[Parkstone logo omitted]
[Parkstone picture cover omitted]
Annual Report
December 31, 1999
<PAGE>
Parkstone Advantage Bond Fund
Parkstone Advantage International
Discovery Fund
Parkstone Advantage
Mid Capitalization Fund
Parkstone Advantage
Small Capitalization Fund
Armada Advantage Equity Growth Fund
Parkstone Advantage Fund
Annual Report -- December 31, 1999
TABLE OF CONTENTS
Message From Your Chairman ........................................... 1
Message From Your Investment Adviser ................................. 2
Portfolio Performance Discussion ..................................... 4
Report of Independent Auditors ....................................... 9
FINANCIAL STATEMENTS
Statements of Operations .......................................... 10
Statements of Changes in Net Assets ............................... 11
Statement of Net Assets ........................................... 13
Financial Highlights .............................................. 23
NOTES TO FINANCIAL STATEMENTS ........................................ 28
NOTICE TO SHAREHOLDERS ............................................... 34
Not FDIC Insured Not Bank Guaranteed May Lose Value
Shares of the Funds are not deposits or obligations of, or guaranteed or
endorsed by National City Corporation or any of its affiliates. Shares of the
Funds are not federally insured by the U.S. Government, the Federal Deposit
Insurance Corporation, the Federal Reserve Board of any other agency. Investment
return and principal value will vary as a result of market conditions or other
factors so that shares of the Funds, when redeemed, may be worth more or less
than their original cost. An investment in the Funds involves investment risks,
including the possible loss of principal.
This report is submitted for the general information of shareholders of The
Parkstone Advantage Fund. It is not authorized for distribution to prospective
shareholders unless accompanied by or proceeded by a prospectus.
<PAGE>
Parkstone Advantage Fund
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 Corporation
J. WILLIAM PULLEN
President and Chief Executive Officer,
Whayne Supply Company
The Parkstone Advantage Fund Trustees also serve as the Trustees of the
Armada Funds and Parkstone Group of Funds.
[Parkstone logo omitted]
<PAGE>
MESSAGE FROM YOUR CHAIRMAN
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THE PARKSTONE ADVANTAGE FUND DECEMBER 31, 1999
Dear Shareholders:
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 calendar year ended
December 31, 1999. With a return of 55.70%, the fund was able to outperform its
benchmark, the EAFE, by 28.74% in a period when EAFE had outperformed the S&P
500 by 5.92%.
In the pages that follow, you will find a detailed discussion of the performance
of each of the Parkstone Advantage Fund portfolios during the 1999 calendar
year.
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 call your account representative or the Parkstone Advantage
Fund Investor Services line at 1-800-355-4555.
Sincerely,
/s/Robert D. Neary
Robert D. Neary
Chairman
[Parkstone logo omitted]
1
<PAGE>
MESSAGE FROM YOUR INVESTMENT ADVISER
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THE PARKSTONE ADVANTAGE FUND DECEMBER 31, 1999
ECONOMIC AND MARKET OVERVIEW
Dear Shareholder:
In 1999, the U.S. economy closed in on the longest expansion in this country's
history. We continued to enjoy a period not only of unprecedented growth, but
also of inordinate economic and price stability. While the gross domestic
product grew by more than 4 percent for the fourth consecutive year, inflation
increased by a scant 2.7 percent. Setting aside volatility in the energy and
food sectors, 1999's core inflation rate reached a mere 1.9 percent, the lowest
level since 1965. In short, the fundamentals of the U.S. economy are as good as
they've been in decades.
We can attribute this high-growth, low-inflation environment to a number of
factors, leading with the tremendous role that technology has played on a number
of fronts. In manufacturing, automation has allowed corporate America to make
massive gains in productivity in the past decade, up 5.7 percent in the 12
months ending September 1999 alone, more than offsetting the need to commit more
financial resources to labor costs. At the same time, the Internet is driving
prices down by giving businesses and consumers access to comparative pricing
information on an unprecedented scale and by eliminating unnecessary
distribution channels. E-commerce sales rose by nearly 250% to over $20 billion.
Meanwhile, the monetary policies of the Federal Reserve Board, coupled with a
more prudent fiscal policy, have exerted a stabilizing influence on both the
economy and the financial markets. We are also reaping the rewards of better
regulatory and trade policies. Deregulation in the telecommunications, energy,
and banking sectors, to name just three, has spurred new competition and a wave
of mergers and acquisitions that are driving down costs while boosting profits.
Also keeping prices in check is the dramatic growth in global trade, which has
grown from 5 percent of worldwide gross domestic product in 1980 to 12 percent
during the past year.
Looking at the U.S. equity markets, the S&P 500 Composite Index returned a total
of 21.04 percent, making 1999 the fifth consecutive year in which the blue chip
index's return exceeded the 20-percent mark. And, after 5 straight years of
relative underperformance, small cap stocks staged a major comeback. The Russell
2000 Index, a leading small cap benchmark, actually outperformed the S&P 500,
returning 21.26 percent.
However, hidden behind these aggregate numbers is the fact that Internet,
telecommunications, and other technology stocks enjoyed a disproportionate share
of the market's gains. Many other sectors, such as utilities, transportation,
health care, and consumer staples, posted small or even negative returns.
How great was this disparity? In the small cap market, the technology-heavy
Russell 2000 Growth Index returned 43.1 percent for the year, but the Russell
2000 Value Index actually declined in value, returning -1.49 percent. The
difference within the large cap market was not quite as dramatic, although still
telling. While the S&P 500/BARRA Growth Index returned a total of 28.26 percent,
its counterpart, the S&P 500/BARRA Value Index, lagged with a total return of
12.72 percent.
Looking beyond the United States, few could have predicted the speed of the
economic recovery that took place in Japan and the emerging markets of Asia and
Latin America following the meltdown in 1998. However, the rapid and large
monetary stimulus provided by innumerable central banks served to quickly
restore confidence, allowing developing currencies and, subsequently, interest
rates, to stabilize. At the same time, the rapid growth in the United States
allowed exports from many developing regions to expand vigorously.
As a result, international equity markets staged a major comeback in 1999. The
Morgan Stanley MSCI EAFE (Europe, Australasia, Far East) Index posted a total
return of 26.96 percent. In Asia, Hong Kong's Hang Seng Stock Index jumped 73.52
percent over the past 12 months while Japan's Nikkei 225 Index returned 55.0
percent in U.S. dollars, aided in part by the strong recovery of the yen.
Thanks to a rally late in the year fueled largely by
a wave of merger activity and technology and
2
<PAGE>
MESSAGE FROM YOUR INVESTMENT ADVISER
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THE PARKSTONE ADVANTAGE FUND DECEMBER 31, 1999
telecom buying, many leading European indices finished 1999 with outstanding
numbers in local currency terms. France's CAC 40 grew by 51.1 percent, Germany's
Xetra DAX increased by 39.0 percent, and the U.K.'s FTSE 100 climbed 17.8
percent. However, European results in dollars were dampened by the dismal
performance of the euro, the single currency introduced by 11 European countries
on January 1, 1999. The euro dropped by 14 percent versus the U.S. dollar to
near parity by year-end, and as a result the Morgan Stanley MSCI Europe Index
returned a respectable, though disappointing, 15.89 percent for the year.
The success of the world equity markets was not mirrored by the fixed income
markets, which recorded their worst year since 1994. The Lehman Aggregate Bond
Index posted only its second negative performance since 1976, returning -.083%.
Virtually every sector of the bond market performed poorly as the unexpectedly
strong world economic growth stirred up concerns about inflation. The Fed raised
interest rates three times for a total of 75 basis points and other central
banks followed suit. The Treasury markets, which had reaped the rewards of the
"flight to quality" in late 1998 had the farthest to fall, but no fixed income
sector was spared.
Looking ahead, we predict the bond market to show signs of a recovery in the
coming year. A vigilant Fed and European Central Bank will likely impose at
least two more rate hikes, but bond prices will start trending upward as
investors become convinced that the specter of inflation has been quelled.
Furthermore, we don't expect to see a repeat of the huge 13.4 percent surge in
energy prices that contributed to inflationary worries throughout the year.
The prospects for the equity markets remain strong, and the inequality we saw in
1999 is unlikely to continue-at least not to the extremes that we've witnessed.
The solid underlying fundamentals of the economy and healthy profit outlook for
many overlooked sectors should lead to a broadening of the market in 2000.
Although technology stocks are likely to continue to perform well over the long
term, a shakeout in this sector is long overdue. This may finally be the year in
which investors stop throwing money indiscriminately at dot-com companies and
begin differentiating between those that have viable business models and those
that are unlikely to succeed.
We are particularly intrigued by the earnings potential of companies in Asia and
Europe as well as Latin America. All of these economies are at much earlier
stages in their economic expansion than the United States. Moreover, we believe
that Japan and the countries of Western Europe are finally beginning to
undertake the sorely needed structural reforms that will enable them to compete
in a competitive and truly global 21st-century economy. The international
portfolios of U.S. investors should also benefit from continued strength in the
yen and a likely decline in the U.S. dollar versus the euro.
In summary, we look forward to stronger worldwide economic growth than we've
seen in the past decade with virtually no region of the globe left behind.
Meanwhile, inflation throughout will remain surprisingly quiescent.
/s/Donald L. Ross
Donald L. Ross
Chief Investment Officer
National City Investment Management Company
3
<PAGE>
PORTFOLIO PERFORMANCE DISCUSSION
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THE PARKSTONE ADVANTAGE FUND DECEMBER 31, 1999
BOND FUND
Rising interest rates, worries about inflation, and an oversupply of new issues
contributed to the bond market's worst performance since 1994 and its second
worst year since 1973. For the 12 months ended December 31, 1999, the Parkstone
Advantage Bond Fund produced a total return of -1.96% (net of fees) while the
Lehman Aggregate Bond Index returned -0.83%.
The economic crisis in Asia and Russia during 1998 had led to a global "flight
to quality" that sent Treasury prices soaring but led to a lack of liquidity in
every other sector of the bond market. Our portfolio had benefited from an
underweight in long corporate bonds relative to the benchmark during this
period, especially in August through October of 1998. The management team began
1999 by adding back holdings in corporate and mortgage-backed issues, but a
monetary crisis in Brazil led us to approach these moves cautiously. As it
turned out, the non-Treasury, or "spread"-sectors rebounded faster than we had
anticipated as a flood of private capital quickly stabilized Brazil. We found
ourselves underweighted in spread sectors as they enjoyed a strong first-quarter
recovery. Treasury prices, in turn, began a year-long decline.
Meanwhile, the continued strength of the U.S. economy and the rapid global
recovery sparked concerns that inflation might be on the rise. This fear
prompted investors to flee the bond market and the Federal Reserve Board to
raise interest rates three times. As a result, Treasury yields (which move in
the opposite direction of their prices) climbed nearly 140 basis points by
year-end, sparking a sell-off in other bond sectors as well. The plunge in bond
prices was further exacerbated by an oversupply of new issues. In early summer,
corporations flooded the market in anticipation of a Y2K-related investor
pullback at year-end.
Despite the fears, inflation totaled less than 3% in 1999. We believe that it
will remain well under control in the coming year as a vigilant Fed continues to
tighten. Additional rate hikes could cause additional short-term bond market
volatility, but investors should ultimately benefit once the specter of
inflation has been erased. The management team currently maintains an overweight
in spread sectors, which continue to offer superior value.
