MARKETVEST FUNDS INC, 497, 1997-07-02

MARKETVEST FUNDS INC
497, 1997-07-02

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Combined prospectus for

Marketvest Equity Fund

Marketvest International Equity Fund

Marketvest Pennsylvania Intermeditate
Municipal Bond Fund

Marketvest Short-Term Bond Fund

Marketvest Intermediate U.S.
Government Bond Fund

JUNE 1997

[LOGO OF MARKETVEST FUNDS]

MARKETVEST GROUP OF FUNDS
COMBINED PROSPECTUS

Marketvest Funds, Inc. which currently consists of three diversified
investment portfolios, and Marketvest Funds, which currently consists
of one diversified and one non-diversified investment portfolio (each
portfolio individually referred to as a "Fund" and collectively as the
"Funds") are open-end, management investment companies (mutual funds).
This combined prospectus offers investors interests in the following
five Funds, each having a distinct investment objective and policies:

Marketvest Equity Fund;

Marketvest International Equity Fund;

Marketvest Pennsylvania Intermediate Municipal Bond Fund;

Marketvest Short-Term Bond Fund; and

Marketvest Intermediate U.S. Government Bond Fund.

THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS
OF ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF THE
PRINCIPAL AMOUNT INVESTED.

This combined prospectus contains the information you should read and
know before you invest in any of the Funds. Keep this prospectus for
future reference.

The Funds have also filed a Combined Statement of Additional dated
June 30, 1997 with the Securities and Exchange Commission ("SEC"). The
information contained in the Combined Statement of Additional
Information is incorporated by reference into this prospectus. You may
request a copy of the Combined Statement of Additional Information
free of charge, obtain other information, or make inquiries about any
of the Funds by writing to or calling the Funds at 1-800-MKT-VEST
(1-800-658-8378). The Combined Statement of Additional Information,
material incorporated by reference into this document, and other
information regarding the Funds is maintained electronically with the
SEC at Internet Web site (http://www.sec.gov).

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

Prospectus dated June 30, 1997

TABLE OF CONTENTS

- --------------------------------------------------------------------------------

SYNOPSIS 1

- ------------------------------------------------------

Risk Factors 2
International Equity Fund only 2

SUMMARY OF FUND EXPENSES 3

- ------------------------------------------------------

FINANCIAL HIGHLIGHTS 6

- ------------------------------------------------------

INVESTMENT OBJECTIVE AND POLICIES

OF EACH FUND 9

- ------------------------------------------------------

Equity Fund 9
International Equity Fund 10
Pennsylvania Intermediate Municipal
Bond Fund 11
Short-Term Bond Fund 14
Intermediate U.S. Government
Bond Fund 15

PORTFOLIO INVESTMENT AND STRATEGIES 15

- ------------------------------------------------------

MARKETVEST GROUP OF FUNDS INFORMATION 37

- ------------------------------------------------------

Management of the Marketvest Group

of Funds 37

BROKERAGE TRANSACTIONS 41

- ------------------------------------------------------

Distribution of Shares of the Funds 41

Administration of the Funds 42

Portfolio Turnover 42

Expenses of the Funds 43

NET ASSET VALUE 44

- ------------------------------------------------------

INVESTING IN THE FUNDS 44

- ------------------------------------------------------

Share Purchases 44

Minimum Investment Required 44

What Shares Cost 45

Reducing the Sales Charge 46

Systematic Investment Program 48

Exchanging Securities for Fund Shares 48

Certificates and Confirmations 48

Dividends and Capital Gains 48

EXCHANGE PRIVILEGE 48

- ------------------------------------------------------

Exchange by Telephone 49

Written Exchange 50

REDEEMING SHARES 50

- ------------------------------------------------------

Systematic Withdrawal Program 51

Accounts with Low Balances 51

SHAREHOLDER INFORMATION 52

- ------------------------------------------------------

Marketvest Funds, Inc. 52

Marketvest Funds 52

TAX INFORMATION 53

- ------------------------------------------------------

Federal Income Tax 53

Pennsylvania Personal Property Taxes 53

Additional Tax Information for
Pennsylvania Intermediate Municipal

Bond Fund 54

PERFORMANCE INFORMATION 56

- ------------------------------------------------------

Performance Information for
Predecessor Common and Collective

Investment Funds 56

FINANCIAL STATEMENTS 61

- ------------------------------------------------------

APPENDIX 68

- ------------------------------------------------------

ADDRESSES 72

- ------------------------------------------------------

SYNOPSIS

- --------------------------------------------------------------------------------

Marketvest Funds, Inc. was incorporated under the laws of the State of
Maryland pursuant to Articles of Incorporation dated October 25, 1995,
as amended. Marketvest Funds was established as a Massachusetts
business trust under a Declaration of Trust dated September 1, 1995,
as amended. Both the Articles of Incorporation and the Declaration of
Trust permit the Funds to offer separate series of shares of common
stock and beneficial interests, respectively, representing interests
in separate portfolios of securities. The shares in any one portfolio
may be (but are not currently) offered in separate classes. The Funds
are designed for individuals and institutions as a convenient means of
accumulating interests in professionally managed portfolios. As of the
date of this prospectus, Marketvest Funds, Inc. is comprised of the
following three portfolios:

Marketvest Equity Fund ("Equity Fund")--seeks to provide growth
of principal by investing primarily in the equity securities of
high quality companies;

Marketvest Short-Term Bond Fund ("Short-Term Bond Fund")--seeks
to provide current income by investing primarily in investment
grade debt securities, U.S. government securities, and
mortgage-backed and asset-backed securities while maintaining a
dollar-weighted average portfolio maturity of between one to
three years; and

Marketvest Intermediate U.S. Government Bond Fund ("Intermediate U.S.
Government Bond Fund")--seeks to provide current income by investing
primarily in securities which are issued or guaranteed as to payment of
principal and interest by the U.S. government or U.S. government agencies
or instrumentalities while maintaining a dollar-weighted average
portfolio maturity of between three to ten years.

In addition, as of the date of this prospectus, Marketvest Funds is
comprised of the following two portfolios:

Marketvest International Equity Fund ("International Equity
Fund")--seeks to provide long-term capital appreciation by
investing primarily in shares of other mutual funds, the
portfolios of which consist primarily of equity securities of
non-U.S. issuers; and

Marketvest Pennsylvania Intermediate Municipal Bond Fund
("Pennsylvania Intermediate Municipal Bond Fund")--seeks to
provide current income which is exempt from federal regular
income tax and the personal and corporate income taxes imposed
by the Commonwealth of Pennsylvania by investing primarily in
Pennsylvania municipal securities while maintaining a
dollar-weighted average portfolio maturity of between three to
ten years. The Fund may not be a suitable investment for
non-Pennsylvania taxpayers or retirement plans since it intends
to invest in Pennsylvania municipal securities.

For information on how to purchase shares of any of the Funds, please
refer to "Investing in the Funds." A minimum initial investment of
$1,000 is required for each Fund except the International Equity Fund,
for which the minimum initial investment is $10,000. Subsequent
investments in each Fund must be in amounts of at least $50. Shares of
each Fund are sold at net asset value plus any applicable sales
charge, and are redeemed at net asset value. Information on redeeming
shares may

be found under "Redeeming Shares." The Funds are advised by Dauphin Deposit Bank
and Trust Company ("Dauphin Deposit" or the "Adviser").

RISK FACTORS

Investors should be aware of the following general considerations: the
market value of fixed-income securities, which constitute a major part
of the investments of some of the Funds, may vary inversely in
response to changes in prevailing interest rates. As with other mutual
funds that invest primarily in equity securities, the Equity and
International Equity Funds are subject to market risks. The
possibility exists that the values of common stocks will decline over
short or even extended periods of time. The foreign securities in
which some Funds may invest may be subject to certain risks (i.e.,
greater price volatility and illiquidity than U.S. equity securities)
in addition to those inherent in U.S. investments. One or more Funds
may make certain investments and employ certain investment techniques
that involve other risks, including entering into repurchase
agreements, lending portfolio securities and entering into futures
contracts and related options as hedges. These risks and those
associated with investing in mortgage-backed securities, when-issued
securities, options and variable rate securities, and securities which
may be considered to be "derivatives" are described under the sections
"Investment Objective and Policies of Each Fund," "Portfolio
Investments and Strategies," and "Derivative Contracts and
Securities."

INTERNATIONAL EQUITY FUND ONLY

In addition to the above-listed risk factors, investors in the
International Equity Fund should be aware of the following additional
general considerations:

The International Equity Fund may also invest in underlying funds that
invest without limit in the securities of emerging market countries
and, in some cases, an underlying fund may invest without limit in the
securities of a single country. An underlying fund may also invest
substantially all of its assets in the securities of a single issuer.
In addition, an underlying fund may concentrate its investments within
one industry. However, by holding shares of multiple underlying funds,
the Fund seeks to reduce these risks. Although the Fund will limit its
direct investments in fixed income securities to investment grade
securities or unrated securities of comparable quality, the underlying
funds may invest 35% or more of their respective assets in high yield
securities (commonly known as "junk bonds"). The Fund and the
underlying funds may also make certain investments and employ certain
investment techniques that involve other risks, such as leveraged
borrowing, selling securities short, engaging in foreign currency
exchange transactions, trading in options, and entering into futures
contracts and swap agreements, all of which may involve increased
risks to the Fund. For a description of the risks associated with the
investments noted above, as well as those associated with investing in
mortgage-backed securities and securities which may be considered to
be "derivatives," please refer to the relevant descriptions under the
sections "Investment Objective and Policies," "Portfolio Investments
and Strategies," and "Additional Considerations of Investing in Other
Investment Companies" for more information.

MARKETVEST GROUP OF FUNDS
SUMMARY OF FUND EXPENSES

- --------------------------------------------------------------------------------

PENNSYLVANIA
INTERMEDIATE

MUNICIPAL
EQUITY FUND BOND FUND

<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES

Maximum Sales Charge Imposed on Purchases

(as a percentage of offering price).............................................. 4.75% 3.50%
Maximum Sales Charge Imposed on Reinvested Dividends

(as a percentage of offering price).............................................. None None
Contingent Deferred Sales Charge (as a percentage of original purchase price or
redemption proceeds, as applicable).............................................. None None
Redemption Fees (as a percentage of amount redeemed, if applicable)................ None None
Exchange Fee....................................................................... None None

ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)

<S> <C> <C>
Management Fees (after waiver)(1).................................................. 0.80% 0.60%
12b-1 Fees(2)...................................................................... 0.00% 0.00%
Total Other Expenses (after waiver)(3)............................................. 0.25% 0.23%
Total Fund Operating Expenses (after waivers)(4)........................... 1.05% 0.83%
</TABLE>

(1) The management fees for the Equity Fund and the Pennsylvania
Intermediate Muncipal Bond Fund have been reduced to reflect the
voluntary waiver of the management fee by the investment adviser.
The adviser can terminate this voluntary waiver at any time at its
sole discretion. With respect to the Equity Fund and the
Pennsylvania Intermediate Municipal Bond Fund, the maximum
management fees are 1.00% and 0.75%, respectively.

(2) As of the date of this prospectus, the Funds are not paying or
accruing 12b-1 fees. The Funds can pay up to 0.25% as a 12b-1 fee
to the distributor. Certain trust clients of Dauphin Deposit Bank
and Trust Company will not be affected by the distribution plan
because the distribution plan will not be activated unless and
until a separate class of shares of the Funds (which would not
have a Rule 12b-1 plan) are created and such clients' investments
in the Funds are converted to such class. If and when a Rule 12b-1
fee is assessed, long-term shareholders may pay more than the
economic equivalent of the maximum front-end sales charges
permitted under the rules of the National Association of
Securities Dealers, Inc.

(3) Total Other Expenses have been reduced to reflect the voluntary
waiver of the administrative fee by the administrator. The
administrator can terminate this voluntary waiver at any time at
its sole discretion.

(4) The Total Fund Operating Expenses were 1.26% for the Equity Fund and 1.02%
for Pennsylvania Intermediate Municipal Bond Fund absent the voluntary

waivers described in Notes 1 and 3 above.

THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN
UNDERSTANDING THE VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE
FUNDS WILL BEAR, EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE
DESCRIPTIONS OF THE VARIOUS COSTS AND EXPENSES, SEE "MARKETVEST GROUP
OF FUNDS INFORMATION" AND "INVESTING IN THE FUNDS." WIRE-TRANSFERRED
REDEMPTIONS MAY BE SUBJECT TO ADDITIONAL FEES.

EXAMPLE

You would pay the following expenses on a $1,000 investment assuming
(a) 5% annual return and (b) redemption at the end of each time
period.

PENNSYLVANIA
INTERMEDIATE

MUNICIPAL

EQUITY FUND BOND FUND

<S> <C> <C>
1 Year...................................................................... $58 $43
3 Years..................................................................... $79 $61
5 Years..................................................................... $103 $79
10 Years.................................................................... $170 $134
</TABLE>

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS
EXAMPLE IS BASED ON DATA FOR THE FISCAL YEAR ENDED FEBRUARY 28, 1997.

MARKETVEST GROUP OF FUNDS
SUMMARY OF FUND EXPENSES

- --------------------------------------------------------------------------------

INTERMEDIATE INTERNATIONAL
SHORT-TERM U.S. GOVERNMENT EQUITY

BOND FUND BOND FUND FUND*

<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES

Maximum Sales Charge Imposed on Purchases

(as a percentage of offering price)............................. 3.50% 3.50% 1.50%
Maximum Sales Charge Imposed on Reinvested Dividends

(as a percentage of offering price)............................. None None None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable)........... None None None
Redemption Fees (as a percentage of amount redeemed, if
applicable)..................................................... None None None
Exchange Fee...................................................... None None None

ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)

<S> <C> <C> <C>
Management Fees (after waiver)(1)................................. 0.60% 0.60% 0.50%
12b-1 Fees(2)..................................................... 0.00% 0.00% 0.00%
Total Other Expenses (after waiver)(3)............................ 0.30% 0.25% 0.25%
Total Fund Operating Expenses (after waivers)(4).......... 0.90% 0.85% 0.75%
</TABLE>

* Expenses for the International Equity Fund are estimated based on expenses
expected to be incurred during the fiscal year ending February 28, 1998.
During the course of this period, expenses may be more or less than the
amount shown. The table above does not reflect any of the shareholder
transaction expenses, operating costs or investment advisory fees of the
underlying funds. By investing in the Fund, you bear not only the Fund's
expenses detailed above, but also the expenses of the underlying funds. You
would not incur the Fund's expenses detailed above if you were to perform
your own review and analysis and invest in the underlying funds directly.

(1) The management fees for the Short-Term Bond Fund and the
Intermediate U.S. Government Bond Fund and the estimated
management fee for the International Equity Fund have been reduced
to reflect the voluntary waiver of the management fee by the
investment adviser. The adviser can terminate this voluntary
waiver at any time at its sole discretion. With respect to the
Short-Term Bond Fund, the Intermediate U.S. Government Bond Fund,
and the International Equity Fund, the maximum management fees are
0.75%, 0.75%, and 0.65%, respectively.

(3) Total Other Expenses have been reduced to reflect the voluntary
waiver of the administrative fee by the administrator for the
Short-Term Bond Fund and the Intermediate U.S. Government Bond
Fund. Total Other Expenses of the International Equity Fund have
been reduced to reflect the anticipated voluntary waiver of the
adminstrative fee by the administrator and reimbursement of
certain expenses by the adviser. The administrator and adviser can
terminate these voluntary waivers and reimbursements at any time
at their sole discretion.

(4) The Total Fund Operating Expenses for the period ended February
28, 1997, were 1.08% for the Short-Term Bond Fund, 1.03% for the
Intermediate U.S. Government Bond Fund, absent the voluntary
waivers described in Notes (1) and (3) above. Total Fund Operating
Expenses for the International Equity Fund are expected to be
1.07%, for the year ended February 28, 1998, absent the
anticipated voluntary waivers described in Notes (1) and (3)
above.

EXAMPLE

You would pay the following expenses on a $1,000 investment assuming
(a) 5% annual return, (b) payment of the maximum sales charge and (c)
redemption at the end of each time period.

INTERMEDIATE
SHORT-TERM U.S. GOVERNMENT INTERNATIONAL

BOND FUND BOND FUND EQUITY FUND

<S> <C> <C> <C>
1 Year........................................... $44 $43 $23
3 Years.......................................... $63 $61 39
5 Years.......................................... $83 $80 --
10 Years......................................... $142 $136 --
</TABLE>

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN. THIS EXAMPLE FOR THE SHORT-TERM BOND FUND AND THE
INTERMEDIATE U.S. GOVERNMENT BOND FUND IS BASED ON DATA FOR THE FISCAL
YEAR ENDED FEBRUARY 28, 1997, AND FOR THE INTERNATIONAL EQUITY FUND IS
BASED ON DATA FOR THE FISCAL YEAR ENDING FEBRUARY 28, 1998.

FINANCIAL HIGHLIGHTS

- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

The following table has been audited by Ernst & Young LLP, the Funds'
independent auditors. Their report dated April 14, 1997, on the Funds'
financial statements for the period ended February 28, 1997, is
included in the Annual Report, which is incorporated by reference.
This table should be read in conjunction with the Funds' financial
statements and notes thereto, which may be obtained from the Funds.

PERIOD NET REALIZED AND

ENDED NET ASSET UNREALIZED DISTRIBUTIONS TO DISTRIBUTIONS TO
FEBRUARY VALUE, NET GAIN/(LOSS) ON TOTAL FROM SHAREHOLDERS FROM SHAREHOLDERS FROM

28, BEGINNING INVESTMENT INVESTMENT INVESTMENT NET INVESTMENT NET REALIZED GAIN TOTAL
1997(A) OF PERIOD INCOME TRANSACTIONS OPERATIONS INCOME ON INVESTMENTS DISTRIBUTIONS

<S> <C> <C> <C> <C> <C> <C> <C>
MARKETVEST EQUITY FUND
$ 10.00 0.14 2.10 2.24 (0.14) (0.19) (0.33)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
MARKETVEST PENNSYLVANIA INTERMEDIATE MUNICIPAL BOND FUND

$ 10.00 0.40 0.09 0.49 (0.40) -- (0.40)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
MARKETVEST SHORT-TERM BOND FUND

$ 10.00 0.49 (0.05) 0.44 (0.49) -- (0.49)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
MARKETVEST INTERMEDIATE U.S. GOVERNMENT BOND FUND

$ 10.00 0.59 (0.18) 0.41 (0.59) -- (0.59)

PERIOD ENDED NET ASSET
FEBRUARY 28, VALUE,

1997(A) END OF PERIOD
<S> <C>
MARKETVEST EQUITY FUND $ 11.91
MARKETVEST PENNSYLVANIA INTERMEDIATE MUNICIPAL BOND FUND $ 10.09
MARKETVEST SHORT-TERM BOND FUND $ 9.95
MARKETVEST INTERMEDIATE U.S. GOVERNMENT BOND FUND $ 9.82
</TABLE>

(a) Reflects operations for the period from April 1, 1996 (date of
initial public investment) to February 28, 1997.

(b) Based on net asset value, which does not reflect the sales charge
or contingent deferred sales charge, if applicable.

(d) This voluntary expense decrease is reflected in both the expense
and net investment income ratios shown above.

(e) Represents total commissions paid on portfolio securities divided
by total portfolio shares purchased or sold on which commissions
were charged.

Further information about the Funds' performance is contained in the
Funds' annual report, dated February 28, 1997, which can be obtained
free of charge.

RATIOS TO AVERAGE NET ASSETS(C)
NET ASSETS,

END OF AVERAGE

NET PERIOD PORTFOLIO COMMISSION

TOTAL INVESTMENT EXPENSE (000 TURNOVER RATE
RETURN(B) EXPENSES INCOME WAIVER(D) OMITTED) RATE PAID(E)

MARKETVEST INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS

- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

PERIOD ENDED

MAY 31, 1997(A)
(UNAUDITED)

<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- ----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS

- ----------------------------------------------------------------------------------------------
Net investment income 0.06

- ----------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 0.49
- ---------------------------------------------------------------------------------------------- -------
Total from investment operations 0.55

- ---------------------------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $ 10.55
- ---------------------------------------------------------------------------------------------- -------
TOTAL RETURN (B) 5.50%

- ----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS

- ----------------------------------------------------------------------------------------------
Expenses 0.75%*

- ----------------------------------------------------------------------------------------------
Net investment income 3.84%*

- ----------------------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.38%*

- ----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA

- ----------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $42,484
- ----------------------------------------------------------------------------------------------
Portfolio turnover 1%

- ----------------------------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from April 1, 1997 (date of
initial public investment) to May 31, 1997.

(b) Based on net asset value, which does not reflect the sales charge
or contingent deferred sales charge, if applicable.

(See Notes which are an integral part of the Financial Statements)

INVESTMENT OBJECTIVE AND POLICIES OF EACH FUND

- --------------------------------------------------------------------------------

The investment objective and policies of each Fund appear below. The
investment objective of a Fund cannot be changed without the approval
of the shareholders of such Fund. While there is no assurance that a
Fund will achieve its investment objective, it endeavors to do so by
following the investment policies described in this prospectus.

Unless indicated otherwise, the investment policies of a Fund may be
changed by the Board of Trustees or the Board of Directors
(hereinafter referred to as "Board Members") without the approval of
the shareholders of such Fund. Shareholders will be notified before
any material change in these policies becomes effective.

Additional information about investment limitations, strategies that
one or more Funds may employ, and certain investment policies
mentioned below, appears in the "Portfolio Investments and Strategies"
section of this prospectus and in the Combined Statement of Additional
Information.

EQUITY FUND

The investment objective of the Equity Fund is to provide growth of
principal. The Fund pursues its objective by investing primarily in
the equity securities of high quality companies. Emphasis is placed on
stocks where the market price of the stock appears low when compared
to present earnings. The Fund's investment approach is based on the
conviction that, over the long term, the economy will continue to
expand and develop and that this economic growth will be reflected in
the growth of the revenues and earnings of publicly-held corporations.
Under normal market conditions, the Fund intends to invest at least
65% of its total assets in equity securities of U.S. companies. In
most market conditions, the stocks comprising the Fund's assets will
exhibit traditional value characteristics, such as higher than average
sales growth, higher than average return on equity, low debt to equity
ratios, and stocks of companies with high return on their invested
capital.

ACCEPTABLE INVESTMENTS. The securities in which the Fund invests include, but
are not limited to:

Common Stocks (as described under "Portfolio Investments and
Strategies");

Convertible Securities (as described under "Portfolio Investments and
Strategies");

Securities of Foreign Issuers. The Fund may invest in
securities of foreign issuers traded on the New York or
American Stock Exchanges or in the over-the-counter market,
including American Depositary Receipts ("ADRs"). ADRs are
receipts typically issued by an American bank or trust company
that evidences ownership of underlying securities issued by a
foreign issuer. ADRs may not necessarily be denominated in the
same currency as the securities into which they may be
converted. Generally, ADRs, in registered form, are designed
for use in U.S. securities markets (see "Securities of Foreign
Issuers" below);

Futures and Options. The Fund may purchase and sell financial and stock
index futures contracts and purchase and sell options on such futures
contracts and on its portfolio securities (as described under "Portfolio

Investments and Strategies--Futures and Options Transactions");

U.S. Government Securities (as described under "Portfolio Investments and
Strategies");

Corporate Obligations (as described under "Portfolio Investments and
Strategies");

Mortgage-Backed Securities (as described under "Portfolio Investments and
Strategies"); and

Money Market Instruments (as described under "Portfolio Investments and
Strategies").

INTERNATIONAL EQUITY FUND

The investment objective of the International Equity Fund is to
provide long-term capital appreciation. The Fund seeks to achieve its
investment objective by investing primarily in shares of other mutual
funds (the "underlying funds"), the portfolios of which consist
primarily of equity securities of non-U.S. issuers. Under normal
market conditions, and as an investment policy, the Fund will invest
at least 65% of its total assets in underlying funds that are
international equity funds. However, as an operational policy, the
Fund anticipates investing substantially all of its assets in
international equity funds. International equity funds are those which
invest primarily in equity securities of companies located in three or
more countries outside the United States. The Adviser will attempt to
identify and select a varied portfolio of international equity funds
which presents the greatest long-term capital growth potential based
on the Adviser's analysis of many factors. The selection of
international equity funds may include international equity funds that
invest primarily in emerging markets (as described below) or focus
their investments on geographic regions (provided they invest in at
least three countries other than the United States). The Adviser will
first assess the relative attractiveness of individual countries,
geographic regions, and/or emerging markets. After identifying the
most and least attractive countries, regions or markets, consideration
will be given to the expected returns and risks before deciding
whether to invest in funds that overweight or underweight certain
countries, regions or markets. The selection of underlying funds also
involves an initial peer group screening process which assesses fund
investment style, investment objectives and policies, and fund
management. Rankings of certain independent rating services are also
considered. Potential underlying funds which, in the Adviser's view,
meet these criteria will then be subject to further evaluation of
investment policies, historic total return, size, volatility and
operating expenses over various time periods. Also, on a macroeconomic
level, a fund's geographical diversification is also considered. The
underlying funds may be subject to more, less, the same or different
investment restrictions than the Fund, and the Adviser will consider
these similarities and differences when making investment decisions.

The Investment Company Act of 1940 (the "1940 Act") currently provides
that the Fund may not purchase the securities of an underlying fund
if, as a result, the Fund together with any of its affiliates would
own more than 3% of the total outstanding securities of that
underlying fund. Thus, the Fund's ability to invest in shares of
certain underlying funds could be restricted and the Adviser may have
to select alternative investments. By investing in the Fund, you bear
not only the Fund's total operating expenses, but the operating
expenses of the underlying funds as well. See "Expenses of the Funds."

Assets not invested in international equity funds may be invested in
underlying funds other than international equity funds, such as global
funds (funds that invest primarily in securities of issuers

throughout the world, including the United States), individual country
funds and domestic equity and debt funds to the extent consistent with
the Fund's objective of long-term capital appreciation. As described
in more detail below in the section "Portfolio Investments and
Strategies," the Fund may also make direct investments in the
securities held by these underlying funds, including, but not limited
to: domestic and foreign equity securities (such as equity or debt
securities of foreign issuers traded on the New York or American Stock
Exchanges or in the over-the-counter market in the form of sponsored
or unsponsored ADRs, Global Depositary Receipts ("GDRs"), and European
Depositary Receipts ("EDRs") (collectively, "Depositary Receipts");
fixed income securities, which include preferred stock, bonds, notes,
or other debt securities of U.S. and foreign companies or governments;
short-term debt securities, including U.S. Treasury bills and other
short-term U.S. government securities, commercial paper, certificates
of deposit and bankers' acceptances; warrants; and unit investment
trusts. The Fund and underlying funds may also invest in variable rate
demand notes, invest in restricted securities, invest up to 15% of
their net assets in illiquid securities, engage in repurchase
agreements, when-issued and delayed delivery transactions and forward
commitments, invest in foreign currency exchange transactions
(including forward foreign currency exchange transactions), enter into
futures contracts and foreign currency futures contracts, and trade in
options on foreign currencies, stock index and financial futures
contracts, portfolio securities and stock indices. The Fund and the
underlying funds may also lend their portfolio securities, and borrow
for investment purposes.

The underlying funds may also be authorized to invest up to 100% of
their respective assets in the securities of foreign issuers and
engage in foreign currency transactions (including forward foreign
currency exchange transactions) with respect to these investments;
invest primarily in either the securities of emerging market countries
or in the securities of a single country; invest 35% or more of their
respective assets in high yield securities (i.e., "junk bonds");
invest in warrants; sell securities short; engage in leveraged
borrowing; and enter into interest rate swaps, currency swaps, and
other types of swap agreements such as caps, collars, and floors. The
Fund will not concentrate its assets (i.e., invest 25% or more of its
total assets) in any one industry but may invest its assets in
underlying funds that concentrate their investments in a single
industry.

Although the Fund will normally invest in open-end, management
investment companies, or "mutual funds," it also may invest in
closed-end management investment companies and/or unit investment
trusts. Unlike open-end funds that offer and sell their shares at net
asset value plus any applicable sales charge, the shares of closed-end
funds and unit investment trusts may trade at a market value that
represents a premium, discount or spread to net asset value.

For temporary defensive purposes (up to 100% of total assets) and to
maintain liquidity (up to 35% of total assets), the Fund may invest in
short-term money market instruments. See "Money Market Instruments"
below.

PENNSYLVANIA INTERMEDIATE MUNICIPAL BOND FUND

The investment objective of the Pennsylvania Intermediate Municipal
Bond Fund is to provide current income which is exempt from federal
regular income tax and the personal and corporate income taxes imposed
by the Commonwealth of Pennsylvania. (Federal regular income tax does
not include the federal individual alternative minimum tax or the
federal alternative minimum tax for

corporations.) In addition, shares of the Fund are exempt from
personal property taxes imposed by counties in Pennsylvania to the
extent that the Fund invests in obligations that are exempt from such
taxes. The Fund pursues its investment objective by investing
primarily in Pennsylvania municipal securities. Interest income of the
Fund that is exempt from federal regular income tax and Pennsylvania
state personal and corporate income tax retains its tax-free status
when distributed to the Fund's shareholders. However, income
distributed by the Fund may not necessarily be exempt from state or
municipal taxes in states other than Pennsylvania. Thus, the Fund may
not be a suitable investment for non-Pennsylvania taxpayers or
retirement plans. As a matter of investment policy, which may not be
changed without shareholder approval, under normal market conditions
at least 80% of the value of the Fund's net assets will be invested in
Pennsylvania municipal securities. In addition, as a matter of
investment policy that may be changed without shareholder approval,
the Fund will invest its assets so that, under normal circumstances,
at least 65% of the value of its total assets will be invested in
securities of Pennsylvania issuers. Up to 20% of the Pennsylvania
municipal securities invested in by the Fund may generate income that
is subject to the federal alternative minimum tax. The Fund will
attempt to maintain a dollar-weighted average portfolio maturity of
between three to ten years.

ACCEPTABLE INVESTMENTS. The municipal securities in which the Fund invests
include the following:

obligations issued by or on behalf of the Commonwealth of Pennsylvania,
its political subdivisions, agencies, or instrumentalities (i.e.,
authorities);

debt obligations of any state, territory, or possession of the United
States, including the District of Columbia, or any political subdivision
of any of these;

variable rate demand notes; and

participation, trust, and partnership interests, as described below, in
any of the above obligations;

the interest from which is, in the opinion of bond counsel for the
issuers or in the judgment of the Adviser to the Fund, exempt from
both federal regular income tax and the personal and corporate income
taxes imposed by the Commonwealth of Pennsylvania. It is likely that
shareholders who are subject to alternative minimum tax will be
required to include interest from a portion of the municipal
securities owned by the Fund in calculating the federal individual
alternative minimum tax or the federal alternative minimum tax for
corporations.

CHARACTERISTICS. The municipal securities in which the Fund invests are:

rated, at the time of purchase, within the four highest ratings for
municipal securities by a nationally recognized statistical rating
organization ("NRSRO"), such as Moody's Investors Service, Inc.
("Moody's") (Aaa, Aa, A, or Baa), Standard & Poor's Ratings Group ("S&P")
(AAA, AA, A, or BBB), or Fitch Investors Service, Inc. ("Fitch") (AAA,
AA, A, or BBB); or

guaranteed at the time of purchase by the U.S. government as to the
payment of principal and interest; or

fully collateralized by an escrow of U.S. government securities or other
securities acceptable to the Adviser; or

rated at the time of purchase within Moody's highest short-term
municipal obligation rating (MIG1/VMIG1) or Moody's highest
municipal commercial paper rating (PRIME-1) or S&P's highest
municipal commercial paper rating (SP-1); or

unrated if, at the time of purchase, other municipal securities
of that issuer are rated investment grade by an NRSRO (i.e.,
Baa or BBB or better by Moody's, S&P, or Fitch); or

unrated if determined to be of equivalent quality to one of the foregoing
rating categories by the Adviser.

PARTICIPATION INTERESTS. The Fund may purchase interests in municipal
securities from financial institutions such as commercial and
investment banks, savings associations, and insurance companies. These
interests may take the form of participations, beneficial interests in
a trust, partnership interests or any other form of indirect ownership
that allows the Fund to treat the income from the investment as exempt
from federal income tax. The Fund invests in these participation
interests in order to obtain credit enhancement or demand features
that would not be available through direct ownership of the underlying
municipal securities.

MUNICIPAL LEASES. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of
equipment and facilities. They may take the form of a lease, an
installment purchase contract, or a conditional sales contract.

TEMPORARY INVESTMENTS. The Fund normally invests at least 80% of its
net assets in Pennsylvania municipal securities, as described above.
Although the Fund is permitted to invest up to 20% of its net assets
in taxable, temporary investments under normal market conditions,
there is no current intention of generating income subject to federal
regular income tax or Pennsylvania state personal income tax. In
addition, from time to time, when the Adviser determines that market
conditions call for a temporary defensive posture, the Fund may invest
up to 100% of its total assets in short-term tax-exempt or taxable
temporary investments. These temporary investments include: notes
issued by or on behalf of municipal or corporate issuers; obligations
issued or guaranteed by the U.S. government, its agencies, or
instrumentalities; other debt securities; commercial paper;
certificates of deposit of banks; shares of other investment
companies; and repurchase agreements.

