GOVERNOR FUNDS, 497, 1999-02-16

GOVERNOR FUNDS
497, 1999-02-16

Previous: RFS BANCORP INC, 10QSB, 1999-02-16

Next: SECURITY OF PENNSYLVANIA FINANCIAL CORP, 10QSB, 1999-02-16

<PAGE> 1

ESTABLISHED GROWTH FUND
AGGRESSIVE GROWTH FUND
EMERGING GROWTH FUND
INTERNATIONAL EQUITY FUND
INTERMEDIATE TERM INCOME FUND
LIMITED DURATION GOVERNMENT SECURITIES FUND
PENNSYLVANIA MUNICIPAL BOND FUND
LIFESTYLE CONSERVATIVE GROWTH FUND
LIFESTYLE MODERATE GROWTH FUND
LIFESTYLE GROWTH FUND

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

3435 Stelzer Road
Columbus, Ohio 43219
For current yield, purchase, and redemption
information, call (800) 766-3960.

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

The Governor Funds (the "Trust") is an open-end management investment company
consisting of twelve portfolios, ten of which are described herein. This
Prospectus relates only to the following ten portfolios: Established Growth
Fund, Aggressive Growth Fund, International Equity Fund, Emerging Growth Fund,
Intermediate Term Income Fund (the "Income Fund"), Limited Duration Government
Securities Fund (the "Government Securities Fund"), Pennsylvania Municipal Bond
Fund (the "Pennsylvania Bond Fund"), Lifestyle Conservative Growth Fund,
Lifestyle Moderate Growth Fund and Lifestyle Growth Fund (collectively with the
Lifestyle Conservative Growth and Lifestyle Moderate Growth Funds, the
"Lifestyle Funds"). With the exception of Pennsylvania Bond Fund (which is a
non-diversified portfolio), each portfolio is a diversified portfolio of the
Trust (all portfolios of the Trust hereinafter collectively referred to by name,
or as the "Funds," or individually as a "Fund"). The Trustees of the Trust have
divided each Fund's beneficial ownership into an unlimited number of
transferable units called shares (the "Shares").

Additional information about the Funds and the Trust, contained in a Statement
of Additional Information, has been filed with the Securities and Exchange
Commission and is available upon request without charge by writing to the Trust
at its address or by calling the Trust at the telephone number shown above. The
Statement of Additional Information bears the same date as this Prospectus and
is incorporated by reference in its entirety into this Prospectus.

This Prospectus sets forth concisely the information about the Funds and the
Trust that a prospective investor ought to know before investing. Investors
should read this Prospectus and retain it for future reference.

THE SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, THE ADVISOR, SUB-ADVISORS, KEYSTONE OR ANY OF THEIR AFFILIATES.
SUCH SHARES ARE NOT FEDERALLY INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENTAL AGENCY, AND AN INVESTMENT IN A FUND INVOLVES CERTAIN INVESTMENT
RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.

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

The date of this Prospectus is January 4, 1999.

<PAGE> 2

Governors Group Advisors, Inc., 23 Front Street, Harrisburg, Pennsylvania (the
"Advisor"), and Martindale Andres & Company, Inc., West Conshohocken,
Pennsylvania, (the "Sub-Advisor," or "Martindale Andres"), are wholly owned
subsidiaries of Keystone Financial, Inc. ("Keystone"), and act as the respective
advisor and sub-advisor to each of the Funds other than the International Equity
Fund. The Advisor and Brinson Partners, Inc., Chicago, Illinois, (the
"International Equity Fund Sub-Advisor" or, collectively with the Sub-Advisor,
the "Sub-Advisors"), a wholly owned subsidiary of UBS AG, act as the respective
advisor and sub-advisor for the International Equity Fund.

Each Fund's net asset value per share will fluctuate as the value of its
holdings changes in response to changing market prices and/or other factors.

BISYS Fund Services Ohio, Inc. ("BISYS Ohio"), Columbus, Ohio, and the Advisor
act as the Funds' administrators. BISYS Fund Services ("BISYS") acts as the
Funds' distributor. BISYS Fund Services, Inc., Columbus, Ohio, the general
partner of BISYS, acts as the Funds' transfer agent (the "Transfer Agent") and
performs certain fund accounting services for each of the Funds.

<PAGE> 3

PROSPECTUS SUMMARY

SHARES OFFERED: Shares of the Established Growth Fund, Aggressive Growth
Fund, Emerging Growth Fund, International Equity Fund, Income Fund, Government
Securities Fund, Pennsylvania Bond Fund, Lifestyle Conservative Growth Fund,
Lifestyle Moderate Growth Fund and Lifestyle Growth Fund, ten separate
investment Funds of the Governor Funds, a Delaware business trust (the "Trust").

OFFERING PRICE: The Government Securities Fund has a public offering price
equal to the net asset value per share plus a sales charge of 3.00% of the
public offering price, reduced on investments of $100,000 or more. The public
offering price of each of the other Funds is equal to the net asset value per
share plus a sales charge of 4.50% of the public offering price, reduced on
investments of $100,000 or more (See "HOW TO PURCHASE AND REDEEM SHARES--Sales
Charges"). Under certain circumstances, the sales charge may be eliminated (See
"HOW TO PURCHASE AND REDEEM SHARES--Sales Charge Waivers").

MINIMUM PURCHASE: $1,000 minimum initial investment with $25 minimum
subsequent investments. Such minimum initial investment is reduced for investors
using the Auto Invest Plan described herein and for employees of the Advisor,
Sub-Advisors and their affiliates.

TYPE OF COMPANY: Each Fund, with the exception of Pennsylvania Bond Fund
(which is a non-diversified series), is a diversified series of an open-end,
management investment company.

INVESTMENT OBJECTIVES: For the ESTABLISHED GROWTH FUND, growth of capital
with some current income as a secondary objective.

For the AGGRESSIVE GROWTH FUND, growth of capital.

For the EMERGING GROWTH FUND, long-term growth of capital.

For the INTERNATIONAL EQUITY FUND, capital appreciation.

For the INTERMEDIATE TERM INCOME FUND (the "Income Fund"), current income
with long-term growth of capital as a secondary objective.

For the LIMITED DURATION GOVERNMENT SECURITIES FUND (the "Government
Securities Fund"), current income with preservation of capital as a secondary
objective.

For the PENNSYLVANIA MUNICIPAL BOND FUND (the "Pennsylvania Bond Fund"),
(1) income which is exempt from federal income tax and Pennsylvania state income
tax, although such income may be subject to the federal alternative minimum tax
when received by certain Shareholders, and (2) preservation of capital.

For the LIFESTYLE CONSERVATIVE GROWTH FUND, capital appreciation and
income.

For the LIFESTYLE MODERATE GROWTH FUND, capital appreciation and, secondly,
income.

For the LIFESTYLE GROWTH FUND, capital appreciation.

INVESTMENT POLICIES: Under normal market conditions, the ESTABLISHED GROWTH
FUND will invest substantially all, but under such conditions in no event less
than 65%, of its total assets in common stocks and securities convertible into
common stocks of companies with market capitalizations of at least $1 billion.

Under normal market conditions, the AGGRESSIVE GROWTH FUND will invest
substantially all, but under such conditions in no event less than 65%, of its
total assets in common stocks and securities convertible
3
<PAGE> 4

into common stocks of companies with market capitalizations ranging between $100
million and $5 billion.

Under normal market conditions, the EMERGING GROWTH FUND will invest
substantially all, but under such conditions in no event less than 65%, of its
total assets in common stocks and securities convertible into common stocks of
growth-oriented micro-cap companies. For purposes of this policy, the Emerging
Growth Fund considers companies with equity market capitalizations, at the time
of purchase, of between $30 million and $350 million to be micro-cap companies.

Under normal market conditions, the INTERNATIONAL EQUITY FUND will invest
substantially all, but under such conditions in no event less than 65%, of its
total assets in equity securities of companies domiciled outside the United
States.

Under normal market conditions, the INCOME FUND will invest substantially
all, but under such conditions in no event less than 65%, of its total assets in
fixed income securities of all types, including high and medium grade corporate
bonds, U.S. Government bonds and mortgage-backed securities. The Income Fund
intends that, under normal market conditions, its portfolio will maintain a
dollar weighted average maturity of three to ten years.

Under normal market conditions, the GOVERNMENT SECURITIES FUND will invest
substantially all, but under such conditions in no event less than 65%, of its
total assets in securities issued or guaranteed by the U.S. Government or its
agencies and instrumentalities. Under such market conditions, the Government
Securities Fund expects to maintain an average portfolio duration of
approximately one to three years.

Under normal market conditions, the PENNSYLVANIA BOND FUND will invest at
least 80% of its net assets in municipal securities issued by or on behalf of
the Commonwealth of Pennsylvania or any county, political subdivision or
municipality thereof, including any agency, board, authority or commission of
any of the foregoing, and debt obligations issued by the Government of Puerto
Rico and other governmental entities, which generate interest income which is
exempt from federal and Pennsylvania state income taxes (but may be subject to
the federal alternative minimum tax when received by certain Shareholders).

Each of the LIFESTYLE FUNDS is a fund-of-funds and will invest in other
funds ("Underlying Funds") of the Trust.

RISK FACTORS AND SPECIAL CONSIDERATIONS: An investment in any of the Funds
and Underlying Funds is subject to certain risks, including without limitation
interest rate and market risk, as set forth in detail under "INVESTMENT
OBJECTIVES AND POLICIES--Risk Factors and Investment Techniques." As with other
mutual funds, there can be no assurance that any of the Funds or Underlying
Funds will achieve its investment objectives. The Funds and Underlying Funds, to
the extent set forth under "INVESTMENT OBJECTIVES AND POLICIES," may engage in
the following practices: the use of repurchase agreements and reverse repurchase
agreements, entering into options and futures transactions, the short selling of
securities, the purchase of securities from primarily one state, the purchase of
securities on a when-issued or delayed-delivery basis, the lending of portfolio
securities and the purchase of foreign securities, both directly and through
American Depository Receipts, and derivatives.

INVESTMENT ADVISOR: Governors Group Advisors, Inc.

INVESTMENT SUB-ADVISORS: Martindale Andres & Company, Inc. and Brinson
Partners, Inc.

4
<PAGE> 5

DIVIDENDS: For the Established Growth Fund and Aggressive Growth Fund,
dividends from net income are declared and generally paid quarterly. For the
Emerging Growth Fund, dividends from net income are declared and generally paid
semi-annually. For the International Equity Fund, dividends from net income are
declared and generally paid annually. For the Income Fund, Government Securities
Fund and Pennsylvania Bond Fund, dividends from net income are declared and
generally paid monthly. For the Lifestyle Funds, dividends from net income are
declared and generally paid quarterly. For all the Funds, net realized capital
gains, if any, are distributed at least annually.

DISTRIBUTOR: BISYS Fund Services ("BISYS").

BACKGROUND INFORMATION

The Established Growth, Aggressive Growth, Emerging Growth, Income,
Government Securities and Pennsylvania Bond Funds commenced operations on
December 2, 1996, February 3, 1997, July 1, 1998, December 2, 1996, July 1,
1997, and October 1, 1996, respectively, as separate investment portfolios
(sometimes referred to as "predecessor funds") of The Sessions Group, which was
organized as an Ohio business trust. On or about February 2, 1999 those Funds
are expected to be reorganized as portfolios of the Trust. This prospectus
reflects that reorganization.