As of December 31, 11% of the fund's net assets were invested in U.S. Treasury
securities, 4% in Agency debt, 44% in mortgage-backed securities, 28% in
corporate bonds, and 10% in asset-backed securities. As of the same date, the
average maturity of the fund was 8.4 years with an average credit quality of
triple-A.
Bond Fund
Average Annual Total Return as of December 31, 1999
One Three Five Inception
Year Year Year to Date
- ---------------------------------------------------------
(1.96%) 4.05% 6.05% 3.81%
[Bond Fund graph omitted]
plot points follows:
Bond Lehman Aggregate
Fund Bond Index
9/93 10,000 10,000
12/93 9,950 10,005
12/94 9,414 9,714
12/95 11,012 11,509
12/96 11,210 11,925
12/97 12,072 13,079
12/98 12,882 14,213
12/99 12,630 14,095
The Bond Fund's performance is compared to the Lehman Aggregate Bond Index,
which represents the performance of overall bond market. 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 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.
4
<PAGE>
PORTFOLIO PERFORMANCE DISCUSSION
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THE PARKSTONE ADVANTAGE FUND DECEMBER 31, 1999
INTERNATIONAL DISCOVERY FUND
The management team was pleased with the fund's outstanding performance during
the past year. Our disciplined approach to country allocation added significant
value over the benchmark, as the fund moved early and aggressively into the
Asian markets. Stock selection was also an additive. In particular, technology
and telecom stocks such as Nokia, NTT D.C.M. and Yahoo Japan performed strongly.
For the 12 months ended December 31, 1999, the Parkstone Advantage International
Discovery Fund returned a total of 55.70% (net of fees). During the same period,
the Morgan Stanley MSCI EAFE (Europe, Australasia, Far East) Index returned
26.96%.
The accelerating growth of the world economy actually hindered the fund's
performance somewhat during the first half of the year. Investors chose not to
pay up for the predictable growth offered by many of the European companies in
the portfolio, opting to take on more risk in a resurgent Asia and other
emerging markets. The precipitous decline in the euro, the single currency
introduced by eleven European countries on January 1, 1999, also detracted from
our results in Europe during this period.
We began adding to our Japanese holdings in March and April just as a major
restructuring announcement by Sony, the world's largest consumer electronics
company, jump-started that country's equity markets. Investors interpreted
Sony's plant closings and workforce reduction as a sign that Asian companies
were at last taking the painful steps that had proven so beneficial to U.S.
business over the past decade. Reforms in government policy and capital
injections into the banking industry also comforted us that Japan was starting
to correct longstanding problems.
The management team took a significant stake in Sony, starting with the
restructuring announcement. Our stake increased as we learned more about its new
PlayStation 2 gaming product and saw a huge upgrade cycle at hand in consumer
electronics. The portfolio's largest holding, our Sony investment returned 313%.
Among our country allocations, we benefited most from our overweight in Hong
Kong. Our investment discipline favored Hong Kong for its relatively inexpensive
valuation and improvements in economic conditions and investor sentiment. We
also viewed U.S. policy toward China as shifting to a more accommodative tone.
By year-end, the Hang Seng Stock Index, Hong Kong's leading blue-chip indicator,
jumped 73.52%.
Looking ahead, foreign markets continue to be well-positioned in terms of
economic growth, government policy shifts, and corporate restructuring. Given
our optimistic view on continued global growth, the management team is also
looking at increasing holdings in basic materials and capital goods. We are
looking at Germany with renewed interest as a result of new tax initiatives
proposed by Finance Minister Hans Eichel. We added to our position in Allianz
and initiated a position in the year 2000 of Murich Re, both of which should
enhance the portfolio.
International Discovery Fund
Average Annual Total Return as of December 31, 1999
One Three Five Inception
Year Year Year to Date
- ----------------------------------------------------------
55.70% 21.08% 17.59% 13.14%
[International Discovery Fund graph omitted]
[plot points follows:]
International MSCI EAFE
Discovery Fund Index
9/30/93 10,000 10,000
12/93 10,350 10,086
12/94 9,650 10,871
12/95 10,590 12,091
12/96 12,222 12,823
12/97 12,482 13,052
12/98 13,931 15,662
12/99 21,691 19,884
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 major stock markets in these 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 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.
5
<PAGE>
PORTFOLIO PERFORMANCE DISCUSSION
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THE PARKSTONE ADVANTAGE FUND DECEMBER 31, 1999
Mid Capitalization Fund
Technology and Internet stocks drove the outstanding performance of the mid-cap
market in 1999, as consistently strong earnings and attractive valuations
relative to large caps beckoned investors. For the year ended December 31, 1999,
the Parkstone Advantage Mid Capitalization Fund returned a total of 44.36% (net
of fees) while the Russell Mid Cap Growth Index returned 51.30%.
The management team was pleased with the performance of the fund, despite the
fact that our results fell somewhat short of the benchmark's. Frankly,
outperforming the index would have been very difficult without overweighting the
portfolio in pure Internet and telecommunications stocks, a position that we
opted against as part of our prudent risk management strategy.
Although we had some exposure to pure-play Internet stocks such as Exodus
Communications, Verisign, and Real Network, we elected to focus more on the
companies meeting the infrastructure needs of the Internet and
telecommunications industries. Our best performers in this arena included
PMC-Sierra and RF Micro Devices, which posted gains of 230% and 137%,
respectively, since joining the portfolio. Comverse Technology, one of our
largest holdings in the technology sector, enjoyed an outstanding year as well,
more than tripling in value.
We guessed correctly that software companies would reemerge during the second
half as corporations began reallocating their information technology budget away
from Y2K preparations. Beneficiaries of this trend included Mercury Interactive,
Citrix Systems, and Rational Software. Our semiconductor holdings-led by Xilinx
and Altera-also generated superior returns, thanks to the recovery in emerging
markets and the growth of the Internet, wireless communications, and other
components of the digital economy.
Our biotechnology picks, led by Medimmune and Biogen, posted excellent results.
Medimmune's stock, up 199%, benefited from the successful introduction of
Synagis. This injectable vaccine prevents infection from respiratory syncytial
virus, the leading cause of pneumonia in children.
Looking ahead, the management team believes that the technology sector will
continue to thrive, and it should drive much of the performance of the midcap
market. Given our concern about the valuations of pure-play Internet companies,
which appear to be extended, our weighting in these stocks will likely remain
below the benchmark's and many of our peers as well. We are also aggressively
seeking out growth opportunities beyond the technology sector in such areas as
health care, media, and telecommunications, where valuations appear to be
somewhat more reasonable.
Mid Capitalization Fund
Average Annual Total Return as of December 31, 1999
One Three Five Inception
Year Year Year to Date
- ----------------------------------------------------------
44.36% 21.49% 22.12% 16.58%
[Mid Capitalization Fund graph omitted]
[plot points follows:]
Mid Capitalization Russell Mid Cap
Fund Growth Index
9/30/93 10,000 10,000
12/93 10,021 10,322
12/94 9,499 10,099
12/95 12,258 13,531
12/96 14,386 15,896
12/97 16,196 19,478
12/98 17,869 22,956
12/99 25,795 34,733
The Mid Capitalization Fund's performance is compared to the Russell Mid Cap
Growth Index to better reflect the Fund's focus on the mid-cap sector of the
U.S. stock market. 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 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.
6
<PAGE>
PORTFOLIO PERFORMANCE DISCUSSION
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THE PARKSTONE ADVANTAGE FUND DECEMBER 31, 1999
SMAll CAPITALIZATION FUND
In 1999, small cap stocks rebounded strongly to outperform large caps for the
first time in six years. During the first four months, a handful of Internet
stocks at the high end of the market cap range-CMGI, DoubleClick, and E-Trade
among them-accounted for nearly all the gains we witnessed. The rally
subsequently broadened out to include semiconductor and software stocks as well
as a whole new group of smaller Internet-related equities.
For the 12 months ended December 31, 1999, the Parkstone Advantage Small
Capitalization Fund produced a total return of 31.24% (net of fees) while the
Russell 2000 Growth Index returned a total of 43.10%. The management team was
not pleased with results early in the year and took actions that set the stage
for the fund to outperform its benchmark from May onward.
The narrow market worked against the fund during the first quarter because our
market cap limit effectively prevented us from owning many of the early
high-fliers. We remedied this situation heading into the second quarter by
allowing the fund to own any stock, as long as it remained in our benchmark.
Our large exposure to technology stocks, particularly semiconductor and
semiconductor capital equipment companies, proved to be a significant driver of
performance from May onward. SDL, which we had purchased in August 1998,
returned 721% from January through November. At that point, we were forced to
sell our position because it had exceeded the portfolio's maximum market cap
level. Other strong performers in this sector included Credence Systems and PRI
Automation. Shareholders also profited when three holdings-Clarify Inc., DII
Group, and Optical Coating Labs-were acquired by other companies at significant
market premiums.
Earnings for technology companies should remain robust, and at year-end the fund
remained overweighted in this sector. In particular, the portfolio offers
exposure to a number of emerging technologies that offer catalysts for
accelerating growth. The management team is sanguine about the prospects for
wireless infrastructure holdings such as Sawtek and Digital Microwave. These
companies should benefit from the migration to wireless technology for Internet
access and other services that have traditionally been delivered through land
lines.
We also like the prospects in the oil field services sector, where integrated
oil companies have made major discoveries in deepwater areas. As a result,
deepwater construction contractors such as Cal Dive International will be much
in demand to help develop those resources.
Small Capitalization Fund
Average Annual Total Return as of December 31, 1999
One Three Five Inception
Year Year Year to Date
- ----------------------------------------------------------
31.24% 6.54% 16.30% 15.46%
[Small Capitalization Fund graph omitted]
[plot points follows:]
Small Capitalization Russell 2000
Fund Growth Index
9/30/93 10,000 10,000
12/93 10,648 10,262
12/94 11,209 10,013
12/95 15,207 13,120
12/96 19,717 14,597
12/97 18,638 16,488
12/98 18,171 16,690
12/99 23,847 23,884
The Small Capitalization Fund's performance is compared to the Russell 2000
Growth Index to better reflect the Fund's focus on the mid-cap sector of the
U.S. stock market. 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 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>
PORTFOLIO PERFORMANCE DISCUSSION
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THE PARKSTONE ADVANTAGE FUND DECEMBER 31, 1999
ARMADA ADVANTAGE EQUITY
GROWTH FUND
Leadership in the market narrowed during the final months of 1999, as investors
rewarded technology stocks and a handful of other companies exhibiting strong
earnings growth. From its inception on September 13, 1999, through December 31,
1999, the Armada Advantage Equity Growth Fund produced a total return of 14.00%
(net of fees). During the same period, the S&P 500 Composite Index returned a
total of 9.68%.
The portfolio's large weighting in technology stocks, 31.4% versus 28.2% for the
S&P 500 Index, was responsible for much of the fund's outperformance. Cisco, our
largest single holding, returned 51.5% for the period. Qualcomm, another core
holding, returned 359% since the inception of the Fund, while Nortel Networks,
Analog Devices, Sun Microsystems, and Applied Materials also rose briskly.
Prudent risk management dictated that we trim our exposure to Cisco and Qualcomm
somewhat at year-end.
The portfolio's overweight in consumer cyclicals relative to the S&P 500 also
served the fund well. Our best performers from this sector included Home Depot
and Wal-Mart, whose returns totaled 50.8% and 44.0%, respectively. Costco, Gap,
and Lowe's Companies saw significant share price appreciation as well. The
portfolio also profited from an underweight in financial stocks, which were hurt
by rising interest rates and speculation that more rate hikes might be in the
offing.