There are no rating requirements applicable to temporary investments.
However, the Adviser will limit temporary investments to those it
considers to be of comparable quality to the Fund's acceptable
investments.

PENNSYLVANIA MUNICIPAL SECURITIES. Pennsylvania municipal securities
are generally issued to finance public works, such as airports,
bridges, housing, hospitals, mass transportation projects, schools,
streets, and water and sewer works. They are also issued to repay
outstanding obligations, to raise funds for general operating
expenses, and to make loans to other public institutions and
facilities. Pennsylvania municipal securities include industrial
development bonds issued by or on behalf of public authorities to
provide financing aid to acquire sites or construct and equip
facilities for privately or publicly owned corporations. The
availability of this financing encourages these corporations to locate
within the sponsoring communities and thereby increases local
employment.

The two principal classifications of municipal securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured
by the issuer's pledge of its full faith and credit and

taxing power for the payment of principal and interest. Revenue bonds
do not represent a pledge of credit or create any debt of or charge
against the general revenues of a municipality or public authority.
Interest on and principal of revenue bonds are payable only from the
revenue generated by the facility financed by the bond or other
specified sources of revenue. Industrial development bonds are
typically classified as revenue bonds.

INVESTMENT RISKS. Yields on municipal securities depend on a variety
of factors, including, but not limited to: the general conditions of
the municipal bond market; the size of the particular offering; the
maturity of the obligations; and the rating of the issue. Further, any
adverse economic conditions or developments affecting the Commonwealth
of Pennsylvania or its municipalities could impact the Fund's
portfolio. The ability of the Fund to achieve its investment objective
also depends on the continuing ability of the issuers of Pennsylvania
municipal securities and participation interests, or the guarantors of
either, to meet their obligations for the payment of interest and
principal when due. Investing in Pennsylvania municipal securities
which meet the Fund's quality standards may not be possible if the
Commonwealth of Pennsylvania or its municipalities do not maintain
their current credit ratings. In addition, any Pennsylvania
constitutional amendments, legislative measures, executive orders,
administrative regulations, or voter initiatives could result in
adverse consequences affecting Pennsylvania municipal securities.

NON-DIVERSIFICATION. The Fund is a non-diversified investment
portfolio. As such, there is no limit on the percentage of assets
which can be invested in any single issuer, except as noted below. An
investment in the Fund, therefore, will entail greater risk than would
exist in a diversified portfolio of securities because the higher
percentage of investment among fewer issuers may result in greater
fluctuation in the total market value of the Fund's portfolio. Any
economic, political, or regulatory developments affecting the value of
the securities in the Fund's portfolio will have a greater impact on
the total value of the portfolio than would be the case if the
portfolio was diversified among more issuers.

The Fund intends to comply with Subchapter M of the Internal Revenue
Code. This undertaking requires that at the end of each quarter of the
taxable year, with regard to at least 50% of the Fund's total assets,
no more than 5% of its total assets are invested in the securities of
a single issuer; and beyond that, no more than 25% of its total assets
are invested in the securities of a single issuer.

SHORT-TERM BOND FUND

The investment objective of the Short-Term Bond Fund is to provide
current income. The Fund will invest primarily in investment grade
debt securities, U.S. government securities, and mortgage-backed and
asset-backed securities. In addition, the Fund may invest in taxable
municipal obligations. Under normal market conditions, the Fund will
invest at least 65% of its assets in bonds. The Fund will attempt to
maintain a dollar-weighted average portfolio maturity of between one
to three years.

ACCEPTABLE INVESTMENTS. The securities in which the Fund invests include, but
are not limited to:

U.S. Government Securities (as described under "Portfolio Investments and
Strategies");

Corporate Obligations (as described under "Portfolio Investments and

Strategies");

Mortgage-Backed Securities (as described under "Portfolio Investments and
Strategies");

Asset-Backed Securities (as described under "Portfolio Investments and
Strategies"); and

Money Market Instruments (as described under "Portfolio Investments and
Strategies").

INTERMEDIATE U.S. GOVERNMENT BOND FUND

The investment objective of the Intermediate U.S. Government Bond Fund
is to provide current income. Under normal market conditions, the Fund
will invest at least 65% of the value of its total assets in
securities which are issued or guaranteed as to payment of principal
and interest by the U.S. government or U.S. government agencies or
instrumentalities. For purposes of this 65% policy, the Fund will
consider CMOs (as defined under "Portfolio Investments and
Strategies") issued by U.S. government agencies or instrumentalities
to be U.S. government securities. The remaining 35% of the Fund's
assets may be invested in any of the securities discussed below. In
addition, the Fund may invest in taxable municipal obligations. The
Fund will attempt to maintain a dollar-weighted average portfolio
maturity of between three to ten years.

ACCEPTABLE INVESTMENTS. The securities in which the Fund invests include, but
are not limited to:

U.S. Government Securities (as described under "Portfolio Investments and
Strategies");

Mortgage-Backed Securities (as described under "Portfolio Investments and
Strategies");

Asset-Backed Securities (as described under "Portfolio Investments and
Strategies");

Corporate Obligations (as described under "Portfolio Investments and
Strategies"); and

Money Market Instruments (as described under "Portfolio Investments and
Strategies").

PORTFOLIO INVESTMENTS AND STRATEGIES

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The following is a description of the portfolio investments and
strategies of the Funds as well as the potential investments and
strategies of the underlying funds that may be purchased by the
International Equity Fund. Because the International Equity Fund and
the underlying funds may invest in substantially similar securities in
a similar fashion, thereby incurring similar risks, all further
references to the International Equity Fund include the underlying
funds unless otherwise indicated. Although many of the underlying
funds may have the same or similar investment policies as the
International Equity Fund, they are not required to do so.

COMMON STOCKS. The Equity Fund and the International Equity Fund may
invest in common stocks. The common stocks in which the Funds may
directly invest will be selected by the Adviser on the basis of
traditional research techniques, including assessment of earnings and
dividend growth prospects of the companies. The Funds may also invest
in preferred stocks. Factors such as, but not limited to, product
position, market share, potential earnings growth, asset values, and
revenues may be considered in evaluating common stocks.

As with other mutual funds that invest primarily in equity securities,
the Funds are subject to market risks. That is, the possibility exists
that the values of common stocks will decline over short

or even extended periods of time. The companies in which the Funds may
invest may be classified as small to mid to large-cap companies. There
are some additional risk factors associated with investments in small
capitalization companies. In particular, stocks in the small
capitalization sector may be more volatile in price than larger
capitalization stocks. This is because, among other things, small
companies have less certain growth prospects than larger companies;
have a lower degree of liquidity in the equity market; and tend to
have a greater sensitivity to changing economic conditions. Further,
in addition to exhibiting greater volatility, the stocks of small
companies may, to some degree, fluctuate independently of the stocks
of large companies; that is, the stocks of small companies may decline
in price as the prices of large company stocks rise or vice versa.

CONVERTIBLE SECURITIES. The Equity Fund and the International Equity
Fund may invest in convertible securities. Convertible securities are
fixed income securities which may be exchanged or converted into a
predetermined number of the issuer's underlying common stock at the
option of the holder during a specified time period. Convertible
securities may take the form of convertible preferred stock,
convertible bonds or debentures, units consisting of "usable" bonds
and warrants, or a combination of the features of several of these
securities. The investment characteristics of each convertible
security vary widely, which allows convertible securities to be
employed for different investment objectives.

The Funds may invest in convertible securities that are rated, at the
time of purchase, investment grade by an NRSRO or, if unrated, of
comparable quality as determined by the Adviser. The International
Equity Fund may invest in underlying funds that invest in convertible
securities that are rated below investment grade at the time of
purchase. See description of "Credit Ratings," "High Yield Securities"
and the Appendix to this Prospectus for more information about
investment ratings.

Convertible bonds and convertible preferred stocks are fixed income
securities that generally retain the investment characteristics of
fixed income securities until they have been converted, but also react
to movements in the underlying equity securities. The holder is
entitled to receive the fixed income of a bond or the dividend
preference of a preferred stock until the holder elects to exercise
the conversion privilege. The interest income and dividends from
convertible bonds and preferred stocks provide a stable stream of
income with generally higher yields than common stocks, but lower than
nonconvertible securities of similar quality.

In general, the market value of a convertible security is at least the
higher of its "investment value" (i.e, its value as a fixed income
security) or its "conversion value" (i.e., its value upon conversion
into its underlying common stock). As a fixed income security, a
convertible security tends to increase in market value when interest
rates decline and tends to decrease in value when interest rates rise.
However, the price of a convertible security is also influenced by the
market value of the security's underlying common stock. The price of a
convertible security tends to increase as the market value of the
underlying stock rises, whereas it tends to decrease as the market
value of the underlying stock declines. While no securities investment
is without some risk, investments in convertible securities generally
entail less risk than investments in the common stock of the same
issuer.

ZERO COUPON CONVERTIBLE SECURITIES. _Zero coupon convertible
securities are debt securities which are issued at a discount to
their face amount and do not entitle the holder to any periodic
payments of interest prior to maturity. Rather, interest earned
on zero coupon convertible securities accretes at a stated yield
until the security reaches its face amount at maturity. Zero
coupon convertible securities are convertible into a specific
number of shares of the issuer's common stock. In addition, zero
coupon convertible securities usually have put features that
provide the holder with the opportunity to sell the bonds back to
the issuer at a stated price before maturity. Generally, the
prices of zero coupon convertible securities may be more
sensitive to market interest rate fluctuations than conventional
convertible securities.

Federal income tax law requires the holder of a zero coupon
convertible security to recognize income with respect to the
security prior to the receipt of cash payments. To maintain their
qualification as regulated investment companies and avoid
liability for federal income taxes, the Funds will be required to
distribute income accrued with respect to zero coupon convertible
securities which each such Fund owns, and may have to sell
portfolio securities (perhaps at disadvantageous times) in order
to generate cash to satisfy these distribution requirements.

SECURITIES OF FOREIGN ISSUERS. As noted above, the Equity Fund may
invest a portion of its assets in securities of foreign issuers. The
International Equity Fund may invest up to 100% of its total assets in
the equity securities of foreign issuers, including international
stocks. International stocks are issued by foreign companies around
the world (excluding the United States). Investing in non-U.S.
securities carries substantial risks in addition to those associated
with domestic investments.

The International Equity Fund's investment approach of investing in
foreign securities is based on the premise that investing in non-U.S.
securities provides three potential benefits over investing solely in
U.S. securities: (1) the opportunity to invest in foreign issuers
believed to have superior growth potential; (2) the opportunity to
invest in foreign countries with economic policies or business cycles
different from those of the U.S.; and (3) the opportunity to reduce
portfolio volatility to the extent that securities markets inside and
outside the U.S. do not move in harmony.

The International Equity Fund may also take advantage of the unusual
opportunities for higher returns available from investing in
developing or emerging market countries. The International Equity Fund
may invest without limit in emerging market countries. A developing or
emerging market country generally is considered to be in the initial
stages of industrialization. The Adviser considers emerging market
countries to be all countries that are generally considered to have
developing or emerging markets. Furthermore, the Adviser considers
emerging market countries to be all countries considered by the
International Bank for Reconstruction and Development (more commonly
known as the World Bank) and the International Finance Corporation, as
well as countries that are classified by the United Nations or
otherwise regarded by their authorities as developing. Investments in
developing countries are more volatile and risky. See description
below.

To the extent that the International Equity Fund invests in underlying
funds that invest primarily in the securities of a single country, any
political, economic or regulatory developments affecting the value of
the securities in the underlying fund's portfolio will have a greater
impact on the total value of the portfolio than would be the case if
the portfolio were diversified among the securities of more countries.

The economies of foreign countries may differ from the U.S. economy in
such respects as growth of gross domestic product, rate of inflation,
currency depreciation, capital reinvestment, resource
self-sufficiency, and balance of payments position. Further, the
economies of developing countries generally are heavily dependent on
international trade and, accordingly, have been and may continue to be
adversely affected by trade barriers, exchange controls, managed
adjustments in relative currency values, and other protectionist
measures imposed or negotiated by the countries with which they trade.
These economies also have been, and may continue to be, adversely
affected by economic conditions in the countries with which they
trade.

Prior governmental approval for foreign investments may be required
under certain circumstances in some countries, or in issuers or
industries deemed sensitive to national interests, and the extent of
foreign investment in certain debt securities and domestic companies
may be subject to limitation. Foreign ownership limitations also may
be imposed by the charters of individual companies to prevent, among
other concerns, violation of foreign investment limitations.

Repatriation of investment income, capital, and the proceeds of sales
by foreign investors may require governmental registration and/or
approval in some countries. The International Equity Fund and Equity
Fund could be adversely affected by delays in, or a refusal to grant,
any required governmental registration or approval for such
repatriation. Any investment subject to such repatriation controls
will be considered illiquid if it appears reasonably likely that this
process will take more than seven days.

With respect to any foreign country, there is the possibility of
nationalization, expropriation or confiscatory taxation, political
changes, governmental regulation, social instability or diplomatic
developments (including war) which could affect adversely the
economies of such countries or the value of the investments in those
countries.

Brokerage commissions, custodial services, and other costs relating to
foreign investment may be more expensive than in the United States.
Foreign markets may have different clearance and settlement procedures
and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions,
making it difficult to conduct such transactions. The inability of the
Funds to make intended security purchases due to settlement problems
could cause the Funds to miss attractive investment opportunities.
Inability to dispose of a portfolio security due to settlement
problems could result either in losses due to subsequent declines in
value of the portfolio security or, if either Fund has entered into a
contract to sell the security, could result in possible liability to
the purchaser.

Other differences between foreign and U.S. companies include: less
publicly available information about foreign companies; the lack of
uniform accounting, auditing, and financial reporting standards and
practices or regulatory requirements comparable to those applicable to
U.S. companies; less readily available market quotations on foreign
companies; differences in government regulation and supervision of
foreign stock exchanges, brokers, listed companies, and banks;
differences in legal systems which may affect the ability to enforce
contractual obligations or obtain court judgments; the limited size of
many foreign securities markets and limited trading volume in issuers
compared to the volume of trading in U.S. securities could cause
prices to be erratic for reasons apart from factors that affect the
quality of securities; the likelihood that foreign securities

may be less liquid or more volatile; unreliable mail service between
countries; political or financial changes which adversely affect
investments in some countries; certain markets may require payment for
securities before delivery; and religious and ethnic instability.

In the past, U.S. government policies have discouraged or restricted
certain investments abroad by investors. Investors are advised that
when such policies are instituted, the Funds will abide by them, and
the International Equity Fund anticipates compliance by the underlying
funds in which it invests.

DEPOSITARY RECEIPTS. _ADRs are receipts typically issued by an
American bank or trust company that evidences ownership of
underlying securities issued by a foreign issuer. ADRs may not
necessarily be denominated in the same currency as the securities
into which they may be converted. Generally, ADRs, in registered
form, are designed for use in U.S. securities markets. EDRs and
GDRs are typically issued by foreign banks or trust companies,
although they also may be issued by U.S. banks or trust
companies, and evidence ownership of underlying securities issued
by either a foreign or a U.S. corporation. Generally, Depositary
Receipts in registered form are designed for use in the U.S.
securities market and Depositary Receipts in bearer form are
designed for use in securities markets outside the U.S.
Depositary Receipts may not necessarily be denominated in the
same currency as the underlying securities into which they may be
converted. Depositary Receipts may be available for investment
through "sponsored" or "unsponsored" facilities. A sponsored
facility is established jointly by a depositary and the issuer of
the security underlying the receipt, whereas an unsponsored
facility may be established by a depositary without participation
by the issuer of the receipt's underlying security. Holders of an
unsponsored Depositary Receipt generally bear all the costs of
the unsponsored facility. The depositary of an unsponsored
facility frequently is under no obligation to distribute
shareholder communications received from the issuer of the
deposited security or to pass through to the holders of the
receipts voting rights with respect to the deposited securities.
Ownership of unsponsored Depositary Receipts may not entitle the
Equity Fund or the International Equity Fund to financial or
other reports from the issuer of the underlying security, to
which they would be entitled as the owner of sponsored Depositary
Receipts.

EMERGING MARKETS. Generally included in emerging markets are all
countries in the world except Australia, Canada, Japan, New Zealand,
the United States, and most western European countries. The risks of
investing in developing or emerging markets are similar to, but
greater than, the risks of investing in the securities of developed
international markets since emerging or developing markets tend to
have economic structures that are less diverse and mature, and
political systems that are less stable, than developed countries.

In certain emerging market countries, there is less government
supervision and regulation of business and industry practices, stock
exchanges, brokers, and listed companies than in the United States.
The economies of emerging market countries may be predominantly based
on a few industries and may be highly vulnerable to change in local or
global trade conditions. The securities markets of many of these
countries also may be smaller, less liquid, and subject to greater
price volatility than those in the United States. Some emerging market
countries also may have fixed or managed currencies which are not
free-floating against the U.S. dollar. Further, certain emerging

market country currencies may not be internationally traded. Certain
of these currencies have experienced a steady devaluation relative to
the U.S. dollar. Any devaluations in the currencies in which portfolio
securities are denominated may have an adverse impact on the
International Equity Fund. Finally, many emerging market countries
have experienced substantial, and in some periods, extremely high,
rates of inflation for many years. Inflation and rapid fluctuations in
inflation rates have had, and may continue to have, negative effects
on the economies for individual emerging market countries. Moreover,
the economies of individual emerging market countries may differ
favorably or unfavorably from the U.S. economy in such respects as the
rate of growth of domestic product, inflation, capital reinvestment,
resource self-sufficiency and balance of payments position.

U.S. GOVERNMENT SECURITIES. The Funds may invest in U.S. government securities.
These instruments are either issued or guaranteed by the U.S. government, its
agencies or instrumentalities. These securities include, but are not limited to:
direct obligations of the U.S. Treasury, such as U.S. Treasury bills, notes, and
bonds; notes, bonds and discount notes issued or guaranteed by U.S. government
agencies and instrumentalities supported by the full faith and credit of the
United States; notes, bonds, and discount notes of U.S. government agencies or
instrumentalities which receive or have access to federal funding; and notes,
bonds, and discount notes of other U.S. government instrumentalities supported
only by the credit of the instrumentalities.

CORPORATE OBLIGATIONS. The Equity Fund, the International Equity Fund,
the Short-Term Bond Fund, and the Intermediate U.S. Government Bond
Fund (and the Pennsylvania Intermediate Municipal Bond Fund, as a
temporary investment) may invest in corporate obligations including
preferred stocks and corporate bonds, notes, and debentures, which may
have floating or fixed rates of interest. Corporate debt obligations
will normally be rated at the time of purchase investment grade (BBB
or Baa or better) by an NRSRO or, if unrated, of comparable quality as
determined by the Adviser (see "Credit Ratings" below). The
International Equity Fund may invest in underlying funds that are
permitted to invest in debt securities that are rated below investment
grade (i.e., "junk bonds"). See "High Yield Securities."

FLOATING RATE CORPORATE DEBT OBLIGATIONS. _The Equity Fund, the
International Equity Fund, the Short-Term Bond Fund, and the
Intermediate U.S. Government Bond Fund (and the Pennsylvania
Intermediate Municipal Bond Fund, as a temporary investment) may
invest in floating rate corporate debt obligations, including
increasing rate securities. Floating rate securities are
generally offered at an initial interest rate which is at or
above prevailing market rates. The interest rate paid on these
securities is then reset periodically (commonly every 90 days) to
an increment over some predetermined interest rate index.
Commonly utilized indices include the three-month Treasury bill
rate, the six-month Treasury bill rate, the one-month or
three-month London Interbank Offered Rate (LIBOR), the prime rate
of a bank, the commercial paper rates, or the longer-term rates
on U.S. Treasury securities.

Increasing rate securities, which currently do not make up a
significant share of the market in corporate debt securities, are
generally offered at an initial interest rate which is at or
above prevailing market rates. Interest rates are reset
periodically (most commonly every 90 days) at different levels on
a predetermined scale. These levels of interest are ordinarily
set at progressively higher increments over time. Some increasing
rate securities may, by agreement, revert to a fixed rate status.
These securities may also contain features which allow the issuer
the

option to convert the increasing rate of interest to a fixed rate
under such terms, conditions, and limitations as are described in
each issue's prospectus.

FIXED RATE CORPORATE DEBT OBLIGATIONS. _The Equity Fund, the
International Equity Fund, the Short-Term Bond Fund, and the
Intermediate U.S. Government Bond Fund (and the Pennsylvania
Intermediate Municipal Bond Fund, as a temporary investment) may
also invest in fixed rate securities, including fixed rate
securities with short-term characteristics. Fixed rate securities
with short-term characteristics are long-term debt obligations
but are treated in the market as having short maturities because
call features of the securities may make them callable within a
short period of time. A fixed rate security with short-term
characteristics would include a fixed income security priced
close to call or redemption price or a fixed income security
approaching maturity, where the expectation of call or redemption
is high.

Fixed rate securities tend to exhibit more price volatility
during times of rising or falling interest rates than securities
with floating rates of interest. This is because floating rate
securities, as described above, behave like short-term
instruments in that the rate of interest they pay is subject to
periodic adjustments based on a designated interest rate index.
Fixed rate securities pay a fixed rate of interest and are more
sensitive to fluctuating interest rates. In periods of rising
interest rates, the value of a fixed rate security is likely to
fall. Fixed rate securities with short-term characteristics are
not subject to the same price volatility as fixed rate securities
without such characteristics. Therefore, they behave more like
floating rate securities with respect to price volatility.

MORTGAGE-BACKED SECURITIES. The Equity Fund, the International Equity
Fund, the Short-Term Bond Fund, and the Intermediate U.S. Government
Bond Fund may invest in mortgage-backed securities rated at the time
of purchase investment grade (BBB or Baa or better) by an NRSRO, or
which are of comparable quality in the judgment of the Adviser.
Mortgage-backed securities are securities that directly or indirectly
represent a participation in, or are secured by and payable from,
mortgage loans on real property. There are currently four basic types
of mortgage-backed securities: (i) those issued or guaranteed by the
U.S. government or one of its agencies or instrumentalities, such as
Government National Mortgage Association ("Ginnie Mae"), Federal
National Mortgage Association ("Fannie Mae"), and Federal Home Loan
Mortgage Corporation ("Freddie Mac"); (ii) those issued by private
issuers that represent an interest in or are collateralized by
mortgage-backed securities issued or guaranteed by the U.S. government
or one of its agencies or instrumentalities; (iii) those issued by
private issuers that represent an interest in or are collateralized by
whole loans or mortgage-backed securities without a government
guarantee but usually having some form of private credit enhancement;
and (iv) privately issued securities which are collateralized by pools
of mortgages in which each mortgage is guaranteed as to payment of
principal and interest by an agency or instrumentality of the U.S.
government.

The privately issued mortgage-related securities provide for a
periodic payment consisting of both interest and/or principal. The
interest portion of these payments will be distributed by a Fund as
income, and the capital portion will be reinvested.

ADJUSTABLE RATE MORTGAGE SECURITIES ("ARMS"). The Equity Fund, the
International Equity Fund, the Short-Term Bond Fund, and the Intermediate
U.S. Government Bond Fund

may invest in ARMS. ARMS are pass-through mortgage-backed
securities with adjustable rather than fixed interest rates. The
ARMS in which a Fund invests are issued by Ginnie Mae, Fannie
Mae, and Freddie Mac and are actively traded. The underlying
mortgages which collateralize ARMS issued by Ginnie Mae are fully
guaranteed by the Federal Housing Administration or Veterans
Administration, while those collateralizing ARMS issued by Fannie
Mae or Freddie Mac are typically conventional residential
mortgages conforming to strict underwriting size and maturity
constraints.

COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"). The Equity Fund,
the International Equity Fund, the Short-Term Bond Fund, and the
Intermediate U.S. Government Bond Fund may invest in CMOs. CMOs
are debt obligations collateralized by mortgage loans or mortgage
pass-through securities. Typically, CMOs are collateralized by
Ginnie Mae, Fannie Mae or Freddie Mac certificates, but may be
collateralized by whole loans or private pass-through securities.
CMOs may have fixed or floating rates of interest.

A Fund will invest only in CMOs that are rated at the time of
purchase investment grade (BBB or Baa or better) by an NRSRO. A
Fund may also invest in certain CMOs which are issued by private
entities such as investment banking firms and companies related
to the construction industry. The CMOs in which a Fund may invest
may be: (i) securities which are collateralized by pools of
mortgages in which each mortgage is guaranteed as to payment of
principal and interest by an agency or instrumentality of the
U.S. government; (ii) securities which are collateralized by
pools of mortgages in which payment of principal and interest is
guaranteed by the issuer and such guarantee is collateralized by
U.S. government securities; (iii) collateralized by pools of
mortgages in which payment of principal and interest is dependent
upon the underlying pool of mortgages with no U.S. government
guarantee; or (iv) other securities in which the proceeds of the
issuance are invested in mortgage-backed securities and payment
of the principal and interest is supported by the credit of an
agency or instrumentality of the U.S. government.

REAL ESTATE MORTGAGE INVESTMENT CONDUITS ("REMICS"). The Equity
Fund, the International Equity Fund, the Short-Term Bond Fund,
and the Intermediate U.S. Government Bond Fund may invest in
REMICs. REMICs are offerings of multiple class mortgage-backed
securities which qualify and elect treatment as such under
provisions of the Internal Revenue Code. Issuers of REMICs may
take several forms, such as trusts, partnerships, corporations,
associations, or segregated pools of mortgages. Once REMIC status
is elected and obtained, the entity is not subject to federal
income taxation. Instead, income is passed through the entity and
is taxed to the person or persons who hold interests in the
REMIC. A REMIC interest must consist of one or more classes of
"regular interests," some of which may offer adjustable rates of
interest, and a single class of "residual interests." To qualify
as a REMIC, substantially all the assets of the entity must be in
assets directly or indirectly secured principally by real
property.

ASSET-BACKED SECURITIES. The International Equity Fund, the Short-Term
Bond Fund and the Intermediate U.S. Government Bond Fund may invest in
asset-backed securities. Asset-backed securities have structural
characteristics similar to mortgage-backed securities but have
underlying assets that generally are not mortgage loans or interests
in mortgage loans. The Funds may invest in

asset-backed securities rated at the time of purchase investment grade
(BBB or Baa or better) by an NRSRO including, but not limited to,
interests in pools of receivables, such as motor vehicle installment
purchase obligations and credit card receivables, equipment leases,
manufactured housing (mobile home) leases, or home equity loans. These
securities may be in the form of pass-through instruments or
asset-backed bonds. The securities are issued by non-governmental
entities and carry no direct or indirect government guarantee.

INVESTMENT RISKS OF MORTGAGE-BACKED AND ASSET-BACKED SECURITIES.

Mortgage-backed and asset-backed securities generally pay back
principal and interest over the life of the security. At the time a
Fund reinvests the payments and any unscheduled prepayments of
principal received, the Fund may receive a rate of interest which is
actually lower than the rate of interest paid on these securities
("prepayment risks"). Mortgage-backed and asset-backed securities are
subject to higher prepayment risks than most other types of debt
instruments with prepayment risks because the underlying mortgage
loans or the collateral supporting asset-backed securities may be
prepaid without penalty or premium. Prepayment risks on
mortgage-backed securities tend to increase during periods of
declining mortgage interest rates because many borrowers refinance
their mortgages to take advantage of the more favorable rates.
Prepayments on mortgage-backed securities are also affected by other
factors, such as the frequency with which people sell their homes or
elect to make unscheduled payments on their mortgages. Although
asset-backed securities generally are less likely to experience
substantial prepayments than are mortgage-backed securities, certain
factors that affect the rate of prepayments on mortgage-backed
securities also affect the rate of prepayments on asset-backed
securities.

While mortgage-backed securities generally entail less risk of a
decline during periods of rapidly rising interest rates,
mortgage-backed securities may also have less potential for capital
appreciation than other similar investments (e.g., investments with
comparable maturities) because as interest rates decline, the
likelihood increases that mortgages will be prepaid. Furthermore, if
mortgage-backed securities are purchased at a premium, mortgage
foreclosures and unscheduled principal payments may result in some
loss of a holder's principal investment to the extent of the premium
paid. Conversely, if mortgage-backed securities are purchased at a
discount, both a scheduled payment of principal and an unscheduled
prepayment of principal would increase current and total returns and
would accelerate the recognition of income, which would be taxed as
ordinary income when distributed to shareholders.

Asset-backed securities present certain risks that are not presented
by mortgage-backed securities. Primarily, these securities do not have
the benefit of the same security interest in the related collateral.
Credit card receivables are generally unsecured and the debtors are
entitled to the protection of a number of state and federal consumer
credit laws, many of which give such debtors the right to set off
certain amounts owed on the credit cards, thereby reducing the balance
due. Most issuers of asset-backed securities backed by motor vehicle
installment purchase obligations permit the servicer of such
receivables to retain possession of the underlying obligations. If the
servicer sells these obligations to another party, there is a risk
that the purchaser would acquire an interest superior to that of the
holders of the related asset-backed securities. Further, if a vehicle
is registered in one state and is then re-registered because the owner
and obligor moves to another state, such re-registration could defeat
the original security interest in the vehicle in certain cases. In

addition, because of the large number of vehicles involved in a
typical issuance and technical requirements under state laws, the
trustee for the holders of asset-backed securities backed by
automobile receivables may not have a proper security interest in all
of the obligations backing such receivables. Therefore, there is the
possibility that recoveries on repossessed collateral may not, in some
cases, be available to support payments on these securities.

BANK INSTRUMENTS. The Funds only invest in Bank Instruments either
issued by an institution that has capital, surplus and undivided
profits over $100 million or is insured by the Bank Insurance Fund or
the Savings Association Insurance Fund. The Equity Fund, the
International Equity Fund, the Short-Term Bond Fund, and the
Intermediate U.S. Government Bond Fund may purchase foreign Bank
Instruments which include Eurodollar Certificates of Deposit ("ECDs"),
Yankee Certificates of Deposit ("Yankee CDs") and Eurodollar Time
Deposits ("ETDs"). The banks issuing these instruments are not
necessarily subject to the same regulatory requirements that apply to
domestic banks, such as reserve requirements, loan requirements, loan
limitations, examinations, accounting, auditing, and recordkeeping and
the public availability of information.

CREDIT FACILITIES. Demand notes are borrowing arrangements between a
corporation and an institutional lender (such as a Fund) payable upon
demand by either party. The notice period for demand typically ranges
from one to seven days, and the party may demand full or partial
payment.

Revolving credit facilities are borrowing arrangements in which the
lender agrees to make loans up to a maximum amount upon demand by the
borrower during a specified term. As the borrower repays the loan, an
amount equal to the repayment may be borrowed again during the term of
the facility. A Fund generally acquires a participation interest in a
revolving credit facility from a bank or other financial institution.
The terms of the participation require a Fund to make a pro rata share
of all loans extended to the borrower and entitles the Fund to a pro
rata share of all payments made by the borrower. Demand notes and
revolving credit facilities usually provide for floating or variable
rates of interest.

CREDIT ENHANCEMENT. Certain of the acceptable investments of the Funds
may have been credit enhanced by a guaranty, letter of credit or
insurance. Any bankruptcy, receivership or default of the party
providing the credit enhancement will adversely affect the quality and
marketability of the underlying security.

CREDIT RATINGS. Each Fund may invest in unrated securities if they are
determined to be of comparable quality to the Fund's acceptable rated
investments. If a security is subsequently downgraded below the
permissible investment category for a Fund, the Adviser will determine
whether it continues to be an acceptable investment; if not, the
security will be sold. Bonds rated BBB by S&P or Fitch or Baa by
Moody's are investment grade, but have more speculative
characteristics than A-rated bonds. Changes in economic conditions or
other circumstances are more likely to lead to weakened capacity to
make principal and interest payments than higher rated bonds. A
description of the rating categories is contained in the Appendix to
this Prospectus.

VARIABLE RATE DEMAND NOTES. Each Fund may purchase variable rate
demand notes. Variable rate demand notes are long-term debt
instruments that have variable or floating interest rates and provide
the Funds with the right to tender the security for repurchase at its
stated principal amount plus accrued interest. Such securities
typically bear interest at a rate that is intended to cause the

securities to trade at par. The interest rate may float or be adjusted
at regular intervals (ranging from daily to annually), and is normally
based on a published interest rate or interest rate index. Many
variable rate demand notes allow a Fund to demand the repurchase of
the security on not more than seven days prior notice. Other notes
only permit a Fund to tender the security at the time of each interest
rate adjustment or at other fixed intervals. (See "Demand Features.")
Each Fund treats variable rate demand notes as maturing on the later
of the date of the next interest rate adjustment or the date on which
a Fund may next tender the security for repurchase.

