TIP FUNDS, 485APOS, 1998-11-16

TIP FUNDS
485APOS, 1998-11-16

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 16, 1998

File No. 333-00641
File No. 811-07527
- - --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 /X/
POST-EFFECTIVE AMENDMENT NO. 12
-------------------------------

and

REGISTRATION STATEMENT UNDER
INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 13

TIP FUNDS
(formerly, Turner Funds)
(Exact Name of Registrant as Specified in Charter)

c/o The CT Corporation System
2 Oliver Street
Boston, Massachusetts 02109
(Address of Principal Executive Offices, Zip Code)

Registrant's Telephone Number, including Area Code (610) 251-0268

(Name and Address of Agent for Service)

STEPHEN KNEELEY
TURNER INVESTMENT PARTNERS, INC.
1235 WESTLAKES DR., SUITE 350
BERWYN, PENNSYLVANIA 19312-2414

Copies to:

JAMES W. JENNINGS, ESQUIRE JOHN H. GRADY, JR., ESQUIRE
MORGAN, LEWIS & BOCKIUS LLP MORGAN, LEWIS & BOCKIUS LLP
2000 ONE LOGAN SQUARE 1800 M STREET, NW
PHILADELPHIA, PENNSYLVANIA 19103 WASHINGTON, DC 20036

TITLE OF SECURITIES BEING REGISTERED...UNITS OF BENEFICIAL INTEREST.

- - --------------------------------------------------------------------------------
It is proposed that this filing become effective (check appropriate box):
_____ immediately upon filing pursuant to paragraph (b)
_____ on January 28, 1998, pursuant to paragraph (b)
_____ 60 days after filing pursuant to paragraph (a)
_____ on [date] pursuant to paragraph (a) of Rule 485
X 75 days after filing pursuant to paragraph (a)(2)
- - -----

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

<PAGE>

TIP FUNDS

PROSPECTUS
JANUARY 31, 1999

ADVISER CLASS SHARES
INSTITUTIONAL CLASS SHARES

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

TURNER FUNDS: CLOVER FUNDS:

TURNER ULTRA LARGE CAP GROWTH CLOVER SMALL CAP VALUE FUND
FUND CLOVER EQUITY VALUE FUND
TURNER GROWTH EQUITY FUND CLOVER MAX CAP VALUE FUND
TURNER MIDCAP GROWTH FUND CLOVER FIXED INCOME FUND
TURNER SMALL CAP GROWTH FUND
TURNER MICRO CAP GROWTH FUND PENN CAPITAL FUNDS:
TURNER SHORT DURATION GOVERNMENT
FUNDS - ONE YEAR PORTFOLIO PENN CAPITAL STRATEGIC HIGH YIELD BOND FUND
TURNER SHORT DURATION GOVERNMENT PENN CAPITAL SELECT FINANCIAL SERVICES FUND
FUNDS - THREE YEAR PORTFOLIO PENN CAPITAL VALUE PLUS FUND
TURNER FIXED INCOME FUND
TIP TARGET SELECT EQUITY FUND

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

INVESTMENT ADVISERS:

TURNER INVESTMENT PARTNERS, INC.
CLOVER CAPITAL MANAGEMENT, INC.
PENN CAPITAL MANAGEMENT COMPANY, INC.

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED ANY FUND SHARES OR
DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR COMPLETE.
IT IS A CRIME FOR ANYONE TO TELL YOU OTHERWISE.

<PAGE>

TIP Funds

HOW TO READ THIS PROSPECTUS
- - --------------------------------------------------------------------------------

TIP Funds is a mutual fund family that offers shares in separate investment
portfolios (Funds). The Funds have individual investment goals and strategies.
This prospectus gives you important information about the Funds that you should
know before investing. Please read this prospectus and keep it for future
reference.

We have arranged the prospectus into different sections so that you can easily
review this important information. On the next page, we discuss general
information you should know about investing in the Funds. If you would like more
detailed information about the Funds, please see:

Turner Ultra Large Cap Growth Fund..............................................
Turner Growth Equity Fund.......................................................
Turner Midcap Growth Fund.......................................................
Turner Small Cap Growth Fund....................................................
Turner Micro Cap Growth Fund....................................................
Turner Short Duration Government Funds-One Year Portfolio.......................
Turner Short Duration Government Funds-Three Year Portfolio.....................
Turner Fixed Income Fund........................................................
TIP Target Select Equity Fund...................................................
Clover Small Cap Value Fund.....................................................
Clover Equity Value Fund........................................................
Clover Max Cap Value Fund.......................................................
Clover Fixed Income Fund........................................................
Penn Capital Strategic High Yield Bond Fund.....................................
Penn Capital Select Financial Services Fund.....................................
Penn Capital Value Plus Fund....................................................
Each Fund's principal investments...............................................
The Advisers and portfolio managers.............................................
Purchasing, selling and exchanging Fund shares..................................
Dividends, distributions and taxes..............................................
How Fund shares are distributed.................................................
Financial Highlights............................................................
How to obtain more information about TIP Funds........................Back Cover

For information about key terms and concepts, look for our "________________"
explanations.

[INSERT ICON MAP]

<PAGE>

INTRODUCTION
- - --------------------------------------------------------------------------------

Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using
professional investment managers, invests it in securities like stocks and
bonds. Before you invest, you should know a few things about investing in mutual
funds.

Each Fund has its own investment goal and strategies for reaching that goal.
Before investing, make sure that the Fund's goal matches your own. Each Adviser
invests Fund assets in a way that it believes will help the Fund achieve its
goal. We cannot guarantee that a Fund will achieve its goal. The Advisers make
judgments about the stock market, the economy, or companies may not reflect
actual market movements, economic conditions or company performance, and these
judgments may not anticipate actual market movements or the impact of economic
conditions or company performance. In fact, no matter how good a job an Adviser
does, you could lose money on your investment in a Fund, just as you could with
other investments. A Fund share is not a bank deposit, and it is not insured or
guaranteed by the FDIC or any government agency.

The value of your investment in a Fund is based on the market value (or price)
of the securities the Fund holds. These prices change daily due to economic and
other events that affect securities markets generally, as well as those that
affect particular companies or governments. These price movements, sometimes
called volatility, will vary depending on the types of securities the Fund owns
and the markets in which they trade. The effect on a Fund's share price of a
change in the value of a single security holding will depend on how widely the
Fund diversifies its holdings.

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

YEAR 2000 RISKS

Like other mutual funds (and most organizations around the world), the Funds
could be affected by computer problems related to the transition to the year
2000. While no one knows if these problems will have any impact on the Funds or
on the financial markets in general, we are taking steps to protect Fund
investors. These include efforts to ensure that our own systems are prepared to
make the transition to the year 2000, and to determine that the problem will not
affect the systems used by the Funds' major service providers. Each Fund also
makes an effort to determine that the companies in which it invests will not be
substantially affected. Whether these steps will be effective can only be known
for certain in the year 2000. There is additional information on these risks in
our Statement of Additional Information.

<PAGE>

TURNER ULTRA LARGE CAP GROWTH FUND
- - --------------------------------------------------------------------------------
[ICON] FUND SUMMARY

INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS Very large capitalization U.S.
common stocks
SHARE PRICE VOLATILITY Medium to high
PRINCIPAL INVESTMENT STRATEGY Attempts to identify very large
capitalization U.S. companies with
strong earnings growth potential
INVESTOR PROFILE Investors seeking long-term growth
of capital who can withstand the
share price volatility of equity
investing.

TOP FIVE HOLDINGS* AS OF
---/---/---

- - ----------- ----%
- - ----------- ----%
- - ----------- ----%
- - ----------- ----%
- - ----------- ----%

* Holdings may vary.

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

[ICON] INVESTMENT STRATEGY OF THE TURNER ULTRA LARGE CAP GROWTH FUND

The Turner Ultra Large Cap Growth Fund invests primarily in common stocks and
other equity securities of U.S. companies with very large market capitalizations
(i.e., over $10 billion) that its Adviser believes have strong earnings growth
potential. The Fund may also purchase securities of smaller companies that offer
growth potential. The Fund will invest in securities of companies that are
diversified across economic sectors, and will attempt to maintain sector
concentrations that approximate those of its current benchmark, the Russell 200
Growth Index.

[ICON] WHAT ARE THE RISKS OF INVESTING IN THE FUND?

Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate drastically from day-to-day. This price volatility is
the principal risk of investing in the Fund. In addition, the Fund is subject to
the risk that its principal market segment, large capitalization growth stocks,
may underperform compared to other market segments or to the equity markets as a
whole.

Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.

TURNER'S EQUITY INVESTMENT PHILOSOPHY

Turner believes earnings expectations drive stock prices. We buy companies with
strong earnings dynamics, and sell those with deteriorating earnings prospects.
We believe forecasts for market timing and sector rotation are unreliable, and
introduce an unacceptable level of risk. As a result, all portfolios are fully
invested and maintain sector weightings that are neutral to a benchmark index.
We believe it is imprudent to be overly concentrated in any individual security.
Therefore, we limit portfolio exposure to a maximum of 2% in any single issue
(except the securities that comprise more than 2% of the benchmark index, in
which case we may hold up to 120% of an issue's index weighting). These risk
control measures allow our stock selection process to be the primary determinant
of performance.

<PAGE>

TURNER ULTRA LARGE CAP GROWTH FUND
- - --------------------------------------------------------------------------------
[ICON] PERFORMANCE INFORMATION

The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.

This bar chart shows changes in the performance of the Fund's Institutional
Class Shares from year to year for ____ years.*

[BAR CHART]

* The performance information shown above is based on a calendar year. The
Fund's total return from 1/1/98 to 9/30/98 was _____%.

Best Quarter Worst Quarter
----% ----%
---- ----

This table compares the Fund's average annual total returns for the periods
ending December 31, 1997 to those of the Russell 200 Growth Index.

1 YEAR 5 YEARS SINCE INCEPTION (2/1/97)

Turner Ultra Large Cap Growth Fund ___% ___%
Russell 200 Growth Index ___% ___%

WHAT IS AN INDEX?
An index measures the market price of a specific group of securities in a
particular market of securities in a market sector. You cannot invest directly
in an index. An index does not have an investment adviser and does not pay any
commissions or expenses. If an index had expenses, its performance would be
lower.

- - --------------------------------------------------------------------------------
[icon] FUND FEES AND EXPENSES

Every mutual fund has operating expenses to pay for professional advisory,
shareholder, distribution, administration and custody services and other costs
of doing business. This table describes the Fund's fees and expenses that you
may pay indirectly if you hold shares of the Fund.

ANNUAL FUND OPERATING EXPENSES

INSTITUTIONAL
CLASS SHARES

Investment Advisory Fees 0.75%
Distribution and Service (12b-1) Fees None
Other Expenses 0.25%
----
Total Annual Fund Operating Expenses 1.00%*
- - --------------------------------------------------------------------------------
*This table shows the highest fees and expenses that could be currently charged
to the Fund. ACTUAL EXPENSES CHARGED TO SHAREHOLDERS ARE ___% SINCE THE ADVISER
IS WAIVING __% OF ITS ADVISORY FEE. THIS WAIVER MAY BE DISCONTINUED AT ANY TIME.
For more information about these fees, see "Investment Adviser" and
"Distribution of Fund Shares." In addition, the Fund has an arrangement with
certain broker dealers who have agreed to pay certain fund expenses in return
for the direction of a percentage of the Fund's brokerage transactions. As a
result of these arrangements, it is anticipated that the Fund's expenses will be
reduced by an additional __%.

EXAMPLE

This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated. The Example also
assumes that each year your investment has a 5% return and Fund expenses remain
the same. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:

<TABLE>
1 YEAR 3 YEARS 5 YEARS 10 YEARS

<S> <C> <C> <C> <C>
Turner Ultra Large Cap Growth Fund $____ $____ $____ $____
</TABLE>

<PAGE>

TURNER GROWTH EQUITY FUND
- - --------------------------------------------------------------------------------

[ICON] FUND SUMMARY

INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS U.S. common stocks
SHARE PRICE VOLATILITY Medium to high
PRINCIPAL INVESTMENT STRATEGY Attempts to identify reasonably
priced large and mid-cap U.S.
companies with strong earnings
growth potential
INVESTOR PROFILE Investors seeking long-term growth
of capital who can withstand the
share price volatility of equity
investing.

TOP FIVE HOLDINGS* AS OF
---/---/---

- - ----------- ----%
- - ----------- ----%
- - ----------- ----%
- - ----------- ----%
- - ----------- ----%

* Holdings may vary.

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

[ICON] INVESTMENT STRATEGY OF THE TURNER GROWTH EQUITY FUND

The Turner Growth Equity Fund invests primarily in common stocks and other
equity securities of U.S. companies with a variety of capitalizations that its
Adviser believes have strong earnings growth potential and that are reasonably
valued at the time of purchase. The Fund will invest in securities of companies
that are diversified across economic sectors, and will attempt to maintain
sector concentrations that approximate those of its current benchmark, the
Russell 1000 Growth Index.

Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.

[ICON] WHAT ARE THE RISKS OF INVESTING IN THE FUND?

Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate drastically from day-to-day. This price volatility is
the principal risk of investing in the Fund. In addition, the Fund is subject to
the risk that its principal market segment, large and medium capitalization
growth stocks, may underperform compared to other market segments or to the
equity markets as a whole.

The medium capitalization companies the Fund invests in may be more vulnerable
to adverse business or economic events than larger, more established companies.
In particular, these mid-sized companies may have limited product lines, markets
and financial resources, and may depend upon a relatively small management
group.

TURNER'S EQUITY INVESTMENT PHILOSOPHY

<PAGE>

TURNER GROWTH EQUITY FUND
- - --------------------------------------------------------------------------------
[ICON] PERFORMANCE INFORMATION

This bar chart shows changes in the performance of the Fund's Institutional
Class Shares from year to year for five years.*

[BAR CHART]

* The performance information shown above is based on a calendar year. The
Fund's total return from 1/1/98 to 9/30/98 was _____%.

Best Quarter Worst Quarter
----% ----%
---- ----
This table compares the Fund's average annual total returns for the periods
ending December 31, 1997 to those of the Russell 1000 Growth Index.

1 YEAR 5 YEARS SINCE INCEPTION (3/11/92)

Turner Growth Equity Fund ___% ___% ___%
Russell 1000 Growth Index ___% ___% ___%

- - --------------------------------------------------------------------------------
[ICON] FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES

INSTITUTIONAL
CLASS SHARES

EXAMPLE

<TABLE>
1 YEAR 3 YEARS 5 YEARS 10 YEARS

<S> <C> <C> <C> <C>
Turner Growth Equity Fund $____ $____ $____ $____
</TABLE>

<PAGE>

TURNER MIDCAP GROWTH FUND
- - --------------------------------------------------------------------------------
[ICON] FUND SUMMARY

INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS Mid-cap U.S. common stocks
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT STRATEGY Attempts to identify medium
capitalization U.S. companies with
strong earnings growth potential
INVESTOR PROFILE Investors seeking long-term growth
of capital who can withstand the
share price volatility of equity investing.

TOP FIVE HOLDINGS* AS OF
---/---/---

- - ----------- ----%
- - ----------- ----%
- - ----------- ----%
- - ----------- ----%
- - ----------- ----%

* Holdings may vary.

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

[ICON] INVESTMENT STRATEGY OF THE TURNER MIDCAP GROWTH FUND

The Turner Midcap Growth Fund invests primarily in common stocks and other
equity securities of U.S. companies with medium market capitalizations (i.e.,
between $1 billion and $8 billion) that the Adviser believes have strong
earnings growth potential. The Fund will invest in securities of companies that
are diversified across economic sectors, and will attempt to maintain sector
concentrations that approximate those of its current benchmark, the Russell
Midcap Growth Index.

Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.

[ICON] WHAT ARE THE RISKS OF INVESTING IN THE FUND?

Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate drastically from day-to-day. This price volatility is
the principal risk of investing in the Fund. In addition, the Fund is subject to
the risk that its principal market segment, medium capitalization growth stocks,
may underperform compared to other market segments or to the equity markets as a
whole.

The medium capitalization companies the Fund invests in may be more vulnerable
to adverse business or economic events than larger, more established companies.
In particular, these mid-size companies may have limited product lines, markets
and financial resources, and may depend upon a relatively small management
group.

TURNER'S EQUITY INVESTMENT PHILOSOPHY

<PAGE>

TURNER MIDCAP GROWTH FUND
- - --------------------------------------------------------------------------------
[ICON] PERFORMANCE INFORMATION

This bar chart shows changes in the performance of the Fund's Institutional
Class Shares from year to year for one year.*

[BAR CHART]

* The performance information shown above is based on a calendar year. The
Fund's total return from 1/1/98 to 9/30/98 was _____%.

Best Quarter Worst Quarter
----% ----%
---- ----

This table compares the Fund's average annual total returns for the periods
ending December 31, 1997 to those of the Russell Midcap Growth Index.

1 YEAR SINCE INCEPTION (10/1/96)

Turner Midcap Growth Fund ___% ___%
Russell Midcap Growth Index ___% ___%

- - --------------------------------------------------------------------------------
[icon] FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES

INSTITUTIONAL
CLASS SHARES

Investment Advisory Fees 0.75%
Distribution and Service (12b-1) Fees None
Other Expenses 0.50%
----
Total Annual Fund Operating Expenses 1.25%*
- - --------------------------------------------------------------------------------
*This table shows the highest fees and expenses that could be currently charged
to the Fund. ACTUAL EXPENSES CHARGED TO SHAREHOLDERS ARE ___% SINCE THE ADVISER
IS WAIVING __% OF ITS ADVISORY FEE. THIS WAIVER MAY BE DISCONTINUED AT ANY TIME.
For more information about these fees, see "Investment Adviser" and
"Distribution of Fund Shares." In addition, the Fund has an arrangement with
certain broker dealers who have agreed to pay certain fund expenses in return
for the direction of a percentage of the Fund's brokerage transactions. As a
result of these arrangements, it is anticipated that the Fund's expenses will be
reduced by an additional __%.

EXAMPLE

<TABLE>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Turner Midcap Growth Fund $___ $___ $___ $___
</TABLE>

<PAGE>

TURNER SMALL CAP GROWTH FUND
- - --------------------------------------------------------------------------------
[ICON] FUND SUMMARY

INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS Small cap U.S. common stocks
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT STRATEGY Attempts to identify small cap U.S.
companies with strong earnings
growth potential
INVESTOR PROFILE Investors seeking long-term growth
of capital who can withstand the
share price volatility of small cap
equity investing.

TOP FIVE HOLDINGS* AS OF
---/---/---

- - ----------- ----%
- - ----------- ----%
- - ----------- ----%
- - ----------- ----%
- - ----------- ----%

* Holdings may vary.

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

[ICON] INVESTMENT STRATEGY OF THE TURNER SMALL CAP GROWTH FUND

The Turner Small Cap Growth Fund invests primarily in common stocks and other
equity securities of U.S. companies with small market capitalizations (i.e.,
under $2 billion) that the Adviser believes have strong earnings growth
potential. The Fund will invest in securities of companies that are diversified
across economic sectors, and will attempt to maintain sector concentrations that
approximate those of its current benchmark, the Russell 2000 Index.

Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.

[ICON] WHAT ARE THE RISKS OF INVESTING IN THE FUND?

Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate drastically from day-to-day. This price volatility is
the principal risk of investing in the Fund. In addition, the Fund is subject to
the risk that its principal market segment, small cap U.S. growth stocks, may
underperform compared to other market segments or to the equity markets as a
whole.

The small capitalization companies the Fund invests in may be more vulnerable to
adverse business or economic events than larger, more established companies. In
particular, these small companies may have limited product lines, markets and
financial resources, and may depend upon a relatively small management group.

TURNER'S EQUITY INVESTMENT PHILOSOPHY

<PAGE>

TURNER SMALL CAP GROWTH FUND
- - --------------------------------------------------------------------------------
[ICON] PERFORMANCE INFORMATION

This bar chart shows changes in the performance of the Fund's Institutional
Class Shares from year to year for three years.*

[BAR CHART]

* The performance information shown above is based on a calendar year. The
Fund's total return from 1/1/98 to 9/30/98 was _____%.

Best Quarter Worst Quarter
----% ----%
---- ----

This table compares the Fund's average annual total returns for the periods
ending December 31, 1997 to those of the Russell 2000 Index.

1 YEAR SINCE INCEPTION
(2/7/94)

Turner Small Cap Growth Fund ___% ___%
Russell 2000 Index ___% ___%

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

[icon] FUND FEES AND EXPENSES

Annual Fund Operating Expenses
INSTITUTIONAL
CLASS SHARES

Investment Advisory Fees 1.00%
Distribution and Service (12b-1) Fees None
Other Expenses 0.25%
----
Total Annual Fund Operating Expenses 1.25%*

- - --------------------------------------------------------------------------------
*This table shows the highest fees and expenses that could be currently charged
to the Fund. ACTUAL EXPENSES CHARGED TO SHAREHOLDERS ARE ___% SINCE THE ADVISER
IS WAIVING __% OF ITS ADVISORY FEE. THESE WAIVERS MAY BE DISCONTINUED AT ANY
TIME. For more information about these fees, see "Investment Adviser" and
"Distribution of Fund Shares." In addition, the Fund has an arrangement with
certain broker dealers who have agreed to pay certain fund expenses in return
for the direction of a percentage of the Fund's brokerage transactions. As a
result of these arrangements, it is anticipated that the Fund's expenses will be
reduced by an additional __%.

EXAMPLE

<TABLE>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Turner Small Cap Growth Fund $___ $___ $___ $___
</TABLE>

<PAGE>

TURNER MICRO CAP GROWTH FUND
- - --------------------------------------------------------------------------------
[ICON] FUND SUMMARY

INVESTMENT GOAL Capital Appreciation
INVESTMENT FOCUS Micro cap U.S. common stocks
SHARE PRICE VOLATILITY Very high
PRINCIPAL INVESTMENT STRATEGY Attempts to identify micro cap U.S.
companies with strong earnings
growth potential
INVESTOR PROFILE Investors seeking long-term growth
of capital who can withstand the
share price volatility of micro cap
equity investing.

TOP FIVE HOLDINGS* AS OF
---/---/---

- - ----------- ----%
- - ----------- ----%
- - ----------- ----%
- - ----------- ----%
- - ----------- ----%

* Holdings may vary.

- - --------------------------------------------------------------------------------
[ICON] INVESTMENT STRATEGY OF THE TURNER MICRO CAP GROWTH FUND

The Turner Micro Cap Growth Fund invests primarily in common stocks and other
equity securities of U.S. companies with very small market capitalizations
(i.e., under $500 million) that the Adviser believes have strong earnings growth
potential. The Fund will invest in securities of companies that are diversified
across economic sectors, and will attempt to maintain sector concentrations that
approximate the economic sector weightings of the smallest 1/3 of its current
benchmark, the Russell 2000 Growth Index.

Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.

[ICON] WHAT ARE THE RISKS OF INVESTING IN THE FUND?

Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate drastically from day-to-day. This price volatility is
the principal risk of investing in the Fund. In addition, the Fund is subject to
the risk that its principal market segment, U.S. micro capitalization growth
stocks, may underperform compared to other market segments or to the equity
markets as a whole.

The micro capitalization companies the Fund invests in may be extremely
vulnerable to adverse business or economic events than larger, more established
companies. In particular, these very small companies may have limited product
lines, markets and financial resources, and may depend upon a relatively small
management group. Micro cap stocks also tend to be traded only in the
over-the-counter market, and may not be as liquid as larger capitalization
stocks. As a result, the prices of the micro cap stocks owned by the Fund will
be very volatile, and the price movements of the Fund's shares will reflect that
volatility.

TURNER'S EQUITY INVESTMENT PHILOSOPHY

<PAGE>

TURNER MICRO CAP GROWTH FUND
- - --------------------------------------------------------------------------------
[ICON] PERFORMANCE INFORMATION

This bar chart shows changes in the performance of the Fund's Institutional
Class Shares from year to year for ____ years.*

[BAR CHART]

* The performance information shown above is based on a calendar year. The
Fund's total return from 1/1/98 to 9/30/98 was _____%.

Best Quarter Worst Quarter
----% ----%
---- ----

This table compares the Fund's average annual total returns for the periods
ending December 31, 1997 to those of the Russell 2000 Growth Index.

1 YEAR SINCE INCEPTION (___)

Turner Micro Cap
Growth Fund ___% ___%
Russell 2000 Growth
Index ___% ___%

- - --------------------------------------------------------------------------------
[ICON] FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES

INSTITUTIONAL
CLASS SHARES

Investment Advisory Fees 1.00%
Distribution and Service (12b-1) Fees None
Other Expenses 0.25%
----
Total Annual Fund Operating Expenses 1.25%*
- - --------------------------------------------------------------------------------
*This table shows the highest fees and expenses that could be currently charged
to the Fund. ACTUAL EXPENSES CHARGED TO SHAREHOLDERS ARE ___% SINCE THE ADVISER
IS WAIVING __% OF ITS ADVISORY FEE. THESE WAIVERS MAY BE DISCONTINUED AT ANY
TIME. For more information about these fees, see "Investment Adviser" and
"Distribution of Fund Shares."

EXAMPLE

<TABLE>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Turner Micro Cap Growth Fund $____ $____ $____ $____
</TABLE>

<PAGE>

TURNER SHORT DURATION GOVERNMENT FUNDS - ONE YEAR PORTFOLIO
- - --------------------------------------------------------------------------------
[ICON] FUND SUMMARY

INVESTMENT GOAL Total return consistent with the
preservation of capital
INVESTMENT FOCUS Fixed income securities issued or
guaranteed by the U.S. Government
SHARE PRICE VOLATILITY Low
PRINCIPAL INVESTMENT STRATEGY Attempts to identify U.S. Government
securities that are attractively
priced
INVESTOR PROFILE Investors seeking current income
with a very limited amount of share
price volatility.

TOP FIVE HOLDINGS* AS OF
---/---/---

- - ----------- ----%
- - ----------- ----%
- - ----------- ----%
- - ----------- ----%
- - ----------- ----%

* Holdings may vary.

- - --------------------------------------------------------------------------------
[ICON] INVESTMENT STRATEGY OF THE TURNER SHORT DURATION GOVERNMENT FUNDS -
ONE YEAR PORTFOLIO

The Turner Short Duration Government Funds - One Year Portfolio invests
primarily in a broad array of debt securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. The Fund may also invest to a
limited extent in high grade corporate debt obligations and cash equivalents. In
selecting investments for the Fund, the Adviser chooses U.S. Government
obligations that are attractively priced relative to the market or to similar
instruments. The Adviser considers the "effective duration" of the Fund's entire
portfolio when selecting securities. The Fund's effective duration will be
comparable to or less than that of one-year U.S. Treasury bills. Effective
duration is a measure of a security's price volatility or risk associated with
changes in interest rates. Because the Adviser limits effective duration in
order to manage interest rate risk, the Fund may invest in securities with any
maturity.

[ICON] WHAT ARE THE RISKS OF INVESTING IN THE FUND?

The Fund's fixed income securities will change in value in response to interest
rate changes and other factors. Since the value of securities with longer
maturities will fluctuate more in response to interest rate changes, this risk
is greater for long-term debt securities than for short-term debt securities. In
addition, an issuer may be unable to make timely payments of principal or
interest to the Fund. Some investment grade debt securities have speculative
characteristics. Fixed income securities, regardless of credit quality,
experience price volatility, especially in response to interest rate changes. In
addition, the Fund is subject to the risk that is principal market segment,
short duration U.S. Government securities, may underperform compared to other
market segments or to the fixed income markets as a whole.

Although the Fund's U.S. Government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. Government agencies are
backed by the U.S. Treasury, while others are backed solely by the ability of
the agency to borrow from the U.S. Treasury or by the agency's own resources.

Mortgage-backed securities are fixed income securities representing an interest
in a pool of underlying mortgage loans. They are sensitive to changes in
interest rates, but may respond to these changes differently from other fixed
income securities due to the possibility of prepayment of the underlying
mortgage loans. As a result, it may not be possible to determine in advance the
actual maturity date or average life of a mortgage-backed security, and may be
difficult to calculate the average maturity of a portfolio of mortgage-backed
securities and, therefore, the ability to assess the volatility risk of that
portfolio. Therefore, the Adviser may not be able to effectively manage the
duration of the Fund's portfolio during periods where significant numbers of the
underlying mortgages are being prepaid.

<PAGE>

TURNER SHORT DURATION GOVERNMENT FUNDS - ONE YEAR PORTFOLIO
- - --------------------------------------------------------------------------------
[ICON] PERFORMANCE INFORMATION

This bar chart shows changes in the performance of the Fund's Institutional
Class Shares from year to year for ____ years.*

[BAR CHART]

* The performance information shown above is based on a calendar year. The
Fund's total return from 1/1/98 to 9/30/98 was _____%.

Best Quarter Worst Quarter
----% ----%
---- ----

This table compares the Fund's average annual total returns for the periods
ending December 31, 1997 to those of the _____ Index.

1 YEAR SINCE INCEPTION (___)

Turner Short Duration
Government Funds-
One Year Portfolio ___% ___%
_____ Index ___% ___%

- - --------------------------------------------------------------------------------
[icon] FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES

<TABLE>
<CAPTION>
INSTITUTIONAL ADVISER
CLASS SHARES CLASS SHARES
<S> <C> <C>
Investment Advisory Fees 0.25% 0.25%
Distribution and Service (12b-1) Fees None None
Other Expenses 0.11% 0.36%
---- ----
Total Annual Fund Operating Expenses 0.36%* 0.61%*
</TABLE>
- - --------------------------------------------------------------------------------
*This table shows the highest fees and expenses that could be currently charged
to the Fund. ACTUAL EXPENSES CHARGED TO SHAREHOLDERS ARE ___% SINCE THE ADVISER
IS WAIVING __% OF ITS ADVISORY FEE. THESE WAIVERS MAY BE DISCONTINUED AT ANY
TIME. For more information about these fees, see "Investment Adviser" and
"Distribution of Fund Shares."

EXAMPLE

<TABLE>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Institutional Class Shares $__ $__ $__ $__
Adviser Class Shares $__ $__ $__ $__
</TABLE>

<PAGE>

TURNER SHORT DURATION GOVERNMENT FUNDS - THREE YEAR PORTFOLIO
- - --------------------------------------------------------------------------------
[ICON] FUND SUMMARY

INVESTMENT GOAL Total return consistent with the
preservation of capital
INVESTMENT FOCUS Fixed income securities issued or
guaranteed by the U.S. Government
SHARE PRICE VOLATILITY Low to medium
PRINCIPAL INVESTMENT STRATEGY Attempts to identify U.S. Government
securities that are attractively
priced
INVESTOR PROFILE Investors seeking current income
with a limited amount of share price
volatility.

TOP FIVE HOLDINGS* AS OF
---/---/---

- - ----------- ----%
- - ----------- ----%
- - ----------- ----%
- - ----------- ----%
- - ----------- ----%

* Holdings may vary.

- - --------------------------------------------------------------------------------
[ICON] INVESTMENT STRATEGY OF THE TURNER SHORT DURATION GOVERNMENT FUNDS -
THREE YEAR PORTFOLIO

The Turner Short Duration Government Funds - Three Year Portfolio invests
primarily in a broad array of debt securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. The Fund may also invest to a
limited extent in high grade corporate debt obligations and cash equivalents. In
selecting investments for the Fund, the Adviser chooses U.S. Government
obligations that are attractively priced relative to the market or to similar
instruments. The Adviser considers the "effective duration" of the Fund's entire
portfolio when selecting securities. The Fund's effective duration will be
comparable to or less than that of three-year U.S. Treasury notes. Effective
duration is a measure of a security's price volatility or risk associated with
changes in interest rates. Because the Adviser limits effective duration in
order to manage interest rate risk, the Fund may invest in securities with any
maturity.

[ICON] WHAT ARE THE RISKS OF INVESTING IN THE FUND?

The Fund's fixed income securities will change in value in response to interest
rate changes and other factors. Since the value of securities with longer
maturities will fluctuate more in response to interest rate changes, this risk
is greater for long-term debt securities than for short-term debt securities. In
addition, an issuer may be unable to make timely payments of principal or
interest to the Fund. Some investment grade debt securities have speculative
characteristics. Fixed income securities, regardless of credit quality,
experience price volatility, especially in response to interest rate changes. In
addition, the Fund is subject to the risk that its principal market segment,
short duration U.S. Government securities, may underperform compared to other
market segments or to the fixed income markets as a whole.

<PAGE>

TURNER SHORT DURATION GOVERNMENT FUNDS - THREE YEAR PORTFOLIO
- - --------------------------------------------------------------------------------
[ICON] PERFORMANCE INFORMATION

This bar chart shows changes in the performance of the Fund's Institutional
Class Shares from year to year for ____ years.*

[BAR CHART]

* The performance information shown above is based on a calendar year. The
Fund's total return from 1/1/98 to 9/30/98 was _____%.

Best Quarter Worst Quarter
----% ----%
---- ----

This table compares the Fund's average annual total returns for the periods
ending December 31, 1997 to those of the _____ Index.

1 YEAR SINCE INCEPTION (___)

Turner Short Duration
Government Funds-
Three Year Portfolio ___% ___%
_____ Index ___% ___%

- - --------------------------------------------------------------------------------
[ICON] FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
INSTITUTIONAL ADVISER
CLASS SHARES CLASS SHARES
<S> <C> <C>
Investment Advisory Fees 0.25% 0.25%
Distribution and Service (12b-1) Fees None None
Other Expenses 0.11% 0.36%
---- ----
Total Annual Fund Operating Expenses 0.36%* 0.61%*
</TABLE>
- - --------------------------------------------------------------------------------
*This table shows the highest fees and expenses that could be currently charged
to the Fund. ACTUAL EXPENSES CHARGED TO SHAREHOLDERS ARE ___% SINCE THE ADVISER
IS WAIVING __% OF ITS ADVISORY FEE. THESE WAIVERS MAY BE DISCONTINUED AT ANY
TIME. For more information about these fees, see "Investment Adviser" and
"Distribution of Fund Shares."

EXAMPLE

<TABLE>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Institutional Class Shares $__ $__ $__ $__
Adviser Class Shares $__ $__ $__ $__
</TABLE>

<PAGE>

TURNER FIXED INCOME FUND
- - --------------------------------------------------------------------------------
[ICON] FUND SUMMARY

<TABLE>
<S> <C>
INVESTMENT GOAL Current income and capital appreciation
INVESTMENT FOCUS Investment U.S. grade corporate and government bonds
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT STRATEGY Attempts to identify quality fixed income securities with
intermediate maturities
INVESTOR PROFILE Investors who are seeking current income and capital
appreciation and who are willing to accept principal risk.
</TABLE>

[ICON] INVESTMENT STRATEGY OF THE TURNER FIXED INCOME FUND
- - --------------------------------------------------------------------------------

The Turner Fixed Income Fund invests primarily in investment grade fixed income
securities, including U.S. government securities, corporate debt securities,
mortgage-backed securities, asset-backed securities, and short-term obligations.
In selecting investments for the Fund, the Adviser chooses securities with
intermediate durations, and the Fund's average duration will typically be
between three and six years (although the Fund may hold securities with longer
or shorter durations). The Adviser will allocate the Fund's assets among various
market sectors based on its analysis of historical data, yield trends and credit
ratings.

[ICON] WHAT ARE THE RISKS OF INVESTING IN THE FUND?

The Fund's fixed income securities will change in value in response to interest
rate changes and other factors. Since the value of securities with longer
maturities will fluctuate more in response to interest rate changes, this risk
is greater for long-term debt securities than for short-term debt securities. In
addition, an issuer may be unable to make timely payments of principal or
interest to the Fund. Some investment grade debt securities have speculative
characteristics. Fixed income securities, regardless of credit quality,
experience price volatility, especially in response to interest rate changes. In
addition, the Fund is subject to the risk that its principal market segment,
U.S. fixed income securities, may underperform compared to other market segments
or to the fixed income markets as a whole.

Although the Fund's U.S. government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. Government agencies are
backed by the U.S. Treasury, while others are backed solely by the ability of
the agency to borrow from the U.S. Treasury or by the agency's own resources.

<PAGE>

TURNER FIXED INCOME FUND
- - --------------------------------------------------------------------------------
[ICON] PERFORMANCE INFORMATION

As of November 30, 1998, the Fund had not yet commenced operations, and did not
have a performance history.

- - --------------------------------------------------------------------------------
[Icon] FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES

INSTITUTIONAL CLASS SHARES

Investment Advisory Fees 0.50%
Distribution and Service (12b-1) Fees None
Other Expenses 0.70%
----
Total Annual Fund Operating Expenses 1.20%*
- - --------------------------------------------------------------------------------
*This table shows the highest fees and expenses that could be currently charged
to the Fund. ACTUAL EXPENSES CHARGED TO SHAREHOLDERS ARE ___% SINCE THE ADVISER
IS WAIVING __% OF ITS ADVISORY FEE. THESE WAIVERS MAY BE DISCONTINUED AT ANY
TIME. For more information about these fees, see "Investment Adviser" and
"Distribution of Fund Shares."

EXAMPLE

1 YEAR 3 YEARS

Turner Fixed Income Fund $_____ $_____

<PAGE>

TIP TARGET SELECT EQUITY FUND
- - --------------------------------------------------------------------------------
[ICON] FUND SUMMARY

INVESTMENT GOAL Long-term capital appreciation
INVESTMENT FOCUS Common stocks of U.S. issuers
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT STRATEGY Utilizing sub-advisers experience in
selecting securities that have
growth potential or that are
undervalued, the Fund invests in
U.S. common stocks
INVESTOR PROFILE Investors who want capital
appreciation but who can tolerate
the risks of investing in equity
securities.

TOP FIVE HOLDINGS* AS OF
---/---/---

- - ----------- ----%
- - ----------- ----%
- - ----------- ----%
- - ----------- ----%
- - ----------- ----%

* Holdings may vary.

- - --------------------------------------------------------------------------------
[ICON] INVESTMENT STRATEGY OF THE TIP TARGET SELECT EQUITY FUND

The TIP Target Select Equity Fund invests primarily in common stocks and other
equity securities of companies regardless of their market capitalization. The
Fund uses a multi-manager approach, relying upon a number of sub-advisers to
manage portions of the Fund's portfolio under the general supervision of Turner.
In selecting investments for the Fund, the Adviser and Sub-Advisers choose
stocks of companies that have above-average growth potential or that have been
undervalued by the market. The Fund will invest in securities of companies
operating in a broad range of industries based on their growth potential or
their relatively attractive price.

Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.

[ICON] WHAT ARE THE RISKS OF INVESTING IN THE FUND?

The small and medium capitalization companies the Fund invests in may be more
vulnerable to adverse business or economic events than larger, more established
companies. In particular, these small and mid-sized companies may have limited
product lines, markets and financial resources, and may depend upon a relatively
small management group.

The Fund's investment approach, with its emphasis on stocks in a variety of
capitalization ranges, is expected to offer potentially higher returns and a
higher level of volatility relative to equity funds that invest solely in large
cap companies. In addition, because the Fund does not employ a specific "growth"
or "value" discipline, the Fund can be expected to perform differently than
funds that employ a specific investment style.

The Fund is non-diversified, which means that it may invest in the securities of
a relatively few number of issuers. Since the assets of the Fund may be invested
in a limited number of issuers, the Fund may be more susceptible to a single
adverse economic or regulatory occurrence affecting these issuers. However, the
Fund's sub-advisers will each purchase a number of different securities in an
attempt to minimize this risk.

<PAGE>

TIP TARGET SELECT EQUITY FUND
- - --------------------------------------------------------------------------------
[ICON] PERFORMANCE INFORMATION

This bar chart shows changes in the performance of the Fund's Institutional
Class Shares from year to year for three years.*

[BAR CHART]

* The performance information shown above is based on a calendar year. The
Fund's total return from 1/1/98 to 9/30/98 was _____%.

Best Quarter Worst Quarter
----% ----%
---- ----

This table compares the Fund's average annual total returns for the periods
ending December 31, 1997 to those of the _________ Index.

1 YEAR SINCE INCEPTION
(2/7/94)

TIP Target Select Equity Fund ___% ___%
______ Index ___% ___%

- - --------------------------------------------------------------------------------
[icon] FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES
INSTITUTIONAL
CLASS SHARES

Investment Advisory Fees 1.05%
Distribution and Service (12b-1) Fees None
Other Expenses 0.25%
----
Total Annual Fund Operating Expenses 1.30%*
- - --------------------------------------------------------------------------------
*This table shows the highest fees and expenses that could be currently charged
to the Fund. ACTUAL EXPENSES CHARGED TO SHAREHOLDERS ARE ___% SINCE THE ADVISER
IS WAIVING __% OF ITS ADVISORY FEE. THESE WAIVERS MAY BE DISCONTINUED AT ANY
TIME. For more information about these fees, see "Investment Adviser" and
"Distribution of Fund Shares."

EXAMPLE

<TABLE>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
TIP Target Select Equity Fund $___ $___ $___ $___
</TABLE>

<PAGE>

CLOVER SMALL CAP VALUE FUND
- - --------------------------------------------------------------------------------
[ICON] FUND SUMMARY

INVESTMENT GOAL Long-term total return
INVESTMENT FOCUS Small cap U.S. common stocks
SHARE PRICE VOLATILITY Medium to high
PRINCIPAL INVESTMENT STRATEGY Attempts to identify small cap U.S.
companies that are undervalued
relative to the market or their
historical valuation
INVESTOR PROFILE Investors seeking long-term total
return who can withstand the share
price volatility of small cap
investing.

TOP FIVE HOLDINGS* AS OF
---/---/---

- - ----------- ----%
- - ----------- ----%
- - ----------- ----%
- - ----------- ----%
- - ----------- ----%

* Holdings may vary.

- - --------------------------------------------------------------------------------
[ICON] INVESTMENT STRATEGY OF THE CLOVER SMALL CAP VALUE FUND

The Clover Small Cap Value Fund invests primarily in common stocks and other
equity securities of U.S. companies with small market capitalizations (i.e.,
under $___ billion) that the Adviser believes are undervalued relative to the
market or to their historical valuation. The Fund will invest in securities of
companies operating in a broad range of industries based primarily on value
characteristics such as price-cash flow, price-earnings and price-book value
ratios.

[ICON] WHAT ARE THE RISKS OF INVESTING IN THE FUND?

Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate drastically from day-to-day. This price volatility is
the principal risk of investing in the Fund. In addition, the Fund is subject to
the risk that its principal market segment, small capitalization value stocks,
may underperform compared to other market segments or to the equity markets as a
whole.

The out-of-favor and undervalued companies the Fund invests in may be more
vulnerable to negative investor sentiment, adverse business or economic events
than larger, more growth-oriented companies. In addition, the performance of the
stocks which comprise the portfolio do not necessarily track major market
indices.

<PAGE>

CLOVER SMALL CAP VALUE FUND
- - --------------------------------------------------------------------------------
[ICON] PERFORMANCE INFORMATION

This bar chart shows changes in the performance of the Fund's Institutional
Class Shares from year to year for one year.*

[BAR CHART]

* The performance information shown above is based on a calendar year. The
Fund's total return from 1/1/98 to 9/30/98 was _____%.

Best Quarter Worst Quarter
----% ----%
---- ----

This table compares the Fund's average annual total returns for the periods
ending December 31, 1997 to those of the Russell 2000 Index.

1 YEAR SINCE INCEPTION (2/28/96)

Clover Small Cap Value Fund ___% ___%
Russell 2000 Index ___% ___%

- - --------------------------------------------------------------------------------
[icon] FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES

INSTITUTIONAL
CLASS SHARES

Investment Advisory Fees 0.85%
Distribution and Service (12b-1) Fees None
Other Expenses 0.55%
----
Total Annual Fund Operating Expenses 1.40%*
- - --------------------------------------------------------------------------------
*This table shows the highest fees and expenses that could be currently charged
to the Fund. ACTUAL EXPENSES CHARGED TO SHAREHOLDERS ARE ___% SINCE THE ADVISER
IS WAIVING __% OF ITS ADVISORY FEE. THESE WAIVERS MAY BE DISCONTINUED AT ANY
TIME. For more information about these fees, see "Investment Adviser" and
"Distribution of Fund Shares."

EXAMPLE

<TABLE>

1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Clover Small Cap Value Fund $____ $____ $____ $____
</TABLE>

<PAGE>

CLOVER EQUITY VALUE FUND
- - --------------------------------------------------------------------------------
[ICON] FUND SUMMARY

INVESTMENT GOAL Long-term total return
INVESTMENT FOCUS U.S. equity securities
SHARE PRICE VOLATILITY Medium to high
PRINCIPAL INVESTMENT STRATEGY Attempts to identify U.S. equity
securities that are undervalued
relative to the market or historic
valuations
INVESTOR PROFILE Investors seeking long-term total
return who can withstand the share
price volatility of equity investing.

TOP FIVE HOLDINGS* AS OF
---/---/---

- - ----------- ----%
- - ----------- ----%
- - ----------- ----%
- - ----------- ----%
- - ----------- ----%

* Holdings may vary.

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

[ICON] INVESTMENT STRATEGY OF THE CLOVER EQUITY VALUE FUND

The Clover Equity Value Fund invests primarily in common stocks and other equity
securities of U.S. companies with medium and small market capitalizations (i.e.,
under $750 million) that the Adviser believes are undervalued relative to the
market or their historic valuation. The Fund will invest in securities of
companies operating in a broad range of industries based primarily on value
characteristics such as price-cash flow, price-earnings and price-book value
ratios.

[ICON] WHAT ARE THE RISKS OF INVESTING IN THE FUND?

Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate drastically from day-to-day. Price volatility is the
principal risk of investing in the Fund. In addition, the Fund is subject to the
risk that its principal market segment, medium capitalization value stocks, may
underperform compared to other market segments or to the equity markets as a
whole.

<PAGE>

CLOVER EQUITY VALUE FUND
- - --------------------------------------------------------------------------------
[ICON] PERFORMANCE INFORMATION

This bar chart shows changes in the performance of the Fund's Institutional
Class Shares from year to year for six years.*

[BAR CHART]

* The performance information shown above is based on a calendar year. The
Fund's total return from 1/1/98 to 9/30/98 was _____%.

Best Quarter Worst Quarter
----% ----%
---- ----

This table compares the Fund's average annual total returns for the periods
ending December 31, 1997 to those of the S&P MidCap Index.