Looking ahead, the management team has positioned the portfolio to benefit from
a period of continued strong economic growth and low inflation. In technology,
semiconductor stocks such as Texas Instruments and Altera should prosper from
strong worldwide demand. Cisco, Lucent Technologies, Intel, and ADC
Telecommunications, companies that are meeting the ever-expanding infrastructure
needs of the Internet and telecommunications industries, continue to look
attractive.
The portfolio maintains an overweight in the industrial sector because these
companies, which derive a significant portion of revenue from exports, should
benefit from the global recovery now well underway. We remain modestly
overweight in energy stocks as well, where we think oil prices may rise as a
result of reduced production by OPEC. The management team is less optimistic
about telecommunications providers and consumer non-cyclicals due to concerns
about price competition. We are also eyeing pharmaceutical companies with
caution because of Medicare proposals on the table that could prove detrimental
to earnings.
8
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
THE PARKSTONE ADVANTAGE FUND DECEMBER 31, 1999
The Board of Trustees and Shareholders
The Parkstone Advantage Fund
We have audited the accompanying statements of net assets of the Parkstone
Advantage Fund (comprised of the Bond Fund, International Discovery Fund, Mid
Capitalization Fund, Small Capitalization Fund and Armada Advantage EquityGrowth
Fund) (the "Fund") as of December 31, 1999, and the related statements of
operations, statements of changes in net assets and financial highlights for
each of the periods indicated therein. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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 the financial highlights. Our procedures included
confirmation of securities owned as of December 31, 1999, by correspondence with
the Fund's 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.
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 above listed funds of the Parkstone Advantage Fund at December 31, 1999,
and the results of their operations, the changes in their net assets and their
financial highlights for each of the periods indicated therein, in conformity
with auditing standards generally accepted in the United States.
/s/Ernst & Young LLP
Philadelphia, Pennsylvania
February 11, 2000
9
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
THE PARKSTONE ADVANTAGE FUND
(000)
PERIOD ENDED
YEAR ENDED DECEMBER 31, 1999 DECEMBER 31, 1999
------------------------------------------------------- -----------------
INTERNATIONAL MID SMALL ARMADA
BOND DISCOVERY CAPITALIZATION CAPITALIZATION ADVANTAGE EQUITY
FUND FUND FUND FUND GROWTH FUND*
----- ------------ -------------- -------------- -----------------
INVESTMENT INCOME:
<S> <C> <C> <C> <C> <C>
Interest ......................................... $ 657 $ 17 $ 59 $ 56 $ 3
Dividends ........................................ -- 232 50 20 10
Securities lending ............................... -- -- 12 14 --
Less: Foreign taxes withheld ..................... -- (21) -- -- --
------ ------ ------ ------ ----
Total Investment Income ..................... 657 228 121 90 13
------ ------ ------ ------ ----
EXPENSES:
Investment advisory fees ......................... 71 211 243 161 12
Less: fees waived by Investment Adviser .......... -- -- -- -- (12)
Administration fees .............................. 20 49 49 32 3
Custodian and accounting fees .................... 13 23 15 13 --
Professional fees ................................ 12 33 42 31 4
Trustees fees .................................... -- 1 -- -- --
Transfer Agent fees .............................. 10 11 17 11 1
Printing and shareholder reports ................. 7 12 17 11 7
Miscellaneous .................................... -- 7 3 6 --
------ ------ ------ ------ ----
Total Expenses .............................. 133 347 386 265 15
------ ------ ------ ------ ----
Net Investment Income/(Loss) ..................... 524 (119) (265) (175) (2)
------ ------ ------ ------ ----
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Net realized gain/(loss) on futures .............. -- 53 (47) -- --
Net realized gain/(loss) on investments .......... (365) 5,334 7,383 1,929 (26)
Net realized loss on foreign currency
transactions .................................. -- (18) -- -- --
Net change in unrealized appreciation/
depreciation on investments ................... (418) 2,599 1,211 1,461 728
Net change in unrealized appreciation/
depreciation on futures ....................... -- 4 -- -- --
------ ------ ------ ------ ----
Net gain/(loss) on investments ................... (783) 7,972 8,547 3,390 702
------ ------ ------ ------ ----
Net increase/decrease in net assets resulting
from operations ............................... $ (259) $7,853 $8,282 $3,215 $700
====== ====== ====== ====== ====
</TABLE>
- ------------
* Fund commenced operations on September 13, 1999.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
THE PARKSTONE ADVANTAGE FUND
(000)
BOND FUND INTERNATIONAL DISCOVERY FUND
---------------------- ----------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
---------------------- ----------------------------
1999 1998 1999 1998
-------- -------- -------- --------
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income/(loss) ................................ $ 524 $ 619 $ (119) $ (123)
Net realized gain/(loss) on investments, futures and
foreign currency transactions ........................... (365) 259 5,369 451
Net change in unrealized appreciation/depreciation
on investments, futures and foreign currency
transactions .............................................. (418) (47) 2,603 1,692
------- ------- ------- -------
Net increase/decrease in net assets resulting from operations .... (259) 831 7,853 2,020
------- ------- ------- -------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income ........................ (627) (581) -- --
Distributions from net realized capital gains ............... (111) -- (770) (80)
------- ------- ------- -------
Total Distributions .............................................. (738) (581) (770) (80)
------- ------- ------- -------
CAPITAL TRANSACTIONS:
Proceeds from shares issued ................................. 1,156 2,788 631 1,560
Dividends reinvested ........................................ 739 580 770 80
Cost of shares redeemed ..................................... (5,765) (3,137) (6,271) (3,993)
------- ------- ------- -------
Increase/(decrease) in net assets from capital transactions ...... (3,870) 231 (4,870) (2,353)
------- ------- ------- -------
Total increase/(decrease) in net assets .......................... (4,867) 481 2,213 (413)
NET ASSETS:
Beginning of year ........................................... 12,337 11,856 18,371 18,784
------- ------- ------- -------
End of year ................................................. $ 7,470 $12,337 $20,584 $18,371
======= ======= ======= =======
CAPITAL SHARE TRANSACTIONS:
Issued ...................................................... 110 256 42 118
Reinvested .................................................. 76 54 51 6
Redeemed .................................................... (547) (288) (418) (306)
------- ------- ------- -------
Change in shares ................................................. (361) 22 (325) (182)
======= ======= ======= =======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
THE PARKSTONE ADVANTAGE FUND
(000)
ARMADA
ADVANTAGE EQUITY
MID CAPITALIZATION FUND SMALL CAPITALIZATION FUND GROWTH FUND*
------------------------ ------------------------- ----------------
YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
----------------------- --------------------- ---------------
1999 1998 1999 1998 1999
---------- --------- --------- -------- ---------
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
<S> <C> <C> <C> <C> <C>
Net investment loss ............................. $ (265) $ (288) $ (175) $ (276) $ (2)
Net realized gain/(loss) on investments
and futures ................................... 7,336 1,267 1,929 1,354 (26)
Net change in unrealized appreciation/depreciation
on investments and futures .................... 1,211 1,838 1,461 (1,788) 728
-------- -------- -------- ------- ------
Net increase/decrease in net assets resulting
from operations ................................... 8,282 2,817 3,215 (710) 700
-------- -------- -------- ------- ------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net realized capital gains ... (1,236) -- (712) -- --
-------- -------- -------- ------- ------
CAPITAL TRANSACTIONS:
Proceeds from shares issued ..................... 1,749 3,569 1,640 3,285 5,000
Dividends reinvested ............................ 1,236 -- 712 -- --
Cost of shares redeemed ......................... (16,130) (8,379) (10,836) (6,981) --
-------- -------- -------- ------- ------
Increase/(decrease) in net assets from capital
transactions ...................................... (13,145) (4,810) (8,484) (3,696) 5,000
-------- -------- -------- ------- ------
Total increase/(decrease) in net assets .............. (6,099) (1,993) (5,981) (4,406) 5,700
NET ASSETS:
Beginning of period ............................. 29,066 31,059 22,454 26,860 --
-------- -------- -------- ------- ------
End of period ................................... $ 22,967 $ 29,066 $ 16,473 $22,454 $5,700
======== ======== ======== ======= ======
CAPITAL SHARE TRANSACTIONS:
Issued .......................................... 105 238 109 198 500
Reinvested ...................................... 74 -- 45 -- --
Redeemed ........................................ (951) (570) (706) (421) --
-------- -------- -------- ------- ------
Change in shares ..................................... (772) (332) (552) (223) 500
======== ======== ======== ======= ======
</TABLE>
- -------------
* Fund commenced operations on September 13, 1999.
See notes to financial statements.