DEMAND FEATURES. Each Fund may acquire securities that are subject to
puts and standby commitments ("demand features") to purchase the
securities at their principal amount (usually with accrued interest)
within a fixed period (usually seven days) following a demand by a
Fund. The demand feature may be issued by the issuer of the underlying
securities, a dealer in the securities or by another third party, and
may not be transferred separately from the underlying security. A Fund
uses these arrangements to provide the Fund with liquidity and not to
protect against changes in the market value of the underlying
securities. The bankruptcy, receivership or default by the issuer of
the demand feature, or a default on the underlying security or other
event that terminates the demand feature before its exercise, will
adversely affect the liquidity of the underlying security. Demand
features that are exercisable even after a payment default on the
underlying security may be treated as a form of credit enhancement.

MONEY MARKET INSTRUMENTS. For temporary defensive purposes (up to 100%
of total assets) and to maintain liquidity (up to 35% of total
assets), the Equity Fund, the International Equity Fund, the
Short-Term Bond Fund, and the Intermediate U.S. Government Bond Fund
may invest in U.S. and foreign short-term money market instruments,
including:

commercial paper rated A-1 or A-2 by S&P, Prime-1 or Prime-2 by
Moody's, or F-1 or F-2 by Fitch, and Europaper
(dollar-denominated commercial paper issued outside the United
States) rated A-1, A-2, Prime-1, or Prime-2;

instruments of domestic and foreign banks and savings and loans
(such as certificates of deposit, demand and time deposits,
savings shares, and bankers' acceptances) if they have capital,
surplus, and undivided profits of over $100,000,000, or if the
principal amount of the instrument is insured by the Bank
Insurance Fund, which is administered by the Federal Deposit
Insurance Corporation ("FDIC"), or the Savings Association
Insurance Fund, which is also administered by the FDIC. These
instruments may include ECDs, Yankee CDs, and ETDs;

obligations of the U.S. government or its agencies or instrumentalities;

repurchase agreements;

securities of other investment companies; and

other short-term instruments which are not rated but are
determined by the Adviser to be of comparable quality to the
other obligations in which a Fund may invest.

As noted previously under "Temporary Investments," the Pennsylvania
Intermediate Municipal Bond Fund may also invest up to 100% of its
total assets in certain of the above U.S. short-term

instruments when the Adviser determines that market conditions call
for a temporary defensive posture.

REPURCHASE AGREEMENTS. The securities in which each Fund invests may
be purchased pursuant to repurchase agreements. Repurchase agreements
are arrangements in which banks, broker/dealers, and other recognized
financial institutions sell securities to a Fund and agree at the time
of sale to repurchase them at a mutually agreed upon time and price.
To the extent that the original seller does not repurchase the
securities from a Fund, the Fund could receive less than the
repurchase price on any sale of such securities.

FUTURES AND OPTIONS TRANSACTIONS. The Equity Fund and the
International Equity Fund may engage in futures and options
transactions as described below. As a means of reducing fluctuations
in the net asset value of their shares, the Funds may attempt to hedge
all or a portion of their respective portfolios by buying and selling
financial and stock index futures contracts, buying put and call
options on portfolio securities and put options on financial futures
contracts, and writing call options on futures contracts. The Funds
may also write covered put and call options on portfolio securities to
attempt to increase their current income or to hedge a portion of
their portfolio investments. The Funds will maintain their positions
in securities, option rights, and segregated cash subject to puts and
calls until the options are exercised, closed, or have expired. An
option position on futures contracts may be closed out
over-the-counter or on a nationally recognized exchange which provides
a secondary market for options of the same series. The Funds purchase
and write options only with investment dealers and other financial
institutions (such as commercial banks or savings associations) deemed
creditworthy by the Adviser.

FUTURES CONTRACTS. _The Equity Fund and the International Equity
Fund may purchase and sell financial futures contracts to hedge
against the effects of changes in the value of portfolio
securities due to anticipated changes in interest rates and
market conditions without necessarily buying or selling the
securities.

The Funds also may purchase and sell stock index futures to hedge
against changes in prices. The Funds do not intend to engage in
futures transactions for speculative purposes, but may do so to a
limited extent as permitted by exclusions under the Commodities
Exchange Act ("Act").

A futures contract is a firm commitment by two parties: the
seller who agrees to make delivery of the specific type of
security called for in the contract ("going short") and the buyer
who agrees to take delivery of the security ("going long") at a
certain time in the future. For example, in the fixed income
securities market, prices move inversely to interest rates. A
rise in rates means a drop in price. Conversely, a drop in rates
means a rise in price. In order to hedge its holdings of fixed
income securities against a rise in market interest rates, the
Funds could enter into contracts to deliver securities at a
predetermined price (i.e., "go short") to protect themselves
against the possibility that the prices of their fixed income
securities may decline during the Funds' anticipated holding
period. A Fund would "go long" (agree to purchase securities in
the future at a predetermined price) to hedge against a decline
in market interest rates.

Stock index futures contracts are based on indices that reflect
the market value of common stock of the firms included in the
indices. An index futures contract is an agreement pursuant to
which two parties agree to take or make delivery of an amount of
cash equal to the differences between the value of the index at
the close of the last trading day of the contract and the price
at which the index contract was originally written.

"MARGIN" IN FUTURES TRANSACTIONS. _Unlike the purchase or sale of
a security, the Equity Fund and the International Equity Fund do
not pay or receive money upon the purchase or sale of a futures
contract. Rather, the Funds are required to deposit an amount of
"initial margin" in cash or U.S. Treasury bills with their
custodian (or the broker, if legally permitted). The nature of
initial margin in futures transactions is different from that of
margin in securities transactions in that initial margin in
futures transactions does not involve the borrowing of funds by a
Fund to finance the transactions.

Initial margin is in the nature of a performance bond or good
faith deposit on the contract which is returned to a Fund upon
termination of the futures contract, assuming all contractual
obligations have been satisfied.

A futures contract held by a Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day
the Fund pays or receives cash, called "variation margin," equal
to the daily change in value of the futures contract. This
process is known as "marking to market." Variation margin does
not represent a borrowing or loan by a Fund but is instead
settlement between a Fund and the broker of the amount one would
owe the other if the futures contract expired. In computing its
daily net asset value, a Fund will mark to market its open
futures positions. A Fund is also required to deposit and
maintain margin when it writes call options on futures contracts.

PUT OPTIONS ON FUTURES CONTRACTS. _The Equity Fund and the
International Equity Fund may purchase listed put options on
financial and stock index futures contracts to protect portfolio
securities against decreases in value resulting from market
factors, such as an anticipated increase in interest rates.
Unlike entering directly into a futures contract, which requires
the purchaser to buy a financial instrument on a set date at a
specified price, the purchase of a put option on a futures
contract entitles (but does not obligate) its purchaser to decide
on or before a future date whether to assume a short position at
the specified price.

Generally, if the hedged portfolio securities decrease in value
during the term of an option, the related futures contracts will
also decrease in value and the option will increase in value. In
such an event, a Fund will normally close out its option by
selling an identical option. If the hedge is successful, the
proceeds received by a Fund upon the sale of the second option
will be large enough to offset both the premium paid by the Fund
for the original option plus the decrease in value of the hedged
securities.

Alternatively, a Fund may exercise its put option to close out
the position. To do so, it would simultaneously enter into a
futures contract of the type underlying the option (for a price
less than the strike price of the option) and exercise the
option. The Fund would then deliver the futures contract in
return for payment of the strike price. If a Fund neither closes
out nor

exercises an option, the option will expire on the date provided
in the option contract, and only the premium paid for the
contract will be lost.

STOCK INDEX OPTIONS. _The Equity Fund and the International
Equity Fund may purchase put options on stock indices listed on
national securities exchanges or traded in the over-the-counter
market to protect against decreases in stock prices. A stock
index fluctuates with changes in the market values of the stocks
included in the index.

The effectiveness of purchasing stock index options will depend
upon the extent to which price movements in a Fund's portfolio
correlate with price movements of the stock index selected.
Because the value of an index option depends upon movements in
the level of the index rather than the price of a particular
stock, whether a Fund will realize a gain or loss from the
purchase of options on an index depends upon movements in the
level of stock prices in the stock market generally or, in the
case of certain indices, in an industry or market segment, rather
than movements in the price of a particular stock. Accordingly,
successful use by a Fund of options on stock indices will be
subject to the ability of the Adviser to predict correctly
movements in the directions of the stock market generally or of a
particular industry. This requires different skills and
techniques than predicting changes in the price of individual
stocks.

CALL OPTIONS ON FINANCIAL AND STOCK INDEX FUTURES CONTRACTS. _In
addition to purchasing put options on futures, the Equity Fund
and the International Equity Fund may write (sell) listed and
over-the-counter call options on financial and stock index
futures contracts (including cash settled stock index options) to
hedge their respective portfolios against an increase in market
interest rates or a decrease in stock prices. When a Fund writes
a call option on a futures contract, it is undertaking the
obligation of assuming a short futures position (selling a
futures contract) at the fixed strike price at any time during
the life of the option if the option is exercised. As stock
prices fall or market interest rates rise, causing the prices of
futures to go down, a Fund's obligation under a call option on a
future (to sell a futures contract) costs less to fulfill,
causing the value of the Fund's call option position to increase.

In other words, as the underlying futures price goes down below
the strike price, the buyer of the option has no reason to
exercise the call, so that a Fund keeps the premium received for
the option. This premium can offset, in whole or part, the drop
in value of a Fund's portfolio securities.

Prior to the expiration of a call written by a Fund, or exercise
of it by the buyer, a Fund may close out the option by buying an
identical option. If the hedge is successful, the cost of the
second option will be less than the premium received by a Fund
for the initial option. The net premium income of a Fund will
then offset, in whole or part, the decrease in value of the
hedged securities.

A Fund will not maintain open positions in futures contracts it
has sold or call options it has written on futures contracts if,
in the aggregate, the value of the open positions (marked to
market) exceeds the current market value of its securities
portfolio plus or minus the unrealized gain or loss on those open
positions, adjusted for the correlation of volatility between the
hedged securities and the futures contracts. If this limitation
is exceeded at any time, a Fund

will take prompt action to close out a sufficient number of open
contracts to bring its open futures and options positions within
this limitation.

PURCHASING PUT AND CALL OPTIONS ON PORTFOLIO SECURITIES. _The
Equity Fund and the International Equity Fund may purchase put
and call options on portfolio securities and on stock indices to
protect against price movements in particular securities in their
respective portfolios. A put option gives a Fund, in return for a
premium, the right (but not the obligation) to sell the
underlying security to the writer (seller) at a specified price
during the term of the option. A call option gives a Fund, in
return for a premium, the right (but not the obligation) to buy
the underlying securities from the seller at a specified price
during the term of the option.

WRITING COVERED PUT AND CALL OPTIONS ON PORTFOLIO SECURITIES.
_The Equity Fund and the International Equity Fund may write
covered put and call options on their portfolio securities to
generate income and thereby protect against price movements in
particular securities in their respective portfolios. As the
writer of a call option, a Fund has the obligation upon exercise
of the option during the option period to deliver the underlying
security upon payment of the exercise price. When a Fund writes a
put option on a futures contract, it is undertaking to buy a
particular futures contract at a fixed price at any time during a
specified period if the option is exercised.

A Fund may only write call options either on securities held in
its portfolio or on securities which it has the right to obtain
without payment of further consideration (or has segregated cash
in the amount of any additional consideration). In the case of
put options, a Fund will segregate cash, U.S. Treasury
obligations or other liquid securities with a value equal to or
greater than the exercise price of the underlying securities.

OVER-THE-COUNTER OPTIONS. _The Equity Fund and the International
Equity Fund may purchase and write over-the-counter options on
portfolio securities in negotiated transactions with the buyers
or writers of the options when options on the portfolio
securities held by a Fund are not traded on an exchange.
Over-the-counter options are two-party contracts with price and
terms negotiated between buyer and seller. In contrast,
exchange-traded options are third-party contracts with
standardized strike prices and expiration dates and are purchased
from a clearing corporation. Exchange-traded options have a
continuous liquid market while over-the-counter options may not.
The Funds will not buy call options or write put options, other
than to close out open option positions, without further
notification to shareholders.

RISKS. _When the Equity Fund and the International Equity Fund
use futures and options on futures as hedging devices, there is a
risk that the prices of the securities subject to the futures
contracts may not correlate perfectly with the prices of the
securities in their respective portfolios. This may cause the
futures contract and any related options to react differently
than the portfolio securities to market changes. In addition, the
Adviser could be incorrect in its expectations about the
direction or extent of market factors such as stock price
movements. In these events, a Fund may lose money on the futures
contract or option.

It is not certain that a secondary market for positions in
futures contracts or for options will exist at all times.
Although the Adviser will consider liquidity before entering into
these

transactions, there is no assurance that a liquid secondary
market on an exchange or otherwise will exist for any particular
futures contract or option at any particular time. A Fund's
ability to establish and close out futures and options positions
depends on this secondary market.

The Funds will engage in futures contracts and related options in
conformity with the requirements of the Act, which entitles the
Funds to an exclusion from regulation provided that, among other
representations, the Funds use futures contracts and related
options contracts solely for "bona fide hedging purposes" within
the meaning and intent of the 1940 Act, and with respect to
positions in futures contracts and related option contracts that
are not for bona fide hedging purposes, the Funds limit the
aggregate initial margin and premiums required to establish such
positions to no more than five percent of the liquidation value
of their respective net assets, after taking into account
unrealized profits and unrealized losses on any such contracts
they have entered into and excluding the value of any options
that are "in-the-money" at the time of purchase. When the Funds
purchase futures contracts, an amount of cash and cash
equivalents, equal to the underlying commodity value of the
futures contracts (less any related margin deposits), will be
deposited in a segregated account with the custodian (or the
broker, if legally permitted) to collateralize the position and
thereby insure that the use of such futures contracts are
unleveraged. When the Funds sell futures contracts, they will
either own or have the right to receive the underlying future or
security, or will make deposits to collateralize the position as
discussed above.

FOREIGN CURRENCY TRANSACTIONS. Foreign currency transactions may be
used by the International Equity Fund to obtain the necessary
currencies to settle securities transactions. Currency transactions
may be conducted either on a spot or cash basis at prevailing rates or
through forward foreign currency exchange contracts.

Foreign currency transactions also may be used to protect assets
against adverse changes in foreign currency exchange rates or exchange
control regulations. Such changes could unfavorably affect the value
of assets which are denominated in foreign currencies, such as foreign
securities or funds deposited in foreign banks, as measured in U.S.
dollars. Although foreign currency exchanges may be used to protect
against a decline in the value of one or more currencies, such efforts
may also limit any potential gain that might result from a relative
increase in the value of such currencies and might, in certain cases,
result in losses. Further, the Fund may be affected either unfavorably
or favorably by fluctuations in the relative rates of exchange between
the currencies of different nations. Cross-hedging transactions
involve the risk of imperfect correlation between changes in the
values of the currencies to which such transactions relate and changes
in the value of the currency or other asset or liability that is the
subject of the hedge.

FORWARD COMMITMENTS. Forward commitments are contracts to purchase
securities for a fixed price at a date beyond customary settlement
time. The International Equity Fund may enter into these contracts if
liquid securities in amounts sufficient to meet the purchase price are
segregated on the Fund's records at the trade date and maintained
until the transaction has been settled. Risk is involved if the value
of the security declines before settlement. Although the Fund may
enter into forward commitments with the intention of acquiring the
security, it may dispose of the commitment prior to settlement and
realize a short-term profit or loss.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS AND OPTIONS ON FOREIGN
CURRENCIES. The International Equity Fund may engage in forward
foreign currency exchange contracts and options on foreign currencies.
A forward foreign currency exchange contract ("forward contract") is
an obligation to purchase or sell an amount of a particular currency
at a specific price and on a future date agreed upon by the parties.

Generally, no commission charges or deposits are involved. At the time
the International Equity Fund enters into a forward contract, Fund
assets with a value equal to the Fund's obligation under the forward
contract are segregated on the Fund's records and are maintained until
the contract has been settled. The Fund will not enter into a forward
contract with a term of more than one year. The Fund will generally
enter into a forward contract to provide the proper currency to settle
a securities transaction at the time the transaction occurs ("trade
date"). The period between the trade date and settlement date will
vary between 24 hours and 30 days, depending upon local custom.

The International Equity Fund may also protect against the decline of
a particular foreign currency by entering into a forward contract to
sell an amount of that currency approximating the value of all or a
portion of the Fund's assets denominated in that currency ("hedging").
The success of this type of short-term hedging strategy is highly
uncertain due to the difficulties of predicting short-term currency
market movements and of precisely matching forward contract amounts
and the constantly changing value of the securities involved. Although
the Adviser will consider the likelihood of changes in currency values
when making investment decisions, the Adviser believes that it is
important to be able to enter into forward contracts when it believes
the interests of the Fund will be served.

The International Equity Fund may purchase and write put and call
options on foreign currencies for the purpose of protecting against
declines in the U.S. dollar value of foreign currency-denominated
portfolio securities and against increases in the U.S. dollar cost of
such securities to be acquired. As in the case of other kinds of
options, however, the writing of an option on a foreign currency
constitutes only a partial hedge, up to the amount of the premium
received, and the Fund could be required to purchase or sell foreign
currencies at disadvantageous exchange rates, thereby incurring
losses. The purchase of an option on a foreign currency may constitute
an effective hedge against fluctuations in exchange rates although, in
the event of rate movements adverse to the Fund's position, it may
forfeit the entire amount of the premium plus related transaction
costs. Options on foreign currencies to be written or purchased by the
Fund are traded on U.S. and foreign exchanges or over-the-counter.

CURRENCY RISKS. _Because the International Equity Fund may
purchase securities denominated in currencies other than the U.S.
dollar, changes in foreign currency exchange rates could affect:
the Fund's net asset value; the value of interest earned; gains
and losses realized on the sale of securities; and net investment
income and capital gain, if any, to be distributed to
shareholders by the Fund. If the value of a foreign currency
rises against the U.S. dollar, the value of the Fund assets
denominated in that currency will increase; correspondingly, if
the value of a foreign currency declines against the U.S. dollar,
the value of Fund assets denominated in that currency will
decrease.

The exchange rates between the U.S. dollar and foreign currencies
are a function of such factors as supply and demand in the
currency exchange markets, international balances of payments,
governmental interpretation, speculation and other economic and
political conditions. Although the Fund values its assets daily
in U.S. dollars, the Fund will not convert its holdings of
foreign currencies to U.S. dollars daily. When the Fund converts
its holdings to another currency, it may incur conversion costs.
Foreign exchange dealers may realize a profit on the difference
between the price at which they buy and sell currencies.

WARRANTS. The Equity Fund and the International Equity Fund may invest
in warrants. Warrants provide an option to purchase common stock at a
specific price (usually at a premium above the market value of the
optioned common stock at issuance) valid for a specific period of
time. Warrants may have a life ranging from less than a year to twenty
years or may be perpetual. However, most warrants have expiration
dates after which they are worthless. In addition, if the market price
of the common stock does not exceed the warrant's exercise price
during the life of the warrant, the warrant will expire as worthless.
Warrants have no voting rights, pay no dividends, and have no rights
with respect to the assets of the corporation issuing them. The
percentage increase or decrease in the market price of the warrant may
tend to be greater than the percentage increase or decrease in the
market price of the underlying common stock.

SWAP AGREEMENTS. As one way of managing its exposure to different
types of investments, the International Equity Fund may enter into
interest rate swaps, currency swaps, and other types of swap
agreements such as caps, collars, and floors. Depending on how they
are used, swap agreements may increase or decrease the overall
volatility of the Fund's investments, its share price and yield.

Swap agreements are sophisticated instruments that typically involve a
small investment of cash relative to the magnitude of risks assumed.
As a result, swaps can be highly volatile and may have a considerable
impact on the Fund's performance. Swap agreements are subject to risks
related to the counterparty's ability to perform, and may decline in
value if the counterparty's creditworthiness deteriorates. The Fund
may also suffer losses if it is unable to terminate outstanding swap
agreements to reduce its exposure through offsetting transactions.
When the Fund enters into a swap agreement, assets of the Fund equal
to the value of the swap agreement will be segregated by the Fund.

HIGH YIELD SECURITIES. The International Equity Fund may purchase
underlying funds that may invest 35% or more of their respective
assets in debt securities which are not considered investment grade
bonds (commonly referred to as "junk bonds") by an NRSRO, such as
Moody's or S&P. There is no minimal acceptable rating for a security
to be purchased or held in the underlying funds, and the underlying
funds, may, from time to time, purchase or hold securities in the
lowest rating category. Debt obligations that are not determined to be
investment grade are high-yield, high-risk bonds, typically subject to
greater market fluctuations and greater risk of loss of income and
principal due to an issuer's default. To a greater extent than
investment grade bonds, lower rated bonds tend to reflect short-term
corporate, economic, and market developments, as well as investor
perceptions of the issuer's credit quality. In addition, lower rated
bonds may be more difficult to dispose of or to value than higher
rated, lower-yielding bonds. A description of the rating categories

is contained in the Appendix to this Prospectus. (Underlying funds
that invest 35% or more of their respective assets in junk bonds are
not considered international equity funds).

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. Each Fund may purchase
securities on a when-issued or delayed delivery basis. These
transactions are arrangements in which a Fund purchases securities
with payment and delivery scheduled for a future time. The seller's
failure to complete these transactions may cause a Fund to miss a
price or yield considered to be advantageous. Settlement dates may be
a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, a Fund may pay more or less than the market value of the
securities on the settlement date.

A Fund may dispose of a commitment prior to settlement if the Adviser
deems it appropriate to do so. In addition, a Fund may enter into
transactions to sell its purchase commitments to third parties at
current market values and simultaneously acquire other commitments to
purchase similar securities at later dates. A Fund may realize
short-term profits or losses upon the sale of such commitments.

LENDING OF PORTFOLIO SECURITIES. In order to generate additional
income, each Fund may lend portfolio securities on a short-term or
long-term basis, to broker/dealers, banks, or other institutional
borrowers of securities. A Fund will only enter into loan arrangements
with broker/dealers, banks, or other institutions which the Adviser
has determined are creditworthy under guidelines established by the
Board Members and will receive collateral in the form of cash or U.S.
government securities equal to at least 100% of the value of the
securities loaned at all times. This policy cannot be changed without
the approval of holders of a majority of a Fund's shares.

There is the risk that, when lending portfolio securities, the
securities may not be available to a Fund on a timely basis and a Fund
may, therefore, lose the opportunity to sell the securities at a
desirable price. In addition, in the event that a borrower of
securities would file for bankruptcy or become insolvent, disposition
of the securities may be delayed pending court action.

RESTRICTED AND ILLIQUID SECURITIES. The Funds may invest in restricted
securities. Restricted securities are any securities in which a Fund
may otherwise invest pursuant to its investment objective and policies
but which are subject to restrictions on resale under federal
securities law. However, each Fund will limit investments in illiquid
securities, including (where applicable) restricted securities not
determined by the Board Members to be liquid, non-negotiable time
deposits, over-the-counter options, and repurchase agreements
providing for settlement in more than seven days after notice, to 15%
of its net assets.

With respect to the International Equity Fund, the shares of underlying funds
may, in certain cases, be considered illiquid. See "Additional Considerations of

Investing in Other Investment Companies."

BORROWING MONEY. The Funds will not borrow money directly or through
reverse repurchase agreements (arrangements in which a Fund sells a
portfolio instrument for a percentage of its cash value with an
agreement to buy it back on a set date) or pledge securities except,
under certain circumstances, a Fund may borrow up to one-third of the
value of its total assets and pledge assets

as necessary to secure such borrowings. This policy cannot be changed
without the approval of holders of a majority of a Fund's shares.

The International Equity Fund may purchase underlying funds that may
borrow money directly or through reverse repurchase agreements and
pledge assets as necessary to secure such borrowings. An underlying
fund will maintain continuous asset coverage (i.e., total assets
including borrowings, less liabilities exclusive of borrowings) of
300% of the amount borrowed. (For this purpose, the proceeds received
from a reverse repurchase agreement will be deemed a borrowing by an
underlying fund). If the 300% asset coverage should decline as a
result of market fluctuations or other reasons, an underlying fund may
be required to sell some of its portfolio securities within three days
to reduce the debt and restore the 300% asset coverage, even though it
may be disadvantageous from an investment standpoint to sell portfolio
securities at the time.

Borrowing money, also known as leveraging, will cause an underlying
fund to incur interest charges, and may increase the effect of
fluctuations in the value of the investments of the underlying fund on
the net asset value of its shares. Generally, an underlying fund will
not purchase additional securities for investment while there are
borrowings outstanding representing more than 5% of its total assets.

SHORT SALES. The International Equity Fund may purchase shares in an
underlying fund that may sell securities short, subject to certain
restrictions. A short sale occurs when a borrowed security is sold in
anticipation of a decline in its price. If the decline occurs, shares
equal in number to those sold short can be purchased at the lower
price. If the price increases, the higher price must be paid. The
purchased shares are then returned to the original lender. Risk arises
because no loss limit can be placed on the transaction. When an
underlying fund enters into a short sale, assets equal to the market
price of the securities sold short or any lesser price at which the
underlying fund can obtain such securities, are segregated on the
underlying fund's records and maintained until the underlying fund
meets its obligations under the short sale.

DIVERSIFICATION. As noted previously, the Pennsylvania Intermediate
Municipal Bond Fund is a non-diversified portfolio. However, the
Equity Fund, the International Equity Fund, the Short-Term Bond Fund,
and the Intermediate U.S. Government Bond Fund are diversified
portfolios. Therefore, with respect to 75% of the value of total
assets, these Funds will not invest more than 5% of their respective
total assets in securities of any one issuer, other than cash, cash
items or securities issued or guaranteed by the government of the
United States or its agencies or instrumentalities, repurchase
agreements collateralized by U.S. government securities, and
securities of other investment companies in the case of the
International Equity Fund. None of these Funds may acquire more than
10% of the outstanding voting securities of any one issuer. This
policy cannot be changed without the approval of holders of a majority
of a Fund's shares.

The underlying funds in which the International Equity Fund invests
may be non-diversified investment companies. As such, there is no 1940
Act limit on the percentage of assets which can be invested in any
single issuer. However, it is anticipated that the underlying funds
would comply with the diversification limits of Sub-chapter M of the
Internal Revenue Code, as described under "Pennsylvania Intermediate
Bond Fund--Non-Diversification." An investment in such funds,
therefore, will entail greater risks than would exist in diversified
investment companies because the

higher percentage of investments among fewer issuers may result in
greater fluctuation in the total market value of the fund's portfolio.
Any economic, political, or regulatory developments affecting the
value of the securities of such issuer held by the fund will have a
greater impact on the total value of the fund's portfolio than would
be the case if the fund were diversified among more issuers.

In some instances the International Equity Fund may purchase shares in
an underlying fund that may invest a substantial portion of its assets
in a single country. Such an investment may result in a greater
fluctuation in the total market value of the underlying fund's
portfolio because of the higher percentage of investments among fewer
issuers or in a single country. The economic, political or regulatory
developments affecting the value of the securities in the underlying
fund's portfolio will therefore have a greater impact on the total
value of the portfolio than would be the case if the portfolio were
diversified among more issuers or countries. The International Equity
Fund intends to reduce these risks by holding shares of multiple
underlying funds. Many of the underlying funds will be diversified
funds, and their investments will be spread over a range of issuers,
industries, and countries. The level of diversification the
International Equity Fund obtains from being invested in a number of
underlying funds is designed (but not guaranteed) to reduce the risk
associated with an investment in a single underlying fund.

INDUSTRY CONCENTRATION. The International Equity Fund may purchase
shares in underlying funds that may concentrate their investments
within one industry. Because the scope of investment alternatives
within an industry is limited, the value of the shares of such an
underlying fund may be subject to greater market fluctuation than an
investment in a fund which invests in a broader range of securities.

DERIVATIVE CONTRACTS AND SECURITIES. The term "derivative" has
traditionally been applied to certain contracts (including, futures,
forward, option and swap contracts) that "derive" their value from
changes in the value of an underlying security, currency, commodity or
index. Certain types of securities that incorporate the performance
characteristics of these contracts are also referred to as
"derivatives." The term has also been applied to securities "derived"
from the cash flows from underlying securities, mortgages or other
obligations. Derivative contracts and securities can be used to reduce
or increase the volatility of an investment portfolio's total
performance. While the response of certain derivative contracts and
securities to market changes may differ from traditional investments,
such as stock and bonds, derivatives do not necessarily present
greater market risks than traditional investments. The Funds will only
use derivative contracts for the purposes disclosed above in this
prospectus section and in the section entitled "Investment Objective
and Policies of Each Fund." To the extent that the Funds invest in
securities that could be characterized as derivatives (such as
convertible securities, options, futures contracts, and
mortgage-backed and asset-backed securities), they will only do so in
a manner consistent with their investment objectives, policies and
limitations.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. Each Fund may
invest in the securities of other investment companies. Except for the
International Equity Fund, which is subject to different limitations
as described below, each of the other Funds may not own more than 3%
of the total outstanding voting stock of any investment company,
invest more than 5% of its total assets in any one investment company,
or invest more than 10% of its total assets in investment companies in

general. The Funds (except the International Equity Fund) will invest
in other investment companies primarily for the purpose of investing
short-term cash which has not yet been invested in other portfolio
instruments. It should be noted that investment companies incur
certain expenses such as management fees and, therefore, any
investment by a Fund in shares of another investment company would be
subject to such duplicate expenses.

Any investment in a mutual fund involves risk and, although the
International Equity Fund intends to invest substantially all of its
assets in a number of underlying funds, this practice does not
eliminate investment risk. Moreover, investing through the
International Equity Fund in an underlying portfolio of mutual funds
involves certain additional expenses and certain tax results which
would not be present in a direct investment in the underlying funds.
See "Expenses of the Funds" and "Federal Tax Information."

The International Equity Fund and its affiliates may purchase only up
to 3% of the total outstanding securities of any underlying fund. For
this purpose, shares of underlying funds held by the other Funds and
by private discretionary investment advisory accounts managed by the
Adviser will be aggregated with those held by the International Equity
Fund. Accordingly, when affiliated persons and other accounts managed
by the Adviser hold shares of any of the underlying funds, the
International Equity Fund's ability to invest fully in shares of those
funds is restricted, and the Adviser must then, in some instances,
select alternative investments that would not have been its first
preference.

The 1940 Act also provides that, when the International Equity Fund
invests in shares of an underlying fund, the underlying fund will be
obligated to redeem its shares held by the International Equity Fund
only in an amount up to 1% of the underlying fund's outstanding
securities during any period of less than 30 days. Therefore, if the
International Equity Fund owns more than 1% of an underlying fund's
outstanding securities, the portion of the investment exceeding 1% may
be considered illiquid and, when added together with other such
illiquid securities, may not exceed 15% of the International Equity
Fund's net assets. See "Restricted and Illiquid Securities" These
limitations are not fundamental investment policies and may be changed
by the Board Members without shareholder approval.

Under certain circumstances, an underlying fund may determine to make
payment of a redemption by the International Equity Fund wholly or
partly by a distribution in kind of securities from the underlying
fund's portfolio, in lieu of cash, in conformity with the rules of the
SEC. In such cases, the International Equity Fund may hold portfolio
securities distributed by an underlying fund until the Adviser
determines that it is appropriate to dispose of such securities.

Investment decisions by the investment advisers of the underlying
funds are made independently of each other and of the International
Equity Fund and its Adviser. Therefore, the investment adviser of one
underlying fund may be purchasing shares of the same issuer whose
shares are being sold by the investment adviser of another such fund.
The result of this would be an indirect expense to the International
Equity Fund without accomplishing any investment purpose.

The International Equity Fund may purchase shares of both load and
no-load underlying funds (including those with a contingent deferred
sales charge). However, in most cases, the International Equity Fund
anticipates purchasing underlying fund shares without a sales load or
qualifying for a

reduction or waiver of any sales load because of the amount it intends
to invest in the underlying fund.

Under the 1940 Act, a mutual fund must sell its shares at the price
(including sales load, if any) described in its prospectus, and
current rules under the 1940 Act do not permit negotiation of sales
charges. Therefore, the International Equity Fund currently is not
able to negotiate the level of the sales charges at which it will
purchase shares of load funds. In some cases, the sales load may be as
great as 8.5% of the public offering price (or 9.29% of the net amount
invested). Nevertheless, when appropriate, the International Equity
Fund will purchase such shares pursuant to (i) letters of intent,
permitting it to obtain reduced or no sales charges by aggregating its
intended purchases over time (generally 13 months from the initial
purchase under the letter); (ii) rights of accumulation, permitting it
to obtain reduced or no sales charges as it purchases additional
shares of an underlying fund; and (iii) the right to obtain reduced or
no sales charges by aggregating its purchases of several funds within
a family of mutual funds.

MARKETVEST GROUP OF FUNDS INFORMATION

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MANAGEMENT OF THE MARKETVEST GROUP OF FUNDS

BOARD MEMBERS. Marketvest Funds, Inc. is managed by a Board of Directors.
Marketvest Funds is managed by a Board of Trustees. The Board Members are
responsible for managing each Fund's business affairs and for exercising all of
the powers of the Funds except those reserved for the shareholders.