1 YEAR 5 YEARS SINCE INCEPTION (12/6/91)

Clover Equity Value Fund ___% ___% ___%
S&P Mid Cap Index ___% ___% ___%

- - --------------------------------------------------------------------------------
[ICON] FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES

INSTITUTIONAL
CLASS SHARES

Investment Advisory Fees 0.74%
Distribution and Service (12b-1) Fees None
Other Expenses 0.36%
----
Total Annual Fund Operating Expenses 1.10%*
- - --------------------------------------------------------------------------------
*This table shows the highest fees and expenses that could be currently charged
to the Fund. ACTUAL EXPENSES CHARGED TO SHAREHOLDERS ARE ___% SINCE THE ADVISER
IS WAIVING __% OF ITS ADVISORY FEE. THESE WAIVERS MAY BE DISCONTINUED AT ANY
TIME. For more information about these fees, see "Investment Adviser" and
"Distribution of Fund Shares."

EXAMPLE

<TABLE>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Clover Equity Value Fund $____ $____ $____ $____
</TABLE>

<PAGE>

CLOVER MAX CAP VALUE FUND
- - --------------------------------------------------------------------------------
[ICON] FUND SUMMARY

INVESTMENT GOAL Long-term total return
INVESTMENT FOCUS Large capitalization U.S.
common stocks
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT STRATEGY Attempts to identify large
capitalization U.S. companies with
low valuations and attractive
dividend yields relative to the
market or to their own trading
history
INVESTOR PROFILE Investors seeking long-term total return
who can withstand the share price
volatility of equity investing.

TOP FIVE HOLDINGS* AS OF
---/---/---

- - ----------- ----%
- - ----------- ----%
- - ----------- ----%
- - ----------- ----%
- - ----------- ----%

* Holdings may vary.

- - --------------------------------------------------------------------------------
[ICON] INVESTMENT STRATEGY OF THE CLOVER MAX CAP VALUE FUND

The Clover Max Cap Value Fund invests primarily in common stocks and other
equity securities of U.S. companies with large market capitalizations (i.e.,
over $___ billion) that the Adviser believes have low valuations and attractive
dividend yields relative to the market or to their own trading history. The
Adviser will typically screen the stocks of the 500 largest U.S. companies
(based on market capitalization) for those with the highest dividend yields. The
Fund will invest in securities of companies operating in a broad range of
industries based primarily on value characteristics such as price-cash flow,
dividend yield, price-earnings and price-book value ratios.

[ICON] WHAT ARE THE RISKS OF INVESTING IN THE FUND?

Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate drastically from day-to-day. This price volatility is
the principal risk of investing in the Fund. In addition, the Fund is subject to
the risk that its principal market segment, large capitalization value stocks,
may underperform compared to other market segments or to the equity markets as a
whole.

The out-of-favor and undervalued companies the Fund invests in may be more
vulnerable to negative investor sentiment, adverse business or economic events
than more growth-oriented companies. In addition, the performance of the stocks
which comprise the portfolio do not necessarily track major market indices.

<PAGE>

CLOVER MAX CAP VALUE FUND
- - --------------------------------------------------------------------------------
[ICON] PERFORMANCE INFORMATION

This bar chart shows changes in the performance of the Fund's Institutional
Class Shares from year to year for ____ years.*

[BAR CHART]

* The performance information shown above is based on a calendar year. The
Fund's total return from 1/1/98 to 9/30/98 was _____%.

Best Quarter Worst Quarter
----% ----%
---- ----

This table compares the Fund's average annual total returns for the periods
ending December 31, 1997 to those of the S&P 500 Index.

1 YEAR SINCE INCEPTION (10/31/97)

Clover Max Cap Value Fund ___% ___%
S&P 500 Index ___% ___%

- - --------------------------------------------------------------------------------
[icon] FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES

INSTITUTIONAL CLASS SHARES

Investment Advisory Fees 0.74%
Distribution and Service (12b-1) Fees None
Other Expenses 0.21%
----
Total Annual Fund Operating Expenses 0.95%*
- - --------------------------------------------------------------------------------
*This table shows the highest fees and expenses that could be currently charged
to the Fund. ACTUAL EXPENSES CHARGED TO SHAREHOLDERS ARE ___% SINCE THE ADVISER
IS WAIVING __% OF ITS ADVISORY FEE. THESE WAIVERS MAY BE DISCONTINUED AT ANY
TIME. For more information about these fees, see "Investment Adviser" and
"Distribution of Fund Shares."

EXAMPLE

<TABLE>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Clover Max Cap Value Fund $____ $____ $____ $____
</TABLE>

<PAGE>

CLOVER FIXED INCOME FUND
- - --------------------------------------------------------------------------------
[ICON] FUND SUMMARY

INVESTMENT GOAL High current income
INVESTMENT FOCUS Fixed income obligations of U.S.
issuers
SHARE PRICE VOLATILITY Low to medium
PRINCIPAL INVESTMENT STRATEGY Attempts to identify investment-grade
U.S. government and corporate
securities that offer income
potential
INVESTOR PROFILE Investors seeking high current
income who can withstand some
modest share price volatility.

TOP FIVE HOLDINGS* AS OF
---/---/---

- - ----------- ----%
- - ----------- ----%
- - ----------- ----%
- - ----------- ----%
- - ----------- ----%

* Holdings may vary.

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

[ICON] INVESTMENT STRATEGY OF THE CLOVER FIXED INCOME FUND

The Clover Fixed Income Fund invests primarily in U.S. government obligations
and investment grade fixed income securities, including corporate debt
obligations and mortgage- and asset-backed securities. The Fund also may invest
to a limited extent in securities rated below investment grade ("junk bonds").
In selecting investments for the Fund, the Adviser chooses fixed income
securities of issuers that the Adviser believes will offer attractive income
potential with an acceptable level of risk. The Adviser will invest in fixed
income obligations of different types and maturities depending on its current
assessment of the relative market values of the sectors in which the Fund
invests. The Adviser does not attempt to forecast interest rate changes. The
Fund's average weighted maturity will typically be between seven and nine years.

[ICON] WHAT ARE THE RISKS OF INVESTING IN THE FUND?

The Fund's fixed income securities will change in value in response to interest
rate changes and other factors. Since the value of securities with longer
maturities will fluctuate more in response to interest rate changes, this risk
is greater for long-term debt securities than for short-term debt securities. In
addition, an issuer may be unable to make timely payments of principal or
interest to the Fund. Some investment grade debt securities have speculative
characteristics. Fixed income securities, regardless of credit quality,
experience price volatility, especially in response to interest rate changes. In
addition, the Fund is subject to the risk that its principal market segment,
fixed income securities, may underperform compared to other market segments or
to the fixed income markets as a whole.

Mortgage-backed securities are fixed income securities representing an interest
in a pool of underlying mortgage loans. They are sensitive to changes in
interest rates, but may respond to these changes differently from other fixed
income securities due to the possibility of prepayment of the underlying
mortgage loans. As a result, it may not be possible to determine in advance the
actual maturity date or average life of a mortgage-backed security. Rising
interest rates tend to discourage refinancings, with the result that the average
life and volatility of the security will increase and its market price will
decrease. When interest rates fall, however, mortgage-backed securities may not
gain as much in market value because additional mortgage prepayments must be
reinvested at lower interest rates. Prepayment risk may make it difficult to
calculate the average maturity of a portfolio of mortgage-backed securities and,
therefore, the ability to assess the volatility risk of that portfolio.

Junk bonds involve greater risks of default or downgrade, are more volatile than
investment grade securities, and are susceptible to legislative and regulatory
developments that may affect the value of these securities. Junk bonds involve
greater risk of default or price declines than investment grade securities due
to actual or perceived changes in an issuer's creditworthiness.

<PAGE>

CLOVER FIXED INCOME FUND
- - --------------------------------------------------------------------------------
[ICON] PERFORMANCE INFORMATION

This bar chart shows changes in the performance of the Fund's Institutional
Class Shares from year to year for six years.*

[BAR CHART]

* The performance information shown above is based on a calendar year. The
Fund's total return from 1/1/98 to 9/30/98 was _____%.

Best Quarter Worst Quarter
----% ----%
---- ----

This table compares the Fund's average annual total returns for the periods
ending December 31, 1997 to those of the Merrill Lynch U.S. Domestic Master
Index.

1 YEAR 5 YEARS SINCE INCEPTION
(12/6/91)

Clover Fixed Income Fund ___% ___% ___%
Merrill Lynch U.S.
Domestic Master Index ___% ___% ___%

- - --------------------------------------------------------------------------------
[ICON] FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES

INSTITUTIONAL
CLASS SHARES

Investment Advisory Fees 0.45%
Distribution and Service (12b-1) Fees None
Other Expenses 0.30%
----
Total Annual Fund Operating Expenses 0.75%*
- - --------------------------------------------------------------------------------

*This table shows the highest fees and expenses that could be currently charged
to the Fund. ACTUAL EXPENSES CHARGED TO SHAREHOLDERS ARE ___% SINCE THE ADVISER
IS WAIVING __% OF ITS ADVISORY FEE. THESE WAIVERS MAY BE DISCONTINUED AT ANY
TIME. For more information about these fees, see "Investment Adviser" and
"Distribution of Fund Shares."

EXAMPLE

<TABLE>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Clover Fixed Income Fund $____ $____ $____ $____
</TABLE>

<PAGE>

PENN CAPITAL STRATEGIC HIGH YIELD BOND FUND
- - --------------------------------------------------------------------------------
[ICON] FUND SUMMARY

INVESTMENT GOAL High current income and capital
appreciation
INVESTMENT FOCUS High yield "junk" bonds and other
high yield securities
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT STRATEGY Attempts to identify high yield
junk bonds and other high yield,
high risk securities with
capital appreciation potential
INVESTOR PROFILE Investors seeking current income and
long-term growth of capital who
can withstand the share price
volatility of junk bond investing.

TOP FIVE HOLDINGS* AS OF
---/---/---

- - ----------- ----%
- - ----------- ----%
- - ----------- ----%
- - ----------- ----%
- - ----------- ----%

* Holdings may vary.

- - --------------------------------------------------------------------------------
[ICON] INVESTMENT STRATEGY OF THE PENN CAPITAL STRATEGIC HIGH YIELD BOND FUND

The Penn Capital Strategic High Yield Bond Fund invests primarily in fixed
income securities rated below investment grade ("junk bonds"). In selecting
investments for the Fund, the Adviser chooses securities that offer high current
yields as well as capital appreciation potential, including preferred stocks,
convertible securities, zero coupon obligations, payment-in-kind bonds, and
variable rate securities. The Fund's average weighted maturity may vary, and
will generally be ten years or less. The Fund will typically invest in
securities rated BB+/Ba1 or lower, and may purchase unrated securities and
securities rated in the lowest ratings categories.

Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.

[ICON] WHAT ARE THE RISKS OF INVESTING IN THE FUND?

Fixed income securities will typically change in value in response to interest
rate changes and other factors. Since the value of securities with longer
maturities will fluctuate more in response to interest rate changes, this risk
is greater for long-term debt securities than for short-term debt securities.
Fixed income securities, regardless of credit quality, experience price
volatility, especially in response to interest rate changes. However, high yield
junk bonds generally are less sensitive to interest rate changes.

Junk bonds involve greater risks of default or downgrade, are more volatile than
investment grade securities. Junk bonds involve greater risk of default or price
declines than investment grade securities due to actual or perceived changes in
an issuer's creditworthiness. In addition, issuers of junk bonds may be more
susceptible than other issuers to economic downturns. Junk bonds are subject to
the risk that the issuer may not be able to pay interest or dividends and
ultimately to repay principal upon maturity. Discontinuation of these payments
could substantially adversely affect the market price of the security.

The Fund is subject to the risk that its particular market segment, high yield
securities, may underperform compared to other market segments or to the fixed
income markets as a whole.

<PAGE>

PENN CAPITAL STRATEGIC HIGH YIELD BOND FUND
- - --------------------------------------------------------------------------------
[ICON] PERFORMANCE INFORMATION

This bar chart shows changes in the performance of the Fund's Institutional
Class Shares from year to year for ____ years.*

[BAR CHART]

* The performance information shown above is based on a calendar year. The
Fund's total return from 1/1/98 to 9/30/98 was _____%.

Best Quarter Worst Quarter
----% ----%
---- ----

This table compares the Fund's average annual total returns for the periods
ending December 31, 1997 to those of the _____ Index.

1 YEAR SINCE INCEPTION (___)

Penn Capital Strategic
High Yield Bond Fund ___% ___%
_____ Index ___% ___%

- - --------------------------------------------------------------------------------
[ICON] FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES

<TABLE>
INSTITUTIONAL CLASS SHARES ADVISER CLASS SHARES

<S> <C> <C>
Investment Advisory Fees 0.55% 0.55%
Distribution and Service (12b-1) Fees None None
Other Expenses 0.13% 0.38%
---- ----
Total Annual Fund Operating Expenses 0.68%* 0.93%*
</TABLE>
- - --------------------------------------------------------------------------------

EXAMPLE

<TABLE>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Institutional Class Shares $__ $__ $__ $__
Adviser Class Shares $__ $__ $__ $__
</TABLE>

<PAGE>

PENN CAPITAL SELECT FINANCIAL SERVICES FUND
- - --------------------------------------------------------------------------------
[ICON] FUND SUMMARY

INVESTMENT GOAL Long-term capital appreciation
INVESTMENT FOCUS Common stocks of U.S. financial
services firms
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT STRATEGY Attempts to identify quality U.S.
financial services firms
INVESTOR PROFILE Investors who want capital
appreciation and who can
withstand the risks of equity and
financial sector investing.

TOP FIVE HOLDINGS* AS OF
---/---/---

- - ----------- ----%
- - ----------- ----%
- - ----------- ----%
- - ----------- ----%
- - ----------- ----%

* Holdings may vary.

- - -------------------------------------------------------------------------------
[ICON] INVESTMENT STRATEGY OF THE PENN CAPITAL SELECT FINANCIAL SERVICES FUND

The Penn Capital Select Financial Services Fund invests primarily in common
stocks and other equity securities of U.S. financial services companies,
including banks, brokerage houses, insurance companies and investment advisory
companies, that the Adviser believes have above average growth potential or that
are undervalued. The Adviser also invests in financial services companies that
it believes to be potential merger or acquisition targets. If the Adviser
incorrectly predicts that a company will be involved in such a transaction, the
Fund may lose any premium it paid for these stocks, and ultimately may realize a
lower return than if the company is not involved in such a transaction.

Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.

[ICON] WHAT ARE THE RISKS OF INVESTING IN THE FUND?

Since the Fund's investments are focused on the financial services sector, it is
subject to the risk that the financial services sector will underperform the
broader market, as well as the risk that issuers in that sector will be impacted
by market conditions, legislative or regulatory changes, or competition. The
Fund may also be more susceptible to changes in interest rates and other market
and economic factors that affect financial services firms, including the effect
of interest rate changes on the share prices of those financial service firms.

<PAGE>

PENN CAPITAL SELECT FINANCIAL SERVICES FUND
- - --------------------------------------------------------------------------------
[ICON] PERFORMANCE INFORMATION

This bar chart shows changes in the performance of the Fund's Institutional
Class Shares from year to year for ____ years.*

[BAR CHART]

* The performance information shown above is based on a calendar year. The
Fund's total return from 1/1/98 to 9/30/98 was _____%.

Best Quarter Worst Quarter
----% ----%
---- ----

This table compares the Fund's average annual total returns for the periods
ending December 31, 1997 to those of the _____ Index.

1 YEAR SINCE INCEPTION (___)

Penn Capital Select
Financial Services Fund ___% ___%
_____ Index ___% ___%

- - --------------------------------------------------------------------------------
[ICON] FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES

INSTITUTIONAL CLASS SHARES

EXAMPLE

<TABLE>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Penn Capital Select
Financial Services Fund $_____ $_____ $_____ $_____

</TABLE>

<PAGE>

PENN CAPITAL VALUE PLUS FUND
- - --------------------------------------------------------------------------------
[ICON] FUND SUMMARY

<TABLE>
<S> <C>
INVESTMENT GOAL Capital appreciation and above average income
INVESTMENT FOCUS Large and small cap U.S. common stocks and high yield "junk bonds"
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT STRATEGY Attempts to identify undervalued small cap and large cap U.S. companies
and junk bonds with income and capital appreciation potential
INVESTOR PROFILE Investors seeking long-term growth of capital who can withstand the
share price volatility of equity and junk bond investing.
</TABLE>

- - --------------------------------------------------------------------------------
[ICON] INVESTMENT STRATEGY OF THE PENN CAPITAL VALUE PLUS FUND

The Penn Capital Value Plus Fund invests primarily in common stocks and other
equity securities of U.S. companies. The Fund also invests in fixed income
obligations (principally "junk bonds"). In selecting investments for the Fund,
the Adviser chooses stocks of companies that have low-price earnings ratios
relative to the market. The Fund will invest in junk bonds to generate income.
The Fund will invest in a diverse number of industries and issuers, but may
invest in a relatively high percentage of its assets in a single industry.

Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.

[ICON] WHAT ARE THE RISKS OF INVESTING IN THE FUND?

"Junk bonds" are securities rated below investment grade. Junk bonds involve
greater risks of default or downgrade, are more volatile than investment grade
securities. Junk bonds involve greater risk of default or price declines than
investment grade securities due to actual or perceived changes in an issuer's
creditworthiness.

The Fund is subject to the risk that its principal market segment, equity
securities, may underperform compared to other market segment or to the
financial markets as a whole.

<PAGE>

PENN CAPITAL VALUE PLUS FUND
- - --------------------------------------------------------------------------------
[ICON] PERFORMANCE INFORMATION

As of November 30, 1998, the Fund had not yet commenced operations, and did not
have a performance history.

- - --------------------------------------------------------------------------------
[ICON] FUND FEES AND EXPENSES

ANNUAL FUND OPERATING EXPENSES

INSTITUTIONAL CLASS SHARES

Investment Advisory Fees 1.00%
Distribution and Service (12b-1) Fees None
Other Expenses 0.40%
----
Total Annual Fund Operating Expenses 1.40%*
- - --------------------------------------------------------------------------------
*This table shows the highest fees and expenses that could be currently charged
to the Fund. ACTUAL EXPENSES CHARGED TO SHAREHOLDERS ARE ___% SINCE THE ADVISER
IS WAIVING __% OF ITS ADVISORY FEE. THESE WAIVERS MAY BE DISCONTINUED AT ANY
TIME. For more information about these fees, see "Investment Adviser" and
"Distribution of Fund Shares."

EXAMPLE

1 YEAR 3 YEARS

Penn Capital Value Plus Fund $ $

<PAGE>

[ICON] THE FUNDS' PRINCIPAL INVESTMENTS
- - --------------------------------------------------------------------------------

The table below shows each Fund's principal investments. In other words, the
table describes the type or types of investments that we believe will MOST
LIKELY help each Fund achieve its investment goal.

<TABLE>
<CAPTION>
TURNER TURNER TURNER TURNER TURNER TURNER SHORT TURNER SHORT TURNER TIP TARGET
ULTRA GROWTH MIDCAP SMALL CAP MICRO CAP DURATION DURATION FIXED SELECT EQUITY
LARGE CAP EQUITY GROWTH GROWTH GROWTH GOVERNMENT GOVERNMENT INCOME FUND
GROWTH FUND FUND FUND FUND FUNDS - ONE FUNDS - FUND
FUND YEAR THREE YEAR
PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. X X X X X X
COMMON
STOCKS
- - --------------- ----------- ----------- ---------- ----------- ------------ ------------- ------------- ---------- -------------

FIXED X X X X
INCOME
OBLIGATIONS
- - --------------- ----------- ----------- ---------- ----------- ------------ ------------- ------------- ---------- -------------
JUNK BONDS X
- - --------------- ----------- ----------- ---------- ----------- ------------ ------------- ------------- ---------- -------------
</TABLE>

<TABLE>
<CAPTION>
CLOVER MAX CLOVER EQUITY CLOVER SMALL CLOVER FIXED PENN CAPITAL PENN SELECT PENN CAPITAL
CAP VALUE VALUE FUND CAP VALUE INCOME FUND STRATEGIC HIGH FINANCIAL VALUE PLUS
INCOME FUND FUND YIELD BOND SERVICES FUND
COMPANY
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. COMMON STOCKS X X X X X
- - --------------------- -------------- -------------- --------------- ------------- ---------------- ---------------- ------------
FIXED INCOME X X X
OBLIGATIONS
- - --------------------- -------------- -------------- --------------- ------------- ---------------- ---------------- ------------
JUNK BONDS X X X
- - --------------------- -------------- -------------- --------------- ------------- ---------------- ---------------- ------------
</TABLE>

Each Fund also may invest in other securities, use other strategies and engage
in other investment practices, which are described in detail in our Statement of
Additional Information (SAI). Of course, we cannot guarantee that any Fund will
achieve its investment goal.

The investments listed above and the investments and strategies described
throughout this prospectus are those that we use under normal conditions. During
unusual economic or market conditions or for temporary defensive or liquidity
purposes, each Fund may invest up to 100% of its assets in cash, repurchase
agreements and short-term obligations that would not ordinarily be consistent
with the Funds' objectives. The Funds will do so only if the Adviser believes
that the risk of loss outweighs the opportunity for gains. When a Fund is
investing for temporary defensive purposes, it is not pursuing its investment
goal.

[ICON] INVESTMENT ADVISERS
- - --------------------------------------------------------------------------------
As the Funds' Advisers, Turner Investment Partners, Clover Capital Management,
and Penn Capital Management Company, make investment decisions for their Funds
and continuously review, supervise and administer the Funds' investment
programs. The Adviser also ensures compliance with the Funds' investment
policies and guidelines.

Turner Investment Partners, Inc., an SEC-registered adviser, serves as the
Adviser to the Turner Ultra Large Cap Growth, Turner Growth Equity, Turner
Midcap Growth, Turner Small Cap Growth, Turner Micro Cap Growth Fund, Turner
Short Duration Government Funds - One Year Portfolio, Turner Short Duration
Government Funds - Three Year Portfolio, and Turner Fixed Income Funds. Turner
also serves as Adviser to
36

<PAGE>

the TIP Target Select Equity Fund and oversees the Fund's sub-advisers. As of
October 31, 1998, Turner had approximately $3 billion in assets under
management. The Funds pay Turner investment advisory fees as follows:

Turner Ultra Large Cap Growth Fund .75%
Turner Growth Equity Fund .75%
Turner Midcap Growth Fund .75%
Turner Small Cap Growth Fund 1.00%
Turner Micro Cap Growth Fund 1.00%
Turner Short Duration Government Funds - One Year Portfolio .25%
Turner Short Duration Government Funds - Three Year Portfolio .25%
Turner Fixed Income Fund .50%*
TIP Target Select Equity Fund 1.05%**

*The Turner Fixed Income Fund was not in operation as of 9/30/98.
** Turner pays a portion of this fee to the Fund's sub-advisers.

Clover Capital Management, Inc., an SEC-registered adviser, serves as the
Adviser to the Clover Equity Value, Clover Small Cap Value, Clover Max Cap
Value, and Clover Fixed Income Funds. As of October 31, 1998, Clover Capital had
approximately $1.9 billion in assets under management. The Funds pay Clover
Capital investment advisory fees as follows:

Clover Max Cap Value Fund .74%
Clover Equity Value Fund .74%
Clover Small Cap Value Fund .85%
Clover Fixed Income Fund .45%

Penn Capital Management Company, Inc., an SEC-registered adviser, serves as the
Adviser to the Penn Capital Strategic High Yield Bond Fund, Penn Capital Select
Financial Services, and Penn Capital Value Plus Funds. As of October 31, 1998,
Penn Capital had approximately $350 million in assets under management. The
Funds pay Penn Capital investment advisory fees as follows:

Penn Capital Strategic High Yield Bond .55%
Penn Capital Financial Services Fund 1.00%
Penn Capital Value Plus Fund 1.00%*

*The Penn Capital Value Plus Fund was not open as of 9/30/98.

The Advisers may use their affiliates as brokers for Fund transactions provided
certain SEC guidelines are followed. These guidelines are described in the SAI.

PORTFOLIO MANAGERS

TURNER FUNDS:

Robert Turner, Mark Turner, and John Hammerschmidt serve as fund managers of
Turner Investment Partners, Inc. ("Turner"). Together they manage the Turner
Ultra Large Cap Growth and Turner Growth Equity Funds. Mr. Robert Turner, CFA,
Chairman and Chief Investment Officer of Turner, founded Turner in 1990. He

<PAGE>

serves as lead portfolio manager for the Growth Equity Fund, and manages
Turner's portion of the TIP Target Select Equity Fund. Prior to 1990, he was
Senior Investment Manager with Meridian Investment Company. Mr. Hammerschmidt,
Senior Equity Portfolio Manager, joined Turner in 1992. He is the lead portfolio
manager for the Ultra Large Cap Growth Fund. Prior to 1992, he was a Vice
President in Government Securities Trading at S.G. Warburg. Mr. Mark Turner,
CFA, President of the Adviser, founded Turner in 1990. Prior to 1990, he was
Vice President and Senior Portfolio Manager with First Maryland Asset
Management.

Christopher McHugh, Bill McVail, and Robert Turner serve as fund managers of
Turner Investment Partners, Inc. ("Turner"). Together they manage the Turner
Midcap Growth Fund. Mr. McHugh, Equity Portfolio Manager, joined Turner in 1990.
He is the lead portfolio manager for the Midcap Growth Fund. Prior to 1990, he
was a Performance Specialist with Provident Capital Management. Mr. McVail, CFA,
Senior Equity Portfolio Manager of the Adviser, joined Turner in 1998. Prior to
1998, he was Portfolio Manager to PNC Equity Advisers. Mr. Turner, as described
above, founded Turner in 1990.

Christopher McHugh, Bill McVail, CFA, and Frank Sustersic, serve as fund
managers of Turner Investment Partners, Inc. ("Turner"). Together they manage
the Turner Small Cap Growth Fund. Mr. McVail is the lead portfolio manager for
the Small Cap Growth Fund. As described above, Mr. McHugh and Mr. McVail are
Equity Portfolio Managers of Turner. Mr. Sustersic, a Senior Security Analyst
and Equity Portfolio Manager of the Adviser, joined Turner in 1994. Prior to
1994, he was an Investment Officer/Fund Manager at First Fidelity Bank
Corporation.

Frank L. Sustersic, CFA, and Robert E. Turner, CFA, manage the Turner Micro Cap
Growth Fund. Mr. Sustersic, a Senior Security Analyst and Equity Portfolio
Manager at Turner, serves as lead portfolio manager to the Fund. Mr. Sustersic
joined Turner in 1994. Mr. Turner, as described above, founded Turner in 1990.

James L. Midanek, a Fixed Income Portfolio Manager of Turner Investment
Partners, Inc., is the portfolio manager of the Turner Short Duration Government
Funds - One and Three Year Portfolios. Mr. Midanek joined Turner in 1997. Prior
to joining Turner, Mr. Midanek was Chief Investment Officer of Solon Asset
Management, L.P., which he founded in 1989, and Portfolio Manager of the Funds.
From 1992 to 1994, Mr. Midanek was Chief Investment Officer to the Fixed Income
Group of Montgomery Asset Management, L.P., where he managed four institutional
fixed income funds.

CLOVER FUNDS:

Lawrence R. Creatura and Paul W. Spindler serve as fund managers of Clover
Capital Management, Inc. ("Clover Capital"). Together they manage the Clover Max
Cap Value Fund. Mr. Creatura, CFA, is a vice President of Investments of Clover
Capital. Prior to his current position, he was a Laser Systems
Engineer/Researcher for Laser Surge, Inc. Mr. Spindler, CFA, is a Vice President
of Investments of Clover Capital.

Michael E. Jones and Paul W. Spindler serve as fund managers of Clover Capital
Management, Inc. ("Clover Capital"). Together they manage the Clover Equity
Value Fund. Mr. Jones, CFA, is a co-founder and Managing Director of Clover
Capital. As described above, Mr. Spindler is a Vice President of Investments of
Clover Capital.

Michael E. Jones and Lawrence R. Creatura serve as fund managers of Clover
Capital Management, Inc. ("Clover Capital"). Together they manage the Clover
Small Cap Fund. Mr. Jones, as described above is a co-

<PAGE>

founder of Clover Capital. Mr. Creatura, as described above, is a Vice President
of Investments of Clover Capital.

Richard J. Huxley and Paul W. Spindler serve as fund managers of Clover Capital
Management, Inc. ("Clover Capital"). Together they manage the Clover Fixed
Income Fund. Mr. Huxley is the Executive Vice President and Fixed Income Manager
for Clover Capital. As described above, Mr. Spindler is a Vice President of
Investments of Clover Capital.

PENN CAPITAL FUNDS:

The Penn Capital Strategic High Yield Bond Fund is managed by a team consisting
of certain principals of Penn Capital, including co-managers Richard A. Hocker
and Kathleen A. News. The Penn Capital Select Financial Services and Penn
Capital Value Plus Funds are managed by Richard Hocker and Scott D. Schumacher.
Prior to founding Penn Capital, Mr. Hocker was a shareholder and Senior
Portfolio Manager of Delaware Management Co., an investment management firm. Ms.
News, a co-founder of the Penn Capital, serves as the Managing Director of the
Adviser and co-portfolio manager of the Strategic High Yield Fund. Ms. News has
over 20 years of investment experience at both the Penn Capital and Delaware
Management Co., including over 10 years managing high yield portfolios. Mr.
Schumacher, a Senior Analyst, joined Penn Capital in 1987.

<PAGE>

- - --------------------------------------------------------------------------------
[ICON] PURCHASING, SELLING AND EXCHANGING FUND SHARES

CHOOSING ADVISER OR INSTITUTIONAL CLASS SHARES

Adviser and Institutional Class Shares have different expenses and other
characteristics, allowing you to choose the class that best suits your needs.
You should consider the amount you want to invest, and how long you plan to have
it invested.

ADVISER CLASS SHARES INSTITUTIONAL CLASS SHARES
* No sales charge * No sales charge
* Higher annual expenses * Lower annual expenses
* $10,000 minimum initial investment * $100,000 minimum initial
investment

For Adviser Class Shares, the minimum initial investment for IRAs is $500. As of
November 30, 1998, Adviser Class Shares were not yet available to investors.

HOW TO PURCHASE FUND SHARES

You may purchase Fund shares directly from us by:

o mail
o telephone
o wire, or
o Automated Clearing House (ACH).

WHEN CAN YOU PURCHASE SHARES?
You may purchase shares on any day that the New York Stock Exchange is open for
business (a Business Day).

FOR CUSTOMERS OF FINANCIAL INSTITUTIONS
If you purchase, sell or exchange Fund shares through a financial institution
(rather than directly from us), you may have to transmit your purchase, sale and
exchange requests to your financial institution at an earlier time for your
transaction to become effective that day. This allows the financial institution
time to process your request and transmit it to us. For more information about
how to purchase, sell or exchange Fund shares through your financial
institution, you should contact your financial institution directly.

To purchase shares directly from us, please call 1-800-224-6312. Write your
check, payable in U.S. dollars, to "TIP Funds" and include the name of the
appropriate Fund(s) on the check. You may mail your check to us at: TIP Funds,
P.O. Box 419805, Kansas City, Missouri 64141-6805. We cannot accept third-party
checks, credit cards, credit card checks or cash.

You may also purchase shares by wiring money to the Funds as follows: United
Missouri Bank of Kansas, N.A.; ABA #10-10-00695; for Account Number
98-7060-116-8; Further Credit: [_________ Fund]. The shareholder's name and
account number must be specified in the wire.

We may reject any purchase order if we determine that accepting the order would
not be in the best interests of the TIP Funds or its shareholders.

Certain investors who deal directly with a financial intermediary will have to
follow the intermediary's procedures for transacting with the Funds.

The price per share (the offering price) will be the net asset value per share
(NAV) next determined after we receive your purchase order. We calculate each
Fund's NAV once each Business Day at the regularly-

<PAGE>

scheduled close of normal trading on the New York Stock Exchange (normally, 4:00
p.m. Eastern time). So, if you want to receive the current Business Day's NAV,
generally we must receive your purchase order before 4:00 p.m. Eastern time.

HOW WE CALCULATE NAV

In calculating NAV, we generally value a Fund's portfolio at market price. If
market prices are unavailable or we think that they are unreliable, fair value
prices may be determined in good faith using methods approved by the Board of
Trustees. Some Funds hold portfolio securities that are listed on foreign
exchanges. These securities may trade on weekends or other days when the Funds
do not calculate NAV. As a result, the NAV of these Funds' shares may change on
days when you cannot purchase or sell Fund shares.

NET ASSET VALUE
NAV for one Fund share is the value of that share's portion of all of the assets
in the Fund.

MINIMUM PURCHASES

To purchase Fund shares for the first time, you must invest at least $2,500 in
any Fund. We may accept investments of smaller amounts at our discretion.

SYSTEMATIC INVESTMENT PLAN

If you have a checking or savings account with certain banks, you may purchase
Fund shares automatically through regular deductions from your account. Please
call 1-800-224-6312 for information regarding participating banks. With minimum
initial purchase amounts and a minimum preauthorized investment amount of $100,
you may begin regularly scheduled investments once a month.

SALES CHARGES

There are no sales charges for the Funds.

SELLING FUND SHARES
- - --------------------------------------------------------------------------------

TELEPHONE TRANSACTIONS
Purchasing, selling and exchanging Fund shares over the telephone is extremely
convenient, but not without risk. Although we have certain safeguards and
procedures to confirm the identity of callers and the authenticity of
instructions, we are not responsible for any losses or costs incurred by
following telephone instructions we reasonably believe to be genuine. If you or
your financial institution transact with us over the telephone, you will
generally bear the risk of any loss.

HOW TO SELL YOUR FUND SHARES

You may sell (sometimes called "redeem") your shares on any Business Day by
contacting us directly by mail or telephone. You may also sell your shares by
contacting your financial institution by mail or telephone. The sale price of
each share will be the next NAV determined after we receive your request.

SYSTEMATIC WITHDRAWAL PLAN

IF YOU HAVE AT LEAST $10,000 IN YOUR ACCOUNT, YOU MAY USE THE SYSTEMATIC
WITHDRAWAL PLAN. Under the plan you may arrange monthly, quarterly, semi-annual
or annual automatic withdrawals of at least $100 from any Fund. The proceeds of
each withdrawal will be mailed to you by check or, if you have an account with
certain

<PAGE>

banks, electronically transferred to your account. Please call 1-800-224-6312
for information regarding banks that participate in the Systematic Withdrawal
Plan.

RECEIVING YOUR MONEY

Normally, we will send your sale proceeds within three Business Days after we
receive your request, but it may take up to seven Business Days. Your proceeds
can be wired to your bank account (subject to a $10 wire fee) or sent to you by
check. IF YOU RECENTLY PURCHASED YOUR SHARES BY CHECK OR THROUGH ACH, REDEMPTION
PROCEEDS MAY NOT BE AVAILABLE UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO
15 BUSINESS DAYS).

SIGNATURE GUARANTEES

A signature guarantee is a widely accepted way to protect shareholders by
verifying the signature on certain redemption requests. We require signature
guarantees to be provided in the following circumstances: (1) written requests
for redemptions in excess of $50,000; (2) all written requests to wire
redemption proceeds to a bank other than the bank previously designated on the
account application; and (3) redemption requests that provide that the
redemption proceeds should be sent to an address other than the address of
record or to a person other than the registered shareholder(s) for the account.
Signature guarantees can be obtained from any of the following institutions: a
national or state bank, a trust company, a federal savings and loan association,
or a broker-dealer that is a member of a national securities exchange. We do not
accept guarantees from notaries public or from organizations that do not provide
reimbursement in the case of fraud.

REDEMPTIONS IN KIND

We generally pay sale (redemption) proceeds in cash. However, under unusual
conditions that make the payment of cash unwise (and for the protection of the
Fund's remaining shareholders) we might pay all or part of your redemption
proceeds in liquid securities with a market value equal to the redemption price
(redemption in kind). Although it is highly unlikely that your shares would ever
be redeemed in kind, you would probably have to pay brokerage costs to sell the
securities distributed to you, as well as taxes on any capital gains from the
sale as with any redemption.

SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES

We may suspend your right to sell your shares if the NYSE restricts trading, the
SEC declares an emergency or for other reasons. More information about this is
in our Statement of Additional Information (SAI).

EXCHANGING FUND SHARES
- - --------------------------------------------------------------------------------

HOW TO EXCHANGE YOUR SHARES

You may exchange your shares on any Business Day by contacting us directly by
mail or telephone. You may also exchange shares through your financial
institution by mail or telephone. IF YOU RECENTLY PURCHASED SHARES BY CHECK OR
THROUGH ACH, YOU MAY NOT BE ABLE TO EXCHANGE YOUR SHARES UNTIL YOUR CHECK HAS
CLEARED (WHICH MAY TAKE UP TO 15 BUSINESS DAYS). This exchange privilege may be
changed or canceled at any time upon 60 days' notice.

EXCHANGES
When you exchange shares, you are really selling your shares and buying other
Fund shares. So, your sale price and purchase price will be based on the NAV
next calculated after we receive your exchange request.

<PAGE>

DIVIDENDS, DISTRIBUTIONS AND TAXES
- - --------------------------------------------------------------------------------

DIVIDENDS AND DISTRIBUTIONS

The Turner Growth Equity, Turner Fixed Income, Clover Small Cap Value, Clover
Equity Value and Clover Max Cap Value Funds distribute their investment income
quarterly as a dividend to shareholders. The Turner Short Duration Government
Funds, Clover Fixed Income Fund, and Penn Capital Strategic High Yield Bond Fund
distribute their investment income monthly as a dividend to shareholders. The
Turner Ultra Large Cap Growth, Turner Midcap Growth, Turner Small Cap Growth,
Turner Micro Cap Growth, Penn Capital Select Financial Services and Penn Capital
Value Plus Funds distribute their investment income at least annually as a
dividend to shareholders. The Funds make distributions of capital gains, if any,
at least annually.

You will receive dividends and distributions in the form of additional Fund
shares unless you elect to receive payment in cash. To elect cash payment, you
must notify us in writing prior to the date of the distribution. Your election
will be effective for dividends and distributions paid after we receive your
written notice. To cancel your election, simply send us written notice.

THE "RECORD DATE"
If you own Fund shares on a Fund's record date, you will be entitled to receive
the distribution.

TAXES

PLEASE CONSULT YOUR TAX ADVISOR REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL,
STATE AND LOCAL INCOME TAXES. Below we have summarized some important tax issues
that affect the Funds and their shareholders. This summary is based on current
tax laws, which may change.

Each Fund will distribute substantially all of its investment income and capital
gains, if any. The dividends and distributions you receive may be subject to
federal, state and local taxation, depending upon your tax situation.
Capital gains distributions may be taxable at different rates depending on the
length of time a Fund holds its portfolio securities. YOU MAY BE TAXED ON EACH
SALE OR EXCHANGE OF FUND SHARES.

The Funds use a tax management technique known as "highest in, first out." Using
this technique, the portfolio holdings that have experienced the
smallest gain or largest loss are sold first in an effort to minimize capital
gains and enhance after-tax returns.

FUND DISTRIBUTIONS
Distributions you receive from a Fund may be taxable whether or not you reinvest
them.

MORE INFORMATION ABOUT TAXES IS IN OUR SAI.

DISTRIBUTION OF FUND SHARES
- - --------------------------------------------------------------------------------

SEI Investments Distribution Co. (SIDCo.) is the distributor of the shares of
the Turner Ultra Large Cap Growth, Turner Growth Equity, Turner Midcap Growth,
Turner Small Cap Growth, Turner Micro Cap Growth, Turner Short Duration
Government Funds - One Year Portfolio, Turner Short Duration Government Funds -
Three Year Portfolio, Turner Fixed Income, Penn Capital Strategic High Yield
Bond Fund, Penn Capital Select Financial Services, and Penn Capital Value Plus
Funds.

<PAGE>

CCM Securities, Inc. ("CCM Securities") is the distributor of the shares of the
Clover Max Cap Value, Clover Equity Value, Clover Small Cap Value, and Clover
Fixed Income Funds.

SIDCo. and CCM Securities receive no compensation for distributing the Funds'
shares.

The Turner Short Duration Funds and the Penn Capital Strategic High Yield Bond
Fund have adopted a shareholder service plan for their Adviser Class Shares that
allows the Funds to pay service fees for services provided to shareholders.
Because these fees are paid out of a Fund's assets continuously, over time these
fees will increase the cost of your investment and may cost you more than paying
other types of sales charges. For Adviser Class Shares, shareholder service
fees, as a percentage of average daily net assets, are .25%.

<PAGE>

FINANCIAL HIGHLIGHTS
- - --------------------------------------------------------------------------------

The tables that follow present performance information about Shares of each
Fund. This information is intended to help you understand each Fund's financial
performance for the past five years, or, if shorter, the period of the Fund's
operations. Some of this information reflects financial information for a single
Fund share. The total returns in the tables represent the rate that you would
have earned [or lost] on an investment in a Fund, assuming you reinvested all of
your dividends and distributions. As of September 30, 1998, the Turner Fixed
Income and Penn Capital Value Plus Funds had not commenced operations.

Financial Highlights

Study these tables to see how each Fund performed since it began investment
operations.

This information has been audited by Ernst & Young LLP, independent auditors.
Their report, along with each Fund's financial statements, appears in our annual
report that accompanies our Statement of Additional Information. You can obtain
our annual report, which contains more performance information, at no charge by
calling 1-800-224-6312.

TURNER ULTRA LARGE CAP GROWTH FUND
- - --------------------------------------------------------------------------------

Net Asset Value, Beginning of Period
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income
Net Gains or Losses on Securities (both realized and unrealized)
Total From Investment Operations
LESS DISTRIBUTIONS
Dividends (from net investment income)
Distributions (from capital gains)
Returns of Capital
Total Distributions
Net Asset Value, End of Period
TOTAL RETURN
................................................................................
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
Ratio of Expenses to Average Net Assets
Ratio of Net Income to Average Net Assets
Portfolio Turnover Rate

- - --------------
(1) Commencement of operations.
(2) Total return excludes the effect of sales charge.
(3) Annualized.

<PAGE>

FINANCIAL HIGHLIGHTS
- - --------------------------------------------------------------------------------

TURNER GROWTH EQUITY FUND
- - --------------------------------------------------------------------------------

- - ------------
(1) Commencement of operations.
(2) Total return excludes the effect of sales charge.
(3) Annualized.

46
<PAGE>

FINANCIAL HIGHLIGHTS
- - --------------------------------------------------------------------------------

TURNER MIDCAP GROWTH FUND
- - --------------------------------------------------------------------------------

- - ------------
(1) Commencement of operations.
(2) Total return excludes the effect of sales charge.
(3) Annualized.

<PAGE>

Financial Highlights
- - --------------------------------------------------------------------------------

TURNER SMALL CAP GROWTH FUND
- - --------------------------------------------------------------------------------

- - -----------
(1) Commencement of operations.
(2) Total return excludes the effect of sales charge.
(3) Annualized.

<PAGE>

FINANCIAL HIGHLIGHTS
- - --------------------------------------------------------------------------------

TURNER MICRO CAP GROWTH FUND
- - --------------------------------------------------------------------------------

- - ----------
(1) Commencement of operations.
(2) Total return excludes the effect of sales charge.
(3) Annualized.

<PAGE>

FINANCIAL HIGHLIGHTS
- - --------------------------------------------------------------------------------

TURNER SHORT DURATION GOVERNMENT FUNDS - ONE YEAR PORTFOLIO
- - --------------------------------------------------------------------------------

- - -----------
(1) Commencement of operations.
(2) Total return excludes the effect of sales charge.
(3) Annualized.

<PAGE>

FINANCIAL HIGHLIGHTS
- - --------------------------------------------------------------------------------

TURNER SHORT DURATION GOVERNMENT FUND - THREE YEAR PORTFOLIO
- - --------------------------------------------------------------------------------

- - -----------
(1) Commencement of operations.
(2) Total return excludes the effect of sales charge.
(3) Annualized.

<PAGE>

FINANCIAL HIGHLIGHTS
- - --------------------------------------------------------------------------------

TIP TARGET SELECT EQUITY FUND
- - --------------------------------------------------------------------------------

- - -----------
(1) Commencement of operations.
(2) Total return excludes the effect of sales charge.
(3) Annualized.

<PAGE>

FINANCIAL HIGHLIGHTS
- - --------------------------------------------------------------------------------

CLOVER SMALL CAP VALUE FUND
- - --------------------------------------------------------------------------------

- - -----------
(1) Commencement of operations.
(2) Total return excludes the effect of sales charge.
(3) Annualized.

<PAGE>

FINANCIAL HIGHLIGHTS
- - --------------------------------------------------------------------------------

CLOVER EQUITY VALUE FUND
- - --------------------------------------------------------------------------------

- - -----------
(1) Commencement of operations.
(2) Total return excludes the effect of sales charge.
(3) Annualized.

<PAGE>

FINANCIAL HIGHLIGHTS
- - --------------------------------------------------------------------------------

CLOVER MAX CAP VALUE FUND
- - --------------------------------------------------------------------------------

- - -----------
(1) Commencement of operations.
(2) Total return excludes the effect of sales charge.
(3) Annualized.

<PAGE>

FINANCIAL HIGHLIGHTS
- - --------------------------------------------------------------------------------

CLOVER FIXED INCOME FUND
- - --------------------------------------------------------------------------------

- - -------------
(1) Commencement of operations.
(2) Total return excludes the effect of sales charge.
(3) Annualized.

<PAGE>

FINANCIAL HIGHLIGHTS
- - --------------------------------------------------------------------------------

PENN CAPITAL STRATEGIC HIGH YIELD BOND FUND
- - --------------------------------------------------------------------------------

- - -------------
(1) Commencement of operations.
(2) Total return excludes the effect of sales charge.
(3) Annualized.

<PAGE>

FINANCIAL HIGHLIGHTS
- - --------------------------------------------------------------------------------

PENN CAPITAL SELECT FINANCIAL SERVICES FUND
- - --------------------------------------------------------------------------------

- - --------------
(1) Commencement of operations.
(2) Total return excludes the effect of sales charge.
(3) Annualized.

<PAGE>

FUNDS

INVESTMENT ADVISERS

Turner Investment Partners, Inc.
Clover Capital Management, Inc.
Penn Capital Management Company, Inc.

DISTRIBUTORS

SEI Investments Distribution Co.
CCM Securities, Inc.