12
<PAGE>
Statement of Net Assets
- --------------------------------------------------------------------------------
THE PARKSTONE ADVANTAGE FUND DECEMBER 31, 1999
BOND FUND
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
(000) DESCRIPTION (000)
- ---------- ------------------------------------- -------
ASSET BACKED SECURITIES (9.9%):
$160 First Security Auto Owner Trust,
Series 1999-1, Class A4, 5.740%,
06/15/04 ........................... $ 156
9 Green Tree Financial, Series 1994-1,
Class A3, 6.900%, 04/15/19 ......... 9
200 IMC Home Equity Loan Trust,
Series 1997-7, Class A5, 6.760%,
10/20/20 ........................... 197
100 New Century Equity Trust,
Series 1999-NCA, Class A4, 7.220%,
07/25/30 ........................... 98
100 New Century Home Equity,
Series 1997-NC6, Class A6, 7.010%,
05/25/26 ........................... 98
100 Saxon Asset Security Trust,
Series 1999-3, Class AF6, 7.525%,
06/25/14 ........................... 99
80 Vanderbilt Mortgage Finance,
Series 1999-C, Class 1A3, 7.385%,
01/07/20 ........................... 80
------
Total Asset Backed Securities (Cost $751) 737
------
CORPORATE BONDS (28.3%):
Banks (5.8%):
95 Citicorp, 6.375%, 11/15/08 ........... 88
100 First Chicago, 6.875%, 06/15/03 ...... 99
85 First Union, 6.950%, 11/01/04 ........ 84
175 PNC Trust, Series 1998-7, Class A5,
6.750%, 09/25/28 ................... 161
------
432
------
Banks/Foreign (0.7%):
55 HSBC Holding, 7.500%,
07/15/09 ........................... 54
------
Chemicals (0.7%):
60 Lubrizol, 5.875%, 12/01/08 ........... 53
------
Communications Equipment (1.2%):
90 Motorola, 7.500%, 05/15/25 ........... 88
------
Computer Software (2.2%):
175 Computer Associates, 6.250%,
04/15/03 ........................... 168
------
Financial Services (3.3%):
250 Countrywide Home Loan, 6.840%,
10/22/04 ........................... 244
------
Leasing & Renting (0.6%):
50 Comdisco, 6.000%, 01/30/02 ........... 48
------
Leisure & Recreational Products (0.7%):
55 Brunswick, 6.750%, 12/15/06 .......... 51
------
Machinery (1.7%):
125 General Electric Capital, 7.620%,
05/08/00 ........................... 125
------
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
(000) DESCRIPTION (000)
- ---------- ------------------------------------- -------
Corporate Bonds, continued:
Printing & Publishing (0.9%):
$ 75 American Greetings, 6.100%,
08/01/28 ........................... $ 67
------
Real Estate Investment Trusts (6.2%):
50 Bradley Operating Partnership,
7.000%, 11/15/04 ................... 47
125 Commercial Net Lease Realty, 8.125%,
06/15/04 ........................... 122
75 Gables Realty LP, 6.800%, 03/15/05 70
140 New Plan Excel Realty Trust, 6.875%,
10/15/04 ........................... 136
100 Susa Partnership, 7.000%, 12/01/07 ... 89
------
464
------
Retail (1.3%):
105 J.C. Penney & Co., 7.600%, 04/01/07 .. 98
------
Steel & Steel Works (2.0%):
160 Worthington Industries, 7.125%,
05/15/06 ........................... 153
------
Wholesale (1.0%):
80 Arrow Electronic, 6.875%, 06/01/18 ... 71
------
Total Corporate Bonds (Cost $2,199) ............. 2,116
------
Collateralized Mortgage Obligations (13.6%):
235 Credit Suisse First Boston Mortgage
Securities, Series 1997-C1, Class A1C,
7.240%, 04/20/07 ................... 228
190 Morgan Stanley Capital I, Series 1999-FNV1,
Class A2, 6.530%, 03/15/32 ......... 177
130 Prudential Securities Secured Financing,
Series 1998-C1, Class A1A3, 6.350%,
09/15/07 ........................... 122
80 Prudential Securities Secured Financing,
Series 1999-NRF1, Class A2, 6.480%,
01/15/09 ........................... 75
268 Residential Accredit Loans, Series 1999-QS3,
Class A8, 6.500%, 03/25/29 ......... 242
100 Residential Funding Mortgage Securities I,
Series 1998-S13, Class
A21, 6.750%, 06/25/28 .............. 92
90 Vende Mortgage Trust, Series 1999-3,
Class D, 6.500%, 06/15/25 .......... 84
------
Total Collateralized Mortgage Obligations
(Cost $1,089) ................................ 1,020
------
U.S. Government Agency Obligations (33.6%):
Federal National Mortgage Association (19.9%):
125 5.625%, 05/14/04 ..................... 120
155 6.375%, 06/15/09 ..................... 148
13
<PAGE>
Statement of Net Assets
- --------------------------------------------------------------------------------
THE PARKSTONE ADVANTAGE FUND DECEMBER 31, 1999
Bond Fund (concluded)
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
(000) DESCRIPTION (000)
- ---------- ------------------------------------- -------
U.S. GOVERNMENT AGENCY OBLIGATIONS, CONTINUED:
Federal National Mortgage Association (continued)
201 Pool # 376750, 7.000%, 09/01/27 ..... $ 195
233 Pool # 433330, 6.500%, 08/01/28 ..... 220
358 Pool # 437810, 6.000%, 08/01/28 ..... 328
246 Pool # 437972, 6.000%, 08/01/28 ..... 225
95 Pool # C18271, 7.000%, 11/01/28 ..... 92
169 Pool # 252212, 6.500%, 01/01/29 ..... 159
------
1,487
------
Government National Mortgage Association (13.7%):
168 Pool # 345871, 6.500%, 09/15/23 ..... 159
352 Pool # 780213, 7.500%, 08/15/25 ..... 348
119 Pool # 498651, 6.500%, 04/01/29 ..... 111
79 Pool # 472939, 6.500%, 05/15/29 ..... 74
35 Pool # 478962, 7.500%, 12/15/29 ..... 35
90 Pool # 499998, 7.500%, 12/15/29 ..... 89
210 Pool # 516397, 7.500%, 12/15/29 ..... 208
------
1,024
------
Total U.S. Government Agency Obligations
(Cost $2,585) ............................... 2,511
------
U.S. TREASURY OBLIGATIONS (11.2%):
U.S. Treasury Notes (6.3%):
100 6.250%, 10/31/01 ...................... 100
145 6.500%, 05/15/05 ...................... 145
230 6.125%, 08/15/07 ...................... 224
------
469
------
U.S. Treasury Bond (4.9%):
390 6.250%, 08/15/23 ...................... 368
------
Total U.S. Treasury Obligations (Cost $853) .... 837
------
Cash Equivalent (2.5%):
184 Goldman Sachs Financial Square
Premium Money Market Fund,
(Cost $184) ................................ 184
------
Total Investments -- 99.1% (Cost $7,661) ...... $7,405
======
Other Assets and Liabilities, Net -- 0.9% ...... 65
------
VALUE
(000)
-------
NET ASSETS:
Fund shares (unlimited authorization -- no par
value) based on 769,034 outstanding shares of
beneficial interest ....................... $7,591
Undistributed net investment income ......... 524
Net unrealized depreciation on investments .. (256)
Accumulated net realized loss on
investments ............................... (389)
------
Total Net Assets -- 100.0% ..................... $7,470
======
Net Asset Value, Offering and Redemption
Price Per Share ............................. $9.72
=====
- ------------
THE GROSS UNREALIZED APPRECIATION/(DEPRECIATION)
FOR BOOK PURPOSES WHICH IS NOT MATERIALLY DIFFERENT FROM
FEDERAL INCOME TAX PURPOSES IS AS FOLLOWS:
Gross appreciation .......................... $ 7
Gross depreciation .......................... (263)
-----
$(256)
-----
See notes to financial statements.
14
<PAGE>
Statement of Net Assets
- --------------------------------------------------------------------------------
THE PARKSTONE ADVANTAGE FUND DECEMBER 31, 1999
INTERNATIONAL DISCOVERY FUND
MARKET
SECURITY VALUE
SHARES DESCRIPTION (000)
- ---------- -------------------------------------- -------
COMMON STOCKS (95.7%):
Australia (1.3%):
11,085 National Australia Bank+ ............ $ 169
4,842 Rio Tinto ........................... 104
------
273
------
Austria (0.4%):
1,947 Mayr Melnhof Karton ................. 90
------
Canada (1.2%):
2,780 BCE ................................. 251
------
Finland (3.5%):
2,235 Nokia ADR ........................... 425
4,337 Sonera Oyj .......................... 297
------
722
------
France (11.4%):
608 Altran Technologies ................. 367
2,097 Aventis ............................. 122
1,813 Axa ................................. 253
426 Bouygues ............................ 271
860 Castorama Dubois .................... 262
465 Compagnie de Saint Gobain ........... 87
900 Equant* ............................. 102
128 L'Oreal ............................. 103
210 Louis Vuitton-Moet Hennessy ......... 94
1,762 STMicroelectronics+ ................. 271
382 Thomson Multimedia* ................. 21
2,078 Total Fina, Cl B+ ................... 277
1,425 Vivendi ............................. 128
------
2,358
------
Germany (9.0%):
465 Allianz ............................. 156
1,112 Consors Discount-Broker* ............ 93
2,906 Deutsche Bank ....................... 245
1,932 Deutsche Telekom .................... 138
2,066 Epcos* .............................. 155
1,682 HypoVereinsbank ..................... 115
2,513 Linde ............................... 137
1,700 Mannesmann+ ......................... 410
3,110 Siemens+ ............................ 396
------
1,845
------
Hong Kong (5.6%):
59,277 China Telecom (Hong Kong)* .......... 371
11,067 HSBC Holdings ....................... 155
14,160 Hutchison Whampoa Limited ........... 206
36,325 Johnson Electric Holdings ........... 233
36,868 Li & Fung ........................... 92
18,088 Swire Pacific, Cl A ................. 107
------
1,164
------
Ireland (0.5%):
12,914 Bank of Ireland ..................... 103
------
Israel (0.5%):
1,170 BATM Advanced Communications ........ 96
------
Italy (4.0%):
2,025 Assicurazioni Generali .............. 67
1,107 Bipop - Carire ...................... 98
12,374 Bulgari ............................. 111
16,000 Telecom Italia ...................... 226
28,432 Telecom Italia Mobile+ .............. 317
------
819
------
Japan (22.7%):
1,250 Benesse ............................. 301
172 Fancl ............................... 46
3,594 Fanuc ............................... 457
MARKET
SECURITY VALUE
SHARES DESCRIPTION (000)
- ---------- -------------------------------------- ------
COMMON STOCKS, CONTINUED:
Japan (continued):
3,984 Fujitsu*+ ........................... $ 182
58 Hikari Tsushin ...................... 116
1,812 Honda Motor ......................... 67
600 Internet Initiative Japan ADR* ...... 58
20,000 Itochu*+ ............................ 100
1,300 Ito Yokado .......................... 141
7,050 NEC ................................. 168
3,832 Nihon Unisys ........................ 132
14,078 Nikko Securities .................... 178
465 Nintendo ............................ 77
3 Nippon Telegraph & Telephone ........ 51
15 NTT Mobile Communications Network ... 577
5,413 Sanwa Bank+ ......................... 66
993 Seven-Eleven ........................ 157
790 SMC ................................. 175
244 Softbank ............................ 234
2,524 Sony ................................ 748
7,736 Sumitomo Bank ....................... 106
4,569 Takeda Chemical Industries .......... 226
599 Takefuji ............................ 75
1,758 Tokyo Electron 241
------
4,679
------
Mexico (0.9%):
1,640 Telefonos de Mexico ADR ............. 184
------
Netherlands (3.2%):
1,769 Heineken ............................ 86
3,095 ING Groep ........................... 187
3,984 Royal Dutch Petroleum ............... 244
3,912 Wolters Kluwer ...................... 133
------
650
------
Poland (0.1%):
1,257 Polski Koncern Nafto GDR* ........... 16
------
Singapore (3.5%):
16,384 DBS Group Holdings .................. 269
22,520 Natsteel Electronics ................ 119
19,656 Singapore Airlines .................. 223
4,700 Singapore Press Holdings ............ 102
------
713
------
South Korea (1.2%):
2,700 Korea Electric Power ADR ............ 45
5,570 Pohang Iron & Steel ADR ............. 195
------
240
------
Spain (1.3%):
9,477 Telefonica .......................... 237
400 Terra Networks* ..................... 22
------
259
------
Sweden (3.2%):
5,868 Hennes & Mauritz, Series B .......... 197
4,901 LM Ericsson ADR ..................... 322
1,250 Pharmacia & Upjohn .................. 56
2,861 Svenska Cellulosa, Series A ......... 84
------
659
------
Switzerland (5.7%):
135 Adecco .............................. 105