INVESTMENT ADVISER. Pursuant to an investment advisory contract with
both Marketvest Funds, Inc. and Marketvest Funds, investment decisions
for the Funds are made by Dauphin Deposit Bank and Trust Company
("Dauphin Deposit"), the Funds' investment adviser, subject to
direction by the Board Members. The Adviser continually conducts
investment research and supervision for each Fund (including, with
respect to the International Equity Fund, underlying fund analysis)
and is responsible for the purchase or sale of portfolio instruments,
for which it receives an annual advisory fee from the assets of each
Fund.

ADVISORY FEES. The Adviser receives an annual investment advisory
fee at annual rates equal to percentages of the relevant Fund's
average net assets as follows: 1.00% of the Equity Fund, 0.65% of
the International Equity Fund, and 0.75% of the Pennsylvania
Intermediate Municipal Bond Fund, the Short-Term Bond Fund, and
the Intermediate U.S. Government Bond Fund. The fee paid by the
Equity Fund, the Pennsylvania Intermediate Municipal Bond Fund,
the Short-Term Bond Fund and the Intermediate U.S. Government
Bond Fund, while higher than the advisory fee paid generally by
other mutual funds, is comparable to the advisory fees paid by
other mutual funds with similar objectives and policies. The
Adviser may voluntarily choose to waive a portion of its fee or
reimburse the Funds for certain operating expenses, but reserves
the right to terminate such waiver or reimbursement at any time
at its sole discretion.

The investment advisory fees of the underlying funds in which the
International Equity Fund invests are not included in the
discussion of the International Equity Fund's advisory fee above.
By investing in the International Equity Fund, you bear not only
that Fund's expenses,

but also similar expenses of the underlying funds. You would not
incur the International Equity Fund's expenses if you were to
invest in the underlying funds directly.

ADVISER'S BACKGROUND. Dauphin Deposit is a wholly-owned
subsidiary of Dauphin Deposit Corporation (the "Corporation"), a
bank holding company. Through its subsidiaries and affiliates,
the Corporation provides a comprehensive range of financial
services to the public. The headquarters of both the Corporation
and Dauphin Deposit are located at 213 Market Street, Harrisburg,
PA 17105. The Board of Directors and shareholders of the
Corporation have approved the merger of the Corporation (the
"Merger") with and into First Maryland Bancorp ("FMB"), a
subsidiary of Allied Irish Banks PLC ("AIB"). As a result, upon
consummation of the Merger all existing subsidiaries of the
Corporation would become subsidiaries of FMB and the separate
legal existence of the Corporation would cease. It is presently
anticipated that the Merger will be completed on or about July 8,
1997.

Under the provisions of the 1940 Act, completion of the Merger
would result in an "assignment" and therefore automatic
termination of Dauphin Deposit's current investment advisory
contract with the Funds (the "Termination"). Accordingly, the
Board Members of the Funds considered and approved new investment
advisory contracts between the Funds and Dauphin Deposit, subject
to approval by shareholders of the Funds and consummation of the
Merger. At a Special Meeting of the Funds' shareholders on June
30, 1997, the new investment advisory contracts with Dauphin
Deposit were approved, subject only to consummation of the
Merger.

Dauphin Deposit, and its divisions, Bank of Pennsylvania,
Valleybank, and Farmers Bank, provide banking services through
over 100 branch offices located in a twelve county area in south
central Pennsylvania with regional headquarters in Harrisburg,
Hanover, and Reading, Pennsylvania. Among the services offered to
clients are commercial and consumer lending, time and regular
savings and demand deposits, cash management, credit cards, and
personal, corporate, and pension trust services. Mortgage lending
is provided through its affiliate, Eastern Mortgage Services,
Inc. As of March 31, 1997, Dauphin Deposit had assets in excess
of $6 billion.

Dauphin Deposit's Trust and Financial Services Group provides
individuals, businesses, and municipalities with investment,
custodial, and trust services. As of March 31, 1997, the Trust
and Financial Services Group had in excess of $2 billion under
active management, including $1.2 billion as investment adviser
to the Marketvest Group of Funds.

AIB is an Irish banking corporation whose securities are traded
on the Irish Stock Exchange, London Stock Exchange, and the New
York Stock Exchange. AIB is a registered bank holding company
under the BHCA, and, based upon total assets at December 31,
1996, is the largest banking corporation organized under the laws
of Ireland. At December 31, 1996, AIB and its subsidiaries had
total assets of approximately $43.9 billion. AIB and its
subsidiaries provide a full range of banking, financial and
related services principally in Ireland, the United States and
United Kingdom.

The principal executive offices of AIB are located at Bankcentre,
Ballsbridge, Dublin 4, Ireland.

FMB, a Maryland corporation incorporated in 1973, is registered
as a bank holding company and is a subsidiary of AIB. AIB owns
100% of the outstanding common stock of FMB and controls
approximately 99% of the outstanding voting power of FMB. At
December 31, 1996, FMB had consolidated total assets of $10.8
billion, total deposits of $7.5 billion and total shareholders'
equity of $1.2 billion.

FMB's principal subsidiaries are The First National Bank of
Maryland, First Omni Bank N.A. and The York Bank and Trust
Company. Through its subsidiaries, FMB provides comprehensive
corporate, commercial, correspondent and retail banking services,
personal and corporate trust services and related financial
products and services to individuals, businesses, governmental
units and financial institutions primarily in Maryland and the
adjacent areas, including south central Pennsylvania and the
District of Columbia. At December 31, 1996, FMB operated 195
branch banking centers, 278 automatic teller machines and
employed approximately 4,824 people.

The principal executive offices of FMB are located at 25 South
Charles Street, Baltimore, Maryland 21201.

Hopper Soliday and Co., Inc. ("Hopper Soliday"), headquartered in
Lancaster, Pennsylvania, is a wholly-owned subsidiary of the
Corporation. Hopper Soliday's services include municipal finance,
investment banking, securities underwriting, market making,
institutional sales, retail brokerage, and other general
securities businesses permitted for bank holding companies and
their non-bank subsidiaries. Hopper Soliday is a registered
broker/dealer and an affiliate of the Adviser. As such, the
Adviser is permitted under certain limited circumstances (as
described further under "Brokerage Transactions") to use Hopper
Soliday, or other affiliates, as a broker to execute portfolio
transactions on behalf of the Funds. As part of its regular
banking operations, Dauphin Deposit may make loans to public
companies and municipalities. Thus, it may be possible, from time
to time, for the Funds to hold or acquire the securities of
issuers which are also lending clients of Dauphin Deposit.
Because of the internal controls maintained by Dauphin Deposit to
restrict the flow of non-public information, investments for the
Funds are typically made without any knowledge of Dauphin
Deposit's or its affiliates' lending relationships with an
issuer; therefore, the lending relationship will not be a factor
in the selection of securities.

The Funds and the Adviser have each adopted strict codes of
ethics governing the conduct of all employees who manage the
Funds and their portfolio securities. These codes recognize that
such persons owe a fiduciary duty to the Funds' shareholders and
must place the interests of the shareholders ahead of the
employees' own interest. Among other things, the codes: require
preclearance and periodic reporting of personal securities
transactions; prohibit personal transactions in securities being
purchased or sold, or being considered for purchase or sale, by
the Funds; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for
less than sixty days. Violations of the codes are subject to
review by the Board Members, and could result in severe penalties
imposed by the Funds or the Adviser.

PORTFOLIO MANAGERS' BACKGROUND. Samuel E. Long has been the portfolio
manager for the Equity Fund since its inception. Mr. Long is an Equity
Specialist and Vice President of Dauphin Deposit. Mr. Long joined Dauphin
Deposit in November 1985 as Senior Equity Manager. From 1979 to 1985, Mr.
Long was Resident Manager and Vice President of the Harrisburg branch
office of W.H. Newbold's Son and Company, Inc. In this capacity, Mr. Long
achieved the designations of Registered Options Principal, General Sales
Supervisor, as well as Series III-Commodities Representative, and Series
IV-General Securities Representative. From 1974 to 1979, Mr. Long managed
an equity fund as well as employee benefit accounts for Commonwealth
National Bank. From 1969 to 1974, he was a Registered Investment
Representative with Walston and Co.

Daryl B. Girton has been the portfolio manager for the Short-Term Bond Fund
since its inception. Mr. Girton is a Fixed Income Specialist and Vice
President of Dauphin Deposit. He has been the Portfolio Manager of Dauphin
Deposit's Employee Benefit Short Term Bond Fund and Personal Trust U.S.
Government Fund since September of 1994. From 1989 to 1994, Mr. Girton
managed personal trust common funds for Fulton Bank, including a government
income fund, a common stock fund, and an equity income fund. Mr. Girton
graduated from Thiel College with a B.A. in Business Administration and
received an M.B.A. from Shippensburg University. Mr. Girton is a Chartered
Financial Analyst and a member of the Philadelphia Financial Analysts
Society.

Cathleen S. Saylor has been the portfolio manager for the Pennsylvania
Intermediate Municipal Bond Fund and the Intermediate U.S. Government Bond
Fund since their inception. Ms. Saylor is a Fixed Income Specialist and
Vice President of Dauphin Deposit. Ms. Saylor has been the Manager of
Dauphin Deposit's Personal Trust Municipal Bond Fund (since 1987), Dauphin
Deposit's Employee Benefit Fixed Income Fund (since 1985), and Dauphin
Deposit's Personal Trust Fixed Income Fund (since 1985). She had previously
managed Dauphin Deposit's Employee Benefit Short Term Bond Fund from 1987
to 1994. Ms. Saylor joined Dauphin Deposit in 1974 and is a former
supervisor in the Trust Operations Securities Processing Department. She
attended Harrisburg Area Community College for Business Administration and
is a graduate of the Pennsylvania Bankers' Association Central Atlantic
School of Trust. Ms. Saylor is a Chartered Financial Analyst and a member
of the Baltimore Security Analysts Society.

Brett A. Hoffacker has been the assistant portfolio manager for the Equity
Fund, and the portfolio manager of the International Equity Fund, since the
inception of each. Mr. Hoffacker is an Equity Specialist and Vice President
of Dauphin Deposit. Mr. Hoffacker has been the Portfolio Manager of Dauphin
Deposit's Personal Trust Equity Fund (since 1994) and Dauphin Deposit's
Employee Benefit Global Equity Fund (since 1994). From 1983 to 1994, Mr.
Hoffacker was Manager of the Investment and Employee Benefit Departments of
Farmers Bank and Trust Company, a Division of Dauphin Deposit. Mr.
Hoffacker graduated from the Pennsylvania State University with a B.A. in
Finance and the Pennsylvania Bankers' Association Central Atlantic School
of Trust. Mr. Hoffacker is a Certified Financial Planner, Certified
Retirement Plan Specialist, and a former registered investment broker. From
1980 to 1983, Mr. Hoffacker

was employed by York Bank and Trust in Trust Employee Benefits as an
account administrator.

BROKERAGE TRANSACTIONS

- --------------------------------------------------------------------------------

When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the Adviser looks for prompt execution of the
order at a favorable price. In working with dealers, the Adviser will
generally utilize those who are recognized dealers in specific
portfolio instruments, except when a better price and execution of the
order can be obtained elsewhere. In selecting among firms believed to
meet these criteria, the Adviser may give consideration to those firms
which have sold or are selling shares of a Fund. The Adviser makes
decisions on portfolio transactions and selects brokers and dealers
subject to review by the Board Members.

Notwithstanding the foregoing, to the extent consistent with
applicable provisions of the 1940 Act, Rule 17e-1, and other rules and
exemptions adopted by the SEC under the 1940 Act, the Board Members
have determined that all orders for transactions in securities or
options on behalf of the Funds may be placed by Dauphin Deposit with
broker/dealers affiliated with Dauphin Deposit, including Hopper
Soliday. The Funds may use Hopper Soliday or another affiliated broker
in a portfolio transaction when Dauphin Deposit believes that the
affiliated broker's charge for the transaction does not exceed usual
and customary levels and is likely to result in price and execution at
least as favorable as those of other qualified unaffiliated
broker/dealers.

DISTRIBUTION OF SHARES OF THE FUNDS

Edgewood Services, Inc. is the principal distributor for shares of the Funds. It
is a New York corporation organized on October 26, 1993, and is the principal
distributor for a number of investment companies. Edgewood Services, Inc. is a

subsidiary of Federated Investors.

DISTRIBUTION PLAN. Pursuant to the provisions of a distribution plan
adopted in accordance with Rule 12b-1 under the 1940 Act (the "Plan"),
each Fund may pay to Edgewood Services, Inc., the distributor, an
amount computed at an annual rate of up to 0.25% of the average daily
net asset value of that Fund's shares to finance any activity which is
principally intended to result in the sale of that Fund's shares
subject to the Plan.

Certain trust clients of Dauphin Deposit will not be affected by the
Plan because the Plan will not be activated unless and until a
separate class of shares of the Funds (which would not have a Rule
12b-1 plan) is created and such trust clients' investments in the
Funds are converted to such class.

The distributor may, from time to time, and for such periods as it
deems appropriate, voluntarily reduce its compensation under the Plan
to the extent the expenses attributable to the shares exceed such
lower expense limitation as the distributor may, by notice to the
Funds, voluntarily declare to be effective.

The distributor may select financial institutions such as banks,
fiduciaries, custodians for public funds, investment advisers, and
broker/dealers to provide sales and support services as agents for
their clients or customers who beneficially own shares. Financial
institutions will receive fees from the distributor based upon shares
owned by their clients or customers. The schedules of such fees

and the basis upon which such fees will be paid will be determined
from time to time by the distributor.

The Funds' Plan is a compensation type plan. As such, the Funds make
no payments to the distributor except as described above. Therefore,
the Funds do not pay for unreimbursed expenses of the distributor,
including amounts expended by the distributor in excess of amounts
received by it from the Funds, interest, carrying or other financing
charges in connection with excess amounts expended, or the
distributor's overhead expenses. However, the distributor may be able
to recover such amounts or may earn a profit from future payments made
by the Funds under the Plan.

The Glass-Steagall Act prohibits a depository institution (such as
Dauphin Deposit) from being an underwriter or distributor of certain
securities, including shares of registered open-end mutual fund
companies. The Glass-Steagall Act does not prohibit such a depository
institution from acting as investment adviser or custodian to such an
investment company or from purchasing shares of such a company as
agent for and upon the order of their customer. In the event the
Glass-Steagall Act is deemed to prohibit depository institutions from
acting in the advisory or custodial capacities described above or
should Congress relax current restrictions on depository institutions,
the Board Members will consider appropriate changes in the services.

ADMINISTRATIVE ARRANGEMENTS. The distributor may also pay financial
institutions as directed by the Adviser a fee based upon the average
daily net asset value of shares of their customers invested in each
Fund for providing administrative services. This fee is in addition to
the amounts paid under the Distribution Plan for administrative
services, and, if paid, will be reimbursed by the Adviser and not a
Fund.

ADMINISTRATION OF THE FUNDS

ADMINISTRATIVE SERVICES. Federated Administrative Services ("FAS"),
Pittsburgh, Pennsylvania, a subsidiary of Federated Investors,
provides the Funds with the administrative personnel and services
necessary to operate each Fund. Such services include certain legal
and accounting services. FAS receives an annual administrative fee
equal to 0.15% of the Funds' average aggregate daily net assets.

The administrative fee received during any fiscal year shall aggregate
at least $75,000 per Fund. FAS may voluntarily choose to waive a
portion of its fee at any time.

CUSTODIAN. Dauphin Deposit is custodian for the securities and cash of the
Funds.

PORTFOLIO TURNOVER

Although the Funds do not intend to invest for the purpose of seeking
short-term profits, securities in the Funds' portfolios will be sold
whenever the Adviser believes it is appropriate to do so in light of
the Funds' investment objective, without regard to the length of time
a particular security may have been held. Generally, a high portfolio
turnover rate results in increased transaction costs and higher taxes
paid by the Funds' shareholders. In addition, a high rate of portfolio
turnover may result in the realization of a larger amount of capital
gains which, when distributed to the Funds' shareholders, are taxable
to them. Additionally, with respect to the International Equity Fund,
to the extent that the underlying funds have assessed a sales charge
on the International Equity Fund's

investment, a higher portfolio turnover rate for the International
Equity Fund could impact the International Equity Fund's overall
performance and total return. Nevertheless, transactions for a Fund's
portfolio will be based only upon investment considerations and will
not be limited by any other considerations when the Fund's Adviser
deems it appropriate to make changes in a Fund's portfolio. There is
no limit on the underlying funds' portfolio turnover rates.

EXPENSES OF THE FUNDS

The Funds pay all of their own expenses and their allocable shares of
Marketvest Funds, Inc.'s and Marketvest Funds' expenses. The expenses
of each Fund include, but are not limited to, the cost of: organizing
the Funds and continuing their existence; Board Members' fees;
investment advisory and administrative services; printing prospectuses
and other Fund documents for shareholders; registering the Funds and
shares of the Funds; taxes and commissions; issuing, purchasing,
repurchasing, and redeeming shares; fees for custodians, transfer
agents, dividend disbursing agents, shareholder servicing agents, and
registrars; printing, mailing, auditing, accounting, and legal
expenses; reports to shareholders and governmental agencies; meetings
of Board Members and shareholders and proxy solicitations therefor;
distribution fees; insurance premiums; association membership dues;
and such nonrecurring and extraordinary items as may arise.

An investor in the International Equity Fund should recognize that you
may invest directly in underlying funds and that, by investing in
underlying funds indirectly through the International Equity Fund, you
will bear not only your proportionate share of the expenses of the
International Equity Fund and of Marketvest Funds as described above,
but also, indirectly, similar expenses of the underlying funds. In
addition, you will bear your proportionate share of expenses, if any,
related to the distribution of the International Equity Fund's shares,
see "Distribution of Shares of the Funds," and also may indirectly
bear expenses paid by an underlying fund related to the distribution
of its shares. You also will bear your proportionate share of any
sales charges incurred by the International Equity Fund related to the
purchase of shares of the underlying funds. However, in certain
instances, the International Equity Fund may be eligible to purchase
underlying funds at a reduced or no sales charge, whereas an
individual investor would have to pay the full sales charge if the
investor directly invested in such underlying funds. In those
instances, it may be possible for an investor to bear greater
transaction and operating expenses by investing directly in the
underlying fund than if the investor were to invest indirectly through
such underlying funds as a shareholder in the International Equity
Fund (even after aggregating the transaction and operating expenses of
the International Equity Fund and the underlying funds). Finally, you
should recognize that, as a result of the International Equity Fund's
policies of investing in other mutual funds, you may receive taxable
capital gains distributions to a greater extent than would be the case
if you invest directly in the underlying funds. See "Dividends and
Capital Gains" and "Federal Income

Tax Consequences."

NET ASSET VALUE

- --------------------------------------------------------------------------------

Each Fund's net asset value per share fluctuates. It is determined by
dividing the sum of the market value of all securities and other
assets, less liabilities, by the number of shares outstanding.

INVESTING IN THE FUNDS

- --------------------------------------------------------------------------------

SHARE PURCHASES

Fund shares are sold on days on which the New York Stock Exchange and
the Federal Reserve Wire System are open for business except on
Columbus Day and Veterans' Day. Shares of the Funds may be purchased
through Hopper Soliday or Dauphin Deposit. In connection with the sale
of shares of the Funds, the distributor may from time to time offer
certain items of nominal value to any shareholder or investor. The
Funds reserve the right to reject any purchase request.

To purchase shares of the Funds through Hopper Soliday, call toll free
1-800-MKT-VEST (1-800-658-8378). Trust and institutional investors
should contact their account officer to make purchase requests through
Dauphin Deposit. Texas residents must purchase shares of the Funds
through Edgewood Services, Inc. at 1-800-618-3573. A purchase request
must be received by Hopper Soliday or Edgewood Services, Inc. before
4:00 p.m. (Eastern time), and by Dauphin Deposit before 2:00 p.m.
(Eastern time), in order for shares of a Fund to be purchased at that
day's net asset value. Purchase requests through registered
broker/dealers must be received by Hopper Soliday before 3:00 p.m.
(Eastern time) in order for shares to be purchased at that day's net
asset value. Hopper Soliday and Dauphin Deposit are responsible for
promptly submitting purchase requests and providing proper written
purchasing instructions to a Fund. The order will be placed by Hopper
Soliday or Edgewood Services, Inc. when payment is received. Payment
for shares purchased through Dauphin Deposit must be received on the
next business day after placing the order.

BY CHECK. Purchases of shares by check must be made payable to the Fund and sent
to Hopper Soliday, 1703 Oregon Pike, P.O. Box 4548, Lancaster, PA 17604-4548.

BY WIRE. Shares of the Funds cannot be purchased by Federal Reserve
Wire on Columbus Day or Veterans' Day. To purchase shares by wire,
Dauphin Deposit trust and institutional investors should contact their
account officer. All other shareholders should contact Hopper Soliday.

MINIMUM INVESTMENT REQUIRED

The minimum initial investment in a Fund by an investor is $1,000
except for the International Equity Fund, for which the minimum
initial investment is $10,000. Subsequent investments in each Fund
must be in amounts of at least $50. These minimums may be waived (or
lowered) for purchases by the Trust and Financial Services Group of
Dauphin Deposit and its affiliates for fiduciary or custodial accounts
and for certain purchases by employees of Dauphin Deposit Corporation
and its subsidiaries. Following the Merger, such waivers (or
reductions) will also be made available for purchases by AIB, FMB, and
the affiliates of each, for fiduciary and custodial accounts, and for
certain purchases by employees of AIB and its subsidiaries, including
FMB. An institutional

investor's minimum investment will be calculated by combining all
accounts it maintains with the Funds.

WHAT SHARES COST

Shares are sold at their net asset value next determined after an
order is received, plus a sales charge, as follows:

EQUITY FUND:

SALES CHARGE AS A SALES CHARGE AS A
PERCENTAGE OF PUBLIC PERCENTAGE OF NET

AMOUNT OF TRANSACTIONS OFFERING PRICE AMOUNT INVESTED
<S> <C> <C>
Less than $50,000 4.75% 4.99%

- ------------------------------------
$50,000 but less than $100,000 4.50% 4.71%
- ------------------------------------
$100,000 but less than $250,000 4.00% 4.17%
- ------------------------------------
$250,000 but less than $500,000 3.50% 3.63%
- ------------------------------------
$500,000 or more 3.00% 3.09%
- ------------------------------------
</TABLE>

INTERNATIONAL EQUITY FUND:

SALES CHARGE AS A SALES CHARGE AS A
PERCENTAGE OF PUBLIC PERCENTAGE OF NET

AMOUNT OF TRANSACTIONS OFFERING PRICE AMOUNT INVESTED
<S> <C> <C>
Less than $100,000 1.50% 1.52%

- ------------------------------------
$100,000 but less than $250,000 1.00% 1.01%
- ------------------------------------
$250,000 but less than $500,000 0.75% 0.76%
- ------------------------------------
$500,000 or more 0.50% 0.50%
- ------------------------------------
</TABLE>

PENNSYLVANIA INTERMEDIATE MUNICIPAL BOND FUND, SHORT-TERM BOND FUND, AND
INTERMEDIATE U.S. GOVERNMENT BOND FUND:

SALES CHARGE AS A SALES CHARGE AS A
PERCENTAGE OF PUBLIC PERCENTAGE OF NET

AMOUNT OF TRANSACTIONS OFFERING PRICE AMOUNT INVESTED
<S> <C> <C>
Less than $100,000 3.50% 3.63%

- ------------------------------------
$100,000 but less than $250,000 3.00% 3.09%
- ------------------------------------
$250,000 but less than $500,000 2.50% 2.56%
- ------------------------------------
$500,000 or more 2.00% 2.04%
- ------------------------------------
</TABLE>

The net asset value is determined as of the close of trading (normally
4:00 p.m., Eastern time) on the New York Stock Exchange, Monday
through Friday, except on: (i) days on which there are not sufficient
changes in the value of a Fund's portfolio securities that its net
asset value might be

materially affected; (ii) days during which no shares are tendered for
redemption and no orders to purchase shares are received; and (iii)
the following holidays: New Year's Day, Martin Luther King Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Columbus Day, Veterans' Day, Thanksgiving Day, and Christmas Day.

PURCHASES AT NET ASSET VALUE. Shares of the Funds may be purchased at
net asset value, without a sales charge, by the Trust and Financial
Services Division of Dauphin Deposit and their affiliates (including
AIB, FMB and their subsidiaries, following the Merger) for accounts in
which they serve in the capacity of Trustee, Guardian,
Attorney-in-fact, Executor, Administrator, Investment Advisor,
Managing Agent, or Custodian under the Uniform Gifts to Minors Act, by
trust companies, by trust departments of other financial institutions,
and by banks and savings and loans (savings associations) for their
accounts. Board Members, emeritus trustees, employees and retired
employees of Marketvest Funds, Inc. and Marketvest Funds, Dauphin
Deposit Corporation and its subsidiaries, including Dauphin Deposit
and Hopper Soliday, or Edgewood Services, Inc. or their affiliates, or
any bank or investment dealer who has a sales agreement with Edgewood
Services, Inc. with regard to the Funds, and their spouses and
children under 21, may also buy shares at net asset value, without a
sales charge. Following the Merger, employees of AIB and its
subsidiaries, including FMB, and the spouses and children under 21 of
such employees, will also be permitted to purchase shares at net asset
value without a sales charge. However, purchases of Fund shares at net
asset value under brokerage accounts established with Hopper Soliday
may be subject to per-transaction charges. Shareholders should consult
Hopper Soliday for more information about its charges.

SALES CHARGE REALLOWANCE. For sales of shares of a Fund, a dealer will
normally receive up to 85% of the applicable sales charge. For shares
sold with a sales charge, Hopper Soliday will receive 85% of the
applicable sales charge for purchases of shares of the Funds made
directly through Hopper Soliday. The sales charge for shares sold
other than through Hopper Soliday or registered broker/dealers will be
retained by the distributor. However, the distributor will,
periodically, uniformly offer to pay to dealers additional amounts in
the form of cash or promotional incentives, such as reimbursement of
certain expenses of qualified employees and their spouses to attend
informational meetings about the Funds or other special events at
recreational-type facilities, or items of material value. Such
payments, all or a portion of which may be paid from the sales charge
the distributor normally retains or any other source available to it,
will be predicated upon the amount of shares of the Funds that are
sold by the dealer.

REDUCING THE SALES CHARGE

The sales charge can be reduced on the purchase of shares through:
quantity discounts and accumulated purchases; signing a 13-month
letter of intent; using the reinvestment privilege; or concurrent
purchases.

QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. As shown in the table
above, larger purchases reduce the sales charge paid. The Funds will
combine purchases made on the same day by the investor, the investor's
spouse, and the investor's children under age 21 when it calculates
the sales charge.

If an additional purchase of shares of a Fund is made, each Fund will
consider the previous purchases still invested in any of the Funds.
For example, if a shareholder of the Equity Fund

already owns shares having a current value at the public offering
price of $30,000 and purchases $20,000 more at the current public
offering price, the sales charge on the additional purchase according
to the schedule now in effect would be 4.50%, not 4.75%.

To receive the sales charge reduction, Hopper Soliday or the
distributor must be notified by the shareholder in writing or by the
shareholder's financial institution at the time the purchase is made
that Fund shares are already owned or that purchases are being
combined. Each Fund will reduce the sales charge after it confirms the
purchases.

LETTER OF INTENT. If a shareholder intends to purchase at least
$50,000 of shares in the Equity Fund or $100,000 of shares in the
International Equity Fund, Pennsylvania Intermediate Municipal Bond
Fund, the Short-Term Bond Fund, and the Intermediate U.S. Government
Bond Fund over the next 13 months, the sales charge may be reduced by
signing a letter of intent to that effect. This letter of intent
includes a provision for a sales charge adjustment depending on the
amount actually purchased within the 13-month period and a provision
for the custodian to hold up to 4.75% (for the Equity Fund), 1.50%
(for the International Equity Fund), or 3.50% (for the Pennsylvania
Intermediate Municipal Bond Fund, the Short-Term Bond Fund, and the
Intermediate U.S. Government Bond Fund) of the total amount intended
to be purchased in escrow (in shares of the Funds) until such purchase
is completed.

The shares held in escrow will be applied to the shareholder's account
at the end of the 13-month period unless the amount specified in the
letter of intent is not purchased. In this event, an appropriate
number of escrowed shares may be redeemed in order to realize the
difference in the sales charge.

This letter of intent will not obligate the shareholder to purchase
shares, but if the shareholder does so, each purchase during the
period will be at the sales charge applicable to the total amount
intended to be purchased. This letter may be dated as of a prior date
to include any purchases made within the past 90 days; however, these
previous purchases will not receive the reduced sales charge.

REINVESTMENT PRIVILEGE. If shares in the Funds have been redeemed, the
shareholder has a one-time right, within 30 days, to reinvest the
redemption proceeds at the next-determined net asset value without any
sales charge. Hopper Soliday or the distributor must be notified by
the shareholder in writing or by the shareholder's financial
institution of the reinvestment in order to eliminate a sales charge.
If the shareholder redeems his or her shares in a Fund, there may be
tax consequences. Shareholders contemplating such transactions should
consult their own tax advisers.

CONCURRENT PURCHASES. For purposes of qualifying for a sales charge
reduction, a shareholder has the privilege of combining concurrent
purchases of two or more Funds in Marketvest Group of Funds, the
purchase price of which includes a sales charge. For example, if a
shareholder concurrently invested $30,000 in shares of the Equity Fund
with a sales charge, and $20,000 in shares of another Fund with a
sales charge, the sales charge would be reduced on the Equity Fund
purchase.

To receive this sales charge reduction, Hopper Soliday or the
distributor must be notified by the shareholder in writing or by their
financial institution at the time the concurrent purchases are made.
The Funds will reduce the sales charge after they confirm the
purchases.

SYSTEMATIC INVESTMENT PROGRAM

Once a Fund account has been opened, shareholders may add to their
investment on a regular basis in a minimum amount of $50. The minimum
amount of $50 may be waived (or lowered) at times for employees of
Dauphin Deposit. Under this program, funds may be automatically
withdrawn periodically from the shareholder's checking account and
invested in Fund shares at the net asset value next determined after
an order is received by a Fund, plus the applicable sales charge. A
shareholder may apply for participation in this program through Hopper
Soliday.

EXCHANGING SECURITIES FOR FUND SHARES

A complete description of how the Funds may accept securities in
exchange for Fund shares is explained in the Funds' Combined Statement
of Additional Information under "Exchanging Securities for Fund
Shares."

CERTIFICATES AND CONFIRMATIONS

As transfer agent for the Funds, Federated Shareholder Services
Company maintains a share account for each shareholder. Share
certificates will not be issued.

Detailed confirmations of each purchase or redemption are sent to each
shareholder. In addition, monthly confirmations are sent to report
dividends paid during that month.

DIVIDENDS AND CAPITAL GAINS

With respect to the Equity Fund, dividends are declared and paid
monthly. With respect to the International Equity Fund, dividends are
declared and paid annually. With respect to the Pennsylvania
Intermediate Municipal Bond Fund, Short-Term Bond Fund, and
Intermediate U.S. Government Bond Fund, dividends are declared daily
and paid monthly. Dividends are declared just prior to determining net
asset value. If an order for shares is placed on the preceding
business day, shares purchased by wire begin earning dividends on the
business day wire payment is received by a Fund. If the order for
shares and payment by wire are received on the same day, shares begin
earning dividends on the next business day. Shares purchased by check
begin earning dividends on the business day after the check is
converted into federal funds. Capital gains realized by a Fund, if
any, will be distributed at least once every 12 months. Dividends and
capital gains will be automatically reinvested in additional shares on
payment dates at the ex-dividend date net asset value without a sales
charge, unless cash payments are requested by writing to the Fund.

EXCHANGE PRIVILEGE

- --------------------------------------------------------------------------------

Shareholders may exchange shares of one Fund for shares of any of the
other Funds in the Marketvest Group of Funds at net asset value,
subject to certain conditions. In addition, shares of a Fund may be
exchanged for shares of the following funds distributed by Federated
Securities Corp.:

Liberty U.S. Government Money Market Trust--a U.S. government money
market fund; and

Pennsylvania Municipal Cash Trust (Institutional Service Shares)--a
Pennsylvania municipal money market fund. Shareholders who exercise this
exchange privilege must exchange

shares having a net asset value of at least $1,000. Prior to
any exchange, the shareholder must receive a copy of the
current prospectus of the participating fund into which an
exchange is to be made.

Exchanges are made at net asset value, plus the difference between a
Fund's sales charge already paid and any applicable sales charge on
shares of the fund to be acquired in the exchange.

