, 6/15/03...................... 599
800 First Union Capital II, 7.95%, 11/15/29.................. 778
705 First Union Corp., 6.95%, 11/1/04........................ 701
390 HSBC Holdings PLC, 7.50%, 7/15/09........................ 392
--------
3,185
--------
Consumer Goods & Services (0.4%):
825 American Greetings, 6.10%, 8/1/28........................ 753
--------
Electrical & Electronic (0.2%):
450 Arrow Electronic, Inc., 6.88%, 6/1/18.................... 398
--------
Financial (0.5%):
800 Ford Motor Credit Co., 7.38%, 10/28/09................... 805
--------
Financial Services (2.9%):
300 Bradley Operating Limited Partnership, 7.00%, 11/15/04... 285
2,065 Countrywide Home, 6.84%, 10/22/04........................ 2,018
950 Prudential Securities Secured Financing Corp., 6.35%,
9/15/07................................................. 900
665 Prudential Securities Secured Financing Corp., 6.48%,
1/15/09................................................. 630
1,050 Susa Partnership, 7.00%, 12/1/07......................... 953
--------
4,786
--------
Industrial (0.3%):
440 Pentair Inc., 7.85%, 10/15/09............................ 435
--------
Industrial Goods & Services (1.9%):
785 Brunswick Corp., 6.75%, 12/15/06......................... 744
1,275 Computer Assoc. International,
6.25%, 4/15/03.......................................... 1,231
650 Cummins Engine, Inc., 6.45%, 3/1/05...................... 614
645 Motorola, Inc., 7.50%, 5/15/25........................... 640
--------
3,229
--------
Metals (0.7%):
1,200 Worthington Industries, 7.13%, 5/15/06................... 1,166
--------
Real Estate Investment Trust (2.1%):
1,000 Commercial Net Lease Realty,
8.13%, 6/15/04.......................................... 981
1,100 Federal Realty Investment Trust,
8.75%, 12/1/09.......................................... 1,088
485 Gables Realty, 6.80%, 3/15/05............................ 458
1,050 New Plan Excel Realty Trust, 6.88%, 10/15/04............. 1,028
--------
3,555
--------
Total Corporate Bonds 18,312
--------
</TABLE>
Continued
56
<PAGE> 58
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
Balanced Allocation Fund
(Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- --------------------------------------------------------- --------
<S> <C> <C>
Convertible Bonds (0.0%):
United Kingdom (0.0%):
Aerospace/Defense (0.0%):
$ 3 British Aerospace PLC, 7.45%, 11/29/03, Loan Stock....... $ 4
--------
Total Convertible Bonds 4
--------
Asset Backed Securities (4.0%):
1,180 First Security Auto Owner Trust, 5.74%, 6/15/04.......... 1,156
290 Flagship Auto Receivables Owner Trust, Series 1999-2,
Class A3, 6.84%, 11/18/04............................... 289
840 General Electric Capital Mortgage Services, Inc., 6.19%,
1/25/23................................................. 817
1,600 IMC Home Equity Loan Trust, 6.76%, 10/20/20.............. 1,582
700 Saxon Asset Securities Trust, 7.53%, 6/25/14............. 696
1,560 Saxon Asset Securities Trust, 7.55%, 10/25/26............ 1,562
600 Vanderbilt Mortgage Finance, Series 1999-C, Class 1A3,
7.39%, 1/7/20........................................... 600
--------
Total Asset Backed Securities 6,702
--------
Mortgage Backed Securities (7.5%):
350 Champion Home Equity Loan Trust, Series 1997-2, Class A5,
6.71%, 9/25/29.......................................... 341
1,200 Credit Suisse First Boston, Series 1997-C1, Class A1C,
7.24%, 4/20/07.......................................... 1,180
823 General Electric Capital Mortgage Services, Inc., 6.50%,
1/25/29................................................. 753
610 Greenpoint Manufactured Housing, Series 1999-1, Class A3,
6.11%, 11/15/18......................................... 575
1,500 Morgan Stanley Capital, Inc., 6.53%, 3/15/32............. 1,422
1,000 New Century Home Equity Loan Trust, Series 1997-NC6,
Class A6, 7.01%, 5/25/26................................ 988
770 New Century Home Equity Loan Trust, 7.22%, 11/25/27...... 754
670 New Century Home Equity Loan Trust, 7.53%, 9/25/28....... 668
1,748 PNC, Series 98-7, Class A5, 6.75%, 9/25/28............... 1,635
2,654 Residential Accredit Loans, Inc., 6.50%, 3/25/29......... 2,444
400 Residential Asset Securities Corp., 7.18%, 1/25/25....... 399
770 Residential Funding Mortgage, Inc., 6.75%, 6/25/28....... 708
760 Vendee Mortgage Trust, 6.50%, 6/15/25.................... 711
--------
Total Mortgage Backed Securities 12,578
--------
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------------- --------
<S> <C> <C>
U.S. Government Agencies (5.0%):
Fannie Mae (5.0%):
$ 2,932 7.00%, 9/1/27............................................. $ 2,868
492 6.00%, 8/1/28............................................. 457
1,656 6.50%, 11/1/28............................................ 1,580
3,823 6.00%, 3/1/29............................................. 3,547
(d) 6.50%, 8/1/29............................................. (d)
--------
Total U.S. Government Agencies 8,452
--------
Government Obligations (5.6%):
Government National Mortgage Association (5.6%):
634 6.50%, 9/15/23............................................ 603
692 6.50%, 12/15/23........................................... 659
3,437 7.50%, 8/15/25............................................ 3,436
4,500 7.50%, 9/15/28............................................ 4,493
335 7.50%, 11/15/29........................................... 335
--------
Total Government Obligations 9,526
--------
U.S. Treasury Notes (2.9%):
500 6.25%, 10/31/01(c)........................................ 502
2,300 6.50%, 5/15/05(c)......................................... 2,331
2,040 6.13%, 8/15/07(c)......................................... 2,021
--------
Total U.S. Treasury Notes 4,854
--------
U.S. Treasury Bonds (1.5%):
2,600 6.25%, 8/15/23(c)......................................... 2,516
--------
Total U.S. Treasury Bonds 2,516
--------
Cash Equivalents (0.2%):
382 Goldman Sachs Financial Square Premium.................... 382
--------
Total Cash Equivalents 382
--------
</TABLE>
Continued
57
<PAGE> 59
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
Balanced Allocation Fund
(Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
--------- -------------------------------------------------------- ---------
<S> <C> <C>
Short Term Securities Purchased With Collateral (7.8%)
Repurchase Agreement (7.8%):
$ 13,187 Lehman Brothers Triparty Agreement, 5.83%, 12/1/99, (See
Significant Accounting Policies, Lending Portfolio
Securities in the Notes to Financial Statements for
collateral description) $ 13,187
---------
Total Short Term Securities Purchased With Collateral 13,187
---------
Total Investments (Cost $147,967)(a) -- 106.8% 180,126
Liabilities in excess of other assets -- (6.8)% (11,495)
---------
Total Net Assets -- 100.0% $ 168,631
=========
</TABLE>
- - -------
(a) Cost for federal income tax purposes differs from value by net unrealized
appreciation as follows:
<TABLE>
<S> <C>
Unrealized appreciation.................................. $35,382
Unrealized depreciation.................................. (3,223)
-------
Net unrealized appreciation.............................. $32,159
=======
</TABLE>
(b) Represents non-income producing securities.
(c) All or part of this security has been loaned at November 30, 1999.
(d) Market value and principal amount are less than $1,000.
See notes to financial statements.
58
<PAGE> 60
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Prime Obligations Fund
------------------------------------------------------------------------------
Six Months Ended Year Ended
November 30, 1999 May 31, 1999
---------------------------------------- -----------------------------------
Investor A Investor B Institutional Investor A Investor B Institutional
---------- ---------- ------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 1.000 $1.000 $ 1.000 $ 1.000 $1.000 $ 1.000
------- ------ -------- ------- ------ --------
Investment Activities
Net investment income... 0.023 0.018 0.023 0.046 0.037 0.047
Distributions
Net investment income.. (0.023) (0.018) (0.023) (0.046) (0.037) (0.047)
------- ------ -------- ------- ------ --------
Net Asset Value, End of
Period................. $ 1.000 $1.000 $ 1.000 $ 1.000 $1.000 $ 1.000
======= ====== ======== ======= ====== ========
Total Return............ 2.31%(a) 1.85%(a) 2.36%(a) 4.66% 3.73% 4.76%
Ratios/Supplementary
Data
Net Assets at end of
period (000)........... $16,782 $ 589 $589,718 $14,924 $ 764 $628,553
Ratio of expenses to
average net assets..... 0.76%(b) 1.66%(b) 0.66%(b) 0.76% 1.66% 0.65%
Ratio of net investment
income to average net
assets................. 4.55%(b) 3.66%(b) 4.65%(b) 4.76% 3.59% 4.67%
Ratio of expenses to
average net assets*.... 0.91%(b) 1.66%(b) 0.66%(b) 0.93% 1.67% 0.67%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Not annualized
(b) Annualized.
See notes to financial statements.
59
<PAGE> 61
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Prime Obligations Fund
----------------------------------------------------------------------
Eleven Months Ended
May 31, 1998 Year Ended June 30, 1997
------------------------------------------- ------------------------
Investor A Investor B (a) Institutional Investor A Institutional
---------- -------------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- ------- -------- -------- --------
Investment Activities
Net investment income.. 0.045 0.027 0.046 0.048 0.049
Distributions
Net investment income.. (0.045) (0.027) (0.046) (0.048) (0.049)
-------- ------- -------- -------- --------
Net Asset Value, End of
Period................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======= ======== ======== ========
Total Return............ 4.63%(b) 2.75%(b) 4.73%(b) 4.91% 5.01%
Ratios/Supplementary
Data
Net Assets at end of
period (000)........... $217,934 $ 387 $690,947 $195,046 $677,324
Ratio of expenses to
average net assets..... 0.76%(c) 1.66%(c) 0.66%(c) 0.73% 0.63%
Ratio of net investment
income to average net
assets................. 4.93%(c) 4.01%(c) 5.04%(c) 4.80% 4.90%
Ratio of expenses to
average net assets*.... 0.93%(c) 1.68%(c) 0.68%(c) 0.90% 0.65%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) For the period September 30, 1997 (commencement of offering Investor B
shares) to May 31, 1998.
(b) Not annualized
(c) Annualized
See notes to financial statements.
60
<PAGE> 62
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Prime Obligations Fund
--------------------------------------------------------------------------
Year Ended Year Ended Year Ended
June 30, 1996 June 30, 1995 June 30, 1994
------------------------ ------------------------ ------------------------
Investor A Institutional Investor A Institutional Investor A Institutional
---------- ------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- -------- --------
Investment Activities
Net investment income.. 0.050 0.051 0.047 0.048 0.027 0.028
Distributions
Net investment income.. (0.050) (0.051) (0.047) (0.048) (0.027) (0.028)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of
Period................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ======== ========
Total Return............ 5.07% 5.17% 4.81% 4.91% 2.75% 2.85%
Ratios/Supplemetary Data
Net Assets at end of
period (000)........... $147,478 $596,075 $108,565 $640,380 $105,611 $561,697
Ratio of expenses to
average net assets..... 0.74% 0.64% 0.75% 0.65% 0.74% 0.64%
Ratio of net investment
income to average net
assets................. 4.93% 5.05% 4.71% 4.83% 2.71% 2.84%
Ratio of net investment
income to average net
assets*................ 0.91% 0.66% 0.92% 0.67% 0.91% 0.66%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
See notes to financial statements.
61
<PAGE> 63
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
U.S. Government Obligations Fund
-----------------------------------------------------
Six Months Ended Year Ended
November 30, 1999 May 31, 1999
--------------------------- ------------------------
Investor A Institutional Investor A Institutional
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period................ $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- ------- ------- --------
Investment Activities
Net investment income.... 0.022 0.023 0.044 0.045
Distributions
Net investment income.... (0.022) (0.023) (0.044) (0.045)
------- ------- ------- --------
Net Asset Value, End of
Period................... $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= ========
Total Return.............. 2.22%(a) 2.27%(a) 4.53% 4.64%
Ratios/Supplementary Data
Net Assets at end of
period (000)............. $ 975 $99,202 $ 2,032 $121,475
Ratio of expenses to
average net assets....... 0.84%(b) 0.73%(b) 0.75% 0.67%
Ratio of net investment
income to average net
assets................... 4.32%(b) 4.48%(b) 4.75% 4.57%
Ratio of expenses to
average net assets*...... 0.99%(b) 0.73%(b) 0.92% 0.69%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Not annualized
(b) Annualized.
See notes to financial statements.
62
<PAGE> 64
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
U.S. Government Obligations Fund
------------------------------------------------------
Eleven Months Ended Year Ended
May 31, 1998 June 30, 1997
--------------------------- ------------------------
Investor A Institutional Investor A Institutional
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period..... $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- --------
Investment Activities.... 0.044 0.045 0.047 0.048
Distributions............ (0.044) (0.045) (0.047) (0.048)
-------- -------- -------- --------
Net Asset Value, End of
Period.................. $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ========
Total Return............. 4.53%(a) 4.62%(a) 4.79% 4.89%
Ratios/Supplementary Data
Net Assets at end of
period (000)............ $169,210 $185,384 $212,082 $210,162
Ratio of expenses to
average net assets...... 0.76%(b) 0.66%(b) 0.74% 0.64%
Ratio of net investment
income to average net
assets.................. 4.83%(b) 4.93%(b) 4.69% 4.79%
Ratio of expenses to
average net assets*..... 0.93%(b) 0.68%(b) 0.91% 0.66%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Not annualized.
(b) Annualized.
See notes to financial statements.
63
<PAGE> 65
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
U.S. Government Obligations Fund
--------------------------------------------------------------------------
Year Ended Year Ended Year Ended
June 30, 1996 June 30, 1995 June 30, 1994
------------------------ ------------------------ ------------------------
Investor A Institutional Investor A Institutional Investor A Institutional
---------- ------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- -------- --------
Investment Activities
Net investment income.. 0.049 0.050 0.047 0.048 0.027 0.028
Distributions
Net investment income.. (0.049) (0.050) (0.047) (0.048) (0.027) (0.028)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of
Period................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ======== ========
Total Return............ 4.99% 5.10% 4.76% 4.87% 2.69% 2.79%
Ratios/Supplementary
Data
Net Assets at end of
period (000)........... $186,944 $207,451 $169,179 $227,565 $172,482 $192,612
Ratio of expenses to
average net assets..... 0.74% 0.64% 0.77% 0.67% 0.77% 0.67%
Ratio of net investment
income to average net
assets................. 4.88% 4.99% 4.62% 4.76% 2.64% 2.74%
Ratio of expenses to
average net assets*.... 0.91% 0.66% 0.94% 0.69% 0.94% 0.69%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
See notes to financial statements.
64
<PAGE> 66
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Tax-Free Fund
-----------------------------------------------------
Six Months Ended
November 30, 1999 Year Ended May 31, 1999
--------------------------- ------------------------
Investor A Institutional Investor A Institutional
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period................ $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- ------- ------- --------
Investment Activities
Net investment income.... 0.013 0.013 0.025 0.026
Distributions
Net investment income.... (0.013) (0.013) (0.025) (0.026)
------- ------- ------- --------
Net Asset Value, End of
Period................... $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= ========
Total Return.............. 1.28%(a) 1.33%(a) 2.56% 2.66%
Ratios/Supplementary Data
Net Assets at end of
period (000)............. $ 685 $88,305 $ 621 $110,136
Ratio of expenses to
average net assets....... 0.81%(b) 0.72%(b) 0.77% 0.68%
Ratio of net investment
income to average net
assets................... 2.49%(b) 2.62%(b) 2.71% 2.62%
Ratio of expenses to
average net assets*...... 0.96%(b) 0.72%(b) 0.94% 0.70%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Not annualized.
(b) Annualized.
See notes to financial statements.
65
<PAGE> 67
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Tax-Free Fund
------------------------------------------------------
Eleven Months Ended
May 31, 1998 Year Ended June 30, 1997
--------------------------- ------------------------
Investor A Institutional Investor A Institutional
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period................ $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- -------- ------- --------
Investment Activities..... 0.026 0.027 0.028 0.029
Distributions............. (0.026) (0.027) (0.028) (0.029)
------- -------- ------- --------
Net Asset Value, End of
Period................... $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======== ======= ========
Total Return.............. 2.66%(a) 2.75%(a) 2.83% 2.94%
Ratios/Supplementary Data
Net Assets at end of
period (000)............. $55,106 $104,062 $47,466 $108,884
Ratio of expenses to
average net assets....... 0.76%(b) 0.66%(b) 0.78% 0.68%
Ratio of net investment
income to average net
assets................... 2.86%(b) 2.96%(b) 2.82% 2.90%
Ratio of expenses to
average net assets*...... 0.93%(b) 0.68%(b) 0.95% 0.70%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Not annualized.
(b) Annualized.
See notes to financial statements.
66
<PAGE> 68
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Tax-Free Fund
--------------------------------------------------------------------------
Year Ended Year Ended Year Ended
June 30, 1996 June 30, 1995 June 30, 1994
------------------------ ------------------------ ------------------------
Investor A Institutional Investor A Institutional Investor A Institutional
---------- ------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- -------- ------- ------- ------- -------
Investment Activities
Net investment income.. 0.029 0.030 0.029 0.030 0.018 0.019
Distributions
Net investment income.. (0.029) (0.030) (0.029) (0.030) (0.018) (0.019)
------- -------- ------- ------- ------- -------
Net Asset Value, End of
Period................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======== ======= ======= ======= =======
Total Return............ 2.91% 3.02% 2.90% 3.00% 1.81% 1.92%
Ratios/Supplementary
Data
Net Assets at end of
period (000)........... $41,713 $106,154 $45,102 $98,489 $48,256 $84,465
Ratio of expenses to
average net assets..... 0.76% 0.66% 0.74% 0.64% 0.68% 0.58%
Ratio of net investment
income to average net
assets................. 2.89% 2.97% 2.88% 2.97% 1.81% 1.90%
Ratio of expenses to
average net assets*.... 0.93% 0.68% 0.95% 0.70% 0.93% 0.68%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
See notes to financial statements.
67
<PAGE> 69
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Treasury Fund
------------------------------------------------------
Six Months Ended Year Ended
November 30, 1999 May 31, 1999
--------------------------- ------------------------
Investor A Institutional Investor A Institutional
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- -------- ------- --------
Investment Activities
Net investment income.. 0.022 0.022 0.044 0.045
Distributions
Net investment income.. (0.022) (0.022) (0.044) (0.045)
------- -------- ------- --------
Net Asset Value, End of
Period................. $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======== ======= ========
Total Return............ 2.19%(a) 2.24%(a) 4.51% 4.61%
Ratios/Supplementary
Data
Net Assets at end of
period (000)........... $ 9,573 $235,662 $ 9,161 $269,534
Ratio of expenses to
average net assets..... 0.69%(b) 0.60%(b) 0.67% 0.58%
Ratio of net investment
income to average net
assets................. 4.31%(b) 4.42%(b) 4.77% 4.52%
Ratio of expenses to
average net assets*.... 0.91%(b) 0.67%(b) 0.91% 0.68%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a)Not annualized.
(b)Annualized.
See notes to financial statements.
68
<PAGE> 70
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Treasury Fund
------------------------------------------------------
Eleven Months Ended
May 31, 1998 Year Ended June 30, 1997
--------------------------- ------------------------
Investor A Institutional Investor A Institutional
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period..... $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- --------
Investment Activities.... 0.045 0.046 0.047 0.048
Distributions............ (0.045) (0.046) (0.047) (0.048)
-------- -------- -------- --------
Net Asset Value, End of
Period.................. $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ========
Total Return............. 4.61%(a) 4.70%(a) 4.82% 4.93%
Ratios/Supplementary Data
Net Assets at end of
period (000)............ $240,208 $321,584 $176,006 $324,377
Ratio of expenses to
average net assets...... 0.67%(b) 0.57%(b) 0.67% 0.57%
Ratio of net investment
income to average net
assets.................. 4.90%(b) 5.00%(b) 4.72% 4.83%
Ratio of expenses to
average net assets*..... 0.92%(b) 0.67%(b) 0.92% 0.67%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Not annualized.
(b) Annualized.
See notes to financial statements.
69
<PAGE> 71
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Treasury Fund
-----------------------------------------------------------------------------
Year Ended Year Ended December 1, 1993 to
June 30, 1996 June 30, 1995 June 30, 1994 (a)
------------------------ ------------------------ ---------------------------
Investor A Institutional Investor A Institutional Investor A Institutional
---------- ------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- ------- -------
Investment Activities... 0.049 0.050 0.047 0.048 0.016 0.017
Distributions........... (0.049) (0.050) (0.047) (0.048) (0.016) (0.017)
-------- -------- -------- -------- ------- -------
Net Asset Value, End of
Period................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ======= =======
Total Return............ 5.04% 5.14% 4.81% 4.91% 1.66%(b) 1.72%(b)
Ratios/Supplementary
Data
Net Assets at end of
period (000)........... $158,723 $223,416 $105,391 $192,232 $56,535 $76,035
Ratio of expenses to
average................ 0.70% 0.60% 0.75% 0.64% 0.64%(c) 0.54%(c)
Ratio of net investment
income to.............. 4.87% 4.98% 4.82% 4.95% 2.84%(c) 3.15%(c)
Ratio of expenses to
average................ 0.95% 0.70% 1.04% 0.78% 0.99%(c) 0.74%(c)
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Period from comencement of operations.
(b) Not annualized.
(c) Annualized.
See notes to financial statements.
70
<PAGE> 72
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Small Capitalization Fund
-----------------------------------------------------------------------------------
Six Months Ended Year Ended
November 30, 1999 May 31, 1999
------------------------------------------ -------------------------------------
Investor A Investor B Institutional Investor A Investor B Institutional
---------- ---------- ------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 18.49 $ 17.78 $ 18.89 $ 25.72 $ 25.02 $ 26.15
------- ------- -------- ------- ------- --------
Investment Activities
Net investment income
(loss)................ (0.14) (0.20) (0.10) (0.34) (0.50) (0.23)
Net realized and
unrealized gains
(losses) from
investments........... 5.97 5.70 6.07 (4.36) (4.21) (4.50)
------- ------- -------- ------- ------- --------
Total from Investment
Activities............ 5.83 5.50 5.97 (4.70) (4.71) (4.73)
------- ------- -------- ------- ------- --------
Distributions
Net realized gains..... -- -- -- (2.53) (2.53) (2.53)
------- ------- -------- ------- ------- --------
Total Distributions.... -- -- -- (2.53) (2.53) (2.53)
------- ------- -------- ------- ------- --------
Net Asset Value, End of
Period................. $ 24.32 $ 23.28 $ 24.86 $ 18.49 $ 17.78 $ 18.89
======= ======= ======== ======= ======= ========
Total Return (excludes
sales and redemption
charges)............... 31.53%(b) 30.93%(b) 31.60%(b) (18.92)% (9.52)% (18.71)%
Ratios/Supplementary
Data:
Net Assets at end of
period (000)........... $48,547 $19,243 $222,630 $57,813 $18,736 $226,139
Ratio of expenses to
average net assets..... 1.70%(c) 2.45%(c) 1.45%(c) 1.61% 2.37% 1.36%
Ratio of net investment
income (loss) to
average net assets..... (1.03)%(c) (1.79)%(c) (0.79)%(c) (1.07)% (1.82)% (0.82)%
Portfolio turnover (a).. 65.25% 65.25% 65.25% 99.86% 99.86% 99.86%
</TABLE>
- - -------
(a) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
(b) Not annualized.