761 Credit Suisse Group ................. 151
30 Julius Baer Holdings ................ 91
15
<PAGE>
Statement of Net Assets
- --------------------------------------------------------------------------------
THE PARKSTONE ADVANTAGE FUND DECEMBER 31, 1999
INTERNATIONAL DISCOVERY FUND (CONCLUDED)
SHARES OR MARKET
PRINCIPAL SECURITY VALUE
SHARES DESCRIPTION (000)
- ---------- -------------------------------------- -------
Common Stocks, continued:
Switzerland (continued):
62 Nestle .............................. $ 114
164 Novartis ............................ 241
19 Roche Holding ....................... 226
77 Swiss Re ............................ 158
336 UBS, Registered ..................... 91
-------
1,177
-------
Taiwan (1.1%):
4,976 Taiwan Semiconductor ADR* ........... 224
-------
United Kingdom (15.3%):
13,324 Allied Zurich ....................... 157
6,838 Bass ................................ 85
8,470 BOC Group ........................... 182
20,965 BP Amoco ............................ 211
2,027 British Aerospace Conversion
Loan Stock* ....................... 3
7,989 British Telecom ..................... 196
2,800 Colt Telecom Group* ................. 144
10,092 Compass Group ....................... 139
2,973 Energis* ............................ 143
22,339 FKI ................................. 87
9,928 Freeserve* .......................... 93
30,089 Invensys ............................ 164
8,230 Logica .............................. 213
14,971 Marconi ............................. 265
21,732 National Grid Holdings .............. 166
10,197 Pearson ............................. 331
11,200 QXL* ................................ 263
5,601 Standard Chartered .................. 87
15,350 Thus* ............................... 97
8,408 WPP Group ........................... 133
-------
3,159
-------
United States (0.1%):
375 Infonet Services* ................... 10
49 OpenTV* ............................. 4
-------
14
-------
Total Common Stocks (Cost $12,478) ............. 19,695
-------
U.S. Government Agency Obligation (1.5%):
$300,000 Federal Home Loan Mortgage
Discount Note, 5.470%,
01/12/00, (Cost $300) ........... 300
-------
Cash Equivalent (3.6%):
745,338 Goldman Sachs Financial Square
Premium Money Market Fund,
(Cost $745) ..................... 745
-------
Total Investments (Cost $13,523)-- 100.8% ..... $20,740
=======
Other Assets and Liabilities, Net -- (0.8%) ..... (156)
-------
Value
(000)
-------
Net Assets:
Fund shares (unlimited authorization -- no par
value) based on 1,003,461 outstanding shares
of beneficial interest .................... $ 8,456
Accumulated net realized gain on investments
and futures ............................. 4,916
Net unrealized appreciation on investments .. 7,217
Net investment loss ......................... (5)
-------
Total Net Assets -- 100.0% ...................... $20,584
=======
Net Asset Value, Offering and Redemption Price
Per Share ................................... $20.51
=======
- ---------------
* Non-income producing security
+ Security fully or partially on loan
ADR -- American Depository Receipt
Cl -- Class
GDR -- Global Depository Receipt
- ---------------
THE GROSS UNREALIZED APPRECIATION/DEPRECIATION FOR BOOK
PURPOSES WHICH IS NOT MATERIALLY DIFFERENT FROM
FEDERAL INCOME TAX PURPOSES IS AS FOLLOWS:
Gross appreciation .......................... $ 7,415
Gross depreciation .......................... (198)
-------
$ 7,217
-------
At December 31, 1999, sector diversification of the Portfolio was as follows:
SECTOR DIVERSIFICATION % OF
COMMON STOCKS NET ASSETS VALUE
---------- -------
Electronics ...................... 13.8% $ 2,848
Banking .......................... 9.4% 1,933
Manufacturing .................... 6.5% 1,338
Telecommunications ............... 6.5% 1,331
Telecommunication Services ....... 6.3% 1,302
Retail ........................... 6.3% 1,300
Telecommunications Equiptment .... 5.5% 1,128
Telephone ........................ 5.0% 1,031
Pharmaceuticals .................. 4.2% 871
Insurance ........................ 3.8% 791
Oil & Gas ........................ 3.6% 748
Computer Software ................ 2.7% 551
Food & Beverage .................. 2.5% 518
Engineering Services ............. 2.5% 505
Computers ........................ 2.4% 496
Financial Services ............... 2.3% 475
Building and Construction ........ 1.7% 358
Commercial Services .............. 1.5% 301
Metals ........................... 1.5% 299
Internet ......................... 1.2% 255
Publishing ....................... 1.1% 234
Airlines ......................... 1.1% 223
Distribution ..................... 0.9% 192
Chemicals ........................ 0.9% 182
Paper Products ................... 0.9% 174
Advertising ...................... 0.7% 133
Human Resources .................. 0.5% 105
Automotive ....................... 0.3% 67
Aerospace ........................ 0.1% 6
------ -------
Total Common Stocks .............. 95.7% 19,695
Total U.S. Government
Agency Obligation ............. 3.6% 745
Total Cash Equivalent ............ 1.5% 300
------ -------
Total Investments ................ 100.8% 20,740
Other Assets and Liabilities, Net. (0.8%) (156)
------ -------
Net Assets ....................... 100.0% $20,584
====== =======
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
Statement of Net Assets
- --------------------------------------------------------------------------------
THE PARKSTONE ADVANTAGE FUND DECEMBER 31, 1999
MID CAPITALIZATION FUND
MARKET
SECURITY VALUE
SHARES DESCRIPTION (000)
- ---------- --------------------------------- ------------
Common Stocks (95.5%):
Air Transportation (0.4%):
6,300 Southwest Airlines .............. $ 102
--------
Auto (1.6%):
1,700 General Motors, Cl H* ........... 163
7,400 Gentex* ......................... 205
--------
368
--------
Broadcasting, Newspapers & Advertising (8.3%):
4,300 AMFM*+ .......................... 336
1,700 Doubleclick*+ ................... 430
4,100 Interpublic Group of Companies .. 237
2,000 Real Network* ................... 241
1,100 Univision Communications*+ ...... 112
3,400 Westwood One * .................. 258
4,000 Young & Rubicam ................. 283
--------
1,897
--------
Communications Equipment (0.4%):
1,300 CTS ............................. 98
--------
Computer Equipment (2.2%):
2,800 Lexmark International, Cl A*+ ... 253
3,200 Visual Networks*+ ............... 254
--------
507
--------
Computers (4.8%):
3,400 Comverse Technology*+ ........... 492
2,500 Jabil Circuit* .................. 182
3,600 Symbol Technologies ............. 229
6,500 Unisys* ......................... 208
--------
1,111
--------
Drugs & Health Care (5.4%):
3,000 Biogen*+ ........................ 253
8,200 Forest Laboratories* ............ 504
2,900 Medimmune*+ ..................... 481
--------
1,238
--------
Electrical Services (5.1%):
6,300 AES* ............................ 471
4,000 Calpine* ........................ 256
6,200 Gemstar International*+ ......... 442
--------
1,169
--------
Food & Beverage (0.6%):
2,500 Adolph Coors, Cl B .............. 131
--------
Insurance (2.2%):
6,800 Aflac ........................... 321
6,800 Nationwide Financial Services ... 190
--------
511
--------
Miscellaneous Business Services (4.6%):
3,200 Citrix Systems*+ ................ 394
12,600 Concord EFS*+ ................... 324
3,700 Electronics for Imaging* ........ 215
3,300 Fiserv* ......................... 126
--------
1,059
--------
MARKET
SECURITY VALUE
SHARES DESCRIPTION (000)
- ---------- --------------------------------- ------------
Common Stocks, continued:
Petroleum & Fuel Products (0.8%):
4,800 Apache .......................... $ 177
--------
Printing & Publishing (0.8%):
4,500 Valassis Communications ......... 190
--------
Professional Services (0.9%):
5,100 Paychex ......................... 204
--------
Retail (5.9%):
3,300 Best Buy* ....................... 166
6,600 BJ's Wholesale Club* ............ 241
3,300 Circuit City .................... 149
12,000 Family Dollar Stores ............ 196
9,700 Jack In The Box* ................ 201
7,300 Linens 'N Things* ............... 216
2,500 Tandy ........................... 123
4,100 The Children's Place*+ .......... 67
--------
1,359
--------
Semi-Conductors/Instruments (22.6%):
7,300 Altera* ......................... 362
4,800 Analog Devices* ................. 446
2,400 JDS Uniphase* ................... 387
3,900 KLA-Tencor* ..................... 434
3,000 LSI Logic*+ ..................... 203
3,400 Maxim Integrated Products* ...... 160
4,100 Novellus Systems* ............... 502
2,500 PMC-Sierra* ..................... 401
5,000 RF Micro Devices* ............... 342
2,700 Sanmina*+ ....................... 270
1,800 SDL* ............................ 392
7,400 Teradyne* ....................... 488
7,100 Vitesse Semiconductor* .......... 372
9,600 Xilinx* ......................... 437
--------
5,196
--------
Software (14.8%):
3,300 Adobe Systems ................... 222
3,600 J.D. Edwards & Company* ......... 108
2,600 Legato Systems* ................. 179
3,100 Mercury Interactive* ............ 335
10,800 Novell* ......................... 431
6,800 Rational Software* .............. 334
5,600 Remedy* ......................... 265
5,400 Siebel Systems* ................. 454
5,400 Symantec* ....................... 317
1,700 Verisign* ....................... 325
2,950 Veritas Software*+ .............. 422
--------
3,392
--------
Telephone & Telecommunication (12.1%):
3,800 Broadwing* ...................... 140
10,500 Centurytel+ ..................... 497
1,700 Echostar Communications* ........ 166
5,000 Exodus Communications*+ ......... 444
7,000 McLeodUSA, Cl A*+ ............... 412
17
<PAGE>
Statement of Net Assets
- --------------------------------------------------------------------------------
THE PARKSTONE ADVANTAGE FUND DECEMBER 31, 1999
MID CAPITALIZATION FUND (CONCLUDED)
SHARES OR MARKET
PRINCIPAL SECURITY VALUE
AMOUNT DESCRIPTION (000)
- ---------- --------------------------------- ------------
COMMON STOCKS, CONTINUED:
Telephone & Telecommunication (continued):
4,300 Nextel, Cl A*+ .................. $ 443
3,000 RCN* ............................ 146
1,950 Voicestream Wireless*+ .......... 278
3,200 Winstar Communications*+ ........ 241
-------
2,767
-------
Testing Laboratories (2.0%):
1,500 Affymetrix*+ .................... 255
1,700 PE Biosystems ................... 205
-------
460
-------
Total Common Stocks (Cost $13,536) ......... 21,936
-------
U.S. Government Agency Obligation (2.9%):
$670,000 Federal Home Loan Bank
Discount Note 4.820%,
01/06/00, (Cost $670) .... 670
-------
CASH EQUIVALENT (1.9%):
425,846 Goldman Sachs Financial
Square Premium Money
Market Fund, (Cost $426) ...... 426
-------
Total Investments (Cost $14,632) -- 100.3% $23,032
=======
Other Assets and Liabilities, Net -- (0.3%) (65)
-------
VALUE
(000)
-------
NET ASSETS:
Fund shares (unlimited authorization -- no par
value) based on 1,079,539 outstanding shares
of beneficial interest $ 7,529
Net unrealized appreciation on investments 8,400
Accumulated net realized gain 7,038
-------
Total Net Assets -- 100.0% $22,967
=======
Net Asset Value, Offering and Redemption
Price Per Share $21.27
=======
- --------------
* Non-income producing security
+ Security fully or partially on loan
Cl -- Class
- --------------
THE GROSS UNREALIZED APPRECIATION/(DEPRECIATION)
FOR BOOK PURPOSES WHICH IS NOT MATERIALLY DIFFERENT
FROM FEDERAL INCOME TAX PURPOSES IS AS FOLLOWS:
Gross appreciation ...................... $ 8,647
Gross depreciation ...................... (247)
-------
$ 8,400
-------
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE>
Statement of Net Assets
- --------------------------------------------------------------------------------
THE PARKSTONE ADVANTAGE FUND DECEMBER 31, 1999
Small Capitalization Fund
MARKET