Upon receipt by Federated Shareholder Services Company of proper
instructions and all necessary supporting documents, shares submitted
for exchange will be redeemed at the next determined net asset value.
If the exchanging shareholder does not have an account in the
participating fund whose shares are being acquired, a new account will
be established with the same registration, dividend, and capital gain
options as the account from which shares are exchanged, unless
otherwise specified by the shareholder. In the case where the new
account registration is not identical to that of the existing account,
a signature guarantee is required. (See "Redeeming Shares by Mail.")
Exercise of this privilege is treated as a redemption and a new
purchase for federal income tax purposes and, depending on the
circumstances, a short or long-term capital gain or loss may be
realized. The Funds reserve the right to modify or terminate the
exchange privilege at any time. Shareholders would be notified prior
to any modification or termination. Shareholders may obtain further
information on the exchange privilege by calling their Hopper Soliday
representative or an authorized broker.

EXCHANGE BY TELEPHONE

Shareholders may provide instructions for exchanges between
participating funds by calling Hopper Soliday toll-free at
1-800-MKT-VEST (1-800-658-8378). In addition, investors may exchange
shares by calling their authorized broker directly.

An authorization form permitting the Funds to accept telephone
exchange requests must first be completed. It is recommended that
investors request this privilege at the time of their initial
application. If not completed at the time of initial application,
authorization forms and information on this service can be obtained
through a Hopper Soliday representative or authorized broker. Shares
may be exchanged by telephone only between fund accounts having
identical shareholder registrations. Telephone exchange instructions
may be recorded. If reasonable procedures are not followed by a Fund,
it may be liable for losses due to unauthorized or fraudulent
telephone instructions.

Telephone exchange instructions must be received by Hopper Soliday or
an authorized broker and transmitted to Federated Shareholder Services
Company before 3:00 p.m. (Eastern time) for shares to be exchanged the
same day. Shareholders who exchange into shares of the Funds will not
receive a dividend from a Fund on the date of the exchange.

Shareholders of the Funds may have difficulty in making exchanges by
telephone through banks, brokers, and other financial institutions
during times of drastic economic or market changes. If shareholders
cannot contact their Hopper Soliday representative or authorized
broker by telephone, it is recommended that an exchange request be
made in writing and sent by mail for next day delivery.

WRITTEN EXCHANGE

An investor may exchange shares by sending a written request to Hopper
Soliday, 1703 Oregon Pike, P.O. Box 4548, Lancaster, PA 17604-4548. In
addition, trust and institutional investors of Dauphin Deposit wishing
to make an exchange by written request may do so by sending it to
their trust officer, c/o Dauphin Deposit Bank and Trust Company, 213
Market Street, Harrisburg, PA 17101.

REDEEMING SHARES

- --------------------------------------------------------------------------------

Each Fund redeems shares at their net asset value next determined
after the Fund receives the redemption request. Redemptions will be
made on days on which a Fund computes its net asset value. Telephone
or written requests for redemptions must be received in proper form
and can be made through Hopper Soliday or Dauphin Deposit.

The International Equity Fund reserves the right to restrict or
terminate wire redemption privileges.

BY TELEPHONE. To redeem shares of a Fund through Hopper Soliday, call
toll-free 1-800-MKT-VEST (1-800-658-8378). Trust and institutional
investors of Dauphin Deposit should contact their account officer to
make redemption requests. Shares of a Fund will be redeemed at the net
asset value next determined after a Fund receives the redemption
request from Hopper Soliday or Dauphin Deposit. A redemption request
must be received by Hopper Soliday or Dauphin Deposit before 4:00 p.m.
(Eastern time) in order for shares of a Fund to be redeemed at that
day's net asset value. Redemption requests through registered
broker/dealers must be received by Hopper Soliday before 3:00 p.m.
(Eastern time) in order for shares to be redeemed at that day's net
asset value. Hopper Soliday and Dauphin Deposit are responsible for
promptly submitting redemption requests and providing proper written
redemption instructions to a Fund. Registered broker/dealers may
charge customary fees and commissions for this service. In no event
will proceeds be sent more than seven days after a proper request for
redemption has been received.

An authorization form permitting a Fund to accept telephone requests
must first be completed. Authorization forms and information on this
service are available from Hopper Soliday or Dauphin Deposit.
Telephone redemption instructions may be recorded. If reasonable
procedures are not followed by a Fund, it may be liable for losses due
to unauthorized or fraudulent telephone instructions. In the event of
drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur,
another method of redemption should be utilized, such as a written
request to Hopper Soliday or Dauphin Deposit.

If, at any time, a Fund shall determine it necessary to terminate or
modify this method of redemption, shareholders would be promptly
notified.

BY MAIL. Any shareholder may redeem shares of a Fund by sending a
written request to Hopper Soliday. Trust and institutional investors
should send a written request to Dauphin Deposit. The written request
should include the shareholder's name, the Fund name, the account
number, and the share or dollar amount requested. Shareholders should
call Hopper Soliday or Dauphin Deposit for assistance in redeeming by
mail.

SIGNATURES. Shareholders requesting a redemption of any amount to be
sent to an address other than that on record with a Fund, or a
redemption payable other than to the shareholder of record must have
signatures on written redemption requests guaranteed by:

a trust company or commercial bank whose deposits are insured
by the Bank Insurance Fund ("BIF"), which is administered by
the Federal Deposit Insurance Corporation ("FDIC");

a member of the New York, American, Boston, Midwest, or Pacific
Stock Exchange; a savings bank or savings association whose
deposits are insured by the Savings Association Insurance Fund
("SAIF"), which is administered by the FDIC;

or any other "eligible guarantor institution," as defined in the
Securities Exchange Act of 1934.

The Funds do not accept signatures guaranteed by a notary public. The
Funds and their transfer agent have adopted standards for accepting
signature guarantees from the above institutions. The Funds may elect
in the future to limit eligible signature guarantors to institutions
that are members of a signature guarantee program. The Funds and their
transfer agent reserve the right to amend these standards at any time
without notice. Normally, a check for the proceeds is mailed within
one business day, but in no event more than seven days, after receipt
of a proper written redemption request.

SYSTEMATIC WITHDRAWAL PROGRAM

Shareholders who desire to receive payments of a predetermined amount
may take advantage of the Systematic Withdrawal Program. Under this
program, Fund shares are redeemed to provide for periodic withdrawal
payments in an amount directed by the shareholder. Depending upon the
amount of the withdrawal payments, the amount of dividends paid and
capital gains distributions with respect to Fund shares, and the
fluctuation of the net asset value of Fund shares redeemed under this
program, redemptions may reduce, and eventually deplete, the
shareholder's investment in a Fund. For this reason, payments under
this program should not be considered as yield or income on the
shareholder's investment in a Fund. To be eligible to participate in
this program, a shareholder must have an account value of at least
$10,000. A shareholder may apply for participation in this program
through Hopper Soliday. Due to the fact that shares are sold with a
sales charge, it is not advisable for shareholders to be purchasing
shares while participating in this program.

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, a Fund
may redeem shares in any account and pay the proceeds to the
shareholder if the account balance falls below the required minimum
value of $1,000 due to shareholder redemptions. This requirement does
not apply, however, if the balance falls below $1,000 because of
changes in a Fund's net asset value. Before shares are redeemed to
close an account, the shareholder is notified in writing and allowed
30 days to purchase additional shares to meet the minimum requirement.

SHAREHOLDER INFORMATION

- --------------------------------------------------------------------------------

There is a remote possibility that one fund within the Marketvest
Group of Funds may become liable for any misstatement, inaccuracy or
incomplete disclosure in the prospectus or Statement of Additional
Information about another fund within the Marketvest Group of Funds.

MARKETVEST FUNDS, INC.

VOTING RIGHTS. Each share of a Fund gives the shareholder one vote in
Board Member elections and other matters submitted to shareholders for
vote. All shares of each Fund in Marketvest Funds, Inc. have equal
voting rights, except that in matters affecting only a particular
Fund, only shares of that Fund are entitled to vote.

As a Maryland corporation, Marketvest Funds, Inc. (formerly named Court Street
Funds, Inc.) is not required to hold annual shareholder meetings. Shareholder
approval will be sought only for certain changes in the operation of Marketvest
Funds, Inc. or a Fund and for the election of Board Members under certain
circumstances.

Board Members may be removed by the Board Members or by shareholders
at a special meeting. A special meeting of shareholders shall be
called by the Board Members upon the written request of shareholders
owning at least 10% of the outstanding shares of all series of
Marketvest Funds, Inc. entitled to vote.

As of June 2, 1997, Donald & Co., nominee account for Dauphin Deposit
Bank & Trust Co., Harrisburg, Pennsylvania, was the owner of record of
more than 25% of the outstanding shares of the designated Fund:
22,752,389.230 shares (50.84%) of the Equity Fund; 6,885,673.132
shares (47.02%) of the Short-Term Bond Fund; 19,721,859.719 shares
(71.87%) of the Intermediate U.S. Government Bond Fund; and therefore,
may, for certain purposes, be deemed to control these Funds and be
able to affect the outcome of certain matters presented for a vote of
shareholders.

As of June 2, 1997, Greenco, nominee account for Dauphin Deposit Bank
& Trust Co., Harrisburg, Pennsylvania, was the owner of record of more
than 25% of the outstanding shares of the designated Fund:
21,786,763.986 shares (48.68%) of the Equity Fund; 7,741,155.647
shares (52.87%) of the Short-Term Bond Fund; 7,696,708.818 shares
(28.05%) of the Intermediate U.S. Government Bond Fund; and therefore,
may, for certain purposes, be deemed to control these Funds and be
able to affect the outcome of certain matters presented for a vote of
shareholders.

MARKETVEST FUNDS

VOTING RIGHTS. Each share of a Fund gives the shareholder one vote in
Board Member elections and other matters submitted to shareholders for
vote. As a Massachusetts business trust, Marketvest Funds (formerly
named Court Street Funds) is not required to hold annual shareholder
meetings. Shareholder approval will be sought only for certain changes
in the operation of Marketvest Funds or a Fund and for the election of
Board Members under certain circumstances. Board Members may be
removed by the Board Members or by shareholders at a special meeting.
A special meeting of the shareholders for this purpose shall be called
by the Board Members upon the

written request of shareholders owning at least 10% of the outstanding
shares of all series of Marketvest Funds entitled to vote.

When the International Equity Fund is asked to vote on matters
relating to the underlying funds, the International Equity Fund is
required to either: seek voting instructions from its shareholders
regarding underlying fund proxies and to vote such proxies in
accordance with the instructions received; or to vote such proxies in
the same proportion as the vote of all other holders of the underlying
fund securities.

As of June 2, 1997, Donald & Co., nominee account for Dauphin Deposit
Bank & Trust Co., Harrisburg, Pennsylvania, was the owner of record of
more than 25% of the outstanding shares, or 21,802,557.516 shares
(99.63%), of the Pennsylvania Intermediate Municipal Bond Fund, and
therefore, may, for certain purposes, be deemed to control this Fund
and be able to affect the outcome of certain matters presented for a
vote of shareholders.

As of June 2, 1997, Greenco, nominee account for Dauphin Deposit Bank
and Trust Company, Harrisburg, Pennsylvania, was the owner of more
than 25%, or 3,968,395.722 shares (98.44%), of the International
Equity Fund, and therefore, may, for certain purposes, be deemed to
control this Fund and be able to affect the outcome of certain matters
presented for a vote of shareholders.

TAX INFORMATION

- --------------------------------------------------------------------------------

FEDERAL INCOME TAX

The Funds expect to pay no federal income tax because each Fund
intends to meet requirements of the Internal Revenue Code applicable
to regulated investment companies and to receive the special tax
treatment afforded to such companies. Each Fund will be treated as a
single, separate entity for federal income tax purposes so that income
(including capital gains) and losses realized by a Fund will not be
combined for tax purposes with those realized by any of the other
Funds.

With respect to the Equity Fund, the International Equity Fund, the
Short-Term Bond Fund, and the Intermediate U.S. Government Bond Fund,
unless otherwise exempt, shareholders are required to pay federal
income tax on any dividends and other distributions received. This
applies whether dividends and distributions are received in cash or as
additional shares. Each Fund will provide detailed tax information for
reporting purposes.

PENNSYLVANIA PERSONAL PROPERTY TAXES

With respect to the Equity Fund, the International Equity Fund, the
Short-Term Bond Fund, and the Intermediate U.S. Government Bond Fund,
shares are exempt from personal property taxes imposed by counties and
school districts in Pennsylvania. Shares of the Pennsylvania
Intermediate Municipal Bond Fund are exempt from personal property
taxes imposed by counties and school districts in Pennsylvania to the
extent that the Fund invests in obligations that are exempt from such
taxes. Shareholders are urged to consult their own tax advisers
regarding the status of their accounts under state and local tax laws.

The International Equity Fund may invest in underlying funds with
capital loss carry-forwards. If such an underlying fund realizes
capital gains, it will be able to offset the gains to the extent of
its loss carry-forwards in determining the amount of capital gains
which must be distributed to its shareholders. To the extent that
gains are offset in this manner, the International Equity Fund will
not realize gains on the related fund until such time as the
underlying fund is sold.

Income received by the underlying funds from sources within various
foreign countries may be subject to foreign income taxes withheld at
the source. Since less than 50% of the value of the International
Equity Fund's total assets at the close of its taxable year is
expected to consist of direct investments in stock or securities of
foreign corporations, the International Equity Fund does not qualify
to "pass through" to the International Equity Fund's shareholders the
amount of foreign income taxes paid by the underlying funds. Each
shareholder's respective pro rata share of foreign taxes paid by the
underlying funds will, therefore, be netted against their share of the
underlying fund's gross income.

The International Equity Fund's transactions in foreign currencies and
hedging activities may give rise to ordinary income or loss to the
extent such income or loss results from fluctuations in value of the
foreign currency concerned. In addition, such activities will likely
produce a difference between book income and taxable income. This
difference may cause a portion of the International Equity Fund's
income distributions to constitute a return of capital for tax
purposes or require the International Equity Fund to make
distributions exceeding book income to qualify as a regulated
investment company for tax purposes.

The foregoing discussion relates only to U.S. federal income tax law
as applicable to U.S. citizens or residents. Foreign shareholders
(i.e., nonresident alien individuals and foreign corporations,
partnerships, trusts, and estates) generally are subject to U.S.
withholding tax at the rate of 30% (or lower tax treaty rate) on
distributions derived from net investment income and short-term
capital gains. Distributions to foreign shareholders of long-term
capital gains and any gains from the sale or other disposition of
shares of the International Equity Fund generally are not subject to
U.S. taxation. Distributions by the International Equity Fund also may
be subject to state, local and foreign taxes, and their treatment
under applicable tax laws may differ from the federal income tax
treatment.

ADDITIONAL TAX INFORMATION FOR PENNSYLVANIA
INTERMEDIATE MUNICIPAL BOND FUND

Shareholders are not required to pay the federal regular income tax on
any dividends received from the Fund that represent net interest on
tax-exempt municipal bonds. However, under the Tax Reform Act of 1986,
dividends representing net interest income earned on some municipal
bonds may be included in calculating the federal individual
alternative minimum tax or the federal alternative minimum tax for
corporations.

The alternative minimum tax, up to 28% of alternative minimum taxable
income for individuals and 20% for corporations, applies when it
exceeds the regular tax for the taxable year. Alternative minimum
taxable income is equal to the regular taxable income of the taxpayer
increased by certain "tax preference" items not included in regular
taxable income and reduced by only a portion of the deductions allowed
in the calculation of the regular tax.

The Tax Reform Act of 1986 treats interest on certain "private
activity" bonds issued after August 7, 1986 as a tax preference item
for both individuals and corporations. Unlike traditional governmental
purpose municipal bonds, which finance roads, schools, libraries,
prisons and other public facilities, private activity bonds provide
benefits to private parties. The Fund may purchase all types of
municipal bonds, including private activity bonds. Thus, should it
purchase any such bonds, a portion of the Fund's dividends may be
treated as a tax preference item.

In addition, in the case of a corporate shareholder, dividends of the
Fund which represent interest on municipal bonds will become subject
to the 20% corporate alternative minimum tax because the dividends are
included in a corporation's "adjusted current earnings." The corporate
alternative minimum tax treats 75% of the excess of a taxpayer's
"adjusted current earnings" over the taxpayer's alternative minimum
taxable income as a tax preference item. "Adjusted current earnings"
is based upon the concept of a corporation's "earnings and profits."
Since "earnings and profits" generally includes the full amount of any
Fund dividend, and alternative minimum taxable income does not include
the portion of the Fund's dividend attributable to municipal bonds
which are not private activity bonds, the difference will be included
in the calculation of the corporation's alternative minimum tax.

Shareholders should consult with their tax advisers to determine
whether they are subject to the alternative minimum tax or the
corporate alternative minimum tax and, if so, the tax treatment of
dividends paid by the Fund. Dividends of the Fund representing net
interest income earned on some temporary investments and any realized
net short-term gains are taxed as ordinary income. Distributions
representing net long-term capital gains realized by the Fund, if any,
will be taxable as long-term capital gains regardless of the length of
time shareholders have held their shares.

These tax consequences apply whether dividends are received in cash or
as additional shares. Information on the tax status of dividends and
distributions is provided annually.

PENNSYLVANIA TAXES. Under existing Pennsylvania laws, distributions
made by the Fund will not be subject to Pennsylvania income taxes to
the extent that such distributions qualify as exempt-interest
dividends under the Internal Revenue Code and represent (i) interest
from obligations of the Commonwealth of Pennsylvania, or of any
municipal corporation, or political subdivision thereof; or (ii)
interest from obligations of the United States or its possessions.

Conversely, to the extent that distributions made by the Fund are
attributable to other types of obligations, such distributions will be
subject to Pennsylvania income taxes.

OTHER STATE AND LOCAL TAXES. Income from the Fund is not necessarily
free from taxes in states other than Pennsylvania. State laws differ
on this issue, and shareholders are urged to consult their own tax
advisers regarding the status of their accounts under state and local
tax laws.

PERFORMANCE INFORMATION

- --------------------------------------------------------------------------------

From time to time, the Funds may advertise total return and yield. In
addition, the Pennsylvania Intermediate Municipal Bond Fund may
advertise tax-equivalent yield.

Total return represents the change, over a specified period of time,
in the value of an investment in a Fund after reinvesting all income
and capital gains distributions. It is calculated by dividing that
change by the initial investment and is expressed as a percentage.

The yield of each Fund is calculated by dividing the net investment
income per share (as defined by the SEC) earned by each Fund over a
thirty-day period by the maximum offering price per share of a Fund on
the last day of the period. This number is then annualized using
semi-annual compounding. The yield does not necessarily reflect income
actually earned by each Fund and, therefore, may not correlate to the
dividends or other distributions paid to shareholders.

The tax-equivalent yield of the Pennsylvania Intermediate Municipal
Bond Fund is calculated similarly to the yield, but is adjusted to
reflect the taxable yield that the Fund would have had to earn to
equal its actual yield, assuming a specific tax rate. The yield and
tax-equivalent yield do not necessarily reflect income actually earned
by the Fund and, therefore, may not correlate to the dividends or
other distributions paid to shareholders.

The performance information normally reflects the effect of the
maximum sales load which, if excluded, would increase the total return
and yield. From time to time, advertisements for the Funds may refer
to ratings, rankings, and other information in certain financial
publications and/or compare the Funds' performance to certain indices.

PERFORMANCE INFORMATION FOR PREDECESSOR COMMON
AND COLLECTIVE INVESTMENT FUNDS

The Equity Fund, the International Equity Fund, the Pennsylvania
Intermediate Municipal Bond Fund, the Short-Term Bond Fund, and the
Intermediate U.S. Government Bond Fund emanate from common and/or
collective investment funds that were managed by the Adviser (the
"Common and Collective Funds"). The assets from the Common and
Collective Funds were transferred to the corresponding Fund in
connection with each Fund's commencement of operations.

Set forth below are certain historical performance data for these
Common and Collective Funds. This information is deemed relevant
because the Common and Collective Funds were managed in a manner that
is in all material respects equivalent to the management of the
corresponding Funds, using substantially the same investment
objective, policies, strategies, and limitations as those used by each
of the corresponding Funds. However, the past performance data shown
below is not necessarily indicative of each Fund's future performance.
Each Fund is actively managed, and its investments will vary from time
to time. Each Fund's investments are not identical to the past
portfolio investments of the Common and Collective Funds. In that
regard, unlike the Funds, the Common and Collective Funds were not
registered investment companies under the 1940 Act and therefore were
not subject to certain investment restrictions and other rules and
regulations of the 1940 Act (which may have an impact on performance)
and further, were not subject to the various Internal Revenue Code
provisions applicable to registered investment companies. Moreover,
the

Common and Collective Funds did not incur expenses that correspond to
the advisory, administrative, and other fees to which each Fund is
subject. Accordingly, the performance information shown below has been
adjusted to reflect the anticipated total expense ratios for each
Fund. This adjustment has the effect of lessening the actual
performance for the Common and Collective Funds. Because a sales load
was not imposed on the Common and Collective Funds, the performance
figures shown below have been adjusted to reflect the effect of the
maximum sales load (i.e., 4.75% on the Equity Fund, 1.50% on the
International Equity Fund, and 3.50% on the Pennsylvania Intermediate
Municipal Bond Fund, the Short-Term Bond Fund, and the Intermediate
U.S. Government Bond Fund) applicable to certain purchasers of each
Fund. This adjustment further reduces the actual performance of the
Common and Collective Funds. Corresponding performance figures which
do not reflect the sales load are also provided.

PERFORMANCE INFORMATION FOR EACH OF THE EQUITY FUND, THE INTERNATIONAL EQUITY
FUND, THE PENNSYLVANIA INTERMEDIATE MUNICIPAL BOND FUND, THE SHORT-TERM BOND
FUND, AND THE INTERMEDIATE U.S. GOVERNMENT BOND FUND CAN BE FOUND UNDER

"FINANCIAL HIGHLIGHTS" HEREIN.

AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED MARCH 31, 1996*

REFLECTING LOAD

PREDECESSOR COMMON FUNDS

(CORRESPONDING MARKETVEST FUNDS) 1 YEAR 3 YEARS 5 YEARS SINCE INCEPTION
<S> <C> <C> <C> <C>

Personal Trust Equity Fund
Inception: October 1978

(MARKETVEST EQUITY FUND) 23.14% 13.96% 13.01% 13.79%
- ---------------------------------------------------------------------
Equity Fund for Tax-Exempt Organizations
Inception: March 1984

(MARKETVEST EQUITY FUND) 23.40% 13.59% 13.12% 14.00%
- ---------------------------------------------------------------------
Personal Trust Municipal Bond Fund
Inception: August 1981
(MARKETVEST PENNSYLVANIA INTERMEDIATE

MUNICIPAL BOND FUND) 1.26% 2.23% 4.29% 6.76%
- ---------------------------------------------------------------------
U.S. Government Fixed Income Fund
Inception: July 1989

(MARKETVEST SHORT-TERM BOND FUND) 2.75% 2.75% 4.46% 7.17%
- ---------------------------------------------------------------------
Personal Trust Fixed Income Fund
Inception: October 1978
(MARKETVEST INTERMEDIATE U.S.

GOVERNMENT BOND FUND) 4.63% 2.85% 6.44% 9.00%
- ---------------------------------------------------------------------
</TABLE>

* The Average Annual Total Return for each common fund has been
adjusted to reflect each corresponding Fund's expenses, net of
voluntary waivers.

AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED MARCH 31, 1996*

WITHOUT LOAD

1 YEAR 3 YEARS 5 YEARS SINCE INCEPTION
<S> <C> <C> <C> <C>

Personal Trust Equity Fund
Inception: October 1978

(MARKETVEST EQUITY FUND) 27.75% 15.35% 13.84% 14.08%
- ---------------------------------------------------------------------
Equity Fund for Tax-Exempt Organizations
Inception: March 1984

(MARKETVEST EQUITY FUND) 28.02% 15.00% 13.95% 14.35%
- ---------------------------------------------------------------------
Personal Trust Municipal Bond Fund
Inception: August 1981
(MARKETVEST PENNSYLVANIA INTERMEDIATE

MUNICIPAL BOND FUND) 5.33% 3.57% 5.11% 7.05%
- ---------------------------------------------------------------------
U.S. Government Fixed Income Fund
Inception: July 1989

(MARKETVEST SHORT-TERM BOND FUND) 6.55% 3.98% 5.20% 7.98%
- ---------------------------------------------------------------------
Personal Trust Fixed Income Fund
Inception: October 1978
(MARKETVEST INTERMEDIATE U.S.

GOVERNMENT BOND FUND) 8.36% 4.07% 7.20% 9.22%
- ---------------------------------------------------------------------
</TABLE>

* The Average Annual Total Return for each common fund has been
adjusted to reflect each corresponding Fund's expenses, net of
voluntary waivers.

AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED MAY 31, 1996

(UNLESS OTHERWISE NOTED)*
REFLECTING LOAD

PREDECESSOR COLLECTIVE FUNDS

(CORRESPONDING MARKETVEST FUNDS) 1 YEAR 3 YEARS 5 YEARS SINCE INCEPTION
<S> <C> <C> <C> <C>

Employee Benefit Equity Fund
Inception: August 1981

(MARKETVEST EQUITY FUND) 19.69% 14.27% 13.29% 15.10%
- ---------------------------------------------------------------------
Employee Benefit Short-Term Fixed Income Fund
Inception: April 1984

(MARKETVEST SHORT-TERM BOND FUND) 1.24% 3.23% 4.55% 7.00%
- ---------------------------------------------------------------------
Employee Benefit Fixed Income Fund
Inception: August 1981
(MARKETVEST INTERMEDIATE U.S.

GOVERNMENT BOND FUND) -.33% 2.05% 5.60% 9.62%
- ---------------------------------------------------------------------
Employee Benefit Global Equity Fund***
Inception: May 1991**

(MARKETVEST INTERNATIONAL

EQUITY FUND) 12.65% 10.56% 12.52% 10.37%
- ---------------------------------------------------------------------
</TABLE>

* The Average Annual Total Return for each common fund has been
adjusted to reflect each corresponding Fund's expenses, net of
voluntary waivers.

** The Average Annual Total Return for this predecessor collective
fund is calculated for the period ended March 31, 1997, which is
the day immediately preceding the transfer of such fund's assets
to the corresponding Fund.

*** Like all performance information quoted in this table, the
performance information relates solely to the performance of the
predecessor collective fund. Unlike the other Funds, however, the
International Equity Fund has elected to make this predecessor
collective fund performance a part of that Fund's permanent
performance record. Accordingly, when performance information is
listed for the International Equity Fund, it includes the
above-listed performance for the predecessor collective fund.

AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED MAY 31, 1996

(UNLESS OTHERWISE NOTED)*
WITHOUT LOAD

1 YEAR 3 YEARS 5 YEARS SINCE INCEPTION
<S> <C> <C> <C> <C>

Employee Benefit Equity Fund
Inception: August 1981

(MARKETVEST EQUITY FUND) 25.68% 16.14% 14.39% 15.54%
- ---------------------------------------------------------------------
Employee Benefit Short-Term Fixed Income Fund
Inception: April 1984

(MARKETVEST SHORT-TERM BOND FUND) 4.92% 4.46% 5.30% 7.30%
- ---------------------------------------------------------------------
Employee Benefit Fixed Income Fund
Inception: August 1981
(MARKETVEST INTERMEDIATE U.S.

GOVERNMENT BOND FUND) 3.28% 3.27% 6.36% 9.99%
- ---------------------------------------------------------------------
Employee Benefit Global Equity Fund***
Inception: May 1991**

(MARKETVEST INTERNATIONAL

EQUITY FUND) 14.32% 11.11% 12.85% 10.64%
- ---------------------------------------------------------------------
</TABLE>

* The Average Annual Total Return for each predecessor collective
fund has been adjusted to reflect each corresponding Fund's
expenses, net of voluntary waivers.

MARKETVEST INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS

MAY 31, 1997 (UNAUDITED)

- --------------------------------------------------------------------------------

SHARES VALUE

- ----------- ------------------------------------------------------------------------------------- -------------
<C> <S> <C>
GLOBAL FUNDS--96.9%

- --------------------------------------------------------------------------------------------------
272,480 American EuroPacific Growth Fund $ 7,506,835
-------------------------------------------------------------------------------------
87,466 GAM International Fund 2,310,860
-------------------------------------------------------------------------------------
251,892 Harbor International Fund 9,098,341
-------------------------------------------------------------------------------------
320,447 Hotchkis & Wiley International Fund 7,540,115
-------------------------------------------------------------------------------------
483,231 T. Rowe Price International Stock Fund 7,142,154
-------------------------------------------------------------------------------------
677,790 Templeton Foreign Fund, Class I 7,550,578
------------------------------------------------------------------------------------- -------------
TOTAL GLOBAL FUNDS (IDENTIFIED COST $39,189,381) 41,148,883
------------------------------------------------------------------------------------- -------------
SHORT-TERM INVESTMENT--2.5%

- --------------------------------------------------------------------------------------------------
1,086,138 Temporary Investment Fund, Inc. (IDENTIFIED COST $1,086,138) 1,086,138
------------------------------------------------------------------------------------- -------------
TOTAL INVESTMENTS (IDENTIFIED COST $40,275,519(A) $ 42,235,021
------------------------------------------------------------------------------------- -------------
</TABLE>

(a) The cost of investments for federal tax purposes amounts to
$40,275,519. The net unrealized appreciation of investments on a
federal tax basis amounts to $1,959,502, which is comprised of
all appreciation at May 31, 1997.

Note: The categories of investments are shown as a percentage of net assets
($42,483,530) at May 31, 1997.

(See Notes which are an integral part of the Financial Statements)

MARKETVEST INTERNATIONAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES

MAY 31, 1997 (UNAUDITED)

- --------------------------------------------------------------------------------

<TABLE>

<S> <C>

ASSETS:

- ---------------------------------------------------------------------------------------------------
Total investments in securities, at value

(identified and tax cost $40,275,519) $ 42,235,021
- ---------------------------------------------------------------------------------------------------
Income receivable 273,641

- --------------------------------------------------------------------------------------------------- -------------
Total assets 42,508,662

- ---------------------------------------------------------------------------------------------------
LIABILITIES:

- ---------------------------------------------------------------------------------------------------
Accrued expenses 25,132

- --------------------------------------------------------------------------------------------------- -------------
NET ASSETS for 4,025,778 shares outstanding $ 42,483,530
- --------------------------------------------------------------------------------------------------- -------------
NET ASSETS CONSIST OF:

- ---------------------------------------------------------------------------------------------------
Paid in capital $ 40,231,154
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 1,959,502

- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments 37,843
- ---------------------------------------------------------------------------------------------------
Undistributed net investment income 255,031

- --------------------------------------------------------------------------------------------------- -------------
Total Net Assets $ 42,483,530
- --------------------------------------------------------------------------------------------------- -------------
NET ASSET VALUE AND REDEMPTION PROCEEDS PER SHARE:

$42,483,530 / 4,025,778 shares outstanding $10.55
- --------------------------------------------------------------------------------------------------- -------------
OFFERING PRICE PER SHARE:

(100/98.5 of $10.55)* $10.71
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>

*See "What Shares Cost" in the Prospectus.

(See Notes which are an integral part of the Financial Statements)

MARKETVEST INTERNATIONAL EQUITY FUND
STATEMENT OF OPERATIONS
PERIOD ENDED MAY 31, 1997 (UNAUDITED)(A)

- --------------------------------------------------------------------------------

<TABLE>

<S> <C> <C> <C>
INVESTMENT INCOME:

- --------------------------------------------------------------------------------------------------
Dividends $ 264,306
- --------------------------------------------------------------------------------------------------
Interest 39,943

- -------------------------------------------------------------------------------------------------- ------------
Total income 304,249

- --------------------------------------------------------------------------------------------------
EXPENSES:

- ---------------------------------------------------------------------------------------
Investment advisory fee $ 43,156
- ---------------------------------------------------------------------------------------
Administrative personnel and services fee 12,350

- ---------------------------------------------------------------------------------------
Custodian fees 1,328

- ---------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 2,515
- ---------------------------------------------------------------------------------------
Directors'/Trustees' fees 539

- ---------------------------------------------------------------------------------------
Legal fees 629

- ---------------------------------------------------------------------------------------
Portfolio accounting fees 6,359

- ---------------------------------------------------------------------------------------
Share registration costs 4,423

- ---------------------------------------------------------------------------------------
Printing and postage 1,527

- ---------------------------------------------------------------------------------------
Insurance premiums 494

- ---------------------------------------------------------------------------------------
Miscellaneous 1,370

- --------------------------------------------------------------------------------------- ---------
Total expenses 74,690

- ---------------------------------------------------------------------------------------
Waivers and reimbursements--

- ----------------------------------------------------------------------------
Waiver of investment advisory fee $ (9,959)
- ----------------------------------------------------------------------------
Waiver of administrative personnel and services fee (5,303)
- ----------------------------------------------------------------------------
Reimbursement of other operating expenses (10,210)

- ---------------------------------------------------------------------------- ---------
Total waivers and reimbursements (25,472)

- --------------------------------------------------------------------------------------- ---------
Net expenses 49,218

- -------------------------------------------------------------------------------------------------- ------------
Net investment income 255,031

- -------------------------------------------------------------------------------------------------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:

- --------------------------------------------------------------------------------------------------
Net realized gain on investments 37,843

- --------------------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments 1,959,502
- -------------------------------------------------------------------------------------------------- ------------
Net realized and unrealized gain on investments 1,997,345
- -------------------------------------------------------------------------------------------------- ------------
Change in net assets resulting from operations $ 2,252,376
- -------------------------------------------------------------------------------------------------- ------------
</TABLE>

(a) For the period from April 1, 1997 (date of initial public
investment) to May 31, 1997.