5
<PAGE> 6

FEE TABLE

<TABLE>
<CAPTION>
ESTABLISHED AGGRESSIVE EMERGING INTERNATIONAL
GROWTH GROWTH GROWTH EQUITY
FUND FUND FUND FUND
----------- ---------- -------- -------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a
percentage of Offering price)............... 4.50% 4.50% 4.50% 4.50%
ESTIMATED ANNUAL FUND OPERATING EXPENSES (as a
percentage of average net assets)
Management Fees After Fee Waiver(1)........... 0.60% 0.70% 0.50% 0.40%
12b-1 Fees.................................... None None None None
Other Expenses................................ 0.37% 0.39% 1.09% 1.03%
---- ---- ---- ----
Estimated Total Fund Operating Expenses After
Fee Waiver(1)............................... 0.97% 1.09% 1.59% 1.43%
==== ==== ==== ====
</TABLE>

<TABLE>
<CAPTION>
GOVERNMENT PENNSYLVANIA
INCOME SECURITIES BOND
FUND FUND FUND
------ ---------- ------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage
of Offering price)...................................... 4.50% 3.00% 4.50%
ESTIMATED ANNUAL FUND OPERATING EXPENSES (as a percentage
of average net assets)
Management Fees After Fee Waiver(1)....................... 0.30% 0.30% 0.30%
12b-1 Fees................................................ None None None
Other Expenses............................................ 0.27% 0.35% 0.28%
---- ---- ----
Estimated Total Fund Operating Expenses After Fee
Waiver(1)............................................... 0.57% 0.65% 0.58%
==== ==== ====
</TABLE>

<TABLE>
<CAPTION>
LIFESTYLE
CONSERVATIVE LIFESTYLE
GROWTH MODERATE LIFESTYLE
FUND GROWTH FUND GROWTH FUND
------------ ----------- -----------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a
percentage of Offering price)...................... 4.50% 4.50% 4.50%
ESTIMATED ANNUAL FUND OPERATING EXPENSES(2) (as a
percentage of average net assets)
Management Fees After Fee Waiver(1).................. 0.15% 0.15% 0.15%
12b-1 Fees........................................... 0.50% 0.50% 0.50%
Other Expenses....................................... 1.00%(2) 1.00%(2) 1.00%(2)
---- ---- ----
Estimated Total Fund Operating Expenses After Fee
Waiver(1).......................................... 1.65% 1.65% 1.65%
==== ==== ====
</TABLE>

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

(1) The Advisor has agreed voluntarily to reduce its investment advisory fees
with respect to the Established Growth, Aggressive Growth, Emerging Growth,
International Equity, Income, Government Securities, Pennsylvania Bond,
Lifestyle Conservative Growth, Lifestyle Moderate Growth, and the Lifestyle
Growth Funds to 0.60%, 0.70%, 0.50%, 0.40%, 0.30%, 0.30%, 0.30%, 0.15%,
0.15% and 0.15%, respectively. The Administrator has agreed voluntarily to
reduce its administration fee to 0.115% for the Established Growth,
Aggressive Growth, Emerging Growth, International Equity, Income, Government
Securities and Pennsylvania Bond Funds. Absent such voluntary fee waivers,
which may be reduced or terminated at any time upon notice to Shareholders,
Management Fees and Estimated Total Fund Operating Expenses for the
Established Growth Fund would be 0.75% and 1.16%, respectively; for the
Aggressive Growth Fund, would be 1.00% and 1.43%, respectively;
for the Emerging Growth Fund, would be 1.25% and 2.38%, respectively; for
the International Equity Fund,

6
<PAGE> 7

would be 1.25% and 2.32%, respectively; for the Income Fund would be 0.60%
and 0.91%, respectively; for the Government Securities Fund, would be 0.60%
and 0.99%, respectively; for the Pennsylvania Bond Fund, would be 0.60% and
0.92%, respectively; for the Lifestyle Conservative Growth Fund, would be
0.25% and 1.75%, respectively; for the Lifestyle Moderate Growth Fund, would
be 0.25% and 1.75%, respectively; and for the Lifestyle Growth Fund, would
be 0.25% and 1.75%, respectively.

(2) Does not include expenses of the Underlying Funds, which are borne by the
Lifestyle Funds in connection with their investments in the Underlying
Funds. Including expenses of the Underlying Funds, which are estimated based
upon the initial allocation of each Lifestyle Fund's investment in the
Underlying Funds and upon the total operating expenses of the Underlying
Funds for their fiscal year ended June 30, 1998 or their estimated expenses
for the current year, Other Expenses would be 1.68% for the Lifestyle
Conservative Growth Fund, 1.67% for the Lifestyle Moderate Growth Fund and
1.88% for the Lifestyle Growth Fund. Actual Underlying Fund expenses
incurred by each Lifestyle Fund may vary with changes in the allocation of
each Lifestyle Fund's assets among the Underlying Funds and with other
events that directly affect the expenses of the Underlying Funds.

Example. You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
The Established Growth Fund.............. $54 $75 $ 96 $159
The Aggressive Growth Fund............... $56 $78 $102 $172
The Emerging Growth Fund................. $60 $93 N/A N/A
The International Equity Fund............ $59 $88 N/A N/A
The Income Fund.......................... $51 $62 $ 75 $113
The Government Securities Fund........... $36 $50 $ 65 $109
The Pennsylvania Bond Fund............... $51 $63 $ 76 $114
Lifestyle Conservative Growth Fund(*).... $61 $95 N/A N/A
Lifestyle Moderate Growth Fund(*)........ $61 $95 N/A N/A
Lifestyle Growth Fund(*)................. $61 $95 N/A N/A
</TABLE>

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

* The amounts shown do not include expenses of the Underlying Funds. Including
expenses of the Underlying Funds, one and three year expenses for the
Lifestyle Conservative Growth Fund would be $68 and $114, respectively; for
the Lifestyle Moderate Growth Fund, would be $67 and $114, respectively; and
for the Lifestyle Growth Fund, would be $69 and $120, respectively.

The purpose of the above fee table is to assist a potential purchaser of
Shares of a Fund in understanding the various costs and expenses that an
investor in such Fund will bear directly or indirectly (except for the Lifestyle
Funds which bear indirect expenses in connection with their investments in the
Underlying Funds that are not reflected in the fee table or Example). Such
expenses do not include any fees charged by the Advisor or any of its affiliates
to its customer accounts which may have invested in Shares of the Funds. The
table sets forth management fees and other expenses with respect to Shares of
the Funds other than the Emerging Growth, International Equity and the Lifestyle
Funds for the fiscal year or period ended June 30, 1998, as restated to reflect
current fees that would have been applicable had they been in effect during such
year or period, and the estimated management fees and other expenses of Shares
of the Emerging Growth, International Equity and Lifestyle Funds for the current
fiscal year. Long-term shareholders of the Lifestyle Funds may pay more than the
maximum front-end sales charges permitted by the National Association of
Securities Dealers Regulation, Inc. See "MANAGEMENT OF THE TRUST" and "GENERAL
INFORMATION" for a more complete discussion of the annual operating expenses of
the Funds. THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.

7
<PAGE> 8

FINANCIAL HIGHLIGHTS

The Funds are ten separate funds of the Trust. The tables below set forth
certain information concerning the investment results of each Fund other than
the Emerging Growth, International Equity and the Lifestyle Funds. The
information has been derived from the financial statements (the "Financial
Statements") included in the Annual Report to Shareholders for the year ended
June 30, 1998 for the Funds' predecessor funds. The Emerging Growth Fund
commenced operations after June 30, 1998, and the International Equity and the
Lifestyle Funds had not commenced operations prior to the date of this
prospectus. The Financial Highlights contained in the following table have been
audited by KPMG Peat Marwick LLP, independent certified public accountants for
the Funds. The following tables should be read in conjunction with the Financial
Statements and notes thereto. More information about the performance of each
Fund other than the Emerging Growth, International Equity and the Lifestyle
Funds is also contained in the Annual Report, which may be obtained without
charge by calling 1-800-766-3960.

<TABLE>
<CAPTION>
ESTABLISHED GROWTH FUND AGGRESSIVE GROWTH FUND
------------------------------------ ------------------------------------
PERIOD FROM PERIOD FROM
COMMENCEMENT COMMENCEMENT
OF OPERATIONS OF OPERATIONS
FISCAL YEAR ENDED THROUGH FISCAL YEAR ENDED THROUGH
JUNE 30, 1998 JUNE 30, 1997(A) JUNE 30, 1998 JUNE 30, 1997(A)
----------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD............................ $ 11.13 $ 10.00 $ 10.24 $ 10.00
Investment Activities:
Net investment income (loss)...... 0.10 0.08 (0.01) 0.01
Net realized and unrealized gain
(loss) on investments........... 2.99 1.13 1.30 0.24
-------- -------- -------- --------
Total from Investment Activities.... 3.09 1.21 1.29 0.25
-------- -------- -------- --------
Distributions from:
Net investment income (loss)...... (0.10) (0.08) -- (0.01)
Net realized gains................ (0.06) -- (0.12) --
-------- -------- -------- --------
Total Distributions............... (0.16) (0.08) (0.12) (0.01)
-------- -------- -------- --------
NET CHANGE IN NET ASSET VALUE PER
SHARE............................. 2.93 1.13 1.17 0.24
-------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD...... $ 14.06 $ 11.13 $ 11.41 $ 10.24
======== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA:
Total Return (excludes sales
charge)........................... 27.92% 12.20%(b) 12.72% 2.52%(b)
Net Assets, at end of period
(000)............................. $258,812 $190,914 $135,612 $105,258
Ratio of expenses to average net
assets............................ 0.71% 0.44%(c) 0.83% 0.66%(c)
Ratio of net investment income
(loss) to average net assets...... 0.77% 1.39%(c) (0.09%) 0.28%(c)
Ratio of expenses to average net
assets*........................... 1.06% 1.01%(c) 1.33% 1.35%(c)
Ratio of net investment income
(loss) to average net assets*..... 0.42% 0.82%(c) (0.59%) (0.41%)(c)
Portfolio turnover.................. 6% 1% 8% 2%
</TABLE>

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

* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.

(a) Commencement of operations of the Established Growth Fund was December 2,
1996. The commencement of operations of the Aggressive Growth Fund was
February 3, 1997.

(b) Not annualized.

8
<PAGE> 9

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
GOVERNMENT
INCOME FUND SECURITIES FUND PENNSYLVANIA BOND FUND
-------------------------------- ---------------- -----------------------------------
PERIOD FROM PERIOD FROM
COMMENCEMENT COMMENCEMENT
FISCAL OF OPERATIONS FISCAL FISCAL OF OPERATIONS
YEAR ENDED THROUGH YEAR ENDED YEAR ENDED THROUGH
JUNE 30, 1998 JUNE 30, 1997(A) JUNE 30, 1998(A) JUNE 30, 1998 JUNE 30, 1997(A)
------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD...................... $ 9.77 $ 10.00 $ 10.00 $ 10.29 $ 10.21
Investment Activities:
Net investment income....... 0.62 0.36 0.56 0.49 0.34
Net realized and unrealized
gain (loss) on
investments............... 0.33 (0.23) (0.04) 0.11 0.06
-------- -------- ------- -------- --------
Total from Investment
Activities.................. 0.95 0.13 0.52 0.60 0.40
-------- -------- ------- -------- --------
Distributions from:
Net investment income....... (0.62) (0.36) (0.56) (0.50) (0.32)
Net realized gains.......... -- -- -- -- --
-------- -------- ------- -------- --------
Total Distributions......... (0.62) (0.36) (0.56) (0.50) (0.32)
-------- -------- ------- -------- --------
NET CHANGE IN NET ASSET VALUE
PER SHARE................... 0.33 (0.23) (0.04) 0.10 0.08
-------- -------- ------- -------- --------
NET ASSET VALUE, END OF
PERIOD...................... $ 10.10 $ 9.77 $ 9.96 $ 10.39 $ 10.29
======== ======== ======= ======== ========
RATIOS/SUPPLEMENTAL DATA:
Total Return (excludes sales
charge)..................... 9.95% 1.40%(b) 5.39% 5.89% 3.98%(b)
Net Assets, at end of period
(000)....................... $275,565 $207,859 $29,360 $118,685 $123,194
Ratio of expenses to average
net assets.................. 0.57% 0.37%(c) 0.65% 0.58% 0.37%(c)
Ratio of net investment income
to average net assets....... 6.27% 6.45%(c) 5.58% 4.65% 4.46%(c)
Ratio of expenses to average
net assets*................. 0.92% 0.84%(c) 1.18% 0.92% 0.86%(c)
Ratio of net investment income
to average net assets*...... 5.92% 5.98%(c) 5.05% 4.31% 3.97%(c)
Portfolio turnover............ 218% 329% 482% 62% 98%
</TABLE>

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

* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.

(a) Commencement of operations of the Income Fund was December 2, 1996. The
commencement of operations of the Government Securities Fund was July 1,
1997. The commencement of operations of the Pennsylvania Bond Fund was
October 1, 1996.

(b) Not annualized.

9
<PAGE> 10

PERFORMANCE INFORMATION

From time to time performance information for the Funds showing the Funds'
aggregate total return, average annual total return and yield may be presented
in advertisements, sales literature and shareholder reports. SUCH PERFORMANCE
FIGURES ARE BASED ON HISTORICAL PERFORMANCE AND ARE NOT INTENDED TO INDICATE
FUTURE PERFORMANCE. Average annual total return will be calculated for the
period since commencement of operations for a Fund (or the respective collective
investment fund of its predecessor fund) and will include the performance of its
predecessor fund. Average annual total return will reflect the imposition of the
maximum sales charge, if any. Average annual total return is measured by
comparing the value of an investment in a Fund at the beginning of the relevant
period to the redeemable value of the investment at the end of the period
(assuming immediate reinvestment of any dividends or capital gains
distributions), which figure is then annualized. Aggregate total return is
calculated similarly to average annual total return except that the return
figure is aggregated over the relevant period instead of annualized. Yield will
be computed by dividing a Fund's net investment income per share earned during a
recent one-month period by that Fund's per share maximum offering price (reduced
by any undeclared earned income expected to be paid shortly as a dividend) on
the last day of the period and annualizing the result. Tax equivalent yield of
the Pennsylvania Bond Fund demonstrates the taxable yield necessary to produce
an after-tax yield equivalent to the yield of that Fund. Each of the Funds may
also present its aggregate total return, average annual total return and yield,
as the case may be, excluding the effect of a sales charge.

The Established Growth Fund, Aggressive Growth Fund, Income Fund and
Government Securities Fund each had been initially funded by the transfer of all
of the assets of a corresponding collective investment fund and common trust
fund managed by the Advisor (collectively, the "CIFs"). Because the management
of each Fund is substantially the same as its corresponding CIFs, the quoted
performance of that Fund will include the performance of its CIFs for the
periods prior to the effectiveness of the Trust's registration statement as it
relates to such Fund. Such performance will be restated to reflect the estimated
current fees of that Fund. Such CIFs were not registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), and therefore were not subject
to certain investment restrictions that are imposed by the 1940 Act. If the CIFs
had been so registered, their performance might have been adversely affected.