(c) Annualized
See notes to financial statements.
71
<PAGE> 73
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Small Capitalization Fund
-------------------------------------------------------------------------------------------------
Eleven Months Ended Year Ended
May 31, 1998 June 30, 1997
---------------------------------------------------------- -----------------------------------
Investor A Investor B Investor C Institutional Investor A Investor B Investor C
---------- ---------- ---------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period..... $ 27.55 $ 26.99 $ 27.05 $ 27.91 $ 34.17 $ 33.78 $ 33.83
-------- ------- ------- -------- -------- ------- -------
Investment Activities
Net investment income
(loss)................. (0.35) (0.53) (0.49) (0.27) (0.29) (0.41) (0.34)
Net realized and
unrealized gains
(losses) from
investments............ (0.18) (0.14) (0.18) (0.19) (1.08) (1.13) (1.19)
-------- ------- ------- -------- -------- ------- -------
Total from Investment
Activities............. (0.53) (0.67) (0.67) (0.46) (1.37) (1.54) (1.53)
-------- ------- ------- -------- -------- ------- -------
Distributions
Net realized gains...... (1.30) (1.30) (1.30) (1.30) (5.25) (5.25) (5.25)
-------- ------- ------- -------- -------- ------- -------
Total Distributions..... (1.30) (1.30) (1.30) (1.30) (5.25) (5.25) (5.25)
-------- ------- ------- -------- -------- ------- -------
Net Asset Value, End of
Period.................. $ 25.72 $ 25.02 $ 25.08 $ 26.15 $ 27.55 $ 26.99 $ 27.05
======== ======= ======= ======== ======== ======= =======
Total Return (excludes
sales and redemption
charges)................ (1.90)%(a) (2.47)%(a) (2.43)%(a) (1.62)%(a) (4.53)% (5.13)% (5.08)%
Ratios/Supplementary
Data:
Net Assets at end of
period (000)............ $163,178 $41,399 $14,747 $527,805 $188,645 $46,895 $14,962
Ratio of expenses to
average net assets...... 1.60%(b) 2.35%(b) 2.35%(b) 1.35%(b) 1.57% 2.32% 2.32%
Ratio of net investment
income (loss) to average
net assets.............. (1.23)%(b) (1.99)%(b) (1.99)%(b) (0.99)%(b) (1.19)% (94)% (1.94)%
Portfolio turnover (c)... 46.17% 46.17% 46.17% 46.17% 48.45% 48.45% 48.45%
<CAPTION>
Institutional
-------------
<S> <C>
Net Asset Value,
Beginning of Period..... $ 34.50
-------------
Investment Activities
Net investment income
(loss)................. (0.22)
Net realized and
unrealized gains
(losses) from
investments............ (1.12)
-------------
Total from Investment
Activities............. (1.34)
-------------
Distributions
Net realized gains...... (5.25)
-------------
Total Distributions..... (5.25)
-------------
Net Asset Value, End of
Period.................. $ 27.91
=============
Total Return (excludes
sales and redemption
charges)................ (4.39)%
Ratios/Supplementary
Data:
Net Assets at end of
period (000)............ $602,787
Ratio of expenses to
average net assets...... 1.32%
Ratio of net investment
income (loss) to average
net assets.............. (0.94)%
Portfolio turnover (c)... 48.45%
</TABLE>
- - -------
(a)Not annualized.
(b)Annualized.
(c)Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between classes of shares issued.
See notes to financial statements.
72
<PAGE> 74
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Small Capitalization Fund
------------------------------------------------------------------------------------------------------
Year Ended Year Ended
June 30, 1996 June 30, 1995
------------------------------------------------ -----------------------------------------------------
Investor A Investor B Investor C Institutional Investor A Investor B Investor C (a) Institutional
---------- ---------- ---------- ------------- ---------- ----------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period.......... $ 25.88 $ 25.79 $25.91 $ 26.08 $ 19.75 $19.83 $24.17 $ 19.83
-------- ------- ------ -------- ------- ------ ------ --------
Investment
Activities
Net investment
income (loss).. (0.23) (0.39) (0.20) (0.27) (0.18) (0.19) (0.05) (0.25)
Net realized and
unrealized
gains (losses)
from
investments.... 12.17 12.03 11.77 12.34 8.46 8.30 3.94 8.65
-------- ------- ------ -------- ------- ------ ------ --------
Total from
Investment
Activities..... 11.94 11.64 11.57 12.07 8.28 8.11 3.89 8.40
-------- ------- ------ -------- ------- ------ ------ --------
Distributions
Net realized
gains.......... (3.65) (3.65) (3.65) (3.65) (2.15) (2.15) (2.15) (2.15)
-------- ------- ------ -------- ------- ------ ------ --------
Total
Distributions.. (3.65) (3.65) (3.65) (3.65) (2.15) (2.15) (2.15) (2.15)
-------- ------- ------ -------- ------- ------ ------ --------
Net Asset Value,
End of Period... $ 34.17 $ 33.78 $33.83 $ 34.50 $ 25.88 $25.79 $25.91 $ 26.08
======== ======= ====== ======== ======= ====== ====== ========
Total Return
(excludes sales
and redemption
charges)........ 49.93% 48.87% 48.32% 50.03% 44.88% 43.78% 44.37%(e) 45.32%
Ratios/
Supplementary
Data:
Net Assets at end
of period (000). $187,016 $30,310 $5,751 $528,866 $71,894 $9,990 $ 224 $354,825
Ratio of expenses
to average net
assets.......... 1.54% 2.29% 2.29% 1.29% 1.55% 2.32% 3.53%(d) 1.33%
Ratio of net
investment
income (loss) to
average net
assets.......... (1.18)% (1.93)% (1.94)% (0.93)% (1.27)% (2.03)% (3.06)%(d) 1.06%
Ratio of expenses
to average net
assets*......... -- -- -- -- 1.58% 2.55% 3.53%(d) 1.33%
Portfolio
turnover (f).... 67.22% 67.22% 67.22% 67.22% 50.53% 50.53% 50.53% 50.53%
<CAPTION>
Year Ended
June 30, 1994
-----------------------------------------
Investor A Investor B (b) Institutional
----------- --------------- -------------
<S> <C> <C> <C>
Net Asset Value,
Beginning of
Period.......... $ 20.31 $22.71 $ 20.31
----------- --------------- -------------
Investment
Activities
Net investment
income (loss).. (0.15) (0.09) (0.28)
Net realized and
unrealized
gains (losses)
from
investments.... 0.09 (2.79) 0.30
----------- --------------- -------------
Total from
Investment
Activities..... (0.06) (2.88) 0.02
----------- --------------- -------------
Distributions
Net realized
gains.......... (0.50) -- (0.50)
----------- --------------- -------------
Total
Distributions.. (0.50) -- (0.50)
----------- --------------- -------------
Net Asset Value,
End of Period... $ 19.75 $19.83 $ 19.83
=========== =============== =============
Total Return
(excludes sales
and redemption
charges)........ (0.55)% (12.68)%(c) (0.15)%
Ratios/
Supplementary
Data:
Net Assets at end
of period (000). $42,791 $2,130 $271,425
Ratio of expenses
to average net
assets.......... 1.40% 2.35%(d) 1.30%
Ratio of net
investment
income (loss) to
average net
assets.......... (1.24)% (2.19)%(d) (1.14)%
Ratio of expenses
to average net
assets*......... 1.55% 2.61%(d) 1.30%
Portfolio
turnover (f).... 72.64% 72.64% 72.64%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from November 16, 1994 (commencement of offering of Investor C
shares) to June 30, 1995.
(b) Period from February 4, 1994 (commencement of offering of Investor B
shares) to June 30, 1994.
(c) Not annualized.
(d) Annualized.
(e) Represents total return for the Institutional shares for the period from
July 1, 1994 to November 15, 1994 plus the total return for the Investor C
shares for the period from November 16, 1994 to June 30, 1995.
(f) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
73
<PAGE> 75
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Mid Capitalization Fund
------------------------------------------------------------------------------------
Six Months Ended Year Ended
November 30, 1999 May 31, 1999
------------------------------------------- -------------------------------------
Investor A Investor B Institutional Investor A Investor B Institutional
---------- ---------- ------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 14.10 $ 13.14 $ 14.27 $ 14.98 $ 14.20 $ 15.12
------- ------- -------- ------- ------- --------
Investment Activities
Net investment income
(loss)................ (0.10) (0.14) (0.07) (0.19) (0.28) (0.14)
Net realized and
unrealized gains
(losses) from
investments........... 2.81 2.60 2.84 1.15 1.06 1.13
------- ------- -------- ------- ------- --------
Total from Investment
Activities............ 2.71 2.46 2.77 0.96 0.78 0.99
------- ------- -------- ------- ------- --------
Distributions
Net realized gains..... -- -- -- (1.84) (1.84) (1.84)
------- ------- -------- ------- ------- --------
Total Distributions.... -- -- -- (1.84) (1.84) (1.84)
------- ------- -------- ------- ------- --------
Net Asset Value, End of
Period................. $ 16.81 $ 15.60 $ 17.04 $ 14.10 $ 13.14 $ 14.27
======= ======= ======== ======= ======= ========
Total Return (excludes
sales and redemption
charges)............... 19.22%(b) 18.72%(b) 19.41%(b) 8.08% 7.19% 8.20%
Ratios/Supplementary
Data:
Net Assets at end of
period (000)........... $44,315 $16,585 $329,229 $50,605 $16,629 $319,733
Ratio of expenses to
average net assets..... 1.60%(c) 2.35%(c) 1.35%(c) 1.57% 2.32% 1.32%
Ratio of net investment
income (loss) to
average net assets..... (1.11)%(c) (1.85)%(c) (0.86)%(c) (1.00)% (1.75)% (0.75)%
Portfolio turnover (a).. 52.62% 52.62% 52.62% 100.19% 100.19% 100.19%
</TABLE>
- - -------
(a)Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between classes of shares issued.
(b)Not Annualized.
(c)Annualized.
See notes to financial statements.
74
<PAGE> 76
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Mid Capitalization Fund
-------------------------------------------------------------------------------------------------------
Eleven Months Ended Year Ended
May 31, 1998 June 30,1997
------------------------------------------------------ ---------------------------------------------
Investor Investor Investor Investor Investor Investor
A B C Institutional A B C Institutional
-------- -------- -------- ------------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period..... $ 15.72 $ 15.12 $15.24 $ 15.82 $ 20.71 $ 20.28 $20.36 $ 20.83
------- ------- ------ -------- ------- ------- ------ --------
Investment Activities
Net investment income
(loss)................. (0.14) (0.23) (0.23) (0.11) (0.16) (0.24) (0.21) (0.13)
Net realized and
unrealized gains
(losses) from
investments............ 2.51 2.42 2.46 2.52 1.30 1.21 1.22 1.25
------- ------- ------ -------- ------- ------- ------ --------
Total from Investment
Activities............. 2.37 2.19 2.23 2.41 1.14 0.97 1.01 1.12
------- ------- ------ -------- ------- ------- ------ --------
Distributions
Net realized gains...... (3.11) (3.11) (3.11) (3.11) (6.13) (6.13) (6.13) (6.13)
------- ------- ------ -------- ------- ------- ------ --------
Total Distributions..... (3.11) (3.11) (3.11) (3.11) (6.13) (6.13) (6.13) (6.13)
------- ------- ------ -------- ------- ------- ------ --------
Net Asset Value, End of
Period.................. $ 14.98 $ 14.20 $14.36 $ 15.12 $ 15.72 $ 15.12 $15.24 $ 15.82
======= ======= ====== ======== ======= ======= ====== ========
Total Return (excludes
sales and redemption
charges)................ 16.84%(a) 16.27%(a) 16.44%(a) 16.98%(a) 5.78% 4.94% 5.17% 5.58%
Ratios/Supplementary Da-
ta:
Net Assets at end of
period (000)............ $90,183 $23,780 $2,228 $518,080 $80,634 $21,994 $2,018 $544,082
Ratio of expenses to
average net assets...... 1.55%(b) 2.30%(b) 2.30%(b) 1.30%(b) 1.56% 2.31% 2.31% 1.31%
Ratio of net investment
income (loss) to average
net assets.............. (1.02)%(b) (1.77)%(b) (1.77)%(b) (0.77)%(b) (1.05)% (1.80)% (1.80)% (0.80)%
Portfolio turnover (c)... 38.41% 38.41% 38.41% 38.41% 38.47% 38.47% 38.47% 38.47%
</TABLE>
- - -------
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
75
<PAGE> 77
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Mid Capitalization Fund
---------------------------------------------------------------------------------------------
Year Ended Year Ended
June 30, 1996 June 30, 1995
--------------------------------------------- -----------------------------------------------
Investor Investor Investor Investor Investor Investor
A B C Institutional A B C (a) Institutional
-------- -------- -------- ------------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period.......... $ 16.56 $ 16.35 $16.40 $ 16.62 $ 14.69 $14.63 $16.29 $ 14.70
------- ------- ------ -------- ------- ------ ------ --------
Investment
Activities
Net investment
income (loss).. (0.16) (0.23) (0.17) (0.16) (0.12) (0.11) (0.02) (0.08)
Net realized and
unrealized
gains (losses)
from
investments.... 4.97 4.82 4.79 5.03 3.46 3.30 1.60 3.47
------- ------- ------ -------- ------- ------ ------ --------
Total from
Investment
Activities..... 4.81 4.59 4.62 4.87 3.34 3.19 1.58 3.39
------- ------- ------ -------- ------- ------ ------ --------
Distributions
Net realized
gains.......... (0.66) (0.66) (0.66) (0.66) (0.48) (0.48) -- (0.49)
In excess of net
realized gains. -- -- -- -- (0.99) (0.99) (1.47) (0.98)
------- ------- ------ -------- ------- ------ ------ --------
Total
Distributions.. (0.66) (0.66) (0.66) (0.66) (1.47) (1.47) (1.47) (1.47)
------- ------- ------ -------- ------- ------ ------ --------
Net Asset Value,
End of Period... $ 20.71 $ 20.28 $20.36 $ 20.83 $ 16.56 $16.35 $16.40 $ 16.62
======= ======= ====== ======== ======= ====== ====== ========
Total Return
(excludes sales
and redemption
charges)........ 29.57% 28.59% 28.69% 29.83% 24.85% 23.88% 23.56%(e) 25.20%
Ratios/Supplementary
Data:
Net Assets at end
of period (000). $66,260 $15,840 $1,088 $650,495 $43,803 $6,073 $ 153 $683,320
Ratio of expenses
to average net
assets.......... 1.54% 2.29% 2.29% 1.29% 1.51% 2.29% 2.27%(d) 1.29%
Ratio of net
investment
income (loss) to
average net
assets.......... (0.94)% (1.70)% (1.73)% (0.68)% (0.87)% (1.61)% (1.43)%(d) (0.64)%
Ratio of expenses
to average net
assets*......... -- -- -- -- 1.54% 2.54% 2.53%(d) 1.29%
Ratio of net
investment
income (loss) to
average net
assets*......... -- -- -- -- (0.90)% (1.87)% (1.70)%(d) (0.65)%
Portfolio
turnover (f).... 49.27% 49.27% 49.27% 49.27% 46.39% 46.39% 46.39% 46.39%
<CAPTION>
Year Ended
June 30, 1994
-------------------------------------
Investor Investor
A B (b) Institutional
---------- ------------ -------------
<S> <C> <C> <C>
Net Asset Value,
Beginning of
Period.......... $ 15.11 $16.66 $ 15.10
---------- ------------ -------------
Investment
Activities
Net investment
income (loss).. (0.10) (0.05) (0.11)
Net realized and
unrealized
gains (losses)
from
investments.... (0.28) (1.98) (0.25)
---------- ------------ -------------
Total from
Investment
Activities..... (0.38) (2.03) (0.36)
---------- ------------ -------------
Distributions
Net realized
gains.......... (0.04) -- (0.04)
In excess of net
realized gains. -- -- --
---------- ------------ -------------
Total
Distributions.. (0.04) -- (0.04)
---------- ------------ -------------
Net Asset Value,
End of Period... $ 14.69 $14.63 $ 14.70
========== ============ =============
Total Return
(excludes sales
and redemption
charges)........ (2.57)% (12.18)%(c) (2.44)%
Ratios/Supplementary
Data:
Net Assets at end
of period (000). $36,108 $1,616 $533,260
Ratio of expenses
to average net
assets.......... 1.38% 2.30%(d) 1.28%
Ratio of net
investment
income (loss) to
average net
assets.......... (0.75)% (1.57)%(d) (0.65)%
Ratio of expenses
to average net
assets*......... 1.53% 2.56%(d) 1.28%
Ratio of net
investment
income (loss) to
average net
assets*......... (0.90)% (1.83)%(d) (0.65)%
Portfolio
turnover (f).... 70.87% 70.87% 70.87%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from November 16, 1994 (commencement of offering of Investor C
shares) to June 30, 1995.
(b) Period from February 4, 1994 (commencement of offering of Investor B
shares) to June 30, 1994.
(c) Not annualized.
(d) Annualized.
(e) Represents total return for the Institutional shares for the period from
July 1, 1994 to November 15, 1994 plus the total return for the Investor C
shares for the period from November 16, 1994 to June 30, 1995.
(f) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
76
<PAGE> 78
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Large Capitalization Fund
------------------------------------------------------------------------------------
Six Months Ended Year Ended
November 30, 1999 May 31, 1999
------------------------------------------- -------------------------------------
Investor A Investor B Institutional Investor A Investor B Institutional
---------- ---------- ------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 19.67 $ 19.21 $ 19.81 $ 16.19 $ 15.95 $ 16.27
------- ------- -------- ------- ------- --------
Investment Activities
Net investment income
(loss)................ (0.10) (0.15) (0.04) (0.11) (0.23) (0.06)
Net realized and
unrealized gains
(losses) from
investments........... 3.47 3.36 3.47 3.89 3.79 3.90
------- ------- -------- ------- ------- --------
Total from Investment
Activities............ 3.37 3.21 3.43 3.78 3.56 3.84
------- ------- -------- ------- ------- --------
Distributions
Net realized gains..... -- -- -- (0.30) (0.30) (0.30)
------- ------- -------- ------- ------- --------
Total Distributions.... -- -- -- (0.30) (0.30) (0.30)
------- ------- -------- ------- ------- --------
Net Asset Value, End of
Period................. $ 23.04 $ 22.42 $ 23.24 $ 19.67 $ 19.21 $ 19.81
======= ======= ======== ======= ======= ========
Total Return (excludes
sales and redemption
charges)............... 17.13%(b) 16.71%(b) 17.31%(b) 23.42% 22.38% 23.67%
Ratios/Supplementary
Data:
Net Assets at end of
period (000)........... $24,363 $15,935 $438,495 $24,513 $14,128 $409,107
Ratio of expenses to
average net assets..... 1.33%(c) 2.08%(c) 1.08%(c) 1.35% 2.11% 1.10%
Ratio of net investment
income (loss) to
average net assets..... (0.58)%(c) (1.33)%(c) (0.33)%(c) (0.59)% (1.34)% (0.33)%
Portfolio turnover (a).. 31.56% 31.56% 31.56% 50.51% 50.51% 50.51%
</TABLE>
- - -------
(a) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
(b) Not Annualized.
(c) Annualized.
See notes to financial statements.
77
<PAGE> 79
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Large Capitalization Fund
-----------------------------------------------------------------------------------------------
Eleven Months Ended Year Ended
May 31, 1998 June 30, 1997
--------------------------------------------------------- ------------------------------------
Investor A Investor B Investor C Institutional Investor A Investor B Investor C
---------- ---------- ---------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period.......... $ 14.44 $ 14.34 $14.28 $ 14.48 $ 11.23 $11.22 $11.16
------- ------- ------ -------- ------- ------ ------
Investment
Activities
Net investment
income (loss)... (0.06) (0.12) (0.06) (0.03) -- (0.05) (0.06)
Net realized and
unrealized gains
(losses) from
investments..... 3.51 3.43 3.32 3.52 3.30 3.25 3.27
------- ------- ------ -------- ------- ------ ------
Total from
Investment
Activities..... 3.45 3.31 3.26 3.49 3.30 3.20 3.21
------- ------- ------ -------- ------- ------ ------
Distributions
Net investment
income.......... (1.67) (1.67) (1.67) (1.67) (0.01) -- (0.01)
Net realized
gains........... -- -- -- -- (0.08) (0.08) (0.08)
Tax return of
capital......... (0.03) (0.03) (0.03) (0.03) -- -- --
------- ------- ------ -------- ------- ------ ------
Total
Distributions.. (1.70) (1.70) (1.70) (1.70) (0.09) (0.08) (0.09)
------- ------- ------ -------- ------- ------ ------
Net Asset Value,
End of Period... $ 16.19 $ 15.95 $15.84 $ 16.27 $ 14.44 $14.34 $14.28
======= ======= ====== ======== ======= ====== ======
Total Return
(excludes sales
and redemption
charges)........ 25.95%(b) 25.12%(b) 24.87%(b) 26.18% 29.52% 28.62% 28.82%
Ratios/Supplementary
Data:
Net Assets at end
of period (000). $21,628 $10,169 $ 268 $358,221 $12,260 $4,130 $ 42
Ratio of expenses
to average net
assets.......... 1.35%(c) 2.09%(c) 2.09%(c) 1.10% 1.37% 2.12% 2.12%
Ratio of net
investment
income (loss) to
average net
assets.......... (0.45)%(c) (1.21)%(c) (1.24)%(c) (0.19)% (0.14)% (0.88)% (0.91)%
Ratio of expenses
to average net
assets*......... (d) (d) (d) (d) (d) (d) (d)
Portfolio
turnover (e).... 24.74% 24.74% 24.74% 24.74% 48.44% 48.44% 48.44%
<CAPTION>
December 28, 1995 to
June 30, 1996 (a)
--------------------------------------------------------
Institutional Investor A Investor B Investor C Institutional
-------------- ------------ ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period.......... $ 11.25 $10.00 $10.00 $10.00 $ 10.00
-------------- ------------ ------------- ------------- ---------------
Investment
Activities
Net investment
income (loss)... 0.03 0.03 0.01 -- 0.03
Net realized and
unrealized gains
(losses) from
investments..... 3.31 1.23 1.23 1.17 1.25
-------------- ------------ ------------- ------------- ---------------
Total from
Investment
Activities..... 3.34 1.26 1.24 1.17 1.28
-------------- ------------ ------------- ------------- ---------------
Distributions
Net investment
income.......... (0.03) (0.03) (0.02) -- (0.03)
Net realized
gains........... (0.08) -- -- -- --
Tax return of
capital......... -- -- -- (0.01) --
-------------- ------------ ------------- ------------- ---------------
Total
Distributions.. (0.11) (0.03) (0.02) (0.01) (0.03)
-------------- ------------ ------------- ------------- ---------------
Net Asset Value,
End of Period... $ 14.48 $11.23 $11.22 $11.16 $ 11.25
============== ============ ============= ============= ===============
Total Return
(excludes sales
and redemption
charges)........ 29.81% 8.99%(b) 8.77%(b) 8.14%(b) 12.86%(b)
Ratios/Supplementary
Data:
Net Assets at end
of period (000). $338,388 $1,657 $ 832 $ 2 $274,150
Ratio of expenses
to average net
assets.......... 1.12% 1.40%(c) 1.78%(c) 2.24%(c) 2.19%(c)
Ratio of net
investment
income (loss) to
average net
assets.......... 0.19% 0.31%(c) (0.32)%(c) (0.45)%(c) 1.26%(c)
Ratio of expenses
to average net
assets*......... (d) 2.62%(c) 4.07%(c) 4.25%(c) 2.26%(c)
Portfolio
turnover (e).... 48.44% 0.86% 0.86% 0.86% 0.86%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations
(b) Not Annualized
(c) Annualized
(d) No fees were waived during this period
(e) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued
See notes to financial statements.