LEGAL COUNSEL

Morgan, Lewis & Bockius LLP

More information about the Funds is available without charge through the
following:

STATEMENT OF ADDITIONAL INFORMATION (SAI)
- - --------------------------------------------------------------------------------

The SAI dated January 31, 1999, includes more detailed information about TIP
Funds. The SAI is on file with the SEC and is incorporated by reference into
this prospectus. This means that the SAI, for legal purposes, is a part of this
prospectus.

ANNUAL AND SEMIANNUAL REPORTS
- - --------------------------------------------------------------------------------

These reports list the Funds' holdings and contain information from the Funds'
managers about fund strategies and recent market conditions and trends. The
reports also contain detailed financial information about the Funds.

TO OBTAIN MORE INFORMATION:

BY TELEPHONE: Call 1-800-224-6312.

BY MAIL: Write to us at:
P.O. Box 419805
Kansas City, MO 64141-6805

BY INTERNET: http://www.___________

FROM THE SEC: You can also obtain these documents, and other information about
the TIP Funds, from the SEC's website ("http://www.sec.gov"). You may review and
copy documents at the SEC Public Reference Room in Washington, DC (for
information call 1-800-SEC-0330). You may request documents by mail from the
SEC, upon payment of a duplicating fee, by writing to: Securities and Exchange
Commission, Public Reference Section, Washington, DC 20549-6009.

The Fund's Investment Company Act registration number is 811-07527.

<PAGE>

TIP FUNDS

TURNER ULTRA LARGE CAP GROWTH FUND
TURNER GROWTH EQUITY FUND
TURNER MIDCAP GROWTH FUND
TURNER SMALL CAP GROWTH FUND
TURNER MICRO CAP GROWTH FUND
TURNER SHORT DURATION GOVERNMENT FUNDS-ONE YEAR PORTFOLIO
TURNER SHORT DURATION GOVERNMENT FUNDS-THREE YEAR PORTFOLIO
TURNER FIXED INCOME FUND
TIP TARGET SELECT EQUITY FUND

INVESTMENT ADVISER:
TURNER INVESTMENT PARTNERS, INC.

This Statement of Additional Information is not a prospectus and relates only to
the Turner Ultra Large Cap Growth Fund ("Ultra Large Cap Fund"), Turner Growth
Equity Fund ("Growth Equity Fund"), Turner Midcap Growth Fund ("Midcap Fund"),
Turner Small Cap Growth Fund ("Small Cap Fund"), Turner Micro Cap Growth Fund
("Micro Cap Fund"), Turner Fixed Income Fund (the "Fixed Income Fund"), Turner
Short Duration Government Fund-One Year Portfolio ("One Year Portfolio"), Turner
Short Duration Government Fund-Three Year Portfolio ("Three Year Portfolio"),
and TIP Target Select Equity Fund ("Target Select Fund") (each a "Fund" and,
together, the "Funds"). It is intended to provide additional information
regarding the activities and operations of the TIP Funds (the "Trust") and
should be read in conjunction with the Funds' Prospectuses dated January 31,
1999. The Prospectuses may be obtained without charge by calling 1-800-
224-6312.

TABLE OF CONTENTS

THE TRUST...................................................................S-2
INVESTMENT OBJECTIVES.......................................................S-2
INVESTMENT POLICIES.........................................................S-3
RISK FACTORS................................................................S-6
DESCRIPTION OF PERMITTED INVESTMENTS........................................S-7
INVESTMENT LIMITATIONS.....................................................S-18
THE ADVISER................................................................S-20
THE ADMINISTRATOR..........................................................S-21
DISTRIBUTION AND SHAREHOLDER SERVICES......................................S-23
TRUSTEES AND OFFICERS OF THE TRUST.........................................S-24
COMPUTATION OF YIELD AND TOTAL RETURN......................................S-27
PURCHASE AND REDEMPTION OF SHARES..........................................S-28
DETERMINATION OF NET ASSET VALUE...........................................S-29
TAXES ..................................................................S-29
PORTFOLIO TRANSACTIONS.....................................................S-31
DESCRIPTION OF SHARES......................................................S-34
SHAREHOLDER LIABILITY......................................................S-35
LIMITATION OF TRUSTEES' LIABILITY..........................................S-35
5% SHAREHOLDERS............................................................S-35
FINANCIAL INFORMATION......................................................S-35
EXPERTS....................................................................S-35
LEGAL COUNSEL..............................................................S-35
APPENDIX ...................................................................A-1

January 31, 1999

S-1

<PAGE>

THE TRUST

This Statement of Additional Information relates only to the Turner Ultra Large
Cap Growth Fund ("Ultra Large Cap Fund"), Turner Growth Equity Fund ("Growth
Equity Fund"), Turner Midcap Growth Fund ("Midcap Fund"), Turner Small Cap
Growth Fund ("Small Cap Fund"), Turner Micro Cap Growth Fund ("Micro Cap Fund"),
Turner Fixed Income Fund (the "Fixed Income Fund"), Turner Short Duration
Government Fund-One Year Portfolio ("One Year Portfolio"), Turner Short Duration
Government Fund-Three Year Portfolio ("Three Year Portfolio"), and TIP Target
Select Equity Fund ("Target Select Fund") (each a "Fund" and, together, the
"Funds"). Each Fund is a separate series of the TIP Funds (formerly, Turner
Funds) (the "Trust"), a diversified, open-end management investment company
established as a Massachusetts business trust under a Declaration of Trust dated
January 26, 1996, and amended on February 21, 1997. The Declaration of Trust
permits the Trust to offer separate series ("portfolios") of shares of
beneficial interest ("shares"). Each portfolio is a separate mutual fund, and
each share of each portfolio represents an equal proportionate interest in that
portfolio. See "Description of Shares." The Trust also offers shares in the
Clover Max Cap Value Fund, Clover Equity Value Fund, Clover Small Cap Value
Fund, Clover Fixed Income Fund, Penn Capital Select Financial Services Fund,
Penn Capital Strategic High Yield Bond Fund, and Penn Capital Value Plus Fund.
Capitalized terms not defined herein are defined in the Prospectus offering
shares of the Funds.

INVESTMENT OBJECTIVES

TURNER ULTRA LARGE CAP GROWTH FUND -- The Ultra Large Cap Fund seeks capital
appreciation.

TURNER GROWTH EQUITY FUND -- The Growth Equity Fund seeks capital appreciation.

TURNER MIDCAP GROWTH FUND -- The Midcap Fund seeks capital appreciation.

TURNER SMALL CAP GROWTH FUND -- The Small Cap Fund seeks capital appreciation.

TURNER MICRO CAP GROWTH FUND -- The Micro Cap Fund seeks capital appreciation.

TURNER FIXED INCOME FUND -- The Fixed Income Fund seeks total return through
current income and capital appreciation.

TURNER SHORT DURATION GOVERNMENT FUND-ONE YEAR PORTFOLIO & TURNER SHORT DURATION
GOVERNMENT FUND-THREE YEAR PORTFOLIO -- The investment objective of each Fund is
to provide maximum total return consistent with preservation of capital and
prudent investment management. Under normal circumstances, the Short Duration
One Year Portfolio seeks to maintain an average effective duration comparable to
or less than that of one-year U.S. Treasury bills. The Short Duration Three Year
Portfolio seeks to maintain an average effective duration comparable to or less
than that of three-year U.S. Treasury notes. Effective duration is an indicator
of a security's price volatility or risk associated with changes in interest
rates. Because the Adviser seeks to manage interest rate risk by limiting
effective duration, each Fund may invest in securities of any maturity.

S-2

<PAGE>

TIP TARGET SELECT EQUITY FUND -- The Target Select Fund seeks long term growth
of capital primarily from investment in U.S. equity securities.

There can be no assurance that any Fund will achieve its investment objective.

INVESTMENT POLICIES

TURNER ULTRA LARGE CAP GROWTH FUND--The Ultra Large Cap Fund invests primarily
(and, under normal conditions, at least 65% of its total assets) in a
diversified portfolio of common stocks of issuers that, at the time of purchase,
have market capitalizations in excess of $10 billion that Turner Investment
Partners, Inc. (the "Adviser"), believes to have strong earnings growth
potential. The Fund seeks to purchase securities that are well diversified
across economic sectors and to maintain sector concentrations that approximate
the economic sector weightings comprising the Russell 200 Growth Index (or such
other appropriate index selected by the Adviser). Any remaining assets may be
invested in securities issued by smaller capitalization companies, warrants and
rights to purchase common stocks, and they may invest up to 10% of its total
assets in American Depository Receipts ("ADRs"). The Fund only will purchase
securities that are traded on registered exchanges or the over-the-counter
market in the United States. The Fund may purchase shares of other investment
companies and foreign securities.

TURNER GROWTH EQUITY FUND--The Growth Equity Fund invests as fully as
practicable (and, under normal conditions, at least 65% of its total assets) in
a portfolio of common stocks that the Adviser believes to have potential for
strong growth in earnings and to be reasonably valued at the time of purchase.
The Fund seeks to purchase securities that are well diversified across economic
sectors and to maintain sector concentrations that approximate the economic
sector weightings of the Russell 1000 Growth Index (or such other appropriate
index selected by the Adviser). The Fund may invest in warrants and rights to
purchase common stocks, and may invest up to 10% of its total assets in ADRs.
The Fund only will purchase securities that are traded on registered exchanges
or the over-the-counter market in the United States.

TURNER MIDCAP GROWTH FUND--The Midcap Fund invests primarily (and, under normal
conditions, at least 65% of its total assets) in a diversified portfolio of
common stocks of issuers that, at the time of purchase, have market
capitalizations between $1 billion and $8 billion that the Adviser believes to
have strong earnings growth potential. The Fund seeks to purchase securities
that are well diversified across economic sectors and to maintain sector
concentrations that approximate the economic sector weightings comprising the
Russell Midcap Growth Index (or such other appropriate index selected by the
Adviser). Any remaining assets may be invested in securities issued by smaller
capitalization companies and larger capitalization companies, warrants and
rights to purchase common stocks, and it may invest up to 10% of its total
assets in ADRs. The Fund only will purchase securities that are traded on
registered exchanges or the over-the-counter market in the United States. The
Fund may purchase shares of other investment companies.

TURNER SMALL CAP GROWTH FUND--The Small Cap Fund invests primarily (and, under
normal conditions, at least 65% of its total assets) in a diversified portfolio
of common stocks of issuers

S-3

<PAGE>

with market capitalizations of not more than $2 billion that the Adviser
believes to have strong earnings growth potential. Under normal market
conditions, the Fund will maintain a weighted average market capitalization of
less than $2 billion. The Fund seeks to purchase securities that are well
diversified across economic sectors and to maintain sector concentrations that
approximate the economic sector weightings comprising the Russell 2000 Index (or
such other appropriate index selected by the Adviser), the Fund may invest in
warrants and rights to purchase common stocks, and may invest up to 10% of its
total assets in ADRs. The Fund only will purchase securities that are traded on
registered exchanges or the over-the-counter market in the United States.

TURNER MICRO CAP GROWTH FUND -- The Micro Cap Fund invests primarily (and, under
normal conditions, at least 65% of its total assets) in a diversified portfolio
of common stocks of issuers with market capitalizations of not more than $500
million at the time of purchase that the Adviser believes to have strong
earnings growth potential. Under normal market conditions, the Fund will
maintain a weighted average market capitalization of less than $350 million. The
Fund will not hold securities with market capitalizations over $1 billion. The
Fund seeks to purchase securities that are well diversified across economic
sectors. The Micro Cap Fund will typically invest in companies whose market
capitalizations, at the time of purchase, are $350 million or under. The Fund
may invest in warrants and rights to purchase common stocks, and may invest up
to 10% of its total assets in micro cap stocks of foreign issuers and in ADRs.

The Micro Cap Fund invests in some of the smallest, most dynamic publicly-traded
companies. These emerging growth companies are typically in the early stages of
a long-term development cycle. In many cases, these companies offer unique
products, services or technologies and often serve special or expanding market
niches. Because of their small size, and less frequent trading activity, the
companies represented in the Fund's portfolio may be overlooked or not closely
followed by investors. Accordingly, their prices may rise either as a result of
improved business fundamentals, particularly when earnings grow faster than
general expectations, or as more investors appreciate the full extent of a
company's underlying business potential. Thus in the opinion of the Fund's
Adviser, they offer substantial appreciation potential for meeting retirement
and other long-term goals.

The Fund's share price can move up and down significantly, even over short
periods of time, due to the volatile nature of micro capitalization stocks. To
manage risk and improve liquidity, Turner expects to invest in numerous small,
publicly traded companies, representing a broad cross-section of U.S.
industries.

TURNER SHORT DURATION GOVERNMENT FUND - ONE YEAR PORTFOLIO & TURNER SHORT
DURATION GOVERNMENT FUND - THREE YEAR PORTFOLIO -- Under normal market
conditions, each Fund invests at least 65% of the value of its total assets in
obligations either issued or guaranteed by the U.S. Government, its agencies or
instrumentalities ("U.S. Government securities"). Certain of the obligations,
including U.S. Treasury bills, notes and bonds and mortgage-related securities
of the Government National Mortgage Association ("GNMA"), are issued or
guaranteed by the U.S. Government. Other securities issued by U.S. Government
agencies or instrumentalities are supported only by the credit of the agency or
instrumentality, such as those issued by the Federal Home Loan Bank, while
others, such as those issued by Fannie Mae and the Student Loan Marketing
Association, have an additional line of credit with the U.S. Treasury.

S-4

<PAGE>

The balance of each Fund's assets may be invested in cash and high grade debt
securities, shares of other investment companies, including privately issued
mortgage-related securities and general obligation bonds and notes of various
states and their political subdivisions, rated within the three highest grades
assigned by Standard & Poor's Corporation ("S&P") (AAA, AA or A), Moody's
Investors Service, Inc. ("Moody's") (Aaa, Aa or A), or Fitch Investor Services,
Inc. ("Fitch") (AAA, AA or A), or, if unrated by S&P, Moody's and/or Fitch,
judged by the Adviser to be of comparable quality. A further description of
S&P's, Moody's and Fitch's ratings is included in the Appendix to the Statement
of Additional Information.

The relative proportions of the Funds' net assets invested in the different
types of permissible investments will vary from time to time depending upon the
Adviser's assessment of the relative market value of the sectors in which the
Funds invest. In addition, the Funds may purchase securities that are trading at
a discount from par when the Adviser believes there is a potential for capital
appreciation.

The Short Duration Funds may enter into forward commitments or purchase
securities on a when issued basis, and may invest in variable or floating rate
obligations.

TARGET SELECT EQUITY FUND -- The Adviser and Sub-Advisers of the Fund will each
invest in a maximum of 20 equity securities (hence the Target Select Equity Fund
designation) and as few as 10 that they believe have the greatest return
potential. Such a focused security-selection process permits each manager to act
on only the investment ideas that they think are their strongest ones. The
intent is to avoid diluting performance by owning too many securities, so that
the positive contributions of winning investments will prove substantial.

The Fund is designed to provide an investment that combines the investment
expertise and best investment ideas of four outstanding money-management firms.
The Adviser and Sub-Advisers will manage a portion of the Fund's portfolio on a
day-to-day basis. Assets for investment will be allocated to each manager by the
Fund' Board of Trustees, based on the recommendation of the Adviser. The
expectation is that the allocations will result in a portfolio invested in a
variety of equity securities with differing capitalizations and valuations,
chosen by differing investment strategies.

The Fund intends to invest primarily (and, under normal circumstances, at least
65% of its total assets) in equity securities of companies that are
headquartered in the United States or do business both in the United States and
abroad. Those securities, however, will be traded principally in the United
States equity market. Selection of equity securities will not be restricted by
market capitalization, and the Fund's Adviser and Sub-Advisers will employ their
own proprietary investment processes in managing assets.

S-5

<PAGE>

Any remaining assets of the Fund may be invested in securities of foreign
issuers, shares of other investment companies, ADRs and REITs. The Fund may also
invest up to 15% of its net assets in illiquid securities, invest up to 25% of
its total assets in convertible securities, including convertible securities
rated below investment grade, purchase unregistered securities that are eligible
for re-sale pursuant to Rule 144A under the Securities Act, and purchase fixed
income securities, including securities rated below investment grade. In
addition, the Fund may effect short sales, purchase securities on a when-issued
basis, and may enter into futures and options transactions. Debt securities
rated below investment grade, i.e., rated lower than BBB by S&P and/or Baa by
Moody's or unrated securities of comparable quality, are also known as "junk
bonds." The maximum percentage of the Fund's assets that may be invested in
securities rated below investment grade is 25%.

Under normal circumstances, the Adviser and each of the Sub-Advisers may invest
a portion of the assets under its management in the Money Market Instruments
described below in order to maintain liquidity, or if securities meeting the
Fund's investment objective and policies are not otherwise reasonably available
for purchase, provided that such Instruments do not exceed 25% of the Fund's
total assets. For temporary defensive purposes during periods when the Adviser
determines that market conditions warrant, the Adviser and each Sub-Adviser may
invest up to 100% of the assets under their management in Money Market
Instruments and in cash.

GENERAL

Each Fund may purchase securities on a when-issued basis and borrow money.

Each Fund may enter into futures and options transactions.

Each Fund may invest up to 15% (10% for the Short Duration Funds) of its net
assets in illiquid securities.

Each Fund, except the Ultra Large Cap, Midcap and Short Duration Funds, may
purchase convertible securities.

Each Fund may enter into repurchase agreements.

Each Fund may purchase fixed income securities, including variable and floating
rate instruments.

Each Fund may purchase Rule 144A securities.

Each Fund may, for temporary defensive purposes, invest up to 100% of its total
assets in money market instruments (including U.S. Government securities, bank
obligations, commercial paper rated in the highest rating category by an NRSRO,
repurchase agreements involving the foregoing securities), shares of money
market investment companies and cash.

S-6

<PAGE>

RISK FACTORS

NON-DIVERSIFICATION

The Target Select Fund is a non-diversified company, as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), which means that a
relatively high percentage of assets of the Fund may be invested in the
obligations of a limited number of issuers. Although the Adviser and the
Sub-Advisers do not intend to invest more than 5% of the Fund's assets in any
single issuer (with the exception of securities which are issued or guaranteed
by a national government), the value of the shares of the Fund may be more
susceptible to any single economic, political or regulatory occurrence than the
shares of a diversified investment company would be. The Fund intends to satisfy
the diversification requirements necessary to qualify as a regulated investment
company under the Internal Revenue Code of 1986, as amended (the "Code"), which
requires that the Fund be diversified (i.e., not invest more than 5% of its
assets in the securities in any one issuer) as to 50% of its assets.

PORTFOLIO TURNOVER

An annual portfolio turnover rate in excess of 100% may result from the
Adviser's investment strategy. Portfolio turnover rates in excess of 100% may
result in higher transaction costs, including increased brokerage commissions,
and higher levels of taxable capital gain.

YEAR 2000

The Trust depends on the smooth functioning of computer systems in almost every
aspect of its business. Like other mutual funds, business and individuals around
the world, the Trust could be adversely affected if the computer systems used by
its service providers do not properly process dates on and after January 1, 2000
and distinguish between the year 2000 and the year 1900. The Trust has asked its
service providers whether they expect to have their computer systems adjusted
for the year 2000 transition, and received assurances from each that its system
is expected to accommodate the year 2000 without material adverse consequences
to the Trust. The Trust and its shareholders may experience losses if these
assurances prove to be incorrect or as a result of year 2000 computer
difficulties experienced by issuers of portfolio securities or third parties,
such as custodians, banks, broker-dealers or others with which the Trust does
business.

DESCRIPTION OF PERMITTED INVESTMENTS

AMERICAN DEPOSITARY RECEIPTS ("ADRs")

ADRs are securities, typically issued by a U.S. financial institution (a
"depositary"), that evidence ownership interests in a security or a pool of
securities issued by a foreign issuer and deposited with the depositary. ADRs
may be available through "sponsored" or "unsponsored" facilities. A sponsored
facility is established jointly by the issuer of the security underlying the
receipt and a depositary, whereas an unsponsored facility may be established by
a depositary without participation by the issuer of the underlying security.
Holders of unsponsored depositary receipts 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

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issuer of the deposited security or to pass through, to the holders of the
receipts, voting rights with respect to the deposited securities.

ASSET-BACKED SECURITIES

Asset-backed securities are secured by non-mortgage assets such as company
receivables, truck and auto loans, leases and credit card receivables. Such
securities are generally issued as pass-through certificates, which represent
undivided fractional ownership interests in the underlying pools of assets. Such
securities also may be debt instruments, which are also known as collateralized
obligations and are generally issued as the debt of a special purpose entity,
such as a trust, organized solely for the purpose of owning such assets and
issuing such debt.

BORROWING

The Funds may borrow money equal to 5% of their total assets for temporary
purposes to meet redemptions or to pay dividends. Borrowing may exaggerate
changes in the net asset value of a Fund's shares and in the return on the
Fund's portfolio. Although the principal of any borrowing will be fixed, a
Fund's assets may change in value during the time the borrowing is outstanding.
The Funds may be required to liquidate portfolio securities at a time when it
would be disadvantageous to do so in order to make payments with respect to any
borrowing. The Funds may be required to segregate liquid assets in an amount
sufficient to meet their obligations in connection with such borrowings. In an
interest rate arbitrage transaction, a Fund borrows money at one interest rate
and lends the proceeds at another, higher interest rate. These transactions
involve a number of risks, including the risk that the borrower will fail or
otherwise become insolvent or that there will be a significant change in
prevailing interest rates.

CONVERTIBLE SECURITIES

Convertible securities are corporate securities that are exchangeable for a set
number of another security at a prestated price. Convertible securities
typically have characteristics of both fixed income and equity securities.
Because of the conversion feature, the market value of a convertible security
tends to move with the market value of the underlying stock. The value of a
convertible security is also affected by prevailing interest rates, the credit
quality of the issuer and any call provisions.

DERIVATIVES

Derivatives are securities that derive their value from other securities,
financial instruments or indices. The following are considered derivative
securities: options on futures, futures, options (e.g., puts and calls), swap
agreements, mortgage-backed securities (e.g., CMOs, REMICs, IOs and POs), when
issued securities and forward commitments, floating and variable rate
securities, convertible securities, "stripped" U.S. Treasury securities (e.g.,
Receipts and STRIPs), privately issued stripped securities (e.g., TGRs, TRs, and
CATs). See elsewhere in the "Description of Permitted Investments and Risk
Factors" for discussions of these various instruments.

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EQUITY SECURITIES

Equity securities include common stocks, preferred stocks, warrants, rights to
acquire common or preferred stocks, and securities convertible into or
exchangeable for common stocks. Investments in equity securities in general are
subject to market risks that may cause their prices to fluctuate over time. The
value of securities convertible into equity securities, such as warrants or
convertible debt, is also affected by prevailing interest rates, the credit
quality of the issuer and any call provision. Fluctuations in the value of
equity securities in which an equity Fund invests will cause the net asset value
of the Fund to fluctuate. An investment in an equity Fund may be more suitable
for long-term investors who can bear the risk of short-term principal
fluctuations.

FIXED INCOME SECURITIES

The market value of fixed income investments will change in response to interest
rate changes and other factors. During periods of falling interest rates, the
values of outstanding fixed income securities generally rise. Conversely, during
periods of rising interest rates, the values of such securities generally
decline. Moreover, while securities with longer maturities tend to produce
higher yields, the prices of longer maturity securities are also subject to
greater market fluctuations as a result of changes in interest rates. Changes by
recognized agencies in the rating of any fixed income security and in the
ability of an issuer to make payments of interest and principal also affect the
value of these investments. Changes in the value of these securities will not
necessarily affect cash income derived from these securities, but will affect
the investing Fund's net asset value.

Investment grade bonds include securities rated BBB by S&P or Baa by Moody's,
which may be regarded as having speculative characteristics as to repayment of
principal. If a security is downgraded, the Adviser will review the situation
and take appropriate action.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS

Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of a specific security at a specified future
time and at a specified price. An option on a futures contract gives the
purchaser the right, in exchange for a premium, to assume a position in a
futures contract at a specified exercise price during the term of the option. A
Fund may use futures contracts and related options for bona fide hedging
purposes, to offset changes in the value of securities held or expected to be
acquired or be disposed of, to minimize fluctuations in foreign currencies, or
to gain exposure to a particular market or instrument. A Fund will minimize the
risk that it will be unable to close out a futures contract by only entering
into futures contracts which are traded on national futures exchanges. In
addition, a Fund will only sell covered futures contracts and options on futures
contracts.

Stock and bond index futures are futures contracts for various stock and bond
indices that are traded on registered securities exchanges. Stock and bond index
futures contracts obligate the seller to deliver (and the purchaser to take) an
amount of cash equal to a specific dollar amount times the difference between
the value of a specific stock or bond index at the close of the last trading day
of the contract and the price at which the agreement is made.

Stock and bond index futures contracts are bilateral agreements pursuant to
which two parties agree to take or make delivery of an amount of cash equal to a
specified dollar amount times the

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difference between the stock or bond index value at the close of trading of the
contract and the price at which the futures contract is originally struck. No
physical delivery of the stocks or bonds comprising the Index is made; generally
contracts are closed out prior to the expiration date of the contracts.

No price is paid upon entering into futures contracts. Instead, a Fund would be
required to deposit an amount of cash or U.S. Treasury securities known as
"initial margin." Subsequent payments, called "variation margin," to and from
the broker, would be made on a daily basis as the value of the futures position
varies (a process known as "marking to market"). The margin is in the nature of
a performance bond or good-faith deposit on a futures contract.

There are risks associated with these activities, including the following: (1)
the success of a hedging strategy may depend on an ability to predict movements
in the prices of individual securities, fluctuations in markets and movements in
interest rates; (2) there may be an imperfect or no correlation between the
changes in market value of the securities held by the Fund and the prices of
futures and options on futures; (3) there may not be a liquid secondary market
for a futures contract or option; (4) trading restrictions or limitations may be
imposed by an exchange; and (5) government regulations may restrict trading in
futures contracts and futures options.

A Fund may enter into futures contracts and options on futures contracts traded
on an exchange regulated by the Commodities Futures Trading Commission ("CFTC"),
as long as, to the extent that such transactions are not for "bona fide hedging
purposes," the aggregate initial margin and premiums on such positions
(excluding the amount by which such options are in the money) do not exceed 5%
of a Fund's net assets. A Fund may buy and sell futures contracts and related
options to manage its exposure to changing interest rates and securities prices.
Some strategies reduce a Fund's exposure to price fluctuations, while others
tend to increase its market exposure. Futures and options on futures can be
volatile instruments and involve certain risks that could negatively impact a
Fund's return.

In order to avoid leveraging and related risks, when a Fund purchases futures
contracts, it will collateralize its position by depositing an amount of cash or
liquid securities, equal to the market value of the futures positions held, less
margin deposits, in a segregated account with its custodian. Collateral equal to
the current market value of the futures position will be marked to market on a
daily basis.

ILLIQUID SECURITIES

Illiquid securities are securities that cannot be disposed of within seven
business days at approximately the price at which they are being carried on the
Fund's books. Illiquid securities include demand instruments with demand notice
periods exceeding seven days, securities for which there is no active secondary
market, and repurchase agreements with durations or maturities over 7 days in
length.

INVESTMENT COMPANY SHARES

Each Fund may invest in shares of other investment companies, to the extent
permitted by applicable law and subject to certain restrictions. These
investment companies typically incur fees

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that are separate from those fees incurred directly by the Fund. A Fund's
purchase of such investment company securities results in the layering of
expenses, such that shareholders would indirectly bear a proportionate share of
the operating expenses of such investment companies, including advisory fees, in
addition to paying Fund expenses. Under applicable regulations, a Fund is
prohibited from acquiring the securities of another investment company if, as a
result of such acquisition: (1) the Fund owns more than 3% of the total voting
stock of the other company; (2) securities issued by any one investment company
represent more than 5% of the Fund's total assets; or (3) securities (other than
treasury stock) issued by all investment companies represent more than 10% of
the total assets of the Fund. See also "Investment Limitations."

LEVERAGING

Leveraging a Fund creates an opportunity for increased net income, but, at the
same time, creates special risk considerations. For example, leveraging may
exaggerate changes in the net asset value of a Fund's shares and in the yield on
the Fund's portfolio. Although the principal of such borrowings will be fixed, a
Fund's assets may change in value during the time the borrowing is outstanding.
Leveraging creates interest expenses for a Fund which could exceed the income
from the assets retained. To the extent the income derived from securities
purchased with borrowed funds exceeds the interest that a Fund will have to pay,
the Fund's net income will be greater than if leveraging were not used.
Conversely, if the income from the assets retained with borrowed funds is not
sufficient to cover the cost of leveraging, the net income of the Fund will be
less than if leveraging were not used, and therefore the amount available for
distribution to stockholders as dividends will be reduced. Because the SEC staff
believes both reverse repurchase agreements and dollar roll transactions are
collateralized borrowings, the SEC staff believes that they create leverage,
which is a speculative factor. The requirement that such transactions be fully
collateralized by assets segregated by the Fund's Custodian does impose a
practical limit on the leverage created by such transactions. The Adviser will
not use leverage if as a result the effective duration of the portfolios of the
Short Duration One Year Portfolio and the Short Duration Three Year Portfolio
would not be comparable or less than that of a one-year U.S. Treasury note and a
three-year U.S. Treasury note, respectively.

LOWER-RATED SECURITIES

Lower-rated securities are lower-rated bonds commonly referred to as "junk
bonds" or high-yield securities. These securities are rated lower than "Baa3" by
Moody's Investors Service, Inc. (Moody's) and/or lower than "BBB-" by Standard &
Poor's Corporation ("S&P"). The Funds may invest in securities rated in the
lowest ratings categories established by Moody's or by S&P. These ratings
indicate that the obligations are speculative and may be in default. In
addition, the Funds may invest in unrated securities of comparable quality
subject to the restrictions stated in the Funds' Prospectus.

Certain Risk Factors Relating to High-Yield, High-Risk Securities

The descriptions below are intended to supplement the discussion in the
Prospectus.

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Growth of High-Yield, High-Risk Bond Market

The widespread expansion of government, consumer and corporate debt within the
U.S. economy has made the corporate sector more vulnerable to economic downturns
or increased interest rates. Further, an economic downturn could severely
disrupt the market for lower rated bonds and adversely affect the value of
outstanding bonds and the ability of the issuers to repay principal and
interest. The market for lower-rated securities may be less active, causing
market price volatility and limited liquidity in the secondary market. This may
limit the Funds' ability to sell such securities at their market value. In
addition, the market for these securities may be adversely affected by
legislative and regulatory developments. Credit quality in the junk bond market
can change suddenly and unexpectedly, and even recently issued credit ratings
may not fully reflect the actual risks imposed by a particular security.

Sensitivity to Interest Rate and Economic Changes

Lower rated bonds are somewhat sensitive to adverse economic changes and
corporate developments. During an economic down turn or substantial period of
rising interest rates, highly leveraged issuers may experience financial stress
that would adversely affect their ability to service their principal and
interest payment obligations, to meet projected business goals, and to obtain
additional financing. If the issuer of a bond defaulted on its obligations to
pay interest or principal or entered into bankruptcy proceedings, the Funds may
incur losses or expenses in seeking recovery of amounts owed to it. In addition,
periods of economic uncertainty and change can be expected to result in
increased volatility of market prices of high-yield bonds and the Funds' net
asset values.

Payment Expectations

High-yield, high-risk bonds may contain redemption or call provisions. If an
issuer exercised these provisions in a declining interest rate market, the Funds
would have to replace the securities with a lower yielding security, resulting
in a decreased return for investors. Conversely, a high-yield, high-risk bond's
value will decrease in a rising interest rate market, as will the value of the
Funds' assets. If the Funds experience significant unexpected net redemptions,
this may force them to sell high-yield, high-risk bonds without regard to their
investment merits, thereby decreasing the asset base upon which expenses can be
spread and possibly reducing the Funds' rates of return.

Liquidity and Valuation

There may be little trading in the secondary market for particular bonds, which
may affect adversely the Funds' ability to value accurately or dispose of such
bonds. Adverse publicity and investor perception, whether or not based on
fundamental analysis, may decrease the values and liquidity of high-yield,
high-risk bonds, especially in a thin market.

Taxes

The Funds may purchase debt securities (such as zero-coupon, pay-in-kind or
other types of securities) that contain original issue discounts. Original issue
discount that accrues in a taxable year is treated as earned by each Fund and
therefore is subject to the distribution requirements of the tax code even
though the such Fund has not received any interest payments on such

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obligations during that period. Because the original issue discount earned by
the Funds in a taxable year may not be represented by cash income, the Funds may
have to dispose of other securities and use the proceeds to make distributions
to shareholders.

MONEY MARKET INSTRUMENTS

Money market securities are high-quality, dollar-denominated, short-term debt
instruments. They consist of: (i) bankers' acceptances, certificates of
deposits, notes and time deposits of highly-rated U.S. banks and U.S. branches
of foreign banks; (ii) U.S. Treasury obligations and obligations issued or
guaranteed by the agencies and instrumentalities of the U.S. Government; (iii)
high-quality commercial paper issued by U.S. and foreign corporations; (iv) debt
obligations with a maturity of one year or less issued by corporations with
outstanding high-quality commercial paper ratings; and (v) repurchase agreements
involving any of the foregoing obligations entered into with highly-rated banks
and broker-dealers.

MORTGAGE-BACKED SECURITIES

Mortgage-backed securities are instruments that entitle the holder to a share of
all interest and principal payments from mortgages underlying the security. The
mortgages backing these securities include conventional fifteen- and thirty-year
fixed rate mortgages, graduated payment mortgages, adjustable rate mortgages,
and balloon mortgages. During periods of declining interest rates, prepayment of
mortgages underlying mortgage-backed securities can be expected to accelerate.
Prepayment of mortgages which underlie securities purchased at a premium often
results in capital losses, while prepayment of mortgages purchased at a discount
often results in capital gains. Because of these unpredictable prepayment
characteristics, it is often not possible to predict accurately the average life
or realized yield of a particular issue.

PRIVATE PASS-THROUGH SECURITIES: These are mortgage-backed securities issued by
a non-governmental entity, such as a trust. While they are generally structured
with one or more types of credit enhancement, private pass-through securities
typically lack a guarantee by an entity having the credit status of a
governmental agency or instrumentality.

CMOS: CMOs are debt obligations of multiclass pass-through certificates issued
by agencies or instrumentalities of the U.S. Government or by private
originators or investors in mortgage loans. In a CMO, series of bonds or
certificates are usually issued in multiple classes. Principal and interest paid
on the underlying mortgage assets may be allocated among the several classes of
a series of a CMO in a variety of ways. Each class of a CMO is issued with a
specific fixed or floating coupon rate and has a stated maturity or final
distribution date.

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REMICS: A REMIC is a CMO that qualifies for special tax treatment under the Code
and invests in certain mortgages principally secured by interests in real
property. Guaranteed REMIC pass-through certificates ("REMIC Certificates")
issued by Fannie Mae or FHLMC represent beneficial ownership interests in a
REMIC trust consisting principally or mortgage loans or Fannie Mae, FHLMC or
GNMA-guaranteed mortgage pass-through certificates.

STRIPPED MORTGAGE-BACKED SECURITIES ("SMBS"): SMBs are usually structured with
two classes that receive specified proportions of the monthly interest and
principal payments from a pool of mortgage securities. One class may receive all
of the interest payments, while the other class may receive all of the principal
payments. SMBs are extremely sensitive to changes in interest rates because of
the impact thereon of prepayment of principal on the underlying mortgage
securities. The market for SMBs is not as fully developed as other markets; SMBs
therefore may be illiquid.

OBLIGATIONS OF SUPRANATIONAL ENTITIES

Obligations of supranational entities are obligations of entities established
through the joint participation of several governments, such as the Asian
Development Bank, the Inter-American Development Bank, International Bank of
Reconstruction and Development (World Bank), African Development Bank, European
Economic Community, European Investment Bank and the Nordic Investment Bank.

OPTIONS

A put option gives the purchaser of the option the right to sell, and the writer
of the option the obligation to buy, the underlying security at any time during
the option period. A call option gives the purchaser of the option the right to
buy, and the writer of the option the obligation to sell, the underlying
security at any time during the option period. The premium paid to the writer is
the consideration for undertaking the obligations under the option contract. The
initial purchase (sale) of an option contract is an "opening transaction." In
order to close out an option position, a Fund may enter into a "closing
transaction," which is simply the sale (purchase) of an option contract on the
same security with the same exercise price and expiration date as the option
contract originally opened. If a Fund is unable to effect a closing purchase
transaction with respect to an option it has written, it will not be able to
sell the underlying security until the option expires or the Fund delivers the
security upon exercise.

A Fund may purchase put and call options to protect against a decline in the
market value of the securities in its portfolio or to anticipate an increase in
the market value of securities that the Fund may seek to purchase in the future.
A Fund purchasing put and call options pays a premium therefor. If price
movements in the underlying securities are such that exercise of the options
would not be profitable for a Fund, loss of the premium paid may be offset by an
increase in the value of the Fund's securities or by a decrease in the cost of
acquisition of securities by the Fund.

A Fund may write covered call options as a means of increasing the yield on its
portfolio and as a means of providing limited protection against decreases in
its market value. When a Fund sells an option, if the underlying securities do
not increase or decrease to a price level that would make the exercise of the
option profitable to the holder thereof, the option generally will expire
without being exercised and the Fund will realized as profit the premium
received for such option. When a

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call option written by a Fund is exercised, the Fund will be required to sell
the underlying securities to the option holder at the strike price, and will not
participate in any increase in the price of such securities above the strike
price. When a put option written by a Fund is exercised, the Fund will be
required to purchase the underlying securities at the strike price, which may be
in excess of the market value of such securities.

A Fund may purchase and write options on an exchange or over-the-counter.
Over-the-counter options ("OTC options") differ from exchange-traded options in
several respects. They are transacted directly with dealers and not with a
clearing corporation, and therefore entail the risk of non-performance by the
dealer. OTC options are available for a greater variety of securities and for a
wider range of expiration dates and exercise prices than are available for
exchange-traded options. Because OTC options are not traded on an exchange,
pricing is done normally by reference to information from a market maker. It is
the position of the SEC that OTC options are generally illiquid.

A Fund may purchase and write put and call options on foreign currencies (traded
on U.S. and foreign exchanges or over-the-counter markets) to manage its
exposure to exchange rates. Call options on foreign currency written by a Fund
will be "covered," which means that the Fund will own an equal amount of the
underlying foreign currency. With respect to put options on foreign currency
written by a Fund, the Fund will establish a segregated account with its
Custodian consisting of cash or liquid, high grade debt securities in an amount
equal to the amount the Fund would be required to pay upon exercise of the put.

A Fund may purchase and write put and call options on indices and enter into
related closing transactions. Put and call options on indices are similar to
options on securities except that options on an index give the holder the right
to receive, upon exercise of the option, an amount of cash if the closing level
of the underlying index is greater than (or less than, in the case of puts) the
exercise price of the option. This amount of cash is equal to the difference
between the closing price of the index and the exercise price of the option,
expressed in dollars multiplied by a specified number. Thus, unlike options on
individual securities, all settlements are in cash, and gain or loss depends on
price movements in the particular market represented by the index generally,
rather than the price movements in individual securities. A Fund may choose to
terminate an option position by entering into a closing transaction. The ability
of a Fund to enter into closing transactions depends upon the existence of a
liquid secondary market for such transactions.

All options written on indices must be covered. When a Fund writes an option on
an index, it will establish a segregated account containing cash or liquid
securities with its custodian in an amount at least equal to the market value of
the option and will maintain the account while the option is open or will
otherwise cover the transaction.

Each Short Duration Fund will not engage in transactions involving interest rate
futures contracts for speculation but only as a hedge against changes in the
market values of debt securities held or intended to be purchased by the Fund
and where the transactions are appropriate to reduce the Fund's interest rate
risks. There can be no assurance that hedging transactions will be successful. A
Fund also could be exposed to risks if it could not close out its futures or
options positions because of any illiquid secondary market.

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Futures and options have effective durations which, in general, are closely
related to the effective duration of the securities which underlie them. Holding
purchased futures or call option positions (backed by segregated cash or other
liquid securities) will lengthen the duration of a Short Duration Fund's
portfolio.

RISK FACTORS: Risks associated with options transactions include: (1) the
success of a hedging strategy may depend on an ability to predict movements in
the prices of individual securities, fluctuations in markets and movements in
interest rates; (2) there may be an imperfect correlation between the movement
in prices of options and the securities underlying them; (3) there may not be a
liquid secondary market for options; and (4) while a Fund will receive a premium
when it writes covered call options, it may not participate fully in a rise in
the market value of the underlying security.

RECEIPTS

Receipts are sold as zero coupon securities, which means that they are sold at a
substantial discount and redeemed at face value at their maturity date without
interim cash payments of interest or principal. This discount is accreted over
the life of the security, and such accretion will constitute the income earned
on a security for both accounting and tax purposes. Because of these features,
such securities may be subject to greater interest rate volatility than interest
paying investments.

REITS

The Funds may invest in real estate investment trusts ("REITs"), which pool
investors' funds for investment in income producing commercial real estate or
real estate related loans or interests.

REITs pool investors' funds for investment primarily in income producing real
estate or real estate related loans or interests. A REIT is not taxed on income
distributed to its shareholders or unitholders if it complies with regulatory
requirements. Equity REITs invest the majority of their assets directly in real
property and derive their income primarily from rents and capital gains from
appreciation realized through property sales. A shareholder in a Fund should
realize that by investing in REITs indirectly through the Fund, he or she will
bear not only his or her proportionate share of the expenses of the Fund, but
also indirectly, similar expenses of underlying REITs. REITs may be affected by
changes in the value of their underlying properties and by defaults by borrowers
or tenants.

A REIT is not taxed on income distributed to its shareholders or unitholders if
it complies with regulatory requirements relating to its organization,
ownership, assets and income, and with a regulatory requirement that it
distribute to its shareholders or unitholders at least 95% of its taxable income
for each taxable year. Generally, REITs can be classified as Equity REITs,
Mortgage REITs and Hybrid REITs. Equity REITs invest the majority of their
assets directly in real property and derive their income primarily from rents
and capital gains from appreciation realized through property sales. Mortgage
REITs invest the majority of their assets in real estate mortgages and derive
their income primarily from interest payments. Hybrid REITs combine the
characteristics of both Equity and Mortgage REITs. A shareholder in a Fund
should realize that by investing in REITs indirectly through the Fund, he or she
will bear not only his or her

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proportionate share of the expenses of the Fund, but also indirectly, similar
expenses of underlying REITs.

A Fund may be subject to certain risks associated with the direct investments of
the REITs. REITs may be affected by changes in the of their underlying
properties and by defaults by borrowers or tenants. Mortgage REITs may be
affected by the quality of the credit extended. Furthermore, REITs are dependent
on specialized management skills. Some REITs may have limited diversification
and may be subject to risks inherent in financing a limited number of
properties. REITs depend generally on their ability to generate cash flow to
make distributions to shareholders or unitholders, and may be subject to
defaults by borrowers and to self-liquidations. In addition, the performance of
a REIT may be affected by its failure to qualify for tax-free pass-through of
income under the Code or its failure to maintain exemption from registration
under the 1940 Act.

REPURCHASE AGREEMENTS

Repurchase agreements are agreements by which a Fund obtains a security and
simultaneously commits to return the security to the seller (a member bank of
the Federal Reserve System or primary securities dealer as recognized by the
Federal Reserve Bank of New York) at an agreed upon price (including principal
and interest) on an agreed upon date within a number of days (usually not more
than seven) from the date of purchase. The resale price reflects the purchase
price plus an agreed upon market rate of interest which is unrelated to the
coupon rate or maturity of the underlying security. A repurchase agreement
involves the obligation of the seller to pay the agreed upon price, which
obligation is in effect secured by the value of the underlying security.

Repurchase agreements are considered to be loans by a Fund for purposes of its
investment limitations. The repurchase agreements entered into by a Fund will
provide that the underlying security at all times shall have a value at least
equal to 102% of the resale price stated in the agreement (the Adviser monitors
compliance with this requirement). Under all repurchase agreements entered into
by a Fund, the Trust's Custodian or its agent must take possession of the
underlying collateral. However, if the seller defaults, the Fund could realize a
loss on the sale of the underlying security to the extent that the proceeds of
sale, including accrued interest, are less than the resale price provided in the
agreement including interest. In addition, even though the Bankruptcy Code
provides protection for most repurchase agreements, if the seller should be
involved in bankruptcy or insolvency proceedings, a Fund may incur delay and
costs in selling the underlying security or may suffer a loss of principal and
interest if the Fund is treated as an unsecured creditor and is required to
return the underlying security to the seller's estate.

REVERSE DOLLAR ROLL TRANSACTIONS

Each Short Duration Fund may enter into reverse dollar roll transactions, which
involve a purchase by a Fund of an eligible security from a financial
institution concurrently with an agreement by the Fund to resell a similar
security to the institution at a later date at an agreed-upon price. Reverse
dollar roll transactions are fully collateralized in a manner similar to loans
of the Fund's portfolio securities.

S-17

<PAGE>

REVERSE REPURCHASE AGREEMENT AND DOLLAR ROLL TRANSACTIONS

A reverse repurchase agreement involves a sale by a Fund of securities that it
holds to a bank, broker-dealer or other financial institution concurrently with
an agreement by the Fund to repurchase the same securities at an agreed-upon
price and date. A dollar roll transaction involves a sale by a Fund of an
eligible security to a financial institution concurrently with an agreement by
the Fund to repurchase a similar eligible security from the institution at a
later date at an agreed-upon price. Each Fund will fully collateralize its
reverse repurchase agreements and dollar roll transactions in an amount at least
equal to the Fund's obligations under the reverse repurchase agreement or dollar
roll transaction by cash or other liquid securities that the Fund's custodian
segregates from other Fund assets.

RIGHTS

Rights give existing shareholders of a corporation the right, but not the
obligation, to buy shares of the corporation at a given price, usually below the
offering price, during a specified period.

RULE 144A SECURITIES

Rule 144A securities are securities exempt from registration on resale pursuant
to Rule 144A under the 1933 Act. Rule 144A securities are traded in the
institutional market pursuant to this registration exemption, and, as a result,
may not be as liquid as exchange-traded securities since they may only be resold
to certain qualified institutional investors. Due to the relatively limited size
of this institutional market, these securities may affect the Fund's liquidity
to the extent that qualified institutional buyers become, for a time,
uninterested in purchasing such securities. Nevertheless, Rule 144A securities
may be treated as liquid securities pursuant to guidelines adopted by the
Trust's Board of Trustees.