(See Notes which are an integral part of the Financial Statements)

MARKETVEST INTERNATIONAL EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS

- --------------------------------------------------------------------------------

PERIOD ENDED

MAY 31, 1997(A)

(UNAUDITED)

<S> <C>

- ---------------------------------------------------------------------------------------------- ------------------
INCREASE (DECREASE) IN NET ASSETS:

- ----------------------------------------------------------------------------------------------
OPERATIONS--

- ----------------------------------------------------------------------------------------------
Net investment income $ 255,031
- ----------------------------------------------------------------------------------------------
Net realized gain on investments ($37,843 as computed for federal tax purposes) 37,843
- ----------------------------------------------------------------------------------------------
Net change in unrealized appreciation 1,959,502

- ---------------------------------------------------------------------------------------------- ------------------
Change in net assets resulting from operations 2,252,376
- ---------------------------------------------------------------------------------------------- ------------------
SHARE TRANSACTIONS--

- ----------------------------------------------------------------------------------------------
Proceeds from sale of shares 41,563,088

- ----------------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of distributions declared --
- ----------------------------------------------------------------------------------------------
Cost of shares redeemed (1,331,934)

- ---------------------------------------------------------------------------------------------- ------------------
Change in net assets resulting from share transactions 40,231,154
- ---------------------------------------------------------------------------------------------- ------------------
Change in net assets 42,483,530

- ----------------------------------------------------------------------------------------------
NET ASSETS:

- ----------------------------------------------------------------------------------------------
Beginning of period --

- ---------------------------------------------------------------------------------------------- ------------------
End of period (including undistributed net investment income of $255,031) $ 42,483,530
- ---------------------------------------------------------------------------------------------- ------------------
</TABLE>

(a) For the period from April 1, 1997 (date of initial public
investment) to May 31, 1997.

(See Notes which are an integral part of the Financial Statements)

MARKETVEST INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS

MAY 31, 1997 (UNAUDITED)

- --------------------------------------------------------------------------------

(1) ORGANIZATION

The Marketvest Group of Funds consisting of Marketvest Funds, Inc.
(the "Corporation") and Marketvest Funds (the "Trust") are registered
under the Investment Company Act of 1940, as amended (the "Act"), as
open-end management investment companies. The Corporation and the
Trust consist of five portfolios. The financial statements included
herein are only those of Marketvest International Equity Fund (the
"Fund"), a diversified portfolio of the Trust. The financial
statements of the other portfolios are presented separately. The
assets of each portfolio are segregated and a shareholder's interest
is limited to the portfolio in which shares are held. The investment
objective of the Fund is to provide long-term capital appreciation.

(2) SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. These policies are in conformity with generally accepted
accounting principles.

INVESTMENT VALUATIONS--Capital stock of other open-end investment
companies are valued at their net asset value as reported by such
companies. In the absence of readily available market quotations,
investments are valued at fair value as determined by the Board
of Trustees ("the Trustees").

INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income
and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue
Code, as amended (the "Code"). Distributions to shareholders are
recorded on the ex-dividend date.

FEDERAL TAXES--It is the Fund's policy to comply with the
provisions of the Code applicable to regulated investment
companies and to distribute to shareholders each year
substantially all of its income. Accordingly, no provisions for
federal tax are necessary.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may
engage in when-issued or delayed delivery transactions. The Fund
records when-issued securities on the trade date and maintains
security positions such that sufficient liquid assets will be
available to make payment for the securities purchased.
Securities purchased on a when-issued or delayed delivery basis
are marked to market daily and begin earning interest on the
settlement date.

USE OF ESTIMATES--The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
amounts of assets, liabilities, expenses and revenues reported in
the financial statements. Actual results could differ from those
estimated.

MARKETVEST INTERNATIONAL EQUITY FUND

- --------------------------------------------------------------------------------

OTHER--Investment transactions are accounted for on the trade
date.

(3) SHARES OF BENEFICIAL INTEREST

The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without
par value).

Transactions in shares were as follows:

PERIOD ENDED

MAY 31, 1997(A)

- ---------------------------------------------------------------------------------------------- ------------------
<S> <C>
Shares sold 4,153,946

- ----------------------------------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared --
- ----------------------------------------------------------------------------------------------
Shares redeemed (128,168)

- ---------------------------------------------------------------------------------------------- ------------------
Net change resulting from share transactions 4,025,778
- ---------------------------------------------------------------------------------------------- ------------------
</TABLE>

(a) Reflects operations for the period from April 1, 1997 (date of
initial public investment) to May 31, 1997.

(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY FEE--Dauphin Deposit Bank and Trust Company,
the Fund's investment adviser (the "Adviser"), receives for its
services an annual investment advisory fee equal to 0.65% of the
Fund's average daily net assets. The Adviser may voluntarily
choose to waive any portion of its fee and reimburse certain
operating expenses of the Fund. The Adviser can modify or
terminate this voluntary waiver and reimbursement at any time at
its sole discretion.

ADMINISTRATIVE FEE--Federated Administrative Services ("FAS")
provides the Fund with certain administrative personnel and
services. The fee paid to FAS is based on the level of average
aggregate net assets of the Fund for the period. FAS may
voluntarily choose to waive a portion of its fee.

TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND
EXPENSES--Federated Services Company ("FServ"), through its
subsidiary Federated Shareholder Services Company ("FSSC"),
serves as transfer and dividend disbursing agent for the Fund.
The fee paid to FSSC is based on the size, type, and number of
accounts and transactions made by shareholders.

PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting
records for which it receives a fee. The fee is based on the
level of the Fund's average daily net assets for the period, plus
out-of-pocket expenses.

CUSTODIAN FEES--Dauphin Deposit Bank and Trust Company is the
Fund's custodian. The fee is based upon the market value of Fund
securities held in custody plus certain securities transaction
charges.

MARKETVEST INTERNATIONAL EQUITY FUND

- --------------------------------------------------------------------------------

INTERFUND TRANSACTIONS--During the period ended April 30, 1997,
the Fund engaged in purchase and sale transactions with funds
that have a common investment adviser (or affiliated investment
advisers), common Directors/Trustees, and/or common Officers.
These purchase and sale transactions were made at current market
value pursuant to Rule 17a-7 under the Act amounting to
$32,051,537 and $0, respectively.

ORGANIZATIONAL EXPENSES--Organizational expenses estimated to be
$3,500 were borne initially by FAS.

GENERAL--Certain of the Officers and Directors or Trustees of the
Corporation and Trust are Officers and Directors or Trustees of
the above companies.

(5) INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities,
for the period ended May 31, 1997, were as follows:

<TABLE>

<S> <C>
PURCHASES $ 39,651,537

- --------------------------------------------------------------------------------------------------- -------------
SALES $ 500,000
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>

APPENDIX

- --------------------------------------------------------------------------------

STANDARD & POOR'S RATINGS GROUP ("S&P") CORPORATE BOND RATING DEFINITIONS

AAA--Debt rated "AAA" has the highest rating assigned by S&P. Capacity
to pay interest and repay principal is extremely strong.

AA--Debt rated "AA" has a very strong capacity to pay interest and
repay principal and differs from the higher-rated issues only in small
degree.

A--Debt rated "A" has a strong capacity to pay interest and repay
principal, although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher-rated categories.

BBB--Debt rated "BBB" is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity
to pay interest and repay principal for debt in this category than in
higher-rated categories.

BB, B, CCC, CC--Debt rated "BB", "B", "CCC", "CC" is regarded, on
balance, as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the
obligation. "BB" indicates the lowest degree of speculation and "CC"
the highest degree of speculation. While such debt will likely have
some quality and protective characteristics, these are outweighed by
large uncertainties of major risk exposures to adverse conditions.

CI--The rating "CI" is reserved for income bonds on which no interest
is being paid.

D--Debt rated "D" is in default, and payment of interest and/or
repayment of principal is in arrears.

NR--Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that Standard &
Poor's Ratings Group does not rate a particular type of obligation as
a matter of policy.

PLUS (+) OR MINUS (-):--The ratings from AA to CCC may be modified by
the addition of a plus or minus sign to show relative standing within
the major rating categories.

MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATING DEFINITIONS

AAA--Bonds which are rated "Aaa" are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a
large or an exceptionally stable margin and principal is secure. While
the various protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the fundamentally strong
position of such issues.

AA--Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are
generally known as high-grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in Aaa
securities or

fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks
appear somewhat larger than in Aaa securities.

A--Bonds which are rated "A" possess many favorable investment
attributes and are to be considered as upper medium-grade obligations.
Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment sometime in the near future.

BAA--Bonds which are rated "Baa" are considered as medium-grade
obligations, (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear adequate for
the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and, in fact, have
speculative characteristics as well.

BA--Bonds which are "Ba" are judged to have speculative elements;
their future cannot be considered well assured. Often the protection
of interest and principal payments may be very moderate and thereby
not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.

B--Bonds which are rated "B" generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or
of maintenance of other terms of the contract over any long period of
time may be small.

CAA--Bonds which are rated "Caa" are of poor standing. Such issues may
be in default or there may be present elements of danger with respect
to principal or interest.

CA--Bonds which are rated "Ca" represent obligations which are
speculative in a high degree. Such issues are often in default or have
other marked shortcomings.

C--Bonds which are rated "C" are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.

NR--Not rated by Moody's Investors Service, Inc.

FITCH INVESTORS SERVICE, INC. BOND RATING DEFINITIONS

AAA--Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.

AA--Bonds considered to be investment grade and of very high quality.
The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated "AAA." Because
bonds rated in the "AAA" and "AA" categories are not significantly
vulnerable to foreseeable future developments, short-term debt of
these issuers is generally rated "F-1+."

A--Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is
considered strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.

BBB--Bonds considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have adverse
impact on these bonds, and therefore impair timely payment. The
likelihood that the ratings of these bonds will fall below investment
grade is higher than for bonds with higher ratings.

BB--Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can be
identified which could assist the obligor in satisfying its debt
service requirements.

B--Bonds are considered highly speculative. While bonds in this class
are currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the
obligor's limited margin of safety and the need for reasonable
business and economic activity throughout the life of the issue.

CCC--Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations
requires an advantageous business and economic environment.

CC--Bonds are minimally protected. Default in payment of interest
and/or principal seems probable over time.

C--Bonds are in imminent default in payment of interest or principal.

DDD, DD, AND D--Bonds are in default on interest and/or principal
payments. Such bonds are extremely speculative and should be valued on
the basis of their ultimate recovery value in liquidation or
reorganization of the obligor. "DDD" represents the highest potential
for recovery on these bonds, and "D" represents the lowest potential
for recovery.

NR--NR indicates that Fitch Investors Services, Inc. does not rate the specific
issue.

STANDARD AND POOR'S RATINGS GROUP COMMERCIAL PAPER RATING DEFINITIONS

A-1--This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus (+)
sign designation.

A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as
for issues designated A-1.

MOODY'S ISSUERS SERVICE, INC., COMMERCIAL PAPER RATING DEFINITIONS

P-1--Issuers rated PRIME-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations.
PRIME-1 repayment capacity will normally be evidenced by the following
characteristics:

Leading market positions in well established industries.

High rates of return on funds employed.

Conservative capitalization structures with moderate reliance on debt

and ample asset protection.

Broad margins in earning coverage of fixed financial charges
and high internal cash generation.

Well-established access to a range of financial markets and
assured sources of alternate liquidity.

P-2--Issuers rated PRIME-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations.
This will normally be evidenced by many of the characteristics cited
above, but to a lesser degree. Earnings trends and coverage ratios,
while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.

FITCH INVESTORS SERVICE, INC., SHORT-TERM DEBT RATING DEFINITIONS

F-1+--(Exceptionally Strong Credit Quality). Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.

F-1--(Very Strong Credit Quality). Issues assigned this rating reflect
an assurance for timely payment only slightly less in degree than
issues rated F-1+.

F-2--(Good Credit Quality). Issues carrying this rating have a
satisfactory degree of assurance for timely payment, but the margin of
safety is not as great as for issues assigned F-1+ and F-1 ratings.

ADDRESSES

- --------------------------------------------------------------------------------

<TABLE>

Marketvest Equity Fund
Marketvest International Equity Fund
Marketvest Pennsylvania Intermediate

Municipal Bond Fund
Marketvest Short-Term Bond Fund
Marketvest Intermediate

U.S. Government Bond Fund Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

- ---------------------------------------------------------------------------------------------------------------------

Distributor

Edgewood Services, Inc. Clearing Operations
P.O. Box 897
Pittsburgh, Pennsylvania 15230-0897

- ---------------------------------------------------------------------------------------------------------------------

Investment Adviser and Custodian

Dauphin Deposit Bank and Trust Company 213 Market Street
Harrisburg, Pennsylvania 17101
- ---------------------------------------------------------------------------------------------------------------------

Transfer Agent and Dividend Disbursing Agent

Federated Shareholder Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

- ---------------------------------------------------------------------------------------------------------------------

Portfolio Accounting Services

Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

- ---------------------------------------------------------------------------------------------------------------------

Independent Auditors

Ernst & Young LLP One Oxford Centre
Pittsburgh, Pennsylvania 15219

- ---------------------------------------------------------------------------------------------------------------------
</TABLE>

Combined prospectus for

Marketvest Equity Fund

Marketvest International Equity Fund

Marketvest Pennsylvania Intermeditate
Municipal Bond Fund

Marketvest Short-Term Bond Fund

Marketvest Intermediate U.S.
Government Bond Fund

JUNE 1997

[LOGO OF MARKETVEST FUNDS]

[LOGO]

CUSIP 57061D107
CUSIP 57061D206
CUSIP 57061E105
CUSIP 57061E204
CUSIP 57061E303

G01560-01 (6/97)

MARKETVEST GROUP OF FUNDS

COMBINED STATEMENT OF ADDITIONAL INFORMATION

This Combined Statement of Additional Information relates to the
following five portfolios (individually, the "Fund," or collectively,
the "Funds") comprising the Marketvest Group of Funds:

o Marketvest Equity Fund;

o Marketvest International Equity Fund;

o Marketvest Pennsylvania Intermediate Municipal Bond Fund;

o Marketvest Short-Term Bond Fund; and

o Marketvest Intermediate U.S. Government Bond Fund.

This Combined Statement of Additional Information should be read with
the combined prospectus of the Funds dated June 30, 1997. This
Statement is not a prospectus itself. To receive a copy of the
prospectus, write to the Funds or call Hopper Soliday and Co., Inc. at
1-800-MKT-VEST (1-800-658-8378). Terms used but not defined herein,
which are defined in the prospectus, are used herein as defined in the
prospectus.

Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

Statement dated June 30, 1997

Cusip 57061D107
Cusip 57061D206
Cusip 57061E105
Cusip 57061E204
Cusip 57061E303

G01560-02 (6/97)

<PAGE>

- -------------------------------------------------------------------------------
TABLE OF CONTENTS

- -------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND POLICIES OF THE FUNDS 1
Convertible Securities 1
Foreign Securities 2
Foreign Currency Hedging Transactions 2
Pennsylvania Municipal Securities 3
Participation Interests 3
Variable Rate Municipal Securities 3
Municipal Leases 3
Adjustable Rate Mortgage Securities 4
Collateralized Mortgage Obligations 4
Real Estate Mortgage Investment Conduits 5
Privately Issued Mortgage-Related Securities 5
Resets of Interest 5
Caps and Floors 5
Swap Agreements 6
Foreign Bank Instruments 6
When-Issued and Delayed Delivery Transactions 6
Repurchase Agreements 6
Credit Enhancement 7
Restricted and Illiquid Securities 7
Reverse Repurchase Agreements 7
Lending of Portfolio Securities 7
Weighted Average Portfolio Maturity 8
Portfolio Turnover 8

PENNSYLVANIA INVESTMENT RISKS 8

INVESTMENT LIMITATIONS 9

MANAGEMENT OF THE FUNDS 11
Officers and Board Members 11
Fund Ownership 12
Directors' Compensation Table--

Marketvest Funds, Inc. 13
Trustees' Compensation Table--

Marketvest Funds 13
Trustee Liability 14

INVESTMENT ADVISORY SERVICES 14
Adviser to the Funds 14
Advisory Fees 14

OTHER SERVICES 14
Administration of the Funds 14
Custodian 14
Transfer Agent, Dividend Disbursing Agent, and

Portfolio Accounting Services 14
Independent Auditors 14

BROKERAGE TRANSACTIONS 15
International Equity Fund ONLY 15

PURCHASING SHARES 16
Distribution Plan 16
Administrative Arrangements 16
Conversion to Federal Funds 16
Exchanging Securities For Fund Shares 16

DETERMINING NET ASSET VALUE 17
Determining Market Value of Securities 17
Trading in Foreign Securities 17
Valuing Municipal Bonds 17

EXCHANGE PRIVILEGE 18

REDEEMING SHARES 18
Redemption in Kind 18

MASSACHUSETTS PARTNERSHIP LAW 18

EFFECT OF BANKING LAWS 18

TAX STATUS 19
The Funds' Tax Status 19
International Equity Fund 19
Shareholders' Tax Status 20

TOTAL RETURN 20

YIELD 21

TAX-EQUIVALENT YIELD 21
Tax-Equivalency Table 21

PERFORMANCE COMPARISONS 23
Economic and Market Information 24

FINANCIAL STATEMENTS 24

<PAGE>

- --------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES OF THE FUNDS

- --------------------------------------------------

The Funds' combined prospectus discusses the Funds' investment
objectives and the policies employed to achieve those objectives. The
following discussion supplements the description of the Funds'
investment policies in the prospectus.

The Funds' respective investment objectives cannot be changed without
the approval of that Fund's shareholders. Unless otherwise indicated,
the investment policies described below may be changed by the Board of
Trustees or the Board of Directors (hereinafter referred to as "Board
Members") without shareholder approval. Shareholders will be notified
before any material change in these policies becomes effective.

The International Equity Fund seeks to achieve its investment
objective by investing primarily in shares of other investment
companies (the "underlying funds"). To the extent that the
International Equity Fund's assets are invested in underlying funds,
its investment experience will correspond directly with that of its
proportionate investment in those funds. The International Equity Fund
may also invest directly in the securities held by the underlying
funds. Because the International Equity Fund and the underlying funds
will have substantially similar investment experiences and incur
similar risks, all further references to the International Equity Fund
hereinafter include the underlying funds unless otherwise indicated.
Although many of the underlying funds have the same or similar
investment policies as the International Equity Fund, they are not
required to do so.

CONVERTIBLE SECURITIES

The Equity Fund and the International Equity Fund may invest in
convertible securities which may take the form of convertible
preferred stock, convertible bonds or debentures, units consisting of
"usable" bonds and warrants, or a combination of the features of
several of these securities. Usable bonds are corporate bonds that can
be used, in whole or in part, customarily at full face value, in lieu
of cash to purchase the issuer's common stock. When owned as part of a
unit along with warrants, which are options to buy the common stock,
they function as convertible bonds, except that the warrants generally
will expire before the bond's maturity. Convertible securities are
senior to equity securities and, therefore, have a claim to assets of
the corporation prior to the holders of common stock in the case of
liquidation. However, convertible securities are generally
subordinated to similar nonconvertible securities of the same company.

The Funds will exchange or convert the convertible securities held in
their respective portfolios into shares of the underlying common stock
in instances in which, in the Adviser's opinion, the investment
characteristics of the underlying common shares will assist a Fund in
achieving its investment objective. Otherwise, the Funds will hold or
trade the convertible securities. In selecting convertible securities
for a Fund, the Adviser evaluates the investment characteristics of
the convertible security as a fixed income instrument and the
investment potential of the underlying equity security for capital
appreciation. In evaluating these matters with respect to a particular
convertible security, the Adviser considers numerous factors,
including the economic and political outlook, the value of the
security relative to other investment alternatives, trends in the
determinants of the issuer's profits, and the issuer's management
capability and practices.

Usable bonds are corporate bonds that can be used in whole or in part,
customarily at full face value, in lieu of cash to purchase the
issuer's common stock. When owned as part of a unit along with
warrants, which entitle the holder to buy the common stock, they
function as convertible bonds, except that the warrants generally will
expire before the bonds' maturity. Convertible securities are senior
to equity securities and, therefore, have a claim to assets of the
corporation prior to the holders of common stock in the case of
liquidation. However, convertible securities are generally
subordinated to similar nonconvertible securities of the same company.

The Funds will exchange or convert the convertible securities held in
their respective portfolios into shares of the underlying common
stocks when, in the Adviser's opinion, the investment characteristics
of the underlying common shares will assist the Funds in achieving
their investment objectives. Otherwise, the Funds will hold or trade
the convertible securities. In selecting convertible securities for
the Funds, the Adviser evaluates the investment characteristics of the
convertible security as a fixed income instrument, and the investment
potential of the underlying equity security for capital appreciation.
In evaluating these matters with respect to a particular convertible
security, the Adviser considers numerous factors, including the
economic and political outlook, the value of the security relative to
other investment alternatives, trends in the determinants of the
issuer's profits, and the issuer's management capability and
practices.

FOREIGN SECURITIES

If the International Equity Fund maintains its assets abroad, the
Board Members must consider at least annually whether maintaining the
International Equity Fund's assets with custodians in foreign
countries is consistent with the best interests of the Fund and its
shareholders. The Board Members also must consider the degree of risk
involved through the holding of portfolio securities in domestic and
foreign securities depositories. However, in the absence of willful
misfeasance, bad faith or gross negligence, any losses resulting from
the holding of the Funds' portfolio securities in foreign countries
and/or with foreign custodians or securities depositories will be at
the risk of shareholders, unless the losses are insured. No assurance
can be given that the Board Members' appraisal of the risks will
always be correct or that such exchange control restrictions or
political acts of foreign governments might not occur.

Securities that are acquired by the International Equity Fund outside
the United States and that are publicly traded in the United States on
a foreign securities exchange or in a foreign securities market are
not considered by the Fund to be illiquid assets provided that: (i)
the Fund acquires and holds the securities with the intention of
reselling the securities in the foreign trading market, (ii) the Fund
reasonably believes it can readily dispose of the securities in the
foreign trading market or for cash in the United States, or (iii)
foreign market and current market quotations are readily available.
Investments may be in securities of foreign issuers, whether located
in developed or undeveloped countries.

Investments in foreign securities where delivery takes place outside
the United States will have to be made in compliance with any
applicable U.S. and foreign currency restrictions and tax laws
(including laws imposing withholding taxes on any dividend or interest
income) and laws limiting the amount and types of foreign investments.
Changes of government administrations or economic or monetary policies
in the United States or abroad, or changed circumstances regarding
convertibility or exchange rates, could result in investment losses
for the Fund.

FOREIGN CURRENCY HEDGING TRANSACTIONS

In order to hedge against foreign currency exchange rate risks, the
International Equity Fund may enter into forward foreign currency
exchange contracts and foreign currency futures contracts, as well as
purchase put or call options on foreign currencies, as described
below. The Fund may also conduct its foreign currency exchange
transactions on a spot (i.e., cash) basis at the spot rate prevailing
in the foreign currency exchange market.

The International Equity Fund may enter into forward foreign currency
exchange contracts ("forward contracts") to attempt to minimize the
risk to the Fund from adverse changes in the relationship between the
U.S. dollar and foreign currencies. A forward contract is an
obligation to purchase or sell a specific currency for an agreed price
at a future date which is individually negotiated and privately traded
by currency traders and their customers. The Fund may enter into a
forward contract, for example, when it enters into a contract for the
purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of the security. In addition,
for example, when the Fund believes that a foreign currency may suffer
a substantial decline against the U.S. dollar, it may enter into a
forward contract to sell an amount of that foreign currency
approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency, or when the Fund
believes that the U.S. dollar may suffer a substantial decline against
a foreign currency, it may enter into a forward contract to buy that
foreign currency for a fixed dollar amount. This second investment
practice is generally referred to as "cross-hedging." Because in
connection with the Fund's forward foreign currency transactions an
amount of the Fund's assets equal to the amount of the purchase will
be held aside or segregated to be used to pay for the commitment, the
Fund will always have cash, cash items or high quality debt securities
available sufficient to cover any commitments under these contracts or
to limit any potential risk. The segregated account will be marked to
market on a daily basis. While these contracts are not presently
regulated by the Commodities Futures Trading Commission ("CFTC"), the
CFTC may in the future assert authority to regulate forward contracts.
In such event, the Fund's ability to utilize forward contracts in the
manner set forth above may be restricted. Forward contracts may limit
potential gain from a positive change in the relationship between the
U.S. dollar and foreign currencies. Unanticipated changes in currency
prices may result in poorer overall performance for the Fund than if
it had not engaged in such contracts.

The International Equity Fund may purchase and write put and call
options on foreign currencies for the purpose of protecting against
declines in the dollar value of foreign portfolio securities and
against increases in the dollar cost of foreign securities to be
acquired. As is the case with other kinds of options, however, the
writing of an option on foreign currency will constitute only a
partial hedge, up to the amount of the premium received, and the Fund
could be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase
of an option on foreign currency may constitute an effective hedge
against fluctuation in exchange rates, although, in the event of rate
movements adverse to the Fund's position, the Fund may forfeit the
entire amount of the premium plus related transaction costs. Options
on foreign currencies to be written or purchased by the Fund will be
traded on U.S. and foreign exchanges or over-the-counter.

The International Equity Fund may enter into exchange-traded contracts
for the purchase or sale for future delivery of foreign currencies
("foreign currency futures"). This investment technique will be used
only to hedge against anticipated future changes in exchange rates
which otherwise might adversely affect the value of the Fund's
portfolio securities or adversely affect the prices of securities that
the Fund intends to purchase at a later date. The successful use of
foreign currency futures will usually depend on the ability of the
adviser to forecast currency exchange rate movements correctly. Should
exchange rates move in an unexpected manner, the Fund may not achieve
the anticipated benefits of foreign currency futures or may realize
losses.

PENNSYLVANIA MUNICIPAL SECURITIES

The Pennsylvania Intermediate Municipal Bond Fund may invest in
Pennsylvania municipal securities which have the characteristics set
forth in the prospectus.

A Pennsylvania municipal security will be determined by the Fund's
Adviser to meet the quality standards established by the Board Members
if it is of comparable quality to municipal securities within the
Fund's rating requirements. The Board Members consider the
creditworthiness of the issuer of a municipal security, the issuer of
a participation interest if the Fund has the right to demand payment
from the issuer of the interest, or the guarantor of payment by either
of those issuers. The Fund is not required to sell a municipal
security if the security's rating is reduced below the required
minimum subsequent to its purchase by the Fund. The Adviser considers
this event, however, in its determination of whether the Fund should
continue to hold the security in its portfolio. If Moody's Investors
Service, Inc., Standard & Poor's Ratings Group or Fitch Investors
Service, Inc. ratings change because of changes in those organizations
or in their rating systems, the Fund will try to use comparable
ratings as standards in accordance with the investment policies
described in the Fund's prospectus.

Examples of Pennsylvania municipal securities are:

o municipal notes and municipal
commercial paper;

o serial bonds sold with differing
maturity dates;

o tax anticipation notes sold to finance working capital
needs of municipalities in anticipation of receiving taxes
at a later date;

o bond anticipation notes sold prior
to the issuance of longer-term bonds;

o pre-refunded municipal bonds; and

o general obligation bonds secured by
a municipality pledge of taxation.

PARTICIPATION INTERESTS

The Pennsylvania Intermediate Municipal Bond Fund may invest in
participation interests. The financial institutions from which the
Fund purchases participation interests frequently provide or secure
from other financial institutions irrevocable letters of credit or
guarantees and give the Fund the right to demand payment of the
principal amounts of the participation interests plus accrued interest
on short notice (usually within seven days). The municipal securities
subject to the participation interests are not limited to the Fund's
maximum maturity requirements so long as the participation interests
include the right to demand payment from the issuers of those
interests. By purchasing these participation interests, the Fund is
buying a security meeting the maturity and quality requirements of the
Fund and also is receiving the tax-free benefits of the underlying
securities.

VARIABLE RATE MUNICIPAL SECURITIES

The Pennsylvania Intermediate Municipal Bond Fund may invest in
variable rate municipal securities. Variable interest rates generally
reduce changes in the market value of municipal securities from their
original purchase prices. Accordingly, as interest rates decrease or
increase, the potential for capital appreciation or depreciation is
less for variable interest rate municipal securities than for fixed
income obligations. The terms of these variable rate demand
instruments require payment of principal and accrued interest from the
issuer of the municipal obligations, the issuer of the participation
interests, or a guarantor of either issuer.

MUNICIPAL LEASES

The Pennsylvania Intermediate Municipal Bond Fund may invest up to 5%
of its net assets in municipal leases. The Fund may purchase municipal
securities in the form of participation interests which represent
undivided proportional interests in lease payments by a governmental
or non-profit entity. The lease payments and other rights under the
lease provide for and secure the payments on the certificates. Lease
obligations may be limited by municipal charter or the nature of the
appropriation for the lease. In particular, lease obligations may be
subject to periodic appropriation. If the entity does not appropriate
funds for future lease payments, the entity cannot be compelled to
make such payments. Furthermore, a lease may provide that the
certificate trustee cannot accelerate lease obligations upon default.
The trustee would only be able to enforce lease payments as they
became due. In the event of default or failure of appropriation, it is
unlikely that the trustee would be able to obtain an acceptable
substitute source of payment.

In determining the liquidity of municipal lease securities, the Fund's
Adviser, under the authority delegated by the Board Members, will base
its determination on the following factors: (a) whether the lease can
be terminated by the lessee: (b) the potential recovery, if any, from
a sale of the leased property upon termination of the lease; (c) the
lessee's general credit strength (e.g., its debt, administrative,
economic, and financial characteristics and prospects); (d) the
likelihood that the lessee will discontinue appropriating funding for
the leased property because the property is no longer deemed essential
to its operations (e.g., the potential for an "event of
non-appropriation"); and (e) any credit enhancement or legal recourse
provided upon an event of non-appropriation or other termination of
the lease.

If the Fund purchases unrated municipal leases, the Board Members will
be responsible for determining, on an ongoing basis, the credit
quality of such leases and the likelihood that such leases will not be
canceled.

ADJUSTABLE RATE MORTGAGE SECURITIES ("ARMS")

The ARMS in which the Equity Fund, the International Equity Fund, the
Short-Term Bond Fund, and the Intermediate U.S. Government Bond Fund
invest will be issued by Government National Mortgage Association,
Federal National Mortgage Association, and Federal Home Loan Mortgage
Corporation.

Unlike conventional bonds, ARMS pay back principal over the life of
the ARMS rather than at maturity. Thus, a holder of the ARMS, such as
a Fund, would receive monthly scheduled payments of principal and
interest, and may receive unscheduled principal payments representing
prepayments on the underlying mortgages. At the time that a holder of
the ARMS reinvests the payments and any unscheduled prepayments of
principal that it receives, the holder may receive a rate of interest
which is actually lower than the rate of interest paid on the existing
ARMS. As a consequence, ARMS may be a less effective means of "locking
in" long-term interest rates than other types of U.S. government
securities.

Like other U.S. government securities, the market value of ARMS will
generally vary inversely with changes in market interest rates. Thus,
the market value of ARMS generally declines when interest rates rise
and generally rises when interest rates decline.

While ARMS generally entail less risk of a decline during periods of
rapidly rising rates, ARMS may also have less potential for capital
appreciation than other similar investments (e.g., investments with
comparable maturities) because, as interest rates decline, the
likelihood increases that mortgages will be prepaid. Furthermore, if
ARMS are purchased at a premium, mortgage foreclosures and unscheduled
principal payments may result in some loss of a holder's principal
investment to the extent of the premium paid. Conversely, if ARMS are
purchased at a discount, both a scheduled payment of principal and an
unscheduled prepayment of principal would increase current and total
returns and would accelerate the recognition of income, which would be
taxed as ordinary income when distributed to shareholders.

COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS")

The following example illustrates how mortgage cash flows are
prioritized in the case of CMOs. Most of the CMOs in which the Equity
Fund, the International Equity Fund, the Short-Term Bond Fund, and the
Intermediate U.S. Government Bond Fund invests use the same basic
structure:

(1)Several classes of securities are issued against a pool of
mortgage collateral. The most common structure contains four
classes of securities. The first three (A, B, and C bonds) pay
interest at their stated rates beginning with the issue date,
and the final class (Z bond) typically receives any excess
income from the underlying investments after payments are made
to the other classes and receives no principal or interest
payments until the shorter maturity classes have been retired,
but then receives all remaining principal and interest payments;

(2) The cash flows from the underlying
mortgages are applied first to pay
interest and then to retire securities; and

(3)The classes of securities are retired sequentially. All
principal payments are directed first to the shortest-maturity
class (or A bond). When those securities are completely retired,
all principal payments are then directed to the next
shortest-maturity security (or B bond). This process continues
until all of the classes have been paid off.