78
<PAGE> 80
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
International Discovery Fund
----------------------------------------------------------------------------------
Six Months Ended Year Ended
November 30, 1999 May 31, 1999
------------------------------------------ ------------------------------------
Investor A Investor B Institutional Investor A Investor B Institutional
---------- ---------- ------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period.......... $ 14.81 $14.20 $ 15.03 $ 16.51 $15.98 $ 16.70
------- ------ -------- ------- ------ --------
Investment
Activities
Net investment
income (loss).. (0.19) (0.29) (0.06) (0.15) (0.27) (0.10)
Net realized and
unrealized
gains (losses)
from
investments and
foreign
currencies..... 5.14 4.90 5.04 (0.68) (0.64) (0.70)
------- ------ -------- ------- ------ --------
Total from
Investment
Activities..... 4.95 4.61 4.98 (0.83) (0.91) (0.80)
------- ------ -------- ------- ------ --------
Distributions
Net realized
gains.......... -- -- -- (0.87) (0.87) (0.87)
------- ------ -------- ------- ------ --------
Total
Distributions.. -- -- -- (0.87) (0.87) (0.87)
------- ------ -------- ------- ------ --------
Net Asset Value,
End of Period... $ 19.76 $18.81 $ 20.01 $ 14.81 $14.20 $ 15.03
======= ====== ======== ======= ====== ========
Total Return
(excludes sales
and redemption
charges)........ 33.60%(a) 32.65%(a) 33.31%(a) (5.20)% (5.89)% (4.94)%
Ratios/Supplementary
Data:
Net Assets at end
of period (000). $24,305 $8,406 $310,654 $24,914 $7,604 $267,764
Ratio of expenses
to average net
assets.......... 1.83%(b) 2.58%(b) 1.58%(b) 1.82% 2.57% 1.57%
Ratio of net
investment
income (loss) to
average net
assets.......... (0.66)%(b) (1.42)%(b) (0.43)%(b) (0.45)% (1.21)% (0.20)%
Portfolio
turnover (c).... 75.51% 75.51% 75.51% 84.66% 84.66% 84.66%
<CAPTION>
Eleven Months Ended
May 31, 1998
------------------------------------------------------------
Investor A Investor B Investor C Institutional
-------------- -------------- ------------- ----------------
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period.......... $ 16.25 $ 15.85 $16.21 $ 16.41
-------------- -------------- ------------- ----------------
Investment
Activities
Net investment
income (loss).. (0.09) (0.19) (0.17) (0.04)
Net realized and
unrealized
gains (losses)
from
investments and
foreign
currencies..... 0.86 0.83 0.83 0.84
-------------- -------------- ------------- ----------------
Total from
Investment
Activities..... 0.77 0.64 0.66 0.80
-------------- -------------- ------------- ----------------
Distributions
Net realized
gains.......... (0.51) (0.51) (0.51) (0.51)
-------------- -------------- ------------- ----------------
Total
Distributions.. (0.51) (0.51) (0.51) (0.51)
-------------- -------------- ------------- ----------------
Net Asset Value,
End of Period... $ 16.51 $ 15.98 $16.36 $ 16.70
============== ============== ============= ================
Total Return
(excludes sales
and redemption
charges)........ 5.17%(a) 4.47%(a) 4.49%(a) 5.31%(a)
Ratios/Supplementary
Data:
Net Assets at end
of period (000). $43,268 $12,840 $1,026 $427,922
Ratio of expenses
to average net
assets.......... 1.82%(b) 2.56%(b) 2.56%(b) 1.56%(b)
Ratio of net
investment
income (loss) to
average net
assets.......... (0.75)%(b) (1.49)%(b) (1.48)%(b) (0.47)%(b)
Portfolio
turnover (c).... 34.15% 34.15% 34.15% 34.15%
</TABLE>
- - -------
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
79
<PAGE> 81
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
International Discovery Fund
----------------------------------------------------------------------------------------------------
Year Ended Year Ended
June 30, 1997 June 30, 1996
--------------------------------------------------- -----------------------------------------------
Investor A Investor B Investor C Institutional Investor A Investor B Investor C Institutional
---------- ---------- ---------- ------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period... $ 14.01 $ 13.77 $14.08 $ 14.11 $ 12.23 $12.15 $12.42 $ 12.33
------- ------- ------ -------- ------- ------ ------ --------
Investment Activities
Net investment income
(loss)............... (0.07) (0.16) (0.15) (0.05) (0.02) (0.08) (0.10) 0.02
Net realized and
unrealized gains
(losses) from
investments and
foreign currencies... 2.31 2.24 2.28 2.35 1.81 1.70 1.79 1.80
------- ------- ------ -------- ------- ------ ------ --------
Total from Investment
Activities........... 2.24 2.08 2.13 2.30 1.79 1.62 1.69 1.82
------- ------- ------ -------- ------- ------ ------ --------
Distributions
Net investment income. -- -- -- -- -- -- -- (0.02)
Net realized gains.... -- -- -- -- (0.01) -- (0.03) (0.02)
------- ------- ------ -------- ------- ------ ------ --------
Total Distributions... -- -- -- -- (0.01) -- (0.03) (0.04)
------- ------- ------ -------- ------- ------ ------ --------
Net Asset Value, End of
Period................ $ 16.25 $ 15.85 $16.21 $ 16.41 $ 14.01 $13.77 $14.08 $ 14.11
======= ======= ====== ======== ======= ====== ====== ========
Total Return (excludes
sales and redemption
charges).............. 15.99% 15.11% 15.13% 16.34% 14.65% 13.33% 13.62% 14.76%
Ratios/Supplementary
Data:
Net Assets at end of
period (000).......... $48,557 $13,516 $ 875 $426,111 $39,575 $9,489 $ 474 $364,095
Ratio of expenses to
average net assets.... 1.80% 2.55% 2.56% 1.55% 1.80% 2.55% 2.50% 1.55%
Ratio of net investment
income (loss) to
average net assets.... (0.54)% (1.29)% (1.28)% (0.29)% (0.11)% (0.86)% (0.84)% 0.12%
Ratio of expenses to
average net assets*... (a) (a) (a) (a) 1.88% 2.63% 2.62% 1.55%
Portfolio turnover (b). 45.18% 45.18% 45.18% 45.18% 54.47% 54.47% 54.47% 54.47%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a)No fees were waived during this period.
(b)Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between classes of shares issued.
See notes to financial statements.
80
<PAGE> 82
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
International Discovery Fund
----------------------------------------------------------------------------------------------
Year Ended Year Ended
June 30, 1995 June 30, 1994
---------------------------------------------------- ---------------------------------------------
Investor A Investor B Investor C (a) Institutional Investor A Investor B (b) Institutional
---------- ---------- -------------- ------------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 13.18 $13.21 $12.97 $ 13.24 $ 11.50 $14.12 $ 11.54
------- ------ ------ -------- ------- ------ --------
Investment Activities
Net investment income
(loss)................ 0.03 (0.04) 0.03 0.04 (0.02) (0.01) (0.01)
Net realized and
unrealized gains
(losses) from
investments and
foreign currencies.... (0.36) (0.40) 0.04 (0.33) 1.74 (0.90) 1.75
------- ------ ------ -------- ------- ------ --------
Total from Investment
Activities............ (0.33) (0.44) 0.07 (0.29) 1.72 (0.91) 1.74
------- ------ ------ -------- ------- ------ --------
Distributions
Net investment income.. -- -- -- -- (0.02) -- (0.02)
Net realized gains..... (0.62) (0.62) (0.62) (0.62) (0.02) -- (0.02)
------- ------ ------ -------- ------- ------ --------
Total Distributions.... (0.62) (0.62) (0.62) (0.62) (0.04) 0.00 (0.04)
------- ------ ------ -------- ------- ------ --------
Net Asset Value, End of
Period................. $ 12.23 $12.15 $12.42 $ 12.33 $ 13.18 $13.21 $ 13.24
======= ====== ====== ======== ======= ====== ========
Total Return (excludes
sales and redemption
charges)............... (2.19)% (3.03)% (1.15)%(e) (1.86)% 14.99 % (6.44)%(c) 15.12%
Ratios/Supplementary
Data:
Net Assets at end of
period (000)........... $34,228 $5,469 $ 82 $264,759 $36,297 $2,680 $261,798
Ratio of expenses to
average net assets..... 1.78% 2.57% 2.32%(d) 1.56% 1.63% 2.56%(d) 1.52%
Ratio of net investment
income (loss) to
average net assets..... 0.08% (0.49)% 1.74%(d) 0.31% (0.29)% (0.22)%(d) (0.30)%
Ratio of expenses to
average net assets*.... 1.91% 2.92% 3.27%(d) 1.59% 1.84% 2.61%(d) 1.57%
Portfolio turnover (f).. 104.39% 104.39% 104.39% 104.39% 37.23% 37.23% 37.23%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from November 16, 1994 (commencement of offering of Investor C
shares) to June 30, 1995.
(b) Period from February 4, 1994 (commencement of offering of Investor B
shares) to June 30, 1994.
(c) Not annualized.
(d) Annualized.
(e) Represents total return for the Institutional shares for the period from
July 1, 1994 to November 15, 1994 plus the total return for the Investor C
shares for the period from November 16, 1994 to June 30, 1995.
(f) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
81
<PAGE> 83
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Limited Maturity Bond Fund
------------------------------------------------------------------------------
Six Months Ended Year Ended
November 30, 1999 May 31, 1999
---------------------------------------- -----------------------------------
Investor A Investor B Institutional Investor A Investor B Institutional
---------- ---------- ------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 9.42 $9.42 $ 9.42 $ 9.50 $ 9.50 $ 9.50
------- ----- -------- ------- ------ --------
Investment Activities
Net investment income
(loss)................ 0.25 0.22 0.27 0.53 0.46 0.56
Net realized and
unrealized gains
(losses) from
investments........... (0.08) (0.08) (0.08) (0.08) (0.08) (0.08)
------- ----- -------- ------- ------ --------
Total from Investment
Activities............ 0.17 0.14 0.19 0.45 0.38 0.48
------- ----- -------- ------- ------ --------
Distributions
Net investment income.. (0.25) (0.22) (0.27) (0.53) (0.46) (0.56)
------- ----- -------- ------- ------ --------
Total Distributions.... (0.25) (0.22) (0.27) (0.53) (0.46) (0.56)
------- ----- -------- ------- ------ --------
Net Asset Value, End of
Period................. $ 9.34 $9.34 $ 9.34 $ 9.42 $ 9.42 $ 9.42
======= ===== ======== ======= ====== ========
Total Return (excludes
sales and redemption
charges)............... 1.84%(b) 1.48%(b) 1.99%(b) 4.84% 4.03% 5.12%
Ratios/Supplementary
Data:
Net Assets at end of
period (000)........... $13,317 $ 839 $111,266 $24,246 $ 826 $123,137
Ratio of expenses to
average net assets..... 1.11%(c) 1.86%(c) 0.86%(c) 1.08% 1.83% 0.84%
Ratio of net investment
income (loss) to
average net assets..... 5.36%(c) 4.65%(c) 5.64%(c) 5.55% 4.81% 5.83%
Ratio of expenses to
average net assets*.... 1.26%(c) 2.00%(c) 1.01%(c) 1.32% 2.07% 1.07%
Portfolio turnover (a).. 47.93% 47.93% 47.93% 126.98% 126.98% 126.98%
</TABLE>
- - -------
(a) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
(b) Not annualized.
(c) Annualized.
See notes to financial statements.
82
<PAGE> 84
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Limited Maturity Bond Fund
------------------------------------------------------------------------------------------------------
Eleven Months Ended Year Ended
May 31, 1998 June 30, 1997
----------------------------------------------------- ----------------------------------------------
Investor A Investor B Investor C Institutional Investor A Investor B Investor C Institutional
---------- ---------- ---------- ------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period... $ 9.49 $ 9.49 $ 9.29 $ 9.49 $ 9.48 $ 9.46 $ 9.29 $ 9.48
------- ------ ------ -------- ------- ------ ------ --------
Investment Activities
Net investment income
(loss)............... 0.47 0.40 0.42 0.50 0.55 0.48 0.48 0.57
Net realized and
unrealized gains
(losses) from
investments.......... 0.01 0.02 (0.01) 0.01 0.01 0.02 -- 0.02
------- ------ ------ -------- ------- ------ ------ --------
Total from Investment
Activities........... 0.48 0.42 0.41 0.51 0.56 0.50 0.48 0.59
------- ------ ------ -------- ------- ------ ------ --------
Distributions
Net investment income. (0.47) (0.41) (0.42) (0.50) (0.55) (0.47) (0.48) (0.58)
------- ------ ------ -------- ------- ------ ------ --------
Total Distributions... (0.47) (0.41) (0.42) (0.50) (0.55) (0.47) (0.48) (0.58)
------- ------ ------ -------- ------- ------ ------ --------
Net Asset Value, End of
Period................ $ 9.50 $ 9.50 $ 9.28 $ 9.50 $ 9.49 $ 9.49 $ 9.29 $ 9.49
======= ====== ====== ======== ======= ====== ====== ========
Total Return (excludes
sales and redemption
charges).............. 5.23%(a) 4.50%(a) 4.48%(a) 5.46%(a) 6.11% 5.39% 5.26% 6.42%
Ratios/Supplementary
Data:
Net Assets at end of
period (000).......... $41,571 $1,553 $2,199 $150,510 $27,381 $1,492 $ 41 $136,126
Ratio of expenses to
average net assets.... 1.07%(b) 1.82%(b) 1.80%(b) 0.82%(b) 1.11% 1.86% 1.86% 0.85%
Ratio of net investment
income (loss) to
average net assets.... 5.37%(b) 4.63%(b) 4.60%(b) 5.63%(b) 5.76% 5.02% 4.97% 6.03%
Ratio of expenses to
average net assets*... 1.31%(b) 2.06%(b) 2.04%(b) 1.06%(b) 1.35% 2.10% 2.10% 1.10%
Portfolio turnover (c). 225.88% 225.88% 225.88% 225.88% 607.84% 607.84% 607.84% 607.84%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
83
<PAGE> 85
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Limited Maturity Bond Fund
------------------------------------------------------------------------------------------------------------
Year Ended Year Ended
June 30, 1996 June 30, 1995
---------------------------------------------- --------------------------------------------------
Investor A Investor B Investor C Institutional Investor A Investor B Investor C (a) Institutional Investor A
---------- ---------- ---------- ------------- ---------- ---------- -------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period.......... $ 9.71 $ 9.70 $ 9.53 $ 9.71 $ 9.57 $ 9.56 $ 9.35 $ 9.57 $ 10.18
------- ------ ------ -------- ------- ------ ------ -------- -------
Investment
Activities
Net investment
income (loss).. 0.62 0.55 0.58 0.65 0.56 0.49 0.20 0.58 0.62
Net realized and
unrealized
gains (losses)
from
investments.... (0.21) (0.22) (0.23) (0.21) 0.13 0.12 0.17 0.13 (0.58)
------- ------ ------ -------- ------- ------ ------ -------- -------
Total from
Investment
Activities..... 0.41 0.33 0.35 0.44 0.69 0.61 0.37 0.71 0.04
------- ------ ------ -------- ------- ------ ------ -------- -------
Distributions
Net investment
income......... (0.62) (0.55) (0.58) (0.65) (0.55) (0.47) (0.19) (0.57) (0.61)
In excess of net
realized gains. (0.01) -- -- (0.01) -- -- -- -- (0.04)
Tax return of
capital........ (0.01) (0.02) -- (0.01) -- -- -- -- --
------- ------ ------ -------- ------- ------ ------ -------- -------
Total
Distributions.. (0.64) (0.57) (0.59) (0.67) (0.55) (0.47) (0.19) (0.57) (0.65)
------- ------ ------ -------- ------- ------ ------ -------- -------
Net Asset Value,
End of Period... $ 9.48 $ 9.46 $ 9.29 $ 9.48 $ 9.71 $ 9.70 $ 9.53 $ 9.71 $ 9.57
======= ====== ====== ======== ======= ====== ====== ======== =======
Total Return
(excludes sales
and redemption
charges)........ 4.37% 3.43% 3.71% 4.65% 7.53% 6.68% 3.58%(e) 7.76% 0.32%
Ratios/Supplementary
Data:
Net Assets at end
of period (000). $14,390 $1,547 $ 11 $136,681 $18,930 $ 892 -- $141,781 $24,907
Ratio of expenses
to average net
assets.......... 1.09% 1.84% 1.82% 0.84% 1.05% 1.85% 1.18%(d) 0.84% 0.86%
Ratio of net
investment
income (loss) to
average net
assets.......... 6.09% 5.35% 5.34% 6.32% 5.89% 5.14% 5.61%(d) 6.11% 6.22%
Ratio of expenses
to average net
assets*......... 1.33% 2.08% 2.02% 1.08% 1.36% 2.36% 1.18%(d) 1.11% 1.30%
Portfolio
turnover (f).... 618.60% 618.60% 618.60% 618.60% 397.97% 397.97% 397.97% 397.97% 353.28%
<CAPTION>
Year Ended
June 30, 1994
-----------------------------
Investor B (b) Institutional
--------------- -------------
<S> <C> <C>
Net Asset Value,
Beginning of
Period.......... $ 9.99 $ 10.18
--------------- -------------
Investment
Activities
Net investment
income (loss).. 0.23 0.64
Net realized and
unrealized
gains (losses)
from
investments.... (0.44) (0.59)
--------------- -------------
Total from
Investment
Activities..... (0.21) 0.05
--------------- -------------
Distributions
Net investment
income......... (0.22) (0.62)
In excess of net
realized gains. -- (0.04)
Tax return of
capital........ -- --
--------------- -------------
Total
Distributions.. (0.22) (0.66)
--------------- -------------
Net Asset Value,
End of Period... $ 9.56 $ 9.57
=============== =============
Total Return
(excludes sales
and redemption
charges)........ (2.09)%(c) 0.43%
Ratios/Supplementary
Data:
Net Assets at end
of period (000). $ 629 $156,678
Ratio of expenses
to average net
assets.......... 1.78%(d) 0.76%
Ratio of net
investment
income (loss) to
average net
assets.......... 5.36%(d) 6.32%
Ratio of expenses
to average net
assets*......... 2.33%(d) 1.05%
Portfolio
turnover (f).... 353.28% 353.28%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from November 16, 1994 (commencement of offering of Investor C
shares) to June 30, 1995.
(b) Period from February 4, 1994 (commencement of offering of Investor B
shares) to June 30, 1994.
(c) Not annualized.
(d) Annualized.
(e) Represents total return for the Institutional shares for the period from
July 1, 1994 to November 15, 1994 plus the total return for the Investor C
shares for the period from November 16, 1994 to June 30, 1995.
(f) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
84
<PAGE> 86
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Intermediate Government Obligations Fund
-----------------------------------------------------------------------------
Six Months Ended Year Ended
November 30, 1999 May 31, 1999
--------------------------------------- -----------------------------------
Investor A Investor B Institutional Investor A Investor B Institutional
---------- ---------- ------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 9.77 $9.74 $ 9.76 $ 9.88 $ 9.85 $ 9.88
------ ----- -------- ------- ------ --------
Investment Activities
Net investment income
(loss)................ 0.25 0.21 0.26 0.48 0.40 0.50
Net realized and
unrealized gains
(losses) from
investments........... (0.15) (0.15) (0.14) (0.11) (0.11) (0.12)
------ ----- -------- ------- ------ --------
Total from Investment
Activities............ 0.10 0.06 0.12 0.37 0.29 0.38
------ ----- -------- ------- ------ --------
Distributions
Net investment income.. (0.25) (0.21) (0.26) (0.48) (0.40) (0.50)
------ ----- -------- ------- ------ --------
Total Distributions.... (0.25) (0.21) (0.26) (0.48) (0.40) (0.50)
------ ----- -------- ------- ------ --------
Net Asset Value, End of
Period................. $ 9.62 $9.59 $ 9.62 $ 9.77 $ 9.74 $ 9.76
====== ===== ======== ======= ====== ========
Total Return (excludes
sales and redemption
charges)............... 0.99%(b) 0.61%(b) 1.23%(b) 3.83% 2.96% 4.01%
Ratios/Supplementary
Data:
Net Assets at end of
period (000)........... $7,680 $ 796 $102,725 $10,244 $1,255 $133,678
Ratio of expenses to
average net assets..... 1.26%(c) 2.01%(c) 1.01%(c) 1.24% 1.99% 0.99%
Ratio of net investment
income (loss) to
average net assets..... 5.06%(c) 4.29%(c) 5.30%(c) 4.81% 4.05% 5.06%
Ratio of expenses to
average net assets*.... 1.31%(c) 2.06%(c) 1.06%(c) 1.33% 2.08% 1.08%
Portfolio turnover (a).. 29.39% 29.39% 29.39% 53.07% 53.07% 53.07%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
(b) Not annualized.
(c) Annualized.
See notes to financial statements.