SECURITIES LENDING

In order to generate additional income, a Fund may lend its securities pursuant
to agreements requiring that the loan be continuously secured by collateral
consisting of cash or securities of the U.S. Government or its agencies equal to
at least 100% of the market value of the loaned securities. A Fund continues to
receive interest on the loaned securities while simultaneously earning interest
on the investment of cash collateral. Collateral is marked to market daily.
There may be risks of delay in recovery of the securities or even loss of rights
in the collateral should the borrower of the securities fail financially or
become insolvent.

SECURITIES OF FOREIGN ISSUERS

The Funds may invest in securities of foreign issuers with a strong U.S. trading
presence and in sponsored and unsponsored ADRs. Investments in the securities of
foreign issuers may subject the Funds to investment risks that differ in some
respects from those related to investments in securities of U.S. issuers. Such
risks include future adverse political and economic developments, possible
imposition of withholding taxes on income, possible seizure, nationalization or
expropriation of foreign deposits, possible establishment of exchange controls
or taxation at the source or greater fluctuation in value due to changes in
exchange rates. Foreign issuers of securities often engage in business practices
different from those of domestic issuers of similar securities, and there may be
less information publicly available about foreign issuers. In addition,

S-18

<PAGE>

foreign issuers are, generally speaking, subject to less government supervision
and regulation than are those in the United States. Investments in securities of
foreign issuers are frequently denominated in foreign currencies and the value
of a Fund's assets measured in U.S. dollars may be affected favorably or
unfavorably by changes in currency rates and in exchange control regulations,
and the Funds may incur costs in connection with conversions between various
currencies. Moreover, investments in emerging market nations may be considered
speculative, and there may be a greater potential for nationalization,
expropriation or adverse diplomatic developments (including war) or other events
which could adversely effect the economies of such countries or investments in
such countries.

SHORT SALES

A short sale is "against the box" if at all times during which the short
position is open, a Fund owns at least an equal amount of the securities or
securities convertible into, or exchangeable without further consideration for,
securities of the same issue as the securities that are sold short.

U.S. GOVERNMENT AGENCY OBLIGATIONS

Certain Federal agencies, such as the Government National Mortgage Association
("GNMA"), have been established as instrumentalities of the United States
Government to supervise and finance certain types of activities. Issues of these
agencies, while not direct obligations of the United States Government, are
either backed by the full faith and credit of the United States (e.g., GNMA
securities) or supported by the issuing agencies' right to borrow from the
Treasury. The issues of other agencies are supported by the credit of the
instrumentality (e.g., Fannie Mae securities).

U.S. GOVERNMENT SECURITIES

Bills, notes and bonds issued by the U.S. Government and backed by the full
faith and credit of the United States.

U.S. TREASURY OBLIGATIONS

Bills, notes and bonds issued by the U.S. Treasury, and separately traded
interest and principal component parts of such obligations that are transferable
through the Federal book-entry system known as Separately Traded Registered
Interested and Principal Securities ("STRIPS") and Coupon Under Book Entry
Safekeeping ("CUBES").

VARIABLE AND FLOATING RATE INSTRUMENTS

Certain obligations may carry variable or floating rates of interest, and may
involve a conditional or unconditional demand feature. Such instruments bear
interest at rates which are not fixed, but which vary with changes in specified
market rates or indices. The interest rates on these securities may be reset
daily, weekly, quarterly or some other reset period, and may have a floor or
ceiling on interest rate changes. There is a risk that the current interest rate
on such obligations may not accurately reflect existing market interest rates. A
demand instrument with a demand notice exceeding seven days may be considered
illiquid if there is no secondary market for such security.

S-19

<PAGE>

WARRANTS

Warrants are instruments giving holders the right, but not the obligation, to
buy equity or fixed income securities of a company at a given price during a
specified period.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES

When-issued or delayed delivery securities are subject to market fluctuations
due to changes in market interest rates and it is possible that the market value
at the time of settlement could be higher or lower than the purchase price if
the general level of interest rates has changed. Although a Fund generally
purchases securities on a when-issued or forward commitment basis with the
intention of actually acquiring securities for its investment portfolio, a Fund
may dispose of a when-issued security or forward commitment prior to settlement
if it deems appropriate.

ZERO COUPON SECURITIES

Zero coupon obligations are debt securities that do not bear any interest, but
instead are issued at a deep discount from par. The value of a zero coupon
obligation increases over time to reflect the interest accredit. Such
obligations will not result in the payment of interest until maturity, and will
have greater price volatility than similar securities that are issued at par and
pay interest periodically.

INVESTMENT LIMITATIONS

FUNDAMENTAL POLICIES

The following investment limitations (and those set forth in the Prospectus) are
fundamental policies of each Fund which cannot be changed with respect to a Fund
without the consent of the holders of a majority of that Fund's outstanding
shares. The term "majority of the outstanding shares" means the vote of (i) 67%
or more of a Fund's shares present at a meeting, if more than 50% of the
outstanding shares of a Fund are present or represented by proxy, or (ii) more
than 50% of a Fund's outstanding shares, whichever is less.

No Fund may:

1. (i) Purchase securities of any issuer (except securities issued or
guaranteed by the United States Government, its agencies or
instrumentalities and repurchase agreements involving such securities) if,
as a result, more than 5% of the total assets of the Fund would be invested
in the securities of such issuer; or (ii) acquire more than 10% of the
outstanding voting securities of any one issuer. This restriction applies
to 75% of each Fund's total assets.

2. Purchase any securities which would cause 25% or more of the total assets
of the Fund to be invested in the securities of one or more issuers
conducting their principal business activities in the same industry,
provided that this limitation does not apply to investments in obligations
issued or guaranteed by the U.S. Government or its agencies and
instrumentalities and repurchase agreements involving such securities.

S-20

<PAGE>

3. Borrow money in an amount exceeding 33 1/3% of the value of its total
assets, provided that, for purposes of this limitation, investment
strategies which either obligate the Fund to purchase securities or require
the Fund to segregate assets are not considered to be borrowings. Asset
coverage of at least 300% is required for all borrowings, except where the
Fund has borrowed money for temporary purposes in amounts not exceeding 5%
of its total assets. Each Fund will not purchase securities while its
borrowings exceed 5% of its total assets.

4. Make loans if, as a result, more than 33 1/3% of its total assets would be
lent to other parties, except that each Fund may (i) purchase or hold debt
instruments in accordance with its investment objective and policies; (ii)
enter into repurchase agreements; and (iii) lend its securities.

5. Purchase or sell real estate, physical commodities, or commodities
contracts, except that each Fund may purchase (i) marketable securities
issued by companies which own or invest in real estate (including real
estate investment trusts), commodities, or commodities contracts; and (ii)
commodities contracts relating to financial instruments, such as financial
futures contracts and options on such contracts.

6. Issue senior securities (as defined in the Investment Company Act of 1940
(the "1940 Act")) except as permitted by rule, regulation or order of the
Securities and Exchange Commission (the "SEC").

7. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter in selling a portfolio security.

8. Invest in interests in oil, gas, or other mineral exploration or
development programs and oil, gas or mineral leases.

The foregoing percentages (except with respect to the limitation on borrowing)
will apply at the time of the purchase of a security and shall not be considered
violated unless an excess or deficiency occurs immediately after or as a result
of a purchase of such security.

NON-FUNDAMENTAL POLICIES

The following investment limitations are non-fundamental policies of each Fund
and may be changed with respect to a Fund by the Board of Trustees.

No Fund may:

1. Pledge, mortgage or hypothecate assets except to secure borrowings
permitted by the Fund's fundamental limitation on borrowing.

2. Invest in companies for the purpose of exercising control.

3. Purchase securities on margin or effect short sales, except that each Fund
may (i) obtain short-term credits as necessary for the clearance of
security transactions; (ii) provide initial

S-21

<PAGE>

and variation margin payments in connection with transactions involving
futures contracts and options on such contracts; and (iii) make short sales
"against the box" or in compliance with the SEC's position regarding the
asset segregation requirements imposed by Section 18 of the 1940 Act.

4. Invest its assets in securities of any investment company, except as
permitted by the 1940 Act.

5. Purchase or hold illiquid securities, i.e., securities that cannot be
disposed of for their approximate carrying value in seven days or less
(which term includes repurchase agreements and time deposits maturing in
more than seven days) if, in the aggregate, more than 15% of its net assets
would be invested in illiquid securities.

In addition, each Fund will invest no more than 5% of its net assets in short
sales, unregistered securities, futures contracts, options and investment
company securities. Unregistered securities sold in reliance on the exemption
from registration in Section 4(2) of the 1933 Act and securities exempt from
registration on re-sale pursuant to Rule 144A of the 1933 Act may be treated as
liquid securities under procedures adopted by the Board of Trustees.

THE ADVISER

Turner Investment Partners, Inc., is a professional investment management firm
founded in March, 1990. Robert E. Turner is the Chairman and controlling
shareholder of the Adviser. As of September 30, 1998, the Adviser had
discretionary management authority with respect to approximately $3 billion of
assets. The Adviser has provided investment advisory services to investment
companies since 1992. The principal business address of the Adviser is 1235
Westlakes Drive, Suite 350, Berwyn, Pennsylvania 19312.

The Adviser serves as the investment adviser for each Fund under an investment
advisory agreement (the "Advisory Agreement"). Under the Advisory Agreement, the
Adviser makes the investment decisions for the assets of each Fund and
continuously reviews, supervises and administers each Fund's investment program,
subject to the supervision of, and policies established by, the Trustees of the
Trust. The Adviser makes recommendations to the Trustees with respect to the
appropriate allocation of assets to each of the Target Select Fund's
Sub-Advisers, and directly manages assets of the Fund not allocated to the
Sub-Advisers.

The Advisory Agreement provides that the Adviser shall not be protected against
any liability to the Trust or its shareholders by reason of willful misfeasance,
bad faith or gross negligence on its part in the performance of its duties or
from reckless disregard of its obligations or duties thereunder.

The Advisory Agreement provides that if, for any fiscal year, the ratio of
expenses of any Fund (including amounts payable to the Adviser but excluding
interest, taxes, brokerage, litigation, and other extraordinary expenses)
exceeds limitations established by any state in which the shares of the Fund are
registered, the Adviser will bear the amount of such excess. The Adviser will
not be required to bear expenses of any Fund to an extent which would result in
the Fund's inability to

S-22

<PAGE>

qualify as a regulated investment company under provisions of the Internal
Revenue Code of 1986, as amended (the "Code").

The continuance of the Advisory Agreement as to any Fund after the first two
years must be specifically approved at least annually (i) by the vote of the
Trustees or by a vote of the shareholders of that Fund, and (ii) by the vote of
a majority of the Trustees who are not parties to the Advisory Agreement or
"interested persons" of any party thereto, cast in person at a meeting called
for the purpose of voting on such approval. The Advisory Agreement will
terminate automatically in the event of its assignment, and is terminable at any
time without penalty by the Trustees of the Trust or, with respect to any Fund,
by a majority of the outstanding shares of that Fund, on not less than 30 days'
nor more than 60 days' written notice to the Adviser, or by the Adviser on 90
days' written notice to the Trust.

S-23

<PAGE>

For the fiscal years ended September 30, 1996, 1997, and 1998, the Funds paid
the following advisory fees:

- - -----------------------------------------------------------------------------------------------------------
Advisory Fees Paid Advisory Fees Waived
-------------------------------------------------------------------------------
1996 1997 1998 1996 1997 1998
- - -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ultra Large Cap Fund ** $ 0 ** $ 2,281+
- - -----------------------------------------------------------------------------------------------------------
Growth Equity Fund $666,476 $694,046 $ 0 $24,250
- - -----------------------------------------------------------------------------------------------------------
Midcap Fund ** $ 0 ** $13,244+
- - -----------------------------------------------------------------------------------------------------------
Small Cap Fund $197,634 $762,604 $82,694 $73,594
- - -----------------------------------------------------------------------------------------------------------
Micro Cap Fund
- - -----------------------------------------------------------------------------------------------------------
Fixed Income Fund ** ** ** **
- - -----------------------------------------------------------------------------------------------------------
Short Duration
Government Fund-
One Year Portfolio
- - -----------------------------------------------------------------------------------------------------------
Short Duration
Government Fund-
Three Year Portfolio
- - -----------------------------------------------------------------------------------------------------------
</TABLE>

** Not in operation during the period.

+ Does not include reimbursement fees by the Adviser in the amount of $______
and $_____ with respect to the Ultra Large Cap and Midcap Funds,
respectively, for the fiscal period ended September 30, 1998.

THE SUB-ADVISERS

The Target Select Fund currently has three Sub-Advisers -- Clover Capital
Management, Inc., Penn Capital Management Company, Inc., and Chartwell
Investment Partners (each a "Sub-Adviser" and collectively, the "Sub-Advisers").
Each Sub-Adviser manages a portion of the Fund's assets, which allocation is
determined by the Trustees upon the recommendation of the Adviser. Each
Sub-Adviser makes the investment decisions for the assets of the Fund allocated
to it, and continuously reviews, supervises and administers a separate
investment program, subject to the supervision of, and policies established by,
the Trustees of the Trust. For its services, each of

S-24

<PAGE>

the Sub-Advisers is entitled to receive a fee from Turner Investment Partners,
which is calculated daily and paid monthly, at an annual rate of .80% of the
average daily net assets of the Fund allocated to it. Currently, the Adviser and
each Sub-Adviser has been allocated assets in the range of 15-30% of the Fund's
total assets.

CLOVER CAPITAL MANAGEMENT, INC. ("Clover Capital"), is a professional investment
management firm founded in 1984 by Michael Edward Jones, CFA, and Geoffrey
Harold Rosenberger, CFA, who are Managing Directors of Clover Capital and who
control all of the Clover Capital's outstanding voting stock. Michael Jones,
Managing Director of Clover Capital, is the portfolio manager of the portion of
the Fund's assets managed by Clover Capital. As of September 30, 1998, the
Clover Capital had discretionary management authority with respect to
approximately $1.9 billion of assets. In addition to sub-advising the Fund and
the Clover Funds, separate investment portfolios of the Trust, Clover provides
advisory services to pension plans, religious and educational endowments,
corporations, 401(k) plans, profit sharing plans, individual investors and
trusts and estates. The principal business address of Clover Capital is 11 Tobey
Village Office Park, Pittsford, New York 14534.

PENN CAPITAL MANAGEMENT COMPANY, INC. ("Penn Capital"), 52 Haddonfield-Berlin
Road, Suite 1000, Cherry Hill, New Jersey 08034, is a professional investment
management firm founded in 1987 and registered as an investment adviser under
the Investment Advisers Act. Richard A. Hocker is a founding partner and Chief
Investment Officer of Penn Capital and portfolio manager of the portion of the
assets of the Fund managed by Penn Capital, an investment management firm that
manages the investment portfolios of institutions and high net worth
individuals. As of September 30, 1998, Penn Capital had assets under management
of approximately $350 million. Penn Capital employs a staff of 17 and manages
monies in a variety of investment styles through either separate account
management or one of its private investment funds. In addition, Penn Capital
serves as investment adviser to the Penn Capital Funds, three separate
portfolios of the Trust.

CHARTWELL INVESTMENT PARTNERS ("Chartwell"), 1235 Westlakes Drive, Suite 330,
Berwyn, Pennsylvania 19312, is a professional investment management firm founded
in 1997 and registered as an investment adviser under the Investment Advisers
Act. Chartwell was founded by a team of experienced investment professionals who
had been employees of Delaware Management Company of Philadelphia, Pennsylvania.
The portion of the assets of the Fund managed by Chartwell will be managed by a
team of investment professionals with extensive investment experience. The
portion of the assets of the Fund managed by Chartwell will be managed by a team
of investment professionals with extensive investment experience. Chartwell
currently manages approximately $1.1 billion in assets for institutional
clients.

THE ADMINISTRATOR

S-25

<PAGE>

its duties and obligations thereunder. The Administration Agreement shall remain
in effect for a period of three (3) years after the effective date of the
agreement and shall continue in effect for successive periods of one (1) year
unless terminated by either party on not less than 90 days' prior written notice
to the other party.

The continuance of the Administration Agreement must be specifically approved at
least annually (i) by the vote of a majority of the Trustees or by the vote of a
majority of the outstanding voting securities of the Fund, and (ii) by the vote
of a majority of the Trustees of the Trust who are not parties to the
Administration Agreement or an "interested person" (as that term is defined in
the 1940 Act) of any party thereto, cast in person at a meting called for the
purpose of voting on such approval. The Administration Agreement is terminable
at any time as to any Fund without penalty by the Trustees of the Trust, by a
vote of a majority of the outstanding shares of the Fund or by the Manager on
not less than 30 days' nor more than 60 days' written notice.

The Administrator, a Delaware business trust, has its principal business offices
at Oaks, Pennsylvania 19456. SEI Investments Management Corporation ("SIMC"), a
wholly-owned subsidiary of SEI Investments Company ("SEI Investments"), is the
owner of all beneficial interest in the Administrator. SEI Investments and its
subsidiaries and affiliates, including the Administrator, are leading providers
of funds evaluation services, trust accounting systems, and brokerage and
information services to financial institutions, institutional investors, and
money managers. The Administrator and its affiliates also serve as administrator
or sub-administrator to the following other mutual funds: The Achievement Funds
Trust, The Advisors' Inner Circle Fund, Alpha Select Funds, The Arbor Funds, ARK
Funds, Armada Funds, Bishop Street Funds, Boston 1784 Funds(R), CrestFunds,
Inc., CUFUND, The Expedition Funds, First American Funds, Inc., First American
Investment Funds, Inc., First American Strategy Funds, Inc., HighMark Funds, The
Nevis Funds, Marquis Funds(R), Monitor Funds, Morgan Grenfell Investment Trust,
Oak Associates Funds, THE PBHG Funds, Inc., PBHG Insurance Series Fund, Inc.,
The Pillar Funds, Santa Barbara Group of Mutual Funds, Inc., SEI Asset
Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional
Investments Trust, SEI Institutional International Trust, SEI Institutional
Managed Trust, SEI Liquid Asset Trust, STI Classic Funds, SEI Tax Exempt Trust,
and STI Classic Variable Trust.

For the fiscal years ended September 30, 1996, 1997, and 1998, the Funds paid
the following administrative fees:

- - -------------------------------------------------------------------------------
Administrative Fees Paid
-----------------------------------------------
1996 1997 1998
- - -------------------------------------------------------------------------------
Ultra Large Cap Fund * $ 3,057
- - -------------------------------------------------------------------------------
Growth Equity Fund $136,587 $110,759
- - -------------------------------------------------------------------------------
Midcap Fund * $ 9,404
- - -------------------------------------------------------------------------------
Small Cap Fund $ 68,682 $ 98,104
- - -------------------------------------------------------------------------------

S-26

<PAGE>

- - -------------------------------------------------------------------------------
Micro Cap Fund
- - -------------------------------------------------------------------------------
Fixed Income Fund * *
- - -------------------------------------------------------------------------------
Short Duration
Government Fund-
One Year Portfolio
- - -------------------------------------------------------------------------------
Short Duration
Government Fund-
Three Year Portfolio
- - -------------------------------------------------------------------------------

* Not in operation during the period.

DISTRIBUTION AND SHAREHOLDER SERVICES

SEI Investments Distribution Co. (the "Distributor"), a wholly-owned subsidiary
of SEI Investments, and the Trust are parties to a distribution agreement (the
"Distribution Agreement") with respect to shares of the Funds. The Distributor
receives no compensation for distribution of shares of the Funds.

The Distribution Agreement shall remain in effect for a period of two years
after the effective date of the agreement and is renewable annually. The
Distribution Agreement may be terminated by the Distributor, by a majority vote
of the Trustees who are not interested persons and have no financial interest in
the Distribution Agreement or by a majority vote of the outstanding securities
of the Trust upon not more than 60 days' written notice by either party or upon
assignment by the Distributor.

The Funds have adopted a shareholder service plan for Adviser Class shares (the
"Adviser Class Service Plan") under which firms, including the Distributor, that
provide shareholder and administrative services may receive compensation
therefor. Under the Adviser Class Service Plan, the Distributor may provide
those services itself, or may enter into arrangements under which third parties
provide such services and are compensated by the Distributor. Under such
arrangements, the Distributor may retain as profit any difference between the
fee it receives and the amount it pays such third parties. In addition, the
Funds may enter into such arrangements directly. Under the Adviser Class Service
Plan, the Distributor is entitled to receive a fee at an annual rate of up to
.25% of each Fund's average daily net assets attributable to Adviser Class
shares that are subject to the arrangement in return for provision of a broad
range of shareholder and administrative services, including: maintaining client
accounts; arranging for bank wires; responding to client inquiries concerning
services provided for investments; changing dividend options; account
designations and addresses; providing sub-accounting; providing information on
share positions to clients; forwarding shareholder communications to clients;
processing purchase, exchange and redemption orders; and processing dividend
payments.

S-27

<PAGE>

TRUSTEES AND OFFICERS OF THE TRUST

The management and affairs of the Trust are supervised by the Trustees under the
laws of the Commonwealth of Massachusetts. The Trustees and executive officers
of the Trust and their principal occupations for the last five years are set
forth below. Each may have held other positions with the named companies during
that period. The Trust pays the fees for unaffiliated Trustees.

The Trustees and Executive Officers of the Trust, their respective dates of
birth, and their principal occupations for the last five years are set forth
below. Each may have held other positions with named companies during that
period. Unless otherwise noted, the business address of each Trustee and each
Executive Officer is SEI Investments Company, Oaks, Pennsylvania 19456. Certain
officers of the Trust also serve as officers of some or all of the following:
The Achievement Funds Trust, The Advisors' Inner Circle Fund, Alpha Select
Funds, The Arbor Fund, ARK Funds, Bishop Street Funds, Boston 1784 Funds(R),
CrestFunds, Inc., CUFUND, The Expedition Funds, First American Funds, Inc.,
First American Investment Funds, Inc., First American Strategy Funds, Inc,
HighMark Funds, Marquis Funds(R), Monitor Funds, Morgan Grenfell Investment
Trust, Oak Associate Funds, The PBHG Funds, Inc., PBHG Insurance Series Fund,
Inc., The Pillar Funds, Santa Barbara Group of Mutual Funds, Inc., SEI Asset
Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional
Investments Trust, SEI Institutional Managed Trust, SEI Institutional
International Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust, STI Classic
Funds, and STI Classic Variable Trust, each of which is an open-end management
investment company managed by SEI Investments Mutual Funds Services or its
affiliates and, except for Santa Barbara Group of Mutual Funds, Inc., are
distributed by SEI Investments Distribution Co.

ROBERT E. TURNER (DOB 11/26/56) - Trustee* - Chairman and Chief Investment
Officer of Turner Investment Partners, Inc. ("Turner"), since 1990.

RICHARD A. HOCKER (DOB 07/21/46) - Trustee* - CEO and Chairman of the Board of
Covenant Bank, 1988-1997. Director of Bedminister Bioconversion Corporation,
since 1988. Chief Investment Officer and Senior Vice President of Penn Capital
Management Co., Inc., since 1987.

MICHAEL E. JONES (DOB 12/24/54) - Trustee* - Senior Vice President, Investment
Adviser and Portfolio Manager with Clover Capital Management Inc., since 1984.
Principal of CCM Securities Inc.

ALFRED C. SALVATO (DOB 01/09/58) - Trustee** - Treasurer, Thomas Jefferson
University Health Care Pension Fund, since 1995, and Assistant Treasurer,
1988-1995.

JANET F. SANSONE (DOB 08/11/45) - Trustee** - Corporate Vice President of Human
Resources of Frontier Corporation (telecommunications company), since 1993.
Director of Education at General Electric Corporation, 1982-1993.

JOHN T. WHOLIHAN (DOB 12/12/37) - Trustee** - Professor, Loyola Marymount
University, since 1984.

S-28

<PAGE>

STEPHEN J. KNEELEY (DOB 02/09/63) - President and Chief Executive Officer -
Chief Operating Officer of Turner Investment Partners, Inc., since 1990.

JANET RADER ROTE (DOB 08/24/60) - Vice President and Assistant Secretary -
Director of Compliance of Turner Investment Partners, Inc., since 1992.

TODD B. CIPPERMAN (DOB 02/14/66) - Vice President and Assistant Secretary - Vice
President and Assistant Secretary of SEI, the administrator and distributor
since 1995. Associate, Dewey Ballantine, 1994-1995. Associate, Winston and
Strawn, 1991-1994.

SANDRA K. ORLOW (DOB 10/18/53) - Vice President and Assistant Secretary - Vice
President and Assistant Secretary of the Administrator and Distributor since
1988.

KEVIN P. ROBINS (DOB 04/15/61) - Vice President, Assistant Secretary - Senior
Vice President, General Counsel and Assistant Secretary of SEI, Senior Vice
President, General Counsel and Secretary of the Administrator and Distributor
since 1994. Vice President and Assistant Secretary of SEI, the Administrator and
Distributor 1992-1994. Associate, Morgan, Lewis & Bockius LLP, 1988-1992.

ROBERT DELLACROCE (DOB 12/17/63) - Controller and Chief Accounting Officer -
Director, Funds Administration and Accounting of SEI since 1994. Senior Audit
Manager, Arthur Andersen LLP, 1986-1994.

LYDIA A. GAVALIS (DOB 06/05/64) - Vice President and Assistant Secretary - vice
President and Assistant Secretary of the Manager and the Distributor since 1998.
Assistant General Counsel and Director of Arbitration, Philadelphia Stock
Exchange, 19889-1998.

KATHY HEILIG (DOB 12/21/58) - Vice President and Assistant Secretary - Treasurer
of SEI Investments Company since 1997; Assistant Controller of Sei Investment
since 1995; Vice President of SEI Investments Company since 1991; Director of
Taxes of SEI Investments Company 1987 to 1991. Tax Manager, Arthur Anderson LLP
prior to 1987.

JOSEPH M. O'DONNELL (DOB 11/13/54) - Vice President and Assistant Secretary -
Vice President and Assistant Secretary of Adviser, the Manager and the
Distributor since 1998. Vice President and general Counsel, FPS Services, Inc.,
1993-1997. Staff Counsel and Secretary, Provident Mutual Family of Funds,
1990-1993.

LYNDA J. STRIEGEL (DOB 10/30/48) - Vice President and Assistant Secretary of the
Manager and the Distributor since 1998. Senior Asset Management counsel, Barnett
Banks, Inc. (1997-1998). Partner, Groom and Nordberg, Chartered, 1996-1997.
Associate General Counsel, Riggs Bank N.A., 1991-1995.

JAMES W. JENNINGS (DOB 01/15/37) - Secretary - Partner, Morgan, Lewis & Bockius
LLP, counsel to the Trust, Turner, the Administrator and Distributor.

S-29

<PAGE>

JOHN H. GRADY, JR. (DOB 06/01/61) - Assistant Secretary - 1800 M Street, N.W.,
Washington, D.C. 20036, Partner, Morgan, Lewis & Bockius LLP, Counsel to the
Trust, Turner, Administrator and Distributor.

EDWARD B. BAER (DOB 09/27/68) - Assistant Secretary - 1800 M Street, N.W.,
Washington, D.C. 20036, Associate, Morgan, Lewis & Bockius LLP, Counsel to the
Trust, Turner, Administrator and Distributor, since 1995. Attorney, Aquila
Management Corporation, 1994. Rutgers University School of Law - Newark,
1991-1994.

The following table exhibits Trustee compensation for the fiscal year ended
September 30, 1998.

- - ---------------------------------------------------------------------------------------------------
Name of Person, Aggregate Pension or Estimated Total
Position Compensation Retirement Annual Compensation
From Registrant Benefits Benefits Upon From Registrant
for the Fiscal Accrued as Part Retirement and Fund
Year Ended of Fund Complex Paid
September 30, Expenses to Trustees for
1998 the Fiscal Year
Ended
September 30,
1998
- - ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert Turner* $0 N/A N/A $ 0
- - ----------------------------------------------------------------------------------------------------
Richard A. Hocker* $0 N/A N/A $ 0
- - ----------------------------------------------------------------------------------------------------
Michael E. Jones* $0 N/A N/A $ 0
- - ----------------------------------------------------------------------------------------------------
Alfred C. Salvato** $-- N/A N/A $--
- - ----------------------------------------------------------------------------------------------------
Janet F. Sansone** $-- N/A N/A $--
- - ----------------------------------------------------------------------------------------------------
John T. Wholihan** $-- N/A N/A $--
- - ----------------------------------------------------------------------------------------------------
</TABLE>

* Messrs. Robert Turner, Richard Hocker and Michael Jones are Trustees who
may be deemed to be "interested persons" of the Trust as the term is
defined in the 1940 Act. The Trust pays fees only to the Trustees who are
not interested persons of the Trust. Compensation of Officers and
interested persons of the Trust is paid by the adviser or the manager.

** Member of the Audit Committee.

The Trustees and Officers of the Trust own less than 1% of the outstanding
shares of the Trust.

COMPUTATION OF YIELD AND TOTAL RETURN

From time to time the Trust may advertise yield and total return of the Funds.
These figures will be based on historical earnings and are not intended to
indicate future performance. No

S-30

<PAGE>

representation can be made concerning actual future yields or returns. The yield
of a Fund refers to the annualized income generated by an investment in the Fund
over a specified 30-day period. The yield is calculated by assuming that the
income generated by the investment during that 30- day period is generated in
each period over one year and is shown as a percentage of the investment. In
particular, yield will be calculated according to the following formula:

Yield = 2[((a-b)/cd + 1)(6) - 1] where a = dividends and interest earned during
the period; b = expenses accrued for the period (net of reimbursement); c = the
current daily number of shares outstanding during the period that were entitled
to receive dividends; and d = the maximum offering price per share on the last
day of the period.

For the 30-day period ended September 30, 1998, the Ultra Large Cap Fund's yield
was .__% and the Growth Equity, Midcap and Small Cap Funds' yields were __%. The
Fixed Income Fund was not in operation during this period.

The total return of a Fund refers to the average compounded rate of return to a
hypothetical investment for designated time periods (including but not limited
to, the period from which the Fund commenced operations through the specified
date), assuming that the entire investment is redeemed at the end of each
period. In particular, total return will be calculated according to the
following formula: P (1 + T)n = ERV, where P = a hypothetical initial payment of
$1,000; T = average annual total return; n = number of years; and ERV = ending
redeemable value, as of the end of the designated time period, of a hypothetical
$1,000 payment made at the beginning of the designated time period.

For the fiscal year ended September 30, 1998, and for the period from March 11,
1992 (commencement of operations of the Turner Growth Equity Portfolio of The
Advisors' Inner Circle Fund) through September 30, 1998, the total return for
the Growth Equity Fund was 10.71% and 16.52%, respectively. For the fiscal year
ended September 30, 1998 and the period from February 7, 1994 (commencement of
operations of the Turner Small Cap Portfolio of The Advisors' Inner Circle Fund)
through September 30, 1998, the total return for the Small Cap Fund was -16.90%
and 20.56%, respectively. For the fiscal year ended September 30, 1998, the
total return for the Ultra Large Cap, and Midcap Funds were 17.26% and 1.26%,
respectively. The Fixed Income Fund was not in operation during these periods.

PURCHASE AND REDEMPTION OF SHARES

Purchases and redemptions may be made through the Transfer Agent on days when
the New York Stock Exchange is open for business. Currently, the weekdays on
which the Fund is closed for business are: New Year's Day, Martin Luther King,
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. Shares of each Fund are offered on a
continuous basis.

It is currently the Trust's policy to pay all redemptions in cash. The Trust
retains the right, however, to alter this policy to provide for redemptions in
whole or in part by a distribution in-kind of securities held by a Fund in lieu
of cash. Shareholders may incur brokerage charges on the sale of any such
securities so received in payment of redemptions.

S-31

<PAGE>

The Trust reserves the right to suspend the right of redemption and/or to
postpone the date of payment upon redemption for any period on which trading on
the New York Stock Exchange is restricted, or during the existence of an
emergency (as determined by the SEC by rule or regulation) as a result of which
disposal or valuation of a Fund's securities is not reasonably practicable, or
for such other periods as the SEC has by order permitted. The Trust also
reserves the right to suspend sales of shares of any Fund for any period during
which the New York Stock Exchange, the Adviser, the Administrator, the Transfer
Agent and/or the Custodian are not open for business.

DETERMINATION OF NET ASSET VALUE

The securities of each Fund are valued by the Administrator. The Administrator
may use an independent pricing service to obtain valuations of securities. The
pricing service relies primarily on prices of actual market transactions as well
as on trade quotations obtained from third parties. However, the pricing service
may use a matrix system to determine valuations of fixed income securities. This
system considers such factors as security prices, yields, maturities, call
features, ratings and developments relating to specific securities in arriving
at valuations. The procedures used by the pricing service and its valuation are
reviewed by the officers of the Trust under the general supervision of the
Trustees.

If there is no readily ascertainable market value for a security, the
Administrator will make a good faith determination as to the "fair value" of the
security.

Securities with remaining maturities of 60 days or less will be valued by the
amortized cost method, which involves valuing a security at its cost on the date
of purchase and thereafter (absent unusual circumstances) assuming a constant
amortization of maturity of any discount or premium, regardless of the impact of
fluctuations in general market rates of interest on the value of the instrument.
While this method provides certainty in valuation, it may result in periods
during which value, as determined by this method, is higher or lower than the
price the Trust would receive if it sold the instrument.

TAXES

The following is only a summary of certain tax considerations generally
affecting the Funds and their shareholders, and is not intended as a substitute
for careful tax planning. Shareholders are urged to consult their tax advisors
with specific reference to their own tax situations, including their state and
local tax liabilities.

FEDERAL INCOME TAX

The following is only a summary of certain additional federal tax considerations
generally affecting the Funds and their shareholders that are not discussed in
the Funds' Prospectus. No attempt is made to present a detailed explanation of
the federal, state or local tax treatment of the Funds or their shareholders and
the discussion here and in the Funds' Prospectus is not intended as a substitute
for careful tax planning.

S-32

<PAGE>

The discussion of federal income tax consequences is based on the Internal
Revenue Code of 1986 (the "Code") and the regulations issued thereunder as in
effect on the date of this Statement of Additional Information. New legislation,
as well as administrative changes or court decisions, may significantly change
the conclusions expressed herein, and may have a retroactive effect with respect
to the transactions contemplated herein.

Each Fund intends to qualify as a "regulated investment company" ("RIC") as
defined under Subchapter M of the Code. By following such a policy, each Fund
expects to eliminate or reduce to a nominal amount the federal taxes to which it
may be subject.

In order to qualify for treatment as a RIC under the Code, each Fund must
distribute annually to its shareholders at least the sum of 90% of its net
interest income excludable from gross income plus 90% of its investment company
taxable income (generally, net investment income plus net short-term capital
gain) ("Distribution Requirement") and also must meet several additional
requirements. Among these requirements are the following: (i) at least 90% of
the Fund's gross income each taxable year must be derived from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stock or securities, or certain other income (including
gains from options, futures or forward contracts); (ii) at the close of each
quarter of the Fund's taxable year, at least 50% of the value of its total
assets must be represented by cash and cash items, U.S. Government securities,
securities of other RICs and other securities, with such other securities
limited, in respect to any one issuer, to an amount that does not exceed 5% of
the value of the Fund's assets and that does not represent more than 10% of the
outstanding voting securities of such issuer; and (iii) at the close of each
quarter of the Fund's taxable year, not more than 25% of the value of its assets
may be invested in securities (other than U.S. Government securities or the
securities of other RICs) of any one issuer, or of two or more issuers which are
engaged in the same, similar or related trades or business if the Fund owns at
least 20% of the voting power of such issuer.

Notwithstanding the Distribution Requirement described above, which requires
only that the Fund distribute at least 90% of its annual investment company
taxable income and does not require any minimum distribution of net capital gain
(the excess of net long-term capital gain over net short-term capital loss), the
Funds will be subject to a nondeductible 4% federal excise tax to the extent it
fails to distribute by the end of any calendar year 98% of its ordinary income
for that year and 98% of its capital gain net income (the excess of short- and
long-term capital gains over short-and long-term capital losses) for the
one-year period ending on October 31 of that year, plus certain other amounts.

Each Fund intends to make sufficient distributions to avoid liability for the
federal excise tax. A Fund may in certain circumstances be required to liquidate
Fund investments in order to make sufficient distributions to avoid federal
excise tax liability at a time when the investment advisor might not otherwise
have chosen to do so, and liquidation of investments in such circumstances may
affect the ability of a Fund to satisfy the requirements for qualification as a
RIC.

S-33

<PAGE>

eighteen months, and otherwise will be treated as short-term capital gain or
loss. However, if shares on which a shareholder has received a net capital gain
distribution are subsequently sold, exchanged or redeemed and such shares have
been held for six months or less, any loss recognized will be treated as a
long-term capital loss to the extent of the net capital gain distribution.
Long-term capital gains are currently taxed at a maximum rate of 20%, mid-term
capital gains are currently taxed at a maximum rate of 28%, and short-term
capital gains are currently taxed at ordinary income tax rates.

In certain cases, a Fund will be required to withhold, and remit to the United
States Treasury, 31% of any distributions paid to a shareholder who (1) has
failed to provide a correct taxpayer identification number, (2) is subject to
backup withholding by the Internal Revenue Service, or (3) has not certified to
that Fund that such shareholder is not subject to backup withholding.

If any Fund fails to qualify as a RIC for any taxable year, it will be taxable
at regular corporate rates. In such an event, all distributions (including
capital gains distributions) will be taxable as ordinary dividends to the extent
of the Fund's current and accumulated earnings and profits, and such
distributions may generally be eligible for the corporate dividends-received
deduction.

Funds may, in certain circumstances involving tax-free reorganizations, accept
securities that are appropriate investments as payment for Fund shares (an
"In-Kind Purchase"). An In-Kind Purchase may result in adverse tax consequences
under certain circumstances to either the investors transferring securities for
shares (an "In-Kind Investors") or to investors who acquire shares of the Fund
after a transfer (Anew shareholders@). As a result of an In-Kind Purchase, the
Funds may acquire securities that have appreciated in value or depreciated in
value from the date they were acquired. If appreciated securities were to be
sold after an In-Kind Purchase, the amount of the gain would be taxable to new
shareholders as well as to In-Kind Investors. The effect of this for new
shareholders would be to tax them on a distribution that represents a return of
the purchase price of their shares rather than an increase in the value of their
investment. The effect on In-Kind Investors would be to reduce their potential
liability for tax on capital gains by spreading it over a larger asset base. The
opposite may occur if the Funds acquire securities having an unrealized capital
loss. In that case, In-Kind Investors will be unable to utilize the loss to
offset gains, but, because an In-Kind Purchase will not result in any gains, the
inability of In-Kind Investors to utilize unrealized losses will have no
immediate tax effect. For new shareholders, to the extent that unrealized losses
are realized by the Funds, new shareholders may benefit by any reduction in net
tax liability attributable to the losses. The Adviser cannot predict whether
securities acquired in any In-Kind Purchase will have unrealized gains or losses
on the date of the In-Kind Purchase. Consistent with its duties as investment
adviser, the Adviser will, however, take tax consequences to investors into
account when making decisions to sell portfolio assets, including the impact of
realized capital gains on shareholders of the Funds.

STATE TAXES

No Fund is liable for any income or franchise tax in Massachusetts if it
qualifies as a RIC for federal income tax purposes. Distributions by any Fund to
shareholders and the ownership of shares may be subject to state and local
taxes.

S-34

<PAGE>

PORTFOLIO TRANSACTIONS

The Adviser is authorized to select brokers and dealers to effect securities
transactions for the Funds. The Adviser will seek to obtain the most favorable
net results by taking into account various factors, including price, commission,
if any, size of the transactions and difficulty of executions, the firm's
general execution and operational facilities and the firm's risk in positioning
the securities involved. While the Adviser generally seeks reasonably
competitive spreads or commissions, a Fund will not necessarily be paying the
lowest spread or commission available. The Adviser seeks to select brokers or
dealers that offer a Fund best price and execution or other services which are
of benefit to the Fund.

The Adviser may, consistent with the interests of the Funds, select brokers on
the basis of the research services they provide to the Adviser. Such services
may include analyses of the business or prospects of a company, industry or
economic sector, or statistical and pricing services. Information so received by
the Adviser will be in addition to and not in lieu of the services required to
be performed by the Adviser under the Advisory Agreement. If, in the judgment of
the Adviser, a Fund or other accounts managed by the Adviser will be benefitted
by supplemental research services, the Adviser is authorized to pay brokerage
commissions to a broker furnishing such services which are in excess of
commissions which another broker may have charged for effecting the same
transaction. These research services include advice, either directly or through
publications or writings, as to the value of securities, the advisability of
investing in, purchasing or selling securities, and the availability of
securities or purchasers or sellers of securities; furnishing of analyses and
reports concerning issuers, securities or industries; providing information on
economic factors and trends; assisting in determining portfolio strategy;
providing computer software used in security analyses; and providing portfolio
performance evaluation and technical market analyses. The expenses of the
Adviser will not necessarily be reduced as a result of the receipt of such
supplemental information, such services may not be used exclusively, or at all,
with respect to a Fund or account generating the brokerage, and there can be no
guarantee that the Adviser will find all of such services of value in advising
that Fund.

It is expected that the Funds may execute brokerage or other agency transactions
through the Distributor, which is a registered broker-dealer, for a commission
in conformity with the 1940 Act, the Securities Exchange Act of 1934 and rules
promulgated by the SEC. Under these provisions, the Distributor is permitted to
receive and retain compensation for effecting portfolio transactions for a Fund
on an exchange if a written contract is in effect between the Trust and the
Distributor expressly permitting the Distributor to receive and retain such
compensation. These rules further require that commissions paid to the
Distributor by a Fund for exchange transactions not exceed "usual and customary"
brokerage commissions. The rules define "usual and customary" commissions to
include amounts which are "reasonable and fair compared to the commission, fee
or other remuneration received or to be received by other brokers in connection
with comparable transactions involving similar securities being purchased or
sold on a securities exchange during a comparable period of time." The Trustees,
including those who are not "interested persons" of the Trust, have adopted
procedures for evaluating the reasonableness of commissions paid to the
Distributor and will review these procedures periodically.

Because no Fund markets its shares through intermediary brokers or dealers, it
is not the Funds' practice to allocate brokerage or principal business on the
basis of sales of its shares which may be

S-35

<PAGE>

made through such firms. However, the Adviser may place portfolio orders with
qualified broker-dealers who recommend a Fund's shares to clients, and may, when
a number of brokers and dealers can provide best net results on a particular
transaction, consider such recommendations by a broker or dealer in selecting
among broker-dealers.

For the fiscal years ended September 30, 1996, 1997, and 1998, the Funds
turnover rates were as follows:

- - -------------------------------------------------------------------------------
TURNOVER RATE
-------------------------------------------
1996 1997 1998
- - -------------------------------------------------------------------------------
Ultra Large Cap Fund * 346.47%
- - -------------------------------------------------------------------------------
Growth Equity Fund 147.79% 178.21%
- - -------------------------------------------------------------------------------
Midcap Fund * 348.29%
- - -------------------------------------------------------------------------------
Small Cap Fund 149.00% 130.68%
- - -------------------------------------------------------------------------------
Micro Cap Fund
- - -------------------------------------------------------------------------------
Fixed Income Fund * *
- - -------------------------------------------------------------------------------
Short Duration
Government Fund-
One Year Portfolio
- - -------------------------------------------------------------------------------
Short Duration
Government Fund-
Three Year Portfolio
- - -------------------------------------------------------------------------------

* Not in operation during the period.

The Brokerage Commissions paid for each Fund for the fiscal years ended
September 30, 1996, 1997, and 1998 were as follows:

S-36

<PAGE>

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

Total Dollar Amount of Brokerage Commissions Paid
-----------------------------------------------------
1996 1997 1998
- - -------------------------------------------------------------------------------
Ultra Large Cap Fund * $ 2,586
- - -------------------------------------------------------------------------------
Growth Equity Fund $369,573 $335,291
- - -------------------------------------------------------------------------------
Midcap Fund * $ 17,029
- - -------------------------------------------------------------------------------
Small Cap Fund $128,154 $235,029
- - -------------------------------------------------------------------------------
Micro Cap Fund
- - -------------------------------------------------------------------------------
Fixed Income Fund * *
- - -------------------------------------------------------------------------------
Short Duration
Government Fund-
One Year Portfolio
- - -------------------------------------------------------------------------------
Short Duration
Government Fund-
Three Year Portfolio
- - -------------------------------------------------------------------------------
Target Select Equity
- - -------------------------------------------------------------------------------

* Not in operation during the period.

DESCRIPTION OF SHARES

The Declaration of Trust authorizes the issuance of an unlimited number of
portfolios and shares of each portfolio. Each share of a portfolio represents an
equal proportionate interest in that portfolio with each other share. Shares are
entitled upon liquidation to a pro rata share in the net assets of the
portfolio. Shareholders have no preemptive rights. All consideration received by
the Trust for shares of any portfolio and all assets in which such consideration
is invested would belong to that portfolio and would be subject to the
liabilities related thereto. Share certificates representing shares will not be
issued.

S-37

<PAGE>

SHAREHOLDER LIABILITY

The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust could, under
certain circumstances, be held personally liable as partners for the obligations
of the trust. Even if, however, the Trust were held to be a partnership, the
possibility of the shareholders' incurring financial loss for that reason
appears remote because the Trust's Declaration of Trust contains an express
disclaimer of shareholder liability for obligations of the Trust, and requires
that notice of such disclaimer be given in each agreement, obligation or
instrument entered into or executed by or on behalf of the Trust or the
Trustees, and because the Declaration of Trust provides for indemnification out
of the Trust property for any shareholder held personally liable for the
obligations of the Trust.

LIMITATION OF TRUSTEES' LIABILITY

The Declaration of Trust provides that a Trustee shall be liable only for his
own willful defaults and, if reasonable care has been exercised in the selection
of officers, agents, employees or investment advisers, shall not be liable for
any neglect or wrongdoing of any such person. The Declaration of Trust also
provides that the Trust will indemnify its Trustees and officers against
liabilities and expenses incurred in connection with actual or threatened
litigation in which they may be involved because of their offices with the Trust
unless it is determined in the manner provided in the Declaration of Trust that
they have not acted in good faith in the reasonable belief that their actions
were in the best interests of the Trust. However, nothing in the Declaration of
Trust shall protect or indemnify a Trustee against any liability for his willful
misfeasance, bad faith, gross negligence or reckless disregard of his duties.