Because the cash flow is distributed sequentially instead of pro rata,
as with pass-through securities, the cash flows and average lives of
CMOs are more predictable, and there is a period of time during which
the investors in the longer-maturity classes receive no principal
paydowns. The interest portion of these payments is distributed by a
Fund as income, and the capital portion is reinvested.

REAL ESTATE MORTGAGE INVESTMENT CONDUITS

("REMICS")

The Equity Fund, the International Equity Fund, the Short-Term Bond
Fund, and the Intermediate U.S. Government Bond Fund may invest in
REMICs. REMICs are offerings of multiple class mortgage-backed
securities which qualify and elect treatment as such under provisions
of the Internal Revenue Code. Issuers of REMICs may take several
forms, such as trusts, partnerships, corporations, associations, or
segregated pools of mortgages. Once REMIC status is elected and
obtained, the entity is not subject to federal income taxation.
Instead, income is passed through the entity and is taxed to the
person or persons who hold interests in the REMIC. A REMIC interest
must consist of one or more classes of "regular interests," some of
which may offer adjustable rates of interest, and a single class of
"residual interests." To qualify as a REMIC, substantially all the
assets of the entity must be in assets directly or indirectly secured
principally by real property.

PRIVATELY ISSUED MORTGAGE-RELATED SECURITIES

The Equity Fund, the International Equity Fund, the Short-Term Bond
Fund, and the Intermediate U.S. Government Bond Fund may invest in
privately issued mortgage-related securities. Privately issued
mortgage-related securities generally represent an ownership interest
in federal agency mortgage pass-through securities such as those
issued by Government National Mortgage Association as well as those
issued by nongovernment related entities. The terms and
characteristics of the mortgage instruments may vary among
pass-through mortgage loan pools. The market for such mortgage-related
securities has expanded considerably since its inception. The size of
the primary issuance market and the active participation in the
secondary market by securities dealers and other investors makes
government-related and non-government related pools highly liquid.

RESETS OF INTEREST

The interest rates paid on the ARMS, CMOs, and REMICs in which the
Equity Fund, the International Equity Fund, the Short-Term Bond Fund,
and the Intermediate U.S. Government Bond Fund invests generally are
readjusted at intervals of one year or less to an increment over some
predetermined interest rate index. There are two main categories of
indices: those based on U.S. Treasury securities and those derived
from a calculated measure, such as a cost of funds index or a moving
average of mortgage rates. Commonly utilized indices include the
one-year and five-year constant maturity Treasury Note rates, the
three-month Treasury Bill rate, the 180-day Treasury Bill rate, rates
on longer-term Treasury securities, the National Median Cost of Funds,
the one-month or three-month London Interbank Offered Rate (LIBOR),
the prime rate of a specific bank, or commercial paper rates. Some
indices, such as the one-year constant maturity Treasury Note rate,
closely mirror changes in market interest rate levels.

To the extent that the adjusted interest rate on the mortgage security
reflects current market rates, the market value of an adjustable rate
mortgage security will tend to be less sensitive to interest rate
changes than a fixed rate debt security of the same stated maturity.
Hence, ARMS which use indices that lag changes in market rates should
experience greater price volatility than adjustable rate mortgage
securities that closely mirror the market.

CAPS AND FLOORS

The underlying mortgages which collateralize the ARMS, CMOs, and
REMICs in which the Equity Fund, the International Equity Fund, the
Short-Term Bond Fund, and the Intermediate U.S. Government Bond Fund
invests will frequently have caps and floors which limit the maximum
amount by which the loan rate to the residential borrower may change
up or down: (1) per reset or adjustment interval, and (2) over the
life of the loan. Some residential mortgage loans restrict periodic
adjustments by limiting changes in the borrower's monthly principal
and interest payments rather than limiting interest rate changes.
These payment caps may result in negative amortization.

The value of mortgage securities in which a Fund invests may be
affected if market interest rates rise or fall faster and farther than
the allowable caps or floors on the underlying residential mortgage
loans. Additionally, even though the interest rates on the underlying
residential mortgages are adjustable, amortization and prepayments may
occur, thereby causing the effective maturities of the mortgage
securities in which a Fund invests to be shorter than the maturities
stated in the underlying mortgages.

SWAP AGREEMENTS

Among the hedging strategies into which the International Equity Fund
may enter are interest rate, currency and index swaps and the purchase
or sale of related caps, floors, and collars. The Fund expects to
enter into these transactions primarily to preserve a return or spread
on a particular investment or portion of its portfolio, to protect
against currency fluctuations, as a duration management technique or
to protect against any increase in the price of securities the Fund
anticipates purchasing at a later date. The Fund intends to use these
transactions as hedges and not as speculative investments and will not
sell interest rate caps or floors where it does not own securities or
other instruments providing the income stream the Fund may be
obligated to pay. Interest rate swaps involve the exchange by the Fund
with another party of their respective commitments to pay or receive
interest, e.g., an exchange of floating rate payments for fixed rate
payments with respect to a notional amount of principal. A currency
swap is an agreement to exchange cash flows on a notional amount of
two or more currencies based on the relative value differential among
them and an index swap is an agreement to swap cash flows on a
notional amount based on changes in the values of the reference
indices. The purchase of a cap entitles the purchaser to receive
payments on a notional principal amount from the party selling such
cap to the extent that a specified index exceeds a predetermined
interest rate or amount. The purchase of a floor entitles the
purchaser to receive payments on a notional principal amount from the
party selling such floor to the extent that a specified index falls
below a predetermined interest rate or amount. A collar is a
combination of a cap and a floor that preserves a certain return
within a predetermined range of interest rates or values.

The International Equity Fund will usually enter into swaps on a net
basis, i.e., the two payment streams are netted out in a cash
settlement on the payment date or dates specified in the instrument,
with the Fund receiving or paying, as the case may be, only the net
amount of the two payments. Inasmuch as these swaps, caps, floors, and
collars are entered into for good faith hedging purposes, the Adviser
and the Fund believe such obligations do not constitute senior
securities under the 1940 Act, and, accordingly, will not treat them
as being subject to its borrowing restrictions. There is no minimal
acceptable rating for a swap, cap, floor, or collar to be purchased or
held in the Fund's portfolio. If there is a default by the
counterparty, the Fund may have contractual remedies pursuant to the
agreements related to the transaction. The swap market has grown
substantially in recent years with a large number of banks and
investment banking firms acting both as principals and agents
utilizing standardized swap documentation. As a result, the swap
market has become relatively liquid. Caps, floors and collars are more
recent innovations for which standardized documentation has not yet
been fully developed and, accordingly, they are less liquid than
swaps.

FOREIGN BANK INSTRUMENTS

The Equity Fund, the International Equity Fund, the Short-Term Bond
Fund, and the Intermediate U.S. Government Bond Fund may invest in
foreign bank instruments. Eurodollar Certificates of Deposit ("ECDs"),
Eurodollar Time Deposits ("ETDs"), Yankee Certificates of Deposit
("Yankee CDs"), and Europaper are subject to somewhat different risks
than domestic obligations of domestic issuers. Examples of these risks
include international, economic and political developments, foreign
governmental restrictions that may adversely affect the payment of
principal or interest, foreign withholdings or other taxes on interest
income, difficulties in obtaining or enforcing a judgment against the
issuing bank, and the possible impact of interruptions of the flow of
international currency transactions.

Different risks may also exist for ECDs, ETDs, and Yankee CDs because
the banks issuing these instruments, or their domestic or foreign
branches, are not necessarily subject to the same regulatory
requirements that apply to domestic banks, such as reserve
requirements, loan requirements, loan limitations, examinations,
accounting, auditing, and recordkeeping and the public availability of
information. These factors will be carefully considered by a Fund's
Adviser in selecting investments for a Fund.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

The Funds may engage in when-issued and delayed delivery transactions.
These transactions are made to secure what is considered to be an
advantageous price or yield for a Fund. No fees or other expenses,
other than normal transaction costs, are incurred. However, liquid
assets of a Fund sufficient to make payment for the securities to be
purchased are segregated on a Fund`s records at the trade date. These
assets are marked to market daily and are maintained until the
transaction has been settled.

REPURCHASE AGREEMENTS

The Funds require their custodian to take possession of the securities
subject to repurchase agreements, and these securities will be marked
to market daily. To the extent that the original seller does not
repurchase the securities from a Fund, the Fund could receive less
than the repurchase price on any sale of such securities. In the event
that such a defaulting seller filed for bankruptcy or became
insolvent, disposition of such securities by a Fund might be delayed
pending court action. The Funds believe that under the regular
procedures normally in effect for custody of a Fund's portfolio
securities subject to repurchase agreements, a court of competent
jurisdiction would rule in favor of a Fund and allow retention or
disposition of such securities. A Fund will only enter into repurchase
agreements with banks and other recognized financial institutions,
such as broker/dealers, which are deemed by a Fund's Adviser to be
creditworthy pursuant to guidelines established by the Board Members.

CREDIT ENHANCEMENT

A Fund typically evaluates the credit quality and ratings of credit
enhanced securities based upon the financial condition and ratings of
the party providing the credit enhancement (the "credit enhancer"),
rather than the issuer. However, credit-enhanced securities will not
be treated as having been issued by the credit enhancer for
diversification purposes, unless a Fund has invested more than 10% of
its assets in securities issued, guaranteed or otherwise credit
enhanced by the credit enhancer, in which case the securities will be
treated as having been issued by both the issuer and the credit
enhancer. A Fund may have more than 25% of its total assets invested
in securities credit enhanced by banks. Any bankruptcy, receivership
or default of the party providing the credit enhancement will
adversely affect the quality and marketability of the underlying
security.

RESTRICTED AND ILLIQUID SECURITIES

The Funds may invest in commercial paper issued in reliance on the
exemption from registration afforded by Section 4(2) of the Securities
Act of 1933 and treats such commercial paper as liquid. Section 4(2)
commercial paper is restricted as to disposition under federal
securities law and is generally sold to institutional investors, such
as a Fund, who agree that they are purchasing the paper for investment
purposes and not with a view to public distribution. Any resale by the
purchaser must be in an exempt transaction. Section 4(2) commercial
paper is normally resold to other institutional investors like the
Funds through or with the assistance of the issuer or investment
dealers who make a market in Section 4(2) commercial paper, thus
providing liquidity.

The ability of the Board Members to determine the liquidity of certain
restricted securities is permitted under a Securities and Exchange
Commission ("SEC") staff position set forth in the adopting release
for Rule 144A under the Securities Act of 1933 (the "Rule"). The Rule
is a non-exclusive safe-harbor for certain secondary market
transactions involving resales of otherwise restricted securities to
qualified institutional buyers without registration of securities
under the Securities Act of 1933. The Rule was expected to further
enhance the liquidity of the secondary market for securities eligible
for resale under the Rule. The Funds believe that the staff of the SEC
has left the question of determining the liquidity of all restricted
securities to the Board Members. The Board Members may consider the
following criteria in determining the liquidity of certain restricted
securities:

o the frequency of trades and quotes for the
security;

o the number of dealers willing to purchase
or sell the security and the number of
other potential buyers;

o dealer undertakings to make a market in
the security; and

o the nature of the security and the nature
of the marketplace trades.

REVERSE REPURCHASE AGREEMENTS

Each Fund may enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse repurchase
agreement, a Fund transfers possession of a portfolio instrument to
another person, such as a financial institution, broker, or dealer, in
return for a percentage of the instrument's market value in cash, and
agrees that on a stipulated date in the future the Fund will
repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable a Fund to avoid selling portfolio
instruments at a time when a sale may be deemed to be disadvantageous,
but the ability to enter into reverse repurchase agreements does not
ensure that the Fund will be able to avoid selling portfolio
instruments at a disadvantageous time.

When effecting reverse repurchase agreements, liquid assets of a Fund
in a dollar amount sufficient to make payment for the obligations to
be purchased are segregated at the trade date. These securities are
marked to market daily and are maintained until the transaction is
settled.

LENDING OF PORTFOLIO SECURITIES

The collateral received when a Fund lends portfolio securities must be
valued daily and, should the market value of the loaned securities
increase, the borrower must furnish additional collateral to the Fund.
During the time portfolio securities are on loan, the borrower pays a
Fund any dividends or interest paid on such securities. Loans are
subject to termination at the option of a Fund or the borrower. A Fund
may pay reasonable administrative and custodial fees in connection
with a loan and may pay a negotiated portion of the interest earned on
the cash or equivalent collateral to the borrower or placing broker.

A Fund would not have the right to vote securities on loan, but would
terminate the loan and regain the right to vote if that were
considered important with respect to the investment.

WEIGHTED AVERAGE PORTFOLIO MATURITY

The Pennsylvania Intermediate Municipal Bond Fund, the Short-Term Bond
Fund, and the Intermediate U.S. Government Bond Fund will determine
their dollar-weighted average portfolio maturity by assigning a
"weight" to each portfolio security based upon the pro rata market
value of such portfolio security in comparison to the market value of
the entire portfolio. The remaining maturity of each portfolio
security is then multiplied by its weight, and the results are added
together to determine the weighted average maturity of the portfolio.
For purposes of calculating its dollar-weighted average portfolio
maturity, each Fund will treat variable and floating rate instruments
as having a remaining maturity commensurate with the period remaining
until the next scheduled adjustment to the instrument's interest rate.

PORTFOLIO TURNOVER

The Funds will not attempt to set or meet portfolio turnover rates
since any turnover would be incidental to transactions undertaken in
an attempt to achieve the Funds' investment objectives. It is not
anticipated that the portfolio trading engaged in by the Equity Fund,
the International Equity Fund, the Pennsylvania Intermediate Municipal
Bond Fund, the Short-Term Bond Fund, and the Intermediate U.S.
Government Bond Fund will result in its annual rates of portfolio
turnover exceeding 75%, 90%, 50%, 90%, and 90%, respectively. However,
the underlying funds purchased by the International Equity Fund may
experience much higher portfolio turnover rates resulting in higher
brokerage commissions, and taxable gains or losses. For the period
from April 1, 1996 (date of initial public investment) to February 28,
1997, the portfolio turnover rates for the Equity Fund, the
Pennsylvania Intermediate Municipal Bond Fund, the Short-Term Bond
Fund, and the Intermediate U.S. Government Bond Fund were 37%, 86%,
112%, and 255%, respectively. For the period from April 1, 1997 (date
of initial public investment) to May 31, 1997, the portfolio turnover
rate for the International Equity Fund was 1%.

PENNSYLVANIA INVESTMENT RISKS

The Pennsylvania Intermediate Municipal Bond Fund invests in
obligations of the Commonwealth of Pennsylvania (the "State") and
obligations of its political subdivisions, agencies, or
instrumentalities which results in the Fund's performance being
subject to risks associated with the overall conditions present within
the State. The following information is a general summary of the
State's financial condition and a brief summary of the prevailing
economic conditions. This information is based on official statements
relating to securities issued by the State that are believed to be
reliable but should not be considered as a complete description of all
relevant information.

Fiscal operations improved gradually since the $1.1 billion deficit in
1991. The deficit was nearly eliminated in 1992 with the addition of
increased taxes. During fiscal 1993, Pennsylvania focused on
expenditure reductions while revenues were stabilized and reserves
were increased by $24 million. Fiscal 1994 saw further improvement in
revenues and ended with a surplus of $336 million. Revenues are
expected to increase slightly in fiscal 1995, but the State has
budgeted an increase in appropriations which will decrease the Budget
Stabilization Fund to $4.1 million due to the projected operating
deficit of $297 million. Also, it should be noted that due to the
length and severity of the 1991 recession, coupled with the structural
changes in the industrial landscape, several municipalities have
undergone severe financial stress and are still vulnerable to further
economic cycles.

Historically, the State's economy was largely composed of heavy
industry that was concentrated in steel production, coal and
railroads. The reliance on these industries, especially the steel
sector, has declined and the economy has diversified into services and
trade sectors. Presently, services and trade compose over 50% of the
economy. Unemployment in the State over the past two years has
surpassed the national average and population growth, as in many of
the industrial states, has been motionless.

The debt ratings further demonstrate the overall
condition of the State. The State maintains an
A1 rating by Moody's that has been in effect
since 1986. Standard & Poor's Ratings Group

rates the State AA- since 1985.

<PAGE>

The Fund's concentration in securities issued by the State and its
political subdivisions provides a greater level of risk than a fund
whose assets are diversified across numerous states and municipal
issuers. The ability of the State or its municipalities to meet their
obligations will depend on the availability of tax and other revenues;
economic, political, and demographic conditions within the State; and
the underlying fiscal condition of the State, its counties, and its
municipalities.

INVESTMENT LIMITATIONS

The following is a list of the Funds' investment limitations. The
underlying funds purchased by the International Equity Fund may be
subject to different investment limitations.

SELLING SHORT AND BUYING ON MARGIN

The Funds will not sell any securities short or purchase any
securities on margin, but may obtain such short-term credits
as may be necessary for clearance of purchases and sales of
portfolio securities. With respect to the Equity Fund and the
International Equity Fund, the deposit or payment by the
Funds of initial or variation margin in connection with
futures contracts or related options transactions is not
considered the purchase of a security on margin.

ISSUING SENIOR SECURITIES AND BORROWING MONEY

The Funds will not issue senior securities, except that each
Fund may borrow money directly or through reverse repurchase
agreements in amounts up to one-third of the value of its
total assets, including the amount borrowed and except to the
extent that the Equity Fund and the International Equity Fund
may enter into futures contracts and options. The Funds will
not borrow money or engage in reverse repurchase agreements
for investment leverage, but rather as a temporary,
extraordinary, or emergency measure or to facilitate
management of its portfolio by enabling a Fund to meet
redemption requests when the liquidation of portfolio
securities is deemed to be inconvenient or disadvantageous. A
Fund will not purchase any securities while any borrowings in
excess of 5% of its total assets are outstanding.

PLEDGING ASSETS

The Funds will not mortgage, pledge, or hypothecate any
assets except to secure permitted borrowings. For purposes of
this limitation, the following will not be deemed to be
pledges (where applicable): margin deposits for the purchase
and sale of financial futures contracts and related options
and segregation or collateral arrangements made in connection
with options activities or the purchase of securities on a
when-issued basis.

DIVERSIFICATION OF INVESTMENTS

With respect to securities comprising 75% of the value of its
total assets, each Fund (with the exception of the
International Equity Fund and Pennsylvania Intermediate
Municipal Bond Fund) will not purchase securities issued by
any one issuer (other than cash, cash items, or securities
issued or guaranteed by the U.S. government, its agencies or
instrumentalities, and repurchase agreements collateralized
by such securities) if, as a result, more than 5% of the
value of its total assets would be invested in the securities
of that issuer, and will not acquire more than 10% of the
outstanding voting securities of any one issuer.

With respect to securities comprising 75% of the value of its
total assets, the International Equity Fund will not invest
more than 5% in securities of any one issuer (other than
cash, cash items, securities of investment companies or
securities issued or guaranteed by the government of the
United States or its agencies or instrumentalities and
repurchase agreements collateralized by such securities) if,
as a result, more than 5% of the value of its total assets
would be invested in the securities of that issuer, and will
not acquire more than 10% of the outstanding voting
securities of any one issuer.

UNDERWRITING

The Funds will not underwrite any issue of securities, except
as a Fund may be deemed to be an underwriter under the
Securities Act of 1933 in connection with the sale of
securities in accordance with its investment objective,
policies, and limitations.

<PAGE>

INVESTING IN REAL ESTATE

The Funds will not purchase or sell real estate, including
(with respect to all Funds except the International Equity
Fund) limited partnership interests, although the Funds may
invest in the securities of issuers whose business involves
the purchase or sale of real estate or in securities which
are secured by real estate or interests in real estate.

INVESTING IN COMMODITIES

The Funds will not purchase or sell commodities, commodity
contracts, or commodity futures contracts except to the
extent that the Equity Fund and the International Equity Fund
may engage in transactions involving financial and stock
index futures contracts or options on such futures contracts,
and the International Equity Fund may engage in foreign
currency transactions, invest in options and futures on
foreign currencies, and purchase or sell forward contracts
with respect to foreign currencies and related options.

LENDING CASH OR SECURITIES

The Funds will not lend any of their assets, except portfolio
securities up to one-third of the value of their total
assets. This shall not prevent a Fund from purchasing or
holding U.S. government obligations, money market
instruments, variable rate demand notes, bonds, debentures,
notes, certificates of indebtedness, or other debt
securities, entering into repurchase agreements, or engaging
in other transactions where permitted by a Fund's investment
objective, policies, and limitations or Declaration of Trust
or Articles of Incorporation, as applicable.

The Pennsylvania Intermediate Municipal Bond Fund may,
however, acquire publicly or non-publicly issued municipal
securities or temporary investments or enter into repurchase
agreements in accordance with its investment objective,
policies, and limitations or its Declaration of Trust.

CONCENTRATION OF INVESTMENTS

The Equity Fund, the International Equity Fund, the
Short-Term Bond Fund, and the Intermediate U.S. Government
Bond Fund will not invest 25% or more of the value of their
respective total assets in any one industry (other than
securities issued by the U.S. government, its agencies or
instrumentalities). The International Equity Fund may,
however, invest in investment companies that concentrate
their assets within one industry.

The Pennsylvania Intermediate Municipal Bond Fund will not
purchase securities if, as a result of such purchase, 25% or
more of the value of its total assets would be invested in
any one industry or in industrial development bonds or other
securities, the interest upon which is paid from revenues of
similar types of projects. However, the Fund may invest as
temporary investments more than 25% of the value of its
assets in cash or cash items.

The above investment limitations cannot be changed with respect to a
Fund without shareholder approval of a majority of that Fund's shares.
The following investment limitations may be changed by the Board
Members without shareholder approval. Shareholders will be notified
before any material change in these limitations becomes effective.

INVESTING IN ILLIQUID SECURITIES

The Funds will not invest more than 15% of the value of their
net assets in illiquid securities, including, (where
applicable), repurchase agreements providing for settlement
in more than seven days after notice, over-the-counter
options, non-negotiable fixed time deposits with maturities
over seven days, and certain restricted securities not
determined by the Board Members to be liquid.

Except with respect to the Funds' policy of borrowing money, if a
percentage limitation is adhered to at the time of investment, a later
increase or decrease in percentage resulting from any change in value
or net assets will not result in a violation of such restriction. The
Funds do not expect to borrow money or pledge securities in excess of
5% of the value of its total assets in the coming fiscal year. For
purposes of its policies and limitations, the Funds consider
certificates of deposit and demand and time deposits issued by a U.S.
branch of a domestic bank or savings associations having capital,
surplus, and undivided profits in excess of $100,000,000 at the time
of investment to be "cash items."

MANAGEMENT OF THE FUNDS

OFFICERS AND BOARD MEMBERS

Officers and Directors/Trustees are listed with their addresses,
birthdates, present positions with Marketvest Funds, Inc. and
Marketvest Funds, and principal occupations.

Edward C. Gonzales *
Federated Investors Tower
Pittsburgh, Pennsylvania

Birthdate: October 22, 1930

Chairman, President, Treasurer, and Director of
Marketvest Funds, Inc.
Chairman, President, Treasurer, and Trustee of
Marketvest Funds

Vice President, Treasurer, and Trustee, Federated Investors; Vice
President, Federated Advisers, Federated Management, Federated
Research, Federated Research Corp., Federated Global Research Corp.
and Passport Research, Ltd.; Executive Vice President and Director,
Federated Securities Corp.; Trustee, Federated Services Company;
Chairman, Treasurer, and Trustee, Federated Administrative Services;
Trustee or Director of certain investment companies distributed,
organized, or advised by Federated Investors and its affiliates
(Federated Funds); Executive Vice President, President, or Trustee of
the Federated Funds.

Martin B. Ebbert, Jr.
2301 Hollywood Parkway

York, PA 17403

Birthdate: June 13, 1939

Director of Marketvest Funds, Inc.
Trustee of Marketvest Funds

Retired since December 1995; prior thereto, Senior Vice President,
CoreStates Bank Trust Division; Director of Client Services,
CoreStates Hamilton Bank Trust Division (1990-1995); currently,
Director of the York Country Academy.

Clyde M. McGeary*
248 Willow Avenue
Camp Hill, PA 17011

Birthdate: October 31, 1930

Director of Marketvest Funds, Inc.
Trustee of Marketvest Funds

Retired from service to Commonwealth of

Pennsylvania; formerly, Chief, Division of Arts
and Sciences, Pennsylvania Department of
Education; Partner, MCG, McGeary Consulting

Group (1987-1992).

George A. Ominski
453 Haverhill Road
Lancaster, PA 17601

Birthdate: August 8, 1938

Director of Marketvest Funds, Inc.,
Trustee of Marketvest Funds

President and Managing Director, Capital
Advisors, Inc. (investment advisory firm)

(1982-Present).

<PAGE>

Richard Seidel
770 Hedges Lane

Strafford, Pennsylvania

Birthdate: April 20, 1941

Director of Marketvest Funds, Inc.
Trustee of Marketvest Funds

President and Director of Girard Partners, Ltd.
(1994 to present); President and Director of the
Fairfield Group, Inc. (1983-1993).

Jeffrey W. Sterling
Federated Investors Tower
Pittsburgh, Pennsylvania

Birthdate: February 5, 1947

Vice President and Assistant Treasurer of
Marketvest Funds, Inc. and Marketvest Funds;
Vice President, Federated Administrative
Services; Vice President and Assistant Treasurer
of some of the Federated Funds.

Victor R. Siclari
Federated Investors Tower
Pittsburgh, Pennsylvania

Birthdate: November 17, 1961

Secretary of Marketvest Funds, Inc. and
Marketvest Funds; Corporate Counsel and Vice
President, Federated Administrative Services;
Associate of Morrison & Foerster, a law firm,

from 1990 to 1992.

* This Director/Trustee is deemed to be an "interested person" as
defined in the Investment Company Act of 1940, as amended.

FUND OWNERSHIP

Officers and Board Members own less than 1% of the outstanding shares
of each Fund.

As of June 2, 1997, the following shareholders of record owned 5% or
more of the outstanding shares of the Equity Fund: Donald & Co.,
nominee account for Dauphin Deposit Bank & Trust Company, Harrisburg,
Pennsylvania, owned approximately 22,752,389.230 shares (50.84%);
Greenco, nominee account for Dauphin Deposit Bank & Trust Company,
Harrisburg, Pennsylvania, owned approximately 21,786,763.986 shares
(48.68%).

As of June 2, 1997, the following shareholder of record owned 5% or
more of the outstanding shares of the Pennsylvania Intermediate
Municipal Bond Fund: Donald & Company, nominee account for Dauphin
Bank & Trust Company, Harrisburg, Pennsylvania, owned approximately
21,802,557.516 shares (99.63%).

As of June 2, 1997, the following shareholders of record owned 5% or
more of the outstanding shares of the Short-Term Bond Fund: Donald &
Co., nominee account for Dauphin Bank & Trust Company, Harrisburg,
Pennsylvania, owned approximately 6,885,673.132 shares (47.02%);
Greenco, nominee account for Dauphin Deposit Bank & Trust Company,
Harrisburg, Pennsylvania, owned approximately 7,741,155.647 shares
(52.87%).

As of June 2, 1997, the following shareholders of record owned
approximately 5% or more of the outstanding shares of the Intermediate
U.S. Government Bond Fund: Donald & Co., nominee account for Dauphin
Deposit Bank & Trust Company, Harrisburg, Pennsylvania, owned
approximately 19,721,859.719 shares (71.87%); Greenco, nominee account
for Dauphin Deposit Bank & Trust Company, Harrisburg, Pennsylvania,
owned approximately 7,696,708.818 shares (28.05%).

As of June 2, 1997, the following shareholders of record owned 5% or
more of the outstanding shares of the International Equity Fund:
Greenco, nominee account for Dauphin Deposit Bank and Trust Company,
Harrisburg, Pennsylvania, owned approximately 3,968,395.722 shares
(98.44%).

DIRECTORS' COMPENSATION TABLE--MARKETVEST FUNDS,
INC. (THE "CORPORATION")

AGGREGATE
NAME, COMPENSATION

POSITION WITH FROM TOTAL COMPENSATION PAID
THE CORPORATION THE CORPORATION*# FROM FUND COMPLEX*

Edward C. Gonzales

Chairman, President, $0.00
$ 0 for the Corporation and
Treasurer, and Director
1 other investment company in the Fund Complex
Martin B. Ebbert, Jr. $375.00
$500 for the Corporation and

1 other investment company in the Fund Complex George D. McKeon
$3937.50 $5,250 for the Corporation and Director 1 other investment
company in the Fund Complex George A. Ominski $375.00 $500 for the
Corporation and Director 1 other investment company in the Fund
Complex Richard Seidel $5,625.00 $7,500 for the Corporation and
Director 1 other investment company in the Fund Complex Clyde M.
McGeary $5,625.00 $7,500 for the Corporation and Director 1 other
investment company in the Fund Complex

* Information is for the fiscal year ended
February 28, 1997.

# The aggregate compensation is provided for the
Corporation which is comprised of three
portfolios.
Mr. McKeon received the compensation for the
period from March 1, 1996, until his death on
October 29, 1996. Mr. McGeary was elected as a
Director effective March 19, 1996. Messrs.
Ebbert and Ominski became Directors on
December 16, 1996.

TRUSTEES' COMPENSATION TABLE--MARKETVEST FUNDS
(THE "TRUST")

AGGREGATE

NAME , COMPENSATION

POSITION WITH FROM TOTAL COMPENSATION PAID
THE TRUST THE TRUST*# FROM FUND COMPLEX*

Edward C. Gonzales

Chairman, President, $0.00 $ 0 for the Trust and Treasurer, and
Trustee 1 other investment company in the Fund Complex Martin B.
Ebbert, Jr. $125.00 $500 for the Trust and Trustee 1 other investment
company in the Fund Complex George D. McKeon $1,325.50 $5,250 for the
Trust and Trustee 1 other investment company in the Fund Complex
George A. Ominski $125.00 $500 for the Trust and Trustee 1 other
investment company in the Fund Complex Richard Seidel $1,875.00 $7,500
for the Trust and Trustee 1 other investment company in the Fund
Complex Clyde M. McGeary $1,875.00 $7,500 for the Trust and Trustee 1
other investment company in the Fund Complex

* Information is for the fiscal year ended
February 28, 1997.

# The aggregate compensation is provided for
the Trust which is comprised of two

portfolios.

Mr. McKeon received the compensation for the
period from March 1, 1996, until his death on
October 29, 1996.
Mr. McGeary was elected as a Trustee
effective March 19, 1996. Messrs. Ebbert and
Ominski became Trustees on December 16, 1996.

TRUSTEE LIABILITY

The Trust's Declaration of Trust provides that the Board Members will
only be liable for their own willful defaults. If reasonable care has
been exercised in the selection of officers, agents, employees, or
investment advisers, a Trustee shall not be liable for any neglect or
wrongdoing of any such person. However, they are not protected against
any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.

INVESTMENT ADVISORY SERVICES

ADVISER TO THE FUNDS

The Funds' investment adviser is Dauphin Deposit Bank and Trust
Company ("Dauphin Deposit" or the "Adviser"). It is a wholly-owned
subsidiary of Dauphin Deposit Corporation.

The Adviser shall not be liable to Marketvest Funds, Inc., Marketvest
Funds, a Fund, or any shareholder of any of the Funds for any losses
that may be sustained in the purchase, holding, or sale of any
security, or for anything done or omitted by it, except acts or
omissions involving willful misfeasance, bad faith, gross negligence,
or reckless disregard of the duties imposed upon it by its contract
with the Funds.

ADVISORY FEES

For its advisory services, the Adviser receives an annual investment
advisory fee as described in the prospectus.

For the period from April 1, 1996 (date of initial public investment)
to February 28, 1997, the Funds' Adviser earned fees from the Equity
Fund, the Pennsylvania Intermediate Municipal Bond Fund, the
Short-Term Bond Fund, and the Intermediate U.S. Government Bond Fund
in the amounts of $4,011,688, $1,540,764, $893,616, and $1,574,330,
respectively, of which $802,338, $320,653, $178,723, and $314,866,
respectively, were voluntarily waived. For the period from April 1,
1997 (date of initial public investment) to May 31, 1997, the Funds'
Adviser earned fees from the International Equity Fund in the amount
of $43,156 of which $ 9,959 was voluntarily waived.

OTHER SERVICES

ADMINISTRATION OF THE FUNDS

Federated Administrative Services, a subsidiary of Federated
Investors, provides administrative personnel and services to the Funds
for a fee as described in the prospectus.

For the period from April 1, 1996 (date of initial public investment)
to February 28, 1997, Federated Administrative Services received fees
from the Equity Fund, the Pennsylvania Intermediate Municipal Bond
Fund, the Short- Term Bond Fund, and the Intermediate U.S. Government
Bond Fund in the amounts of $601,643, $320,653, $178,723, and
$314,866, respectively, of which $46,223, $73,421, $36,384, and
$63,541, respectively, were voluntarily waived. For the period from
April 1, 1997 (date of initial public investment) to May 31, 1997,
Federated Administrative Services received fees from the International
Equity Fund in the amount of $12,350 of which $5,303 was voluntarily
waived.