85
<PAGE> 87
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Intermediate Government Obligations Fund
--------------------------------------------------------------------------------------------------------
Eleven Months Ended Year Ended
May 31, 1998 June 30, 1997
------------------------------------------------------- ----------------------------------------------
Investor A Investor B Investor C Institutional Investor A Investor B Investor C Institutional
---------- ---------- ---------- ------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period... $ 9.73 $ 9.71 $ 9.54 $ 9.73 $ 9.70 $ 9.67 $ 9.52 $ 9.71
------- ------- ------- -------- -------- -------- -------- --------
Investment Activities
Net investment income
(loss)............... 0.49 0.43 0.40 0.52 0.52 0.45 0.45 0.55
Net realized and
unrealized gains
(losses) from
investments.......... 0.16 0.15 0.18 0.16 0.04 0.03 0.02 0.03
------- ------- ------- -------- -------- -------- -------- --------
Total from Investment
Activities........... 0.65 0.58 0.58 0.68 0.56 0.48 0.47 0.58
======= ======= ======= ======== ======== ======== ======== ========
Distributions
Net investment income. (0.49) (0.43) (0.43) (0.52) (0.53) (0.44) (0.45) (0.56)
Tax return of capital. (0.01) (0.01) (0.01) (0.01) -- -- -- --
------- ------- ------- -------- -------- -------- -------- --------
Total Distributions .. (0.50) (0.44) (0.44) (0.53) (0.53) (0.44) (0.45) (0.56)
------- ------- ------- -------- -------- -------- -------- --------
Net Asset Value, End of
Period ............... $ 9.88 $ 9.85 $ 9.68 $ 9.88 $ 9.73 $ 9.71 $ 9.54 $ 9.73
======= ======= ======= ======== ======== ======== ======== ========
Total Return (excludes
sales and redemption
charges).............. 6.78%(a) 6.07%(a) 6.19%(a) 7.03%(a) 5.91% 5.09% 5.03% 6.11%
Ratios/Supplementary
Data:
Net Assets at end of
period (000).......... $14,461 $ 1,852 $ 235 $171,481 $ 18,552 $ 1,972 $ 194 $187,856
Ratio of expenses to
average net assets.... 1.22%(b) 1.97%(b) 1.96%(b) 0.97%(b) 1.23% 1.98% 1.99% 0.98%
Ratio of net investment
income (loss) to
average net assets.... 5.42%(b) 4.67%(b) 4.67%(b) 5.67%(b) 5.41% 4.67% 4.69% 5.66%
Ratio of expenses to
average net assets*... 1.31%(b) 2.06%(b) 2.05%(b) 1.06%(b) 1.32% 2.07% 2.07% 1.07%
Portfolio turnover (c). 774.28% 774.28% 774.28% 774.28% 1516.78% 1516.78% 1516.78% 1516.78%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
86
<PAGE> 88
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Intermediate Government Obligations Fund
-------------------------------------------------------------------------------------------------
Year Ended Year Ended
June 30, 1996 June 30, 1995
---------------------------------------------- --------------------------------------------------
Investor A Investor B Investor C Institutional Investor A Investor B Investor C (a) Institutional
---------- ---------- ---------- ------------- ---------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period.......... $ 9.93 $ 9.89 $ 9.76 $ 9.93 $ 9.62 $ 9.60 $ 9.42 $ 9.62
------- ------ ------ -------- ------- ------ ------ --------
Investment Activ-
ities
Net investment
income (loss).. 0.60 0.53 0.53 0.62 0.50 0.43 0.18 0.52
Net realized and
unrealized
gains (losses)
from
investments.... (0.25) (0.24) (0.25) (0.24) 0.31 0.30 0.33 0.31
------- ------ ------ -------- ------- ------ ------ --------
Total from
Investment
Activities..... 0.35 0.29 0.28 0.38 0.81 0.73 0.51 0.83
------- ------ ------ -------- ------- ------ ------ --------
Distributions
Net investment
income......... (0.58) (0.51) (0.52) (0.60) (0.50) (0.44) (0.17) (0.52)
In excess of net
realized gains. -- -- -- -- -- -- -- --
------- ------ ------ -------- ------- ------ ------ --------
Total Distribu-
tions.......... (0.58) (0.51) (0.52) (0.60) (0.50) (0.44) (0.17) (0.52)
------- ------ ------ -------- ------- ------ ------ --------
Net Asset Value,
End of Period... $ 9.70 $ 9.67 $ 9.52 $ 9.71 $ 9.93 $ 9.89 $ 9.76 $ 9.93
======= ====== ====== ======== ======= ====== ====== ========
Total Return
(excludes sales
and redemption
charges)........ 3.69% 2.93% 2.86% 3.95% 8.69% 7.84% 5.21%(e) 9.02%
Ratios/Supplementary
Data:
Net Assets at end
of period (000). $22,954 $1,843 $ 80 $225,313 $27,521 $ 977 $ 9 $249,169
Ratio of expenses
to average net
assets.......... 1.21% 1.96% 1.96% 0.96% 1.25% 2.06% 2.09%(d) 1.04%
Ratio of net
investment
income (loss) to
average net
assets.......... 5.51% 4.78% 4.83% 5.76% 5.22% 4.41% 4.24%(d) 5.43%
Ratio of expenses
to average net
assets*......... 1.30% 2.05% 2.05% 1.05% 1.41% 2.42% 2.36%(d) 1.16%
Portfolio turn-
over (f)........ 916.39% 916.39% 916.39% 916.39% 549.13% 549.13% 549.13% 549.13%
<CAPTION>
Year Ended
June 30, 1994
-----------------------------------------
Investor A Investor B (b) Institutional
----------- --------------- -------------
<S> <C> <C> <C>
Net Asset Value,
Beginning of
Period.......... $ 10.53 $10.14 $ 10.53
----------- --------------- -------------
Investment Activ-
ities
Net investment
income (loss).. 0.59 0.21 0.60
Net realized and
unrealized
gains (losses)
from
investments.... (0.66) (0.54) (0.66)
----------- --------------- -------------
Total from
Investment
Activities..... (0.07) (0.33) (0.06)
----------- --------------- -------------
Distributions
Net investment
income......... (0.59) (0.21) (0.60)
In excess of net
realized gains. (0.25) -- (0.25)
----------- --------------- -------------
Total Distribu-
tions.......... (0.84) (0.21) (0.85)
----------- --------------- -------------
Net Asset Value,
End of Period... $ 9.62 $ 9.60 $ 9.62
=========== =============== =============
Total Return
(excludes sales
and redemption
charges)........ (0.90)% (3.31)%(c) (0.80)%
Ratios/Supplementary
Data:
Net Assets at end
of period (000). $36,106 $ 531 $281,232
Ratio of expenses
to average net
assets.......... 1.00% 1.92%(d) 0.90%
Ratio of net
investment
income (loss) to
average net
assets.......... 5.80% 4.80%(d) 5.90%
Ratio of expenses
to average net
assets*......... 1.29% 2.32%(d) 1.04%
Portfolio turn-
over (f)........ 546.06% 546.06% 546.06%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from November 16, 1994 (commencement of offering of Investor C
shares) to June 30, 1995.
(b) Period from February 4, 1994 (commencement of offering of Investor B
shares) to June 30, 1994.
(c) Not annualized.
(d) Annualized.
(e) Represents total return for the Institutional shares for the period from
July 1, 1994 to November 15, 1994 plus the total return for the Investor C
shares for the period from November 16, 1994 to June 30, 1995.
(f) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
87
<PAGE> 89
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
U.S. Government Income Fund
-------------------------------------------------------------------------------
Six Months Ended Year Ended
November 30, 1999 May 31, 1999
----------------------------------------- -----------------------------------
Investor A Investor B Institutional Investor A Investor B Institutional
---------- ---------- ------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 9.13 $ 9.11 $ 9.13 $ 9.27 $ 9.24 $ 9.27
------- ------- -------- ------- ------- --------
Investment Activities
Net investment income
(loss)................ 0.26 0.22 0.27 0.55 0.47 0.57
Net realized and
unrealized gains
(losses) from
investments........... (0.17) (0.17) (0.17) (0.14) (0.13) (0.14)
------- ------- -------- ------- ------- --------
Total from Investment
Activities............ 0.09 0.05 0.10 0.41 0.34 0.43
------- ------- -------- ------- ------- --------
Distributions
Net investment income.. (0.26) (0.22) (0.27) (0.55) (0.47) (0.57)
------- ------- -------- ------- ------- --------
Total Distributions.... (0.26) (0.22) (0.27) (0.55) (0.47) (0.57)
------- ------- -------- ------- ------- --------
Net Asset Value, End of
Period................. $ 8.96 $ 8.94 $ 8.96 $ 9.13 $ 9.11 $ 9.13
======= ======= ======== ======= ======= ========
Total Return (excludes
sales and redemption
charges)............... 0.98%(b) 0.62%(b) 1.14%(b) 4.46% 3.76% 4.73%
Ratios/Supplementary
Data:
Net Assets at end of
period (000)........... $25,093 $11,839 $147,568 $38,190 $16,373 $150,113
Ratio of expenses to
average net assets..... 1.08%(c) 1.83%(c) 0.83%(c) 1.00% 1.75% 0.75%
Ratio of net investment
income (loss) to
average net assets..... 5.74%(c) 4.99%(c) 6.01%(c) 5.92% 5.15% 6.15%
Ratio of expenses to
average net assets*.... 1.47%(c) 2.22%(c) 1.23%(c) 1.34% 2.09% 1.09%
Portfolio turnover (a).. 45.86% 45.86% 45.86% 52.60% 52.60% 52.60%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
(b) Not annualized.
(c) Annualized.
See notes to financial statements.
88
<PAGE> 90
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
U.S. Government Income Fund
-------------------------------------------------------------------------------------------------------
Eleven Months Ended Year Ended
May 31, 1998 June 30, 1997
------------------------------------------------------ ----------------------------------------------
Investor A Investor B Investor C Institutional Investor A Investor B Investor C Institutional
---------- ---------- ---------- ------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period... $ 9.15 $ 9.13 $ 9.10 $ 9.15 $ 9.25 $ 9.21 $ 9.19 $ 9.25
------- ------- ------ -------- ------- ------- ------ --------
Investment Activities
Net investment income
(loss)............... 0.61 0.55 0.54 0.63 0.70 0.63 0.64 0.72
Net realized and
unrealized gains
(losses) from
investments.......... 0.08 0.07 0.08 0.08 (0.10) (0.09) (0.11) (0.10)
------- ------- ------ -------- ------- ------- ------ --------
Total from Investment
Activities........... 0.69 0.62 0.62 0.71 0.60 0.54 0.53 0.62
------- ------- ------ -------- ------- ------- ------ --------
Distributions
Net investment income. (0.53) (0.47) (0.47) (0.55) (0.59) (0.52) (0.50) (0.61)
Tax return of capital. (0.04) (0.04) (0.04) (0.04) (0.11) (0.10) (0.12) (0.11)
------- ------- ------ -------- ------- ------- ------ --------
Total Distributions... (0.57) (0.51) (0.51) (0.59) (0.70) (0.62) (0.62) (0.72)
------- ------- ------ -------- ------- ------- ------ --------
Net Asset Value, End of
Period................ $ 9.27 $ 9.24 $ 9.21 $ 9.27 $ 9.15 $ 9.13 $ 9.10 $ 9.15
======= ======= ====== ======== ======= ======= ====== ========
Total Return (excludes
sales and redemption
charges).............. 7.80%(a) 6.98%(a) 7.03%(a) 8.04%(a) 6.86% 6.06% 6.07% 6.91%
Ratios/Supplementary
Data:
Net Assets at end of
period (000).......... $54,710 $23,739 $ 363 $161,567 $58,589 $23,448 $ 69 $148,854
Ratio of expenses to
average net assets.... 1.00%(b) 1.75%(b) 1.74%(b) 0.75%(b) 1.02% 1.77% 1.77% 0.77%
Ratio of net investment
income (loss) to
average net assets.... 7.20%(b) 6.45%(b) 6.34%(b) 7.44%(b) 7.64% 6.89% 6.89% 7.90%
Ratio of expenses to
average net assets*... 1.34%(b) 2.09%(b) 2.08%(b) 1.09%(b) 1.36% 2.11% 2.11% 1.11%
Portfolio turnover (c). 278.94% 278.94% 278.94% 278.94% 499.53% 499.53% 499.53% 499.53%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
89
<PAGE> 91
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- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
U.S. Government Income Fund
------------------------------------------------------------------------------------------------------------
Year Ended Year Ended
June 30, 1996 June 30, 1995
---------------------------------------------- --------------------------------------------------
Investor A Investor B Investor C Institutional Investor A Investor B Investor C (a) Institutional Investor A
---------- ---------- ---------- ------------- ---------- ---------- -------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period.......... $ 9.42 $ 9.39 $ 9.36 $ 9.42 $ 9.41 $ 9.38 $ 9.12 $ 9.41 $ 10.04
------- ------- ------ -------- ------- ------ ------ -------- -------
Investment
Activities
Net investment
income (loss).. 0.73 0.66 0.66 0.75 0.75 0.68 0.28 0.76 0.74
Net realized and
unrealized
gains (losses)
from
investments.... (0.17) (0.18) (0.17) (0.17) -- 0.01 0.24 0.01 (0.64)
------- ------- ------ -------- ------- ------ ------ -------- -------
Total from
Investment
Activities..... 0.56 0.48 0.49 0.58 0.75 0.69 0.52 0.77 0.10
------- ------- ------ -------- ------- ------ ------ -------- -------
Distributions
Net investment
income......... (0.65) (0.59) (0.66) (0.67) (0.66) (0.61) (0.25) (0.68) (0.72)
Tax return of
capital........ (0.08) (0.07) -- (0.08) (0.08) (0.07) (0.03) (0.08) (0.01)
------- ------- ------ -------- ------- ------ ------ -------- -------
Total
Distributions.. (0.73) (0.66) (0.66) (0.75) (0.74) (0.68) (0.28) (0.76) (0.73)
------- ------- ------ -------- ------- ------ ------ -------- -------
Net Asset Value,
End of Period... $ 9.25 $ 9.21 $ 9.19 $ 9.25 $ 9.42 $ 9.39 $ 9.36 $ 9.42 $ 9.41
======= ======= ====== ======== ======= ====== ====== ======== =======
Total Return
(excludes sales
and redemption
charges)........ 5.97% 5.22% 5.25% 6.34% 8.46% 7.71% 5.26%(e) 8.70% 0.94%
Ratios/Supplementary
Data:
Net Assets at end
of period (000). $52,250 $19,556 $ 70 $130,615 $50,931 $8,478 $ 29 $110,190 $54,027
Ratio of expenses
to average net
assets.......... 1.01% 1.76% 1.76% 0.76% 1.04% 1.83% 2.88%(d) 0.83% 0.82%
Ratio of net
investment
income (loss) to
average net
assets.......... 7.70% 6.92% 6.92% 7.94% 8.03% 7.28% 11.54%(d) 8.25% 7.42%
Ratio of expenses
to average net
assets*......... 1.35% 2.10% 2.10% 1.10% 1.44% 2.44% 2.88%(d) 1.19% 1.36%
Portfolio
turnover (f).... 348.01% 348.01% 348.01% 348.01% 114.71% 114.71% 114.71% 114.71% 102.24%
<CAPTION>
Year Ended
June 30, 1994
----------------------------
Investor B (b) Institutional
-------------- -------------
<S> <C> <C>
Net Asset Value,
Beginning of
Period.......... $ 9.88 $ 10.04
-------------- -------------
Investment
Activities
Net investment
income (loss).. 0.28 0.74
Net realized and
unrealized
gains (losses)
from
investments.... (0.50) (0.63)
-------------- -------------
Total from
Investment
Activities..... (0.22) 0.11
-------------- -------------
Distributions
Net investment
income......... (0.27) (0.73)
Tax return of
capital........ (0.01) (0.01)
-------------- -------------
Total
Distributions.. (0.28) (0.74)
-------------- -------------
Net Asset Value,
End of Period... $ 9.38 $ 9.41
============== =============
Total Return
(excludes sales
and redemption
charges)........ -2.26%(c) 1.04%
Ratios/Supplementary
Data:
Net Assets at end
of period (000). $2,787 $101,506
Ratio of expenses
to average net
assets.......... 1.77%(d) 0.72%
Ratio of net
investment
income (loss) to
average net
assets.......... 6.72%(d) 7.51%
Ratio of expenses
to average net
assets*......... 2.42%(d) 1.11%
Portfolio
turnover (f).... 102.24% 102.24%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from November 16, 1994 (commencement of offering of Investor C
shares) to June 30, 1995.
(b) Period from February 4, 1994 (commencement of offering of Investor B
shares) to June 30, 1994.
(c) Not annualized.
(d) Annualized.
(e) Represents total return for the Institutional shares for the period from
July 1, 1994 to November 15, 1994 plus the total return for the Investor C
shares for the period from November 16, 1994 to June 30, 1995.
(f) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
90
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- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Bond Fund
-----------------------------------------------------------------------------
Six Months Ended Year Ended
November 30, 1999 May 31, 1999
--------------------------------------- -----------------------------------
Investor A Investor B Institutional Investor A Investor B Institutional
---------- ---------- ------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 9.68 $ 9.69 $ 9.73 $ 9.99 $10.00 $ 10.04
------ ------ -------- ------- ------ --------
Investment Activities
Net investment income
(loss)................ 0.27 0.23 0.28 0.52 0.46 0.56
Net realized and
unrealized gains
(losses) from
investments........... (0.24) (0.23) (0.24) (0.28) (0.29) (0.29)
------ ------ -------- ------- ------ --------
Total from Investment
Activities............ 0.03 0.00 0.04 0.24 0.17 0.27
------ ------ -------- ------- ------ --------
Distributions
Net investment income.. (0.27) (0.23) (0.28) (0.53) (0.46) (0.56)
Net realized gains..... -- -- -- (0.02) (0.02) (0.02)
------ ------ -------- ------- ------ --------
Total Distributions..... (0.27) (0.23) (0.28) (0.55) (0.48) (0.58)
------ ------ -------- ------- ------ --------
Net Asset Value, End of
Period................. $ 9.44 $ 9.46 $ 9.49 $ 9.68 $ 9.69 $ 9.73
====== ====== ======== ======= ====== ========
Total Return (excludes
sales and redemption
charges)............... 0.32%(b) 0.06%(b) 0.47%(b) 2.55% 1.66% 2.70%
Ratios/Supplementary
Data:
Net Assets at end of
period (000)........... $8,191 $3,272 $336,473 $11,916 $4,548 $366,230
Ratio of expenses to
average net assets..... 1.19%(c) 1.94%(c) 0.94%(c) 1.19% 1.94% 0.94%
Ratio of net investment
income (loss) to
average net assets..... 5.65%(c) 4.90%(c) 5.92%(c) 5.29% 4.53% 5.53%
Ratio of expenses to
average net assets*.... 1.24%(c) 1.99%(c) 0.99%(c) 1.28% 2.03% 1.03%
Portfolio turnover (a).. 53.86% 53.86% 53.86% 268.66% 268.66% 268.66%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinuishing between classes of shares issued.
(b) Not annualized.
(c) Annualized.
See notes to financial statements.
91
<PAGE> 93
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Bond Fund
--------------------------------------------------------------------------------------------------------
Eleven Months Ended Year Ended
May 31, 1998 June 30, 1997
------------------------------------------------------- ----------------------------------------------
Investor A Investor B Investor C Institutional Investor A Investor B Investor C Institutional
---------- ---------- ---------- ------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period... $ 9.68 $ 9.69 $ 9.65 $ 9.73 $ 9.51 $ 9.51 $ 9.47 $ 9.56
------- ------- ------- -------- ------- ------- ------- --------
Investment Activities
Net investment income
(loss)............... 0.52 0.46 0.47 0.56 0.56 0.50 0.49 0.59
Net realized and
unrealized gains
(losses) from
investments.......... 0.32 0.32 0.31 0.31 0.17 0.16 0.17 0.17
------- ------- ------- -------- ------- ------- ------- --------
Total from Investment
Activities........... 0.84 0.78 0.78 0.87 0.73 0.66 0.66 0.76
------- ------- ------- -------- ------- ------- ------- --------
Distributions
Net investment income. (0.53) (0.47) (0.47) (0.56) (0.56) (0.48) (0.48) (0.59)
------- ------- ------- -------- ------- ------- ------- --------
Total Distributions... (0.53) (0.47) (0.47) (0.56) (0.56) (0.48) (0.48) (0.59)
------- ------- ------- -------- ------- ------- ------- --------
Net Asset Value, End of
Period................ $ 9.99 $ 10.00 $ 9.96 $ 10.04 $ 9.68 $ 9.69 $ 9.65 $ 9.73
======= ======= ======= ======== ======= ======= ======= ========
Total Return (excludes
sales and redemption
charges).............. 8.83%(a) 8.18%(a) 8.11%(a) 9.15%(a) 7.92% 7.09% 7.15% 8.20%
Ratios/Supplementary
Data:
Net Assets at end of
period (000).......... $16,669 $ 6,423 $ 595 $481,998 $19,760 $ 5,967 $ 508 $492,102
Ratio of expenses to
average net assets.... 1.19%(b) 1.04%(b) 1.94%(b) 0.94%(b) 1.19% 1.94% 1.94% 0.94%
Ratio of net investment
income (loss) to
average net assets.... 5.81%(b) 5.07%(b) 5.06%(b) 6.06%(b) 5.88% 5.15% 5.18% 6.13%
Ratio of expenses to
average net assets*... 1.28%(b) 2.03%(b) 2.03%(b) 1.04%(b) 1.28% 2.03% 2.03% 1.03%
Portfolio turnover (c). 545.68% 545.68% 545.68% 545.68% 827.00% 827.00% 827.00% 827.00%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
92
<PAGE> 94
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- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Bond Fund
--------------------------------------------------------------------------------------------------
Year Ended Year Ended
June 30, 1996 June 30, 1995
---------------------------------------------- ---------------------------------------------------
Investor A Investor B Investor C Institutional Investor A Investor B Investor C (a) Institutional
---------- ---------- ---------- ------------- ---------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period.......... $ 9.67 $ 9.68 $ 9.64 $ 9.72 $ 9.30 $ 9.26 $ 9.02 $ 9.29
------- ------- ------- -------- ------- ------- ------- --------
Investment
Activities
Net investment
income (loss).. 0.57 0.50 0.50 0.59 0.58 0.52 0.22 0.61
Net realized and
unrealized
gains (losses)
from
investments.... (0.16) (0.17) (0.17) (0.16) 0.38 0.42 0.62 0.43
------- ------- ------- -------- ------- ------- ------- --------
Total from
Investment
Activities..... 0.41 0.33 0.33 0.43 0.96 0.94 0.84 1.04
------- ------- ------- -------- ------- ------- ------- --------
Distributions
Net investment
income......... (0.57) (0.50) (0.50) (0.59) (0.58) (0.52) (0.22) (0.61)
In excess of net
realized gains. -- -- -- -- (0.01) -- -- --
------- ------- ------- -------- ------- ------- ------- --------
Total
Distributions.. (0.57) (0.50) (0.50) (0.59) (0.59) (0.52) (0.22) (0.61)
------- ------- ------- -------- ------- ------- ------- --------
Net Asset Value,
End of Period... $ 9.51 $ 9.51 $ 9.47 $ 9.56 $ 9.67 $ 9.68 $ 9.64 $ 9.72
======= ======= ======= ======== ======= ======= ======= ========
Total Return
(excludes sales
and redemption
charges)........ 4.27% 3.46% 3.50% 4.49% 10.85% 10.62% 8.41%(e) 11.78%
Ratios/Supplementary
Data:
Net Assets at end
of period (000). $20,175 $ 4,426 $ 210 $549,336 $17,572 $ 1,330 $ 28 $509,189
Ratio of expenses
to average net
assets.......... 1.19% 1.94% 1.91% 0.94% 1.24% 2.03% 1.99%(d) 1.02%
Ratio of net
investment
income (loss) to
average net
assets.......... 5.71% 4.97% 5.00% 5.96% 6.32% 5.54% 5.62%(d) 6.54%
Ratio of expenses
to average net
assets*......... 1.28% 2.03% 2.03% 1.03% 1.39% 2.39% 2.26%(d) 1.14%
Portfolio
turnover (f).... 1189.27% 1189.27% 1189.27% 1189.27% 1010.64% 1010.64% 1010.64% 1010.64%
<CAPTION>
Year Ended
June 30, 1994
-----------------------------------------
Investor A Investor B (b) Institutional
----------- --------------- -------------
<S> <C> <C> <C>
Net Asset Value,
Beginning of
Period.......... $ 10.54 $ 9.95 $ 10.53
----------- --------------- -------------
Investment
Activities
Net investment
income (loss).. 0.59 0.22 0.60
Net realized and
unrealized
gains (losses)
from
investments.... (0.72) (0.70) (0.72)
----------- --------------- -------------
Total from
Investment
Activities..... (0.13) (0.48) (0.12)
----------- --------------- -------------
Distributions
Net investment
income......... (0.57) (0.21) (0.58)
In excess of net
realized gains. (0.54) -- (0.54)
----------- --------------- -------------
Total
Distributions.. (1.11) (0.21) (1.12)
----------- --------------- -------------
Net Asset Value,
End of Period... $ 9.30 $ 9.26 $ 9.29
=========== =============== =============
Total Return
(excludes sales
and redemption
charges)........ (1.62)% (4.84)%(c) (1.52)%
Ratios/Supplementary
Data:
Net Assets at end
of period (000). $18,391 $ 485 $469,903
Ratio of expenses
to average net
assets.......... 0.98% 1.89%(d) 0.88%
Ratio of net
investment
income (loss) to
average net
assets.......... 5.86% 5.34%(d) 5.97%
Ratio of expenses
to average net
assets*......... 1.27% 2.29%(d) 1.02%
Portfolio
turnover (f).... 893.27% 893.27% 893.27%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from November 16, 1994 (commencement of offering of Investor C
shares) to June 30, 1995.