In addition, from time to time the Income Fund, the Government Securities Fund
and the Pennsylvania Bond Fund may also present their distribution rates in
supplemental sales literature and in shareholder reports. Distribution rates
will be computed by dividing the distribution per share made by a Fund over a
twelve-month period by the maximum offering price per share at the end of that
period. The calculation of income in the distribution rate includes both income
and capital gain dividends and does not reflect unrealized gains or losses,
although a Fund may also present a distribution rate excluding the effect of
capital gains and/or a sales charge. The distribution rate differs from the
yield because it includes capital gain dividends which are often non-recurring
in nature, whereas yield does not include such items.

Investors may also judge the performance of a Fund by comparing or referencing
it to the performance of other mutual funds with comparable investment
objectives and policies through various mutual fund or market indices and to
data prepared by various services, which indices or data may be published by
such services or by other services or publications. In addition to performance
information, general information about the Funds that appears in such
publications may be included in advertisements, sales literature and reports to
Shareholders.

Yield and total return are generally functions of market conditions, interest
rates, types of in-
10
<PAGE> 11

vestments held, and operating expenses. Consequently, current yields and total
return will fluctuate and are not necessarily representative of future results.
Any fees charged by Keystone or by any of its affiliates, including the Advisor
and Sub-Advisor, to its customer accounts which may have invested in Shares of a
Fund will not be included in performance calculations; such fees, if charged,
will reduce the actual performance from that quoted. In addition, if the
Advisor, BISYS Ohio or BISYS voluntarily reduces all or part of its fees for a
Fund, as discussed below, the yield and total return for that Fund will be
higher than they would otherwise be in the absence of such voluntary fee
reductions.

Further information about the performance of the Funds is contained in the
Funds' Annual Report to Shareholders which may be obtained without charge by
contacting the Trust at (800) 766-3960.

INVESTMENT OBJECTIVES AND POLICIES

IN GENERAL

The investment objectives of each Fund are non-fundamental policies and as
such may be changed by the Trust's Trustees without the vote of the Shareholders
of that Fund. There can be no assurance that the investment objectives of any
Fund will be achieved.

THE ESTABLISHED GROWTH FUND

The investment objectives of the Established Growth Fund are growth of capital
with some current income as a secondary objective. Under normal market
conditions, the Established Growth Fund will invest substantially all, but under
such conditions in no event less than 65%, of its total assets in common stocks
and securities convertible into common stocks of companies with market
capitalizations of at least $1 billion. For purposes of the foregoing,
securities convertible into common stocks include convertible bonds, convertible
preferred stock, options and rights. The securities purchased by the Established
Growth Fund are generally traded on established U.S. markets and exchanges.

Under normal market conditions, the Established Growth Fund intends to operate
with a fully invested philosophy, i.e., the Established Growth Fund will
generally invest 90% or more of its assets in common stocks. The Established
Growth Fund's equity investments will be based on two principles: (1) a solid
long-term fundamental business outlook and (2) an attractively valued stock
price. The Established Growth Fund's investment decisions are based upon a
company's expected performance through a business and market cycle which
normally translates into a three to five year investment horizon. In an effort
to mitigate some volatility, the Established Growth Fund does seek to maintain
representation in all major economic sectors. Subject to those guidelines, the
Established Growth Fund intends to invest in the securities of companies its
Sub-Advisor believes to be of high quality and which satisfy one or more of the
following criteria: (1) have a well recognized domestic and/or global franchise;
(2) have a long-term revenue and earnings growth track record which its Sub-
Advisor believes to be superior; (3) have a solid balance sheet, which includes
a low debt-to-equity ratio, and the ability to generate sufficient free cash
flow; (4) have a long-term sustainable competitive advantage; and (5) have
demonstrated a history of increasing shareholder value.

Under normal market conditions, the Established Growth Fund may also invest up
to 35% of its total assets in warrants, foreign securities through sponsored
American Depositary Receipts ("ADRs"), securities of other investment companies
and REITs (real estate investment trusts), cash and Short-Term Obligations and
may engage in other investment techniques described below.

"Short-Term Obligations" consist of obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities (including U.S. Treasury
securities stripped of the unmatured interest coupons and such stripped interest

11
<PAGE> 12

coupons), with maturities of 12 months or less, certificates of deposit,
bankers' acceptances and demand and time deposits of selected banks, securities
of money market mutual funds, and commercial paper rated in one of the two
highest rating categories by appropriate nationally recognized statistical
rating organizations ("NRSROs," e.g., Standard & Poor's Corporation and Moody's
Investors Service) and repurchase agreements collateralized by such obligations.
These obligations are described further in the Statement of Additional
Information. The Established Growth Fund may also invest up to 100% of its total
assets in Short-Term Obligations and cash when deemed appropriate for temporary
defensive purposes as determined by its Sub-Advisor to be warranted due to
current or anticipated market conditions. However, to the extent that the
Established Growth Fund is so invested, it may not achieve its investment
objectives.

THE AGGRESSIVE GROWTH FUND

The investment objective of the Aggressive Growth Fund is growth of capital.
Any income earned by the Aggressive Growth Fund will be incidental to its
overall objective of growth of capital. Under normal market conditions, the
Aggressive Growth Fund will invest substantially all, but under such conditions
in no event less than 65%, of its total assets in common stocks and securities
convertible into common stocks of companies with market capitalizations ranging
between $100 million and $5 billion. Under normal market conditions, the
Aggressive Growth Fund intends to operate with a fully invested philosophy,
e.g., the Aggressive Growth Fund will generally invest 90% or more of its assets
in common stocks and securities convertible into common stocks.

The Aggressive Growth Fund attempts to invest in high quality small to mid
capitalization companies that its Sub-Advisor believes have demonstrated one or
more of the following characteristics: (1) strong management team with an
ownership stake in the business; (2) solid revenue and earnings history; (3)
unique position in the company's targeted market; (4) innovative products and
solid new product distribution channels; and (5) solid balance sheet. In
addition, the Sub-Advisor attempts to invest in companies that are selling at
earnings multiples which the Sub-Advisor believes to be less than their expected
long-term growth rate.

The Fund's Sub-Advisor employs a "bottom-up" approach in its security
selection process. A "bottom-up" approach emphasizes company specific factors
rather than industry factors when making its buy/sell decisions. As a result of
this approach, the Fund's Sub-Advisor does not utilize a sector neutral
strategy. The Sub-Advisor does not seek to have the Aggressive Growth Fund have
representation in all economic sectors; therefore, the Aggressive Growth Fund's
sector weightings may be overweighted and/or underweighted relative to its
appropriate peers and/or benchmarks.

For purposes of the foregoing, securities convertible into common stocks
include convertible bonds, convertible preferred stock, options and rights. The
securities purchased by the Aggressive Growth Fund are generally traded on
established U.S. markets and exchanges, although as discussed below, the
Aggressive Growth Fund may invest in restricted or privately placed securities.
Under normal market conditions, the Aggressive Growth Fund may also invest up to
35% of its total assets in warrants, foreign securities through sponsored ADRs,
securities of other investment companies and REITs, cash and Short-Term
Obligations and may engage in other investment techniques described below.

THE EMERGING GROWTH FUND

The investment objective of the Emerging Growth Fund is long-term growth of
capital. Under normal market conditions, the Emerging Growth Fund will invest
substantially all, but under such conditions in no event less than 65%, of its
total assets in common stocks and securities convertible into common stocks of
growth-oriented micro-cap companies. For purposes of this
12
<PAGE> 13

policy, the Emerging Growth Fund considers companies with equity market
capitalizations, at the time of purchase, of between $30 million and $350
million to be micro-cap companies, and securities convertible into common stocks
include convertible bonds, convertible preferred stock, options and rights.
Under normal market conditions, up to 35% of the Emerging Growth Fund's total
assets may be invested in common stocks and securities convertible into common
stock of companies not meeting the foregoing micro-cap company equity market
parameters.

The Sub-Advisor's investment style with respect to the Emerging Growth Fund
may be characterized as "buy-and-hold." When making individual security
selections, the Sub-Advisor's investment horizon is expected to be a three to
five year period. The Sub-Advisor will purchase and maintain positions in
securities of companies that the Sub-Advisor believes have demonstrated one or
more of the following characteristics: (1) strong entrepreneurial management
team with a substantial ownership interest in the business; (2) solid long-term
revenue and earnings outlook; (3) unique position in the company's targeted
market; (4) sustainable competitive advantage in the company's targeted market;
and (5) solid balance sheet. In addition, the Sub-Advisor attempts to invest in
companies that are selling at earnings multiples which the Sub-Advisor believes
to be less than their projected three to five year earnings growth rate. This
growth at a discount management style relies on a combination of quantitative
and fundamental analysis of historical and projected data to determine a stock's
expected return.

Under normal market conditions, the Emerging Growth Fund may also invest up to
25% of its total assets in warrants, foreign securities, directly or through
sponsored ADRs, securities of other investment companies and REITs, cash and
Short-Term Obligations and may purchase the other investments and engage in
other investment techniques described below. The Emerging Growth Fund may also
invest up to 100% of its total assets in Short-Term Obligations and cash when
deemed appropriate for temporary defensive purposes as determined by the Fund's
Sub-Advisor to be warranted due to current or anticipated market conditions.
However, to the extent that the Emerging Growth Fund is so invested, it may not
achieve its investment objective.

THE INTERNATIONAL EQUITY FUND

The investment objective of the International Equity Fund is capital
appreciation, primarily through a diversified portfolio of non-U.S. equity
securities. Under normal market conditions, the International Equity Fund will
invest substantially all, but under such conditions in no event less than 65%,
of its total assets in equity securities of companies domiciled outside the
United States. That portion of the Fund not invested in equity securities is, in
normal circumstances, invested in U.S. and foreign government securities, high-
grade commercial paper, certificates of deposit, foreign currency, bankers
acceptances, cash and cash equivalents, time deposits, repurchase agreements and
similar money market instruments, both foreign and domestic. The Fund may invest
in convertible debt securities of foreign issuers which are convertible into
equity securities at such time as a market for equity securities is established
in the country involved.

The Sub-Advisor's investment perspective for the Fund is to invest in the
equity securities of non-U.S. markets and companies which are believed to be
undervalued based upon internal research and proprietary valuation systems. This
international equity strategy reflects the Fund's Sub-Advisor's decisions
concerning the relative attractiveness of asset classes, the individual
international equity markets, industries across and within those markets, other
common risk factors within those markets and individual international companies.
The Fund's Sub-Advisor initially identifies those securities which it believes
to be undervalued in relation to the issuer's assets, cash flow, earnings and
revenues. The relative performance of foreign currencies is an important factor
in the Fund's performance. The Fund's Sub-Advisor may manage the Fund's exposure
to
13
<PAGE> 14

various currencies to take advantage of different yield, risk and return
characteristics. The Fund's Sub-Advisor's proprietary valuation model determines
which securities are potential candidates for inclusion in the Fund.

The benchmark for the Fund is the European, Australian, Far East ("EAFE")
Index (the "Benchmark"). The Benchmark is a market driven, broad based index
which includes non-U.S. equity markets in terms of capitalization and
performance. The Benchmark is designed to provide a representative total return
for all major stock exchanges located outside the U.S. From time to time, the
Fund's Sub-Advisor may substitute securities in an equivalent index when it
believes that such securities in the index more accurately reflect the relevant
international market.

As a general matter, the Fund's Sub-Advisor will purchase for the Fund only
securities contained in the underlying index relevant to the Benchmark. The
Fund's Sub-Advisor will attempt to enhance the long-term risk and return
performance of the Fund relative to the Benchmark by deviating from the normal
Benchmark mix of country allocation and currencies in reaction to discrepancies
between current market prices and fundamental values. The active management
process is intended to produce a superior performance relative to the Benchmark
index.

The Fund's Sub-Advisor will purchase securities of companies domiciled in a
minimum of eight countries outside the United States.

THE INTERMEDIATE TERM INCOME FUND

The investment objectives of the Income Fund are current income with long-term
growth of capital as a secondary objective. Under normal market conditions, the
Income Fund will invest substantially all, but under such conditions in no event
less than 65%, of its total assets in fixed income securities of all types,
including variable and floating rate securities and variable amount master
demand notes. A portion of the Income Fund (but under normal market conditions
no more than 35% of its total assets) may be invested in securities of other
investment companies, preferred stocks and, for cash management purposes,
Short-Term Obligations (as described above), and the Income Fund may engage in
other investment techniques described below. Fixed income securities include
bonds, debentures, notes, mortgage-backed and asset-backed securities, state,
municipal or industrial revenue bonds, obligations issued or supported as to
principal and interest by the U.S. Government or its agencies or
instrumentalities ("Government Obligations") and debt securities convertible
into, or exchangeable for, common stocks. In addition, a portion of the Income
Fund may from time to time be invested in participation certificates in pools of
mortgages issued or guaranteed by the U.S. Government or its agencies or
instrumentalities. The Income Fund may invest up to 100% of its total assets in
Short-Term Obligations and cash when deemed appropriate for temporary defensive
purposes as determined by its Sub-Advisor to be warranted due to current or
anticipated market conditions. However, to the extent that the Income Fund is so
invested, it may not achieve its investment objectives.