5% SHAREHOLDERS

As of January 5,1999, the following persons were the only persons who were
record owners (or to the knowledge of the Trust, beneficial owners) of 5% or
more of the shares of the Portfolios. The Trust believes that most of the shares
referred to below were held by the persons indicated in accounts for their
fiduciary, agency, or custodial customers.

Name and Address Number of Shares Percent of Funds
- - ---------------- ---------------- ----------------

FINANCIAL STATEMENTS

The Trust's financial statements for the fiscal year ended September 30, 1998,
including notes thereto and the report of Ernst & Young LLP thereon, are herein
incorporated by reference. A copy of the 1998 Annual Report must accompany the
delivery of this Statement of Additional Information.

EXPERTS

LEGAL COUNSEL

Morgan, Lewis & Bockius LLP, serves as counsel to the Trust.

S-38

<PAGE>

APPENDIX

The following descriptions are summaries of published ratings.

DESCRIPTION OF CORPORATE BOND RATINGS

Bonds rated AAA have the highest rating S&P assigns to a debt obligation. Such a
rating indicates an extremely strong capacity to pay principal and interest.
Bonds rated AA by S&P also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and differs from AAA issues only in
small degree. Debt rated A by S&P 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.

Bonds rated BBB by S&P 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.

Bonds rated Aaa by Moody's 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. Bonds rated Aa by Moody's are
judged by Moody's to be of high quality by all standards. Together with bonds
rated Aaa, they comprise what are generally known as high-grade bonds. They are
rated lower than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risk appear somewhat larger than in Aaa securities.

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

A-1

<PAGE>

developments, short-term debt of these issuers is generally rated F-1+. Bonds
rated A by Fitch are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is considered
to be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings. Bonds rated BBB by
Fitch are 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.

Bonds rated AAA by Duff are judged by Duff to be of the highest credit quality,
with negligible risk factors being only slightly more than for risk-free U.S.
Treasury debt. Bonds rated AA by Duff are judged by Duff to be of high credit
quality with strong protection factors and risk that is modest but that may vary
slightly from time to time because of economic conditions. Bonds rated A by Duff
are judged by Duff to have average but adequate protection factors. However,
risk factors are more variable and greater in periods of economic stress. Bonds
rated BBB by Duff are judged by Duff as having below average protection factors
but still considered sufficient for prudent investment, with considerable
variability in risk during economic cycles.

Obligations rated AAA by IBCA have the lowest expectation of investment risk.
Capacity for timely repayment of principal and interest is substantial, such
that adverse changes in business, economic or financial conditions are unlikely
to increase investment risk significantly. Obligations for which there is a very
low expectation of investment risk are rated AA by IBCA. Capacity for timely
repayment of principal and interest is substantial. Adverse changes in business,
economic or financial conditions may increase investment risk albeit not very
significantly. Obligations for which there is a low expectation on investment
risk are rated A by IBCA. Capacity for timely repayment of principal and
interest is strong, although adverse changes in business, economic or financial
conditions may lead to increased investment risk. Obligations for which there is
currently a low expectation of investment risk are rated BBB by IBCA. Capacity
for timely repayment of principal and interest is adequate, although adverse
changes in business, economic or financial conditions are more likely to lead to
increased investment risk than for obligations in higher categories.

DESCRIPTION OF COMMERCIAL PAPER RATINGS

Commercial paper rated A by Standard & Poor's Corporation ("S&P") is regarded by
S&P as having the greatest capacity for timely payment. Issues rated A are
further refined by use of the numbers 1, 1+, and 2 to indicate the relative
degree of safety. Issues rated A-1+ are those with an "overwhelming degree" of
credit protection. Those rated A-1, the highest rating category, reflect a "very
strong" degree of safety regarding timely payment. Those rated A-2, the second
highest rating category, reflect a satisfactory degree of safety regarding
timely payment but not as high as A-1.

Commercial paper issues rated Prime-1 or Prime-2 by Moody's Investors Service,
Inc. ("Moody's") are judged by Moody's to be of "superior" quality and "strong"
quality respectively on the basis of relative repayment capacity.

F-1+ (Exceptionally Strong) is the highest commercial paper rating Fitch
assigns; paper rated F- 1+ is regarded as having the strongest degree of
assurance for timely payment. Paper rated F-1

A-2

<PAGE>

(Very Strong) reflects an assurance of timely payment only slightly less in
degree than paper rated F-1+. The rating F-2 (Good) reflects a satisfactory
degree of assurance for timely payment, but the margin of safety is not as great
as for issues rated F-1+ or F-1.

The rating Duff-1 is the highest commercial paper rating assigned by Duff. Paper
rated Duff-1 is regarded as having very high certainty of timely payment with
excellent liquidity factors which are supported by good fundamental protection
factors. Risk factors are minor. Duff has incorporated gradations of 1+ and 1-
to assist investors in recognizing quality differences within this highest tier.
Paper rated Duff-1+ has the highest certainty of timely payment, with
outstanding short-term liquidity and safety just below risk-free U.S. Treasury
short-term obligations. Paper rated Duff-1- has high certainty of timely payment
with strong liquidity factors which are supported by good fundamental protection
factors. Risk factors are very small. Paper rated Duff-2 is regarded as having
good certainty of timely payment, good access to capital markets (although
ongoing funding may enlarge total financing requirements) and sound liquidity
factors and company fundamentals. Risk factors are small.

The designation A1, the highest rating by IBCA, indicates that the obligation is
supported by a strong capacity for timely repayment. Those obligations rated A1+
are supported by the highest capacity for timely repayment. Obligations rated
A2, the second highest rating, are supported by a satisfactory capacity for
timely repayment, although such capacity may be susceptible to adverse changes
in business, economic or financial conditions.

A-3

<PAGE>

TIP FUNDS

FUNDS:
CLOVER SMALL CAP VALUE FUND
CLOVER EQUITY VALUE FUND
CLOVER MAX CAP VALUE FUND
CLOVER FIXED INCOME FUND

INVESTMENT ADVISER:
CLOVER CAPITAL MANAGEMENT, INC.

This Statement of Additional Information is not a prospectus and relates only to
the Clover Small Cap Value Fund (the "Small Cap Value Fund"), Clover Equity
Value Fund (the "Equity Value Fund"), Clover Max Cap Value Fund (the "Small Max
Value Fund"), and Clover Fixed Income Fund (the "Fixed Income Fund") (each a
"Fund" and, together, the "Funds"). It is intended to provide additional
information regarding the activities and operations of the TIP Funds (the
"Trust") and should be read in conjunction with the Funds' Prospectus dated
January 31, 1999. The Prospectus may be obtained without charge by calling
1-800-224-6312.
TABLE OF CONTENTS

THE TRUST ....................................................................
INVESTMENT OBJECTIVES.........................................................
INVESTMENT POLICIES...........................................................
RISK FACTORS..................................................................
DESCRIPTION OF PERMITTED INVESTMENTS..........................................
INVESTMENT LIMITATIONS........................................................
THE ADVISER...................................................................
THE ADMINISTRATOR.............................................................
THE DISTRIBUTOR...............................................................
TRUSTEES AND OFFICERS OF THE TRUST............................................
COMPUTATION OF YIELD AND TOTAL RETURN.........................................
PURCHASE AND REDEMPTION OF SHARES.............................................
DETERMINATION OF NET ASSET....................................................
TAXES.........................................................................
PORTFOLIO TRANSACTIONS........................................................
DESCRIPTION OF SHARES.........................................................
SHAREHOLDER LIABILITY.........................................................
LIMITATION OF TRUSTEES' LIABILITY.............................................
5% SHAREHOLDERS...............................................................
FINANCIAL STATEMENTS..........................................................
EXPERTS.......................................................................
LEGAL COUNSEL.................................................................
APPENDIX......................................................................
January 31, 1999

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THE TRUST

This Statement of Additional Information relates only to the Clover Small Cap
Value Fund (the "Small Cap Value Fund"), Clover Equity Value Fund (the "Equity
Value Fund"), Clover Max Cap Value Fund (the "Max Cap Value Fund"), and Clover
Fixed Income Fund (the "Fixed Income Fund") (each a "Fund" and, together, the
"Funds"). Each Fund is a separate series of the TIP Funds (the "Trust"), a
diversified, open-end management investment company established as a
Massachusetts business trust under a Declaration of Trust dated January 26,
1996, as amended on February 21, 1997. The Declaration of Trust permits the
Trust to offer separate series ("portfolios") of shares of beneficial interest
("shares"). Each portfolio is a separate mutual fund, and each share of each
portfolio represents an equal proportionate interest in that portfolio. On June
25, 1997, the Equity Value, Small Cap Value and Fixed Income Funds acquired
substantially all of the assets and liabilities of the Clover Capital Equity,
Clover Capital Small Cap and Clover Capital Fixed Income Portfolios
(collectively, the "Clover Capital Portfolios") of The Advisors' Inner Circle
Fund. The Trust also offers shares in the Turner Ultra Large Cap Growth Fund,
Turner Growth Equity Fund, Turner Midcap Growth Fund, Turner Small Cap Growth
Fund, Turner Micro Cap Growth Fund, Turner Fixed Income Fund, Turner Short
Duration Government Funds-One Year Portfolio, Turner Short Duration Government
Funds-Three Year Portfolio, TIP Target Select Equity Fund, Penn Capital
Strategic High Yield Bond Fund, Penn Capital Select Financial Services Fund, and
Penn Capital Value Plus Fund. Capitalized terms not defined herein are defined
in the Prospectus offering shares of the Funds.

INVESTMENT OBJECTIVES

SMALL CAP VALUE FUND -- The Small Cap Value Fund seeks long-term total return.

EQUITY VALUE FUND -- The Equity Value Fund seeks long-term total return.

MAX CAP VALUE FUND -- The Max Cap Value Fund seeks long-term total return.

FIXED INCOME FUND -- The Fixed Income Fund seeks a high level of income
consistent with reasonable risk to capital.

There can be no assurance that any Fund will achieve its investment objective.

INVESTMENT POLICIES

SMALL CAP VALUE FUND

Under normal market conditions, the Small Cap Value Fund invests at least 75%
and up to 100% of its total assets in a diversified portfolio of equity
securities of U.S. issuers that

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have market capitalizations of $750 million or less at the time of purchase,
including common stocks, warrants and rights to subscribe to common stocks,
equity interests issued by REITs, and both debt securities and preferred stocks
convertible into common stocks. The Small Cap Value Fund may invest in such
convertible debt securities without regard to their term or rating and may, from
time to time, invest in corporate debt securities rated below investment grade,
i.e., rated lower than BBB by Standard & Poors Corporation ("S&P"), Baa by
Moody's Investors Service Inc. ("Moody's"), or unrated securities of comparable
quality as determined by the Adviser.

The Adviser employs database screening techniques to search the universe of
domestic public companies for stocks trading in the bottom 20% of valuation
parameters such as stock price-to-book value, price-to-cash flow,
price-to-earnings and price-to-sales. From these stocks the Adviser selects a
diversified group of securities for investment by utilizing additional screening
and selection strategies to identify the companies that the Adviser believes are
more financially stable. In addition, the Fund may include holdings in issuers
that may not have been identified during the initial screening process but that
the Adviser has identified using its value-oriented fundamental research
techniques. In addition, the Fund may invest up to 10% of its net assets in
ADRs.

All of the equity securities (including ADRs) in which the Fund invests are
traded on registered exchanges or the over-the-counter market in the United
States.

Any remaining assets may be invested in (i) the equity securities described
above of U.S. issuers that have market capitalizations exceeding $750 million at
the time of purchase,
and (ii) Money Market Instruments.

EQUITY VALUE FUND

The Equity Value Fund will invest primarily in equity securities that the
Adviser believes to be undervalued relative to the market or their historic
valuation. The Adviser uses several valuation criteria to determine if a
security is undervalued, including price-to-earnings ratios, price-to-cash flow
ratios, price-to-sales ratios, and price-to-book value ratios. In addition, the
Adviser examines "hidden values" that are not obvious in a company's financial
reports, focusing on finding the current asset values or current transfer values
of assets held by the company.

Under normal market conditions, the Equity Value Fund invests at least 70% and
up to 100% of its net assets in a diversified portfolio of equity securities,
including common stocks, both debt securities and preferred stocks convertible
into common stocks, and ADRs (up to 20% of the Equity Value Fund's net assets).
In addition to these equity securities, the Fund may also invest up to 5% of its
net assets in each of warrants and rights to purchase common stocks, and up to
10% of its net assets in real estate investment trusts ("REITs"). Assets of the
Fund not invested in the equity securities

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described above may be invested in non-convertible fixed income securities and
Money Market Instruments as described below.

All of the equity securities (including ADRs) in which the Fund invests are
traded on registered exchanges or the over-the-counter market in the United
States.

During periods when, or under circumstances where, the Adviser believes that the
return on such securities may equal or exceed the return on equity securities,
the Fund may invest up to 25% of its net assets in non-convertible fixed income
securities consisting of corporate debt securities and obligations issued or
guaranteed as to principal and interest by the U.S. Government or its agencies
or instrumentalities. The Fund may invest in such securities without regard to
their term or rating and may, from time to time, invest in corporate debt
securities rated below investment grade, i.e., rated lower than BBB or Baa by
Moody's Investor Service, Inc. ("Moody's"), or unrated securities of comparable
quality as determined by the Adviser.

Under normal circumstances, up to 30% of the Equity Value Fund's assets may be
invested in Money Market Instruments in order to maintain liquidity, or if the
Adviser determines that securities meeting the Fund's investment objective and
policies are not otherwise reasonably available for purchase.

MAX CAP VALUE FUND

The Max Cap Value Fund invests primarily in large-capitalization equities with
low valuations based on measures such as book value and cash flow. Clover
Capital Management, Inc. (the "Adviser"), will attempt to acquire securities
that have attractive dividend yields relative to the market average and/or their
own trading history.

The Max Cap Value Fund invests at least 75% of its assets in a diversified
portfolio chosen from the 500 largest capitalization equities (currently, $5
billion and above) where the stock price is low relative to book value and cash
flow as compared to the average large capitalization stock. The Adviser
evaluates these large- capitalization domestic companies and searches for stocks
valued in the lowest third based on book value and cash flow. From these
candidates, the companies with adequate financial strength and higher dividend
yields are chosen for investment. The Adviser may also choose stocks whose
primary attractive feature is a current dividend yield which is high relative to
the stocks' historic yield range.

Up to 25% of the Max Cap Value Fund's assets may be invested in
attractively-valued companies whose market capitalizations fall below the top
500 (i.e., below $5 billion). In addition, up to 10% of the Fund may be invested
in ADRs whose market capitalizations fall
among the top 100 in available ADRs.

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During periods when, or under circumstances where, the Adviser believes that the
return on non-convertible fixed income securities may equal or exceed the return
on equity securities, the Fund may invest up to 25% of its net assets in
non-convertible fixed income securities consisting of corporate debt securities
and obligations issued or guaranteed as to principal and interest by the U.S.
Government or its agencies or instrumentalities. The Fund may invest in such
securities without regard to their term or rating and may, from time to time,
invest in corporate debt securities rated below investment grade, i.e., rated
lower than BBB by S&P and/or Baa by Moody's or in unrated securities of
comparable quality as determined by the Adviser. Such high-yield, high-risk
securities are also known as "junk bonds." The Fund's exposure to junk bonds,
including convertible securities rated below investment grade, will not exceed
25% of its total assets.

Under normal circumstances, up to 25% of the Max Cap Value Fund's assets may be
invested in the Money Market Instruments described below in order to maintain
liquidity, or if the Adviser determines that securities meeting the Fund's
investment objective and policies are not otherwise reasonably available for
purchase. For temporary defensive purposes during periods when the Adviser
determines that market conditions warrant, the Fund may invest up to 100% of its
assets in Money Market Instruments and in cash.

FIXED INCOME FUND

Under normal market conditions, the Fixed Income Fund invests at least 70% of
its net assets in the following fixed income securities: (i) obligations issued
or guaranteed as to principal and interest by the U.S. Government, its agencies
or instrumentalities ("U.S. Government Securities"); (ii) corporate bonds and
debentures rated in one of the four highest rating categories; and (iii)
mortgage-backed securities that are collateralized mortgage obligations ("CMOs")
or real estate mortgage investment conduits ("REMICs") rated in one of the two
highest rating categories. The Fund will invest in such corporate bonds and
debentures, CMOs or REMICs only if, at the time of purchase, the security either
has the requisite rating from S&P or Moody's or is unrated but of comparable
quality as determined by the Adviser. Governmental private guarantees do not
extend to the securities' value, which is likely to vary inversely with
fluctuations in interest rates.

The Fund may invest its remaining assets in the following securities: (i) Money
Market Instruments, (ii) asset-backed securities rated A or higher by S&P or
Moody's; (iii) debt securities rated below investment grade, but not lower than
B- by S&P or B3 by Moody's, or if unrated, determined by the Adviser to be of
comparable quality at the time of purchase (up to 15% of the Fund's net assets,
including downgraded securities); (iv) debt securities convertible into common
stocks (up to 10% of the Fund's net assets); (v) U.S. dollar denominated fixed
income securities issued by foreign corporations or issued or guaranteed by
foreign governments, their political subdivisions, agencies or
instrumentalities; and (vi) U.S. dollar denominated obligations of supranational
entities

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traded in the United States. For additional information on corporate bond
ratings, see the Appendix.

The relative proportions of the Fund's net assets invested in the different
types of permissible investments will vary from time to time depending upon the
Adviser's assessment of the relative market value of the sectors in which the
Fund invests. In addition, the Fund may purchase securities that are trading at
a discount from par when the Adviser believes there is a potential for capital
appreciation. The Adviser does not seek to achieve the Fund's investment
objective by forecasting changes in the interest rate environment.

In the event any security owned by the Fund is downgraded below the rating
categories set forth above, the Adviser will review the situation and determine
whether to retain or dispose of the security.

The Fund may enter into forward commitments or purchase securities on a
when-issued basis, and may invest in variable or floating rate obligations.

The Fund expects to maintain a dollar-weighted average portfolio maturity of
five to ten years.

ALL FUNDS

Each Fund may purchase securities on a when-issued basis.

Each Fund may enter into futures and options transactions.

Each Fund may invest up to 15% of its net assets in illiquid securities.

Each Fund may purchase convertible securities.

For temporary defensive purposes during periods when the Adviser determines that
market conditions warrant, each Fund may invest up to 100% of its assets in
Money Market Instruments and in cash.

RISK FACTORS

PORTFOLIO TURNOVER

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YEAR 2000

The Trust depends on the smooth functioning of computer systems in almost every
aspect of its business. Like other mutual funds, businesses and individuals
around the world, the Trust could be adversely affected if the computer systems
used by its service providers do not properly process dates on and after January
1, 2000 and distinguish between the year 2000 and the year 1900. The Trust has
asked its service providers whether they expect to have their computer systems
adjusted for the year 2000 transition, and has received assurances from each
that its system is expected to accommodate the year 2000 without material
adverse consequences to the Trust. The Trust and its shareholders may experience
losses if these assurances prove to be incorrect or as a result of year 2000
computer difficulties experienced by issuers of portfolio securities or third
parties, such as custodians, banks, broker-dealers or others with which the
Trust does business.

DESCRIPTION OF PERMITTED INVESTMENTS

AMERICAN DEPOSITARY RECEIPTS ("ADRS")

ASSET-BACKED SECURITIES

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of credit issued by a financial institution (such as a bank or insurance
company) unaffiliated with the issuers of such securities. The purchase of
asset-backed securities raises risk considerations peculiar to the financing of
the instruments underlying such securities. For example, there is a risk that
another party could acquire an interest in the obligations superior to that of
the holders of the asset-backed securities. There also is the possibility that
recoveries on repossessed collateral may not, in some cases, be available to
support payments on those securities. Asset-backed securities entail prepayment
risk, which may vary depending on the type of asset, but is generally less than
the prepayment risk associated with mortgage-backed securities. In addition,
credit card receivables are unsecured obligations of card holders.

CONVERTIBLE SECURITIES

DERIVATIVES

Derivatives are securities that derive their value from other securities,
financial instruments or indices. The following are considered derivative
securities: options on futures, futures, options (e.g., puts and calls), swap
agreements, mortgage-backed securities (e.g., CMOs, REMICs, IOs and POs),
when-issued securities and forward commitments, floating and variable rate
securities, convertible securities, "stripped" U.S. Treasury securities (e.g.,
Receipts and STRIPs), privately issued stripped securities (e.g., TGRs, TRs, and
CATs). See elsewhere in the "Description of Permitted Investments and Risk
Factors" and in the Statement of Additional Information for discussions of these
various instruments.

DERIVATIVES

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FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS

Stock and bond index futures contracts are bilateral agreements pursuant to
which two parties agree to take or make delivery of an amount of cash equal to a
specified dollar amount times the difference between the stock or bond index
value at the close of trading of the contract and the price at which the futures
contract is originally struck. No physical delivery of the stocks or bonds
comprising the Index is made; generally contracts are closed out prior to the
expiration date of the contracts.

There are risks associated with these activities, including the following: (1)
the success of a hedging strategy may depend on an ability to predict movements
in the prices of individual securities, fluctuations in markets and movements in
interest rates; (2) there may be an imperfect or no correlation between the
changes in market value of the securities held by a Fund and the prices of
futures and options on futures; (3) there may not be a liquid secondary market
for a futures contract or option; (4) trading restrictions or limitations may be
imposed by an exchange; and (5) government regulations may restrict trading in
futures contracts and futures options.

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In order to avoid leveraging and related risks, when a Fund purchases futures
contracts, it will collateralize its position by depositing an amount of cash or
liquid securities equal to the market value of the futures positions held, less
margin deposits, in a segregated account with its custodian. Collateral equal to
the current market value of the futures position will be marked to market on a
daily basis.

ILLIQUID SECURITIES

JUNK BONDS

Bonds rated below investment grade are often referred to as "junk bonds." Such
securities involve greater risk of default or price declines than investment
grade securities due to changes in the issuer's creditworthiness and the outlook
for economic growth. The market for these securities may be less active, causing
market price volatility and limited liquidity in the secondary market. This may
limit a Fund's ability to sell such securities at their market value. In
addition, the market for these securities may also be adversely affected by
legislative and regulatory developments. Credit quality in the junk bond market
can change suddenly and unexpectedly, and even recently-issued credit ratings
may not fully reflect the actual risks imposed by a particular security.

MONEY MARKET INSTRUMENTS

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the U.S. Government; (iii) high-quality commercial paper issued by U.S. and
foreign corporations; (iv) debt obligations with a maturity of one year or less
issued by corporations with outstanding high-quality commercial paper ratings;
and (v) repurchase agreements involving any of the foregoing obligations entered
into with highly-rated banks
and broker-dealers.

MORTGAGE- AND ASSET-BACKED SECURITIES

GOVERNMENT PASS-THROUGH SECURITIES: These are securities that are issued or
guaranteed by a U.S. Government agency representing an interest in a pool of
mortgage loans. The primary issuers or guarantors of these mortgage-backed
securities are the Government National Mortgage Association ("GNMA"), Fannie Mae
and the Federal Home Loan Mortgage Corporation ("FHLMC"). Fannie Mae and FHLMC
obligations are not backed by the full faith and credit of the U.S. Government
as GNMA certificates are, but Fannie Mae and FHLMC securities are supported by
the instrumentalities' right to borrow from the U.S. Treasury. GNMA, Fannie Mae
and FHLMC each guarantee timely distributions of interest to certificate
holders. GNMA and Fannie Mae also each guarantee timely distributions of
scheduled principal. FHLMC has in the past guaranteed only the ultimate
collection of principal of the underlying mortgage loan; however, FHLMC now
issues mortgage-backed securities (FHLMC Gold PCS) which also guarantee timely
payment of monthly principal reductions. Government and private guarantees do
not extend to the securities' value, which is likely to vary inversely with
fluctuations in interest rates.

PRIVATE PASS-THROUGH SECURITIES: These are mortgage-backed securities issued by
a non-governmental entity, such as a trust. These securities include CMOs and
REMICs that are rated in one of the top two rating categories. While they are
generally structured with one or more types of credit enhancement, private
pass-through securities typically lack a guarantee by an entity having the
credit status of a governmental agency or instrumentality.

CMOS: CMOs are debt obligations of multiclass pass-through certificates issued
by agencies or instrumentalities of the U.S. Government or by private
originators or investors

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in mortgage loans. In a CMO, series of bonds or certificates are usually issued
in multiple classes. Principal and interest paid on the underlying mortgage
assets may be allocated among the several classes of a series of a CMO in a
variety of ways. Each class of a CMO, often referred to as a "tranche," is
issued with a specific fixed or floating coupon rate and has a stated maturity
or final distribution date. Principal payments on the underlying mortgage assets
may cause CMOs to be retired substantially earlier than their stated maturities
or final distribution dates, resulting in a loss of all or part of any premium
paid.

REMICS: REMICs, which were authorized under the Tax Reform Act of 1986, are
private entities formed for the purpose of holding a fixed pool of mortgages
secured by an interest in real property. REMICs are similar to CMOs in that they
issue multiple classes of securities. A REMIC is a CMO that qualifies for
special tax treatment under the Code and invests in certain mortgages
principally secured by interests in real property. Investors may purchase
beneficial interests in REMICs, which are known as "regular" interests, or
"residual" interests. Guaranteed REMIC pass-through certificates ("REMIC
Certificates") issued by Fannie Mae or FHLMC represent beneficial ownership
interests in a REMIC trust consisting principally of mortgage loans or Fannie
Mae, FHLMC or GNMA-guaranteed mortgage pass-through certificates. For FHLMC
REMIC Certificates, FHLMC guarantees the timely payment of interest, and also
guarantees the payment of principal as payments are required to be made on the
underlying mortgage participation certificates. Fannie Mae REMIC Certificates
are issued and guaranteed as to timely distribution of principal and interest by
Fannie Mae.

PARALLEL PAY SECURITIES; PAC BONDS: Parallel pay CMOs and REMICs are structured
to provide payments of principal on each payment date to more than one class.
These simultaneous payments are taken into account in calculating the stated
maturity date or final distribution date of each class, which must be retired by
its stated maturity date or final distribution date, but may be retired earlier.
Planned Amortization Class CMOs ("PAC Bonds") generally require payments of a
specified amount of principal on each payment date. PAC Bonds are always
parallel pay CMOs with the required principal payment on such securities having
the highest priority after interest has been paid to all classes.

STRIPPED MORTGAGE-BACKED SECURITIES ("SMBS"): SMBs are usually structured with
two classes that receive specified proportions of the monthly interest and
principal payments from a pool of mortgage securities. One class may receive all
of the interest payments and is thus termed an interest-only class ("IO"), while
the other class may receive all of the principal payments and is thus termed the
principal-only class ("PO"). The value of IOs tends to increase as rates rise
and decrease as rates fall; the opposite is true of POs. SMBs are extremely
sensitive to changes in interest rates because of the impact thereon of
prepayment of principal on the underlying mortgage securities. The market for
SMBs is not as fully developed as other markets; SMBs therefore may be illiquid.

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ADDITIONAL RISK FACTORS: Due to the possibility of prepayments of the underlying
mortgage instruments, mortgage-backed securities generally do not have a known
maturity. In the absence of a known maturity, market participants generally
refer to an estimated average life. An average life estimate is a function of an
assumption regarding anticipated prepayment patterns, based upon current
interest rates, current conditions in the relevant housing markets and other
factors. The assumption is necessarily subjective, and thus different market
participants can produce different average life estimates with regard to the
same security. There can be no assurance that estimated average life will be a
security's actual average life.

OBLIGATIONS OF SUPRANATIONAL AGENCIES

The Fixed Income Fund may purchase obligations of supranational agencies.
Currently, the Fund only intends to invest in obligations issued or guaranteed
by the Asian Development Bank, Inter-American Development Bank, International
Bank for Reconstruction and Development (World Bank), African Development Bank,
European Coal and Steel Community, European Economic Community, European
Investment Bank and Nordic Investment Bank.

OPTIONS

A put option on a security gives the purchaser of the option the right to sell,
and the writer of the option the obligation to buy, the underlying security at
any time during the option period. A call option on a security gives the
purchaser of the option the right to buy, and the writer of the option the
obligation to sell, the underlying security at any time during the option
period. The premium paid to the writer is the consideration for undertaking the
obligations under the option contract. The initial purchase (sale) of an option
contract is an "opening transaction." In order to close out an option position,
a Fund may enter into a "closing transaction," which is simply the sale
(purchase) of an option contract on the same security with the same exercise
price and expiration date as the option contract originally opened. If a Fund is
unable to effect a closing purchase transaction with respect to an option it has
written, it will not be able to sell the underlying security until the option
expires or the Fund delivers the security upon exercise.

A Fund may purchase put and call options to protect against a decline in
the market value of the securities in its portfolio or to anticipate an increase
in the market value of securities that the Fund may seek to purchase in the
future. A Fund purchasing put and call options pays a premium therefor. If price
movements in the underlying securities are such that exercise of the options
would not be profitable for a Fund, loss of the premium paid may be offset by an
increase in the value of the Fund's securities or by a decrease in the cost of
acquisition of securities by the Fund.

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A Fund may write covered call options as a means of increasing its yield
and as a means of providing limited protection against decreases in its market
value. When a Fund sells an option, if the underlying securities do not increase
or decrease to a price level that would make the exercise of the option
profitable to the holder thereof, the option generally will expire without being
exercised and the Fund will realize as profit the premium received for such
option. When a call option written by a Fund is exercised, the Fund will be
required to sell the underlying securities to the option holder at the strike
price, and will not participate in any increase in the price of such securities
above the strike price. When a put option written by a Fund is exercised, the
Fund will be required to purchase the underlying securities at the strike price,
which may be in excess of the market value of such securities.

A Fund may purchase and write put and call options on foreign currencies (traded
on U.S. and foreign exchanges or over-the-counter markets) to manage its
exposure to exchange rates. Call options on foreign currency written by a Fund
will be "covered," which means that the Fund will own an equal amount of the
underlying foreign currency. With respect to put options on foreign currency
written by a Fund, the Fund will establish a segregated account with its
Custodian consisting of cash or liquid, high-grade debt securities in an amount
equal to the amount the Fund would be required to pay upon exercise of the put.

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All options written on securities or indices must be covered. When a Fund writes
an option on an index or a security, it will establish a segregated account
containing cash or liquid securities with its custodian in an amount at least
equal to the market value of the option and will maintain the account while the
option is open or will otherwise cover the transaction.

REITS

The Fixed Income and Small Cap Value Funds may invest in real estate investment
trusts ("REITs"), which pool investors' funds for investment in income-producing
commercial real estate or real-estate related loans or interests.

A REIT is not taxed on income distributed to its shareholders or unitholders if
it complies with regulatory requirements. Equity REITs invest the majority of
their assets directly in real property and derive their income primarily from
rents and capital gains from appreciation realized through property sales. A
shareholder in a Fund should realize that by investing in REITs indirectly
through the Fund, he or she will bear not only his or her proportionate share of
the expenses of the Fund, but also indirectly, similar expenses of underlying
REITs. REITs may be affected by changes in the value of their underlying
properties and by defaults by borrowers or tenants.

A Fund may be subject to certain risks associated with the direct investments of
the REITs. REITs may be affected by changes in the value of their underlying
properties and by

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defaults by borrowers or tenants. Mortgage REITs may be affected by the quality
of the credit extended. Furthermore, REITs are dependent on specialized
management skills. Some REITs may have limited diversification and may be
subject to risks inherent in financing a limited number of properties. REITs
depend generally on their ability to generate cash flow to make distributions to
shareholders or unitholders, and may be subject to defaults by borrowers and to
self-liquidations. In addition, the performance of a REIT may be affected by its
failure to qualify for tax-free pass-through of income under the Code or its
failure to maintain exemption from registration under the 1940 Act.

REPURCHASE AGREEMENTS

Repurchase agreements are agreements by which a Fund obtains a security and
simultaneously commits to return the security to the seller (a member bank of
the Federal Reserve System or primary securities dealer as recognized by the
Federal Reserve Bank of New York) at an agreed-upon price (including principal
and interest) on an agreed-upon date within a number of days (usually not more
than seven) from the date of purchase. The resale price reflects the purchase
price plus an agreed-upon market rate of interest which is unrelated to the
coupon rate or maturity of the underlying security. A repurchase agreement
involves the obligation of the seller to pay the agreed-upon price, which
obligation is in effect secured by the of the underlying security.

Repurchase agreements are considered to be loans by a Fund for purposes of its
investment limitations. The repurchase agreements entered into by a Fund will
provide that the underlying security at all times shall have a value at least
equal to 102% of the resale price stated in the agreement (the Adviser monitors
compliance with this requirement). Under all repurchase agreements entered into
by a Fund, the Trust's Custodian or its agent must take possession of the
underlying collateral. However, if the seller defaults, a Fund could realize a
loss on the sale of the underlying security to the extent that the proceeds of
sale, including accrued interest, are less than the resale price provided in the
agreement including interest. In addition, even though the Bankruptcy Code
provides protection for most repurchase agreements, if the seller should be
involved in bankruptcy or insolvency proceedings, a Fund may incur delay and
costs in selling the underlying security or may suffer a loss of principal and
interest if the Fund is treated as an unsecured creditor and is required to
return the underlying security to the seller's estate.

SECURITIES OF FOREIGN ISSUERS

The Fixed Income Fund may invest in U.S. dollar-denominated fixed income
securities of foreign issuers which are traded in the United States. In
addition, the Equity Fund may invest in ADRs. These instruments may subject the
Fund to investment risks that differ in some respects from those related to
investments in obligations of U.S. domestic issuers. Such risks include future
adverse political and economic developments, the possible

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imposition of withholding taxes on interest or other income, possible seizure,
nationalization, or expropriation of foreign deposits, the possible
establishment of exchange controls or taxation at the source, greater
fluctuations in value due to changes in exchange rates, or the adoption of other
foreign governmental restrictions which might adversely affect the payment of
principal and interest on such obligations. Foreign issuers of securities or
obligations are often subject to accounting treatment and engage in business
practices different from those respecting domestic issuers of similar securities
or obligations. Foreign branches of U.S. banks and foreign banks may be subject
to less stringent reserve requirements than those applicable to domestic
branches of U.S. banks.

U.S. GOVERNMENT AGENCY OBLIGATIONS

U.S. GOVERNMENT SECURITIES

Bills, notes and bonds issued by the U.S. Government and backed by the full
faith and credit of the United States.

U.S. TREASURY OBLIGATIONS

Bills, notes and bonds issued by the U.S. Treasury, and separately-traded
interest and principal component parts of such obligations that are transferable
through the Federal book-entry system known as Separately Traded Registered
Interested and Principal Securities ("STRIPS") and Coupon Under Book Entry
Safekeeping ("CUBES").

VARIABLE OR FLOATING-RATE INSTRUMENTS

The Fixed Income Fund may invest in variable- or floating- rate instruments
which may involve a demand feature and may include variable-amount master demand
notes which may or may not be backed by bank letters of credit. The holder of an
instrument with a demand feature may tender the instrument back to the issuer at
par prior to maturity. A variable-amount master demand note is issued pursuant
to a written agreement between the issuer and the holder, its amount may be
increased by the holder or decreased by the holder or issuer, it is payable on
demand, and the rate of interest varies based upon an agreed formula. The
quality of the underlying credit must, in the opinion of the Adviser, be
equivalent to the long-term bond or commercial paper ratings applicable to
permitted

S-17

<PAGE>

investments for the Fixed Income Fund. The Adviser will monitor on an ongoing
basis the earnings power, cash flow and liquidity ratios of the issuers of such
instruments and will similarly monitor the ability of an issuer of a demand
instrument to pay principal and
interest on demand.

WARRANTS

Warrants are instruments giving holders the right, but not the obligation, to
buy equity or fixed income securities of a company at a given price during a
specified period.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES

When-issued or delayed delivery securities are subject to market fluctuations
due to changes in market interest rates, and it is possible that the market at
the time of settlement could be higher or lower than the purchase price if the
general level of interest rates has changed. Although a Fund generally purchases
securities on a when-issued or forward commitment basis with the intention of
actually acquiring securities for its investment portfolio, a Fund may dispose
of a when-issued security or forward commitment prior to settlement if it deems
appropriate.

ZERO COUPON SECURITIES

Zero coupon obligations are debt securities that do not bear any interest, but
instead are issued at a deep discount from par. The value of a zero coupon
obligation increases over time to reflect the interest accrued. Such obligations
will not result in the payment of interest until maturity, and will have greater
price volatility than similar securities that are issued at par and pay interest
periodically.

INVESTMENT LIMITATIONS

FUNDAMENTAL POLICIES

S-18

<PAGE>

No Fund may:

3. Borrow money in an amount exceeding 33 1/3% of the value of its total
assets, provided that, for purposes of this limitation, investment
strategies which either obligate the fund to purchase securities or require
a Fund to segregate assets are not considered to be borrowings. Asset
coverage of at least 300% is required for all borrowings, except where a
Fund has borrowed money for temporary purposes in amounts not exceeding 5%
of its total assets. A Fund will not purchase securities while its
borrowings exceed 5% of its total assets.

6. Issue senior securities (as defined in the Investment Company Act of 1940
(the "1940 Act")) except as permitted by rule, regulation or order of the
Securities and Exchange Commission (the "SEC").

7. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter in selling a portfolio security.

S-19

<PAGE>

8. Invest in interests in oil, gas, or other mineral exploration or
development programs and oil, gas or mineral leases.

NON-FUNDAMENTAL POLICIES

The following investment limitations are non-fundamental policies of each Fund
and may be changed with respect to a Fund by the Board of Trustees.

No Fund may:

1. Pledge, mortgage or hypothecate assets except to secure borrowings
permitted by the Fund's fundamental limitation on borrowing.

2. Invest in companies for the purpose of exercising control.

3. Purchase securities on margin or effect short sales, except that each Fund
may (i) obtain short-term credits as necessary for the clearance of
security transactions; (ii) provide initial and variation margin payments
in connection with transactions involving futures contracts and options on
such contracts; and (iii) make short sales "against the box" or in
compliance with the SEC's position regarding the asset segregation
requirements imposed by Section 18 of the 1940 Act.

4. Invest its assets in securities of any investment company, except as
permitted by the 1940 Act.

S-20

<PAGE>

THE ADVISER

Clover Capital Management, Inc. (the "Adviser"), is a professional investment
management firm founded in 1984 by Michael Edward Jones, CFA, and Geoffrey
Harold Rosenberger, CFA, who are Managing Directors of the Adviser and who
control all of the Adviser's outstanding voting stock. As of September 30, 1997
the Adviser had discretionary management authority with respect to approximately
$2.2 billion of assets. In addition to advising the Funds, the Adviser provides
advisory services to pension plans, religious and educational endowments,
corporations, 401(k) plans, profit sharing plans, individual investors and
trusts and estates. The principal business address of the Adviser is 11 Tobey
Village Office Park, Pittsford, New York 14534.

The Adviser serves as each Fund's investment adviser under an investment
advisory agreement (the "Advisory Agreement") with the Fund. Under the Advisory
Agreement, the Adviser makes the investment decisions for the assets of each
Fund and continuously reviews, supervises and administers each Fund's investment
program, subject to the supervision of, and policies established by, the
Trustees of the Fund.

S-21

<PAGE>

For the fiscal year ended October 31 1996, for the fiscal period ended September
30, 1997, and for the fiscal year ended September 30, 1998, the Funds paid the
following advisory fees:

Advisory Fees Paid Advisory Fees Waived
------------------------------- -------------------------------
1996 1997 1998 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Equity Value Fund $437,862 $642,434 $73,383 $47,047
Small Cap Value Fund $0 $0 $14,442** $66,598**
Max Cap Value Fund * * * *
Fixed Income Fund $23,932 $35,551 $53,322 $55,083

</TABLE>

* Not in operation during the period.

**Does not include reimbursement of fees by the Adviser in the amount of $51,578
and $14,145 with respect to the Clover Capital Small Cap Portfolio for the
fiscal period of 1996 and 1997, respectively.

***On June 25, 1997, the Equity Value Fund, the Small Cap Value Fund and the
Fixed Income Fund acquired the assets of the Clover Capital Equity, Clover
Capital Small Cap and Clover Capital Fixed Income Portfolios, respectively, of
The Advisors' Inner Circle
Fund.

THE ADMINISTRATOR

The Trust and SEI Investments Mutual Funds Services (the "Administrator") have
entered into an administration agreement (the "Administration Agreement"). The
Administration Agreement provides that the Administrator shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the Trust in
connection with the matters to which the Administration Agreement relates,
except a loss resulting from willful misfeasance, bad faith or gross negligence
on the part of the Administrator in the performance of its duties or from
reckless disregard by it of its duties and obligations thereunder. The
Administration Agreement shall remain in effect for a period of three (3) years
after the effective date of the agreement and shall continue in effect for
successive periods of one (1) year unless terminated by either party on not less
than 90 days' prior written notice to the other party.

The continuance of the Administration Agreement must be specifically approved at
least annually (i) by the vote of a majority of the Trustees or by the vote of a
majority of the outstanding voting securities of the Fund, and (ii) by the vote
of a majority of the Trustees of the Trust who are not parties to the
Administration Agreement or an "interested person" (as that term is defined in
the 1940 Act) of any party thereto, cast in person at a meeting called for the
purpose of voting on such approval. The Administration Agreement is

S-22

<PAGE>

terminable at any time as to any Fund without penalty by the Trustees of the
Trust, by a vote of a majority of the outstanding shares of the Fund or by the
Manager on not less than 30 days' nor more than 60 days' written notice.

The Administrator, a Delaware business trust, has its principal business offices
at Oaks, Pennsylvania 19456. SEI Investments Management Corporation ("SIMC"), a
wholly-owned subsidiary of SEI Investments Company ("SEI Investments"), is the
owner of all beneficial interest in the Administrator. SEI Investments and its
subsidiaries and affiliates, including the Administrator, are leading providers
of funds evaluation services, trust accounting systems, and brokerage and
information services to financial institutions, institutional investors, and
money managers. The Administrator and its affiliates also serve as administrator
or sub-administrator to the following other mutual funds: The Achievement Funds
Trust, The Advisors' Inner Circle Fund, Alpha Select Funds, The Arbor Funds, ARK
Funds, Armada Funds, Bishop Street Funds, Boston 1784 Funds(R), CoreFunds, Inc.,
CrestFunds, Inc., CUFUND, The Expedition Funds, First American Funds, Inc.,
First American Investment Funds, Inc., First American Strategy Funds, Inc.,
HighMark Funds, The Nevis Funds, Marquis Funds(R), Monitor Funds, Morgan
Grenfell Investment Trust, Oak Associates Funds, THE PBHG Funds, Inc., PBHG
Insurance Series Fund, Inc., The Pillar Funds, Santa Barbara Group of Mutual
Funds, Inc., SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index
Funds, SEI Institutional Investments Trust, SEI Institutional International
Trust, SEI Institutional Managed Trust, SEI Liquid Asset Trust, STI Classic
Funds, SEI Tax Exempt Trust, and STI Classic Variable Trust.

For the fiscal year ended October 31, 1996, for the fiscal period ended
September 30, 1997, and for the fiscal year ended September 30, 1998, the Funds
paid the following administrative fees:

Administrative Fees Paid
---------------------------------------------
1996 1997
---- ----
<S> <C> <C> <C>
Equity Value Fund $138,175 $159,591
Small Cap Value Fund $33,606 $52,438
Max Cap Value Fund * *
Fixed Income Fund $50,022 $52,438

</TABLE>

* Not in operation during the period.

S-23

<PAGE>

THE DISTRIBUTOR

CCM Securities, Inc. (the "Distributor"), a wholly-owned subsidiary of CCM, and
the Trust are parties to a distribution agreement (the "Distribution
Agreement"). The Distributor receives no compensation for distribution of shares
of the Funds.

The Distribution Agreement shall remain in effect for a period of two years
after the effective date of the agreement and is renewable annually. The
Distribution Agreement may be terminated by the Distributor or by the Trust, by
a majority vote of the Trustees who are not interested persons and have no
financial interest in the Distribution Agreement or by a majority vote of the
outstanding securities of the Trust upon not more than 60 days' written notice
by either party or upon assignment by the Distributor.

TRUSTEES AND OFFICERS OF THE TRUST

The Trustees and Executive Officers of the Trust, their respective dates of
birth, and their principal occupations for the last five years are set forth
below. Each may have held other positions with named companies during that
period. Unless otherwise noted, the business address of each Trustee and each
Executive Officer is SEI Investments Company, Oaks, Pennsylvania 19456. Certain
officers of the Trust also serve as officers of some or all of the following:
The Achievement Funds Trust, The Advisors' Inner Circle Fund, Alpha Select
Funds, The Arbor Fund, ARK Funds, Bishop Street Funds, Boston 1784 Funds(R),
CrestFunds, Inc., CUFUND, The Expedition Funds, First American Funds, Inc.,
First American Investment Funds, Inc., First American Strategy Funds, Inc,
HighMark Funds, Marquis Funds(R), Monitor Funds, Morgan Grenfell Investment
Trust, Oak Associate Funds, The PBHG Funds, Inc., PBHG Insurance Series Fund,
Inc., The Pillar Funds, Santa Barbara Group of Mutual Funds, Inc., SEI Asset
Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional
Investments Trust, SEI Institutional Managed Trust, SEI Institutional
International Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust, STI Classic
Funds, and STI Classic Variable Trust, each of which is an open-end management
investment company managed by SEI Investments Mutual Fund Services or its
affiliates and, except for Santa Barbara Group of Mutual Funds, Inc., are
distributed by SEI Investments Distribution Co.

ROBERT E. TURNER (DOB 11/26/56) - Trustee* - Chairman and Chief Investment
Officer of Turner Investment Partners, Inc. (the Adviser), since 1990.

S-24

<PAGE>

MICHAEL E. JONES (DOB 12/24/54) - Trustee* - Senior Vice President, Investment
Adviser and Portfolio Manager with Clover Capital Management, Inc., since 1984.
Principal of CCM Securities Inc.

ALFRED C. SALVATO (DOB 01/09/58) - Trustee** - Treasurer, Thomas Jefferson
University Health Care Pension Fund, since 1995, and Assistant Treasurer,
1988-1995.