(b) Period from February 4, 1994 (commencement of offering of Investor B
shares) to June 30, 1994.
(c) Not annualized.
(e) Annualized.
(e) Represents total return for the Institutional shares for the period from
July 1, 1994 to November 15, 1994 plus the total return for the Investor C
shares for the period from November 16, 1994 to June 30, 1995.
(f) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
93
<PAGE> 95
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
National Tax Exempt Bond Fund
-------------------------------------------------------------------------------
Six Months Ended Year Ended
November 30, 1999 May 31, 1999
----------------------------------------- -----------------------------------
Investor A Investor B Institutional Investor A Investor B Institutional
---------- ---------- ------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $10.38 $10.36 $ 10.39 $10.53 $10.50 $ 10.53
------ ------ ------- ------ ------ -------
Investment Activities
Net investment income
(loss)................ 0.18 0.15 0.20 0.37 0.29 0.40
Net realized and
unrealized gains
(losses) from
investments........... (0.28) (0.29) (0.29) (0.03) (0.02) (0.02)
------ ------ ------- ------ ------ -------
Total from Investment
Activities............ (0.10) (0.14) (0.09) 0.34 0.27 0.38
------ ------ ------- ------ ------ -------
Distributions
Net investment income.. (0.18) (0.15) (0.20) (0.37) (0.29) (0.40)
Net realized gains..... -- -- -- (0.12) (0.12) (0.12)
------ ------ ------- ------ ------ -------
Total Distributions.... (0.18) (0.15) (0.20) (0.49) (0.41) (0.52)
------ ------ ------- ------ ------ -------
Net Asset Value, End of
Period................. $10.10 $10.07 $ 10.10 $10.38 $10.36 $ 10.39
====== ====== ======= ====== ====== =======
Total Return (excludes
sales and redemption
charges)............... (0.92)%(b) (1.38)%(b) (0.88)%(b) 3.29% 2.53% 3.56%
Ratios/Supplementary
Data:
Net Assets at end of
period (000)........... $4,060 $ 441 $81,719 $6,886 $ 491 $96,946
Ratio of expenses to
average net assets..... 1.12%(c) 1.87%(c) 0.87%(c) 1.02% 1.77% 0.77%
Ratio of net investment
income (loss) to
average
net assets............. 3.63%(c) 2.89%(c) 3.89%(c) 3.51% 2.76% 3.76%
Ratio of expenses to
average net assets*.... 1.31%(c) 2.06%(c) 1.06%(c) 1.31% 2.06% 1.06%
Portfolio turnover (a).. 14.54% 14.54% 14.54% 6.67% 6.67% 6.67%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
(b) Not annualized.
(c) Annualized.
See notes to financial statements.
94
<PAGE> 96
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
National Tax Exempt Bond Fund
-----------------------------------------------------------------------------
Eleven Months Ended Year Ended
May 31, 1998 June 30, 1997
--------------------------------------- -----------------------------------
Investor A Investor B Institutional Investor A Investor B Institutional
---------- ---------- ------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $10.53 $10.51 $ 10.54 $10.43 $10.39 $ 10.43
------ ------ -------- ------ ------ --------
Investment Activities
Net investment income
(loss)................ 0.35 0.28 0.37 0.44 0.36 0.46
Net realized and
unrealized gains
(losses) from
investments........... 0.22 0.21 0.21 0.12 0.13 0.14
------ ------ -------- ------ ------ --------
Total from Investment
Activities............ 0.57 0.49 0.58 0.56 0.49 0.60
------ ------ -------- ------ ------ --------
Distributions
Net investment income.. (0.39) (0.32) (0.41) (0.41) (0.32) (0.44)
Net realized gains..... (0.18) (0.18) (0.18) (0.05) (0.05) (0.05)
------ ------ -------- ------ ------ --------
Total Distributions.... (0.57) (0.50) (0.59) (0.46) (0.37) (0.49)
------ ------ -------- ------ ------ --------
Net Asset Value, End of
Period................. $10.53 $10.50 $ 10.53 $10.53 $10.51 $ 10.54
====== ====== ======== ====== ====== ========
Total Return (excludes
sales and redemption
charges)............... 5.46%(a) 4.75%(a) 5.71%(a) 5.47% 4.81% 5.89%
Ratios/Supplementary
Data:
Net Assets at end of
period (000)........... $9,502 $ 706 $123,856 $9,601 $ 993 $134,579
Ratio of expenses to
average net assets..... 1.02%(b) 1.77%(b) 0.77%(b) 1.06% 1.81% 0.81%
Ratio of net investment
income (loss) to
average net assets..... 3.64%(b) 2.89%(b) 3.89%(b) 4.19% 3.43% 4.41%
Ratio of expenses to
average net assets*.... 1.31%(b) 2.06%(b) 1.07%(b) 1.35% 2.10% 1.10%
Portfolio turnover (c).. 85.56% 85.56% 85.56% 48.83% 48.83% 48.83%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
95
<PAGE> 97
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
National Tax Exempt Bond Fund
----------------------------------------------------------------------------------------------------
Year Ended Year Ended
June 30, 1996 June 30, 1995
----------------------------------- -----------------------------------------------------
Investor A Investor B Institutional Investor A Investor B Investor C (a)(b) Institutional Investor A
---------- ---------- ------------- ---------- ---------- ----------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period.......... $10.39 $10.36 $ 10.39 $ 10.29 $10.26 $ 9.88 $ 10.29 $ 10.92
------ ------ -------- ------- ------ ------ -------- -------
Investment
Activities
Net investment
income (loss).. 0.41 0.33 0.43 0.41 0.33 (0.03) 0.46 0.40
Net realized and
unrealized
gains (losses)
from
investments.... 0.03 0.03 0.04 0.27 0.27 0.65 0.27 (0.31)
------ ------ -------- ------- ------ ------ -------- -------
Total from
Investment
Activities..... 0.44 0.36 0.47 0.68 0.60 0.62 0.73 0.09
------ ------ -------- ------- ------ ------ -------- -------
Distributions
Net investment
income......... (0.40) (0.33) (0.43) (0.41) (0.33) (0.14) (0.46) (0.39)
Net realized
gains.......... -- -- -- -- -- -- -- (0.21)
In excess of net
realized gains. -- -- -- (0.17) (0.17) (0.16) (0.17) (0.12)
------ ------ -------- ------- ------ ------ -------- -------
Total
Distributions.. (0.40) (0.33) (0.43) (0.58) (0.50) (0.30) (0.63) (0.72)
------ ------ -------- ------- ------ ------ -------- -------
Net Asset Value,
End of Period... $10.43 $10.39 $ 10.43 $ 10.39 $10.36 $10.20 $ 10.39 $ 10.29
====== ====== ======== ======= ====== ====== ======== =======
Total Return
(excludes sales
and redemption
charges)........ 4.29% 3.48% 4.55% 7.02% 6.17% 3.47%(f) 7.25% 0.71%
Ratios/Supplementary
Data:
Net Assets at end
of period (000). $7,835 $ 735 $132,527 $11,378 $ 447 -- $134,784 $13,123
Ratio of expenses
to average net
assets.......... 1.05% 1.80% 0.80% 1.02% 1.80% 0.71%(e) 0.80% 0.87%
Ratio of net
investment
income (loss) to
average net
assets.......... 3.85% 3.11% 4.10% 4.00% 3.22% (0.54)%(e) 4.21% 3.72%
Ratio of expenses
to average net
assets*......... 1.34% 2.09% 1.09% 1.33% 2.33% 0.71%(e) 1.08% 1.32%
Portfolio
turnover (g).... 47.46% 47.46% 47.46% 35.15% 35.15% 35.15% 35.15% 44.39%
<CAPTION>
Year Ended
June 30, 1994
-----------------------------
Investor B (c) Institutional
--------------- -------------
<S> <C> <C>
Net Asset Value,
Beginning of
Period.......... $10.76 $ 10.92
--------------- -------------
Investment
Activities
Net investment
income (loss).. 0.13 0.41
Net realized and
unrealized
gains (losses)
from
investments.... (0.50) (0.31)
--------------- -------------
Total from
Investment
Activities..... (0.37) 0.10
--------------- -------------
Distributions
Net investment
income......... (0.13) (0.40)
Net realized
gains.......... -- (0.21)
In excess of net
realized gains. -- (0.12)
--------------- -------------
Total
Distributions.. (0.13) (0.73)
--------------- -------------
Net Asset Value,
End of Period... $10.26 $ 10.29
=============== =============
Total Return
(excludes sales
and redemption
charges)........ (3.41)%(d) 0.81%
Ratios/Supplementary
Data:
Net Assets at end
of period (000). $ 359 $147,687
Ratio of expenses
to average net
assets.......... 1.80%(e) 0.77%
Ratio of net
investment
income (loss) to
average net
assets.......... 2.88%(e) 3.83%
Ratio of expenses
to average net
assets*......... 2.37%(e) 1.06%
Portfolio
turnover (g).... 44.39% 44.39%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) There was only one share outstanding for the Investor C shares at June 30,
1995.
(b) Period from November 16, 1994 (commencement of offering of Investor C
shares) to June 30, 1995.
(c) Period from February 4, 1994 (commencement of offering of Investor B
shares) to June 30, 1994.
(d) Not annualized.
(e) Annualized.
(f) Represents total return for the Institutional shares for the period from
July 1, 1994 to November 15, 1994 plus the total return for the Investor C
shares for the period from November 16, 1994 to June 30, 1995.
(g) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
96
<PAGE> 98
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Michigan Municipal Bond Fund
---------------------------------------------------------------------------------
Six Months Ended Year Ended
November 30, 1999 May 31, 1999
------------------------------------------ -----------------------------------
Investor A Investor B Institutional Investor A Investor B Institutional
---------- ---------- ------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 10.91 $10.92 $ 10.91 $ 11.06 $11.07 $ 11.06
------- ------ -------- ------- ------ --------
Investment Activities
Net investment income
(loss)................ 0.22 0.18 0.23 0.44 0.36 0.47
Net realized and
unrealized gains
(losses) from
investments........... (0.35) (0.35) (0.34) (0.08) (0.08) (0.08)
------- ------ -------- ------- ------ --------
Total from Investment
Activities............ (0.13) (0.17) (0.11) 0.36 0.28 0.39
------- ------ -------- ------- ------ --------
Distributions
Net investment income.. (0.22) (0.18) (0.23) (0.44) (0.36) (0.47)
Net realized gains..... -- -- -- (0.07) (0.07) (0.07)
------- ------ -------- ------- ------ --------
Total Distributions.... (0.22) (0.18) (0.23) (0.51) (0.43) (0.54)
------- ------ -------- ------- ------ --------
Net Asset Value, End of
Period................. $ 10.56 $10.57 $ 10.57 $ 10.91 $10.92 $ 10.91
======= ====== ======== ======= ====== ========
Total Return (excludes
sales and redemption
charges)............... (1.20)%(b) (1.57)%(b) (0.98)%(b) 3.38% 2.52% 3.54%
Ratios/Supplementary
Data:
Net Assets at end of
period (000)........... $21,274 $2,236 $173,788 $28,305 $3,217 $192,536
Ratio of expenses to
average net assets..... 1.07%(c) 1.81%(c) 0.82%(c) 1.01% 1.76% 0.76%
Ratio of net investment
income (loss) to
average net assets..... 4.09%(c) 3.34%(c) 4.35%(c) 3.96% 3.21% 4.21%
Ratio of expenses to
average net assets*.... 1.25%(c) 2.00%(c) 1.01%(c) 1.29% 2.05% 1.05%
Portfolio turnover (a).. 4.39% 4.39% 4.39% 6.52% 6.52% 6.52%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
(b) Not annualized.
(c) Annualized.
See notes to financial statements.
97
<PAGE> 99
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Michigan Municipal Bond Fund
------------------------------------------------------------------------------
Eleven Months Ended Year Ended
May 31, 1998 June 30, 1997
---------------------------------------- -----------------------------------
Investor A Investor B Institutional Investor A Investor B Institutional
---------- ---------- ------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 10.89 $10.90 $ 10.89 $ 10.76 $10.76 $ 10.77
------- ------ -------- ------- ------ --------
Investment Activities
Net investment income
(loss)................ 0.42 0.34 0.44 0.49 0.41 0.51
Net realized and
unrealized gains
(losses) from
investments........... 0.23 0.23 0.23 0.14 0.13 0.14
------- ------ -------- ------- ------ --------
Total from Investment
Activities............ 0.65 0.57 0.67 0.63 0.54 0.65
------- ------ -------- ------- ------ --------
Distributions
Net investment income.. (0.45) (0.37) (0.47) (0.46) (0.36) (0.49)
Net realized gains..... (0.03) (0.03) (0.03) (0.04) (0.04) (0.04)
------- ------ -------- ------- ------ --------
Total Distributions.... (0.48) (0.40) (0.50) (0.50) (0.40) (0.53)
------- ------ -------- ------- ------ --------
Net Asset Value, End of
Period ................ $ 11.06 $11.07 $ 11.06 $ 10.89 $10.90 $ 10.89
======= ====== ======== ======= ====== ========
Total Return (excludes
sales and redemption
charges)............... 5.96%(a) 5.32%(a) 6.30%(a) 5.89% 5.05% 6.11%
Ratios/Supplementary
Data:
Net Assets at end of
period (000)........... $38,536 $3,983 $206,246 $38,302 $3,503 $194,950
Ratio of expenses to
average net assets..... 0.99%(b) 1.74%(b) 0.74%(b) 1.01% 1.76% 0.76%
Ratio of net investment
income (loss) to
average net assets..... 4.09%(b) 3.34%(b) 4.34%(b) 4.48% 3.73% 4.73%
Ratio of expenses to
average net assets*.... 1.28%(b) 2.03%(b) 1.03%(b) 1.30% 2.05% 1.05%
Portfolio turnover (c).. 26.24% 26.24% 26.24% 28.48% 28.48% 28.48%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
98
<PAGE> 100
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Michigan Municipal Bond Fund
----------------------------------------------------------------------------------------------------
Year Ended Year Ended
June 30, 1996 November 30, 1995
----------------------------------- -----------------------------------------------------
Investor A Investor B Institutional Investor A Investor B Investor C (a)(b) Institutional Investor A
---------- ---------- ------------- ---------- ---------- ----------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period.......... $ 10.75 $10.75 $ 10.76 $ 10.53 $10.52 $10.11 $ 10.53 $ 10.97
------- ------ -------- ------- ------ ------ -------- -------
Investment
Activities
Net investment
income (loss)... 0.47 0.40 0.50 0.48 0.40 (0.02) 0.50 0.47
Net realized and
unrealized gains
(losses) from
investments..... 0.04 0.04 0.04 0.23 0.24 0.62 0.25 (0.36)
------- ------ -------- ------- ------ ------ -------- -------
Total from
Investment
Activities..... 0.51 0.44 0.54 0.71 0.64 0.60 0.75 0.11
------- ------ -------- ------- ------ ------ -------- -------
Distributions
Net investment
income.......... (0.47) (0.40) (0.50) (0.48) (0.40) -- (0.50) (0.45)
Net realized
gains........... (0.03) (0.03) (0.03) (0.01) (0.01) (0.17) (0.02) (0.01)
In excess of net
realized gains.. -- -- -- -- -- -- -- (0.09)
------- ------ -------- ------- ------ ------ -------- -------
Total
Distributions.. (0.50) (0.43) (0.53) (0.49) (0.41) (0.17) (0.52) (0.55)
------- ------ -------- ------- ------ ------ -------- -------
Net Asset Value,
End of Period... $ 10.76 $10.76 $ 10.77 $ 10.75 $10.75 $10.54 $ 10.76 $ 10.53
======= ====== ======== ======= ====== ====== ======== =======
Total Return
(excludes sales
and redemption
charges)........ 4.87% 4.13% 5.12% 6.99% 6.28% 3.39%(f) 7.33% 0.92%
Ratios/Supplementary
Data:
Net Assets at end
of period (000). $36,681 $3,565 $185,191 $37,874 $2,270 -- $176,068 $42,204
Ratio of expenses
to average net
assets.......... 1.02% 1.77% 0.77% 1.00% 1.78% 0.48%(e) 0.78% 0.85%
Ratio of net
investment
income (loss) to
average net
assets.......... 4.32% 3.57% 4.57% 4.57% 3.80% (0.32)%(e) 4.79% 4.25%
Ratio of expenses
to average net
assets*......... 1.31% 2.06% 1.06% 1.32% 2.32% 0.48%(e) 1.07% 1.29%
Portfolio
turnover (g).... 27.66% 27.66% 27.66% 26.06% 26.06% 26.06% 26.06% 6.69%
<CAPTION>
Year Ended
June 30, 1994
-----------------------------
Investor B (c) Institutional
--------------- -------------
<S> <C> <C>
Net Asset Value,
Beginning of
Period.......... $11.09 $ 10.97
--------------- -------------
Investment
Activities
Net investment
income (loss)... 0.16 0.48
Net realized and
unrealized gains
(losses) from
investments..... (0.57) (0.36)
--------------- -------------
Total from
Investment
Activities..... (0.41) 0.12
--------------- -------------
Distributions
Net investment
income.......... (0.16) (0.46)
Net realized
gains........... -- (0.01)
In excess of net
realized gains.. -- (0.09)
--------------- -------------
Total
Distributions.. (0.16) (0.56)
--------------- -------------
Net Asset Value,
End of Period... $10.52 $ 10.53
=============== =============
Total Return
(excludes sales
and redemption
charges)........ (3.69)%(d) 1.02%
Ratios/Supplementary
Data:
Net Assets at end
of period (000). $1,302 $181,051
Ratio of expenses
to average net
assets.......... 1.77%(e) 0.75%
Ratio of net
investment
income (loss) to
average net
assets.......... 3.51%(e) 4.35%
Ratio of expenses
to average net
assets*......... 2.32%(e) 1.04%
Portfolio
turnover (g).... 6.69% 6.69%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) There was only one share outstanding for the Investor C shares at June 30,
1995.
(b) Period from November 16, 1994 (commencement of offering of Investor C
shares) to June 30, 1995.
(c) Period from February 4, 1994 (commencement of offering of Investor B
shares) to June 30, 1994.
(d) Not annualized.
(e) Annualized.
(f) Represents total return for the Institutional shares for the period from
July 1, 1994 to November 15, 1994 plus the total return for the Investor C
shares for the period from November 16, 1994 to June 30, 1995.
(g) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
99
<PAGE> 101
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Equity Income Fund
-------------------------------------------------------------------------
Six Months Ended Year Ended
November 30, 1999 May 31, 1999
------------------------------------- -----------------------------------
Investor A Investor B Institutional Investor A Investor B Institutional
---------- ---------- ------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 18.30 $ 18.15 $ 18.20 $ 18.78 $ 18.68 $ 18.69
--------- --------- --------- ------- ------- --------
Investment Activities
Net investment income
(loss)................ 0.10 0.03 0.12 0.22 0.09 0.27
Net realized and
unrealized gains
(losses) from
investments........... (1.66) (1.64) (1.66) 1.76 1.75 1.75
--------- --------- --------- ------- ------- --------
Total from Investment
Activities............ (1.56) (1.61) (1.54) 1.98 1.84 2.02
--------- --------- --------- ------- ------- --------
Distributions
Net investment income.. (0.09) (0.04) (0.11) (0.22) (0.13) (0.27)
Net realized gains..... -- -- -- (2.24) (2.24) (2.24)
--------- --------- --------- ------- ------- --------
Total Distributions.... (0.09) (0.04) (0.11) (2.46) (2.37) (2.51)
--------- --------- --------- ------- ------- --------
Net Asset Value, End of
Period................. $ 16.65 $ 16.50 $ 16.55 $ 18.30 $ 18.15 $ 18.20
========= ========= ========= ======= ======= ========
Total Return (excludes
sales and redemption
charges)............... (8.55)%(b) (8.91)%(b) (8.48)%(b) 12.06% 11.22% 12.40%
Ratios/Supplementary
Data:
Net Assets at end of
period (000)........... $ 59,675 $ 17,749 $ 177,506 $82,733 $22,456 $221,399
Ratio of expenses to
average net assets..... 1.56%(c) 2.31%(c) 1.31%(c) 1.59% 2.34% 1.34%
Ratio of net investment
income (loss) to
average net assets..... 1.09%(c) 0.36%(c) 1.36%(c) 1.23% 0.48% 1.49%
Portfolio turnover (a).. 21.53% 21.53% 21.53% 51.09% 51.09% 51.09%
</TABLE>
- - -------
(a) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinuishing between classes of shares issued.
(b) Not annualized.
(c) Annualized.
See notes to financial statements.