Under normal market conditions, the Income Fund expects to invest primarily in
Government Obligations, mortgage-backed securities and in debt obligations of
United States corporations. The Income Fund also intends that, under normal
market conditions, its portfolio will maintain a dollar-weighted average
maturity of three to ten years.

The Income Fund expects to invest in a variety of U.S. Treasury obligations,
differing in their interest rates, maturities, and times of issuance, and other
Government Obligations. Obligations of certain agencies and instrumentalities of
the U.S. Government, such as the Government National Mortgage Association
("GNMA") and the Export-Import Bank of the United States, are supported by the
full faith and credit of the U.S. Treasury; others, such as those of the Federal
National Mortgage Association ("FNMA"), are supported by the right of the issuer
to borrow
14
<PAGE> 15

from the Treasury; others are supported by the discretionary authority of the
U.S. Government to purchase the agency's obligations; still others, such as
those of the Federal Farm Credit Banks or the Federal Home Loan Mortgage
Corporation ("FHLMC"), are supported only by the credit of the instrumentality.
No assurance can be given that the U.S. Government would provide financial
support to U.S. Government-sponsored agencies or instrumentalities if it is not
obligated to do so by law. The Income Fund will invest in the obligations of
such agencies or instrumentalities only when its Sub-Advisor believes that the
credit risk with respect thereto is minimal.

The Income Fund also expects to invest in bonds, notes and debentures of a
wide range of U.S. corporate issuers. Such obligations may be secured or
unsecured promises to pay and will in most cases differ in their interest rates,
maturities and times of issuance.

The Income Fund invests only in debt securities which are rated at the time of
purchase within the four highest rating groups assigned by one or more
appropriate NRSROs or, if unrated, which the Fund's Sub-Advisor deems to be of
comparable quality to securities so rated. Securities within the fourth highest
rating group are considered by Moody's Investor Services, Inc. ("Moody's") to
have some speculative characteristics, and while interest payments and principal
security appears adequate for the present, such securities lack certain
protective elements or may be characteristically unreliable over any great
period of time. For a description of the rating symbols of the NRSROs, see the
Appendix to the Statement of Additional Information.

The Income Fund may also invest in U.S. dollar denominated international bonds
for which the primary trading market is in the United States ("Yankee Bonds"),
or for which the primary trading market is abroad ("Eurodollar Bonds"), and in
Canadian Bonds and bonds issued by institutions organized for a specific
purpose, such as the World Bank and the European Economic Community, by two or
more sovereign governments ("Supranational Agency Bonds").

Mortgage-Backed Securities. The Income Fund also invests in mortgage-backed
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities or by nongovernmental entities which are rated, at the time of
purchase, within the four highest bond rating categories assigned by one or more
appropriate NRSROs, or, if unrated, which its Sub-Advisor deems to be of
comparable quality to securities so rated. There are currently three basic types
of mortgage-backed securities: (1) those issued or guaranteed by the U.S.
Government or one of its agencies or instrumentalities, such as GNMA, FNMA and
FHLMC; (2) those issued by private issuers that represent an interest in or are
collateralized by mortgage-backed securities issued or guaranteed by the U.S.
Government or one of its agencies or instrumentalities; and (3) those issued by
private issuers that represent an interest in or are collateralized by whole
mortgage loans or mortgage-backed securities without a government guarantee but
usually having some form of private credit enhancement.

Such mortgage-backed securities may have mortgage obligations directly backing
such securities, including among others, conventional thirty year fixed rate
mortgage obligations, graduated payment mortgage obligations, fifteen year
mortgage obligations and adjustable rate mortgage obligations. All of these
mortgage obligations can be used to create pass-through securities. A
pass-through security is created when mortgage obligations are pooled together
and undivided interests in the pool or pools are sold. The cash flow from the
mortgage obligations is passed through to the holders of the securities in the
form of periodic payments of interest, principal and prepayments (net of a
service fee). Prepayments occur when the holder of an individual mortgage
obligation prepays the remaining principal before the mortgage obligation's
scheduled maturity date.

15
<PAGE> 16

As a result of the pass-through of prepayments of principal on the underlying
securities, mortgage-backed securities are often subject to more rapid
prepayment of principal than their stated maturity would indicate. Because the
prepayment characteristics of the underlying mortgage obligations vary, it is
not possible to predict accurately the realized yield or average life of a
particular issue of pass-through certificates. Prepayment rates are important
because of their effect on the yield and price of the securities. In addition,
prepayment rates will be used to determine a security's estimated average life
and the Income Fund's dollar-weighted average portfolio maturity. Accelerated
prepayments have an adverse impact on yields for pass-through securities
purchased at a premium (i.e., a price in excess of principal amount) and may
involve additional risk of loss of principal because the premium may not have
been fully amortized at the time the obligations are repaid. The opposite is
true for pass-through securities purchased at a discount. The Income Fund may
purchase mortgage-related securities at a premium or a discount. Reinvestment of
principal payments may occur at higher or lower rates than the original yield on
such securities. Due to the prepayment feature and the need to reinvest payments
and prepayments of principal at current rates, mortgage-related securities can
be less effective than typical bonds of similar maturities at maintaining yields
during periods of declining interest rates.

Collateralized Mortgage Obligations. The Income Fund may also acquire
collateralized mortgage obligations or "CMOs" and stripped mortgage-backed
securities. CMOs are debt obligations collateralized by mortgage loans or
mortgage pass-through securities. Typically, CMOs are collateralized by GNMA,
FNMA or FHLMC certificates, but also may be collateralized by whole loans or
private mortgage pass-through securities (such collateral collectively referred
to as "Mortgage Assets"). Payments of principal or interest on the Mortgage
Assets, and any reinvestment income thereon, provide the funds to pay debt
service on the CMOs. CMOs may be issued by agencies or instrumentalities of the
U.S. Government or by private originators of, or investors in, mortgage loans.

IOs and POs. Stripped mortgage-backed securities are securities representing
interests in a pool of mortgages the cash flow from which has been separated
into interest and principal components. "IOs" (interest only securities) receive
the interest portion of the cash flow while "POs" (principal only securities)
receive the principal portion. Stripped mortgage-backed securities may be issued
by U.S. Government agencies or by private issuers, such as mortgage banks,
commercial banks, investment banks, savings and loan associations and special
purpose subsidiaries of the foregoing. As interest rates rise and fall, the
value of IOs tends to move in the same direction as interest rates. The value of
other mortgage-backed securities described herein, like other debt instruments,
will tend to move in the opposite direction compared to interest rates. POs
perform best when prepayments on the underlying mortgages rise since this
increases the rate at which the investment is returned and the yield to maturity
on the PO. When payments on mortgages underlying a PO are slow, the life of the
PO is lengthened and the yield to maturity is reduced.

The Income Fund may purchase stripped mortgage-backed securities for hedging
purposes to protect the Income Fund against interest rate fluctuations. For
example, since an IO will tend to increase in value as interest rates rise, it
may be utilized to hedge against a decrease in value of other fixed-income
securities in a rising interest rate environment. If the Income Fund purchases a
mortgage-related security at a premium, all or part of the premium may be lost
if there is a decline in the market value of the security, whether resulting
from changes in interest rates or prepayments in the underlying mortgage
collateral. Moreover, with respect to stripped mortgage-backed securities, if
the underlying mortgage securities experience greater than anticipated
prepayments of principal, the Income Fund may fail to recoup fully its initial
investment

16
<PAGE> 17

in these securities even if the securities are rated in the highest rating
category by an NRSRO. Stripped mortgage-backed securities may exhibit greater
price volatility than ordinary debt securities because of the manner in which
their principal and interest are returned to investors. The market value of the
class consisting entirely of principal payments can be extremely volatile in
response to changes in interest rates. The yields on stripped mortgage-backed
securities that receive all or most of the interest are generally higher than
prevailing market yields on other mortgage-backed obligations because their cash
flow patterns are also volatile and there is a greater risk that the initial
investment will not be fully recouped. No more than 10% of the Income Fund's
total assets will be invested in IOs and in POs.

Asset-Backed Securities. Asset-backed securities are similar to
mortgage-backed securities except that instead of using mortgages to
collateralize the obligations, a broad range of other assets may be used as
collateral, primarily automobile and credit card receivables and home equity
loans. Such receivables and loans are securitized in pass-through structures
similar to the mortgage pass-through or pay-through structures described above.

Certain debt securities such as, but not limited to, mortgage-backed
securities, CMOs and asset-backed securities, as well as other securities
subject to prepayment of principal prior to the stated maturity date, are
expected to be repaid prior to their stated maturity dates. As a result, the
effective maturity of these securities is expected to be shorter than the stated
maturity. For purposes of compliance with stated maturity policies and
calculation of the Income Fund's dollar-weighted average maturity, the effective
maturity of such securities will be used.

Variable Amount Master Demand Notes. Variable amount master demand notes in
which the Income Fund may invest are unsecured demand notes that permit the
indebtedness thereunder to vary and that provide for periodic adjustments in the
interest rate according to the terms of the instrument. Because master demand
notes are direct lending arrangements between the Income Fund and the issuer,
they are not normally traded. Although there is no secondary market in the
notes, the Income Fund may demand payment of principal and accrued interest at
any time. While the notes are not typically rated by NRSROs, the Fund's
Sub-Advisor must determine them to be of comparable credit quality to commercial
paper in which the Income Fund could invest. The Fund's Sub-Advisor will
consider the earning power, cash flow, and other liquidity ratios of the issuers
of such notes and will continuously monitor their financial status and ability
to meet payment on demand. In determining dollar-weighted average portfolio
maturity, a variable amount master demand note will be deemed to have a maturity
equal to the period of time remaining until the principal amount can be
recovered from the issuer through demand.

THE LIMITED DURATION GOVERNMENT SECURITIES FUND

The investment objectives of the Government Securities Fund are current income
with preservation of capital as a secondary objective. Under normal market
conditions, the Government Securities Fund will invest substantially all, but
under such conditions in no event less than 65%, of its total assets in
Government Obligations and in repurchase agreements backed by such securities.
Government Obligations which the Government Securities Fund may purchase also
include mortgage-backed securities, variable and floating rate securities and
zero coupon securities, as described more fully above under "The Intermediate
Term Income Fund." Under current market conditions, the Government Securities
Fund expects to maintain an average portfolio duration of one to three years.

A portion of the Government Securities Fund (but under normal market
conditions no more than 10% of its total assets) may be invested in securities
of other investment companies.

17
<PAGE> 18

Duration. The Government Securities Fund will attempt to limit its exposure to
interest rate risk by maintaining a duration which, on a weighted average basis
and under normal market conditions, will generally be less than three years.
Duration is a measure of the average life of a fixed-income security that was
developed as a more precise alternative to the concepts of "term to maturity" or
"average dollar weighted maturity" as measures of "volatility" or "risk"
associated with changes in interest rates. Duration incorporates a security's
yield, coupon interest payments, final maturity and call features into one
measure.

Most debt obligations provide interest ("coupon") payments in addition to a
final ("par") payment at maturity. Some obligations also have call provisions.
Depending on the relative magnitude of these payments and the nature of the call
provisions, the market values of debt obligations may respond differently to
changes in interest rates.

Traditionally, a debt security's "term-to-maturity" has been used as a measure
of the sensitivity of the security's price to changes in interest rates (which
is the "interest rate risk" or "volatility" of the security). However,
"term-to-maturity" measures only the time until a debt security provides its
final payment, taking no account of the pattern of the security's payments prior
to maturity. Average dollar weighted maturity is calculated by averaging the
terms to maturity of each debt security held with each maturity "weighted"
according to the percentage of assets that it represents. Duration is a measure
of the expected life of a debt security on a present value basis and reflects
both principal and interest payments. Duration takes the length of the time
intervals between the present time and the time that the interest and principal
payments are scheduled or, in the case of a callable security, expected to be
received, and weights them by the present values of the cash to be received at
each future point in time. For any debt security with interest payments
occurring prior to the payment of principal, duration is ordinarily less than
maturity. In general, all other factors being the same, the lower the stated or
coupon rate of interest of a debt security, the longer the duration of the
security; conversely, the higher the stated or coupon rate of interest of a debt
security, the shorter the duration of the security.

There are some situations where the standard duration calculation does not
properly reflect the interest rate exposure of a security. For example, floating
and variable rate securities often have final maturities of ten or more years;
however, their interest rate exposure corresponds to the frequency of the coupon
reset. Another example where the interest rate exposure is not properly captured
by duration is the case of mortgage pass-through securities. The stated final
maturity of such securities is generally 30 years, but current prepayment rates
are more critical in determining the securities' interest rate exposure. In
these and other similar situations, the Fund's Sub-Advisor will use more
sophisticated analytical techniques to project the economic life of a security
and estimate its interest rate exposure. Since the computation of duration is
based on predictions of future events rather than known factors, there can be no
assurance that the Government Securities Fund will at all times achieve its
targeted portfolio duration.