JOHN T. WHOLIHAN (DOB 12/12/37) - Trustee** - Professor, Loyola Marymount
University, since 1984.

STEPHEN J. KNEELEY (DOB 02/09/63) - President and Chief Executive Officer -
Chief Operating Officer of Turner Investment Partners, Inc., since 1990.

JANET RADER ROTE (DOB 08/24/60) - Vice President and Assistant Secretary
Director of Operations and Compliance of Turner Investment Partners, Inc., since
1992.

TODD B. CIPPERMAN (DOB 02/14/66) - Vice President and Assistant Secretary - Vice
President and Assistant Secretary of SEI, the administrator since 1995.
Associate, Dewey Ballantine (law firm), 1994-1995. Associate, Winston and
Strawn, 1991-1994.

SANDRA K. ORLOW (DOB 10/18/53) - Vice President and Assistant Secretary - Vice
President and Assistant Secretary of the Administrator since 1988.

KEVIN P. ROBINS (DOB 04/15/61) - Vice President, Assistant Secretary - Senior
Vice President, General Counsel and Assistant Secretary of SEI, Senior Vice
President, General Counsel and Secretary of the Administrator since 1994. Vice
President and Assistant Secretary of SEI, the Administrator 1992-1994.
Associate, Morgan, Lewis & Bockius LLP, 1988-1992.

ROBERT DELLACROCE (DOB 12/17/63) - Controller and Chief Accounting Officer -
Director, Funds Administration and Accounting - Director, Funds Administration
and Accounting of SEI since 1994. Senior Audit Manager, Arthur Andersen LLP,
1986-1994.

S-25

<PAGE>

LYDIA A. GAVALIS (DOB 06/05/64) - Vice President and Assistant Secretary - Vice
President and Assistant Secretary of the Manager and the Distributor since 1998.
Assistant General Counsel and Director of Arbitration, Philadelphia Stock
Exchange, 19889-1998.

KATHY HEILIG (DOB 12/21/58) - Vice President and Assistant Secretary - Treasurer
of SEI Investments Company since 1997; Assistant Controller of SEI Investment
since 1995; Vice President of SEI Investments Company since 1991; Director of
Taxes of SEI Investments Company 1987 to 1991. Tax Manager, Arthur Anderson LLP
prior to 1987.

JOSEPH M. O'DONNELL (DOB 11/13/54) - Vice President and Assistant Secretary -
Vice President and Assistant Secretary of Adviser, the Manager and the
Distributor since 1998. Vice President and General Counsel, FPS Services, Inc.,
1993-1997. Staff Counsel and Secretary, Provident Mutual Family of Funds,
1990-1993.

JAMES W. JENNINGS (DOB 01/15/37) - Secretary - Partner, Morgan, Lewis & Bockius
LLP, Counsel to the Trust, the Adviser, the Administrator.

JOHN H. GRADY, JR. (DOB 06/01/61) - Assistant Secretary - 1800 M Street, N.W.,
Washington, D.C. 20036, Partner, Morgan, Lewis & Bockius LLP, Counsel to the
Trust, Adviser, Administrator.

EDWARD B. BAER (DOB 09/27/68) - Assistant Secretary - 1800 M Street, N.W.,
Washington, D.C. 20036, Associate, Morgan, Lewis & Bockius LLP, Counsel to the
Trust, Adviser, Administrator since 1995. Attorney, Aquila Management
Corporation, 1994. Rutgers University School of Law - Newark, 1991-1994.

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

The following table exhibits Trustee compensation for the fiscal year ended
September 30, 1998.

S-26

<PAGE>

Name of Person, Aggregate Pension or Estimated Total
Position Compensation Retirement Annual Compensation
From Benefits Benefits From
Registrant for Accrued as Upon Registrant
the Fiscal Part of Fund Retirement and Fund
Year Ended Expenses Complex Paid
September to Trustees for
30, 1998 the Fiscal
Year Ended
September
30, 1998
- - --------------- -------------- ------------ ---------- ---------------
<S> <C> <C> <C> <C>
Robert Turner* $0 N/A N/A $0

Richard A. Hocker* $0 N/A N/A $0

Michael E. Jones* $0 N/A N/A $0

Alfred C. Salvato** $-- N/A N/A $--

Janet F. Sansone** $-- N/A N/A $--

John T. Wholihan** $-- N/A N/A $--

</TABLE>

* Messrs. Robert Turner, Richard Hocker and Michael Jones are Trustees who may
be deemed to be "interested persons" of the Trust as the term is defined in the
1940 Act. The Trust pays fees only to the Trustees who are not interested
persons of the Trust. Compensation of Officers and interested persons of the
Trust is paid by the adviser or the manager.

** Member of the Audit Committee.

The Trustees and Officers of the Trust own less than 1% of the outstanding
shares of the Trust.

COMPUTATION OF YIELD AND TOTAL RETURN

From time to time the Trust may advertise yield and total return of the Funds.
These figures will be based on historical earnings and are not intended to
indicate future performance. No representation can be made concerning actual
future yields or returns. The yield of a Fund refers to the annualized income
generated by an investment in the Fund over a specified 30-day period. The yield
is calculated by assuming that the income generated by the investment during
that 30-day period is generated in each period over

S-27

<PAGE>

one year and is shown as a percentage of the investment. In particular, yield
will be calculated according to the following formula:

Yield = 2[((a-b)/cd + 1)6 - 1] where a = dividends and interest earned during
the period; b = expenses accrued for the period (net of reimbursement); c = the
current daily number of shares outstanding during the period that were entitled
to receive dividends; and d = the maximum offering price per share on the last
day of the period.

For the 30-day period ended September 30, 1998, yields were __% for the Equity
Value Fund, __% for the Fixed Income Fund, and __% for the Small Cap Value Fund.

The total return of a Fund refers to the average compounded rate of return to a
hypothetical investment for designated time periods (including but not limited
to, the period from which the Fund commenced operations through the specified
date), assuming that the entire investment is redeemed at the end of each
period. In particular, total return will be calculated according to the
following formula: P (1 + T)n = ERV, where P = a hypothetical initial payment of
$1,000; T = average annual total return; n = number of years; and ERV = ending
redeemable , as of the end of the designated time period, of a hypothetical
$1,000 payment made at the beginning of the designated time period.

For the fiscal year ended September 30, 1998, and for the period from December
6, 1991 (commencement of operations) through September 30, 1998, the total
return was ----% and _____% for the Equity Value Fund and ___% and ___% for the
Fixed Income Fund, respectively. For the fiscal year ended September 30, 1998,
and for the period from February 28, 1996, (commencement of operations) through
September 30, 1998 the total return of the Small Cap Value Fund was ___% and
___%, respectively.

PURCHASE AND REDEMPTION OF SHARES

S-28

<PAGE>

SEC by rule or regulation) as a result of which disposal or valuation of a
Fund's securities is not reasonably practicable, or for such other periods as
the SEC has by order permitted. The Trust also reserves the right to suspend
sales of shares of any Fund for any period during which the New York Stock
Exchange, the Adviser, the Administrator, the Transfer Agent and/or the
Custodian are not open for business.

DETERMINATION OF NET ASSET VALUE

The securities of each Fund are valued by the Administrator. The Administrator
may use an independent pricing service to obtain valuations of securities. The
pricing service relies primarily on prices of actual market transactions as well
as on trade quotations obtained from third parties. However, the pricing service
may use a matrix system to determine valuations of fixed income securities. This
system considers such factors as security prices, yields, maturities, call
features, ratings and developments relating to specific securities in arriving
at valuations. The procedures used by the pricing service and its valuations are
reviewed by the officers of the Trust under the general supervision of the
Trustees.

Securities with remaining maturities of 60 days or less will be valued by the
amortized cost method, which involves valuing a security at its cost on the date
of purchase and thereafter (absent unusual circumstances) assuming a constant
amortization to maturity of any discount or premium, regardless of the impact of
fluctuations in general market rates of interest on the value of the instrument.
While this method provides certainty in valuation, it may result in periods
during which value, as determined by this method, is higher or lower than the
price the Trust would receive if it sold the instrument.

If there is no readily ascertainable market value for a security, the
Administrator will make a good faith determination as to the "fair value" of the
security.

TAXES

Federal Income Tax

The following discussion of federal income tax consequences is based on the
Internal Revenue Code of 1986 (the "Code") and the regulations issued thereunder
as in effect on the date of this Statement of Additional Information. New
legislation, as well as administrative changes or court decisions, may
significantly change the conclusions

S-29

<PAGE>

expressed herein, and may have a retroactive effect with respect to the
transactions contemplated herein.

In order to qualify for treatment as a RIC under the Code, each Fund must
distribute annually to its shareholders at least the sum of 90% of its net
interest income excludable from gross income plus 90% of its investment company
taxable income (generally, net investment income plus net short-term capital
gain) ("Distribution Requirement") and also must meet several additional
requirements. Among these requirements are the following: (i) at least 90% of
the Fund's gross income each taxable year must be derived from divi dends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stock or securities, or certain other income (including
gains from options, futures or forward contracts); (ii) at the close of each
quarter of the Fund's taxable year, at least 50% of the value of its total
assets must be represented by cash and cash items, U.S. Government securities,
securities of other RICs and other securities, with such other securities
limited, in respect to any one issuer, to an amount that does not exceed 5% of
the of the Fund's assets and that does not represent more than 10% of the
outstanding voting securities of such issuer; and (iii) at the close of each
quarter of the Fund's taxable year, not more than 25% of the of its assets may
be invested in securities (other than U.S. Government securities or the
securities of other RICs) of any one issuer, or of two or more issuers which are
engaged in the same, similar or related trades or business if the Fund owns at
least 20% of the voting power of such issuer.

Notwithstanding the Distribution Requirement described above, which requires
only that the Fund distribute at least 90% of its annual investment company
taxable income and does not require any minimum distribution of net capital gain
(the excess of net long-term capital gain over net short-term capital loss),
each Fund will be subject to a nondeductible 4% federal excise tax to the extent
it fails to distribute by the end of any calendar year 98% of its ordinary
income for that year and 98% of its capital gain net income (the excess of
short- and long-term capital gains over short-and long-term capital losses) for
the one-year period ending on October 31 of that year, plus certain other
amounts.

Any gain or loss recognized on a sale, exchange or redemption of shares of a
Fund by a shareholder who is not a dealer in securities will generally, for
individual shareholders, be treated as a long-term capital gain or loss if the
shares have been held for more than eighteen months, mid-term capital gain if
the share have been held for more than twelve months but not more than eighteen
months, and otherwise will be treated as short-term capital gain or loss.
However, if shares on which a shareholder has received a net capital gain
distribution are subsequently sold, exchanged or redeemed and such shares have
been held for six months or less, any loss recognized will be treated as a
long-term capital

S-30

<PAGE>

loss to the extent of the net capital gain distribution. Long-term capital gains
are currently taxed at a maximum rate of 20%, mid-term capital gains are
currently taxed at a maximum rate of 28%, and short-term capital gains are
currently taxed at ordinary income tax
rates.

If any Fund fails to qualify as a RIC for any taxable year, it will be taxable
at regular corporate rates. In such an event, all distributions (including
capital gains distributions) will be taxable as ordinary dividends to the extent
of the Fund's current and accumulated earnings and profits, and such
distributions will generally be eligible for the corporate dividends-received
deduction.

S-31

<PAGE>

STATE TAXES

PORTFOLIO TRANSACTIONS

The Funds have no obligation to deal with any broker-dealer or group of
broker-dealers in the execution of transactions in portfolio securities. Subject
to policies established by the Trustees of the Fund, the Adviser is responsible
for placing the orders to execute transactions for the Funds. In placing orders,
it is the policy of the Fund to seek to obtain the best net results taking into
account such factors as price (including the applicable dealer spread), the
size, type and difficulty of the transaction involved, the firm's general
execution and operational facilities and the firm's risk in positioning the
securities involved. While the Adviser generally seeks reasonably competitive
spreads or commissions, the Funds will not necessarily be paying the lowest
spread or commission available.

The money market instruments in which the Funds invest are traded primarily in
the over-the-counter market. Bonds and debentures are usually traded
over-the-counter, but may be traded on an exchange. Where possible, the Adviser
will deal directly with the dealers who make a market in the securities involved
except in those circumstances where better prices and execution are available
elsewhere. Such dealers usually are acting as principal for their own account.
On occasion, securities may be purchased directly from the issuer. Money market
instruments are generally traded on a net basis and do not normally involve
either brokerage commissions or transfer taxes. The cost of executing portfolio
securities transactions of the Funds will primarily consist of dealer spreads
and underwriting commissions.

S-32

<PAGE>

If, in the judgment of the Adviser, a Fund or other accounts managed by the
Adviser will be benefitted by supplemental research services, the Adviser is
authorized to pay brokerage commissions to a broker furnishing such services
which are in excess of commissions which another broker may have charged for
effecting the same transaction. These research services include advice, either
directly or through publications or writings, as to the of securities, the
advisability of investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities; furnishing of
analyses and reports concerning issuers, securities or industries; providing
information on economic factors and trends; assisting in determining portfolio
strategy; providing computer software used in security analyses; and providing
portfolio performance evaluation and technical market analyses. The expenses of
the Adviser will not necessarily be reduced as a result of the receipt of such
supplemental information, such services may not be used exclusively, or at all,
with respect to a Fund or account generating the brokerage, and there can be no
guarantee that the Adviser will find all of such services of value in advising
that Fund.

Although it is not expected that the Funds will do so, the Funds may execute
brokerage or other agency transactions through the Distributor, which, although
a registered broker-dealer, is limited to the sale of shares of mutual funds,
for a commission in conformity with the 1940 Act, the Securities Exchange Act of
1934 and rules promulgated by the SEC. Under these provisions, an affiliated
distributor is permitted to receive and retain compensation for effecting
portfolio transactions for a Fund on an exchange if a written contract is in
effect between the Trust and an affiliated distributor expressly permitting the
distributor to receive and retain such compensation. These rules further require
that commissions paid to an affiliated distributor by a Fund for exchange
transactions not exceed "usual and customary" brokerage commissions. The rules
define "usual and customary" commissions to include amounts which are
"reasonable and fair compared to the commission, fee or other remuneration
received or to be received by other brokers in connection with comparable
transactions involving similar securities being purchased or sold on a
securities exchange during a comparable period of time." The Trustees, including
those who are not "interested persons" of the Trust, have adopted procedures for
evaluating the reasonableness of commissions paid to an affiliated distributor,
and will review these procedures periodically.

Because no Fund markets its shares through intermediary brokers or dealers, it
is not the Funds' practice to allocate brokerage or principal business on the
basis of sales of its shares which may be made through such firms. However, the
Adviser may place portfolio orders with qualified broker-dealers who recommend a
Fund's shares to clients, and may, when a number of brokers and dealers can
provide best net results on a particular transaction, consider such
recommendations by a broker or dealer in selecting among broker-dealers.

[FOR THE FISCAL YEAR ENDED OCTOBER 31, 1996, THE CLOVER CAPITAL EQUITY VALUE
PORTFOLIO PAID SEI INVESTMENTS DISTRIBUTION CO.("SIDCO"), PRIOR DISTRIBUTOR OF
THE PORTFOLIOS,

S-33

<PAGE>

BROKERAGE COMMISSIONS IN THE AGGREGATE AMOUNT OF $2,339.29. FOR THE FISCAL YEAR
ENDED OCTOBER 31, 1996, THE COMMISSIONS THE EQUITY VALUE PORTFOLIO PAID TO SIDCO
REPRESENTED 2% OF THE AGGREGATE BROKERAGE COMMISSIONS WHICH WERE PAID ON
TRANSACTIONS THAT REPRESENTED 62% OF THE AGGREGATE DOLLAR AMOUNT OF TRANSACTIONS
THAT INCURRED COMMISSIONS PAID BY THAT PORTFOLIO DURING SUCH PERIOD. FOR THE
FISCAL YEAR ENDED OCTOBER 31, 1996, THE CLOVER CAPITAL FIXED INCOME PORTFOLIO
PAID SIDCO BROKERAGE COMMISSIONS IN THE AGGREGATE AMOUNT OF $225.03. FOR THE
FISCAL YEAR ENDED OCTOBER 31, 1996, THE COMMISSION THE FIXED INCOME PORTFOLIO
PAID TO SIDCO REPRESENTED 100% OF THE AGGREGATE BROKERAGE COMMISSIONS WHICH WERE
PAID ON TRANSACTIONS THAT REPRESENTED 100% OF THE AGGREGATE DOLLAR AMOUNT OF
TRANSACTIONS THAT INCURRED COMMISSIONS PAID BY THE PORTFOLIO DURING SUCH PERIOD.
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1996, AND FOR THE FISCAL PERIOD ENDED
SEPTEMBER 30, 1997, THE FUNDS PAID AGGREGATE BROKERAGE COMMISSIONS AS FOLLOWS:]

Fund 1996 1997 1998
---- ---- ---- ----
Equity Value Fund $152,253 $189,818
Small Cap Value Fund $ 22,829 $ 62,804
Max Cap Value Fund * *
Fixed Income Fund $ 0 $ 0

* Not in operation during the period.

The Funds are required to identify any securities of their "regular brokers or
dealers" (as such term is defined in the 1940 Act), which the Funds have
acquired during their most recent fiscal year. As of September 30, 1998, the
Equity Value, Fixed Income and Small Cap Value Funds held $_____; $______; and
$______, respectively, of tri-party repurchase agreements with Lehman Brothers.

FOR THE FISCAL PERIOD ENDED SEPTEMBER 30, 1997, AND THE FISCAL YEAR ENDED
SEPTEMBER 30, 1998, THE FUNDS' TURNOVER RATES WERE WAS AS FOLLOWS:

TURNOVER RATE
-------------------------------------
FUND 1998 1997
---- ---- ----

Equity Value Fund -- 51.64%
Small Cap Value Fund -- 59.03%
Max Cap Value Fund -- *
Fixed Income Fund -- 11.83%

* Not in operation during the period.

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DESCRIPTION OF SHARES

SHAREHOLDER LIABILITY

LIMITATION OF TRUSTEES' LIABILITY

S-35

<PAGE>

5% SHAREHOLDERS

As of January 5, 1999, the following persons were the only persons who were
record owners (or to the knowledge of the Trust, beneficial owners) of 5% or
more of the shares of the Portfolios. The Trust believes that most of the shares
referred to below were held by the persons indicated in accounts for their
fiduciary, agency or custodial customers.

Name and Address Number of Shares Percent of Funds
- - ---------------- ---------------- ----------------

FINANCIAL STATEMENTS

EXPERTS

LEGAL COUNSEL

Morgan, Lewis & Bockius LLP, serves as counsel to the Trust.

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<PAGE>

APPENDIX

The following descriptions are summaries of published ratings.

DESCRIPTION OF CORPORATE BOND RATINGS

Debt rated BB, B, CCC, CC and C is regarded as having predominately speculative
characteristics with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the least degree of
speculation and C 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.

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

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

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<PAGE>

Bonds which are rated Ba are judged to have speculative elements; their future
cannot be considered as 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.

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.

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.

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.

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.

Fitch uses plus and minus signs with a rating symbol to indicate the relative
position of a credit within the rating category. Plus and minus signs, however,
are not used in the AAA category. Bonds rated AAA by Fitch are 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. Bonds rated AA by
Fitch are considered to be investment grade and of very high credit 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+. Bonds rated A by Fitch
are considered to be investment grade and of high credit quality. The obligor's
ability to pay interest and repay principal is considered to be strong, but may
be more vulnerable to adverse changes in economic conditions and circumstances
than bonds with higher ratings. Bonds rated BBB by Fitch are 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

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<PAGE>

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.

DESCRIPTION OF COMMERCIAL PAPER RATINGS

Commercial paper rated A by Standard & Poor's Corporation ("S&P") is regarded by
S&P as having the greatest capacity for timely payment. Issues rated A are
further refined by use of the numbers 1, 1+, and 2 to indicate the relative
degree of safety. Issues rated A- 1+ are those with an "overwhelming degree" of
credit protection. Those rated A-1, the highest rating category, reflect a "very
strong" degree of safety regarding timely payment. Those rated A-2, the second
highest rating category, reflect a satisfactory degree of safety regarding
timely payment but not as high as A-1.

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<PAGE>

F-1+ (Exceptionally Strong) is the highest commercial paper rating Fitch
assigns; paper rated F-1+ is regarded as having the strongest degree of
assurance for timely payment. Paper rated F-1 (Very Strong) reflects an
assurance of timely payment only slightly less in degree than paper rated F-1+.
The rating F-2 (Good) reflects a satisfactory degree of assurance for timely
payment, but the margin of safety is not as great as for issues rated F-1+ or
F-1.

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<PAGE>

TIP FUNDS

PENN CAPITAL SELECT FINANCIAL SERVICES FUND
PENN CAPITAL STRATEGIC HIGH YIELD BOND FUND
PENN CAPITAL VALUE PLUS FUND

INVESTMENT ADVISER:
PENN CAPITAL MANAGEMENT COMPANY, INC.

This Statement of Additional Information is not a prospectus and relates only to
the Penn Capital Select Financial Services Fund (the "Select Financial Services
Fund"), Penn Capital Strategic High Yield Bond Fund (the "Strategic High Yield
Fund"), and Penn Capital Value Plus Fund (the "Value Plus Fund") (each a "Fund"
and, together, the "Funds"). It is intended to provide additional information
regarding the activities and operations of the TIP Funds (the "Trust"), and
should be read in conjunction with the Funds' Prospectuses dated January 31,
1999. The Prospectus may be obtained without charge by calling 1-800-224-6312.

TABLE OF CONTENTS

THE TRUST ..............................................................S-2
INVESTMENT OBJECTIVES...................................................S-2
INVESTMENT POLICIES.....................................................S-3
RISK FACTORS............................................................S-7
DESCRIPTION OF PERMITTED INVESTMENTS....................................S-7
INVESTMENT LIMITATIONS.................................................S-23
THE ADVISER............................................................S-24
THE ADMINISTRATOR......................................................S-25
DISTRIBUTION AND SHAREHOLDER SERVICING.................................S-26
TRUSTEES AND OFFICERS OF THE TRUST.....................................S-26
COMPUTATION OF YIELD AND TOTAL RETURN..................................S-29
PURCHASE AND REDEMPTION OF SHARES......................................S-30
DETERMINATION OF NET ASSET VALUE.......................................S-30
TAXES..................................................................S-30
PORTFOLIO TRANSACTIONS.................................................S-33
DESCRIPTION OF SHARES..................................................S-35
SHAREHOLDER LIABILITY..................................................S-35
LIMITATION OF TRUSTEES' LIABILITY......................................S-35
5% SHAREHOLDERS........................................................S-35
FINANCIAL INFORMATION..................................................S-36
EXPERTS................................................................S-36
LEGAL COUNSEL..........................................................S-36
APPENDIX................................................................A-1

January 31, 1999

S-1

<PAGE>

THE TRUST

This Statement of Additional Information relates only to the Penn Capital Select
Financial Services Fund (the "Select Financial Services Fund"), Penn Capital
Strategic High Yield Bond Fund (the "Strategic High Yield Fund") and Penn
Capital Value Plus Fund (the "Value Plus Fund") (each a "Fund" and, together,
the "Funds"). Each Fund is a separate, diversified series of the TIP Funds
(formerly, Turner Funds) (the "Trust"), an open-end management investment
company established as a Massachusetts business trust under a Declaration of
Trust dated January 26, 1996, and amended on February 21, 1997. The Declaration
of Trust permits the Trust to offer separate series ("portfolios") of shares of
beneficial interest ("shares"). Each portfolio is a separate mutual fund, and
each share of each portfolio represents an equal proportionate interest in that
portfolio. See "Description of Shares." The Trust also offers shares of the
Turner Ultra Large Cap Growth Fund, Turner Growth Equity Fund, Turner Midcap
Growth Fund, Turner Small Cap Growth Fund, Turner Micro Cap Growth Fund, Turner
Fixed Income Fund, Turner Short Duration Government Funds-One Year, Turner Short
Duration Government Funds-Three Year Portfolio, TIP Target Select Equity Fund,
Clover Max Cap Value Fund, Clover Equity Value Fund, Clover Small Cap Value
Fund, and Clover Fixed Income Fund. Capitalized terms not defined herein are
defined in the Prospectus offering shares of the Funds.

INVESTMENT OBJECTIVES

PENN CAPITAL SELECT FINANCIAL SERVICES FUND -- The Select Financial Services
Fund seeks to generate long term capital appreciation.

PENN CAPITAL STRATEGIC HIGH YIELD BOND FUND -- The Strategic High Yield Fund
seeks to maximize income through high current yield and, as a secondary
objective, to produce above average capital appreciation.

PENN CAPITAL VALUE PLUS FUND -- The Value Plus Fund seeks to achieve capital
appreciation and above average income with less risk than the average risk of
the S&P 500 Index.

There can be no assurance that any Fund will achieve its investment objective.

INVESTMENT POLICIES

PENN CAPITAL SELECT FINANCIAL SERVICES FUND

The Select Financial Services Fund invests primarily (and, under normal
conditions, at least 65% of its total assets) in the equity securities of
companies principally engaged in the banking industry and the financial services
sector. At least 25% (and up to 100%) of the Fund's total assets will be
invested in issuers in the banking industry. To the extent

S-2

<PAGE>

its investments are concentrated in the banking industry, the Fund is subject to
the risks associated with that industry, including sensitivity to interest rate
changes and potentially adverse legislative and regulatory changes. Examples of
companies in the banking industry include commercial and industrial banks,
savings and loan associations and their holding companies. Examples of companies
in the financial services sector include investment advisers, brokerage
companies, insurance companies, real estate and leasing companies, and companies
that span across these segments.

Generally speaking, the Fund will hold a diversified portfolio of companies with
strong fundamentals, many of which Penn Capital Management Company, Inc. ("Penn
Capital") believes hold the potential to be acquired at a premium to their
trading prices, measured at the time of their original acquisition by the Fund
(takeover candidates). Any remaining assets may be invested in equity securities
and fixed income securities, warrants and rights to purchase common stocks, and
in ADRs. The Fund may also purchase shares of other investment companies and
foreign securities, and may purchase high yield, high risk securities (otherwise
known as "junk bonds") as a means of seeking to generate current income.

The Fund may invest in non-rated securities or in securities rated in the lowest
ratings categories established by the Standard & Poor's Corporation ("S&P")
and/or Moody's Investors Service, Inc. ("Moody's"). Securities rated below
investment grade will not constitute more than 15% of the Select Financial
Services Fund's total assets.

The Fund may invest in repurchase agreements, participate in a securities
lending program, which entails a risk of loss should a borrower fail
financially, and purchase Rule 144A securities.

The Fund may invest in certain instruments such as certain types of mortgage
securities and when-issued securities, and may, to a limited extent, borrow
money and utilize leveraging techniques. These investments and techniques, along
with certain transactions involving futures, options, forwards and swaps,
require the Fund to segregate some or all of its cash or liquid securities to
cover its obligations pursuant to such instruments or techniques. As asset
segregation reaches certain levels, the Fund may lose flexibility in managing
its investments properly, responding to shareholder redemption request, or
meeting other obligations and may be forced to sell other securities that it
wanted to retain or to realize unintended gains or losses.

The Fund may also invest in federal, state and municipal government obligations,
investment grade corporate bonds, foreign securities, including emerging market
securities, zero coupon, pay-in-kind and deferred payment bonds, variable and
floating rate securities, money market instruments, shares of other investment
companies and cash equivalents, and may invest up to 20% of its assets in ADRs.

S-3

<PAGE>

The Fund may, although it has no present intention to do so, invest a portion of
its assets in derivatives, including futures, options, forwards and swaps.
Futures contracts, options, options on futures contracts, forwards and swaps
entail certain costs and risks, including imperfect correlation between the
value of the securities held by the Fund and the value of the particular
derivative instrument, and the risk that the Fund could not close out a futures
or options position when it would be most advantageous to do so.

The Fund may invest up to 15% of its net assets in illiquid securities, and for
temporary defensive purposes, may invest up to 100% of its total assets in money
market instruments (including U.S. Government securities, bank obligations,
commercial paper rated in the highest rating category by a nationally recognized
statistical rating organization ("NRSRO")) and shares of money market investment
companies and may hold a portion of its assets in cash.

PENN CAPITAL STRATEGIC HIGH YIELD BOND FUND

The Strategic High Yield Fund invests primarily (and, under normal conditions,
at least 65% of its total assets) in a diversified portfolio of high yield
securities (otherwise known as "junk bonds"). Securities and other financial
instruments of issuers that may or may not be paying interest on a current basis
and that are currently experiencing financial difficulties including,
potentially, companies which are undergoing or are likely to undergo financial
restructuring or liquidation, both under and outside of Federal Bankruptcy Code
proceedings, are also included in the high yield universe and may be acquired by
the Fund. The Fund invests primarily in publicly traded securities, and, to a
lesser extent, privately placed restricted securities and other financial
instruments for which there is a more limited trading market.

The Adviser believes that the market for high yield securities is relatively
inefficient compared to other securities due to the limited availability of
information on such securities, the lack of extensive institutional research
coverage of and market making activity with respect to many issuers of such
securities, the complexity and difficulty of evaluation of such securities, and
the limited liquidity, at times, of such securities. The Adviser intends to
exploit these inefficiencies using its knowledge and experience in the high
yield market. The Adviser seeks to reduce risk through diversification, credit
analysis and attention to current developments and trends in both the economy
and financial markets.

The Fund will invest primarily in securities rated BB+ or Ba1 or lower by S&P
and/or Moody's, and may invest in non-rated securities and in securities rated
in the lowest rating category established by S&P and/or Moody's. Securities in
the lowest ratings categories may be in default. See Appendix A for a discussion
of these ratings. Any remaining assets may be invested in equity securities and
investment grade fixed income securities. In addition, the Fund may engage in
short sales against the box.

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<PAGE>

PENN CAPITAL VALUE PLUS FUND

The Value Plus Fund invests primarily (and, under normal conditions, at least
65% of its total assets) in a diversified portfolio of equity securities that
may or may not pay dividends but whose main contribution to total return is
intended from capital appreciation. The "value" equity securities the Fund will
purchase will tend to have a low price to earnings ratio relative to the
securities' market prices. The Fund will invest any remaining assets in
fixed-income securities, cash and money market instruments, and may invest up to
35% of its assets in high yield securities.

The Fund seeks to provide, through a combination of income and capital
appreciation, a total return consistent with a reasonable level of risk by
investing in value equity securities and in fixed income obligations, including
high yield securities. The Fund strives to secure a current yield appreciably
higher than the average dividend yield of the companies comprising the S&P 500
Index. Typically, portfolios with high current income also exhibit less
volatility and superior returns in down markets. The Fund actively seeks
opportunity and value in all parts of a company's capital structure, including
common and preferred stocks, as well as investment grade and high yield
corporate and convertible bonds. Typically, one-third of the Fund's assets will
be invested in large cap value equity securities (i.e., securities of issuers
with market capitalizations of over $1 billion), one third in small cap value
equity securities (i.e., securities of issuers with market capitalizations of
less than $1 billion) and one third in bonds (primarily high yield securities)
in order to generate interest income. The Fund's exposure to junk bonds will not
exceed 35% of its total assets.

The Fund will invest primarily in publicly-traded securities, yet will maintain
the right to purchase private securities for which there is a more limited
trading market. The Fund generally seeks diversity both in terms of industries
and issuers, but may invest relatively high proportions of its assets in a
single industry or issuer. The Fund will also from time to time invest in the
securities of companies engaged in an initial public offering.

The fixed income investments of the Fund consist primarily, but not exclusively,
of cash paying, high yield corporate bonds. The Fund may invest in non-rated
securities or in securities rated in the lowest ratings categories established
by S&P and/or Moody's. See Appendix A for a discussion of the these ratings.

The Fund may participate in a securities lending program, which entails a risk
of loss should a borrower fail financially. The Fund may purchase Rule 144A
securities. The Fund may invest in certain instruments such as certain types of
mortgage securities and when-issued securities, and may, to a limited extent,
borrow money and utilize leveraging techniques. These investments and
techniques, along with certain transactions involving futures, options, forwards
and swaps, require a Fund to segregate some or all of its cash or liquid
securities to cover its obligations pursuant to such instruments or techniques.
As

S-5

<PAGE>

asset segregation reaches certain levels, the Fund may lose flexibility in
managing its investments properly, responding to shareholder redemption request,
or meeting other obligations and may be forced to sell other securities that it
wanted to retain or to realize unintended gains or losses.

Investments in floating rate securities (floaters) and inverse floating rate
securities (inverse floaters) and mortgage-backed securities (mortgage
securities), including principal-only and interest-only stripped mortgage-backed
securities (SMBs), may be highly sensitive to interest rate changes, and highly
sensitive to the rate of principal payments (including prepayments on underlying
mortgage assets).

RISK FACTORS

PORTFOLIO TURNOVER

An annual portfolio turnover rate in excess of 100% may result from the
Adviser's investment strategy or from prevailing market conditions. Portfolio
turnover rates in excess of 100% may result in higher transaction costs,
including increased brokerage commissions, and higher levels of taxable capital
gain.

YEAR 2000

The Trust depends on the smooth functioning of computer systems in almost every
aspect of its business. Like other mutual funds, businesses and individuals
around the world, the Trust could be adversely affected if the computer systems
used by its service providers do not properly process dates on and after January
1, 2000 and distinguish between the year 2000 and the year 1900. The Trust has
asked its service providers whether they expect to have their computer systems
adjusted for the year 2000 transition, and received assurances from each that
its system is expected to accommodate the year 2000 without material adverse
consequences to the Trust. The Trust and its shareholders may

S-6

<PAGE>

experience losses if these assurances prove to be incorrect or as a result of
year 2000 computer difficulties experienced by issuers of portfolio securities
or third parties, such as custodians, banks, broker-dealers or others with which
the Trust does business.

DESCRIPTION OF PERMITTED INVESTMENTS

The following is a description of permitted investments for the Funds:

AMERICAN DEPOSITARY RECEIPTS ("ADRS")

ASSET-BACKED SECURITIES

BORROWING

The Funds may borrow money equal to 5% of their total assets for temporary
purposes to meet redemptions or to pay dividends. Borrowing may exaggerate
changes in the net asset value of a Fund's shares and in the return on the
Fund's portfolio. Although the principal of any borrowing will be fixed, a
Fund's assets may change in value during the time the borrowing is outstanding.
A Fund may be required to liquidate portfolio securities at a time when it would
be disadvantageous to do so in order to make payments with respect to any
borrowing. The Funds may be required to segregate liquid assets in an amount
sufficient to meet their obligations in connection with such borrowings. In
addition, the Strategic High Yield Fund may borrow to leverage its portfolio.
Such borrowings may

S-7

<PAGE>

take the form of a margin account or a conventional bank borrowings in
connection with securities purchases or interest rate arbitrage transactions. In
an interest rate arbitrage transaction, the Fund borrows money at one interest
rate and lends the proceeds at another, higher interest rate. These transactions
involve a number of risks, including the risk that the borrower will fail or
otherwise become insolvent or that there will be a significant change in
prevailing interest rates.

CONVERTIBLE SECURITIES

EQUITY SECURITIES

FIXED INCOME SECURITIES

S-8

<PAGE>

FORWARD FOREIGN CURRENCY CONTRACTS

A forward contract involves an obligation to purchase or sell a specific
currency amount at a future date, agreed upon by the parties, at a price set at
the time of the contract. A Fund may also enter into a contract to sell, for a
fixed amount of U.S. dollars or other appropriate currency, the amount of
foreign currency approximating the value of some or all of a Fund's securities
denominated in such foreign currency.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS

S-9

<PAGE>

to market"). The margin is in the nature of a performance bond or good-faith
deposit on a futures contract.

There are risks associated with these activities, including the following: (1)
the success of a hedging strategy may depend on an ability to predict movements
in the prices of individual securities, fluctuations in markets and movements in
interest rates; (2) there may be an imperfect or no correlation between the
changes in market value of the securities held by a Fund and the prices of
futures and options on futures; (3) there may not be a liquid secondary market
for a futures contract or option; (4) trading restrictions or limitations may be
imposed by an exchange; and (5) government regulations may restrict trading in
futures contracts and futures options.

HIGH YIELD FOREIGN SOVEREIGN DEBT SECURITIES

Investing in fixed and floating rate high yield foreign sovereign debt
securities will expose the Strategic High Yield Fund to the direct or indirect
consequences of political, social or economic changes in the countries that
issue the securities. The ability and willingness of sovereign obligers in
developing and emerging market countries or the governmental authorities that
control repayment of their external debt to pay principal and interest on such
debt when due may depend on general economic and political conditions within the
relevant country. Countries such as those in which the Fund may invest have
historically experienced, and may continue to experience, high rates of
inflation, high interest rates, exchange rate or trade difficulties and extreme
poverty and unemployment. Many of these countries are also characterized by
political uncertainty or instability.

S-10

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ILLIQUID SECURITIES

Illiquid securities are securities that cannot be disposed of within seven
business days at approximately the price at which they are being carried on a
Fund's books. Illiquid securities include demand instruments with demand notice
periods exceeding seven days, securities for which there is no active secondary
market, and repurchase agreements with durations or maturities over 7 days in
length.

INVESTMENT COMPANY SHARES

Each Fund may invest in shares of other investment companies, to the extent
permitted by applicable law. These investment companies typically incur fees
that are separate from those fees incurred directly by the Fund. A Fund's
purchase of such investment company securities results in the layering of
expenses, such that shareholders would indirectly bear a proportionate share of
the operating expenses of such investment companies, including advisory fees, in
addition to paying Fund expenses. Under applicable regulations, a Fund is
prohibited from acquiring the securities of another investment company if, as a
result of such acquisition: (1) the Fund owns more than 3% of the total voting
stock of the other company; (2) securities issued by any one investment company
represent more than 5% of the Fund's total assets; or (3) securities (other than
treasury stock) issued by all investment companies represent more than 10% of
the total assets of the Fund. See also "Investment Limitations."

LEVERAGING

LOAN PARTICIPATIONS AND ASSIGNMENTS

Loan participations are interests in loans to corporations or governments which
are administered by the lending bank or agent for a syndicate member
("intermediary bank"). In a loan participation, the borrower will be deemed to

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<PAGE>

be the issuer of the participation interest, except to the extent the Strategic
High Yield Fund derives its rights from the intermediary bank. Because the
intermediary bank does not guarantee a loan participation in any way, a loan
participation is subject to the credit risks generally associated with the
underlying borrower. In the event of the bankruptcy or insolvency of the
borrower, a loan participation may be subject to certain defenses that can be
asserted by such borrower as a result of improper conduct by the intermediary
bank. In addition, in the event the underlying borrower fails to pay principal
and interest when due, the Fund may be subject to delays, expenses and risks
that are greater than those that would have been involved if the Fund had
purchased a direct obligation of such borrower. Under the terms of a loan
participation, the Fund may be regarded as a creditor of the intermediary bank
(rather than of the underlying borrower) so that the Fund may also be subject to
the risk that the intermediary bank may become insolvent.

Loan assignments are investments in assignments of all or a portion of certain
loans from third parties. When a Fund purchases assignments from lenders it will
acquire direct rights against the borrower on the loan. Since assignments are
arranged through private negotiations between potential assignees and assignors,
however, the rights and obligations acquired by the Fund may differ from, and be
more limited than, those held by the assigning lender. Loan participations and
assignments may be considered liquid, as determined by the Fund's adviser based
on criteria approved by the Board of Trustees.

LOWER-RATED SECURITIES

Lower-rated securities are lower-rated bonds commonly referred to as "junk
bonds" or high-yield securities. These securities are rated lower than Baa3 by
Moody's Investors Service, Inc. ("Moody's") and/or lower than BBB- by Standard &
Poor's Corporation ("S&P"). The Funds may invest in securities rated in the
lowest ratings categories established by Moody's or by S&P. These ratings
indicate that the obligations are speculative and may be in default. In
addition, the Funds may invest in unrated securities of comparable quality
subject to the restrictions stated in the Funds' Prospectus.

CERTAIN RISK FACTORS RELATING TO HIGH-YIELD, HIGH-RISK SECURITIES

The descriptions below are intended to supplement the discussion in the
Prospectus.

GROWTH OF HIGH-YIELD, HIGH-RISK BOND MARKET

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<PAGE>

limit the Funds' ability to sell such securities at their market value. In
addition, the market for these securities may be adversely affected by
legislative and regulatory developments. Credit quality in the junk bond market
can change suddenly and unexpectedly, and even recently issued credit ratings
may not fully reflect the actual risks imposed by a particular security.

SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES

PAYMENT EXPECTATIONS

LIQUIDITY AND VALUATION

Taxes

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<PAGE>

taxable year may not be represented by cash income, the Funds may have to
dispose of other securities and use the proceeds to make distributions to
shareholders.

MONEY MARKET INSTRUMENTS

MORTGAGE- AND ASSET-BACKED SECURITIES

The Funds may invest in mortgage-backed securities and asset-backed securities.
Two principal types of mortgage-backed securities are collateralized mortgage
obligations ("CMOs") and real estate mortgage investment conduits ("REMICs"),
which are rated in one of the top two categories by S&P or Moody's. CMOs are
securities collateralized by mortgages, mortgage pass-throughs, mortgage
pay-through bonds (bonds representing an interest in a pool of mortgages where
the cash flow generated from the mortgage collateral pool is dedicated to bond
repayment), and mortgage-backed bonds (general obligations of the issuers
payable out of the issuers' general funds and additionally secured by a first
lien on a pool of single family detached properties). CMOs typically are issued
with a number of classes or series which have different maturities and which are
retired using cash flow from underlying collateral according to a specified
plan.

Investors purchasing such CMOs in the shortest maturities receive or are
credited with their pro rata portion of the scheduled payments of interest and
principal on the underlying mortgages plus all unscheduled prepayments of
principal up to a predetermined portion of the total CMO obligation. Until that
portion of such CMO obligation is repaid, investors in the longer maturities
receive interest only. Accordingly, the CMOs in the longer maturity series are
less likely than other mortgage pass-throughs to be prepaid prior to their
stated maturity. Although some of the mortgages underlying CMOs may be supported
by various types of insurance, and some CMOs may be backed by GNMA certificates
or other mortgage pass-throughs issued or guaranteed by U.S. Government agencies
or instrumentalities, the CMOs themselves are not generally guaranteed.

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<PAGE>

REMICs, which were authorized under the Tax Reform Act of 1986, are private
entities formed for the purpose of holding a fixed pool of mortgages secured by
an interest in real property. REMICs are similar to CMOs in that they issue
multiple classes of securities.

In addition to mortgage-backed securities, the Funds may invest in securities
secured by asset-backed securities including company receivables, truck and auto
loans, leases, and credit card receivables. These issues may be traded
over-the-counter and typically have a short-intermediate maturity structure
depending on the paydown characteristics of the underlying financial assets
which are passed through to the security holder.

Asset-backed securities are not issued or guaranteed by the U.S. Government, its
agencies or instrumentalities; however, the payment of principal and interest on
such obligations may be guaranteed up to certain amounts and for a certain
period by a letter of credit issued by a financial institution (such as a bank
or insurance company) unaffiliated with the issuers of such securities. The
purchase of asset-backed securities raises risk considerations peculiar to the
financing of the instruments underlying such securities. For example, there is a
risk that another party could acquire an interest in the obligations superior to
that of the holders of the asset-backed securities. There also is the
possibility that recoveries on repossessed collateral may not, in some cases, be
available to support payments on those securities. Asset-backed securities
entail prepayment risk, which may vary depending on the type of asset, but is
generally less than the prepayment risk associated with mortgage-backed
securities. In addition, credit card receivables are unsecured obligations of
card holders.

OBLIGATIONS OF SUPRANATIONAL AGENCIES

The Funds may purchase obligations of supranational agencies. Currently, the
Funds only intend to invest in obligations issued or guaranteed by the Asian
Development Bank, Inter-American Development Bank, International Bank for
Reconstruction and Development (World Bank), African Development Bank, European
Coal and Steel Community, European Economic Community, European Investment Bank
and Nordic Investment Bank.

OPTIONS

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price and expiration date as the option contract originally opened. If a Fund is
unable to effect a closing purchase transaction with respect to an option it has
written, it will not be able to sell the underlying security until the option
expires or the Fund delivers the security upon exercise.

A Fund may write covered call options as a means of increasing the yield on its
fund and as a means of providing limited protection against decreases in its
market value. When a Fund sells an option, if the underlying securities do not
increase or decrease to a price level that would make the exercise of the option
profitable to the holder thereof, the option generally will expire without being
exercised and the Fund will realized as profit the premium received for such
option. When a call option written by a Fund is exercised, the Fund will be
required to sell the underlying securities to the option holder at the strike
price, and will not participate in any increase in the price of such securities
above the strike price. When a put option written by a Fund is exercised, the
Fund will be required to purchase the underlying securities at the strike price,
which may be in excess of the market value of such securities.

A Fund may purchase and write put and call options on foreign currencies (traded
on U.S. and foreign exchanges or over-the-counter markets) to manage its
exposure to exchange rates. Call options on foreign currency written by a Fund
will be "covered," which means that the Fund will own an equal amount of the
underlying foreign currency. With respect to put options on foreign currency
written by a Fund, the Fund will establish a segregated account with its
Custodian consisting of cash or liquid securities in an amount equal to the
amount the Fund would be required to pay upon exercise of the put.

A Fund may purchase and write put and call options on indices and enter into
related closing transactions. Put and call options on indices are similar to

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options on securities except that options on an index give the holder the right
to receive, upon exercise of the option, an amount of cash if the closing level
of the underlying index is greater than (or less than, in the case of puts) the
exercise price of the option. This amount of cash is equal to the difference
between the closing price of the index and the exercise price of the option,
expressed in dollars multiplied by a specified number. Thus, unlike options on
individual securities, all settlements are in cash, and gain or loss depends on
price movements in the particular market represented by the index generally,
rather than the price movements in individual securities. A Fund may choose to
terminate an option position by entering into a closing transaction. The ability
of a Fund to enter into closing transactions depends upon the existence of a
liquid secondary market for such transactions.

REITS

The Funds may invest in real estate investment trusts ("REITs"), which pool
investors' funds for investment in income producing commercial real estate or
real estate related loans or interests.