100
<PAGE> 102
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Equity Income Fund
-------------------------------------------------------------------------------------------------------
Eleven Months Ended Year Ended
May 31, 1998 June 30, 1997
------------------------------------------------------ ----------------------------------------------
Investor A Investor B Investor C Institutional Investor A Investor B Investor C Institutional
---------- ---------- ---------- ------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period... $ 19.20 $ 19.14 $19.23 $ 19.13 $ 17.31 $ 17.27 $17.36 $ 17.30
-------- ------- ------ -------- ------- ------- ------ --------
Investment Activities
Net investment income
(loss)............... 0.25 0.11 0.11 0.29 0.29 0.16 0.15 0.34
Net realized and
unrealized gains
(losses) from
investments.......... 2.72 2.71 2.72 2.70 3.57 3.57 3.58 3.51
-------- ------- ------ -------- ------- ------- ------ --------
Total from Investment
Activities........... 2.97 2.82 2.83 2.99 3.86 3.73 3.73 3.85
-------- ------- ------ -------- ------- ------- ------ --------
Distributions
Net investment income. (0.21) (0.10) (0.09) (0.25) (0.28) (0.17) (0.17) (0.33)
Net realized gains.... (3.18) (3.18) (3.18) (3.18) (1.69) (1.69) (1.69) (1.69)
-------- ------- ------ -------- ------- ------- ------ --------
Total Distributions... (3.39) (3.28) (3.27) (3.43) (1.97) (1.86) (1.86) (2.02)
-------- ------- ------ -------- ------- ------- ------ --------
Net Asset Value, End of
Period................ $ 18.78 $ 18.68 $18.79 $ 18.69 $ 19.20 $ 19.14 $19.23 $ 19.13
======== ======= ====== ======== ======= ======= ====== ========
Total Return (excludes
sales and redemption
charges).............. 17.08%(a) 16.28%(a) 16.22%(a) 17.31%(a) 23.81% 22.96% 22.86% 23.80%
Ratios/Supplementary
Data:
Net Assets at end of
period (000).......... $104,503 $27,767 $1,094 $281,395 $99,423 $21,038 $ 778 $315,878
Ratio of expenses to
average net assets.... 1.58%(b) 2.33%(b) 2.33%(b) 1.33%(b) 1.58% 2.33% 2.33% 1.33%
Ratio of net investment
income (loss) to
average net assets.... 1.39%(b) 0.64%(b) 0.63%(b) 1.65%(b) 1.62% 0.88% 0.88% 1.89%
Portfolio turnover (c). 18.62% 18.62% 18.62% 18.62% 20.14% 20.14% 20.14% 20.14%
</TABLE>
- - -------
(a)Not annualized.
(b)Annualized.
(c)Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between classes of shares issued.
See notes to financial statements.
101
<PAGE> 103
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Equity Income Fund
-------------------------------------------------------------------------------------------------------
Year Ended Year Ended
June 30, 1996 June 30, 1995
--------------------------------------------------- --------------------------------------------------
Investor A Investor B Investor C Institutional Investor A Investor B Investor C (a) Institutional
---------- ---------- ---------- ------------- ---------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period.......... $ 14.49 $ 14.47 $14.54 $ 14.49 $ 13.50 $13.49 $13.38 $ 13.50
------- ------- ------ -------- ------- ------ ------ --------
Investment
Activities
Net investment
income (loss).. 0.30 0.19 0.19 0.34 0.36 0.26 0.11 0.39
Net realized and
unrealized
gains (losses)
from
investments.... 3.27 3.25 3.27 3.26 1.00 0.99 1.17 1.00
------- ------- ------ -------- ------- ------ ------ --------
Total from
Investment
Activities..... 3.57 3.44 3.46 3.60 1.36 1.25 1.28 1.39
------- ------- ------ -------- ------- ------ ------ --------
Distributions
Net investment
income......... (0.30) (0.19) (0.19) (0.34) (0.36) (0.26) (0.11) (0.39)
In excess of net
investment
income......... -- -- -- -- (0.01) (0.01) (0.01) (0.01)
Net realized
gains.......... (0.45) (0.45) (0.45) (0.45) -- -- -- --
In excess of net
realized gains. -- -- -- -- -- -- -- --
======= ======= ====== ======== ======= ====== ====== ========
Total
Distributions... (0.75) (0.64) (0.64) (0.79) (0.37) (0.27) (0.12) (0.40)
======= ======= ====== ======== ======= ====== ====== ========
Net Asset Value,
End of Period... $ 17.31 $ 17.27 $17.36 $ 17.30 $ 14.49 $14.47 $14.54 $ 14.49
======= ======= ====== ======== ======= ====== ====== ========
Total Return
(excludes sales
and redemption
charges)....... 25.05% 24.11% 24.17% 25.30% 10.32% 9.41% 9.71%(e) 10.55%
Ratios/Supplementary
Data:
Net Assets at end
of period (000). $82,396 $12,590 $ 164 $337,318 $71,063 $7,131 $ 25 $346,164
Ratio of expenses
to average net
assets.......... 1.57% 2.32% 2.32% 1.32% 1.54% 2.32% 2.30%(d) 1.32%
Ratio of net
investment
income (loss) to
average net
assets.......... 1.86% 1.11% 1.11% 2.11% 2.65% 1.86% 1.88%(d) 2.86%
Ratio of expenses
to average net
assets*......... (f) (f) (f) (f) 1.57% 2.57% 2.55%(d) 1.32%
Portfolio
turnover (g).... 40.75% 40.75% 40.75% 40.75% 77.70% 77.70% 77.70% 77.70%
<CAPTION>
Year Ended
June 30, 1994
-----------------------------------------
Investor A Investor B (b) Institutional
----------- --------------- -------------
<S> <C> <C> <C>
Net Asset Value,
Beginning of
Period.......... $ 14.69 $14.92 $ 14.69
----------- --------------- -------------
Investment
Activities
Net investment
income (loss).. 0.37 0.13 0.39
Net realized and
unrealized
gains (losses)
from
investments.... (0.56) (1.43) (0.56)
----------- --------------- -------------
Total from
Investment
Activities..... (0.19) (1.30) (0.17)
----------- --------------- -------------
Distributions
Net investment
income......... (0.37) (0.13) (0.39)
In excess of net
investment
income......... -- -- --
Net realized
gains.......... (0.24) -- (0.24)
In excess of net
realized gains. (0.39) -- (0.39)
=========== =============== =============
Total
Distributions... (1.00) (0.13) (1.02)
=========== =============== =============
Net Asset Value,
End of Period... $ 13.50 $13.49 $ 13.50
=========== =============== =============
Total Return
(excludes sales
and redemption
charges)....... (1.63)% (8.76)%(c) (1.53)%
Ratios/Supplementary
Data:
Net Assets at end
of period (000). $76,108 $3,836 $355,538
Ratio of expenses
to average net
assets.......... 1.40% 2.33%(d) 1.30%
Ratio of net
investment
income (loss) to
average net
assets.......... 2.56% 1.87%(d) 2.64%
Ratio of expenses
to average net
assets*......... 1.55% 2.59%(d) 1.30%
Portfolio
turnover (g).... 69.35% 69.35% 69.35%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from November 16, 1994 (commencement of offering of Investor C
shares) to June 30, 1995.
(b) Period from February 4, 1994 (commencement of offering of Investor B
shares) to June 30, 1994.
(c) Not annualized.
(d) Annualized.
(e) Represents total return for the Institutional shares for the period from
July 1, 1994 to November 15, 1994 plus the total return for the Investor C
shares for the period from November 16, 1994 to June 30, 1995.
(f) No fees were waived during this period.
(g) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
102
<PAGE> 104
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Balanced Allocation Fund
------------------------------------------------------------------------------
Six Months Ended Year Ended
November 30, 1999 May 31, 1999
---------------------------------------- -----------------------------------
Investor A Investor B Institutional Investor A Investor B Institutional
---------- ---------- ------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 13.52 $13.52 $ 13.50 $ 13.82 $13.81 $ 13.80
------- ------ -------- ------- ------ --------
Investment Activities
Net investment income
(loss)................ 0.37 0.26 0.50 0.27 0.18 0.31
Net realized and
unrealized gains
(losses) from
investments and
foreign currencies.... 1.30 1.36 1.19 0.07 0.07 0.07
------- ------ -------- ------- ------ --------
Total from Investment
Activities............ 1.67 1.62 1.69 0.34 0.25 0.38
------- ------ -------- ------- ------ --------
Distributions
Net investment income.. (0.13) (0.08) (0.15) (0.27) (0.17) (0.31)
Net realized gains..... -- -- -- (0.37) (0.37) (0.37)
------- ------ -------- ------- ------ --------
Total Distributions.... (0.13) (0.08) (0.15) (0.64) (0.54) (0.68)
------- ------ -------- ------- ------ --------
Net Asset Value, End of
Period................. $ 15.06 $15.06 $ 15.04 $ 13.52 $13.52 $ 13.50
======= ====== ======== ======= ====== ========
Total Return (excludes
sales and redemption
charges)............... 12.42%(b) 12.00%(b) 12.58%(b) 2.47% 1.72% 2.73%
Ratios/Supplementary
Data:
Net Assets at end of
period (000)........... $14,370 $5,248 $149,013 $15,760 $5,723 $177,203
Ratio of expenses to
average net assets..... 1.39%(c) 2.14%(c) 1.14%(c) 1.36% 2.11% 1.11%
Ratio of net investment
income (loss) to
average net assets..... 1.70%(c) 0.95%(c) 1.95%(c) 2.05% 1.30% 2.31%
Ratio of expenses to
average net assets*.... 1.56%(c) 2.31%(c) 1.31%(c) 1.61% 2.36% 1.36%
Portfolio turnover (c).. 69.88% 69.88% 69.88% 158.56% 158.56% 158.56%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
(b) Not annualized.
(c) Annualized.
See notes to financial statements.
103
<PAGE> 105
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Balanced Allocation Fund
------------------------------------------------------------------------------------------------------
Eleven Months Ended Year Ended
May 31, 1998 June 30, 1997
----------------------------------------------------- ----------------------------------------------
Investor A Investor B Investor C Institutional Investor A Investor B Investor C Institutional
---------- ---------- ---------- ------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period... $ 13.00 $13.00 $12.92 $ 12.99 $ 13.37 $13.36 $13.28 $ 13.37
------- ------ ------ -------- ------- ------ ------ --------
Investment Activities
Net investment income
(loss)............... 0.29 0.19 0.18 0.32 0.32 0.21 0.21 0.35
Net realized and
unrealized gains
(losses) from
investments and
foreign currencies... 1.21 1.21 1.21 1.20 1.12 1.13 1.14 1.12
------- ------ ------ -------- ------- ------ ------ --------
Total from Investment
Activities........... 1.50 1.40 1.39 1.52 1.44 1.34 1.35 1.47
------- ------ ------ -------- ------- ------ ------ --------
Distributions
Net investment income. (0.32) (0.23) (0.23) (0.35) (0.33) (0.22) (0.23) (0.37)
Net realized gains.... (0.36) (0.36) (0.36) (0.36) (1.48) (1.48) (1.48) (1.48)
------- ------ ------ -------- ------- ------ ------ --------
Total Distributions... (0.68) (0.59) (0.59) (0.71) (1.81) (1.70) (1.71) (1.85)
------- ------ ------ -------- ------- ------ ------ --------
Net Asset Value, End
of Period............ $ 13.82 $13.81 $13.72 $ 13.80 $ 13.00 $13.00 $12.92 $ 12.99
======= ====== ====== ======== ======= ====== ====== ========
Total Return (excludes
sales and redemption
charges).............. 11.87%(a) 11.05%(a) 11.04%(a) 12.06%(a) 11.61% 10.82% 10.90% 11.86%
Ratios/Supplementary
Data:
Net Assets at end of
period (000).......... $19,404 $7,988 $ 927 $262,533 $18,826 $6,299 $ 795 $245,347
Ratio of expenses to
average net assets.... 1.36%(b) 2.11%(b) 2.11%(b) 1.12%(b) 1.36% 2.11% 2.11% 1.10%
Ratio of net investment
income (loss) to
average net assets.... 2.32%(b) 1.57%(b) 1.56%(b) 2.57%(b) 2.47% 1.73% 1.75% 2.77%
Ratio of expenses to
average net assets*... 1.62%(b) 2.37%(b) 2.37%(b) 1.37%(b) 1.61% 2.36% 2.36% 1.36%
Portfolio turnover (c). 117.80% 117.80% 117.80% 117.80% 425.05% 425.05% 425.05% 425.05%
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
104
<PAGE> 106
Financial Highlights
- --------------------------------------------------------------------------------
The Parkstone Group of Funds
<TABLE>
<CAPTION>
Balanced Allocation Fund
-------------------------------------------------------------------------------------------------
Year Ended Year Ended
June 30, 1996 June 30, 1995
---------------------------------------------- --------------------------------------------------
Investor A Investor B Investor C Institutional Investor A Investor B Investor C (a) Institutional
---------- ---------- ---------- ------------- ---------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period.......... $ 12.19 $12.18 $12.12 $ 12.19 $ 10.67 $10.67 $11.13 $ 10.67
------- ------ ------ -------- ------- ------ ------ -------
Investment
Activities
Net investment
income (loss).. 0.32 0.23 0.24 0.36 0.28 0.20 0.09 0.31
Net realized and
unrealized
gains (losses)
from
investments and
foreign
currencies..... 1.74 1.74 1.71 1.74 1.69 1.67 1.16 1.68
------- ------ ------ -------- ------- ------ ------ -------
Total from
Investment
Activities..... 2.06 1.97 1.95 2.10 1.97 1.87 1.25 1.99
------- ------ ------ -------- ------- ------ ------ -------
Distributions
Net investment
income......... (0.31) (0.22) (0.22) (0.35) (0.29) (0.20) (0.10) (0.31)
Net realized
gains.......... (0.57) (0.57) (0.57) (0.57) (0.01) (0.06) -- (0.03)
In excess of net
realized gains. -- -- -- -- (0.15) (0.10) (0.16) (0.13)
------- ------ ------ -------- ------- ------ ------ -------
Total
Distributions.. (0.88) (0.79) (0.79) (0.92) (0.45) (0.36) (0.26) (0.47)
------- ------ ------ -------- ------- ------ ------ -------
Net Asset Value,
End of Period... $ 13.37 $13.36 $13.28 $ 13.37 $ 12.19 $12.18 $12.12 $ 12.19
======= ====== ====== ======== ======= ====== ====== =======
Total Return
(excludes sales
and redemption
charges)........ 17.51% 16.71% 16.61% 17.81% 18.96% 17.96% 17.53%(e) 19.22%
Ratios/Supplementary
Data:
Net Assets at end
of period (000). $17,097 $4,278 $ 362 $113,493 $12,849 $1,291 $ 114 $89,294
Ratio of expenses
to average net
assets.......... 1.41% 2.16% 2.16% 1.16% 1.47% 2.25% 2.16%(d) 1.25%
Ratio of net
investment
income (loss) to
average net
assets.......... 2.37% 1.64% 1.65% 2.62% 2.54% 1.74% 1.65%(d) 2.75%
Ratio of expenses
to average net
assets*......... 1.66% 2.45% 2.41% 1.41% 1.78% 2.77% 2.68%(d) 1.52%
Portfolio
turnover (f).... 437.90% 437.90% 437.90% 437.90% 250.66% 250.66% 250.66% 250.66%
<CAPTION>
Year Ended
June 30, 1994
-----------------------------------------
Investor A Investor B (b) Institutional
----------- --------------- -------------
<S> <C> <C> <C>
Net Asset Value,
Beginning of
Period.......... $ 11.09 $11.71 $ 11.08
----------- --------------- -------------
Investment
Activities
Net investment
income (loss).. 0.26 0.10 0.27
Net realized and
unrealized
gains (losses)
from
investments and
foreign
currencies..... (0.43) (1.05) (0.41)
----------- --------------- -------------
Total from
Investment
Activities..... (0.17) (0.95) (0.14)
----------- --------------- -------------
Distributions
Net investment
income......... (0.25) (0.09) (0.27)
Net realized
gains.......... -- -- --
In excess of net
realized gains. -- -- --
----------- --------------- -------------
Total
Distributions.. (0.25) (0.09) (0.27)
----------- --------------- -------------
Net Asset Value,
End of Period... $ 10.67 $10.67 $ 10.67
=========== =============== =============
Total Return
(excludes sales
and redemption
charges)........ (1.63)% (8.16)%(c) (1.44)%
Ratios/Supplementary
Data:
Net Assets at end
of period (000). $11,901 $ 744 $71,427
Ratio of expenses
to average net
assets.......... 1.18% 2.05%(d) 1.09%
Ratio of net
investment
income (loss) to
average net
assets.......... 2.38% 1.94%(d) 2.49%
Ratio of expenses
to average net
assets*......... 1.63% 2.61%(d) 1.39%
Portfolio
turnover (f).... 192.39% 192.39% 192.39%
</TABLE>
<TABLE>
<S> <C> <C>
--- ---
</TABLE>
- - -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from November 16, 1994 (commencement of offering of Investor C
shares) to June 30, 1995.
(b) Period from February 4, 1994 (commencement of offering of Investor B
shares) to June 30, 1994.
(c) Not annualized.
(e) Annualized.
(e) Represents total return for the Institutional shares for the period from
July 1, 1994 to November 15, 1994 plus the total return for the Investor C
shares for the period from November 16, 1994 to June 30, 1995.
(f) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
See notes to financial statements.
105
<PAGE> 107
Notes to Financial Statements
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
(Unaudited)
1. Organization:
The Parkstone Group of Funds (the "Group") was organized on March 27, 1987,
and is registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), as an open-end investment company established as a Massachusetts
business trust.
The Group is authorized to issue an unlimited number of shares without par
value. The Group presently offers shares of the Prime Obligations Fund, the
U.S. Government Obligations Fund, the Tax-Free Fund, the Treasury Fund
(collectively, "the money market funds"), the Small Capitalization Fund, the
Mid Capitalization Fund, the Large Capitalization Fund, the International
Discovery Fund, the Limited Maturity Bond Fund, the Intermediate Government
Obligations Fund, the U.S. Government Income Fund, the Bond Fund, the
National Tax Exempt Bond Fund (formerly the Municipal Bond Fund), the
Michigan Municipal Bond Fund, the Balanced Allocation Fund and the Equity
Income Fund (collectively, "the variable net asset value funds")
(collectively, "the Funds" and individually, a "Fund"). On August 6, 1999,
the Conservative Allocation and Aggressive Allocation Funds liquidated their
net assets and distributed the proceeds to the outstanding shareholders.
<TABLE>
<CAPTION>
Fund Objective
---- ---------
<S> <C>
Prime Obligations Fund..... To provide current income with liquidity and
stability of principal.
U.S. Government Obligations To provide current income with liquidity and
Fund....................... stability of principal.
Tax-Free Fund.............. To provide as high a level of current interest
income free from federal income taxes as is
consistent with the preservation of capital and
relative stability of principal.
Treasury Fund.............. To provide current income with liquidity and
stability of principal.
Small Capitalization Fund.. To provide capital appreciation with a
diversified portfolio of publicly traded smaller
cap equity securities.
Mid Capitalization Fund.... To provide capital appreciation with a
diversified portfolio of publicly traded mid cap
equity securities.
Large Capitalization Fund.. To provide capital appreciation with a
diversified portfolio of publicly traded large
cap equity securities.
International Discovery To provide capital appreciation by investing in
Fund....................... equity securities of foreign issuers.
Limited Maturity Bond Fund. To provide current income as well as
preservation of capital by investing in a
portfolio of high- and medium-grade fixed-income
securities.
Intermediate Government To provide current income as well as
Obligations Fund........... preservation of capital by investing primarily
in U.S. government securities.
U.S. Government Income To provide current income as well as
Fund....................... preservation of capital by investing primarily
in U.S. government securities.
Bond Fund.................. To provide current income with preservation of
capital by investing in high- and medium-grade
fixed-income securities.
National Tax Exempt Bond To provide current income exempt from federal
Fund....................... income taxes as is consistent with conservation
of capital.
Michigan Municipal Bond To provide current income exempt from federal
Fund....................... income taxes and, to the extent possible, from
Michigan personal income taxes, as is consistent
with conservation of capital.
</TABLE>
Continued
106
<PAGE> 108
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Fund Objective
---- ---------
<S> <C>
Balanced Allocation Fund..... To provide long-term capital appreciation and
current income.
Equity Income Fund........... To provide capital appreciation with a
diversified portfolio of publicly traded larger
cap equity securities which, in the aggregate,
provide an above-average current yield.
</TABLE>
2. Significant Accounting Policies:
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements. The policies are in
conformity with generally accepted accounting principles (GAAP). The
preparation of financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of income and
expenses for the period. Actual results could differ from those estimates.
Securities Valuation:
Investments of the money market funds are valued at either amortized cost,
as permitted in accordance with Rule 2a-7 under the 1940 Act, or at
original cost, which combined with accrued interest approximates market
value. Under the amortized cost method, discount or premium is amortized on
a constant basis to the maturity of the security.
Portfolio securities, the principal market for which is a securities
exchange, will be valued at the closing sales price on that exchange on the
day of computation. With respect to the Fixed Income Funds, Tax-Free Income
Fund and the fixed income securities of the Balanced Allocation Fund, if
there have been no sales during such day, portfolio securities will be
valued at the mean between the most recent quoted bid and asked prices.
Portfolio securities, the principal market for which is not a securities
exchange, will be valued at the mean between the most recent quoted bid and
asked prices in such principal market. With respect to the Growth Funds,
Equity Income Fund, and the equity securities of the Balanced Allocation
Fund, if there have been no sales during such day, portfolio securities
will be valued at the latest bid quotation. In either case, if no such
price is available, then such securities will be valued in good faith at
their respective fair market values using methods determined by or under
the supervision of the Board of Trustees of the Group. Portfolio securities
with a remaining maturity of 60 days or less will be valued either at
amortized cost or original cost plus accrued interest, which approximates
current value.
All other assets and securities including securities for which market
quotations are not readily available will be valued at their fair market
value as determined in good faith under the general supervision of the
Board of Trustees of the Group.
Security Transactions and Related Income:
Security transactions are accounted for on the date the security is
purchased or sold (trade date). Interest income is recognized on the
accrual basis and includes, where applicable, the pro rata amortization of
premium or discount. Dividend income is recorded on the ex-dividend date.
Gains or losses realized from sales of securities are determined by
comparing the identified cost of the security lot sold with the net sales
proceeds.
Foreign Currency Translation:
The market value of investment securities, other assets and liabilities of
the International Discovery Fund and the Balanced Allocation Fund
denominated in a foreign currency are translated into U.S. dollars at the
current exchange rate. Purchases and sales of securities, income receipts
and expense payments are translated into U.S. dollars at the exchange rate
on the dates of the transactions.