The change in market value of U.S. Government fixed-income securities is
largely a function of changes in the prevailing level of interest rates. When
interest rates are falling, a portfolio with a shorter duration generally will
not generate as high a level of total return as a portfolio with a longer
duration. When interest rates are flat, shorter duration portfolios generally
will not generate as high a level of total return as longer duration portfolios
(assuming that long-term interest rates are higher than short-term rates, which
is commonly the case). When interest rates are rising, a portfolio with a
shorter duration will generally outperform longer duration portfolios. With
respect to the composition of a fixed-income portfolio, the longer the duration
of the portfolio, generally the greater the anticipated potential for total
return, with, however, greater
18
<PAGE> 19

attendant interest rate risk and price volatility than for a portfolio with a
shorter duration.

While the Government Securities Fund intends to maintain an average portfolio
duration of one to three years under normal market conditions, there is no limit
as to the maturity of any one security which the Government Securities Fund may
purchase.

THE PENNSYLVANIA MUNICIPAL BOND FUND

The investment objectives of the Pennsylvania Bond Fund are income which is
exempt from federal income tax and Pennsylvania state income tax, although such
income may be subject to the federal alternative minimum tax when received by
shareholders, and preservation of capital. Under normal market conditions, at
least 80% of the net assets of the Pennsylvania Bond Fund are invested in a
portfolio of debt obligations consisting of bonds, notes, commercial paper and
certificates of indebtedness, issued by or on behalf of the Commonwealth of
Pennsylvania, or any county, political subdivision or municipality thereof
(including any agency, board, authority or commission of any of the foregoing),
the interest on which, in the opinion of bond counsel to the issuer, is exempt
from federal and Pennsylvania income taxes (but may be treated as a preference
item for individuals for purposes of the federal alternative minimum tax)
("Pennsylvania Exempt Securities") and in debt obligations issued by the
Government of Puerto Rico and such other governmental entities whose debt
obligations, either by law or treaty, generate interest income which is exempt
from federal and Pennsylvania state income taxes (but may be treated as a
preference item for individuals for purposes of the federal alternative minimum
tax) (together, with Pennsylvania Exempt Securities, called "Exempt
Securities"). In addition, under normal market conditions, at least 65% of the
Fund's net assets are invested in Pennsylvania Exempt Securities. As a matter of
fundamental policy, under normal market conditions, at least 80% of the net
assets of the Fund are invested in securities, the interest on which is exempt
from federal income tax but may be subject to the federal alternative minimum
tax when received by certain Shareholders. To the extent such securities are not
Pennsylvania Exempt Securities, the income therefrom may be subject to
Pennsylvania income taxes. With respect to the Fund's objective of preserving
capital, its Sub-Advisor will attempt to protect principal value in a rising
interest rate environment and enhance principal value in a declining interest
rate environment.

The two principal classifications of Exempt Securities which may be held by
the Pennsylvania Bond Fund are "general obligation" securities and "revenue"
securities. General obligation securities are secured by the issuer's pledge of
its full faith, credit and taxing power for the payment of principal and
interest. Revenue securities are payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from proceeds of a
special excise tax or other specific revenue source such as the user of the
facility being financed. Private activity bonds held by the Fund are in most
cases revenue securities and are not payable from the unrestricted revenues of
the issuer. Consequently, the credit quality of private activity bonds is
usually directly related to the credit standing of the corporate user of the
facility involved.

The Fund may also invest in "moral obligation" securities, which are normally
issued by special purpose public authorities. If the issuer of moral obligation
securities is unable to meet its debt service obligations from current revenues,
it may draw on a reserve fund, the restoration of which is a moral commitment
but not a legal obligation of the state or municipality which created the
issuer.

The Fund invests in Exempt Securities which are rated at the time of purchase
within the four highest rating groups assigned by one or more NRSROs for bonds
and within the two highest rating groups for notes, tax-exempt commercial paper,
or variable rate demand obligations, as the case may be. The Fund may also
purchase Exempt Securities which are unrated at the time of
19
<PAGE> 20

purchase but are determined to be of comparable quality by its Sub-Advisor. The
applicable Exempt Securities ratings are described in the Appendix to the
Statement of Additional Information. Securities within the fourth highest rating
group are considered by Moody's to have some speculative characteristics, and
while interest payments and principal security appears adequate for the present,
such securities lack certain protective elements or may be characteristically
unreliable over any great period of time.

The Fund expects to maintain a dollar-weighted average portfolio maturity of
three to ten years. Within this range, the Fund's Sub-Advisor may vary the
average maturity substantially in anticipation of a change in the interest rate
environment. There is no limit as to the maturity of any individual security.

The Fund may hold uninvested cash reserves pending investment during temporary
defensive periods or if, in the opinion of its Sub-Advisor, suitable Exempt
Securities are unavailable. There is no percentage limitation on the amount of
assets which may be held uninvested. Uninvested cash reserves will not earn
income.

Other Investments. Under normal market conditions, at least 80% of the net
assets of the Fund will be invested in Exempt Securities. However, up to 20% of
the net assets of the Fund may be invested in municipal obligations of other
states, and any political subdivision, county or municipality thereof, which are
not Exempt Securities and in taxable obligations if, for example, suitable
Exempt Securities are unavailable or for cash management purposes. In addition,
the Fund may invest up to 100% of its assets in such securities when deemed
appropriate for temporary defensive purposes as determined by the Fund's
Sub-Advisor to be warranted due to market conditions. Such taxable obligations
consist of Government Obligations and Short-Term Obligations (as described
above). Under such circumstances and during the period of such investment, the
Fund may not achieve its stated investment objectives.

The Fund has no limit to the extent that it may invest its net assets in
Exempt Securities, the interest income from which may be treated as a preference
item for purposes of the federal alternative minimum tax. To the extent the Fund
invests in these securities, individual Shareholders, depending on their own tax
status, may be subject to alternative minimum tax on that part of the Fund's
distributions derived from these bonds. For further information relating to the
types of Exempt Securities which will be included in income subject to
alternative minimum tax, see "ADDITIONAL INFORMATION--Additional Tax Information
With Respect to the Pennsylvania Bond Fund" in the Statement of Additional
Information.

Opinions relating to the validity of Exempt Securities and to the exemption of
interest thereon from federal and Pennsylvania state income taxes are normally
rendered by bond counsel to the respective issuers at the time of issuance.
Neither the Fund nor the Advisor nor the Sub-Advisor will review the proceedings
relating to the issuance of Exempt Securities or the basis for such opinions.

Floating and Variable Rate Securities and Zero Coupon Securities. Exempt
Securities purchased by the Fund may include rated and unrated variable and
floating rate obligations the interest on which is tax-exempt. The Fund may also
invest in zero coupon securities. Such securities are more fully described below
under "Risk Factors and Investment Techniques."

The Fund may also purchase floating and variable rate demand notes and bonds,
which are tax exempt obligations ordinarily having stated maturities in excess
of one year, but which permit the holder to demand payment of principal at any
time, or at specified intervals. Variable rate demand notes include master
demand notes which are obligations that permit the Fund to invest fluctuating
amounts, at varying rates of interest, pursuant to direct arrangements between
the Fund, as lender, and the borrower. These obligations permit daily changes in
the amount borrowed. Frequently, such obligations are secured

20
<PAGE> 21

by letters of credit or other credit support arrangements provided by banks. Use
of letters of credit or other credit support arrangements will not adversely
affect the tax-exempt status of these obligations. Because these obligations are
direct lending arrangements between the lender and borrower, it is not
contemplated that such instruments generally will be traded, and there generally
is no established secondary market for these obligations, although they are
redeemable at face value, plus accrued interest. Accordingly, where these
obligations are not secured by letters of credit or other credit support
arrangements, the Fund's right to redeem is dependent on the ability of the
borrower to pay principal and interest on demand. Each obligation purchased by
the Fund will meet the quality criteria established for the purchase of Exempt
Securities. The Fund's Sub-Advisor will consider on an ongoing basis the
creditworthiness of the issuers of the floating and variable rate demand
obligations in the Fund's portfolio.

Participation Interests. The Fund may purchase from financial institutions
participation interests in Exempt Securities (such as industrial development
bonds and municipal lease/purchase agreements). A participation interest gives
the Fund an undivided interest in the Exempt Security in the proportion that the
Fund's participation interest bears to the total principal amount of the Exempt
Security. These instruments may have fixed, floating or variable rates of
interest. If the participation interest is unrated, it will be backed by an
irrevocable letter of credit or guarantee of a bank that the Board of Trustees
has determined meets the prescribed quality standards for banks in whose
securities the Fund may invest, or the payment obligation otherwise will be
collateralized by Government Obligations. For certain participation interests,
the Fund will have the right to demand payment, on not more than seven days'
notice, for all or any part of the Fund's participation interest in the Exempt
Security, plus accrued interest. As to these instruments, the Fund intends to
exercise its right to demand payment only upon a default under the terms of the
Exempt Security, as needed to provide liquidity to meet redemptions, or to
maintain or improve the quality of its investment portfolio.

Custodial Receipts. The Fund may purchase custodial receipts representing the
right to receive certain future principal and interest payments on Exempt
Securities which underlie the custodial receipts. A number of different
arrangements are possible. In a typical custodial receipt arrangement, an issuer
or a third party owner of Exempt Securities deposits such obligations with a
custodian in exchange for two classes of custodial receipts. The two classes
have different characteristics, but, in each case, payments on the two classes
are based on payments received on the underlying Exempt Securities. One class
has the characteristics of a typical auction rate security, where at specified
intervals its interest rate is adjusted, and ownership changes, based on an
auction mechanism. This class' interest rate generally is expected to be below
the coupon rate of the underlying Exempt Securities and generally is at a level
comparable to that of an Exempt Security of similar quality and having a
maturity equal to the period between interest rate adjustments. The second class
bears interest at a rate that exceeds the interest rate typically borne by a
security of comparable quality and maturity; this rate also is adjusted, but in
this case inversely to changes in the rate of interest of the first class. If
the interest rate on the first class exceeds the coupon rate of the underlying
Exempt Securities, its interest rate will exceed the rate paid on the second
class. In no event will the aggregate interest paid with respect to the two
classes exceed the interest paid by the underlying Exempt Securities. The value
of the second class and similar securities should be expected to fluctuate more
than the value of an Exempt Security of comparable quality and maturity and
their purchase by the Fund should increase the volatility of its net asset value
and, thus, its price per share. These custodial receipts are sold in private
placements. The Fund also may purchase directly from issuers, and not in a
private placement, Exempt Securities having characteristics similar to custodial

21
<PAGE> 22

receipts. These securities may be issued as part of a multi-class offering and
the interest rate on certain classes may be subject to a cap or a floor.

The Fund may use one or more of the investment techniques described below. Use
of such techniques may cause the Fund to earn income which would be taxable to
its Shareholders.

THE LIFESTYLE FUNDS

The investment objective of the Lifestyle Conservative Growth Fund is capital
appreciation and income. The investment objective of the Lifestyle Moderate
Growth Fund is capital appreciation and, secondarily, income. The investment
objective of the Lifestyle Growth Fund is capital appreciation. Each Lifestyle
Fund is a fund-of-funds that seeks to achieve its objective by investing in
Underlying Funds. The table below illustrates the initial Underlying Fund
allocation and ranges for each Lifestyle Fund:

RANGES (PERCENTAGE OF EACH FUND'S NET ASSETS)

<TABLE>
<CAPTION>
NAME OF FUND RANGE
------------ -------
<S> <C>
Lifestyle Conservative Growth Fund
- -----------------------------------
Governor Funds Prime Money Market
Fund
Governor Funds U.S. Treasury
Obligations Money Market Fund..... 0 - 30%
Limited Duration
Government Securities Fund
Intermediate Term Income Fund....... 30 - 60%
Established Growth Fund
Aggressive Growth Fund
International Equity Fund........... 10 - 40%
Lifestyle Moderate Growth Fund
- --------------------------------
Governor Funds Prime Money Market
Fund
Governor Funds U.S. Treasury
Obligations Money Market Fund..... 0 - 20%
Limited Duration
Government Securities Fund
Intermediate Term Income Fund....... 20 - 50%
</TABLE>

<TABLE>
<CAPTION>
NAME OF FUND RANGE
------------ -------
<S> <C>
Established Growth Fund
Aggressive Growth Fund
International Equity Fund........... 30 - 60%
Lifestyle Growth Fund
- ----------------------
Governor Funds Prime Money Market
Fund
Governor Funds U.S. Treasury
Obligations Money Market Fund..... 0 - 10%
Limited Duration
Government Securities Fund
Intermediate Term Income Fund....... 10 - 40%
Established Growth Fund
Aggressive Growth Fund
Emerging Growth Fund
International Equity Fund........... 50 - 80%
</TABLE>

The allocation of each Lifestyle Fund's assets among the Underlying Funds will
initially be made by the Fund's Sub-Advisor within the percentage ranges set
forth in the table above. However, the particular Underlying Fund in which each
Lifestyle Fund may invest, the allocation ranges, and the investments in each
Underlying Fund may be changed from time to time without shareholder approval.
The Sub-Advisor will make allocation decisions according to its outlook for the
economy, financial markets, and relative market valuation of the Underlying
Funds.