SECURITY VALUE
SHARES DESCRIPTION (000)
- ---------- ----------------------------------- ----------
Common Stocks (92.8%):
Air Transportation (0.7%):
4,400 Atlas Air* ........................ $ 121
--------
Auto (2.6%):
8,000 Gentex* ........................... 222
7,800 Monaco Coach* ..................... 199
--------
421
--------
Banks (2.1%):
4,000 Cullen Frost Bankers .............. 103
5,300 Imperial Bancorp* ................. 128
16,200 Republic Security Financial ....... 116
--------
347
--------
Broadcasting, Newspapers & Advertising (3.2%):
2,100 Citadel Communications* ........... 136
4,100 Cumulus Media* .................... 208
4,425 Spanish Broadcasting Systems, Cl A* 178
--------
522
--------
Business Services (18.7%):
850 Allaire* .......................... 124
1,200 Business Objects* ................. 160
2,000 Clarify* .......................... 252
1,700 Clarus Corp* ...................... 112
2,600 Corporate Executive Board* ........ 145
1,400 Diamond Technology Partners* ...... 120
1,000 Digex* ............................ 69
8,600 Hooper Holmes ..................... 221
2,400 Level 8 Systems*+ ................. 83
750 Mastech* .......................... 19
2,100 Mercury Interactive* .............. 227
500 MicroStrategy* .................... 105
7,000 Netobjects* ....................... 116
9,000 Novadigm* ......................... 187
7,700 Online Resources & Communications* 128
4,400 Onyx Software* .................... 163
460 Preview Systems* .................. 30
6,500 Psw Technologies * ................ 130
4,000 Remedy* ........................... 190
11,200 Sapiens International Corporation*+ 184
5,100 Titan* ............................ 240
2,450 Xpedior *+ ........................ 70
--------
3,075
--------
Communications Equipment (12.9%):
5,300 Act Manufacturing* ................ 199
1,450 Ancor Communications* ............. 98
5,400 Audiovox, Cl A* ................... 164
2,350 C-Cor Electronics* ................ 180
2,600 CTS ............................... 196
3,300 Digital Microwave* ................ 77
1,500 Dii Group* ........................ 106
7,000 Mercury Computer Systems* ......... 245
5,400 Optimal Robotics* ................. 201
4,400 Sawtek* ........................... 293
4,300 SBS Technologies* ................. 157
MARKET
SECURITY VALUE
SHARES DESCRIPTION (000)
- ---------- ----------------------------------- ----------
COMMON STOCKS, CONTINUED:
Communications Equipment (continued):
3,100 Sonicwall* ........................ $ 125
1,700 Tut Systems*+ ..................... 91
--------
2,132
--------
Computer Communications Equipment (3.4%):
1,500 Micromuse* ........................ 255
3,800 Visual Networks*+ ................. 301
--------
556
--------
Computers (2.0%):
3,500 Advanced Digital Information*+ .... 170
4,100 National Computer Systems ......... 154
--------
324
--------
Drugs & Health Care (2.5%):
3,400 Biomatrix*+ ....................... 65
900 Gilead Sciences* .................. 49
600 IDEC Pharmaceuticals* ............. 59
500 Incyte Pharmaceuticals* ........... 30
2,800 Priority Healthcare, Cl B* ........ 81
6,500 Titan Pharmaceuticals*+ ........... 123
--------
407
--------
Entertainment (1.8%):
8,970 3DO* .............................. 82
3,000 Macrovision* ...................... 222
--------
304
--------
Financial Services (0.9%):
4,100 Metris+ ........................... 146
--------
Gas & Natural Gas (1.1%):
3,000 Nicor ............................. 98
3,450 Southwest Gas ..................... 79
--------
177
--------
Information Retrieval Services (2.4%):
2,150 Digital River* .................... 72
5,300 National Information Consortium* .. 170
1,500 QRS* .............................. 158
--------
400
--------
Insurance (1.0%):
6,400 Annuity & Life .................... 167
--------
Manufacturing (1.9%):
7,600 Commscope* ........................ 306
--------
Medical & Medical Services (4.7%):
1,100 Arthrocare* ....................... 67
7,000 Datascope ......................... 280
2,900 Enzon* ............................ 126
400 Human Genome Sciences* ............ 61
7,300 PolyMedica* ....................... 169
7,200 Theragenics* ...................... 65
--------
768
--------
19
<PAGE>
Statement of Net Assets
- --------------------------------------------------------------------------------
THE PARKSTONE ADVANTAGE FUND DECEMBER 31, 1999
Small Capitalization Fund (concluded)
MARKET
SECURITY VALUE
SHARES DESCRIPTION (000)
- ---------- ------------------------------------ ---------
COMMON STOCKS, CONTINUED:
Petroleum & Fuel Products (0.6%):
1,650 Cal Dive International* ............ $ 55
2,700 Louis Dreyfus Natural Gas* ......... 49
-------
104
-------
Petroleum Refining (0.2%):
3,350 Tesoro Petroleum* .................. 39
-------
Pharmaceuticals (1.8%):
5,350 King Pharmaceuticals*+ ............. 300
-------
Printing & Publishing (0.8%):
3,000 Valassis Communications* ........... 127
-------
Retail (5.2%):
4,700 BJ's Wholesale Club* ............... 172
4,200 Brauns Fashions* ................... 88
7,400 Jack In The Box ................... 153
5,800 Rex Stores* ........................ 203
6,050 Too* ............................... 104
3,960 Tweeter Home Entertainment Group* .. 141
-------
861
-------
Rubber & Plastic (0.8%):
4,800 Trex* .............................. 128
-------
Semi-Conductors/Instruments (13.8%):
9,155 Asm International N.V.*+ ........... 211
3,750 Burr-Brown* ........................ 135
2,000 Credence Systems*+ ................. 173
3,500 Cymer*+ ............................ 161
3,100 Exar* .............................. 183
2,300 Helix Technology* .................. 103
3,000 Integrated Device Technology*+ ..... 87
16,900 Integrated Silicon Solutions* ...... 280
10,100 Netsilicon* ........................ 203
150 Next Level Communications* ......... 11
3,950 Parlex* ............................ 104
1,900 PRI Automation, Cl A*+ ............. 128
4,400 Silicon Storage Technology* ........ 182
1,500 Transwitch* ........................ 109
3,600 Zoran*+ ............................ 201
-------
2,271
-------
Soap & Cleaner Preperation (0.3%):
2,150 Church & Dwight .................... 57
-------
Specialty Construction (0.9%):
3,400 Mastec* ............................ 151
-------
Telephone & Telecommunication (4.2%):
4,700 Adelphia Business Solutions* ....... 226
7,800 ICG Communications *+ .............. 146
SHARES OR MARKET
PRINCIPAL SECURITY VALUE
AMOUNT DESCRIPTION (000)
- ---------- ----------------------------------- ---------
COMMON STOCKS, CONTINUED:
Telephone & Telecommunication (continued):
3,100 Intermedia*+ ....................... $ 120
11,000 SBA Communications* ................ 206
-------
698
-------
Testing Laboratories (1.2%):
300 Affymetrix* ........................ 51
1,200 Millennium Pharmaceutical*+ ........ 146
-------
197
-------
Trucking (1.1%):
4,300 Expeditors International of
Washington ....................... 188
-------
Total Common Stocks (Cost $9,735) 15,294
-------
U.S. GOVERNMENT OBLIGATION (1.3%):
$220,000 Federal National Mortgage Association
Discount Note 4.059%, 01/06/00
(Cost $220) ........................ 220
-------
CASH EQUIVALENT (4.4%):
717,762 Goldman Sachs Financial
Square Premium Money
Market Fund, (Cost $718) ......... 718
-------
Total Investments (Cost $10,673) -- 98.5% $16,232
=======
Other Assets and Liabilities, Net -- 1.5% 241
-------
Net Assets:
Fund shares (unlimited authorization -- no par
value) based on 793,221 outstanding shares of
beneficial interest 9,213
Net unrealized appreciation on investments 5,559
Accumulated net realized gain on investments 1,701
-------
Total Net Assets -- 100.0% $16,473
=======
Net Asset Value, Offering and Redemption
Price Per Share $20.77
=======
- --------------
* Non-income producing security
+ Security fully or partially on loan
Cl -- Class
- --------------
THE GROSS UNREALIZED APPRECIATION/(DEPRECIATION)
FOR BOOK PURPOSES WHICH IS NOT MATERIALLY DIFFERENT
FROM FEDERAL INCOME TAX PURPOSES IS AS FOLLOWS:
Gross appreciation ......................... $ 5,762
Gross depreciation ......................... (203)
-------
$ 5,559
-------
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE>
Statement of Net Assets
- --------------------------------------------------------------------------------
THE PARKSTONE ADVANTAGE FUND DECEMBER 31, 1999
ARMADA ADVANTAGE EQUITY GROWTH FUND
MARKET
SECURITY VALUE
SHARES DESCRIPTION (000)
- ---------- ------------------------------------ ---------
Common Stocks (96.2%):
Aircraft (0.3%):
300 United Technologies ............. $ 19
-------
Banks (4.0%):
300 Comerica ........................ 14
600 Fannie Mae ...................... 37
700 Freddie Mac ..................... 33
200 J.P. Morgan ..................... 25
1,900 MBNA ............................ 52
400 Northern Trust .................. 21
600 State Street .................... 44
-------
226
-------
Beauty Products (3.5%):
1,200 Colgate Palmolive ............... 78
500 Gillette ........................ 21
900 Procter & Gamble ................ 99
-------
198
-------
Broadcasting, Newspapers & Advertising (2.8%):
1,600 Comcast, Cl A Special ........... 81
800 Omnicom Group ................... 80
-------
161
-------
Chemicals (0.9%):
500 Avery Dennison .................. 36
400 Monsanto ........................ 14
-------
50
-------
Communications Equipment (7.9%):
400 ADC Telecommunications* ......... 29
1,700 Lucent Technologies ............. 127
1,500 Nortel Networks ................. 152
800 Qualcomm* ....................... 141
-------
449
-------
Computers (10.5%):
2,600 Cisco Systems* .................. 279
1,100 EMC* ............................ 120
100 Hewlett Packard ................. 11
800 International Business Machines . 86
700 Lexmark International, Cl A* .... 63
800 Pitney Bowes .................... 39
-------
598
-------
Drugs & Health Care (6.9%):
1,200 Bristol-Myers Squibb ............ 77
200 Lilly (Eli) ..................... 13
900 Merck ........................... 60
2,500 Pfizer .......................... 81
1,700 Schering-Plough ................. 72
1,100 Warner-Lambert .................. 90
-------
393
-------
MARKET
SECURITY VALUE
SHARES DESCRIPTION (000)
- ---------- ------------------------------------ ---------
COMMON STOCKS, CONTINUED:
Entertainment (1.2%):
1,200 AT&T-Liberty Media, Cl A* .......... $ 68
-------
Financial Services (1.5%):
500 American Express ................... 83
-------
Food & Beverage (0.9%):
500 Coca Cola .......................... 29
700 PepsiCo ............................ 25
-------
54
-------
Insurance (3.8%):
1,400 American International Group ....... 151
1,200 Citigroup .......................... 67
-------
218
-------
Machinery (7.5%):
500 Applied Materials* ................. 63
300 Emerson Electric ................... 17
1,600 General Electric ................... 248
2,500 Tyco International ................. 97
-------
425
-------
Marine Transportation (0.8%):
1,000 Carnival, Cl A ..................... 48
-------
Medical & Medical Services (0.6%):
1,000 Medtronic .......................... 36
-------
Miscellaneous Business Services (8.2%):
1,300 Automatic Data Processing .......... 70
400 BMC Software* ...................... 32
1,300 Concord EFS* ....................... 33
2,300 Microsoft* ......................... 269
800 Sun Microsystems* .................. 62
-------
466
-------
Motorcycles (0.9%):
800 Harley-Davidson .................... 51
-------
Paper & Paper Products (1.1%):
1,100 International Paper ................ 62
-------
Petroleum & Fuel Products (1.6%):
1,200 Burlington Resources ............... 40
800 Schlumberger ....................... 45
154 Transocean Sedco Forex ............. 5
-------
90
-------
Petroleum Refining (4.5%):
300 BP Amoco, ADR ...................... 18
800 Chevron ............................ 69