Continued
107
<PAGE> 109
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
(Unaudited)
The International Discovery Fund and the Balanced Allocation Fund do not
isolate that portion of the results of operations resulting from changes in
foreign exchange rates on investments from the fluctuations arising from
changes in market prices of securities held. Such fluctuations are included
with the net realized and unrealized gains or losses from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of portfolio securities, sales of foreign currencies, currency
exchange fluctuations between the trade and settlement dates of securities
transactions, and the difference between the amounts of assets and
liabilities recorded and the U.S. dollar equivalent of the amounts actually
received or paid. Net unrealized foreign exchange gains and losses arise
from changes in the value of assets and liabilities, including investments
in securities, resulting from changes in currency exchange rates.
Repurchase Agreements:
The Funds may purchase instruments from financial institutions, such as
banks and broker-dealers approved by the Board of Trustees, subject to the
seller's agreement to repurchase them at an agreed upon time and price
("repurchase agreements"). The seller under a repurchase agreement is
required to maintain the value of the collateral, in a segregated account,
at not less than the repurchase price. Default by the seller would,
however, expose the relevant Funds to possible loss because of adverse
market action or delay in connection with the disposition of the underlying
obligations. Risks may arise from the potential inability of counterparties
to honor the terms of the repurchase agreements. Accordingly, the Funds
could receive less than the carrying value upon the sale of the underlying
collateral securities.
Forward Currency Contracts:
The Funds may enter into a forward currency contract ("forward") which is
an agreement between two parties to buy and sell a currency at a set price
on a future date. The market value of the forward fluctuates with changes
in currency exchange rates. The forward is marked-to-market daily and the
change in market value is recorded by a Fund as unrealized appreciation or
depreciation. When the forward is closed the Fund records a realized gain
or loss equal to the difference between the value at the time it was opened
and the value at the time it was closed. A Fund could be exposed to risk if
a counterparty is unable to meet the terms of a forward or if the value of
the currency changes unfavorably.
Forwards may involve market or credit risk in excess of the amounts
reflected on the Fund's statement of assets and liabilities. The gain or
loss from the difference between the cost of original contracts and the
amount realized upon the closing of such contracts is included in net
realized gains/losses from investment and foreign currency transactions.
Fluctuations in the value of forwards held at November 30, 1999 are
recorded for financial reporting purposes as unrealized gains and losses by
the Funds. The following forwards were open at November 30, 1999.
Continued
108
<PAGE> 110
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Contract
Amount Contract Value Appreciation Delivery
Forward Currency Contracts (local currency) U.S. Dollar (Depreciation) Date
-------------------------- ---------------- -------------- -------------- --------
<S> <C> <C> <C> <C>
International Discovery
Fund
Short Contracts
Japanese Yen........... 3,000,000,000 $26,242,127 $(3,866,503) 4/3/00
Singapore Dollars...... 1,691,162 1,006,254 (403) 12/7/99
U.S. Dollars........... 12,062,860 12,062,860 -- 4/3/00
U.S. Dollars........... 14,246,563 14,246,563 -- 4/3/00
U.S. Dollars........... 1,060,501 1,060,501 -- 12/7/99
Long Contracts
Japanese Yen........... 1,362,500,000 12,062,860 1,611,476 4/3/00
Japanese Yen........... 1,637,500,000 14,246,563 2,187,730 4/3/00
Japanese Yen........... 111,999,498 1,060,501 38,710 12/7/99
U.S. Dollars........... 26,242,127 26,242,127 -- 4/3/00
U.S. Dollars........... 1,006,254 1,006,254 -- 12/7/99
-----------
Net payable for for-
ward currency con-
tracts............... $ (28,989)
===========
Balanced Allocation Fund
Short Contracts
Singapore Dollars...... 86,284 $ 51,340 $ (21) 12/7/99
U.S. Dollars........... 64,763 64,763 -- 12/7/99
Long Contracts
Japanese Yen........... 6,839,664 64,763 2,364 12/7/99
U.S. Dollars........... 51,340 51,340 -- 12/7/99
-----------
Net receivable for
forward currency con-
tracts............... $ 2,343
===========
</TABLE>
Lending Portfolio Securities:
To generate additional income, each Fund, except the Treasury Fund, may
lend up to 33 and 1/3% of securities in which they are invested pursuant to
agreements requiring that the loan be continuously secured by cash, U.S.
Government or U.S. Government Agency securities, shares of an investment
trust or mutual fund, or any combination of cash and such securities as
collateral equal at all times to at least 100% of the market value plus
accrued interest on the securities lent. The Funds continue to earn
interest and dividends on securities lent while simultaneously seeking to
earn interest on the investment of collateral.
When cash is received as collateral for securities loaned, the Funds may
invest such cash in short-term U.S. government securities, repurchase
agreements, or other short-term corporate securities. The cash or
subsequent short-term investments are recorded as assets of the Funds,
offset by a corresponding liability to repay the cash at the termination of
the loan. In addition, the short-term securities purchased with the cash
collateral are included in the accompanying schedules of portfolio
investments. Fixed income securities received as collateral are not
recorded as an asset or liability of the Fund because the Fund does not
have effective control of such securities.
There may be risks of delay in recovery of the securities or even loss of
rights in the collateral should the borrower of the securities fail
financially. However, loans will be made only to borrowers deemed by
National City Investment Management Co. (IMC) to be of good standing and
creditworthy under guidelines established by the Board of Trustees and
when, in the judgment of the IMC, the consideration which can be earned
currently from such securities loans justifies the attendant risks. Loans
are subject to termination by the Funds or the borrower at any time, and
are, therefore, considered to be liquid investments. According to GAAP, a
statement of cash flows is presented if the Fund lent out, on average, more
than 10% of net assets during the year and received cash as
Continued
109
<PAGE> 111
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
(Unaudited)
collateral for these loans. Under this guideline, a statement of cash flows
is presented for each of the Funds listed below. As of November 30, 1999,
the following Funds had securities on loan with the following market values
(amounts in thousands):
<TABLE>
<CAPTION>
Market Market Value
Value of of Loaned
Collateral Securities
---------- ------------
<S> <C> <C>
Small Capitalization Fund............................ $39,011 $36,135
Mid Capitalization Fund.............................. 71,138 67,317
Intermediate Government Obligations Fund............. 36,656 30,626
Equity Income Fund................................... 32,109 31,052
</TABLE>
The loaned securities were fully collateralized by cash, U.S. Government
securities, short-term corporate notes and repurchase agreements as of
November 30, 1999.
As disclosed in the schedules of portfolio investments the Limited Maturity
Bond, International Discovery, Equity Income, Large Capitalization, Small
Capitalization and the U.S. Government Income Funds collectively invested
cash collateral in a Bear Stearns Repurchase Agreement with an interest
rate of 5.83% and a maturity of 12/1/99 which was collateralized by the
following securities:
<TABLE>
<CAPTION>
Principal Description Market Value
--------- ----------- ------------
<S> <C> <C> <C> <C>
$ 9,457 Fannie Mae, 0.00%, 2/25/24 $ 395
226,042 Various Freddie Mac Strips, 0.00%, 1/1/23-9/1/29 101,710
As disclosed in the schedules of portfolio investments the Balanced
Allocation, Bond, and the International Discovery Funds collectively
invested cash collateral in a Lehman Brothers Repurchase Agreement with an
interest rate of 5.83% and a maturity of 12/1/99 which was collateralized
by the following securities:
<CAPTION>
Principal Description Market Value
--------- ----------- ------------
<S> <C> <C> <C> <C>
$ 3,608 Independent National Mortgage Corp., 7.18%, 4/25/25 $ 3,302
10,928 LB Commercial Conduit Mortgage Trust, 7.43%, 10/15/32 10,857
10,480 Merit Securities Corporation, 0.00%, 11/28/31 10,461
6,534 Salomon Brothers Mortgage Securities, 0.00%, 6/25/29 6,537
16,815 Various Structured Asset Securities 0.00%, 1/25/29-5/25/29 16,761
Corp.,
As disclosed in the schedules of portfolio investments the Intermediate
Government Obligations Fund invested cash collateral in a Paine Webber
Repurchase Agreement with an interest rate of 5.70% and a maturity of
12/1/99 which was collateralized by the following securities:
<CAPTION>
Principal Description Market Value
--------- ----------- ------------
<S> <C> <C> <C> <C>
$ 3,000 Sallie Mae, 6.05%, 9/14/00 $ 3,036
34,965 Freddie Mac, 5.50%, 5/15/02 34,286
62 Tennessee Valley Authority, 8.63%, 12/16/99 68
</TABLE>
Financial Futures Contracts:
Each Fund may invest in financial futures contracts for the purpose of
hedging their existing portfolio securities or securities it intends to
purchase against fluctuations in fair value caused by changes in prevailing
market interest rates. Upon entering into a financial futures contract, the
Fund is required to pledge to the broker an amount of cash and/or other
assets equal to a certain percentage of the contract amount (initial margin
deposit). Subsequent payments, known as "variation margin", are made or
received by the Fund each day, depending on the daily
Continued
110
<PAGE> 112
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
(Unaudited)
fluctuations in the fair value of the underlying security. The Fund
recognizes a gain or loss equal to the daily variation margin. Should
market conditions move unexpectedly, the Fund may not achieve the
anticipated benefits of the financial futures contracts and may realize a
loss. The use of futures transactions involves the risk of imperfect
correlation in movements in the price of futures contracts, interest rates
and the underlying hedged assets.
Mortgage Rolls:
The Funds may enter into mortgage "dollar rolls" in which the Fund sells
mortgage-backed securities for delivery in the current month and
simultaneously contracts to repurchase substantially similar securities on
a specified future date. During the roll period, the Fund forgoes principal
and interest paid on the mortgage-backed securities. The Fund is
compensated by fee income or the difference between the current sales price
and the lower forward price for the future purchase.
Dividends to Shareholders:
Dividends from net investment income are declared daily and paid monthly
for the money market funds. Dividends from net investment income are
declared and paid monthly for the variable net asset value funds.
Distributable net realized capital gains, if any, are declared and
distributed at least annually. Effective December 1, 1998, the Limited
Maturity Bond Fund, Intermediate Government Obligations Fund, U.S.
Government Income Fund and the Bond Fund changed from declaring and paying
dividends from net investment income monthly to declaring dividends from
net investment income daily and paying monthly.
Dividends from net investment income and from net realized capital gains
are determined in accordance with income tax regulations which may differ
from GAAP. These "book/tax" differences are primarily due to differing
treatments for mortgage-backed securities and deferrals of certain losses.
These "book/tax" differences are either considered temporary or permanent
in nature. To the extent these differences are permanent in nature, such
amounts are reclassified within the composition of net assets based on
their federal tax-basis treatment; temporary differences do not require
reclassifications. Dividends and distributions to shareholders which exceed
net investment income and net realized gains for financial reporting
purposes but not for tax purposes are reported as dividends in excess of
net investment income or distributions in excess of net realized gains. To
the extent they exceed net investment income and net realized gains for tax
purposes, they are reported as distributions of capital.
Federal Income Taxes:
It is the policy of each of the Funds to continue to qualify as a regulated
investment company by complying with the provisions available to certain
investment companies, as defined in applicable sections of the Internal
Revenue Code, and to make distributions of net investment income and net
realized capital gains sufficient to relieve it from all, or substantially
all, federal income taxes.
Expenses:
Expenses directly attributable to a Fund are charged to the Fund, while
expenses which are attributable to more than one Fund of the Group are
allocated among the respective Funds based upon relative net assets or
another appropriate basis. In addition, expenses that are directly
attributable to a specific class are charged only to that class.
Continued
111
<PAGE> 113
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
(Unaudited)
The investment income and expenses of a Fund (other than class specific
expenses) and realized and unrealized gains and losses on investments of a
Fund are allocated to each class of shares based upon their relative net
asset value on the date income is earned or expenses are recognized and
realized and unrealized gains and losses are incurred.
3. Purchases and Sales of Securities:
Purchases and sales of securities (excluding short-term securities) for the
period ended November 30, 1999 were as follows (amounts in thousands):
<TABLE>
<CAPTION>
Purchases Sales
--------- --------
<S> <C> <C>
Small Capitalization Fund................................. $169,703 $251,230
Mid Capitalization Fund................................... 189,138 268,788
Large Capitalization Fund................................. 140,982 186,890
International Discovery Fund.............................. 226,740 285,745
Limited Maturity Bond Fund................................ 63,767 78,325
Intermediate Government Obligations Fund.................. 37,494 68,661
U.S. Government Income Fund............................... 88,362 91,604
Bond Fund................................................. 193,585 220,232
National Tax Exempt Bond Fund............................. 13,704 29,632
Michigan Municipal Bond Fund.............................. 8,996 28,233
Equity Income Fund........................................ 62,062 109,186
Balanced Allocation Fund.................................. 124,541 171,965
</TABLE>
4. Capital Share Transactions:
The Group has issued three classes of Fund shares in the Prime Obligations
Fund, the Small Capitalization Fund, the Mid Capitalization Fund, the Large
Capitalization Fund, the International Discovery Fund, the Limited Maturity
Bond Fund, the Intermediate Government Obligations Fund, the National Tax
Exempt Bond Fund, the Michigan Municipal Bond Fund, the U.S. Government
Income Fund, the Bond Fund, the Balanced Allocation Fund, and the Equity
Income Fund: Investor A Shares, Investor B Shares and Institutional Shares;
and two classes of Fund shares in each of the U.S. Government Obligations
Fund, the Tax-Free Fund and the Treasury Fund: Investor A Shares and
Institutional Shares.
The Investor A Shares of the variable net asset value funds are subject to
initial sales charges imposed at the time of purchase, in accordance with
the Funds' prospectuses. Certain redemptions of Investor B Shares made
within five years of purchase (four years if purchased before January 1,
1997) are subject to contingent deferred sales charges in accordance with
the Funds' prospectuses. Each class of shares for each Fund has identical
rights and privileges except with respect to distribution (12b-1) fees paid
by the Investor A Shares and Investor B and shareholder service fees paid by
the Investor B Shares, voting rights on matters affecting a single class of
shares and the exchange privileges of each class of shares.
Continued
112
<PAGE> 114
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in Thousands)
Prime Obligations U.S. Government
Fund Obligations Fund
--------------------------- ---------------------------
For the For the For the For the
six months ended year ended six months ended year ended
november 30, may 31, november 30, may 31,
1999 1999 1999 1999
---------------- ---------- ---------------- ----------
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
Investor A Shares:
Proceeds from shares
issued................ $ 67,740 $ 605,433 $ 16,938 $ 307,020
Dividends reinvested... 170 3,607 12 546
Cost of shares re-
deemed................ (66,052) (812,049) (18,006) (474,744)
--------- --------- -------- ---------
Change in net assets
from Investor A Share
transactions.......... $ 1,858 $(203,009) $ (1,056) $(167,178)
========= ========= ======== =========
Investor B Shares:
Proceeds from shares
issued................ $ 475 $ 1,445 $ -- $ --
Dividends reinvested... 11 19 -- --
Cost of shares re-
deemed................ (661) (1,086) -- --
--------- --------- -------- ---------
Change in net assets
from Investor B Share
transactions.......... $ (175) $ 378 $ -- $ --
========= ========= ======== =========
Institutional Shares:
Proceeds from shares
issued................ $ 337,382 887,484 $ 60,898 $ 228,665
Dividends reinvested... -- 49 -- 23
Cost of shares re-
deemed................ (376,217) (949,929) (83,171) (292,597)
--------- --------- -------- ---------
Change in net assets
from Institutional
Share transactions.... $ (38,835) $ (62,396) $(22,273) $ (63,909)
========= ========= ======== =========
SHARE TRANSACTIONS:
Investor A Shares:
Issued................. 67,740 605,433 16,938 307,020
Reinvested............. 170 3,607 12 546
Redeemed............... (66,052) (812,058) (18,007) (474,730)
--------- --------- -------- ---------
Change in Investor A
Shares................ 1,858 (203,018) (1,057) (167,164)
========= ========= ======== =========
Investor B Shares:
Issued................. 475 1,445 -- --
Reinvested............. 11 19 -- --
Redeemed............... (661) (1,086) -- --
--------- --------- -------- ---------
Change in Investor B
Shares................ (175) 378 -- --
========= ========= ======== =========
Institutional Shares:
Issued................. 337,382 887,484 60,898 228,665
Reinvested............. -- 49 -- 23
Redeemed............... (376,217) (949,928) (83,171) (292,613)
--------- --------- -------- ---------
Change in Institutional
Shares................ (38,835) (62,395) (22,273) (63,925)
========= ========= ======== =========
</TABLE>
Continued
113
<PAGE> 115
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in Thousands)
Tax-Free Treasury
Fund Fund
--------------------------- ----------------------------
For the For the For the For the
six months ended year ended six months ended year ended
november 30, May 31, November 30, May 31,
1999 1999 1999 1999
---------------- ---------- ---------------- -----------
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
Investor A Shares:
Proceeds from shares
issued................ $ 1,134 $ 86,470 $ 58,715 $ 835,457
Dividends reinvested... 11 462 83 318
Cost of shares re-
deemed................ (1,081) (141,417) (58,386) (1,066,829)
--------- --------- --------- -----------
Change in net assets
from Investor A Share
transactions.......... $ 64 $ (54,485) $ 412 $ (231,054)
========= ========= ========= ===========
Institutional Shares:
Proceeds from shares
issued................ $ 80,947 $ 167,432 $ 427,230 $ 992,405
Dividends reinvested... -- -- -- --
Cost of shares re-
deemed................ (102,778) (161,361) (461,104) (1,044,439)
--------- --------- --------- -----------
Change in net assets
from Institutional
Share transactions.... $ (21,831) $ 6,071 $ (33,874) $ (52,034)
========= ========= ========= ===========
SHARE TRANSACTIONS:
Investor A Shares:
Issued................. 1,134 86,469 58,715 835,456
Reinvested............. 11 462 83 318
Redeemed............... (1,081) (141,418) (58,386) (1,066,829)
--------- --------- --------- -----------
Change in Investor A
Shares................ 64 (54,487) 412 (231,055)
========= ========= ========= ===========
Institutional Shares:
Issued................. 80,947 167,432 427,230 992,405
Reinvested............. -- -- -- --
Redeemed............... (102,778) (161,361) (461,104) (1,044,439)
--------- --------- --------- -----------
Change in Institutional
Shares................ (21,831) 6,071 (33,874) (52,034)
========= ========= ========= ===========
</TABLE>
Continued
114
<PAGE> 116
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in Thousands)
Small Mid
Capitalization Capitalization
Fund Fund
--------------------------- ---------------------------
For the For the For the For the
six months ended year ended six months ended year ended
November 30, May 31, November 30, May 31,
1999 1999 1999 1999
---------------- ---------- ---------------- ----------
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
Investor A Shares:
Proceeds from shares
issued................ $ 27,215 $ 448,789 $ 1,808 $ 112,759
Dividends reinvested... -- 10,457 -- 7,986
Cost of shares re-
deemed................ (50,662) (530,608) (16,173) (156,097)
-------- --------- -------- ---------
Change in net assets
from Investor A Share
transactions.......... $(23,447) $ (71,362) $(14,365) $ (35,352)
======== ========= ======== =========
Investor B Shares:
Proceeds from shares
issued................ $ 256 $ 1,307 $ 304 916
Dividends reinvested... -- 3,253 -- 2,600
Cost of shares re-
deemed................ (4,736) (16,532) (3,123) (9,069)
-------- --------- -------- ---------
Change in net assets
from Investor B Share
transactions.......... $ (4,480) $ (11,972) $ (2,819) $ (5,553)
======== ========= ======== =========
Investor C Shares*:
Proceeds from shares
issued................ $ -- $ 365 $ -- 181
Dividends reinvested... -- -- -- --
Cost of shares re-
deemed................ -- (12,866) -- (2,183)
-------- --------- -------- ---------
Change in net assets
from Investor C Share
transactions.......... $ -- $ (12,501) $ -- $ (2,002)
======== ========= ======== =========
Institutional Shares:
Proceeds from shares
issued................ $ 2,336 $ 43,684 $ 6,680 $ 34,083
Dividends reinvested... -- 26,444 -- 38,894
Cost of shares re-
deemed................ (65,019) (254,355) (53,541) (240,008)
-------- --------- -------- ---------
Change in net assets
from Institutional
Share transactions.... $(62,683) $(184,227) $(46,861) $(167,031)
======== ========= ======== =========
SHARE TRANSACTIONS:
Investor A Shares:
Issued................. 1,324 20,256 119 7,624
Reinvested............. -- 530 -- 644
Redeemed............... (2,455) (24,004) (1,072) (10,699)
-------- --------- -------- ---------
Change in Investor A
Shares................ (1,131) (3,218) (953) (2,431)
======== ========= ======== =========
Investor B Shares:
Issued................. 12 62 21 66
Reinvested............. -- 171 -- 224
Redeemed............... (239) (834) (224) (699)
-------- --------- -------- ---------
Change in Investor B
Shares................ (227) (601) (203) (409)
======== ========= ======== =========
Investor C Shares*:
Issued................. -- 14 -- 13
Reinvested............. -- -- -- --
Redeemed............... -- (602) -- (168)
-------- --------- -------- ---------
Change in Investor C
Shares................ -- (588) -- (155)
======== ========= ======== =========
Institutional Shares:
Issued................. 109 1,959 435 2,425
Reinvested............. -- 1,312 -- 3,097
Redeemed............... (3,125) (11,483) (3,512) (17,388)
-------- --------- -------- ---------
Change in Institutional
Shares................ (3,016) (8,212) (3,077) (11,866)
======== ========= ======== =========
</TABLE>
- - -------
* Investor C class of shares closed on August 28, 1998.