A REIT is not taxed on income distributed to its shareholders or unitholders if
it complies with regulatory requirements relating to its organization,
ownership, assets and income, and with a regulatory requirement that it
distribute to its shareholders or unitholders at least 95% of its taxable income
for each taxable year. Generally, REITs can be classified as Equity REITs,
Mortgage REITs and Hybrid REITs. Equity REITs invest the majority of their
assets directly in real property and derive their income primarily from rents
and capital gains from appreciation realized through property sales. Mortgage
REITs invest the majority of their assets in real estate mortgages and derive
their income primarily from interest payments. Hybrid REITs combine the
characteristics of both Equity and Mortgage REITs. Shareholders in the Funds
should realize that by investing in REITs indirectly through the Funds, he or
she will bear not only his or her proportionate share of the expenses of the
Fund, but also indirectly, similar expenses of underlying REITs.

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A Fund may be subject to certain risks associated with the direct investments of
the REITs. REITs may be affected by changes in the value of their underlying
properties and by defaults by borrowers or tenants. Mortgage REITs may be
affected by the quality of the credit extended. Furthermore, REITs are dependent
on specialized management skills. Some REITs may have limited diversification
and may be subject to risks inherent in financing a limited number of
properties. REITs depend generally on their ability to generate cash flow to
make distributions to shareholders or unitholders, and may be subject to
defaults by borrowers and to self-liquidations. In addition, the performance of
a REIT may be affected by its failure to qualify for tax-free pass-through of
income under the Code or its failure to maintain exemption from registration
under the 1940 Act.

REPURCHASE AGREEMENTS

Repurchase agreements are considered to be loans by a Fund for purposes of its
investment limitations. The repurchase agreements entered into by a Fund will
provide that the underlying security at all times shall have a value at least
equal to 102% of the resale price stated in the agreement (the Adviser monitors
compliance with this requirement). Under all repurchase agreements entered into
by a Fund, the Trust's Custodian or its agent must take actual or constructive
possession of the underlying collateral. However, if the seller defaults, a Fund
could realize a loss on the sale of the underlying security to the extent that
the proceeds of sale, including accrued interest, are less than the resale price
provided in the agreement including interest. In addition, even though the
Bankruptcy Code provides protection for most repurchase agreements, if the
seller should be involved in bankruptcy or insolvency proceedings, a Fund may
incur delay and costs in selling the underlying security or may suffer a loss of
principal and interest if the Fund is treated as an unsecured creditor and is
required to return the underlying security to the seller's estate.

RULE 144A SECURITIES

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to certain qualified institutional investors. Due to the relatively limited size
of this institutional market, these securities may affect a Fund's liquidity to
the extent that qualified institutional buyers become, for a time, uninterested
in purchasing such securities. Nevertheless, Rule 144A securities may be treated
as liquid securities pursuant to guidelines adopted by the Trust's Board of
Trustees.

SECURITIES LENDING

In order to generate additional income, a Fund may lend securities which it owns
pursuant to agreements requiring that the loan be continuously secured by
collateral consisting of cash or securities of the U.S. Government or its
agencies equal to at least 100% of the market value of the loaned securities. A
Fund continues to receive interest on the loaned securities while simultaneously
earning interest on the investment of cash collateral. Collateral is marked to
market daily. There may be risks of delay in recovery of the securities or even
loss of rights in the collateral should the borrower of the securities fail
financially or become insolvent.

SECURITIES OF FOREIGN ISSUERS

The Funds may invest in securities of foreign issuers. In addition, the Funds
may invest in American Depositary Receipts. These instruments may subject a Fund
to investment risks that differ in some respects from those related to
investments in obligations of U.S. domestic issuers. These include risks of
adverse political and economic developments (including possible governmental
seizure or nationalization of assets), the possible imposition of exchange
controls or other governmental restrictions, less uniformity in accounting and
reporting requirements, the possibility that there will be less information on
such securities and their issuers available to the public, the difficulty of
obtaining or enforcing court judgments abroad, restrictions on foreign
investments in other jurisdictions, difficulties in effecting repatriation of
capital invested abroad and difficulties in transaction settlements and the
effect of delay on shareholder equity. Foreign securities may be subject to
foreign taxes, and may be less marketable than comparable U.S. securities. The
value of a Fund's investments denominated in foreign currencies will depend on
the relative strengths of those currencies and the U.S. dollars, and the Fund
may be affected favorably or unfavorably by changes in the exchange rates or
exchange control regulations between foreign currencies and the U.S. dollar.
Changes in foreign currency exchange rates also may affect the value of
dividends and interest earned, gains and losses realized on the sale of
securities and net investment income and gains if any, to be distributed to
shareholders by a Fund. Foreign branches of U.S. banks and foreign banks may be
subject to less stringent reserve requirements than those applicable to domestic
branches of U.S. banks. Furthermore, emerging market countries may have less
stable political environments than more developed countries. Also, it may be
more difficult to obtain a judgment in a court outside the United States.

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SHORT SALES

A short sale is "against the box" if at all times during which the short
position is open, the Fund owns at least an equal amount of the securities or
securities convertible into, or exchangeable without further consideration for,
securities of the same issue as the securities that are sold short.

SWAPS, CAPS, FLOORS AND COLLARS

In a typical interest rate swap, one party agrees to make regular payments equal
to a floating interest rate times a "notional principal amount," in return for
payments equal to a fixed rate times the same amount, for a specific period of
time. If a swap agreement provides for payment in different currencies, the
parties might agree to exchange the notional principal amount as well. Swaps may
also depend on other prices or rates, such as the value of an index or mortgage
prepayment rates.

In a typical cap or floor agreement, the buyer of an interest rate cap obtains
the right to receive payments to the extent that a specific interest rate
exceeds an agreed-upon level, while the seller of an interest rate floor is
obligated to make payments to the extent that a specified interest rate falls
below an agreed-upon level. An interest rate collar combines elements of buying
a cap and selling a floor. In swap agreements, if a Fund agrees to exchange
payments in dollars for payments in foreign currency, the swap agreement would
tend to decrease the Fund's exposure to U.S. interest rates and increase its
exposure to foreign currency and interest rates. Caps and floors have an effect
similar to buying or writing options. Depending on how they are used, swap
agreements may increase or decrease the overall volatility of a Fund's
investment and their share price and yield.

Swap agreements are sophisticated hedging instruments that typically involve a
small investment of cash relative to the magnitude of risk assumed. As a result,
swaps can be highly volatile and have a considerable impact on a 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. A Fund may also suffer losses if it is unable to terminate
outstanding swap agreements or reduce its exposure through offsetting
transactions. Any obligation a Fund may have under these types of arrangements
will be covered by setting aside cash or liquid securities in a segregated
account. A Fund will enter into swaps only with counterparties believed to be
creditworthy.

VARIABLE AND FLOATING RATE INSTRUMENTS

Certain obligations may carry variable or floating rates of interest, and may
involve a conditional or unconditional demand feature. Such instruments bear

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interest at rates which are not fixed, but which vary with changes in specified
market rates or indices. The interest rates on these securities may be reset
daily, weekly, quarterly or some other reset period, and may have a floor or
ceiling on interest rate changes. There is a risk that the current interest rate
on such obligations may not accurately reflect existing market interest rates. A
demand instrument with a demand notice exceeding seven days may be considered
illiquid if there is no secondary market for such security.

U.S. GOVERNMENT AGENCY OBLIGATIONS

U.S. GOVERNMENT SECURITIES

Bills, notes and bonds issued by the U.S. Government and backed by the full
faith and credit of the United States.

U.S. TREASURY OBLIGATIONS

U.S. TREASURY RECEIPTS

U.S. Treasury receipts are interests in separately traded interest and principal
component parts of U.S. Treasury obligations that are issued by banks or
brokerage firms and are created by depositing U.S. Treasury obligations into a
special account at a custodian bank. The custodian holds the interest and
principal payments for the benefit of the registered owners of the certificates
of receipts. The custodian arranges for the issuance of the certificates or
receipts evidencing ownership and maintains the register.

VARIABLE OR FLOATING RATE INSTRUMENTS

The Funds may invest in variable or floating rate instruments which may involve
a demand feature and may include variable amount master demand notes which may
or may not be backed by bank letters of credit. Such instruments bear interest
at rates which are not fixed, but which vary with changes in specified market

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rates or indices. The interest rates on these securities may be reset daily,
weekly, quarterly or some other reset period, and may have a floor or ceiling on
interest rate changes. There is a risk that the current interest rate on such
obligations may not accurately reflect existing market interest rates. A demand
instrument with a demand notice exceeding seven days may be considered illiquid
if there is no secondary market for such security.

The holder of an instrument with a demand feature may tender the instrument back
to the issuer at par prior to maturity. A variable amount master demand note is
issued pursuant to a written agreement between the issuer and the holder, its
amount may be increased by the holder or decreased by the holder or issuer, it
is payable on demand, and the rate of interest varies based upon an agreed
formula. The quality of the underlying credit must, in the opinion of the
Adviser, be equivalent to the long-term bond or commercial paper ratings
applicable to permitted investments for the Funds. The Adviser will monitor on
an ongoing basis the earnings power, cash flow and liquidity ratios of the
issuers of such instruments and will similarly monitor the ability of an issuer
of a demand instrument to pay principal and interest on demand.

WARRANTS

Warrants are instruments giving holders the right, but not the obligation, to
buy equity or fixed income securities of a company at a given price during a
specified period.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES

When-issued or delayed delivery transactions involve the purchase of an
instrument with payment and delivery taking place in the future. Delivery of and
payment for these securities may occur a month or more after the date of the
purchase commitment. The Fund will maintain with the Custodian a separate
account with liquid securities or cash in an amount at least equal to these
commitments. The interest rate realized on these securities is fixed as of the
purchase date, and no interest accrues to a Fund before settlement.

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ZERO COUPON, PAY-IN-KIND AND DEFERRED PAYMENT SECURITIES

Zero coupon obligations are debt securities that do not bear any interest, but
instead are issued at a deep discount from par. The value of a zero coupon
obligation increases over time to reflect the interest accredited. Upon
maturity, the holder is entitled to receive the par value of the security. While
interest payments are not made on such securities, holders of such securities
are deemed to have received "phantom income" annually. Because a Fund will
distribute its "phantom income" to shareholders, to the extent that shareholders
elect to receive dividends in cash rather than reinvesting such dividends in
additional shares, a Fund will have fewer assets with which to purchase income
producing securities. In the event of adverse market conditions, zero coupon,
pay-in-kind and deferred payment securities may be subject to greater
fluctuations in value and may be less liquid than comparably rated securities
paying cash interest at regular interest payment periods.

INVESTMENT LIMITATIONS

FUNDAMENTAL POLICIES

The following investment limitations (and those set forth in the Prospectus) are
fundamental policies of each Fund which cannot be changed with respect to a Fund
without the consent of the holders of a majority of that Fund's outstanding
shares. The term "majority of the outstanding shares" means the vote of (i) 67%
or more of a Fund's shares present at a meeting, if more than 50% of the
outstanding shares of the Fund are present or represented by proxy, or (ii) more
than 50% of the Fund's outstanding shares, whichever is less.

No Fund may:

2. Purchase any securities which would cause 25% or more of the total assets
of the Fund to be invested in the securities of one or more issuers
conducting their principal business activities in the same industry. This
limitation does not apply to obligations issued or guaranteed by the U.S.
Government or its agencies and instrumentalities and repurchase agreements
involving such securities.

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3. Borrow money in an amount exceeding 33 1/3% of the value of its total
assets, provided that, for purposes of this limitation, investment
strategies which either obligate a Fund to purchase securities or require
the Fund to segregate assets are not considered to be borrowings. Asset
coverage of at least 300% is required for all borrowings, except where the
Fund has borrowed money for temporary purposes in amounts not exceeding 5%
of its total assets. The Fund will not purchase securities while its
borrowings exceed 5% of its total assets.

6. Issue senior securities (as defined in the Investment Company Act of 1940
(the "1940 Act")) except as permitted by rule, regulation or order of the
Securities and Exchange Commission (the "SEC").

7. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter in selling a portfolio security.

8. Invest in interests in oil, gas, or other mineral exploration or
development programs and oil, gas or mineral leases.

The foregoing percentages will apply at the time of the purchase of a security
and shall not be considered violated unless an excess or deficiency occurs
immediately after or as a result of a purchase of such security.

NON-FUNDAMENTAL POLICIES

The following investment limitations are non-fundamental policies of each Fund
and may be changed with respect to a Fund by the Board of Trustees.

No Fund may:

1. Pledge, mortgage or hypothecate assets except to secure borrowings
permitted by the Fund's fundamental limitation on borrowing (set forth in
the Prospectus).

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2. Invest in companies for the purpose of exercising control.

4. Invest its assets in securities of any investment company, except as
permitted by the 1940 Act.

Unregistered securities sold in reliance on the exemption from registration in
Section 4(2) of the 1933 Act and securities exempt from registration on re-sale
pursuant to Rule 144A of the 1933 Act may be treated as liquid securities under
procedures adopted by the Board of Trustees. Rule 144A securities are securities
that are traded in the institutional market pursuant to an exemption from
registration. Rule 144A securities may not be as liquid as exchange-traded
securities since they may only be resold to certain qualified institutional
buyers.

THE ADVISER

Penn Capital Management Company, Inc. ("Penn Capital" or the "Adviser"), 52
Haddonfield-Berlin Road, Suite 1000, Cherry Hill, New Jersey 08034, is a
professional investment management firm founded in 1987 and registered as an
investment adviser under the Investment Advisers Act. Richard A. Hocker is a
founding partner and Chief Investment Officer of the Adviser, an investment
management firm that manages the investment portfolios of institutions and high
net worth individuals and which currently has assets under management of
approximately $350 million. The Adviser employs a staff of 17 and manages monies
in a variety of investment styles through either separate account management or
one of its private investment funds.

The Adviser serves as the investment adviser for the Fund under an investment
advisory agreement (the "Advisory Agreement"). Under the Advisory Agreement, the
Adviser makes the investment decisions for the assets of the Fund and

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continuously reviews, supervises and administers the Fund's investment programs,
subject to the supervision of, and policies established by, the Trustees of the
Trust.

The Advisory Agreement provides that the Adviser shall not be liable for any
error of judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in carrying out its duties, but shall not
be protected against any liability to the Trust or its shareholders by reason of
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard of its obligations or
duties thereunder (except as provided under provisions of applicable law).

The Advisory Agreement provides that if, for any fiscal year, the ratio of
expenses of any Fund (including amounts payable to the Adviser but excluding
interest, taxes, brokerage, litigation, and other extraordinary expenses)
exceeds applicable limitations, the Adviser will bear the amount of such excess.
The Adviser will not be required to bear expenses of any Fund to an extent which
would result in the Fund's inability to qualify as a regulated investment
company under provisions of the Internal Revenue Code of 1986, as amended (the
"Code").

THE ADMINISTRATOR

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The continuance of the Administration Agreement must be specifically approved at
least annually (i) by the vote of a majority of the Trustees or by the vote of a
majority of the outstanding voting securities of the Fund, and (ii) by the vote
of a majority of the Trustees of the Trust who are not parties to the
Administration Agreement or an "interested person" (as that term is defined in
the 1940 Act) of any party thereto, cast in person at a meeting called for the
purpose of voting on such approval. The Administration Agreement is terminable
at any time as to any Fund without penalty by the Trustees of the Trust, by a
vote of a majority of the outstanding shares of the Fund or by the Manager on
not less than 30 days' nor more than 60 days' written notice.

DISTRIBUTION AND SHAREHOLDER SERVICING

SEI Investments Distribution Co. (the "Distributor"), a wholly-owned subsidiary
of SEI Investments, and the Trust are parties to a distribution agreement (the
"Distribution Agreement"). The Distributor receives no compensation for
distribution of shares of the Funds.

The Distribution Agreement shall remain in effect for a period of two years
after the effective date of the agreement and must be renewed annually
thereafter. The Distribution Agreement may be terminated by the Distributor or
by the Trust, by a majority vote of the Trustees who are not interested persons
and have no financial interest in the Distribution Agreement or by a majority
vote of the outstanding securities of the Trust upon not more than 60 days'
written notice by either party or upon assignment by the Distributor.

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The Strategic High Yield Fund has adopted a shareholder service plan for its
Adviser Class shares (the "Adviser Class Service Plan") under which firms,
including the Distributor, that provide shareholder and administrative services
may receive compensation therefor. Under the Adviser Class Service Plan, the
Distributor may provide those services itself, or may enter into arrangements
under which third parties provide such services and are compensated by the
Distributor. Under such arrangements, the Distributor may retain as profit any
difference between the fee it receives and the amount it pays such third
parties. In addition, the Fund may enter into such arrangements directly. Under
the Adviser Class Service Plan, the Distributor is entitled to receive a fee at
an annual rate of up to .25% of each Fund's average daily net assets
attributable to Adviser Class shares that are subject to the arrangement in
return for provision of a broad range of shareholder and administrative
services, including: maintaining client accounts; arranging for bank wires;
responding to client inquiries concerning services provided for investments;
changing dividend options; account designations and addresses; providing
sub-accounting; providing information on share positions to clients; forwarding
shareholder communications to clients; processing purchase, exchange and
redemption orders; and processing dividend payments.

TRUSTEES AND OFFICERS OF THE TRUST

The Trustees and Executive Officers of the Trust, their respective dates of
birth, and their principal occupations for the last five years are set forth
below. Each may have held other positions with named companies during that
period. Unless otherwise noted, the business address of each Trustee and each
Executive Officer is SEI Investments Company, Oaks, Pennsylvania 19456. Certain
officers of the Trust also serve as officers of some or all of the following:
The Achievement Funds Trust, The Advisors' Inner Circle Fund, The Arbor Fund,
ARK Funds, Bishop Street Funds, Boston 1784 Funds(R), CrestFunds, Inc., CUFUND,
The Expedition Funds, FMB Funds, Inc., First American Funds, Inc., First
American Investment Funds, Inc., First American Strategy Funds, Inc, HighMark
Funds, Marquis Funds(R), Monitor Funds, Morgan Grenfell Investment Trust, The
PBHG Funds, Inc., PBHG Insurance Series Fund, Inc., The Pillar Funds, Santa
Barbara Group of Mutual Funds, Inc., SEI Asset Allocation Trust, SEI Daily
Income Trust, SEI Index Funds, SEI Institutional Investments Trust, SEI
Institutional Managed Trust, SEI International Trust, SEI Liquid Asset Trust,
SEI Tax Exempt Trust, STI Classic Funds, and STI Classic Variable Trust, each of
which is an open-end management investment company managed by SEI Investments
Mutual Funds Services or its affiliates and, except for Santa Barbara Group of
Mutual Funds, Inc., are distributed by SEI Investments Distribution Co.

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ROBERT E. TURNER (DOB 11/26/56) - Trustee* - Chairman and Chief Investment
Officer of Turner Investment Partners, Inc. ("Turner"), since 1990.

MICHAEL E. JONES (DOB 12/24/54) - Trustee* - Senior Vice President, Investment
Adviser and Portfolio Manager with Clover Capital Management Inc., since 1984.
Principal of CCM Securities Inc.

ALFRED C. SALVATO (DOB 01/09/58) - Trustee** - Treasurer, Thomas Jefferson
University Health Care Pension Fund, since 1995, and Assistant Treasurer,
1988-1995.

JOHN T. WHOLIHAN (DOB 12/12/37) - Trustee** - Professor, Loyola Marymount
University, since 1984.

STEPHEN J. KNEELEY (DOB 02/09/63) - President and Chief Executive Officer -
Chief Operating Officer of Turner Investment Partners, Inc., since 1990.

JANET RADER ROTE (DOB 08/24/60) - Vice President and Assistant Secretary
Director of Compliance of Turner Investment Partners, Inc., since 1992.

SANDRA K. ORLOW (DOB 10/18/53) - Vice President and Assistant Secretary - Vice
President and Assistant Secretary of the Administrator and Distributor since
1988.

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ROBERT DELLACROCE (DOB 12/17/63) - Controller and Chief Accounting Officer -
Director, Funds Administration and Accounting of SEI since 1994. Senior Audit
Manager, Arthur Andersen LLP, 1986-1994.

JAMES W. JENNINGS (DOB 01/15/37) - Secretary - Partner, Morgan, Lewis & Bockius
LLP, Counsel to the Trust, Turner, the Administrator and Distributor.

The following table exhibits Trustee compensation for the fiscal year ended
September 30, 1998.

<S> <C> <C> <C> <C>
Robert Turner* $0 N/A N/A $0

Richard A. Hocker* $0 N/A N/A $0

Michael E. Jones* $0 N/A N/A $0

Alfred C. Salvato** $-- N/A N/A $--

Janet F. Sansone** $-- N/A N/A $--

John T. Wholihan** $-- N/A N/A $--

</TABLE>

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* Messrs. Robert Turner, Richard Hocker and Michael Jones are Trustees who may
be deemed to be "interested persons" of the Trust as the term is defined in the
1940 Act. The Trust pays fees only to the Trustees who are not interested
persons of the Trust. Compensation of Officers and interested persons of the
Trust is paid by the adviser or the manager.

** Member of the Audit Committee.

The Trustees and Officers of the Trust own less than 1% of the outstanding
shares of the Trust.

COMPUTATION OF YIELD AND TOTAL RETURN

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PURCHASE AND REDEMPTION OF SHARES

DETERMINATION OF NET ASSET VALUE

The securities of each Fund are valued by the Administrator. The Administrator
may use an independent pricing service to obtain valuations of securities. The
pricing service relies primarily on prices of actual market transactions as well
as on trade quotations obtained from third parties. However, the pricing service
may use a matrix system to determine valuations of fixed income securities. This
system considers such factors as security prices, yields, maturities, call
features, ratings and developments relating to specific securities in arriving
at valuations. The procedures used by the pricing service and its valuations are
reviewed by the officers of the Trust under the general supervision of the
Trustees.

Securities with remaining maturities of 60 days or less will be valued by the
amortized cost method, which involves valuing a security at its cost on the date
of purchase and thereafter (absent unusual circumstances) assuming a constant
amortization to maturity of any discount or premium, regardless of the impact of
fluctuations in general market rates of interest on the value of the instrument.
While this method provides certainty in valuation, it may result in periods
during which value, as determined by this method, is higher or lower than the
price the Trust would receive if it sold the instrument.

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If there is no readily ascertainable market value for a security, the
Administrator will make a good faith determination as to the "fair value" of the
security.

TAXES

FEDERAL INCOME TAX

The discussion of federal income tax consequences is based on the Internal
Revenue Code of 1986, as amended (the "Code") and the regulations issued
thereunder as in effect on the date of this Statement of Additional Information.
New legislation, as well as administrative changes or court decisions, may
significantly change the conclusions expressed herein, and may have a
retroactive effect with respect to the transactions contemplated herein.

In order to qualify for treatment as a RIC under the Code, each Fund must
distribute annually to its shareholders at least the sum of 90% of its net
interest income excludable from gross income plus 90% of its investment company
taxable income (generally, net investment income plus net short-term capital
gain) ("Distribution Requirement") and also must meet several additional
requirements. Among these requirements are the following: (i) at least 90% of a
Fund's gross income each taxable year must be derived from divi dends, interest,
payments with respect to securities loans, gains from the sale or other
disposition of stock or securities, or certain other income (including gains
from options, futures or forward contracts); (ii) at the close of each quarter
of the Fund's taxable year, at least 50% of the value of its total assets must
be represented by cash and cash items, U.S. Government securities, securities of
other RICs and other securities, with such other securities limited, in respect
to any one issuer, to an amount that does not exceed 5% of the value of the
Fund's assets and that does not represent more than 10% of the outstanding
voting securities of such issuer; and (iii) at the close of each quarter of the
Fund's taxable year, not more than 25% of the value of its assets may be
invested in securities (other than U.S. Government securities or the securities
of other RICs) of any one issuer, or of two or more issuers which are engaged in
the same, similar or related trades or business if the Fund owns at least 20% of
the voting power of such issuer.

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Notwithstanding the Distribution Requirement described above, which requires
only that a Fund distribute at least 90% of its annual investment company
taxable income and does not require any minimum distribution of net capital gain
(the excess of net long-term capital gain over net short-term capital loss),
each Fund will be subject to a nondeductible 4% federal excise tax to the extent
it fails to distribute 98% of its ordinary income for that year and 98% of its
capital gain net income (the excess of short- and long-term capital gains over
short-and long-term capital losses) for the one-year period ending on October 31
of that year, plus certain other amounts.

In certain cases, a Fund will be required to withhold and remit to the United
States Treasury 31% of any distributions paid to a shareholder who (1) has
failed to provide a correct taxpayer identification number, (2) is subject to
backup withholding by the Internal Revenue Service, or (3) has not certified to
that Fund that such shareholder is not subject to backup withholding.

If any Fund fails to qualify as a RIC for any taxable year, it will be taxable
at regular corporate rates. In such an event, all distributions (including
capital gains distributions) will be taxable as ordinary dividends to the extent
of a Fund's current and accumulated earnings and profits, and such distributions
will generally be eligible for the corporate dividends-received deduction.

S-34

<PAGE>

the purchase price of their shares rather than an increase in the value of their
investment. The effect on In-Kind Investors would be to reduce their potential
liability for tax on capital gains by spreading it over a larger asset base. The
opposite may occur if the Funds acquire securities having an unrealized capital
loss. In that case, In-Kind Investors will be unable to utilize the loss to
offset gains, but, because an In-Kind Purchase will not result in any gains, the
inability of In-Kind Investors to utilize unrealized losses will have no
immediate tax effect. For new shareholders, to the extent that unrealized losses
are realized by the Funds, new shareholders may benefit by any reduction in net
tax liability attributable to the losses. The Adviser cannot predict whether
securities acquired in any In-Kind Purchase will have unrealized gains or losses
on the date of the In-Kind Purchase. Consistent with its duties as investment
adviser, the Adviser will, however, take tax consequences to investors into
account when making decisions to sell portfolio assets, including the impact of
realized capital gains on shareholders of the Funds.

STATE TAXES

PORTFOLIO TRANSACTIONS

The Funds have no obligation to deal with any broker-dealer or group of
broker-dealers in the execution of transactions in portfolio securities. Subject
to policies established by the Trustees of the Funds, the Adviser is responsible
for placing the orders to execute transactions for the Funds. In placing orders,
it is the policy of the Adviser to seek to obtain the best net results taking
into account such factors as price (including the applicable dealer spread), the
size, type and difficulty of the transaction involved, the firm's general
execution and operational facilities and the firm's risk in positioning the
securities involved. While the Adviser generally seeks reasonably competitive
spreads or commissions, the Funds will not necessarily be paying the lowest
spread or commission available.

S-35

<PAGE>

The Adviser may, consistent with the interests of the Funds, select brokers on
the basis of the research services they provide to the Adviser. Such services
may include analyses of the business or prospects of a company, industry or
economic sector, or statistical and pricing services. Information so received by
the Adviser will be in addition to and not in lieu of the services required to
be performed by the Adviser under the Advisory Agreement. If, in the judgment of
the Adviser, a Fund or other accounts managed by the Adviser will be benefitted
by supplemental research services, the Adviser is authorized to pay brokerage
commissions to a broker furnishing such services which are in excess of
commissions which another broker may have charged for effecting the same
transaction. These research services include advice, either directly or through
publications or writings, as to the value of securities, the advisability of
investing in, purchasing or selling securities, and the availability of
securities or purchasers or sellers of securities; furnishing of analyses and
reports concerning issuers, securities or industries; providing information on
economic factors and trends; assisting in determining portfolio strategy;
providing computer software used in security analyses; and providing portfolio
performance evaluation and technical market analyses. The expenses of the
Adviser will not necessarily be reduced as a result of the receipt of such
supplemental information, such account generating the brokerage, and there can
be no guarantee that the Adviser will find all of such services of value in
advising that Fund.

Although they are not expected to do so, the Funds may execute brokerage or
other agency transactions through the Distributor for commissions in conformity
with the 1940 Act, the Securities Exchange Act of 1934 and rules promulgated by
the SEC. Under these provisions, the Distributor is permitted to receive and
retain compensation for effecting portfolio transactions for a Fund on an
exchange if a written contract is in effect between the Trust and the
Distributor expressly permitting the Distributor to receive and retain such
compensation. These rules further require that commissions paid to the
Distributor by a Fund for exchange transactions not exceed "usual and customary"
brokerage commissions. The rules define "usual and customary" commissions to
include amounts which are "reasonable and fair compared to the commission, fee

S-36

<PAGE>

services may not be used exclusively, or at all, with respect to the Fund or
or other remuneration received or to be received by other brokers in connection
with comparable transactions involving similar securities being purchased or
sold on a securities exchange during a comparable period of time." The Trustees,
including those who are not "interested persons" of the Trust, have adopted
procedures for evaluating the reasonableness of commissions paid to the
Distributor and will review these procedures periodically.

DESCRIPTION OF SHARES

SHAREHOLDER LIABILITY

LIMITATION OF TRUSTEES' LIABILITY

S-37

<PAGE>

liabilities and expenses incurred in connection with actual or threatened
litigation in which they may be involved because of their offices with the Trust
unless it is determined in the manner provided in the Declaration of Trust that
they have not acted in good faith in the reasonable belief that their actions
were in the best interests of the Trust. However, nothing in the Declaration of
Trust shall protect or indemnify a Trustee against any liability for his willful
misfeasance, bad faith, gross negligence or reckless disregard of his duties.

5% SHAREHOLDERS

As of January 5, 1999, the following persons were the only persons who were
record owners (or to the knowledge of the Trust, beneficial owners) of 5% or
more of the shares of the Portfolios. The Trust believes that most of the shares
referred to below were held by the persons indicated in accounts for their
fiduciary, agency, or custodial customers.

PENN CAPITAL SELECT FINANCIAL SERVICES FUND

PENN CAPITAL STRATEGIC HIGH YIELD BOND FUND

PEN CAPITAL VALUE PLUS FUND

FINANCIAL INFORMATION

Ernst & Young LLP has served as the Funds independent auditor since inception.

EXPERTS

[Insert]

LEGAL COUNSEL

Morgan, Lewis & Bockius LLP, serves as counsel to the Trust.

S-38

<PAGE>

APPENDIX

DESCRIPTION OF CORPORATE BOND RATINGS

DESCRIPTION OF MOODY'S LONG-TERM RATINGS

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 by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

Aa Bonds 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 risk appear somewhat larger than the 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 some time in the 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 rated Ba are judged to have speculative elements; their
future cannot be considered as 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.

A-1

<PAGE>

DESCRIPTION OF STANDARD & POOR'S LONG-TERM RATINGS

Investment Grade

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 highest rated debt 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 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.

SPECULATIVE GRADE

Debt rated 'BB', 'B', 'CCC', 'CC', and 'C' is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. 'BB' indicates the least degree of speculation and
'C' the highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.

BB Debt rated 'BB' has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties
or exposure to adverse business, financial, or economic conditions that
could lead to inadequate capacity to meet timely interest and principal
payments. The 'BB' rating category is also used for debt subordinated
to senior debt that is assigned an actual or implied 'BBB-' rating.

B Debt rate 'B' has greater vulnerability to default but presently has
the capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions would likely impair
capacity or willingness to pay interest and repay principal. The 'B'
rating category also is used for debt subordinated to senior debt that
is assigned an actual or implied 'BB' or 'BB-' rating.

CCC Debt rated 'CCC' has a current identifiable vulnerability to default,
and is dependent on favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of
principal. In the event of adverse business, financial, or economic
conditions, it is not likely to have the capacity to pay interest and
repay principal. The 'CCC' rating category also is used for debt
subordinated to senior debt that is assigned an actual or implied 'B'
or 'B-' rating.

CC The rating 'CC' is typically applied to debt subordinated to senior
debt which is assigned an actual or implied 'CCC' rating.

A-2

<PAGE>

C The rating 'C' is typically applied to debt subordinated to senior debt
which is assigned an actual or implied 'CCC-' debt rating. The 'C'
rating may be used to cover a situation where a bankruptcy petition has
been filed, but debt service payments are continued.

CI Debt rated 'CI' is reserved for income bonds on which no interest is
being paid.

D Debt is rated 'D' when the issue is in payment default, or the obligor
has filed for bankruptcy. The 'D' rating is used when interest or
principal payments are not made on the date due, even if the applicable
grace period has not expired, unless S&P believes that such payments
will be made during such grace period.

DESCRIPTION OF DUFF & PHELPS' LONG-TERM DEBT RATINGS

AAA Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.

AA+ High credit quality. Protection factors are strong. Risk is modest but
AA- may vary slightly from time to time because of economic conditions.

A+ Protection factors are average but adequate. However, risk
factors are more variable and
A- greater in periods of economic stress.

BBB+ Below average protection factors but still considered sufficient for
prudent investment.
BBB- Considerable variability in risk during economic cycles.

BB+ Below investment grade but deemed likely to meet obligations
BB when due. Present or prospective financial protection factors fluctuate
BB- according to industry conditions or company fortunes. Overall quality
may move up or down frequently within this category.

B+ Below investment grade and possessing risk that obligations will not be
met when due. B Financial protection factors will fluctuate widely
according to economic cycles, industry B- conditions and/or company
fortunes. Potential exists for frequent changes in the rating within
this category or into a higher or lower rating grade.

CCC Well below investment grade securities. Considerable uncertainty exists
as to timely payment of principal, interest or preferred dividends.
Protection factors are narrow and risk can be substantial with
unfavorable economic/industry conditions, and/or with unfavorable
company developments.

DD Defaulted debt obligations. Issuer failed to meet scheduled principal
and/or interest payments.

DP Preferred stock with dividend arrearages.

A-3

<PAGE>

DESCRIPTION OF FITCH'S LONG-TERM RATINGS

INVESTMENT GRADE BOND

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 credit
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 to
be 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.

SPECULATIVE GRADE BOND

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.

A-4

<PAGE>

DESCRIPTION OF IBCA'S LONG-TERM RATINGS

AAA Obligations for which there is the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial, such that adverse changes in business, economic or
financial conditions are unlikely to increase investment risk
substantially.

AA Obligations for which there is a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic or financial
conditions may increase investment risk, albeit not very significantly.

A Obligations for which there is a low expectation of investment risk.
Capacity for timely repayment of principal and interest is strong,
although adverse changes in business, economic or financial conditions
may lead to increased investment risk.

BBB Obligations for which there is currently a low expectation of
investment risk. Capacity for timely repayment of principal and
interest is adequate, although adverse changes in business, economic or
financial conditions are more likely to lead to increased investment
risk than for obligations in other categories.

BB Obligations for which there is a possibility of investment risk
developing. Capacity for timely repayment of principal and interest
exists, but is susceptible over time to adverse changes in business,
economic or financial conditions.

B Obligations for which investment risk exists. Timely repayment of
principal and interest is not sufficiently protected against adverse
changes in business, economic or financial conditions.

CCC Obligations for which there is a current perceived possibility of
default. Timely repayment of principal and interest is dependent on
favorable business, economic or financial conditions.

CC Obligations which are highly speculative or which have a high risk of
default.

C Obligations which are currently in default.

DESCRIPTION OF THOMSON BANKWATCH'S LONG-TERM DEBT RATINGS

INVESTMENT GRADE

AAA The highest category; indicates that the ability to repay principal and
interest on a timely basis is very high.

AA The second-highest category; indicates a superior ability to repay
principal and interest on a timely basis, with limited incremental risk
compared to issues rated in the highest category.

A The third-highest category; indicates the ability to repay principal
and interest is strong. Issues rated "A" could be more vulnerable to
adverse developments (both internal and external) than obligations with
higher ratings.

A-5

<PAGE>

BBB The lowest investment-grade category; indicates an acceptable capacity
to repay principal and interest. Issues rated "BBB" are, however, more
vulnerable to adverse developments (both internal and external) than
obligations with higher ratings.

NON-INVESTMENT GRADE

BB While not investment grade, the "BB" rating suggests that the
likelihood of default is considerably less than for lower-rated issues.
However, there are significant uncertainties that could affect the
ability to adequately service debt obligations.

B Issues rated "B" show a higher degree of uncertainty and therefore
greater likelihood of default than higher-rated issues. Adverse
developments could well negatively affect the payment of interest and
principal on a timely basis.

CCC Issues rated "CCC" clearly have a high likelihood of default, with
little capacity to address further adverse changes in financial
circumstances.

CC "CC" is applied to issues that are subordinate to other obligations
rated "CCC" and are afforded less protection in the event of bankruptcy
or reorganization.

D Default

A-6

<PAGE>

PART C: OTHER INFORMATION

Item 23. Exhibits

(a)(1) Agreement and Declaration of Trust of the Registrant, dated
January 26, 1996 is incorporated by reference to Exhibit 1 of the
Registrant's Registration Statement as filed on February 1, 1996.

(a)(2) Certificate of Amendment of Agreement and Declaration of Trust
dated March 28, 1997, is incorporated by reference to Exhibit
1(a) of the Registrant's Post-Effective Amendment No. 5 as filed
on April 10, 1997.

(b) By-Laws are incorporated by reference to Exhbit 2 of the
Registrant's Registration Statement as filed on February 1, 1996.

(d)(1) Investment Advisory Agreement between the Registrant and Turner
Investment Partners, Inc., is incorporated by reference to
Exhibit 5(a) of the Registrant's Post-Effective Amendment No. 4
as filed on January 28, 1997.

(d)(2) Investment Advisory Agreement between the Registrant and Clover
Capital Management, Inc., is incorporated by reference to Exhibit
5(b) of the Registrant's Post-Effective Amendment No. 10 as filed
on October 15, 1997.

(d)(3) Investment Advisory Agreement between the Registrant and Penn
Capital Management Company, Inc., is filed herewith.

(d)(4) Investment Advisory Agreement between Registrant and Turner
Investment Partners, Inc., is filed herewith.

(d)(5) Investment Sub-Advisory Agreement between Turner Investment
Partners, Inc., and Clover Capital Management, Inc., is filed
herewith.

(d)(6) Investment Sub-Advisory Agreement between Turner Investment
Partners, Inc., and Penn Capital Management, Inc., is filed
herewith.

(d)(7) Form of Investment Sub-Advisory Agreement between Turner
Investment Partners, Inc., and Chartwell Investment Partners, is
filed herewith.

(e)(1) Distribution Agreement between the Registrant and SEI Investments
Distribution Co. (formerly, SEI Financial Services Company), is

C-1

<PAGE>

incorporated by reference to Exhibit 6(a) of the Registrant's
Post-Effective Amendment No. 4 as filed on January 28, 1997.

(e)(2) Distribution Agreement between the Registrant and CCM Securities
Inc., is incorporated by reference to Exhibit 6(b) of the
Registrant's Registration Statement as filed on January 23, 1998.

(f) Not applicable.

(g) Custodian Agreement between the Registrant and CoreStates Bank,
N.A., is incorporated by reference to Exhibit 8(a) of the
Registrant's Post-Effective Amendment No. 4 as filed on January
28, 1997.

(h)(1) Administration Agreement between the Registrant and SEI
Investments Management Corporation (formerly, SEI Financial
Management Corporation), is incorporated by reference to Exhibit
9(a) of the Registrant's Post-Effective Amendment No. 4 filed on
January 28, 1997.

(h)(2) Transfer Agency Agreement between the Registrant and DST Systems,
Inc. is incorporated by reference to Exhibit 9(b) of the
Registrant's Registration Statement as filed on January 23, 1998.

(i) Opinion and Consent of Counsel, is incorporated by reference to
Exhibit 10 of the Registrant's Pre-Effective Amendment No. 1 to
Registration Statement as filed April 19, 1996.

(j) Consent of Independent Auditors, Ernst & Young, LLP, is filed
herewith.

(k) Not applicable.

(l) Not applicable.

(m) Not applicable.

(n) Not applicable.

(o) Not applicable.

(p) Powers of Attorney for Robert E. Turner, Richard A. Hocker,
Michael E. Jones, Alfred C. Salvato, John T. Wholihan, Stephen J.
Kneeley, Janet F. Sansone, and Robert DellaCroce are filed
herewith.

C-2

<PAGE>

Item 24. Persons Controlled by or under Common Control with Registrant:

See the Prospectus and the Statement of Additional Information regarding
the Registrant's control relationships. SEI Investments Management Corporation
(formerly, SEI Financial Management Corporation) is the owner of all beneficial
interest in the Administrator and is a subsidiary of SEI Investments Company,
which also controls the distributor of the Registrant, SEI Investments
Distribution Co. (formerly, SEI Financial Services Company), as well as to other
corporations engaged in providing various financial and record keeping services,
primarily to bank trust departments, pension plan sponsors, and investment
managers.

Item 25. Indemnification:

Article VIII of the Agreement of Declaration of Trust filed as Exhibit 1 to
the Registration Statement is incorporated by reference. Insofar as
indemnification for liability arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the Declaration of Trust or otherwise, the Registrant is aware that
in the opinion of the Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Act and, therefore, is
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by trustees, directors, officers or controlling persons of the Registrant
in connection with the successful defense of any act, suit or proceeding) is
asserted by such trustees, directors, officers or controlling persons in
connection with the shares being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issues.

C-3

<PAGE>

Item 26. Business and Other Connections of Investment Advisers:

ADVISERS

TURNER INVESTMENT PARTNERS, INC.
Turner Investment Partners, Inc. ("Turner") is the investment adviser for the
Turner Ultra Large Cap Growth, Turner Growth Equity, Turner Midcap Growth,
Turner Small Cap Growth, Turner Micro Cap Growth, Turner Fixed Income, Turner
Short Duration Government Funds - One Year Portfolio, Turner Short Duration
Government Funds - Three Year Portfolio, and TIP Target Select Equity Funds. The
principal address of Turner is 1235 Westlakes Drive, Suite 350, Berwyn, PA
19312. Turner is an investment adviser registered under the Advisers Act.

Name and Position With Position With Other
Company Other Company Company
- - ---------------------- ------------- -------------------

<S> <C> <C>
Stephen J. Kneeley SEI Investments Distribution Co. Registered Representative
Chief Operating Officer,
Secretary, Treasurer

Janet Rader Rote SEI Investments Distribution Co. Registered Representative
Director of Compliance

Michael R. Thompson SEI Investments Distribution Co. Registered Representative
Marketing Director, Assistant
Secretary

Thomas R. Trala
Director of Finance ---- ----

Mark D. Turner
President, Director of Fixed ---- ----
Income

Robert E. Turner, Jr.
Chairman, CIO ---- ----

</TABLE>

CLOVER CAPITAL MANAGEMENT, INC.

Clover Capital Management, Inc. is the investment adviser for the Clover Max Cap
Value, Clover Equity Value, Clover Fixed Income and Clover Small Cap Value
Funds. Clover Capital Management, Inc. is the sub-adviser for the TIP Target
Select Equity Fund. The principal address of Clover Capital Management, Inc. is
11 Tobey Village Office Park, Pittsford, NY 14534.

Name and Position With Connection With Other
Company Other Company Company
- - ---------------------- ------------- ---------------------

<S> <C> <C>
James G. Gould CCM Securities, Inc. Registered Rep for Clover
Director & President Mutual Funds

</TABLE>

C-4

<PAGE>

<TABLE>

<S> <C> <C>
Richard J. Huxley
executive VP & Fixed Income ---- ----
Director

Michael E. Jones CCM Securities, Inc. Registered Representative
Managing Director & Exec. VP

Laura G. Quatela CCM Securities, Inc. Registered Rep for Clover Mutual
VP, Chief Legal Officer & Funds
Secretary

Geoffrey H. Rosenberger CCM Securities, Inc. Registered Representative
Managing Director, Exec VP, &
Treasurer

Charles W. Ruff
Director, VP & Fixed Income ---- ----
Director

</TABLE>

PENN CAPITAL MANAGEMENT COMPANY, INC.
Penn Capital Management Company, Inc. is the investment adviser for the Penn
Capital Select Financial Services, Penn Capital Strategic High Yield Bond and
Penn Capital Value Plus Funds. Penn Capital Management Company, Inc. is the
sub-adviser for the TIP Target Select Equity Fund. The principal address of Penn
Capital Management Company, Inc., is 52 Haddonfield-Berlin Road, Suite 1000,
Cherry Hill, NJ 08034.

Name and Position With Connection With Other
Company Other Company Company
- - ---------------------- ------------- ----------------------

<S> <C> <C>
John J. Gallagher, Jr. Valley Forge Military Academy & Chairman of Board of Trustees
Trustee College

Kimberley Hocker
Trustee ---- ----

Kirsten Hocker
Trustee ---- ----

Marcia Ann Hocker MAH Inc. Secretary/Treasurer
President, COO, Trustee

Richard Alan Hocker
CIO ---- ----

Kathleen Ann News
Managing Director ---- ----

Michael F. Swallow
Secretary, Treasurer ---- ----

</TABLE>

C-5

<PAGE>

CHARTWELL INVESTMENT PARTNERS
Chartwell Investment Partners is the sub-adviser for the TIP Target Select
Equity Fund. The principal address of Chartwell Investment Partners is 1235
Westlakes Drive, Suite 330, Berwyn, PA 19312.

Name and Position With Connection With Other
Company Other Company Company
- - ---------------------- ------------- ---------------------
<S> <C> <C>
Edward N. Antoian
Partner/Portfolio Manager ---- ----

Terry F. Bovarnick
Partner/Portfolio Manager ---- ----

Bobcat Partners
General Partner of Maverick
Partners ---- ----

Chartwell G.P., Inc.
General Partner of Maverick
Partners ---- ----

David C. Dalrymple
Partner/Portfolio Manager ---- ----

Winthrop S. Jessup
Partner ---- ----

Michael T. Kennedy Radnor Holdings Corp. President, CEO
Indirect Limited Partner
Trinity Capital Partners President, CEO
Maverick Partners L.P.
Limited Partner ---- ----

Michael J. McCloskey
Partner ---- ----

John P. McNiff CAM Investment Advisors, Inc. Chairman
Indirect Limited Partner
Longwood Investment Advisors, Managing Director
Inc.
Kevin A. Melich
Partner/Portfolio Manager ---- ----

Harold A. Ofstie
Partner/Portfolio Manager ---- ----

Timothy J. Riddle
Compliance Officer ---- ----

</TABLE>

C-6

<PAGE>

<TABLE>

<S> <C> <C>
Bernard P. Schaffer
Partner/Portfolio Manager ---- ----

Mark A. Sullivan
Vice President Client Services ---- ----

</TABLE>

Item 27. Principal Underwriters:

(a) Furnish the name of each investment company (other than the Registrant)
for which each principal underwriter currently distributing the
securities of the Registrant also acts as a principal underwriter,
distributor or investment adviser.