CUSTODIAN

Under the custodian agreement, Dauphin Deposit Bank and Trust Company
holds each Fund's portfolio securities and keeps all necessary records
and documents relating to its duties. Dauphin Deposit's fees for
custody services are based upon the market value of Fund securities
held in custody plus certain securities transaction charges.

TRANSFER AGENT, DIVIDEND DISBURSING AGENT, AND
PORTFOLIO ACCOUNTING SERVICES

Federated Services Company, Pittsburgh, Pennsylvania, through its
registered transfer agent, Federated Shareholder Services Company, is
transfer agent for shares of the Funds and dividend disbursing agent
for the Funds. Federated Services Company also provides certain
accounting and recordkeeping services with respect to each Fund's
portfolio investments.

INDEPENDENT AUDITORS

The independent auditors for the Funds are Ernst & Young LLP,
Pittsburgh, Pennsylvania.

BROKERAGE TRANSACTIONS

The Adviser may select brokers and dealers who offer brokerage and
research services. These services may be furnished directly to the
Funds or to the Adviser and may include: advice as to the advisability
of investing in securities; security analysis and reports; economic
studies; industry studies; receipt of quotations for portfolio
evaluations; and similar services. Research services provided by
brokers and dealers may be used by the Adviser in advising the Funds
and other accounts. To the extent that receipt of these services may
supplant services for which the Adviser might otherwise have paid, it
would tend to reduce its expenses. The Adviser exercises reasonable
business judgment in selecting brokers who offer brokerage and
research services to execute securities transactions. They determine
in good faith that commissions charged by such persons are reasonable
in relationship to the value of the brokerage and research services
provided. Although investment decisions for a Fund are made
independently from those of the other accounts managed by the Adviser,
investments of the type a Fund may make may also be made by those
other accounts. When a Fund and one or more other accounts managed by
the Adviser are prepared to invest in, or desire to dispose of, the
same security, available investments or opportunities for sales will
be allocated in a manner believed by the Adviser to be equitable to
each. In some cases, this procedure may adversely affect the price
paid or received by a Fund or the size of the position obtained or
disposed of by the Fund. In other cases, however, it is believed that
coordination and the ability to participate in volume transactions
will be to the benefit of the Funds.

The Board Members have determined that portfolio transactions for the
Funds may be executed through Hopper Soliday and other affiliated
broker/dealers if, in the judgment of Dauphin Deposit, the use of
Hopper Soliday or an affiliated broker is likely to result in prices
and execution at least as favorable as those of other qualified
broker/dealers and if, in such transactions, the affiliated
broker/dealer charges the Funds a rate consistent with that charged to
comparable unaffiliated customers in similar transactions. Hopper
Soliday will not participate in commissions from brokerage given by
the Equity Fund or the International Equity Fund to other brokers or
dealers. In addition, pursuant to an exemption granted by the SEC, the
Funds may engage in transactions involving certain money market
instruments with Hopper Soliday or particular affiliates acting as
principal. Over-the-counter purchases and sales are transacted
directly with principal market makers except in those cases in which
better prices and executions may be obtained elsewhere.

Under rules adopted by the SEC, Hopper Soliday may not execute
transactions for the Equity Fund or the International Equity Fund on
the floor of any national securities exchange, but may effect
transactions for the Equity Fund or the International Equity Fund by
transmitting orders for execution, providing for clearance and
settlement, and arranging for the performance of those functions by
members of the exchange not associated with Hopper Soliday. Hopper
Soliday will be required to pay fees charged by those persons
performing the floor brokerage elements out of the brokerage
compensation it receives from the Equity Fund and the International
Equity Fund. The Equity Fund and the International Equity Fund have
been advised by Hopper Soliday that on most transactions, the floor
brokerage generally constitutes from between three-quarters of a cent
and one cent per share, which may be as high as 20% of the total
commissions paid.

For the period from April 1, 1996 (date of initial public investment)
to February 28, 1997, the Equity Fund paid $3,590 in brokerage
commissions to Hopper Soliday. These brokerage commissions represent
1.0% of the aggregate brokerage commissions paid by the Equity Fund,
and 1.2% of the aggregate dollar amount of transactions involving the
payment of brokerage commissions.

INTERNATIONAL EQUITY FUND ONLY

The distributor may assist in the execution of the International
Equity Fund's portfolio transactions to purchase underlying fund
shares for which it may receive distribution payments from the
underlying funds or their underwriters in accordance with the
distribution plans of those funds. In providing execution assistance,
the distributor receives orders from the Adviser; places them with the
underlying fund's distributor, transfer agent or other person, as
appropriate; confirms the trade, price and number of shares purchased;
and assures prompt payment by the Fund and proper completion of the
order.

With respect to purchases of load fund shares, the Adviser may direct
substantially all of the International Equity Fund's orders to the
distributor, which may, in its discretion, direct the order to other
broker-dealers in consideration of sales of the Fund's shares.

The distributor may retain brokerage commissions on portfolio
transactions of mutual funds held in the Fund's portfolio, including
funds which have a policy of considering sales of their shares in
selecting broker-dealers for the execution of their portfolio
transactions. Payment of brokerage commissions to the distributor is
not a factor considered by the Adviser in selecting an underlying fund
for investment.

Under certain circumstances, a sales charge incurred by the
International Equity Fund in acquiring shares of an underlying fund
may not be taken into account in determining the gain or loss on the
disposition of the shares acquired. If shares are disposed of within
90 days from the date they were purchased and if shares of a new
underlying fund are subsequently acquired without imposition of a
sales charge or imposition of a reduced sales charge pursuant to a
right granted to the Fund to acquire shares without payment of a sales
charge or with the payment of a reduced charge, then the sales charge
paid upon the purchase of the initial shares will be treated as paid
in connection with the acquisition of the new underlying fund's shares
rather than the initial shares.

PURCHASING SHARES

Except under certain circumstances described in the prospectus, shares
of the Funds are sold at their net asset value plus a sales charge, if
any, on days the New York Stock Exchange and the Federal Reserve Wire
System are open for business. The procedure for purchasing shares of
the Funds is explained in the prospectus under "Investing in the
Funds."

DISTRIBUTION PLAN

With respect to the Funds, Marketvest Funds, Inc. and Marketvest Funds
have each adopted a Plan pursuant to Rule 12b-1 which was promulgated
by the Securities and Exchange Commission pursuant to the Investment
Company Act of 1940, as amended (the "Plan"). Each Plan provides for
payment of fees to the distributor to finance any activity which is
principally intended to result in the sale of a Fund's shares subject
to the Plan. Such activities may include the advertising and marketing
of shares of a Fund; preparing, printing, and distributing
prospectuses and sales literature to prospective shareholders,
brokers, or administrators; and implementing and operating each Plan.
Pursuant to each Plan, the distributor may pay fees to brokers and
others for such services.

The Board Members expect that the adoption of a Plan will assist a
Fund in selling a sufficient number of shares so as to allow a Fund to
achieve economic viability. It is also anticipated that an increase in
the size of a Fund will facilitate more efficient portfolio management
and thereby assist a Fund in seeking to achieve its investment
objective.

For the period from April 1, 1996 (date of initial public investment)
to February 28, 1997, the Equity Fund, the Pennsylvania Intermediate
Municipal Bond Fund, the Short-Term Bond Fund, and the Intermediate
U.S. Government Bond Fund paid no fees pursuant to the Distribution
Plan. For the period from April 1, 1997 (date of initial public
investment) to May 31, 1997, the International Equity Fund paid no
fees pursuant to the Distribution Plan.

ADMINISTRATIVE ARRANGEMENTS

The administrative services include, but are not limited to, providing
office space, equipment, telephone facilities, and various personnel,
including clerical, supervisory, and computer, as is necessary or
beneficial to establish and maintain shareholders' accounts and
records, process purchase and redemption transactions, process
automatic investments of client account cash balances, answer routine
client inquiries regarding a Fund, assist clients in changing dividend
options, account designations, and addresses, and providing such other
services as a Fund may reasonably request.

CONVERSION TO FEDERAL FUNDS

It is the Funds' policy to be as fully invested as possible so that
maximum interest may be earned. To this end, all payments from
shareholders must be in federal funds or be converted into federal
funds. Federated Services Company acts as the shareholder's agent in
depositing checks and converting them to federal funds.

EXCHANGING SECURITIES FOR FUND SHARES

The Funds may accept securities in exchange for Fund shares. A Fund
will allow such exchanges only upon prior approval of a Fund and a
determination by a Fund and the Adviser that the securities to be
exchanged are acceptable.

Any securities exchanged must meet the investment objective and
policies of a Fund, must have a readily ascertainable market value,
and must not be subject to restrictions on resale. The market value of
any securities exchanged in an initial investment, plus any cash, must
be at least $25,000.

Securities accepted by a Fund will be valued in the same manner as a
Fund values its assets. The basis of the exchange will depend upon the
net asset value of Fund shares on the day the securities are valued.
One share of a Fund will be issued for each equivalent amount of
securities accepted.

Any interest earned on the securities prior to the exchange will be
considered in valuing the securities. All interest, dividends,
subscription or other rights attached to the securities become the
property of a Fund, along with the securities.

DETERMINING NET ASSET VALUE

The net asset value generally changes each day. The days on which the
net asset value is calculated by the Funds are described in the
prospectus. With respect to International Equity Fund, dividend income
is recorded on the ex-dividend date, except certain dividends from
foreign securities where the ex-dividend date may have passed, are
recorded as soon as the Fund is informed of the ex-dividend date.

DETERMINING MARKET VALUE OF SECURITIES

Market or fair values of the Equity Fund, the International Equity
Fund, the Short-Term Bond Fund, and the Intermediate U.S. Government
Bond Fund's portfolio securities, other than options,

are determined as follows:

o for equity securities, according to the
last sale price on a national securities
exchange, if applicable;

o in the absence of recorded sales for listed equity securities,
according to the mean between the last closing bid and asked
prices;

o for unlisted equity securities, latest bid
prices;

o for bonds and other fixed income
securities, as determined by an
independent pricing service;

o for short-term obligations, according to the mean between bid
and asked prices as furnished by an independent pricing service,
or for short-term obligations with remaining maturities of 60
days or less at the time of purchase, at amortized cost; or

o for all other securities, at fair value as determined in good
faith by the Board Members.

Prices provided by independent pricing services may be determined
without relying exclusively on quoted prices and may reflect:
institutional trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and
other market data.

The Equity Fund and the International Equity Fund will value futures
contracts, options and put options on financial futures at their
market values established by the exchanges at the close of options
trading on such exchanges unless the Board Members determine in good
faith that another method of valuing option positions is necessary.

The underlying funds in which the International Equity Fund may invest
value securities in their portfolios for which market quotations are
readily available at their current market value (generally the last
reported sale price) and all other securities and assets at fair value
pursuant to methods established in good faith by the board of
directors/trustees of the underlying fund.

TRADING IN FOREIGN SECURITIES

Trading in foreign securities may be completed at times which vary
from the closing of the New York Stock Exchange. In computing the net
asset value, the International Equity Fund values foreign securities
at the latest closing price on the exchange on which they are traded
immediately prior to the closing of the New York Stock Exchange.
Certain foreign currency exchange rates may also be determined at the
latest rate prior to the closing of the New York Stock Exchange.
Foreign securities quoted in foreign currencies are translated into
U.S.

dollars at current rates.

Occasionally, events that affect these values and exchanges rates may
occur between the times at which they are determined and the closing
of the New York Stock Exchange. If such events materially affect the
value of portfolio securities, these securities may be valued at their
fair value as determined in good faith by the Board Members, although
the actual calculation may be done by others.

VALUING MUNICIPAL BONDS

With respect to the Pennsylvania Intermediate Municipal Bond Fund, the
Board Members use an independent pricing service to value municipal
bonds. The independent pricing service takes into consideration yield,
stability, risk, quality, coupon rate, maturity, type of issue,
trading characteristics, special circumstances of a security or
trading market, and any other factors or market data it considers
relevant in determining valuations for normal institutional size
trading units of debt securities, and does not rely exclusively on
quoted prices. In addition, the Pennsylvania Intermediate Municipal
Bond Fund values short-term obligations according to the mean between
the bid and asked prices as furnished by an independent pricing
service, or for short-term obligations with remaining maturities of 60
days or less at the time of purchase, at amortized cost.

EXCHANGE PRIVILEGE

Shareholders of a Fund may exchange shares of that Fund for shares of
other Funds advised by Dauphin Deposit subject to certain conditions.
Exchange procedures are explained in the prospectus under "Exchange
Privilege."

REDEEMING SHARES

Each Fund redeems shares at the next computed net asset value after a
Fund receives the redemption request. Redemption procedures are
explained in the prospectus under "Redeeming Shares." Redemption
requests cannot be executed on days on which the New York Stock
Exchange is closed or on federal holidays when wire transfers are
restricted.

REDEMPTION IN KIND

Although the Funds intend to redeem shares in cash, they reserve the
right under certain circumstances to pay the redemption price in whole
or in part by a distribution of securities from a Fund's portfolio. To
the extent available, such securities will be readily marketable.
Marketvest Funds, Inc. and Marketvest Funds have elected to be
governed by Rule 18f-1 of the Investment Company Act of 1940, under
which the Funds are obligated to redeem Shares for any one shareholder
in cash only up to the lesser of $250,000 or 1% of a Fund's net asset
value during any 90-day period.

Any redemption beyond this amount will also be in cash unless the
Board Members determine that payments should be in kind. In such a
case, a Fund will pay all or a portion of the remainder of the
redemption in portfolio instruments, valued in the same way as a Fund
determines net asset value. The portfolio instruments will be selected
in a manner that the Board Members deem fair and equitable.

Redemption in kind is not as liquid as a cash redemption. If
redemption is made in kind, shareholders receiving their securities
and selling them before their maturity could receive less than the
redemption value of their securities and could incur certain
transaction costs.

MASSACHUSETTS PARTNERSHIP LAW

Under certain circumstances, shareholders of Marketvest Funds may be
held personally liable as partners under Massachusetts law for acts or
obligations of the Marketvest Funds. To protect shareholders,
Marketvest Funds has filed legal documents with Massachusetts that
expressly disclaim the liability of shareholders of a Fund for such
acts or obligations of Marketvest Funds. These documents require
notice of this disclaimer to be given in each agreement, obligation,
or instrument Marketvest Funds or its Board Members enter into or sign
on behalf of a Fund.

In the unlikely event a shareholder of a Fund is held personally
liable for Marketvest Funds' obligations, Marketvest Funds is required
by the Declaration of Trust to use its property to indemnify, protect
or compensate the shareholder. On request, Marketvest Funds will
defend any claim made and pay any judgment against a shareholder of a
Fund for any act or obligation of Marketvest Funds. Therefore,
financial loss resulting from liability as a shareholder of a Fund
will occur only if Marketvest Funds cannot meet its obligations to
indemnify shareholders and pay judgments against them from the assets
of a Fund.

EFFECT OF BANKING LAWS

The Glass-Steagall Act and other banking laws and regulations
presently prohibit a bank holding company registered under the Bank
Holding Company Act of 1956, as amended, or any bank or non-bank
affiliate thereof from sponsoring, organizing, controlling, or
distributing the shares of a registered, open-end investment company
continuously engaged in the issuance of its shares, and prohibit banks
generally from underwriting, or distributing certain types of
securities such as shares of a registered open-end investment company.
Such laws and regulations do not prohibit such a holding company or
bank or non-bank affiliate from acting as investment adviser, transfer
agent, or custodian to such an investment company or from purchasing
shares of such a company as agent for and upon the order of their
customer. The Funds' Adviser, Dauphin Deposit, is subject to such
banking laws and regulations.

Dauphin Deposit believes, based on the advice of its counsel, that it
may perform the investment advisory services for any Fund contemplated
by its advisory agreements with the Funds without violating the
Glass-Steagall Act or other applicable banking laws or regulations.
Such counsel has pointed out, however, that changes in either federal
or state statutes and regulations relating to the permissible
activities of banks and their subsidiaries or affiliates, as well as
further judicial or administrative decisions or interpretations of
present or future statutes and regulations, could prevent Dauphin
Deposit from continuing to perform all or a part of the above services
for its customers and/or a Fund. In such event, changes in the
operation of a Fund may occur, including the possible alteration or
termination of any automatic or other Fund share investment and
redemption services then being provided by Dauphin Deposit, and the
Board Members would consider alternative investment advisers and other
means of continuing available investment services.

It is not expected that Fund shareholders would suffer any adverse
financial consequences (if another adviser with equivalent abilities
to Dauphin Deposit is found) as a result of any of these occurrences.

TAX STATUS

THE FUNDS' TAX STATUS

The Funds will pay no federal income tax because each Fund expects to
meet the requirements of Subchapter M of the Internal Revenue Code
applicable to regulated investment companies and to receive the
special tax treatment afforded to such companies. To qualify for this
treatment, each Fund must, among other requirements:

o derive at least 90% of its gross income
from dividends, interest, and gains from
the sale of securities;

o derive less than 30% of its gross income from the sale of
securities held less than three months;

o invest in securities within certain
statutory limits; and

o distribute to its shareholders at least
90% of its net income earned during the
year.

These requirements may restrict the degree to which a Fund may engage
in short-term trading and certain hedging transactions and may limit
the range of a Fund's investments.

If permitted by its investment policies, a Fund's transactions in
futures contracts, forward contracts, foreign currency transactions,
options and certain other investment and hedging activities are
subject to special tax rules. In a given case, these rules may
accelerate income to the Fund, defer its losses, cause adjustments in
the holding periods of the Fund's assets, convert short-term capital
losses into long-term capital losses or otherwise affect the character
of the Fund's income. These rules could therefore affect the amount,
timing and character of distributions to shareholders. A Fund will
endeavor to make any available elections pertaining to these
transactions in a manner believed to be in the best interest of the
Fund and its shareholders.

Any dividends declared by the Fund in October, November or December to
shareholders of record during those months and paid during the
following January are treated, for tax purposes, as if they were
received by each shareholder on December 31 of the year in which they
were declared.

INTERNATIONAL EQUITY FUND

Income the International Equity Fund receives from sources within
various foreign countries may be subject to foreign income taxes
withheld at the source. If the Fund has at least 50% of its assets
invested in foreign securities at the end of its taxable year, it may
elect to pass through the foreign tax credit to its shareholders. It
is expected that the International Equity Fund will not have more than
50% of the value of its total assets at the close of its taxable year
invested in foreign securities, and therefore will not be permitted to
make this election and "pass through" to its shareholders. Each
shareholder's respective pro rata share of foreign taxes the Fund pays
will, therefore, be netted against their share of the Fund's gross
income.

The International Equity Fund may invest in any non-U.S. corporations
which could be treated as passive foreign investment companies
("PFICs"). This could result in adverse tax consequences upon the
disposition of, or the receipt of "excess distributions" with respect
to, such equity investments. To the extent the International Equity
Fund does invest in PFICs, it may adopt certain tax strategies to
reduce or eliminate the adverse effects of certain federal tax
provisions governing PFIC investments. Many non-U.S. banks and
insurance companies may not be treated as PFICs if they satisfy
certain technical requirements under the Code. To the extent that the
International Equity Fund does invest in foreign securities which are
determined to be PFIC securities and is required to pay a tax on such
investments, a credit for this tax would not be allowed to be passed
through to its shareholders. Therefore, the payment of this tax would
reduce the International Equity Fund's economic return from its PFIC
shares, and excess distributions received with respect to such shares
are treated as ordinary income rather than capital gains.

An underlying fund may inadvertently invest in non-U.S. corporations
which would be treated as Passive Foreign Investment Companies
("PFICs") or become a PFIC under the Code. This could result in
adverse tax consequences upon the disposition of, or the receipt of
"excess distributions" with respect to, such equity investments. To
the extent an underlying fund does invest in PFICs, it may elect to
treat the PFIC as a "qualified electing fund" or mark-to-market its
investments in PFICs annually. In either case, the underlying fund may
be required to distribute amounts in excess of its realized income and
gains. To the extent that the underlying fund itself is required to
pay a tax on income or gain from investment in PFICs, the payment of
this tax would reduce the International Equity Fund's economic return.

SHAREHOLDERS' TAX STATUS

The dividends received deduction for corporations will apply to
ordinary income distributions to the extent the distribution
represents amounts that would qualify for the dividends received
deduction to the Equity Fund or the International Equity Fund, if
either Fund were a regular corporation, and to the extent designated
by the Fund as so qualifying. Otherwise, these dividends and any
short-term capital gains are taxable as ordinary income.

No portion of any income dividends paid by the other Funds is eligible
for the dividends received deduction available to corporations. These
dividends, and any short-term capital gains, are taxable as ordinary
income.

CAPITAL GAINS

With respect to the Equity Fund, the Short-Term Bond Fund,
the International Equity Fund, and the Intermediate U.S.
Government Bond Fund, long-term capital gains distributed to
shareholders will be treated as long-term capital gains
regardless of how long shareholders have held shares.

With respect to the Pennsylvania Intermediate Municipal Bond
Fund, capital gains or losses may be realized by the Fund on
the sale of portfolio securities and as a result of discounts
from par value on securities held to maturity. Sales would
generally be made because of:

o the availability of higher relative
yields;

o differentials in market values;

o new investment opportunities;

o changes in creditworthiness of an
issuer; or

o an attempt to preserve gains or
limit losses.

Distributions of long-term capital gains are taxed as such,
whether they are taken in cash or reinvested, and regardless
of the length of time the shareholder has owned the shares.

TOTAL RETURN

For the period from April 1, 1996 (date of initial public investment)
to February 28, 1997, the cumulative total returns for the Equity
Fund, the Pennsylvania Intermediate Municipal Bond Fund, the
Short-Term Bond Fund, and the Intermediate U.S. Government Bond Fund
were 16.92%, 1.38%, 0.86%, and 0.56%, respectively. For the period
from April 1, 1997 (date of initial public investment) to May 31,
1997, the cumulative total return for the International Equity Fund
was 3.94%.

Cumulative total return reflects a Fund's total performance over a
specific period of time. This total return assumes and is reduced by
the payment of the maximum sales charge. Each Fund's total return is
representative of only five months of investment activity since the
Funds' date of initial public investment.

The average annual total return for a Fund is the average compounded
rate of return for a given period that would equate a $1,000 initial
investment to the ending redeemable value of that investment. The
ending redeemable value is computed by multiplying the number of
shares owned at the end of the period by the net asset value per share
at the end of the period. The number of shares owned at the end of the
period is based on the number of shares purchased at the beginning of
the period with $1,000, less any applicable sales load, adjusted over
the period by any additional shares, assuming the monthly reinvestment
of all dividends and distributions.

YIELD

The yields for the Equity Fund, the Pennsylvania Intermediate
Municipal Bond Fund, the Short-Term Bond Fund, and the Intermediate
U.S. Government Bond Fund for the 30-day period ended February 28,
1997 were 1.27%, 4.00%, 5.23%, and 6.89%, respectively.

The yield for a Fund is determined by dividing the net investment
income per share (as defined by the SEC) earned by each Fund over a
thirty-day period by the maximum offering price per share of each Fund
on the last day of the period. This value is then annualized using
semi-annual compounding. This means that the amount of income
generated during the thirty-day period is assumed to be generated each
month over a twelve-month period and is reinvested every six months.
The yield does not necessarily reflect income actually earned by a
Fund because of certain adjustments required by the SEC and,
therefore, may not correlate to the dividends or other distributions
paid to shareholders.

To the extent that financial institutions and broker/dealers charge
fees in connection with services provided in conjunction with an
investment in a Fund, the performance will be reduced for those
shareholders paying those fees.

TAX-EQUIVALENT YIELD

The Pennsylvania Intermediate Municipal Bond Fund's tax-equivalent
yield for the thirty-day period ended February 28, 1997 was 6.94%.

The tax-equivalent yield for the Pennsylvania Intermediate Municipal
Bond Fund is calculated similarly to the yield, but is adjusted to
reflect the taxable yield that the Fund would have had to earn to
equal its actual yield, assuming the maximum 42.4% combined federal
and state tax rate for individuals, and also assuming that income is
100% tax-exempt. The Fund will use the "actual earned" method for
determining the percentage of dividend distributions that is
tax-exempt. This information will be provided in connection with
year-end shareholder tax reporting.

TAX-EQUIVALENCY TABLE

The Pennsylvania Intermediate Municipal Bond Fund may also use a
tax-equivalency table in advertising and sales literature. The
interest earned by the municipal bonds in the Fund's portfolio
generally remains free from federal regular income tax,* and is often
free from state and local taxes as well. As the table on the next page
indicates, a "tax-free" investment is an attractive choice for
investors, particularly in times of narrow spreads between "tax-free"
and taxable yields.

TAXABLE YIELD EQUIVALENT FOR 1997

STATE OF PENNSYLVANIA

COMBINED FEDERAL AND STATE INCOME TAX

BRACKET:
<S> <C> <C> <C> <C> <C> <C>

17.80% 30.80% 33.80% 38.80% 42.40%

JOINT $1- $41,201- $99,601- $151,751- OVER

RETURN 41,200 99,600 151,750 271,050 $271,050

SINGLE $1- $24,651- $59,751- $124,651- OVER

RETURN 24,650 59,750 124,650 271,050 $271,050

TAX-EXEMPT

YIELD

TAXABLE YIELD EQUIVALENT

1.50% 1.82% 2.17% 2.27% 2.45% 2.60%

2.00% 2.43% 2.89% 3.02% 3.27% 3.47%

2.50% 3.04% 3.61% 3.78% 4.08% 4.34%

3.00% 3.65% 4.34% 4.53% 4.90% 5.21%

3.50% 4.26% 5.06% 5.29% 5.72% 6.08%

4.00% 4.87% 5.78% 6.04% 6.54% 6.94%

4.50% 5.47% 6.50% 6.80% 7.35% 7.81%

5.00% 6.08% 7.23% 7.55% 8.17% 8.68%

5.50% 6.69% 7.95% 8.31% 8.99% 9.55%

6.00% 7.30% 8.67% 9.06% 9.80% 10.42%

</TABLE>

Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional
state and local taxes paid on comparable taxable investments were not
used to increase federal deductions.

The chart above is for illustrative purposes only. It is not an
indicator of past or future performance of Fund shares.

* Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local income taxes.

<PAGE>

PERFORMANCE COMPARISONS

Each Fund's performance depends upon such variables as:

o portfolio quality;

o average portfolio maturity;

o type of instruments in which the portfolio
is invested;

o changes in interest rates and market value
of portfolio securities;

o changes in each Fund's expenses; and

o various other factors.

Each Fund's performance fluctuates on a daily basis largely because
net earnings and the maximum offering price per share fluctuate daily.
Both net earnings and offering price per share are factors in the
computation of yield and total return.

Investors may use financial publications and/or indices to obtain a
more complete view of a Fund's performance. When comparing
performance, investors should consider all relevant factors such as
the composition of any index used, prevailing market conditions,
portfolio compositions of other funds, and methods used to value
portfolio securities and compute offering price. The financial
publications and/or indices which a Fund uses in advertising may
include:

o LIPPER ANALYTICAL SERVICES, INC., ranks
funds in various fund categories by making
comparative calculations using total
return. Total return assumes the
reinvestment of all income dividends and
capital gains distributions, if any. From
time to time, the Fund will quote its
Lipper ranking in the applicable funds
category in advertising and sales
literature.

o STANDARD & POOR'S DAILY STOCK PRICE INDEX
OF 500 COMMON STOCKS, a composite index of
common stocks in industry, transportation,
and financial and public utility
companies, can be used to compare to the
total returns of funds whose portfolios
are invested primarily in common stocks.
In addition, the Standard & Poor's index
assumes reinvestments of all dividends
paid by stocks listed on its index. Taxes
due on any of these distributions are not
included, nor are brokerage or other fees
calculated in Standard & Poor's figures.

o THE NEW YORK STOCK EXCHANGE COMPOSITE OR COMPONENT INDICES are
unmanaged indices of all industrial, utilities, transportation,
and finance stocks listed on the New York Stock Exchange.

o DOW JONES INDUSTRIAL AVERAGE ("DJIA")
represents share prices of selected large
capitalization, well-established blue-chip
industrial corporations as well as public
utility and transportation companies. The
DJIA indicates daily changes in the
average price of stocks in any of its
categories. It also reports total sales
for each group of industries.

o MORNINGSTAR, INC., an independent rating
service, is the publisher of the bi-weekly
Mutual Fund Values. Mutual Fund Values
rates more than 1,000 NASDAQ-listed mutual
funds of all types, according to their
risk-adjusted returns. The maximum rating
is five stars, and ratings are effective
for two weeks.

o MERRILL LYNCH 1-3 YEAR TREASURY INDEX is
an unmanaged index tracking short-term
U.S. government securities between 1 and
2.99 years. The index is produced by
Merrill Lynch, Pierce, Fenner & Smith, Inc.

o LEHMAN BROTHERS INTERMEDIATE
GOVERNMENT/CORPORATE BOND INDEX is
comprised of issues which include
non-convertible bonds publicly issued by
the U.S. government or its agencies;
corporate bonds guaranteed by the U.S.
government and quasi-federal corporations;
and publicly issued, fixed rate,
non-convertible domestic bonds of
companies in industry, public utilities,
and finance. The average maturity of these
bonds is between 1 and 9.9 years.

o LEHMAN BROTHERS INTERMEDIATE GOVERNMENT
BOND INDEX is comprised of all publicly
issued, non-convertible domestic debt of
the U.S. government, or any agency
thereof, or any quasi-federal corporation.
The index also includes corporate debt
guaranteed by the U.S. government. Only
notes and bonds with a minimum outstanding
principal of $1 million and a minimum
maturity of one year and maximum maturity
of 9.9 years are included.

o LEHMAN BROTHERS GENERAL OBLIGATION
MUNICIPAL BOND INDEX is comprised of state
general obligation debt issues. These
bonds are rated A or better and represent
a variety of coupon ranges. Index figures
are total return calculated for one,
three, and twelve month periods as well as
year-to-date.

o LEHMAN BROTHERS FIVE-YEAR STATE GENERAL
OBLIGATIONS BOND INDEX is comprised of all
state general obligation debt issues with
maturities between four and six years.
These bonds are rated A or better and
represent a variety of coupon ranges.
Index figures are total returns calculated
for one, three, and twelve month periods
as well as year- to-date. Total returns
are also calculated as of the index
inception, December 31, 1979.

o LEHMAN BROTHERS TEN-YEAR STATE GENERAL OBLIGATION BONDS is an
index comprised on the same issues noted above except that the
maturities range between nine and eleven years. Index figures
are total returns calculated as of the index inception, December
31, 1979.

o LEHMAN BROTHERS 1-3 YEAR GOVERNMENT INDEX
is comprised of all publicly issued,
non-convertible domestic debt of the U.S.
government, or any agency thereof, or any
quasi-federal corporation. The index also
includes corporate debt guaranteed by the
U.S. government. Only notes and bonds with
a minimum maturity of one year and maximum
maturity of 2.9 years are included.

o MORGAN STANLEY EUROPE, AUSTRALIA, AND FAR
EAST (EAFE) INDEX is a market
capitalization weighted foreign securities
index, which is widely used to measure the
performance of European, Australian, New
Zealand and Far Eastern stock markets. The
index covers approximately 1,020 companies
drawn from 18 countries in the above
regions. The index values its securities
daily in both U.S. dollars and local
currency and calculates total returns
monthly. EAFE U.S. dollar total return is
a net dividend figure less Luxembourg
withholding tax. The EAFE is monitored by
Capital International, S.A., Geneva,
Switzerland.

Advertising and other promotional literature may include charts,
graphs and other illustrations using the Funds' returns, or returns in
general, that demonstrate basic investment concepts such as
tax-deferred compounding, dollar-cost averaging and systematic
investment. In addition, the Funds can compare their performance, or
performance for the types of securities in which they invest, to a
variety of other investments, such as bank savings accounts,
certificates of deposit, and Treasury bills.

Advertisements may quote performance information which does not
reflect the effect of the sales load.

ECONOMIC AND MARKET INFORMATION

Advertising and sales literature for the Funds may include discussions
of economic, financial and political developments and their effect on
the securities market. Such discussions may take the form of
commentary on these developments by Funds' portfolio managers and
their views and analysis on how such developments could affect the
Funds. In addition, advertising and sales literature may quote
statistics and give general information about the mutual fund
industry, including the growth of the industry, from sources such as
the Investment Company Institute (`ICI"). For example, according to
the ICI, twenty-seven percent of American households are pursuing
their financial goals through mutual funds. These investors, as well
as businesses and institutions, have entrusted over $3 trillion to the
more than 5,500 funds available.

FINANCIAL STATEMENTS

The Financial Statements for Marketvest Equity
Fund, Marketvest Pennsylvania Intermediate
Municipal Bond Fund, Marketvest Short-Term Bond
Fund, and Marketvest Intermediate U.S.
Government Bond Fund are contained in their
Combined Annual Report for the period ended
February 28, 1997, and are incorporated herein
by reference.
(File No. 811-7383).