Continued
115
<PAGE> 117
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in Thousands)
Large International
Capitalization Discovery
Fund Fund
--------------------------- ---------------------------
For the For the For the For the
six months ended year ended six months ended year ended
November 30, May 31, November 30, May 31,
1999 1999 1999 1999
---------------- ---------- ---------------- ----------
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
Investor A Shares:
Proceeds from shares
issued................ $ 4,059 $ 11,843 $ 42,393 $ 11,371
Dividends reinvested... -- 357 -- 1,766
Cost of shares re-
deemed................ (8,193) (13,766) (50,420) (27,594)
-------- -------- -------- ---------
Change in net assets
from Investor A Share
transactions.......... $ (4,134) $ (1,566) $ (8,027) $ (14,457)
======== ======== ======== =========
Investor B Shares:
Proceeds from shares
issued................ $ 943 $ 4,942 $ 38 $ 360
Dividends reinvested... -- 206 -- 568
Cost of shares re-
deemed................ (1,472) (3,437) (1,436) (4,826)
-------- -------- -------- ---------
Change in net assets
from Investor B Share
transactions.......... $ (529) $ 1,711 $ (1,398) $ (3,898)
======== ======== ======== =========
Investor C Shares*:
Proceeds from shares
issued................ $ -- $ 100 $ -- $ 81
Dividends reinvested... -- -- -- --
Cost of shares re-
deemed................ -- (368) -- (964)
-------- -------- -------- ---------
Change in net assets
from Investor C Share
transactions.......... $ -- $ (268) $ -- $ (883)
======== ======== ======== =========
Institutional Shares:
Proceeds from shares
issued................ $ 12,527 $ 65,788 $ 2,819 $ 35,881
Dividends reinvested... -- 4,089 -- 10,376
Cost of shares re-
deemed................ (50,170) (96,262) (41,321) (165,321)
-------- -------- -------- ---------
Change in net assets
from Institutional
Share transactions.... $(37,643) $(26,385) $(38,502) $(119,064)
======== ======== ======== =========
SHARE TRANSACTIONS:
Investor A Shares:
Issued................. 193 636 2,591 763
Reinvested............. -- 19 -- 118
Redeemed............... (382) (745) (3,043) (1,820)
-------- -------- -------- ---------
Change in Investor A
Shares................ (189) (90) (452) (939)
======== ======== ======== =========
Investor B Shares:
Issued................. 46 273 2 25
Reinvested............. -- 11 -- 39
Redeemed............... (71) (186) (90) (332)
-------- -------- -------- ---------
Change in Investor B
Shares................ (25) 98 (88) (268)
======== ======== ======== =========
Investor C Shares*:
Issued................. -- 6 -- 5
Reinvested............. -- -- -- --
Redeemed............... -- (23) -- (68)
-------- -------- -------- ---------
Change in Investor C
Shares................ -- (17) -- (63)
======== ======== ======== =========
Institutional Shares:
Issued................. 586 3,587 163 2,327
Reinvested............. -- 214 -- 681
Redeemed............... (2,371) (5,165) (2,451) (10,816)
-------- -------- -------- ---------
Change in Institutional
Shares................ (1,785) (1,364) (2,288) (7,808)
======== ======== ======== =========
</TABLE>
- - -------
* Investor C class of shares closed on August 28, 1998.
Continued
116
<PAGE> 118
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in Thousands)
Intermediate
Limited Government
Maturity Bond Obligations
Fund Fund
--------------------------- ---------------------------
For the For the For the For the
six months ended year ended six months ended year ended
November 30, May 31, November 30, May 31,
1999 1999 1999 1999
---------------- ---------- ---------------- ----------
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
Investor A Shares:
Proceeds from shares
issued................ $ 468 $ 11,765 $ 291 $ 1,179
Dividends reinvested... 510 1,546 156 376
Cost of shares re-
deemed................ (11,731) (30,528) (2,868) (5,691)
-------- -------- -------- --------
Change in net assets
from Investor A Share
transactions.......... $(10,753) $(17,217) $ (2,421) $ (4,136)
======== ======== ======== ========
Investor B Shares:
Proceeds from shares
issued................ $ 71 $ 87 $ 19 $ 85
Dividends reinvested... 15 44 23 56
Cost of shares re-
deemed................ (66) (854) (483) (727)
-------- -------- -------- --------
Change in net assets
from Investor B Share
transactions.......... $ 20 $ (723) $ (441) $ (586)
======== ======== ======== ========
Investor C Shares*:
Proceeds from shares
issued................ $ -- $ 5 $ -- $ 11
Dividends reinvested... -- 19 -- 3
Cost of shares re-
deemed................ -- (2,235) -- (252)
-------- -------- -------- --------
Change in net assets
from Investor C Share
transactions.......... $ -- $ (2,211) $ -- $ (238)
======== ======== ======== ========
Institutional Shares:
Proceeds from shares
issued................ $ 7,939 $ 28,681 $ 1,929 $ 12,915
Dividends reinvested... 1,012 2,473 837 2,021
Cost of shares re-
deemed................ (19,778) (57,561) (31,820) (51,589)
-------- -------- -------- --------
Change in net assets
from Institutional
Share transactions.... $(10,827) $(26,407) $(29,054) $(36,653)
======== ======== ======== ========
SHARE TRANSACTIONS:
Investor A Shares:
Issued................. 50 1,233 30 119
Reinvested............. 54 162 16 38
Redeemed............... (1,251) (3,197) (296) (572)
-------- -------- -------- --------
Change in Investor A
Shares................ (1,147) (1,802) (250) (415)
======== ======== ======== ========
Investor B Shares:
Issued................. 7 10 2 9
Reinvested............. 2 5 2 6
Redeemed............... (7) (90) (50) (74)
-------- -------- -------- --------
Change in Investor B
Shares................ 2 (75) (46) (59)
======== ======== ======== ========
Investor C Shares*:
Issued................. -- -- -- 2
Reinvested............. -- 2 -- --
Redeemed............... -- (239) -- (26)
-------- -------- -------- --------
Change in Investor C
Shares................ -- (237) -- (24)
======== ======== ======== ========
Institutional Shares:
Issued................. 847 3,008 200 1,296
Reinvested............. 108 260 86 203
Redeemed............... (2,109) (6,037) (3,293) (5,174)
-------- -------- -------- --------
Change in Institutional
Shares................ (1,154) (2,769) (3,007) (3,675)
======== ======== ======== ========
</TABLE>
- - -------
* Investor C class of shares closed on August 28, 1998.
Continued
117
<PAGE> 119
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in Thousands)
U.S. Government
Income Fund Bond Fund
--------------------------- ---------------------------
For the For the For the For the
six months ended year ended six months ended year ended
November 30, May 31, November 30, May 31,
1999 1999 1999 1999
---------------- ---------- ---------------- ----------
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
Investor A Shares:
Proceeds from shares
issued................ $ 17,728 $ 12,842 $ 416 $ 4,227
Dividends reinvested... 662 1,787 231 621
Cost of shares re-
deemed................ (30,833) (30,609) (4,109) (9,208)
-------- -------- -------- ---------
Change in net assets
from Investor A Share
transactions.......... $(12,443) $(15,980) $ (3,462) $ (4,360)
======== ======== ======== =========
Investor B Shares:
Proceeds from shares
issued................ $ 220 $ 979 $ 46 $ 228
Dividends reinvested... 206 567 79 224
Cost of shares re-
deemed................ (4,674) (8,668) (1,297) (2,173)
-------- -------- -------- ---------
Change in net assets
from Investor B Share
transactions.......... $ (4,248) $ (7,122) $ (1,172) $ (1,721)
======== ======== ======== =========
Investor C Shares*:
Proceeds from shares
issued................ $ -- $ 7 $ -- $ 62
Dividends reinvested... -- 3 -- 7
Cost of shares re-
deemed................ -- (376) -- (670)
-------- -------- -------- ---------
Change in net assets
from Investor C Share
transactions.......... $ -- $ (366) $ -- $ (601)
======== ======== ======== =========
Institutional Shares:
Proceeds from shares
issued................ $ 15,027 $ 34,064 $ 18,913 $ 44,541
Dividends reinvested... 511 818 6,370 16,294
Cost of shares re-
deemed................ (15,276) (44,141) (46,195) (164,380)
-------- -------- -------- ---------
Change in net assets
from Institutional
Share transactions.... $ 262 $ (9,259) $(20,912) $(103,545)
======== ======== ======== =========
SHARE TRANSACTIONS:
Investor A Shares:
Issued................. 1,954 1,387 44 421
Reinvested............. 73 193 24 62
Redeemed............... (3,410) (3,300) (432) (921)
-------- -------- -------- ---------
Change in Investor A
Shares................ (1,383) (1,720) (364) (438)
======== ======== ======== =========
Investor B Shares:
Issued................. 24 105 5 23
Reinvested............. 23 62 8 22
Redeemed............... (520) (937) (136) (218)
-------- -------- -------- ---------
Change in Investor B
Shares................ (473) (770) (123) (173)
======== ======== ======== =========
Investor C Shares*:
Issued................. -- 1 -- 6
Reinvested............. -- -- -- 1
Redeemed............... -- (40) -- (67)
-------- -------- -------- ---------
Change in Investor C
Shares................ -- (39) -- (60)
======== ======== ======== =========
Institutional Shares:
Issued................. 1,667 3,676 1,980 4,422
Reinvested............. 57 88 665 1,621
Redeemed............... (1,695) (4,755) (4,836) (16,419)
-------- -------- -------- ---------
Change in Institutional
Shares................ 29 (991) (2,191) (10,376)
======== ======== ======== =========
</TABLE>
- - -------
* Investor C class of shares closed on August 28, 1998.
Continued
118
<PAGE> 120
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in Thousands)
National Tax Exempt Michigan Municipal
Bond Fund Bond Fund
--------------------------- ---------------------------
For the For the For the For the
six months ended year ended six months ended year ended
November 30, May 31, November 30, May 31,
1999 1999 1999 1999
---------------- ---------- ---------------- ----------
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
Investor A Shares:
Proceeds from shares
issued................ $ 43 $ 2,525 $ 591 $ 3,633
Dividends reinvested... 82 275 422 1,127
Cost of shares re-
deemed................ (2,773) (5,310) (7,184) (14,623)
-------- -------- -------- --------
Change in net assets
from Investor A Share
transactions.......... $ (2,648) $ (2,510) $ (6,171) $ (9,863)
======== ======== ======== ========
Investor B Shares:
Proceeds from shares
issued................ $ -- $ 25 $ 11 $ 93
Dividends reinvested... 3 14 36 96
Cost of shares re-
deemed................ (39) (248) (930) (914)
-------- -------- -------- --------
Change in net assets
from Investor B Share
transactions.......... $ (36) $ (209) $ (883) $ (725)
======== ======== ======== ========
Institutional Shares:
Proceeds from shares
issued................ $ 2,361 $ 7,302 $ 5,583 $ 30,857
Dividends reinvested... 153 424 424 1,118
Cost of shares re-
deemed................ (15,147) (33,407) (18,759) (43,116)
-------- -------- -------- --------
Change in net assets
from Institutional
Share transactions.... $(12,633) $(25,681) $(12,752) $(11,141)
======== ======== ======== ========
SHARE TRANSACTIONS:
Investor A Shares:
Issued................. 4 237 56 328
Reinvested............. 8 26 39 102
Redeemed............... (273) (503) (676) (1,320)
-------- -------- -------- --------
Change in Investor A
Shares................ (261) (240) (581) (890)
======== ======== ======== ========
Investor B Shares:
Issued................. -- 2 1 8
Reinvested............. -- 1 3 9
Redeemed............... (4) (23) (87) (82)
-------- -------- -------- --------
Change in Investor B
Shares................ (4) (20) (83) (65)
======== ======== ======== ========
Institutional Shares:
Issued................. 232 691 525 2,782
Reinvested............. 15 40 40 101
Redeemed............... (1,493) (3,163) (1,762) (3,888)
-------- -------- -------- --------
Change in Institutional
Shares................ (1,246) (2,432) (1,197) (1,005)
======== ======== ======== ========
</TABLE>
Continued
119
<PAGE> 121
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in Thousands)
Equity Balanced
Income Allocation
Fund Fund
--------------------------- ---------------------------
For the For the For the For the
six months ended year ended six months ended year ended
November 30, May 31, November 30, May 31,
1999 1999 1999 1999
---------------- ---------- ---------------- ----------
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
Investor A Shares:
Proceeds from shares
issued................ $ 1,874 $ 6,299 $ 468 $ 2,309
Dividends reinvested... 355 11,212 131 796
Cost of shares re-
deemed................ (18,528) (36,843) (3,582) (6,419)
-------- -------- -------- ---------
Change in net assets
from Investor A Share
transactions.......... $(16,299) $(19,332) $ (2,983) $ (3,314)
======== ======== ======== =========
Investor B Shares:
Proceeds from shares
issued................ $ 263 $ 1,162 $ 26 $ 329
Dividends reinvested... 41 3,079 29 268
Cost of shares re-
deemed................ (3,102) (8,817) (1,117) (2,724)
-------- -------- -------- ---------
Change in net assets
from Investor B Share
transactions.......... $ (2,798) $ (4,576) $ (1,062) $ (2,127)
======== ======== ======== =========
Investor C Shares*:
Proceeds from shares
issued................ $ -- $ 175 $ -- $ 94
Dividends reinvested... -- 2 -- 3
Cost of shares re-
deemed................ -- (1,168) -- (986)
-------- -------- -------- ---------
Change in net assets
from Investor C Share
transactions.......... $ -- $ (991) $ -- $ (889)
======== ======== ======== =========
Institutional Shares:
Proceeds from shares
issued................ $ 6,268 $ 27,050 $ 12,278 $ 29,812
Dividends reinvested... 278 7,279 1,562 10,268
Cost of shares re-
deemed................ (31,690) (85,953) (59,149) (121,859)
-------- -------- -------- ---------
Change in net assets
from Institutional
Share transactions.... $(25,144) $(51,624) $(45,309) $ (81,779)
======== ======== ======== =========
SHARE TRANSACTIONS:
Investor A Shares:
Issued................. 104 360 34 170
Reinvested............. 20 678 9 58
Redeemed............... (1,061) (2,082) (255) (466)
-------- -------- -------- ---------
Change in Investor A
Shares................ (937) (1,044) (212) (238)
======== ======== ======== =========
Investor B Shares:
Issued................. 15 65 2 24
Reinvested............. 2 188 2 20
Redeemed............... (179) (501) (79) (199)
-------- -------- -------- ---------
Change in Investor B
Shares................ (162) (248) (75) (155)
======== ======== ======== =========
Investor C Shares*:
Issued................. -- 10 -- 7
Reinvested............. -- -- -- --
Redeemed............... -- (68) -- (75)
-------- -------- -------- ---------
Change in Investor C
Shares................ -- (58) -- (68)
======== ======== ======== =========
Institutional Shares:
Issued................. 356 1,560 883 2,170
Reinvested............. 16 442 112 750
Redeemed............... (1,817) (4,892) (4,214) (8,814)
-------- -------- -------- ---------
Change in Institutional
Shares................ (1,445) (2,890) (3,219) (5,894)
======== ======== ======== =========
</TABLE>
- - -------
* Investor C class of shares closed on August 28, 1998.
Continued
120
<PAGE> 122
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
(Unaudited)
5. Related Party Transactions:
Investment advisory services are provided to the Group by IMC. Under the terms
of the investment advisory agreement, IMC is entitled to receive fees based on
a percentage of the average daily net assets of the Funds.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS"),
and BISYS Fund Services Ohio, Inc. (BISYS Ohio) are wholly-owned subsidiaries
of The BISYS Group, Inc. BISYS, with whom certain officers of the Group are
affiliated, serves the Group as Administrator. Such officers are paid no fees
directly by the Funds for serving as officers and trustees of the Group. Under
the terms of the administration agreement, BISYS's fees are computed at an
annual fee not to exceed 0.20% of the average daily net assets of each Fund.
Effective January 1, 2000, SEI Investments, Inc. will become the Funds'
Administrator. Effective September 19, 1998, SEI Investments, Inc. (SEI) became
the Group's distributor. For the period June 1, 1999 to November 30, 1999, SEI
received $11,406 in commissions from sales of shares of the variable net asset
value funds of which $0 was reallowed to other brokers and dealers. BISYS Ohio
serves the Group as mutual fund accountant. Boston Financial Data Services
serves the Group as Transfer Agent.
The Group has adopted an Investor A Distribution and Shareholder Service Plan
(the "Investor A Plan"), and an Investor B Distribution and Shareholder Service
Plan (the "Investor B Plan"), each in accordance with Rule 12b-1 under the 1940
Act. Pursuant to the Investor A Plan, each Fund is authorized to pay or
reimburse the distributor of Investor A shares, a periodic distribution and/or
service fee, calculated at an annual rate not to exceed 0.25% of the average
daily net asset value of Investor A shares of that Fund. Pursuant to the
Investor B Plan, each Fund is authorized to pay or reimburse the distributor of
Investor B shares, (a) a distribution fee in an amount not to exceed on an
annual basis 0.75% of the average daily net assets of Investor B shares of that
Fund and (b) a service fee in an amount not to exceed on an annual basis 0.25%
of the average daily net assets of the Investor B shares of that Fund. These
fees may be used by the distributor to pay banks, including the IMC, broker
dealers and other institutions, or to reimburse the distributor or its
affiliates for administration, distribution, and shareholder service assistance
in connection with the distribution of Fund shares.
Fees may be voluntarily reduced to assist the Funds in maintaining competitive
expense ratios. Information regarding these transactions is as follows for the
period ended November 30, 1999 (amounts in thousands):
Continued
121
<PAGE> 123
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
U.S.
Prime Government Tax-
Obligations Obligations Free Treasury
Fund Fund Fund Fund
----------- ----------- ----- --------
<S> <C> <C> <C> <C>
Investment Advisory Fees:
Annual fee
(percentage of average net assets).. 0.35% 0.35% 0.35% 0.30%
Administration Fees:
Annual fee before voluntary fee
reductions
(percentage of average net assets).. 0.20% 0.20% 0.20% 0.20%
Voluntary fee reductions............. $ 0 $ 0 $ 0 $ 95
12b-1 Fees Investor A:
Annual fee before voluntary fee
reductions
(percentage of average net assets) . 0.10% 0.10% 0.10% 0.10%
Voluntary fee reductions............. $ 13 $ 2 $ 1 $ 7
12b-1 Fees Investor B:
Annual fee
(percentage of average net assets) . 0.75% -- -- --
Shareholder Service Fees Investor B:
Annual fee
(percentage of average net assets) . 0.25% -- -- --
Transfer Agent Fees:................. $ 73 $ 33 $ 23 $ 33
Fund Accountant Fees:................ 61 15 14 27
</TABLE>
Continued
122
<PAGE> 124
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Small Mid Large International
Capitalization Capitalization Capitalization Discovery
Fund Fund Fund Fund
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Investment Advisory
Fees:
Annual fee
(percentage of average
net assets)............ 1.00% 1.00% 0.75% 1.15%(a)
Administration Fees:
Annual fee
(percentage of average
net assets)............ 0.20% 0.20% 0.20% 0.20%
12b-1 Fees Investor A:
Annual fee
(percentage of average
net assets)............ 0.25% 0.25% 0.25% 0.25%
12b-1 Fees Investor B:
Annual fee
(percentage of average
net assets)............ 0.75% 0.75% 0.75% 0.75%
Shareholder Service Fees
Investor B:
Annual fee
(percentage of average
net assets)............ 0.25% 0.25% 0.25% 0.25%
Transfer Agent Fees:.... $ 225 $ 146 $ 108 $ 116
Fund Accountant Fees:... 44 54 63 72
</TABLE>
Continued
123
<PAGE> 125
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Limited Intermediate U.S.
Maturity Government Government
Bond Obligations Income Bond
Fund Fund Fund Fund
-------- ------------ ---------- -----
<S> <C> <C> <C> <C>
Investment Advisory Fees:
Annual fee before voluntary fee
reductions
(percentage of average net assets).. 0.45% 0.55% 0.55% 0.55%
Voluntary fee reduction.............. $ 88 $ 18 $ 191 $ 55
Administration Fees:
Annual fee before voluntary fee
reductions
(percentage of average net assets).. 0.20% 0.20% 0.20% 0.20%
Voluntary fee reductions............. $ 11 $ 11 $ 16 $ 30
12b-1 Fees Investor A:
Annual fee
(percentage of average net assets).. 0.25% 0.25% 0.25% 0.25%
12b-1 Fees Investor B:
Annual fee
(percentage of average net assets).. 0.75% 0.75% 0.75% 0.75%
Shareholder Service Fees Investor B:
Annual fee
(percentage of average net assets).. 0.25% 0.25% 0.25% 0.25%
Transfer Agent Fees:................. $ 43 $ 46 $ 70 $ 69
Fund Accountant Fees:................ 28 31 44 55
</TABLE>
Continued
124
<PAGE> 126
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Parkstone Group of Funds November 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
National Michigan
Tax Exempt Municipal Equity Balanced
Bond Bond Income Allocation
Fund Fund Fund Fund
---------- --------- ------ ----------
<S> <C> <C> <C> <C>
Investment Advisory Fees:
Annual fee before voluntary fee
reductions
(percentage of average net assets)... 0.55% 0.55% 0.75% 0.75%
Voluntary fee reduction............... $ 63 $ 135 -- $ 156
Administration Fees:
Annual fee before voluntary fee
reductions
(percentage of average net assets) 0.20% 0.20% 0.20% 0.20%
Voluntary fee reductions.............. $ 29 $ 62 -- --
12b-1 Fees Investor A:
Annual fee
(percentage of average net assets)... 0.25% 0.25% 0.25% 0.25%
12b-1 Fees Investor B:
Annual fee
(percentage of average net assets)... 0.75% 0.75% 0.75% 0.75%
Shareholder Service Fees Investor B:
Annual fee
(percentage of average net assets)... 0.25% 0.25% 0.25% 0.25%
Transfer Agent Fees:.................. $ 34 $ 47 $ 158 $ 65
Fund Accountant Fees:................. 27 44 45 43
</TABLE>
6. Concentration of Credit Risk
The Michigan Municipal Bond Fund invests a substantial proportion of its
assets in debt obligations issued by the State of Michigan and its political
subdivisions, agencies and public authorities. This Fund is more susceptible
to factors adversely affecting issuers of Michigan municipal securities than
a fund that is not concentrated in these issuers to the same extent.
7. Common Trust Conversion:
On October 10, 1998, the Mid Capitalization Fund issued shares to acquire all
the assets and liabilities of a certain common trust fund of National City
Bank. The following is a summary of shares issued, net assets converted, net
asset value per share and unrealized appreciation as of the conversion date.
<TABLE>
<CAPTION>
Net
Asset
Value
Net per Unrealized
Shares Assets Share Appreciation
------ ------ ------ ------------
<S> <C> <C> <C> <C>
Mid Capitalization Fund...................... 323 $3,548 $10.99 $641
</TABLE>
Continued
125
<PAGE> 127
Parkstone Funds
Board of Trustees
Robert D. Neary
Chairman
Retired Co-Chairman, Ernst & Young
Director:
Cold Metal Products, Inc.
Strategic Distribution, Inc.
Herbert R. Martens, Jr.
President
Executive Vice President,
National City Corporation
Chairman, President and Chief Executive
Officer, NatCity Investments, Inc.
Leigh Carter
Retired President and Chief Operating
Officer, B.F. Goodrich Company
Director:
Kirtland Capital Corporation
Morrison Products
TruSeal Technologies
John F. Durkott
President and Chief Operating Officer,
Kittle's Home Furnishings Center, Inc.
Robert J. Farling
Retired Chairman, President and Chief
Executive Officer, Centerior Energy
Richard W. Furst
Garvice D. Kincaid Professor of Finance
and Dean, Gatton College of Business
and Economics, University of Kentucky
Director:
Foam Design, Inc.
The Seed Corporation
Office Suites Plus, Inc.
ihigh.com, Inc.
Gerald L. Gherlein
Executive Vice President and General
Counsel, Eaton Corporation
J. William Pullen
President and Chief Executive Officer,
Whayne Supply Company
The Parkstone Trustees also serve as the Trustees of the Armada Funds and
Parkstone Advantage Funds.
Parkstone
FUNDS
<PAGE> 128
Parkstone
FUNDS
One Freedom Valley Drive
Oaks, PA 19456
INVESTMENT ADVISOR:
National City
Investment Management Company
1900 East Ninth Street, 22nd Floor
Cleveland, OH 44114
PAR-F-001-02000