1,200 Coastal ............................ 43
1,800 Conoco ............................. 45
1,000 Exxon Mobil ........................ 81
-------
256
-------
21
<PAGE>
Statement of Net Assets
- --------------------------------------------------------------------------------
THE PARKSTONE ADVANTAGE FUND DECEMBER 31, 1999
ARMADA ADVANTAGE EQUITY GROWTH FUND (CONCLUDED)
SHARES OR MARKET
PRINCIPAL SECURITY VALUE
AMOUNTS DESCRIPTION (000)
- ---------- ------------------------------------ ---------
Common Stocks, continued:
Printing & Publishing (1.4%):
1,100 Time Warner ........................ $ 80
------
Retail (10.8%):
800 Costco Wholesale* .................. 73
1,000 Dayton Hudson ...................... 73
400 Gap ................................ 18
1,950 Home Depot ......................... 134
1,100 Kroger* ............................ 21
500 Lowe's ............................. 30
1,500 Tandy .............................. 74
600 TJX Companies ...................... 12
1,300 Walgreen ........................... 38
2,100 Wal-Mart ........................... 145
------
618
------
Semi-Conductors/Instruments (5.2%):
800 Altera* ............................ 40
600 Analog Devices* .................... 56
1,400 Intel .............................. 115
900 Texas Instruments .................. 87
------
298
------
Telephone & Telecommunication (6.8%):
1,000 Alltel ............................. 83
900 BellSouth .......................... 42
700 GTE ................................ 49
1,500 MCI WorldCom* ...................... 80
1,768 SBC Communications ................. 86
1,000 Vodafone Group ..................... 50
------
390
------
Wholesale (2.6%):
200 Cardinal Health .................... 10
700 Johnson & Johnson .................. 65
1,100 Safeway* ........................... 39
800 Sysco .............................. 32
------
146
------
Total Common Stock (Cost $4,755) 5,483
------
Cash Equivalent (3.3%):
$187,038 Fidelity Domestic Money Market
Fund (Cost $187) 187
------
Total Investments (Cost $4,942) -- 99.5% $5,670
======
Other Assets and Liabilities, Net -- 0.5% 30
------
VALUE
(000)
-----
Net Assets:
Fund shares (unlimited authorization -- no par
value) based on 500,010 outstanding shares of
beneficial interest $4,998
Net unrealized appreciation on investments 728
Accumulated net realized loss on investments (26)
------
Total Net Assets -- 100.0% $5,700
======
Net Asset Value, Offering and Redemption
Price Per Share $11.40
======
- --------------
* Non-income producing security
ADR -- American Depository Receipt
Cl -- Class
- --------------
THE GROSS UNREALIZED APPRECIATION/(DEPRECIATION)
FOR BOOK PURPOSES WHICH IS NOT MATERIALLY DIFFERENT
FROM FEDERAL INCOME TAX PURPOSES IS AS FOLLOWS:
Gross appreciation ......................... $ 928
Gross depreciation ......................... (200)
------
$ 728
------
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
THE PARKSTONE ADVANTAGE FUND
Bond Fund
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT
THE YEAR 1999 1998 1997 1996 1995
-------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ................... $10.92 $ 10.70 $ 10.33 $10.50 $ 9.35
------ ------- ------- ------ -------
INVESTMENT ACTIVITIES
Net investment income ............................. 0.96 0.51 0.48 0.36 0.40
Net realized and unrealized gains/(losses)
from investments ................................ (1.19) 0.20 0.30 (0.18) 1.17
------ ------- ------- ------ -------
Total from Investment Operations .............. (0.23) 0.71 0.78 0.18 1.57
------ ------- ------- ------ -------
LESS DISTRIBUTIONS
Dividends from net investment income .............. (0.83) (0.49) (0.41) (0.35) (0.42)
Distributions from net realized capital gains ..... (0.14) -- -- -- --
------ ------- ------- ------ -------
Total Distributions ........................... (0.97) (0.49) (0.41) (0.35) (0.42)
------ ------- ------- ------ -------
NET ASSET VALUE, END OF YEAR ...................... $ 9.72 $ 10.92 $ 10.70 $10.33 $ 10.50
====== ======= ======= ====== ========
Total Return (1.96%) 6.71% 7.69% 1.83% 16.98%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of year (000) ...................... $7,470 $12,337 $11,856 $9,754 $6,758
Ratio of expenses to average net assets .............. 1.29% 1.44% 1.36% 1.29% 1.57%
Ratio of net investment income to average
net assets ........................................ 5.25% 5.00% 5.36% 5.32% 5.31%
Ratio of expenses to average net assets* ............. (a) 1.50% (a) (a) (a)
Portfolio turnover rate .............................. 242% 190% 144% 492% 178%
<FN>
- -------------
* During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios have
been indicated.
(a)There were no waivers or reimbursements during this period.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
THE PARKSTONE ADVANTAGE FUND
INTERNATIONAL DISCOVERY FUND
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT
THE YEAR 1999(b) 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR .................... $ 13.83 $ 12.44 $ 12.18 $ 10.59 $ 9.65
------- ------- ------- ------- -------
INVESTMENT ACTIVITIES
Net investment loss ................................ (0.10) (0.10) (0.06) (0.04) (0.03)
Net realized and unrealized gains
from investments ................................. 7.54 1.55 0.32 1.67 0.97
------- ------- ------- ------- -------
Total from Investment Operations ............... 7.44 1.45 0.26 1.63 0.94
------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net investment income ............... -- -- -- (0.04) --
Distributions from net realized capital gains ...... (0.76) (0.06) -- -- --
------- ------- ------- ------- -------
Total Distributions ............................ (0.76) (0.06) -- (0.04) --
------- ------- ------- ------- -------
NET ASSET VALUE, END OF YEAR .......................... $ 20.51 $ 13.83 $ 12.44 $ 12.18 $ 10.59
======= ======= ======= ======= =======
Total Return .......................................... 55.70% 11.61% 2.13% 15.41% 9.74%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of year (000) ....................... $20,584 $18,371 $18,784 $17,001 $11,645
Ratio of expenses to average net assets ............... 2.01% 2.05% 1.90% 2.00% 2.38%
Ratio of net investment loss to average
net assets ......................................... (0.69%) (0.66%) (0.46%) (0.35%) (0.39%)
Ratio of expenses to average net assets ............... (a) 2.11%* (a) (a) (a)
Portfolio turnover rate ............................... 115% 73% 34% 65% 86%
- ------------
<FN>
* During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios have
been indicated.
(a) There were no waivers or reimbursements during this period.
(b) Per share data calculated using average shares outstanding method.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
24
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
THE PARKSTONE ADVANTAGE FUND
MID CAPITALIZATION FUND
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT
THE YEAR 1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR .................... $ 15.70 $ 14.23 $ 14.60 $ 12.44 $ 9.64
------- ------- ------- ------- -------
INVESTMENT ACTIVITIES
Net investment loss ................................ (0.41) (0.16) (0.11) (0.09) (0.08)
Net realized and unrealized gains
from investments ................................. 7.08 1.63 1.90 2.25 2.88
------- ------- ------- ------- -------
Total from Investment Operations ............... 6.67 1.47 1.79 2.16 2.80
------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Distributions from net realized capital gains ...... (1.10) -- (2.16) -- --
------- ------- ------- ------- -------
NET ASSET VALUE, END OF YEAR .......................... $ 21.27 $ 15.70 $ 14.23 $ 14.60 $ 12.44
======= ======= ======= ======= =======
TOTAL RETURN .......................................... 44.36% 10.33% 12.58% 17.36% 29.05%
Ratios/Supplementary Data:
Net Assets at end of year (000) ....................... $22,967 $29,066 $31,059 $24,041 $14,977
Ratio of expenses to average net assets ............... 1.59% 1.51% 1.53% 1.42% 1.62%
Ratio of net investment loss to average
net assets ......................................... (1.09%) (0.98%) (0.88%) (0.73%) (0.84%)
Ratio of expenses to average net assets* .............. (a) 1.57% (a) (a) (a)
Portfolio turnover rate ............................... 139% 71% 55% 127% 44%
- ------------
<FN>
* During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios have
been indicated.
(a) There were no waivers or reimbursements during this period.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
25
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
THE PARKSTONE ADVANTAGE FUND
SMALL CAPITALIZATION FUND
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT
THE YEAR 1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR .................... $ 16.69 $ 17.12 $ 18.20 $ 15.71 $ 11.58
------- ------- ------- ------- -------
INVESTMENT ACTIVITIES
Net investment loss ................................ (0.22) (0.20) (0.20) (0.15) (0.15)
Net realized and unrealized gains/(losses)
from investments ................................. 5.16 (0.23) (0.79) 4.79 4.28
------- ------- ------- ------- -------
Total from Investment Operations ............... 4.94 (0.43) (0.99) 4.64 4.13
------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Distributions from net realized capital gains ...... (0.86) -- (0.09) (2.15) --
------- ------- ------- ------- -------
NET ASSET VALUE, END OF YEAR .......................... $ 20.77 $ 16.69 $ 17.12 $ 18.20 $ 15.71
======= ======= ======= ======= =======
Total Return .......................................... 31.24% (2.51%) (5.47%) 29.66% 35.66%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of year (000) ....................... $16,473 $22,454 $26,860 $24,495 $13,273
Ratio of expenses to average net assets ............... 1.65% 1.53% 1.55% 1.40% 1.64%
Ratio of net investment loss to average
net assets ......................................... (1.08%) (1.14%) (1.20%) (1.06%) (1.29%)
Ratio of expenses to average net assets* .............. (a) 1.60% (a) (a) (a)
Portfolio turnover rate ............................... 135% 83% 51% 60% 64%
<FN>
- ------------
* During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios have
been indicated.
(a) There were no waivers or reimbursements during this period.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
26
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
THE PARKSTONE ADVANTAGE FUND
ARMADA ADVANTAGE EQUITY GROWTH FUND
PERIOD ENDED DECEMBER 31,
--------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT
THE PERIOD 1999+
--------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ....................................... $10.00
------
INVESTMENT ACTIVITIES
Net investment loss ..................................................... (1.00)
Net realized and unrealized gains from investments ...................... 2.40
------
Total from Investment Activities .................................... 1.40
------
NET ASSET VALUE, END OF PERIOD ............................................. $11.40
======
Total Return .............................................................. 14.00%(a)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) .......................................... $5,700
Ratio of expenses to average net assets .................................... 1.00% (b)
Ratio of net investment loss to average net assets ......................... (0.109%)(b)
Ratio of expenses to average net assets* ................................... 1.75% (b)
Portfolio turnover rate .................................................... 26%
<FN>
- ------------
* During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios have
been indicated.
+ Fund commenced operations on September 13, 1999.
(a) Total return is for the period indicated and has not been annualized.