Each Lifestyle Fund's net asset value will fluctuate with changes in the value
of the Underlying Funds in which they invest. Each Lifestyle Fund's investment
return is diversified by its investment in the Underlying Funds.

To the extent a Lifestyle Fund or the Underlying Funds are engaged in a
temporary defensive position, they will not be pursuing their investment
objective.

The investments of the Lifestyle Funds are concentrated in the Underlying
Funds, so each Lifestyle Fund's performance is directly related to the
performance of the Underlying Funds.

Each Lifestyle Fund may invest in the Trust's Prime Money Market and U.S.
Treasury Obligations Money Market Funds. Both the Prime

22
<PAGE> 23

Money Market and U.S. Treasury Obligations Money Market Funds each seek current
income with liquidity and stability of principal. The Prime Money Market Fund
and the U.S. Treasury Obligations Money Market Fund seek to maintain a constant
net asset value of $1.00 per share for purchases and redemptions, but there can
be no assurance that either will be able to do so.

The Prime Money Market Fund may invest in the following high quality money
market instruments: (1) U.S. Government Obligations (as described above); (2)
certificates of deposit, bankers' acceptances and time deposits of U.S. banks or
other U.S. financial institutions (including foreign branches of such banks and
institutions) having total assets in excess of $1 billion and which are members
of the Federal Reserve System or the Federal Deposit Insurance Corporation; (3)
certificates of deposit, bankers' acceptances and time deposits of foreign banks
and U.S. branches of foreign banks having assets in excess of the equivalent of
$1 billion; (4) Eurodollar certificates of deposit, Eurodollar time deposits,
Europaper, Canadian commercial paper and Canadian time deposits (limited to 20%
of the Fund's net assets); (5) Yankee certificates of deposit; (6) municipal
obligations which are rated at the time of purchase by one or more nationally
recognized statistical rating organizations in one of the two highest rating
categories for short-term debt obligations, or, if not rated, determined by the
Fund's sub-advisor to be of comparable quality; (7) asset backed securities; (8)
commercial paper, other short-term obligations and variable and floating rate
master demand notes, bonds, debentures and notes; (9) repurchase agreements
relating to the above instruments; (10) reverse repurchase agreements; (11)
securities of other investment companies; (12) securities lending; and (13)
illiquid securities (limited to 10% of the Fund's net assets).

The U.S. Treasury Obligations Money Market Fund may invest in the following
high quality money market instruments: (1) U.S. Government Obligations (as
described above); (2) direct obligations issued by the U.S. Treasury; (3) U.S.
Treasury securities that have been stripped of their unmatured interest coupons;
(4) interest coupons that have been stripped from such U.S. Treasury securities;
(5) receipts and certificates for such stripped debt obligations and stripped
coupons; (6) repurchase agreements relating to the above instruments; (7)
variable and floating rate securities; (8) reverse repurchase agreements; (9)
securities lending; (10) securities of other investment companies; and (11)
securities received on a when-issued or delayed delivery basis.

The Prime Money Market and U.S. Treasury Obligations Money Market Funds are
subject to Rule 2a-7 of the 1940 Act, which sets forth requirements of, among
other things, diversification, average maturity (including a requirement that
dollar-weighted average portfolio maturity may not exceed 90 days) and credit
quality. The Statement of Additional Information also has more information on
the Prime Money Market and U.S. Treasury Obligations Money Market Funds. This is
only a short summary of the investments in which the Prime Money Market and U.S.
Treasury Obligations Money Market Funds may invest. The prospectus for the Prime
Money Market and U.S. Treasury Obligations Money Market Funds has more detailed
descriptions. You may request a prospectus for those Funds by calling (800)
766-3960.

RISK FACTORS AND INVESTMENT TECHNIQUES

Equities. Equity securities such as those in which the Established Growth
Fund, Aggressive Growth Fund, Emerging Growth Fund and International Equity Fund
may invest are more volatile and carry more risks than some other forms of
investment, including investments in high grade fixed income securities.
Therefore, each Fund is subject to stock market risk, e.g., the possibility that
stock prices in general will decline over short or even extended periods of
time.

Equity securities of micro-cap companies, such as those in which the Emerging
Growth Fund
23
<PAGE> 24

may invest, may offer a greater capital appreciation potential but are more
volatile and carry more risk than some other forms of investment, including
investments in equity securities of larger, more established companies or high
grade fixed income securities. Investments in micro-cap companies represent some
of the smaller and least liquid equity securities in the U.S. markets.

Growth-Oriented Companies. The Aggressive Growth Fund and the Emerging Growth
Fund are both intended for investors who have a long-term investment time
horizon and who can accept the higher risks involved in seeking potentially
higher capital appreciation through investments in growth-oriented companies. A
growth-oriented company typically invests most of its net income in its
enterprise and does not pay out much, if any, in dividends. Accordingly, the
Aggressive Growth and Emerging Growth Funds do not anticipate any significant
distributions to Shareholders from net investment income, and potential
investors should be in a financial position to forego current income from their
investment in the Aggressive Growth and Emerging Growth Funds. In addition,
smaller capitalized companies generally have limited product lines, markets and
financial resources and are dependent upon a limited management group. The
securities of less seasoned companies and/or smaller capitalized companies may
have limited marketability, which may affect or limit their liquidity and
therefore the ability of the Aggressive Growth and Emerging Growth Funds to sell
such securities at the time and price they deem advisable. In addition, such
securities may be subject to more abrupt or erratic market movements over time
than securities of more seasoned and/or larger capitalized companies or the
market as a whole.

Micro Capitalization Companies. The Emerging Growth Fund is subject to the
risks associated with investments in micro capitalization companies. Risks of
investing in micro capitalization companies include the probability that some
companies may never realize the value discount potential that appeared to be
inherent in them at the time of investment or may even fail as a business for
several reasons. For example, a new product or innovation may not take hold, an
anticipated takeover or turnaround may not occur, a trademark may lose its value
to other generic products. Also, micro capitalization companies may lack the
resources, financial or otherwise, to take advantage of a valuable product or
favorable market position or may be unable to withstand the competitive
pressures of larger, more established rivals. The Emerging Growth Fund's Sub-
Advisor will seek to minimize the risks described above by broad diversification
of the Emerging Growth Fund's portfolio. However, there can be no assurance that
such diversification will prevent loss in value of certain portfolio securities
or in the Emerging Growth Fund's net asset value.

Bonds. Since the Income Fund, Government Securities Fund and Pennsylvania Bond
Fund each invests in bonds, investors in such a Fund are exposed to bond market
risk, i.e., fluctuations in the market value of bonds. Bond prices are
influenced primarily by changes in the level of interest rates. When interest
rates rise, the prices of bonds generally fall; conversely, when interest rates
fall, bond prices generally rise although certain types of bonds are subject to
the risks of prepayment as described above when interest rates fall. The values
of debt securities also may be affected by change in the credit rating or
financial condition of the issuing entities. While bonds normally fluctuate less
in price than stocks, there have been in the recent past extended periods of
cyclical increases in interest rates that have caused significant declines in
bond prices and have caused the effective maturity of securities with prepayment
features to be extended, thus effectively converting short or intermediate term
securities (which generally have less market risk and less fluctuation in market
value) into longer term securities (the prices of which generally are more
volatile).

Depending upon the prevailing market conditions, the Funds' Sub-Advisors may
purchase debt securities at a discount from face value, which
24
<PAGE> 25

produces a yield greater than the coupon rate. Conversely, if debt securities
are purchased at a premium over face value, the yield will be lower than the
coupon rate. In making investment decisions, the Funds' Sub-Advisors will
consider many factors other than current yield, including the preservation of
capital, maturity, and yield to maturity.

Net Asset Value. Each Fund's net asset value generally will not be stable and
should fluctuate based upon changes in the value of such Fund's portfolio
securities. Depending upon the performance of each Funds' investments, the net
asset value per share of a Fund may decrease instead of increase.

The Sub-Advisors manage the Funds generally without regard to restrictions on
portfolio turnover, except those imposed by provisions of the federal tax laws
regarding short-term trading. Especially with respect to the Income Fund and the
Government Securities Fund, the Advisor intends to manage actively those Funds'
portfolios, which may result in high portfolio turnover rates. For more
information regarding the effects of high portfolio turnover see "Portfolio
Turnover" below.

Derivatives. The Income Fund, Government Securities Fund and Pennsylvania Bond
Fund may invest in any one or more of the following securities: certain variable
or floating rate securities, and, as described below, the Income Fund and the
Government Securities Fund may invest in mortgage-backed securities, and the
Established Growth Fund, Aggressive Growth Fund, Emerging Growth Fund,
International Equity Fund, the Income Fund and the Pennsylvania Bond Fund may
invest in put and call options and futures. Such instruments are considered to
be "derivatives." A derivative is generally defined as an instrument whose value
is based upon, or derived from, some underlying index, reference rate (e.g.,
interest rates), security, commodity or other asset. Certain derivatives that
may be purchased by a Fund, such as those with interest rates that fluctuate
directly or indirectly based on multiples of a stated index, are designed to be
highly sensitive to changes in interest rates and can subject the holders
thereof to extreme reductions of yield and possibly loss of principal. The
Established Growth Fund, Aggressive Growth Fund, Emerging Growth Fund,
International Equity Fund, Income Fund and the Government Securities Fund each
will not invest more than 20% of its total assets in any such derivatives at any
one time, except that there is no limitation on the amount of a Fund's total
assets which may be invested in variable or floating rate obligations. There is
no limit on the amount of the Pennsylvania Bond Fund's assets that may be
invested in derivatives.

Repurchase Agreements. Securities held by each of the Funds may be subject to
repurchase agreements. Under the terms of a repurchase agreement, a Fund would
acquire securities, in exchange for cash, from banks and/or registered
broker-dealers which the Fund's Sub-Advisor deems creditworthy under guidelines
approved by the Trust's Board of Trustees. The seller agrees to repurchase such
securities at a mutually agreed date and price. The repurchase price generally
equals the price paid by the Fund plus interest negotiated on the basis of
current short-term rates, which may be more or less than the rate on the
underlying portfolio securities. Securities subject to repurchase agreements
must be of the same type and quality as those in which the Fund may invest
directly. Repurchase agreements are considered to be loans by a Fund under the
1940 Act. For further information about repurchase agreements and the related
risks, see "INVESTMENT OBJECTIVES AND POLICIES -- Additional Information on
Portfolio Instruments--Repurchase Agreements" in the Statement of Additional
Information.

25
<PAGE> 26

ally agreed-upon date and price. At the time a Fund enters into a reverse
repurchase agreement, it will place in a segregated custodial account assets
such as U.S. Government securities or other liquid securities consistent with
the Fund's investment restrictions having a value equal to the repurchase price
(including accrued interest), and will continually monitor the account to ensure
that such equivalent value is maintained at all times. Reverse repurchase
agreements involve the risk that the market value of the securities sold by a
Fund may decline below the price at which such Fund is obligated to repurchase
the securities. Reverse repurchase agreements are considered to be borrowings by
a Fund under the 1940 Act and therefore a form of leverage. A Fund may
experience a negative impact on its net asset value if interest rates rise
during the term of a reverse repurchase agreement. A Fund generally will invest
the proceeds of such borrowings only when such borrowings will enhance the
Fund's liquidity or when the Fund reasonably expects that the interest income to
be earned from the investment of the proceeds is greater than the interest
expense of the transaction. For further information about reverse repurchase
agreements, see "INVESTMENT OBJECTIVES AND POLICIES--Additional Information on
Portfolio Instruments--Reverse Repurchase Agreements" in the Statement of
Additional Information.

Except as permitted by the 1940 Act, the Trust will not execute portfolio
transactions through, acquire portfolio securities issued by, make savings
deposits in, or enter into repurchase or reverse repurchase agreements with the
Advisor, Sub-Advisors, BISYS, or their affiliates.

Securities Lending. In order to generate additional income, each Fund may,
from time to time, lend its portfolio securities to broker-dealers, banks, or
institutional borrowers of securities. A Fund must receive 100% collateral in
the form of cash or U.S. Government securities. This collateral will be valued
daily by the Fund's Sub-Advisor. Should the market value of the loaned
securities increase, the borrower must furnish additional collateral to the
Fund. During the time portfolio securities are on loan, the borrower pays the
Fund any dividends or interest received on such securities. Loans are subject to
termination by the Fund or the borrower at any time. While a Fund does not have
the right to vote securities on loan, each Fund intends to terminate the loan
and right to vote if that is considered important with respect to the
investment. In the event the borrower would default in its obligations, a Fund
bears the risk of delay in recovery of the portfolio securities and the loss of
rights in the collateral. A Fund will enter into loan agreements only with
broker-dealers, banks, or other institutions that the Fund's Sub-Advisor has
determined are creditworthy under guidelines established by the Trust's Board of
Trustees. No Fund will lend more than 33% of the total value of its portfolio
securities at any one time.