Registrant's distributor, SEI Investments Distribution Co. (the
"Distributor"), acts as distributor for:

<TABLE>

<S> <C>

SEI Daily Income Trust July 15, 1982
SEI Liquid Asset Trust November 29, 1982
SEI Tax Exempt Trust December 3, 1982
SEI Index Funds July 10, 1985
SEI Institutional Managed Trust January 22, 1987
SEI Institutional International Trust August 30, 1988
The Advisors' Inner Circle Fund November 14, 1991
The Pillar Funds February 28, 1992
CUFUND May 1, 1992
STI Classic Funds May 29, 1992
First American Funds, Inc. November 1, 1992
First American Investment Funds, Inc. November 1, 1992
The Arbor Fund January 28, 1993
Boston 1784 Funds(R) June 1, 1993
The PBHG Funds, Inc. July 16, 1993
Morgan Grenfell Investment Trust January 3, 1994
The Achievement Funds Trust December 27, 1994
Bishop Street Funds January 27, 1995
CrestFunds, Inc. March 1, 1995
STI Classic Variable Trust August 18, 1995
ARK Funds November 1, 1995
Monitor Funds January 11, 1996
SEI Asset Allocation Trust April 1, 1996
SEI Institutional Investments Trust June 14, 1996
First American Strategy Funds, Inc. October 1, 1996
HighMark Funds February 15, 1997
Armada Funds March 8, 1997
PBHG Insurance Series Fund, Inc. April 1, 1997
The Expedition Funds June 9, 1997
TIP Institutional Funds January 1, 1998
Oak Associates Funds February 27, 1998
The Nevis Fund, Inc. June 29, 1998
The Parkstone Group of Funds September 14, 1998

</TABLE>

C-7

<PAGE>

The Distributor provides numerous financial services to investment
managers, pension plan sponsors, and bank trust departments. These
services include portfolio evaluation, performance measurement and
consulting services ("Funds Evaluation") and automated execution,
clearing and settlement of securities transactions ("MarketLink").

(b) Furnish the Information required by the following table with respect to
each director, officer or partner of each principal underwriter named
in the answer to Item 21 of Part B. Unless otherwise noted, the
business address of each director or officer is Oaks, PA 19456.

Position and Office Positions and Offices
Name with Underwriter with Registrant
- - ---- ------------------- ---------------------
<S> <C> <C>
Alfred P. West, Jr. Director, Chairman of the Board of Directors --
Henry H. Greer Director --
Carmen V. Romeo Director --
Mark J. Held President & Chief Operating Officer --
Gilbert L. Beebower Executive Vice President --
Richard B. Lieb Executive Vice President --
Dennis J. McGonigle Executive Vice President --
Robert M. Silvestri Chief Financial Officer & Treasurer --
Leo J. Dolan, Jr. Senior Vice President --
Carl A. Guarino Senior Vice President --
Larry Hutchison Senior Vice President --
Jack May Senior Vice President --
Hartland J. McKeown Senior Vice President --
Barbara J. Moore Senior Vice President --
Kevin P. Robins Senior Vice President & General Counsel --
Patrick K. Walsh Senior Vice President --
Robert Aller Vice President --
Gordon W. Carpenter Vice President --
Todd Cipperman Vice President & Assistant Secretary Vice President & Assistant Secretary
S. Courtney E. Collier Vice President & Assistant Secretary --
Robert Crudup Vice President & Managing Director --
Barbara Doyne Vice President --
Jeff Drennen Vice President --
Vic Galef Vice President & Managing Director --
Lydia A. Gavalis Vice President & Assistant Secretary --
Greg Gettinger Vice President & Assistant Secretary --
Kathy Heilig Vice President Vice President & Assistant Secretary
Jeff Jacobs Vice President --
Samuel King Vice President --
Kim Kirk Vice President & Managing Director --
John Krzeminski Vice President & Managing Director --
Carolyn McLaurin Vice President & Managing Director --
W. Kelso Morrill Vice President --
Mark Nagle Vice President --
Joanne Nelson Vice President --
Joseph M. O'Donnell Vice President & Assistant Secretary Vice President & Assistant Secretary
Sandra K. Orlow Vice President & Assistant Secretary Vice President & Assistant Secretary
Cynthia M. Parrish Vice President & Assistant Secretary --
Kim Rainey Vice President --

</TABLE>

C-8

<PAGE>

<TABLE>

<S> <C> <C>
Rob Redican Vice President --
Maria Rinehart Vice President --
Mark Samuels Vice President & Managing Director --
Steve Smith Vice President --
Daniel Spaventa Vice President --
Kathryn L. Stanton Vice President & Assistant Secretary --
Lynda J. Striegel Vice President & Assistant Secretary Vice President & Assistant Secretary
Lori L. White Vice President & Assistant Secretary --
Wayne M. Withrow Vice President & Managing Director --

</TABLE>

Item 28. Location of Accounts and Records:

Books or other documents required to be maintained by Section 31(a) of
the Investment Company Act of 1940, and the rules promulgated
thereunder, are maintained as follows:

(a) With respect to Rules 31a-1(a); 31a-1(b)(1); (2)(a) and (b); (3);
(6); (8); (12); and 31a-1(d), the required books and records will be
maintained at the offices of Registrant's Custodian:

First Union National Bank
Broad & Chestnut Streets
P.O. Box 7618
Philadelphia, Pennsylvania 19101

(b)/(c) With respect to Rules 31a-1(a); 31a-1(b)(1),(4); (2)(C) and
(D); (4); (5); (6); (8); (9); (10); (11); and 31a-1(f), the required
books and records are maintained at the offices of Registrant's
Administrator:

SEI Investments Mutual Funds Services
Oaks, Pennsylvania 19456

(c) With respect to Rules 31a-1(b)(5), (6), (9) and (10) and 31a-1(f),
the required books and records are maintained at the principal offices
of the Registrant's Advisers:

Turner Investment Partners, Inc.
1235 Westlakes Drive, Suite 350
Berwyn, Pennsylvania 19312

C-9
<PAGE>

Clover Capital Management, Inc.
11 Tobey Village Office Park
Pittsford, New York 14534

Penn Capital Management Company, Inc.
52 Haddonfield-Berlin Road
Suite 1000
Cherry Hill, New Jersey 08034

Chartwell Investment Partners
1235 Westlakes Drive
Suite 330
Berwyn, PA 19312

Item 29. Management Services: None.

Item 30. Undertakings: None

C-10

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant has duly caused this
Post-Effective Amendment No. 12 to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Oaks, Commonwealth of Pennsylvania on
the 11th day of November 1998.

TIP FUNDS
By: /s/ Stephen J. Kneeley
-----------------------
Stephen J. Kneeley
President

Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following person in the capacity on the
dates indicated.

<TABLE>

<S> <C> <C>
* Trustee November 11, 1998
---------------------------
Robert E. Turner

* Trustee November 11, 1998
---------------------------
Richard A. Hocker

* Trustee November 11, 1998
---------------------------
Michael E. Jones

* Trustee November 11, 1998
---------------------------
Janet F. Sansone

* Trustee November 11, 1998
---------------------------
Alfred C. Salvato

* Trustee November 11, 1998
---------------------------
John T. Wholihan

/s/ Stephen J. Kneeley President and Chief November 11, 1998
--------------------------- Executive Officer
Stephen J. Kneeley

/s/ Robert DellaCroce Controller and November 11, 1998
--------------------------- Chief Financial
Robert DellaCroce Officer

By: /s/ Stephen J. Kneeley November 11, 1998
---------------------------
Stephen J. Kneeley
Attorney-in-Fact

</TABLE>

C-11

<PAGE>

EXHIBIT INDEX

Name Exhibit
- - ---- -------

<S> <C>
Agreement and Declaration of Trust of the Ex-99.a(1)
Registrant, dated January 26, 1996, (incorporated herein by
reference to Exhibit 1 of the Registration Statement filed on
February 1, 1996).

Amendment dated March 28, 1997, to the Agreement and Ex-99.a(2)
Declaration of Trust of the Registrant, dated January 26,
1996, (incorporated herein by reference to Exhibit 1(a) of
the Post-Effective Amendment No. 5 filed on April 10, 1997)

By-Laws of the Registrant, (incorporated herein by Ex-99.b
reference to Exhibit 2 of the Registration Statement filed on
February 1, 1996).

Investment Advisory Agreement between Ex-99.d(1)
the Registrant and Turner Investment Partners, Inc.
(incorporated herein by reference to Exhibit 5(a) of
the Post-Effective Amendment No. 4 filed on
January 28, 1997).

Investment Advisory Agreement between Ex-99.d(2)
the Registrant and Clover Capital Management, Inc.,
(incorporated by reference to Exhibit 5(b) of the
Post-Effective Amendment No. 10 filed on October 15, 1997).

Investment Advisory Agreement between Ex-99.d(3)
the Registrant and Penn Capital Management
Company, Inc., is filed herewith.

Investment Advisory Agreement between Ex-99.(d)(4)
the Registrant and Turner Investment Partners, Inc.,
is filed herewith.

Investment Sub-Advisory Agreement between Ex-99.d(5)
Turner Investment Partners, Inc. and Clover Capital
Management, Inc., is filed herewith.

Investment Sub-Advisory Agreement between Turner Ex-99.d(6)
Investment Partners, Inc. and Penn Capital Management,
Inc., is filed herewith.

</TABLE>

C-12

<PAGE>

<TABLE>

<S> <C>

Investment Sub-Advisory Agreement between Turner Ex-99.d(7)
Investment Partners, Inc. and Chartwell Investment Partners,
is filed herewith.

Distribution Agreement between the Ex-99.e(1)
Registrant and SEI Investments Distribution Co.
(formerly, SEI Financial Services Company)
(incorporated herein by reference to Exhibit 6(a)
Post-Effective Amendment No. 4 filed on January 28, 1997).

Distribution Agreement between the Registrant and Ex-99.e(2)
CCM Securities, Inc., (incorporated herein by reference to
Exhibit 6(b) of the Registration Statement filed January 23,
1998).

Custodian Agreement between the Registrant Ex-99.g
and CoreStates Bank, N.A. (incorporated herein
by reference to Exhibit 8(a) of the Post-Effective
Amendment No. 4 filed on January 28, 1997).

Administration Agreement between the Ex-99.h(1)
Registrant and SEI Investments Management Corporation
(formerly, SEI Financial Management Corporation)
(incorporated herein by reference to Exhibit 9(a)
of the Post-Effective Amendment No. 4 filed on
January 28, 1997).

Transfer Agency Agreement between the Registrant and Ex-99.h(2)
DST Systems, Inc. (incorporated by reference to Exhibit 9(b)
of the Registration Statement filed January 23, 1998).

Opinion and Consent of Counsel Ex-99.i
(incorporated herein by reference to Exhibit 10 of
the Pre-Effective Amendment No. 1 to Registration
Statement filed April 19, 1996)

Consent of Independent Auditors, Ernst & Young, Ex-23.1
LLP, is filed herewith.

Powers of Attorney for Robert E. Turner, Ex-24
Richard A. Hocker, Michael E. Jones, Alfred C. Salvato,
John T. Wholihan, Stephen J. Kneeley, Janet F. Sansone
and Robert DellaCroce are filed herewith.

</TABLE>

C-13

INVESTMENT ADVISORY AGREEMENT

AGREEMENT made this ____ day of ________, 1997, by and between TIP Funds, a
Massachusetts business trust (the "Trust"), and Penn Capital Management Company,
Inc. (the "Adviser").

WHEREAS, the Trust is an open-end, diversified management investment
company registered under the Investment Company Act of 1940, as amended,
consisting of several series of shares, each having its own investment policies;
and

WHEREAS, the Trust has retained SEI Fund Resources (the "Administrator") to
provide administration of the Trust's operations, subject to the control of the
Board of Trustees;

WHEREAS, the Trust desires to retain the Adviser to render investment
management services with respect to the Portfolios set forth in the attached
schedule and such other portfolios as the Trust and the Adviser may agree upon
(the "Portfolios"), and the Adviser is willing to render such services:

NOW, THEREFORE, in consideration of mutual covenants herein contained, the
parties hereto agree as follows:

1. DUTIES OF ADVISER. The Trust employs the Adviser to manage the
investment and reinvestment of the assets, and to continuously review,
supervise, and administer the investment program of the Portfolios, to
determine in its discretion the securities to be purchased or sold, to
provide the Administrator and the Trust with records concerning the
Adviser's activities which the Trust is required to maintain, and to
render regular reports to the Administrator and to the Trust's
Officers and Trustees concerning the Adviser's discharge of the
foregoing responsibilities.

The Adviser shall discharge the foregoing responsibilities subject to
the control of the Board of Trustees of the Trust and in compliance
with such policies as the Trustees may from time to time establish,
and in compliance with the objectives, policies, and limitations for
each such Portfolio set forth in the Portfolio's prospectus and
statement of additional information as amended from time to time, and
applicable laws and regulations.

The Adviser accepts such employment and agrees, at its own expense, to
render the services and to provide the office space, furnishings and
equipment and the personnel required by it to perform the services on
the terms and for the compensation provided herein.

<PAGE>

2. PORTFOLIO TRANSACTIONS. The Adviser is authorized to select the
brokers or dealers that will execute the purchases and sales of
portfolio securities for the Portfolios and is directed to use its
best efforts to obtain the best net results as described from time to
time in the Portfolios' Prospectuses and Statement of Additional
Information. The Adviser will promptly communicate to the
Administrator and to the officers and the Trustees of the Trust such
information relating to portfolio transactions as they may reasonably
request.

It is understood that the Adviser will not be deemed to have acted
unlawfully, or to have breached a fiduciary duty to the Trust or be in
breach of any obligation owing to the Trust under this Agreement, or
otherwise, by reason of its having directed a securities transaction
on behalf of the Trust to a broker-dealer in compliance with the
provisions of Section 28(e) of the Securities Exchange Act of 1934 or
as described from time to time by the Portfolios' Prospectuses and
Statement of Additional Information.

3. COMPENSATION OF THE ADVISER. For the services to be rendered by the
Adviser as provided in Sections 1 and 2 of this Agreement, the Trust
shall pay to the Adviser compensation at the rate specified in the
Schedule(s) which are attached hereto and made a part of this
Agreement. Such compensation shall be paid to the Adviser at the end
of each month, and calculated by applying a daily rate, based on the
annual percentage rates as specified in the attached Schedule(s), to
the assets. The fee shall be based on the average daily net assets for
the month involved (less any assets of such Portfolios held in
non-interest bearing special deposits with a Federal Reserve Bank).

All rights of compensation under this Agreement for services performed
as of the termination date shall survive the termination of this
Agreement.

4. OTHER EXPENSES. The Adviser shall pay all expenses of printing and
mailing reports, prospectuses, statements of additional information,
and sales literature relating to the solicitation of prospective
clients. The Trust shall pay all expenses relating to mailing to
existing shareholders prospectuses, statements of additional
information, proxy solicitation material and shareholder reports.

5. EXCESS EXPENSES. If the expenses for any Portfolio for any fiscal year
(including fees and other amounts payable to the Adviser, but
excluding interest, taxes, brokerage costs, litigation, and other
extraordinary costs) as calculated every business day would exceed the
expense limitations imposed on investment companies by any applicable
statute or regulatory authority of any jurisdiction in which shares of
a Portfolio are qualified for offer and sale, the Adviser shall bear
such excess cost. However, the Adviser will not bear expenses of any
Portfolio which would result in the Portfolio's inability to qualify
as a regulated investment company under provisions

<PAGE>

of the Internal Revenue Code. Payment of expenses by the Adviser
pursuant to this Section 5 shall be settled on a monthly basis
(subject to fiscal year end reconciliation) by a reduction in the fee
payable to the Adviser for such month pursuant to Section 3 and, if
such reduction shall be insufficient to offset such expenses, by
reimbursing the Trust.

6. REPORTS. The Trust and the Adviser agree to furnish to each other, if
applicable, current prospectuses, proxy statements, reports to
shareholders, certified copies of their financial statements, and such
other information with regard to their affairs as each may reasonably
request.

7. STATUS OF ADVISER. The services of the Adviser to the Trust are not to
be deemed exclusive, and the Adviser shall be free to render similar
services to others so long as its services to the Trust are not
impaired thereby. The Adviser shall be deemed to be an independent
contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Trust in any
way or otherwise be deemed an agent of the Trust.

8. CERTAIN RECORDS. Any records required to be maintained and preserved
pursuant to the provisions of Rule 31a-1 and Rule 31a-2 promulgated
under the Investment Company Act of 1940 which are prepared or
maintained by the Adviser on behalf of the Trust are the property of
the Trust and will be surrendered promptly to the Trust on request.

9. LIMITATION OF LIABILITY OF ADVISER. The duties of the Adviser shall be
confined to those expressly set forth herein, and no implied duties
are assumed by or may be asserted against the Adviser hereunder. The
Adviser shall not be liable for any error of judgment or mistake of
law or for any loss arising out of any investment or for any act or
omission in carrying out its duties hereunder, except a loss resulting
from willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of reckless disregard of its
obligations and duties hereunder, except as may otherwise be provided
under provisions of applicable state law or Federal securities law
which cannot be waived or modified hereby. (As used in this Paragraph
9, the term "Adviser" shall include directors, officers, employees and
other corporate agents of the Adviser as well as that corporation
itself).

10. PERMISSIBLE INTERESTS. Trustees, agents, and shareholders of the Trust
are or may be interested in the Adviser (or any successor thereof) as
directors, partners, officers, or shareholders, or otherwise;
directors, partners, officers, agents, and shareholders of the Adviser
are or may be interested in the Trust as Trustees, shareholders or
otherwise; and the Adviser (or any successor) is or may be interested
in the Trust as a shareholder or otherwise. In addition, brokerage
transactions for the Trust may be effected through affiliates of the
Adviser if approved by the Board of Trustees, subject to the rules and
regulations of the Securities and Exchange Commission.

<PAGE>

11. LICENSE OF ADVISER'S NAME. The Adviser hereby agrees to grant a
license to the Trust for use of its name in the names of the
Portfolios for the term of this Agreement and such license shall
terminate upon termination of this Agreement.

12. DURATION AND TERMINATION. This Agreement, unless sooner terminated as
provided herein, shall remain in effect until two years from date of
execution, and thereafter, for periods of one year so long as such
continuance thereafter is specifically approved at least annually (a)
by the vote of a majority of those Trustees of the Trust who are not
parties to this Agreement or interested persons of any such party,
cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the Trustees of the Trust or by vote of a
majority of the outstanding voting securities of each Portfolio;
provided, however, that if the shareholders of any Portfolio fail to
approve the Agreement as provided herein, the Adviser may continue to
serve hereunder in the manner and to the extent permitted by the
Investment Company Act of 1940 and rules and regulations thereunder.
The foregoing requirement that continuance of this Agreement be
"specifically approved at least annually" shall be construed in a
manner consistent with the Investment Company Act of 1940 and the
rules and regulations thereunder.

This Agreement may be terminated as to any Portfolio at any time,
without the payment of any penalty by vote of a majority of the
Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Portfolio on not less than 30 days' nor more
than 60 days' written notice to the Adviser, or by the Adviser at any
time without the payment of any penalty, on 90 days' written notice to
the Trust. This Agreement will automatically and immediately terminate
in the event of its assignment. Any notice under this Agreement shall
be given in writing, addressed and delivered, or mailed postpaid, to
the other party at any office of such party.

As used in this Section 11, the terms "assignment", "interested
persons", and a "vote of a majority of the outstanding voting
securities" shall have the respective meanings set forth in the
Investment Company Act of 1940 and the rules and regulations
thereunder; subject to such exemptions as may be granted by the
Securities and Exchange Commission under said Act.

13. NOTICE. Any notice required or permitted to be given by either party
to the other shall be deemed sufficient if sent by registered or
certified mail, postage prepaid, addressed by the party giving notice
to the other party at the last address furnished by the other party to
the party giving notice: if to the Trust, at Oaks, PA 19456 and if to
the Adviser at 52 Haddonfield-Berlin Road, Suite 1000, Cherry Hill, NJ
08034.

14. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder
of this Agreement shall not be affected thereby.

<PAGE>

15. GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the Commonwealth of Massachusetts and the applicable
provisions of the 1940 Act. To the extent that the applicable laws of
the Commonwealth of Massachusetts, or any of the provisions herein,
conflict with the applicable provisions of the 1940 Act, the latter
shall control.

A copy of the Declaration of Trust of the Trust is on file with the Secretary of
The Commonwealth of Massachusetts, and notice is hereby given that this
instrument is executed on behalf of the Trustees of the Trust as Trustees, and
are not binding upon any of the Trustees, officers, or shareholders of the Trust
individually but binding only upon the assets and property of the Trust.
Further, the obligations of the Trust with respect to any one Portfolio shall
not be binding upon any other Portfolio.

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
as of the day and year first written above.

TIP FUNDS

By: /s/ Kevin P. Robins
----------------------------
Attest: /s/ Donna Rafa
------------------------

PENN CAPITAL MANAGEMENT COMPANY, INC.

By: /s/ Richard Hooker
----------------------------
Attest: /s/ Scott D. Schumacher
------------------------

<PAGE>

SCHEDULE A DATED AUGUST ____, 1997
TO THE
INVESTMENT ADVISORY AGREEMENT
DATED AUGUST ______ 1997
BETWEEN
TIP FUNDS
AND
PENN CAPITAL MANAGEMENT COMPANY, INC.

Pursuant to Article 3, the Trust shall pay the Adviser compensation at an annual
rate as follows:

Portfolio Fee (in basis points)
--------- ---------------------

Penn Capital Select Financial Services Fund 1.00% of the average
daily net assets

Penn Capital Strategic High Yield Bond Fund .75% of the average
daily net assets

Penn Capital Value Plus Fund 1.00% of the average
daily net assets

INVESTMENT ADVISORY AGREEMENT

AGREEMENT made this 31st day of December, 1997, by and between TIP Funds, a
Massachusetts business trust (the "Trust"), and Turner Investment Partners, Inc.
(the "Adviser").

WHEREAS, the Trust has retained SEI Fund Resources (the "Administrator") to
provide administration of the Trust's operations, subject to the control of the
Board of Trustees;

WHEREAS, the Trust desires to retain the Adviser to render investment
management services with respect to the TIP Target Select Equity Fund (the
"Fund") and such other portfolios as the Trust and the Adviser may agree upon
(each a "Fund") and as are set forth in the attached schedule, and the Adviser
is willing to render such services:

NOW, THEREFORE, in consideration of mutual covenants herein contained, the
parties hereto agree as follows:

1. DUTIES OF ADVISER. The Trust employs the Adviser to manage the
investment and reinvestment of the assets of the Fund, and to hire
(subject to the approval of the Trust's Board of Trustees and, except
as otherwise permitted under the terms of any exemptive relief
obtained in the future by the Adviser from the Securities and Exchange
Commission, or by rule or regulation, a majority of the outstanding
voting securities of the Fund(s)) and thereafter supervise the
investment activities of one or more sub-advisers deemed necessary to
carry out the investment program of the Fund, and to continuously
review, supervise and (where appropriate) administer the investment
program of the Fund(s), to determine in its discretion (where
appropriate) the securities to be purchased or sold, to provide the
Administrator and the Trust with records concerning the Adviser's
activities which the Trust is required to maintain, and to render
regular reports to the Administrator and to the Trust's officers and
Trustees concerning the Adviser's discharge of the foregoing
responsibilities. The retention of a sub-adviser by the Adviser shall
not relieve the Adviser of its responsibilities under this Agreement.

<PAGE>

The Adviser accepts such employment and agrees, at its own expense, to
render the services and to provide the office space, furnishings and
equipment and the personnel (including any sub-advisers) required by
it to perform the services on the terms and for the compensation
provided herein. The Adviser will not, however, pay for the cost of
securities, commodities, and other investments (including brokerage
commissions and other transaction charges, if any) purchased or sold
for the Trust.

All rights of compensation under this Agreement for services performed
as of the termination date shall survive the termination of this
Agreement.

<PAGE>

However, the Adviser will not bear expenses of any Portfolio which
would result in the Portfolio's inability to qualify as a regulated
investment company under provisions of the Internal Revenue Code.
Payment of expenses by the Adviser pursuant to this Section 5 shall be
settled on a monthly basis (subject to fiscal year end reconciliation)
by a reduction in the fee payable to the Adviser for such month
pursuant to Section 3(a) or 3(b) and, if such reduction shall be
insufficient to offset such expenses, by reimbursing the Trust.

<PAGE>

hereby. (As used in this Paragraph 9, the term "Adviser" shall include
directors, officers, employees and other corporate agents of the
Adviser as well as that corporation itself).

This Agreement may be terminated as to any Portfolio at any time,
without the payment of any penalty by vote of a majority of the
Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Portfolio on not less than 30 days nor more
than 60 days written notice to the Adviser, or by the Adviser at any
time without the payment of any penalty, on 90 days written notice to
the Trust. This Agreement will automatically and immediately terminate
in the event of its assignment. Any notice under this Agreement shall
be given in writing, addressed and delivered, or mailed postpaid, to
the other party at any office of such party.

<PAGE>

13. NOTICE. Any notice required or permitted to be given by either party
to the other shall be deemed sufficient if sent by registered or
certified mail, postage prepaid, addressed by the party giving notice
to the other party at the last address furnished by the other party to
the party giving notice: if to the Trust, at One Freedom Valley Drive,
Oaks, PA 19456, and if to the Adviser at 1235 Westlakes Drive, Suite
350, Berwyn, PA 19312.

14. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder
of this Agreement shall not be affected thereby.

<PAGE>

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
as of the day and year first written above.

TIP FUNDS

By: /s/ Stephen J. Kneeley
----------------------
Attest: /s/ Brian Ferko
------------------

TURNER INVESTMENT PARTNERS, INC.

By: /s/ Stephen J. Kneeley
----------------------
Attest: /s/ Brian Ferko
------------------

<PAGE>

SCHEDULE A DATED DECEMBER 31, 1997
TO THE
INVESTMENT ADVISORY AGREEMENT
DATED DECEMBER 31, 1997
BETWEEN
TIP FUNDS
AND
TURNER INVESTMENT PARTNERS, INC.

Pursuant to Article 3, the Trust shall pay the Adviser compensation at an annual
rate as follows:

Portfolio Fee (in basis points)
--------- ---------------------
TIP Target Select Equity Fund 1.05% of the average daily net assets of
the Fund

INVESTMENT SUB-ADVISORY AGREEMENT
TIP FUNDS

AGREEMENT made this 31st day of December, 1997, between Turner Investment
Partners, Inc. (the "Adviser") and Clover Capital Management, Inc. (the
"Sub-Adviser").

WHEREAS, TIP Funds, a Massachusetts business trust (the "Trust") is
registered as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and

WHEREAS, the Adviser has entered into an Investment Advisory Agreement
dated December 31, 1997 (the "Advisory Agreement") with the Trust, pursuant to
which the Adviser will act as investment adviser to the TIP Target Select Equity
Fund (the "Fund"), which is a series of the Trust; and

WHEREAS, the Adviser, with the approval of the Trust, desires to retain the
Sub-Adviser to provide investment advisory services to the Adviser in connection
with the management of the Fund, and the Sub-Adviser is willing to render such
investment advisory services.

NOW, THEREFORE, the parties hereto agree as follows:

1. DUTIES OF THE SUB-ADVISER. Subject to supervision by the Adviser and the
Trust's Board of Trustees, the Sub-Adviser shall manage all of the
securities and other assets of the Fund entrusted to it hereunder (the
"Assets"), including the purchase, retention and disposition of the Assets,
in accordance with the Fund's investment objectives, policies and
restrictions as stated in the Fund's prospectus and statement of additional
information, as currently in effect and as amended or supplemented from
time to time (referred to collectively as the "Prospectus"), and subject to
the following:

(a) The Sub-Adviser shall, in consultation with and subject to the
direction of the Adviser, determine from time to time what Assets will
be purchased, retained or sold by the Fund, and what portion of the
Assets will be invested or held uninvested in cash.

(b) In the performance of its duties and obligations under this Agreement,
the Sub-Adviser shall act in conformity with the Trust's Declaration
of Trust (as defined herein) and the Prospectus and with the
instructions and directions of the Adviser and of the Board of
Trustees of the Trust and will conform to and comply with the
requirements of the 1940 Act, the Internal Revenue Code of 1986, and
all other applicable federal and state laws and regulations, as each
is amended from time to time.

(c) The Sub-Adviser shall determine the Assets to be purchased or sold by
the Fund as provided in subparagraph (a) and will place orders with or
through such persons, brokers or dealers to carry out the policy with
respect to brokerage set forth in the Fund's Registration Statement
(as defined herein) and Prospectus or as the Board of Trustees or the
Adviser may direct from time to time, in conformity with federal
securities laws. In executing Fund transactions and selecting brokers
or dealers, the Sub-Adviser will use its best efforts to seek on
behalf of the Fund the best overall terms available. In assessing the
best overall terms available for any transaction, the Sub-Adviser
shall consider all factors that it deems relevant, including the
breadth of the market in the security, the price of the

<PAGE>

security, the financial condition and execution capability of the
broker or dealer, and the reasonableness of the commission, if any,
both for the specific transaction and on a continuing basis. In
evaluating the best overall terms available, and in selecting the
broker-dealer to execute a particular transaction, the Sub-Adviser may
also consider the brokerage and research services provided (as those
terms are defined in Section 28(e) of the Securities Exchange Act of
1934). Consistent with any guidelines established by the Board of
Trustees of the Trust, the Sub-Adviser is authorized to pay to a
broker or dealer who provides such brokerage and research services a
commission for executing a fund transaction for the Fund which is in
excess of the amount of commission another broker or dealer would have
charged for effecting that transaction if, but only if, the
Sub-Adviser determines in good faith that such commission was
reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer -- viewed in terms of that
particular transaction or terms of the overall responsibilities of the
Sub-Adviser to the Fund. In addition, the Sub-Adviser is authorized to
allocate purchase and sale orders for securities to brokers or dealers
(including brokers and dealers that are affiliated with the Adviser,
Sub-Adviser or the Trust's principal underwriter) to take into account
the sale of shares of the Trust if the Sub-Adviser believes that the
quality of the transaction and the commission are comparable to what
they would be with other qualified firms. In no instance, however,
will the Fund's Assets be purchased from or sold to the Adviser, Sub-
Adviser, the Trust's principal underwriter, or any affiliated person
of either the Trust, Adviser, the Sub-Adviser or the principal
underwriter, acting as principal in the transaction, except to the
extent permitted by the Securities and Exchange Commission ("SEC") and
the 1940 Act.

(d) The Sub-Adviser shall maintain all books and records with respect to
transactions involving the Assets required by subparagraphs (b)(5),
(6), (7), (9), (10) and (11) and paragraph (f) of Rule 31a-1 under the
1940 Act. The Sub-Adviser shall provide to the Adviser or the Board of
Trustees such periodic and special reports, balance sheets or
financial information, and such other information with regard to its
affairs as the Adviser or Board of Trustees may reasonably request.

The Sub-Adviser shall keep the books and records relating to the
Assets required to be maintained by the Sub-Adviser under this
Agreement and shall timely furnish to the Adviser all information
relating to the Sub-Adviser's services under this Agreement needed by
the Adviser to keep the other books and records of the Fund required
by Rule 31a-1 under the 1940 Act. The Sub-Adviser shall also furnish
to the Adviser any other information relating to the Assets that is
required to be filed by the Adviser or the Trust with the SEC or sent
to shareholders under the 1940 Act (including the rules adopted
thereunder) or any exemptive or other relief that the Adviser or the
Trust obtains from the SEC. The Sub-Adviser agrees that all records
that it maintains on behalf of the Fund are property of the Fund and
the Sub-Adviser will surrender promptly to the Fund any of such
records upon the Fund's request; provided, however, that the
Sub-Adviser may retain a copy of such records. In addition, for the
duration of this Agreement, the Sub-Adviser shall preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act any such records
as are required to be maintained by it pursuant to this Agreement, and
shall transfer said records to any successor sub-adviser upon the
termination of this Agreement (or, if there is no successor
sub-adviser, to the Adviser).

(e) The Sub-Adviser shall provide the Fund's custodian on each business
day with information relating to all transactions concerning the
Fund's Assets and shall provide the Adviser with such information upon
request of the Adviser.

<PAGE>

(f) The investment management services provided by the Sub-Adviser under
this Agreement are not to be deemed exclusive and the Sub-Adviser
shall be free to render similar services to others, as long as such
services do not impair the services rendered to the Adviser or the
Trust.

(g) The Sub-Adviser shall promptly notify the Adviser of any financial
condition that is likely to impair the Sub-Adviser's ability to
fulfill its commitment under this Agreement.

(h) The Sub-Adviser shall review all proxy solicitation materials and be
responsible for voting and handling all proxies in relation to the
Assets. The Adviser shall instruct the custodian and other parties
providing services to the Fund to promptly forward misdirected proxies
to the Sub-Adviser.

Services to be furnished by the Sub-Adviser under this Agreement may
be furnished through the medium of any of the Sub-Adviser's partners,
officers or employees.

2. DUTIES OF THE ADVISER. The Adviser shall continue to have responsibility
for all services to be provided to the Fund pursuant to the Advisory
Agreement and shall oversee and review the Sub-Adviser's performance of
its duties under this Agreement; provided, however, that in connection with
its management of the Assets, nothing herein shall be construed to relieve
the Sub-Adviser of responsibility for compliance with the Trust's
Declaration of Trust (as defined herein), the Prospectus, the instructions
and directions of the Board of Trustees of the Trust, the requirements of
the 1940 Act, the Internal Revenue Code of 1986, and all other applicable
federal and state laws and regulations, as each is amended from time to
time.

3. DELIVERY OF DOCUMENTS. The Adviser has furnished the Sub-Adviser with
copies properly certified or authenticated of each of the following
documents:

(a) The Trust's Agreement and Declaration of Trust, as filed with the
Secretary of State of the Commonwealth of Massachusetts (such
Agreement and Declaration of Trust, as in effect on the date of this
Agreement and as amended from time to time, herein called the
"Declaration of Trust");

(b) By-Laws of the Trust (such By-Laws, as in effect on the date of this
Agreement and as amended from time to time, are herein called the
"By-Laws");

4. COMPENSATION TO THE SUB-ADVISER. For the services to be provided by the
Sub-Adviser pursuant to this Agreement, the Adviser will pay the
Sub-Adviser, and the Sub-Adviser agrees to accept as full compensation
therefor, a sub-advisory fee at the rate specified in the Schedule(s) which
is attached hereto and made part of this Agreement. The fee will be
calculated based on the average MONTHLY MARKET VALUE OF THE ASSETS under
the Sub-Adviser's management and will be paid to the Sub-Adviser monthly.
Except as may otherwise be prohibited by law or regulation (including any
then current SEC staff interpretation), the Sub-Adviser may, in its
discretion and from time to time, waive a portion of its fee.

5. INDEMNIFICATION. The Sub-Adviser shall indemnify and hold harmless the
Adviser from and against any and all claims, losses, liabilities or damages
(including reasonable attorney's fees and other related expenses) howsoever
arising from or in connection with the performance of the

<PAGE>

Sub-Adviser's obligations under this Agreement; provided, however, that the
Sub-Adviser's obligation under this Section 5 shall be reduced to the
extent that the claim against, or the loss, liability or damage experienced
by the Adviser, is caused by or is otherwise directly related to the
Adviser's own, or any other sub-adviser's, willful misfeasance, bad faith
or negligence, or to the reckless disregard of its duties under this
Agreement.

6. DURATION AND TERMINATION. This Agreement shall become effective upon its
approval by the Trust's Board of Trustees and by the vote of a majority of
the outstanding voting securities of the Fund. This Agreement shall
continue in effect for a period of more than two years from the date hereof
only so long as continuance is specifically approved at least annually in
conformance with the 1940 Act; provided, however, that this Agreement may
be terminated with respect to the Fund (a) by the Fund at any time, without
the payment of any penalty, by the vote of a majority of Trustees of the
Trust or by the vote of a majority of the outstanding voting securities of
the Fund, (b) by the Adviser at any time, without the payment of any
penalty, on not more than 60 days' nor less than 30 days' written notice to
the Sub-Adviser, or (c) by the Sub-Adviser at any time, without the payment
of any penalty, on 90 days' written notice to the Adviser. This Agreement
shall terminate automatically and immediately in the event of its
assignment, or in the event of a termination of the Adviser's agreement
with the Trust. As used in this Section 6, the terms "assignment" and "vote
of a majority of the outstanding voting securities" shall have the
respective meanings set forth in the 1940 Act and the rules and regulations
thereunder, subject to such exceptions as may be granted by the SEC under
the 1940 Act.

7. GOVERNING LAW. This Agreement shall be governed by the internal laws of the
Commonwealth of Pennsylvania, without regard to conflict of law principles;
provided, however, that nothing herein shall be construed as being
inconsistent with the 1940 Act.

8. SEVERABILITY. Should any part of this Agreement be held invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall
not be affected thereby. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors.

9. NOTICE. Any notice, advice or report to be given pursuant to this Agreement
shall be deemed sufficient if delivered or mailed by registered, certified
or overnight mail, postage prepaid addressed by the party giving notice to
the other party at the last address furnished by the other party:

To the Adviser at: Turner Investment Partners, Inc.
1235 Westlakes Drive, Suite 350
Berwyn, Pennsylvania 19312

To the Sub-Adviser at: Clover Capital Management, Inc.
11 Tobey Village Office Park
Pittsford, New York 14534

10. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior
agreements and understandings relating to this Agreement's subject matter.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.

<PAGE>

A copy of the Declaration of Trust is on file with the Secretary of State
of the Commonwealth of Massachusetts, and notice is hereby given that the
obligations of this instrument are not binding upon any of the Trustees,
officers or shareholders of the Fund or the Trust.

Where the effect of a requirement of the 1940 Act reflected in any
provision of this Agreement is altered by a rule, regulation or order of the
SEC, whether of special or general application, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first written
above.

Turner Investment Partners, Inc. Clover Capital Management, Inc.

By: /s/ Stephen J. Kneeley By: /s/ Michael E. Jones
------------------------- ----------------------------

Name: Stephen J. Kneeley Name: Michael E. Jones
------------------------ --------------------------

Title: Chief Operating Officer Title: Managing Director
----------------------- -------------------------

<PAGE>

SCHEDULE A
TO THE
SUB-ADVISORY AGREEMENT
BETWEEN
TURNER INVESTMENT PARTNERS, INC.
AND
CLOVER CAPITAL MANAGEMENT, INC.

Pursuant to Article 4, the Adviser shall pay the Sub-Adviser compensation at an
annual rate as follows:

TIP Target Select Equity Fund .80%

INVESTMENT SUB-ADVISORY AGREEMENT
TIP FUNDS

AGREEMENT made this 31st day of December, 1997, between Turner Investment
Partners, Inc. (the "Adviser") and Penn Capital Management Company, Inc. (the
"Sub-Adviser").

WHEREAS, TIP Funds, a Massachusetts business trust (the "Trust") is
registered as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and

NOW, THEREFORE, the parties hereto agree as follows:

<PAGE>

(g) The Sub-Adviser shall promptly notify the Adviser of any financial
condition that is likely to impair the Sub-Adviser's ability to
fulfill its commitment under this Agreement.

Services to be furnished by the Sub-Adviser under this Agreement may be
furnished through the medium of any of the Sub-Adviser's partners, officers
or employees.

3. DELIVERY OF DOCUMENTS. The Adviser has furnished the Sub-Adviser with
copies properly certified or authenticated of each of the following
documents:

(b) By-Laws of the Trust (such By-Laws, as in effect on the date of this
Agreement and as amended from time to time, are herein called the
"By-Laws");

<PAGE>

obligation under this Section 5 shall be reduced to the extent that the
claim against, or the loss, liability or damage experienced by the Adviser,
is caused by or is otherwise directly related to the Adviser's own, or any
other sub-adviser's, willful misfeasance, bad faith or negligence, or to
the reckless disregard of its duties under this Agreement.

To the Adviser at: Turner Investment Partners, Inc.
1235 Westlakes Drive, Suite 350
Berwyn, Pennsylvania 19312

To the Sub-Adviser at: Penn Capital Management Company, Inc.
52 Haddonfield-Berlin Road, Suite 1000
Cherry Hill, New Jersey 08034

A copy of the Declaration of Trust is on file with the Secretary of State
of the Commonwealth of

<PAGE>

Massachusetts, and notice is hereby given that the obligations of this
instrument are not binding upon any of the Trustees, officers or shareholders of
the Fund or the Trust.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first written
above.

Turner Investment Partners, Inc. Penn Capital Management Company, Inc.

By: /s/ Stephen J. Kneeley By: /s/ Charles E. Sessa, Jr.
------------------------ ---------------------------------

Name: Stephen J. Kneeley Name: Charles E. Sessa, Jr.
-------------------------- -------------------------------

Title: Chief Operating Officer Title: Executive Vice President
------------------------- ------------------------------

<PAGE>

SCHEDULE A
TO THE
SUB-ADVISORY AGREEMENT
BETWEEN
TURNER INVESTMENT PARTNERS, INC.
AND
PENN CAPITAL MANAGEMENT COMPANY, INC.

Pursuant to Article 4, the Adviser shall pay the Sub-Adviser compensation at an
annual rate as follows:

TIP Target Select Equity Fund .80%

INVESTMENT SUB-ADVISORY AGREEMENT
TIP FUNDS

AGREEMENT made this 31st day of December, 1997, between Turner Investment
Partners, Inc. (the "Adviser") and Chartwell Investment Partners (the
"Sub-Adviser").

WHEREAS, TIP Funds, a Massachusetts business trust (the "Trust") is
registered as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and

NOW, THEREFORE, the parties hereto agree as follows:

<PAGE>

(g) The Sub-Adviser shall promptly notify the Adviser of any financial
condition that is likely to impair the Sub-Adviser's ability to
fulfill its commitment under this Agreement.

Services to be furnished by the Sub-Adviser under this Agreement may
be furnished through the medium of any of the Sub-Adviser's partners,
officers or employees.

3. DELIVERY OF DOCUMENTS. The Adviser has furnished the Sub-Adviser with
copies properly certified or authenticated of each of the following
documents:

(b) By-Laws of the Trust (such By-Laws, as in effect on the date of this
Agreement and as amended from time to time, are herein called the
"By-Laws");

<PAGE>

under this Section 5 shall be reduced to the extent that the claim against,
or the loss, liability or damage experienced by the Adviser, is caused by
or is otherwise directly related to the Adviser's own, or any other
sub-adviser's, willful misfeasance, bad faith or negligence, or to the
reckless disregard of its duties under this Agreement.

To the Adviser at: Turner Investment Partners, Inc.
1235 Westlakes Drive, Suite 350
Berwyn, Pennsylvania 19312

To the Sub-Adviser at: Chartwell Investment Partners

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first written
above.

Turner Investment Partners, Inc. Chartwell Investment Partners

By: /s/ Stephen J. Kneeley By: /s/ Winthrop S. Jessup
---------------------------- ------------------------------

Name: Stephen J. Kneeley Name: Winthrop S. Jessup
-------------------------- ----------------------------

Title: Chief Operating Officer Title: President
------------------------- ---------------------------

<PAGE>

SCHEDULE A
TO THE
SUB-ADVISORY AGREEMENT
BETWEEN
TURNER INVESTMENT PARTNERS, INC.
AND
CHARTWELL INVESTMENT PARTNERS

Pursuant to Article 4, the Adviser shall pay the Sub-Adviser compensation at an
annual rate as follows:

TIP Target Select Equity Fund .80%

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectus and "Financial Statements" in the Statements of
Additional Information in this Post Effective Amendment No. 12 to the
Registration Statement (Form N-1A) (No. 333/00641) of the TIP Funds.

Philadelphia, Pennsylvania
November 13, 1998

TIP FUNDS

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or
officer of TIP Funds (the "Trust"), a business trust organized under the laws of
The Commonwealth of Massachusetts, hereby constitutes and appoints Stephen J.
Kneeley, Kevin P. Robins, James W. Jennings and John H. Grady, Jr., and each of
them singly, his true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution, to sign for him and in his name, place and
stead, and in the capacity indicated below, to sign any or all amendments
(including post-effective amendments) to the Trust's Registration Statement on
Form N-1A under the provisions of the Investment Company Act of 1940 and the
Securities Act of 1933, each such Act as amended, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, acting alone, full power and authority to do and
perform each and every act and thing requisite or necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the date set forth below.

/s/ Robert E. Turner Date: 9/23/97
- - ------------------------- -------
Robert E. Turner, Trustee

<PAGE>

TIP FUNDS

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the date set forth below.

/s/ Richard A. Hocker Date: 9/23/97
- - -------------------------- -------
Richard A. Hocker, Trustee

<PAGE>

TIP FUNDS

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the date set forth below.

/s/ Michael E. Jones Date: 9/23/97
- - ------------------------- -------
Michael E. Jones, Trustee

<PAGE>

TIP FUNDS

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the date set forth below.

/s/ John T. Wholihan Date: 9/23/97
- - ------------------------- -------
John T. Wholihan, Trustee

<PAGE>

TIP FUNDS

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the date set forth below.

/s/ Alfred C. Salvato Date: 9/23/97
- - -------------------------- -------
Alfred C. Salvato, Trustee

<PAGE>

TIP FUNDS

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the date set forth below.

/s/ Janet F. Sansone Date: 9/29/97
- - ------------------------- -------
Janet F. Sansone, Trustee

<PAGE>

TIP FUNDS

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the date set forth below.

/s/ Robert DellaCroce Date: 9/23/97
- - --------------------------------- -------
Robert DellaCroce, Controller and
Chief Financial Officer

<PAGE>

TIP FUNDS

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or
officer of TIP Funds (the "Trust"), a business trust organized under the laws of
The Commonwealth of Massachusetts, hereby constitutes and appoints Kevin P.
Robins, James W. Jennings and John H. Grady, Jr., and each of them singly, his
true and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, to sign for him and in his name, place and stead, and in the
capacity indicated below, to sign any or all amendments (including
post-effective amendments) to the Trust's Registration Statement on Form N-1A
under the provisions of the Investment Company Act of 1940 and the Securities
Act of 1933, each such Act as amended, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, acting alone, full power and authority to do and perform each and every
act and thing requisite or necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the date set forth below.

/s/ Stephen J. Kneeley Date: 9/23/97
- - ----------------------------- -------
Stephen J. Kneeley, President