(b) Annualized.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
27
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
THE PARKSTONE ADVANTAGE FUND DECEMBER 31, 1999
1. ORGANIZATION:
The Parkstone Advantage Fund (the "Company") is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
investment company.
The Company is authorized to issue an unlimited number of shares which are
shares of beneficial interest without par value. The Company presently
offers series of shares of the Bond Fund, the International Discovery Fund,
the Mid Capitalization Fund, the Small Capitalization Fund and the Armada
Advantage Equity Growth Fund (collectively, "the Funds" and individually, a
"Fund"). Sales of shares of the Funds may only be made to separate accounts
of various life insurance companies ("Participating Insurance Companies")
and certain qualified benefit plans. As of December 31, 1999, the
Participating Insurance Company for the Bond, International Discovery, Mid
Capitalization and Small Capitalization Funds is Security Benefit Life
Insurance Company. The Armada Advantage Balanced Allocation Fund is
registered but has not yet commenced operations.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies followed by
the Company in the preparation of its 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:
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 Bond 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 International Discovery Fund, Mid
Capitalization Fund, Small Capitalization Fund and the Armada Advantage
Equity Growth 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 supervison of the Board of Trustees. Portfolio securities with a
remaining maturity of 60 days or less may be valued either at amortized
cost or original cost plus accrued interest, which approximates current
value.
FOREIGN CURRENCY TRANSLATION:
The market value of investment securities, other assets and liabilities of
the International Discovery 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 date of each transaction.
The International Discovery Fund does 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.
28
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
THE PARKSTONE ADVANTAGE FUND (continued) DECEMBER 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. dollars 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 acquire repurchase agreements from member banks of the
Federal Deposit Insurance Corporation with capital, surplus and undivided
profits in excess of $100,000,000 (as of the date of their most recently
published financial statements) and from registered broker/dealers which
National City Investment Management Co. (IMC) deems creditworthy under
guidelines approved by the Board of Trustees, subject to the seller's
agreement to repurchase the underlying securities at a mutually agreed-upon
date and price. The repurchase price generally equals the price paid by the
Fund plus interest negotiated on the basis of current short-term rates,
which may be more or less than the rate on the underlying collateral. The
seller, under a repurchase agreement, is required to maintain the value of
collateral held pursuant to the agreement at not less than the repurchase
price (including accrued interest).
LENDING PORTFOLIO SECURITIES:
To generate additional income, the Funds, may lend up to 33 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 the
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, not considered to be
illiquid investments. The loaned securities were fully collateralized by
cash, U.S. government securities, short-term corporate notes and repurchase
agreements as of December 31, 1999. As of December 31, 1999, the following
Funds had securities with the following market values on loan:
29
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
THE PARKSTONE ADVANTAGE FUND (continued) DECEMBER 31, 1999
MARKET MARKET VALUE
VALUE OF OF LOANED
COLLATERAL (000) SECURITIES (000)
---------------- ----------------
International Discovery Fund ........... $2,203 $2,201
Mid Capitalization Fund ................ 6,307 6,304
Small Capitalization Fund .............. 2,908 2,906
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
The Funds will make distributions from net investment income and net
realized capital gains on investments, if any, annually.
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.
The amounts of dividends from net investment income and of distributions
from net realized gains are determined in accordance with federal income
tax regulations which may differ from GAAP. 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 reclassification. Dividends and
distributions to shareholders which exceed net investment income and net
realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income and
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. On the statement of net assets the following adjustments were
made:
ACCUMULATED UNDISTRIBUTED PAID-IN-
NET INVESTMENT NET INVESTMENT CAPITAL
FUND GAIN (000) INCOME (000) (000)
---- -------------- -------------- -------
International Discovery Fund ......... (170) 170 --
Mid Capitalization Fund .............. (265) 265 --
Small Capitalization Fund ............ (175) 175 --
Armada Advantage Equity Growth Fund .. -- 2 (2)
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 Funds record 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. The Funds 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 December 31, 1999 are
recorded for financial reporting purposes as unrealized gains and losses by
the Funds. The following forwards were open at December 31, 1999.
30
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
THE PARKSTONE ADVANTAGE FUND (continued) DECEMBER 31, 1999
CONTRACTS IN UNREALIZED
TO (DELIVER)/ EXCHANGE APPRECIATION
RECEIVE FOR SETTLEMENT (DEPRECIATION)
FUND (000) (000) DATE (000)
----- ------------- -------- ---------- --------------
INTERNATIONAL DISCOVERY FUND
FOREIGN CURRENCY SALES:
Japanese Yen ........... JP (200,000) $(1,749) 04/03/00 $(238)
FOREIGN CURRENCY PURCHASES:
Euro ................... EU 97 97 01/07/00 --
BritishPound ........... GB 13 21 01/04/00 --
Japanese Yen ........... JP 112,500 996 01/04/00 122
Japanese Yen ........... JP 87,500 761 04/03/00 108
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 second market.
Financial futures contracts open at December 31, 1999 were as follows:
NUMBER NOTIONAL UNREALIZED
OF COST AMOUNT EXPIRATION GAIN
FUND CONTRACTS (000) DATE (000)
---- --------- ----------- ---------- ----------
INTERNATIONAL DISCOVERY FUND --
DAX Index 1 $174 Mar-00 $2
FT-SE 100 Index 1 111 Mar-00 1
NIKKEI 225 Index 1 183 Mar-00 1
MORTGAGE DOLLAR ROLLS:
For the purpose of enhancing the Fund's yield, the BondFund 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
contacts 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.
OTHER:
Expenses that are directly related to one of the Funds are charged directly
to that Fund. Other operating expenses for the Company are pro-rated to
the Funds on the basis of relative net assets.
3. INVESTMENT RISKS:
The International Discovery Fund's investment in foreign securities may
involve risks not present in domestic investments. Since foreign securities
are denominated in foreign currencies and pay interest or dividends in
foreign currencies, changes in the relationship of these currencies to the
U.S. dollar can
31
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
THE PARKSTONE ADVANTAGE FUND (continued) DECEMBER 31, 1999
significantly affect the value of the investment and operations of the
Fund. Foreign investments may also subject the Fund to foreign government
exchange restrictions, expropriation, taxation or other political, social
or economic developments, all of which could affect the market and/or
credit risk of the investments.
4. PURCHASES AND SALES OF SECURITIES:
Purchases and sales of securities (excluding short-term securities and U.S.
Government obligations) for the period ended December 31, 1999, are as
follows:
PURCHASES (000) SALES (000)
--------------- -----------
Bond Fund ................................ $ 7,244 $ 8,508
International Discovery Fund ............. 19,491 25,449
Mid Capitalization Fund .................. 32,389 45,115
Small Capitalization Fund ................ 20,704 30,317
Armada Advantage Equity Growth Fund ...... 5,203 400
Purchases and sales of long-term U.S. Government obligations were:
Purchases (000) Sales (000)
--------------- -----------
Bond Fund ............................. $ 8,144 $22,673
As of December 31, 1999 the following Fund has a capital loss carryforward:
Expiration
Fund Amount (000) Date
----- ------------ -----------
Bond Fund ............................ $338 2007
Armada Advantage Equity Growth Fund .. 26 2007
5. RELATED PARTY TRANSACTIONS:
Investment advisory services are provided to the Funds by National City
Investment Management Co. (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. National City Bank, an affiliate of
IMC, serves as custodian of the Company's assets and receives a fee based
on the daily average net assets of each Fund.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS")
is an Ohio limited partnership. BISYS Fund Services, Inc. ("BISYS Inc."),
and BISYS are subsidiaries of The BISYS Group, Inc. BISYS, with whom
certain officers of the Company were affiliated, served the Company as
Administra-tor and Distributor prior to July 6, 1999. Such officers were
paid no fees directly by the Company for serving as officers of the
Company. Under the terms of the Administration Agreement between BISYS and
the Company, BISYS's fees were computed daily as a percentage of the
average net assets of each of the Funds. BISYS Inc. served as Distributor
to the Company and as Mutual Fund Accountant and Transfer Agent prior to
July 6, 1999.
Effective July 6, 1999, SEI Investments Mutual Funds Services became the
Administrator and Mutual Fund Accountant to the Company; SEI Investments
Distribution Co. became the Distributor of Company shares; and State Street
Bank & Trust Company became the Transfer Agent to the Company.
32
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
THE PARKSTONE ADVANTAGE FUND (concluded) DECEMBER 31, 1999
<TABLE>
<CAPTION>
Armada
Advantage
International Mid Small Equity
Bond Discovery Capitalization Capitalization Growth
Fund Fund Fund Fund Fund
---- ------------- -------------- -------------- ---------
INVESTMENT ADVISORY FEES:
Annual fee
<S> <C> <C> <C> <C> <C>
(percentage of average net assets) 0.55%(a) 1.15%(b) 1.00% 1.00% 0.75%(c)
ADMINISTRATION FEES:
Annual fee
(percentage of average net assets) 0.20% 0.20% 0.20% 0.20% 0.20%
</TABLE>
------------
(a) The contractual Investment Advisory fee was lowered from 0.74% to 0.55%
effective October 1, 1999.
(b) The contractual Investment Advisory fee was lowered from 1.25% to 1.15%
effective October 1, 1999.
(c) The advisor is voluntarily waiving the full Investment Advisory fee.
Fee waivers are voluntary and may change.
Fees may be voluntarily reduced or reimbursed to assist the Funds in
maintaining competitive expense ratios.
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 pro-rata
basis across the Armada Funds, Parkstone Group ofFunds 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 IMC, SEI Investments Distribution Co., or any
parent or subsidiary thereof, who serves as an officer, trustee, or
employee of the Company receives any compensation from the Company.
Trustees who receive fees are eligible for participation in theCompany's
Deferred Compensation Plan (the "Plan"), an unfunded, nonqualified deferred
compensation plan. The Plan allows each eligible Trustee to defer receipt
of all or a percentage of fees that would otherwise be payable for services
performed.
33
<PAGE>
NOTICE TO SHAREHOLDERS (UNAUDITED)
- --------------------------------------------------------------------------------
THE PARKSTONE ADVANTAGE FUND DECEMBER 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 Parkstone Advantage Shareholders:
For the fiscal year ended December 31, 1999, each Fund designated long term
capital gains and exempt income with regard to distributions paid during
the year as follows:
(A) (B) (C) (D)
Long Term Ordinary Tax
Capital Gains Income Exempt Total
Distributions Distributions Distributions Distribution
Fund (Tax Basis) (Tax Basis) (Tax Basis) (Tax Basis)
- ----- ------------- -------------- -------------- ------------
Bond 8.52% 91.48% 0.00% 100.00%
International Discovery 100.00% 0.00% 0.00% 100.00%
Mid Capitalization 100.00% 0.00% 0.00% 100.00%
Small Capitalization 100.00% 0.00% 0.00% 100.00%
Items (A), (B), (C) and (D) are based on a percentage of the fund's total
distribution.
34
<PAGE>
Notes
- --------------------------------------------------------------------------------
<PAGE>
Notes
- --------------------------------------------------------------------------------
<PAGE>
[Parkstone logo omitted]
One Freedom Valley Drive
Oaks, PA 19456
BULKRATE
U.S. POSTAGE
PAID
CINCINNATI CORPORATEMAIL
PERMIT # 9463
CINCINNATI, OH
INVESTMENT ADVISOR:
National City(R)
Investment Management Company
1900 East Ninth Street, 22nd Floor
Cleveland, OH 44114
PAR-F-012-0100
(12/99)