When-Issued or Delayed-Delivery Securities. Each Fund may purchase securities
on a when-issued or delayed-delivery basis. These transactions are arrangements
in which a Fund purchases securities with payment and delivery scheduled for a
future time. Each Fund will engage in when-issued and delayed-delivery
transactions only for the purpose of acquiring portfolio securities consistent
with and in furtherance of its investment objectives and policies, not for
investment leverage, although such transactions represent a form of leveraging.
When-issued or delayed-delivery securities are securities purchased for delivery
beyond the normal settlement date at a stated price and yield and thereby
involve a risk that the price obtained in the transaction will be greater than
those available in the market when delivery takes place. A Fund will generally
not pay for such securities or start earning dividends on them until they are
received on the settlement date. When a Fund agrees to purchase such securities,
however, its custodian will set aside cash or liquid securities equal to the
amount of the commitment in a separate account. Securities purchased on a
when-issued or delayed-delivery basis are recorded as an asset and are subject
to changes in the value based upon market factors and changes in the general
level of interest rates. In when-
26
<PAGE> 27

issued and delayed-delivery transactions, a Fund relies on the seller to
complete the transaction; the seller's failure to do so may cause that Fund to
miss a price considered to be advantageous.

Investment Company Securities. Each Fund may also invest in the securities of
other investment companies, including shares of a money market fund advised by
the Sub-Advisor ("Governor money market funds") and the Underlying Funds in
accordance with the limitations of the 1940 Act and any exemptions therefrom.
Each Fund intends to invest in other investment companies which, in the opinion
of the Fund's Sub-Advisor will assist such Fund in achieving its investment
objective(s) and in money market mutual funds for purposes of short-term cash
management. A Fund will incur additional expenses due to the duplication of fees
and expenses as a result of investing in mutual funds. In order to avoid the
imposition of additional fees as a result of investing in shares of a Governor
money market fund, the Advisor, Sub-Advisor, BISYS, and Governors Group
Advisors, Inc. and BISYS Ohio, as the Funds' administrators, and their
affiliates will reduce their fees charged to a Fund other than the Lifestyle
Funds by an amount equal to the fees charged by such service providers based on
a percentage of that Fund's assets attributable to such Fund's investment in the
Governor money market fund. Additional restrictions on the Funds' investments in
the securities of other mutual funds are contained in the Statement of
Additional Information.

Year 2000. Like other investment companies, financial and business
organizations and individuals around the world, the Funds could be affected
adversely if the computer systems used by the Advisor, Sub-Advisors, the Funds'
other service providers, and others do not properly process and calculate
date-related information and data from and after January 1, 2000. This is
commonly known as the "Year 2000 Problem." The Advisor, Sub-Advisors, and the
Funds' other service providers have informed the Trust that they are taking
steps to address the Year 2000 Problem with respect to the computer systems that
they use. At this time, however, there can be no assurance that these steps will
be sufficient to avoid any adverse impact on the Funds as a result of the Year
2000 Problem.

Convertible Securities. The Established Growth Fund, Aggressive Growth Fund,
Emerging Growth Fund, International Equity Fund and Income Fund each may invest
in convertible securities. A convertible security is a bond, debenture, note,
preferred stock or other security that may be converted into or exchanged for a
prescribed amount of common stock of the same or a different issuer within a
particular period of time at a specified price or formula. Convertible
securities rank senior to common stocks in a corporation's capital structure
and, therefore, entail less risk than the corporation's common stock. The value
of a convertible security is a function of its "investment value" (its value as
if it did not have a conversion privilege) and its "conversion value" (the
security's worth if it were to be exchanged for the underlying security, at
market value, pursuant to its conversion privilege).

Restricted Securities. Securities in which the Aggressive Growth Fund, the
Emerging Growth Fund, the International Equity Fund and the Income Fund may
invest include securities issued by corporations without registration under the
Securities Act of 1933, as amended (the "1933 Act"), such as securities issued
in reliance on the so-called "private placement" exemption from registration
which is afforded by Section 4(2) of the 1933 Act ("Section 4(2) securities").
Section 4(2) securities are restricted as to disposition under the Federal
securities laws, and generally are sold to institutional investors such as the
Aggressive Growth Fund, the Emerging Growth Fund, the International Equity Fund
and the Income Fund who agree that they are purchasing the securities for
investment and not with a view to public distribution. Any resale must also
generally be made in an exempt transaction. Section 4(2) securities are normally
resold, if at all, to other institutional investors through or with the
assistance of the issuer or investment dealers
27
<PAGE> 28

who facilitate the resale of such Section 4(2) securities, thus providing some
liquidity.

Pursuant to procedures adopted by the Board of Trustees of the Trust, a
Sub-Advisor may determine Section 4(2) securities to be liquid if such
securities are eligible for resale under Rule 144A under the 1933 Act and are
readily saleable. Rule 144A permits the Aggressive Growth Fund, the Emerging
Growth Fund, the International Equity Fund and the Income Fund to purchase
securities which have been privately placed and resell such securities to
certain qualified institutional buyers without restriction. For purposes of
determining whether a Rule 144A security is readily saleable, and therefore
liquid, a Sub-Advisor must consider, among other things, the frequency of trades
and quotes for the security, the number of dealers willing to purchase or sell
the security and the number of potential purchasers, dealer undertakings to make
a market in the security, and the nature of the security and marketplace trades
of such security. However, investing in Rule 144A securities, even if such
securities are initially determined to be liquid, could have the effect of
increasing the level of the Aggressive Growth Fund's, the Emerging Growth
Fund's, the International Equity Fund's and the Income Fund's illiquidity to the
extent that qualified institutional buyers become, for a time, uninterested in
purchasing these securities.

Writing Covered Call and Put Options. The Established Growth Fund, Aggressive
Growth Fund, Emerging Growth Fund, International Equity Fund, Income Fund and
Pennsylvania Bond Fund may write covered call and put options on securities, or
futures contracts regarding securities, in which such Fund may invest, in an
effort to realize additional income. A put option gives the purchaser the right
to sell, and a writer has the obligation to purchase, the underlying security at
the stated exercise price at any time prior to the expiration date of the
option, regardless of the market price of the security. A call option gives the
purchaser of the option the right to buy, and a writer has the obligation to
sell, the underlying security at the stated exercise price at any time prior to
the expiration of the option, regardless of the market price of the security.
The premium paid to the writer is consideration for undertaking the obligations
under the option contract. Such options will be listed on national securities or
futures exchanges. Each Fund may write covered call options as a means of
seeking to enhance its income through the receipt of premiums in instances in
which the Fund's Sub-Advisor determines that the underlying securities or
futures contracts are not likely to increase in value above the exercise price.
Each Fund also may seek to earn additional income through the receipt of
premiums by writing put options. By writing a call option, a Fund limits its
opportunity to profit from any increase in the market value of the underlying
security above the exercise price of the option; by writing a put option, a Fund
assumes the risk that it may be required to purchase the underlying security at
a price in excess of its then current market value.

Each of the Established Growth Fund, Aggressive Growth Fund, Emerging Growth
Fund, International Equity Fund, Income Fund and Pennsylvania Bond Fund, as part
of its option transactions, also may write index put and call options. Through
the writing of index options a Fund can achieve many of the same objectives as
through the use of options on individual securities. Options on securities
indices are similar to options on a security except that, rather than the right
to take or make delivery of a security at a specified price, an option on a
securities index gives the holder the right to receive, upon exercise of the
option, an amount of cash if the closing level of the securities index upon
which the option is based is greater than, in the case of a call, or less than,
in the case of a put, the exercise price of the option.

When a Fund writes an option, an amount equal to the net premium (the premium
less the commission) received by that Fund is included in the liability section
of the Fund's statement of assets and liabilities as a deferred credit. The
amount of the deferred credit will be subsequently marked-to-market to reflect
the current
28
<PAGE> 29

value of the option written. The current value of the traded option is the last
sale price or, in the absence of a sale, the mean between bid and asked price.
If an option expires on the stipulated expiration date or if the Fund enters
into a closing purchase transaction, it will realize a gain (or a loss if the
cost of a closing purchase transaction exceeds the net premium received when the
option is sold) and the deferred credit related to such option will be
eliminated. If a call option is exercised, the Fund may deliver the underlying
security in the open market. In either event, the proceeds of the sale will be
increased by the net premium originally received and the Fund will realize a
gain or loss. The Established Growth Fund, Aggressive Growth Fund, Emerging
Growth Fund, International Equity Fund, Income Fund and Pennsylvania Bond Fund
will each limit its writing of options such that at no time will more than 25%
of its total assets be subject to such options transactions.

Purchasing Options. The Established Growth Fund, Aggressive Growth Fund,
Emerging Growth Fund, International Equity Fund, Income Fund and Pennsylvania
Bond Fund may each purchase put and call options written by third parties
covering indices and those types of financial instruments or securities in which
the Fund may invest to attempt to provide protection against adverse price
effects from anticipated changes in prevailing prices for such instruments. The
purchase of a put option is intended to protect the value of a Fund's holdings
in a falling market while the purchase of a call option is intended to protect
the value of a Fund's positions in a rising market. Put and call options
purchased by a Fund will be valued at the last sale price, or in the absence of
such a price, at the mean between bid and asked price. Such options will be
listed on national securities or futures exchanges.

In purchasing a call option, a Fund would be in a position to realize a gain
if, during the option period, the price of the underlying security, index or
futures contract increased by an amount in excess of the premium paid for the
call option. It would realize a loss if the price of the underlying security,
index or futures contract declined or remained the same or did not increase
during the period by more than the amount of the premium. By purchasing a put
option, the Fund would be in a position to realize a gain if, during the option
period, the price of the security, index or futures contract declined by an
amount in excess of the premium paid. It would realize a loss if the price of
the security, index or futures contract increased or remained the same or did
not decrease during that period by more than the amount of the premium. If a put
or call option purchased by the Fund were permitted to expire without being sold
or exercised, its premium would represent a realized loss to the Fund.

Puts. The Pennsylvania Bond Fund also may require "puts" with respect to
Exempt Securities held in its portfolio. The Pennsylvania Bond Fund may sell,
transfer, or assign a put in conjunction with the sale, transfer, or assignment
of the underlying security or securities.

The amount payable to the Pennsylvania Bond Fund upon its exercise of a "put"
is normally (i) the Fund's acquisition cost of the Exempt Securities (excluding
any accrued interest which the Fund paid on the acquisition), less any amortized
market premium or plus any amortized market or original issue discount during
the period the Fund owned the securities, plus (ii) all interest accrued on the
securities since the last interest payment date during that period.

Puts may be acquired by the Pennsylvania Bond Fund to facilitate the liquidity
of its portfolio assets. Puts may also be used to facilitate the reinvestment of
the Fund's assets at a rate of return more favorable than that of the underlying
security. Puts may, under certain circumstances, also be used to shorten the
maturity of underlying variable rate or floating rate securities for purposes of
calculating the remaining maturity of those securities.

The Pennsylvania Bond Fund expects that it will generally acquire this type of
put only where the put is available without the payment of any direct or
indirect consideration. However, if nec-
29
<PAGE> 30

essary or advisable, the Fund may pay for such puts either separately in cash or
by paying a higher price for portfolio securities which are acquired subject to
the puts (thus reducing the yield to maturity otherwise available for the same
securities).

The Pennsylvania Bond Fund intends to enter into such puts only with dealers,
banks, and broker-dealers which, in its Sub-Advisor's opinion, present minimal
credit risks.

Futures Contracts. The Established Growth Fund, Aggressive Growth Fund,
Emerging Growth Fund, International Equity Fund, Income Fund and Pennsylvania
Bond Fund may each purchase or sell contracts for the future delivery of the
specific financial instruments or securities in which that Fund may invest, and
indices based upon the types of securities in which that Fund may invest
(collectively, "Futures Contracts"). Each such Fund may use this investment
technique as a substitute for a comparable market position in the underlying
securities or to hedge against anticipated future changes in market prices,
which otherwise might adversely affect either the value of such Fund's
securities or the prices of securities which such Fund intends to purchase at a
later date. In addition, the Income Fund and the Pennsylvania Bond Fund may
purchase or sell futures contracts to hedge against changes in market interest
rates which may result in the premature call at par value of certain securities
which that Fund has purchased at a premium.

To the extent a Fund is engaging in a futures transaction as a hedging device,
because of the risk of an imperfect correlation between securities in the Fund's
portfolio that are the subject of a hedging transaction and the futures contract
used as a hedging device, it is possible that the hedge will not be fully
effective if, for example, losses on the portfolio securities exceed gains on
the futures contract or losses on the futures contract exceed gains on the
portfolio securities. For futures contracts based on indices, the risk of
imperfect correlation increases as the composition of a Fund's portfolio varies
from the composition of the index. In an effort to compensate for the imperfect
correlation of movements in the price of the securities being hedged and
movements in the price of futures contracts, a Fund may buy or sell futures
contracts in a greater or lesser dollar amount than the dollar amount of the
securities being hedged if the historical volatility of the future contract has
been less or greater than that of the securities. Such "over hedging" or "under
hedging" may adversely affect a Fund's net investment results if the market does
not move as anticipated when the hedge is established.

Successful use of futures by a Fund also is subject to the Fund's
Sub-Advisor's ability to predict correctly movements in the direction of the
market. For example, if a Fund has hedged against the possibility of a decline
in the market adversely affecting the value of securities held in its portfolio
and prices increase instead, the Fund will lose part or all of the benefit of
the increased value of securities which it has hedged because it will have
offsetting losses in its futures positions. Furthermore, if in such
circumstances the Fund has insufficient cash, it may have to sell securities to
meet daily variation margin requirements. The Fund may have to sell such
securities at a time when it may be disadvantageous to do so.

An option on a futures contract gives the purchaser the right, in return for
the premium paid, to assume a position in a futures contract (a long position if
the option is a call and a short position if the option is a put) at a specified
exercise price at any time during the option exercise period. The writer of the
option is required upon exercise to assume an offsetting futures position (a
short position if the option is a call and a long position if the option is a
put). Upon exercise of the option, the assumption of offsetting futures
positions by the writer and holder of the option will be accompanied by delivery
of the accumulated cash balance in the writer's futures margin account which
represents the amount by which the market price of the futures contract, at
exercise, exceeds, in the case of a call, or is less than,

30
<PAGE> 31

in the case of a put, the exercise price of the option on the futures contract.

Call options sold by a Fund with respect to futures contracts will be covered
by, among other things, entering into a long position in the same contract at a
price no higher than the strike price of the call option, or by ownership of the
instruments underlying, or instruments the prices of which are expected to move
relatively consistently with the instruments underlying, the futures contract.
Put options sold by a Fund with respect to futures contracts will be covered
when, among other things, cash or liquid securities are placed in a segregated
account to fulfill the obligation undertaken.

The Established Growth Fund, Aggressive Growth Fund, Emerging Growth Fund,
International Equity Fund, Income Fund and Pennsylvania Bond Fund may each
utilize various index futures to protect against changes in the market value of
the securities in its portfolio or which it intends to acquire. Securities index
futures contracts are based on an index of various types of securities, e.g.,
stocks or long-term corporate bonds. The index assigns relative values to the
securities included in an index, and fluctuates with changes in the market value
of such securities. The contract is an agreement pursuant to which two parties
agree to take or make delivery of an amount of cash based upon the difference
between the value of the index at the close of the last trading day of the
contract and the price at which the index contract was originally written. The
acquisition or sale of an index futures contract enables a Fund to protect its
assets from fluctuations in prices of certain securities without actually buying
or selling such securities.

In general, the value of futures contracts sold by a Fund to offset declines
in its portfolio securities will not exceed the total market value of the
portfolio securities to be hedged, and futures contracts purchased by a Fund
will be covered by a segregated account consisting of cash or liquid securities
in an amount equal to the total market value of such futures contracts, less the
initial margin deposited therefor.

When buying futures contracts and when writing put options, a Fund will be
required to segregate in a separate account cash and/or liquid securities in an
amount sufficient to meet its obligations. When writing call options, a Fund
will be required to own the financial instrument or futures contract underlying
the option or segregate cash and/or liquid securities in an amount sufficient to
meet its obligations under written calls.

Interest Rate Swaps. The International Equity Fund may engage in interest rate
swaps, in order to attempt to protect its investments from interest rate
fluctuations. The International Equity Fund intends to use interest rate swaps
as a hedge and not as a speculative investment. Interest rate swaps involve the
exchange of the International Equity Fund with another party of their respective
rights to receive interest (e.g., an exchange of fixed rate payments for
floating rate payments). For example, if the International Equity Fund holds an
interest paying security whose interest rate is reset once a year, it may swap
the right to receive at a rate that is reset daily. Such a swap position would
offset changes in the value of the underlying security because of subsequent
changes in interest rates. This would protect the International Equity Fund from
a decline in the value of the underlying security due to rising rates, but would
also limit its ability to benefit from falling interest rates.

The International Equity Fund will enter into interest rate swaps only on a
net basis (i.e., the two payments streams will be netted out, with the
International Equity Fund receiving or paying as the case may be, only the net
amount of the two payments). The net amount of the excess, if any, of the
International Equity Fund's obligations over its entitlements with respect to
each interest rate swap will be accrued on a daily basis, and an amount of cash
or liquid high grade debt securities having an aggregate net asset value at
least equal to the accrued excess, will be maintained in

31
<PAGE> 32

a segregated account by the International Equity Fund's custodian bank.

The use of interest rate swaps involves investment techniques and risks
different from those associated with ordinary portfolio security transactions.
If the International Equity Fund Sub-Advisor is incorrect in its forecasts of
market values, interest rates and other applicable factors, the investment
performance of the International Equity Fund will be less favorable than it
would have been if this investment technique were never used. Interest rate
swaps do not involve the delivery of securities or other underlying assets or
principal. Thus, if the other party to an interest rate swap defaults, the
International Equity Fund's risk of loss consists of the net amount of interest
payments that the International Equity Fund is contractually entitled to
receive.

Variable and Floating Rate Obligations. Securities purchased by the Income
Fund, Government Securities Fund and Pennsylvania Bond Fund may include rated
and unrated variable and floating rate obligations. A variable rate obligation
is one whose terms provide for the adjustment of its interest rate on set dates
and which, upon such adjustments, can reasonably be expected to have a market
value that approximates its par value.

A floating rate obligation is one whose terms provide for the adjustment of
its interest rate whenever a specified interest rate changes. Such obligations
are frequently not rated by credit rating agencies; however, unrated variable
and floating rate obligations purchased by a Fund will be determined by a Fund's
Sub-Advisor to be of comparable quality at the time of purchase to rated
instruments eligible for purchase under such Fund's investment policies. In
making such determinations, the Sub-Advisor will consider the earning power,
cash flow and other liquidity ratios of the issuers of such obligations and will
continuously monitor their financial condition.

Although there may be no active secondary market with respect to a particular
variable or floating rate obligation purchased by a Fund, the Fund may attempt
to resell the obligation at any time to a third party. The absence of an active
secondary market, however, could make it difficult for a Fund to dispose of a
variable or floating rate obligation in the event the issuer of the obligation
defaulted on its payment obligations and the Fund could, as a result or for
other reasons, suffer a loss to the extent of the default. Variable or floating
rate obligations may be secured by bank letters of credit.

Variable and floating rate obligations for which no readily available market
exists and which are not subject to a demand feature that will permit the Fund
to receive payment of the principal within seven days after demand by that Fund,
will be considered illiquid and therefore, together with other illiquid
securities held by such Fund, will not exceed 15% of such Fund's net assets.

Zero Coupon Securities. The Income Fund, Government Securities Fund and
Pennsylvania Bond Fund may each invest in zero coupon securities which are debt
securities issued or sold at a discount from their face value which do not
entitle the holder to any periodic payment of interest prior to maturity or a
specified redemption date (or cash payment date). The amount of the discount
varies depending on the time remaining until maturity or cash payment date,
prevailing interest rates, liquidity of the security and perceived credit
quality of the issuer. Zero coupon securities also may take the form of debt
securities that have been stripped of their unmatured interest coupons, the
coupons themselves and receipts or certificates representing interests in such
stripped debt obligations and coupons. The market prices of zero coupon
securities generally are more volatile than the market prices of
interest-bearing securities and are likely to respond to a greater degree to
changes in interest rates than
32
<PAGE> 33

interest-bearing securities having similar maturities and credit qualities.
Federal income tax law requires the holder of a zero coupon security or of
certain pay-in-kind bonds to accrue income with respect to these securities
prior to the receipt of cash payments. To maintain its qualification as a
regulated investment company and avoid liability for federal income taxes, a
Fund may be required to distribute such income accrued with respect to these
securities and may have to dispose of portfolio securities under disadvantageous
circumstances in order to generate cash to satisfy these distribution
requirements. For further information regarding zero coupon securities, see
"Additional General Tax Information" in the Statement of Additional Information.

Short Sales. The Income Fund, Government Securities Fund and Pennsylvania Bond
Fund may from time to time sell securities short. Short sales are effected when
the Fund's Sub-Advisor believes that the price of a particular security will
decline, and involve the sale of a security which a Fund does not own in the
hope of purchasing the same security at a later date at a lower price. When a
Fund sells a security short, it will borrow the same security from a broker or
other institution to complete the sale. A Fund may make a profit or incur a loss
depending upon whether the market price of the security sold short decreases or
increases between the date of the short sale and the date on which the Fund must
replace the borrowed security. An increase in the value of a security sold short
by a Fund over the price at which it was sold short will result in a loss to
that Fund, and there can be no assurance that a Fund will be able to close out
the position at any particular time or at an acceptable price.

All short sales must be fully collateralized, and the Income Fund, Government
Securities Fund and Pennsylvania Bond Fund will not sell securities short if,
immediately after and as a result of the sale, the value of all securities sold
short by that Fund exceeds 25% of its total assets.

Foreign Investments. Investments in foreign securities (including Yankee
Bonds, Eurodollar Bonds and Supranational Bonds) may subject the Established
Growth Fund, Aggressive Growth Fund, Emerging Growth Fund, International Equity
Fund and Income Fund to investment risks that differ in some respects from those
related to investments in securities of U.S. domestic issuers. Such risks
include future adverse political and economic developments, the possible
imposition of withholding taxes on interest or other investment income, possible
seizure, nationalization, or expropriation of foreign deposits or investments,
the possible establishment of exchange controls or taxation at the source, less
stringent disclosure requirements, less liquid or developed securities markets
or the adoption of other foreign governmental restrictions which might adversely
affect the payment of principal, interest or dividends on such securities or the
purchase or sale thereof. In addition, foreign branches of U.S. banks and
foreign banks may be subject to less stringent reserve requirements and to
different accounting, auditing, reporting, and recordkeeping standards than
those applicable to domestic branches of U.S. banks. The Income Fund will
acquire securities issued by foreign branches of U.S. banks, foreign banks, or
other foreign issuers only when the Fund's Sub-Advisor believes that the risks
associated with such instruments are minimal.

Investments in foreign securities will usually involve currencies of foreign
countries, and the value of the assets of a Fund that may invest in foreign
securities as measured in United States dollars may be affected favorably or
unfavorably by changes in foreign currency exchange rates and exchange control
regulations, and the Fund may incur costs in connection with conversions between
various currencies. The expected introduction of a single currency, the euro, on
January 1, 1999 for participating nations in the European Economic and Monetary
Union presents unique uncertainties, including whether the payment and
operational systems of banks and other financial institutions will be ready by
the scheduled launch date; the legal treatment of

33
<PAGE> 34

certain outstanding financial contracts after January 1, 1999 that refer to
existing currencies rather than the euro; the establishment of exchange rates
for existing currencies and the euro; and the creation of suitable clearing and
settlement payment systems for the new currency. These or other factors,
including political and economic risks, could cause market disruptions before or
after the introduction of the euro, and could adversely affect the value of
securities held by the Funds.

The normal currency allocation of the International Equity Fund is identical
to the currency mix of the Benchmark. The International Equity Fund expects to
maintain this normal currency exposure when global currency markets are fairly
priced relative to each other and relative to associated risks. The
International Equity Fund may actively deviate from such normal currency
allocations to take advantage of or to protect the International Equity Fund
from risk and return characteristics of the currencies and short-term interest
rates when those prices deviate significantly from fundamental value. Deviations
from the Benchmark are determined by the International Equity Fund Sub-Advisor
based upon its research.

To manage exposure to currency fluctuations, the International Equity Fund may
alter equity or money market exposures (in its normal asset allocation mix as
previously identified), enter into forward currency exchange contracts, buy or
sell options, futures or options on futures relating to foreign currencies and
may purchase securities indexed to currency baskets. The International Equity
Fund will also use these currency exchange techniques in the normal course of
business to hedge against adverse changes in exchange rates in connection with
purchases and sales of securities. Some of these strategies may require the
International Equity Fund to set aside liquid assets in a segregated custodial
account to cover its obligations. These techniques are further described below.

The International Equity Fund may conduct its foreign currency exchange
transactions on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign currency exchange market or through entering into contracts to purchase
or sell foreign currencies at a future date (i.e., "forward foreign currency"
contract or "forward" contract). A forward contact involves an obligation to
purchase or sell a specific currency amount at a future date, which may be any
fixed number of days from the date of the contract, agreed upon by the parties,
at a price set at the time of the contract. The International Equity Fund will
convert currency on a spot basis from time to time and investors should be aware
of the potential costs of currency conversion.

When the Fund's Sub-Advisor believes that the currency of a particular country
may suffer a significant decline against the U.S. dollar or against another
currency, the Fund may enter into a currency 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 the International Equity
Fund's securities denominated in such foreign currency.

At the maturity of a forward contract, the International Equity Fund may
either sell a portfolio security and make delivery of the foreign currency, or
it may retain the security and terminate its contractual obligation to deliver
the foreign currency by repurchasing an "offsetting" contract with the same
currency trader obligating it to purchase, on the same maturity date, the same
amount of the foreign currency. The International Equity Fund may realize a gain
or loss from currency transactions.

The International Equity Fund also 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 the Fund's exposure to changes in currency exchange rates.
Call options on foreign currency written by the International Equity Fund will
be "covered," which means that the Fund will own

34
<PAGE> 35

an equal amount of the underlying foreign currency. With respect to put options
on foreign currency written by the International Equity Fund, the Fund will
establish a segregated account with its custodian bank consisting of cash, U.S.
government securities or other high-grade liquid debt securities in an amount
equal to the amount the Fund would be required to pay upon exercise of the put.

Interest Rate Futures Contracts and Options on Interest Rate Futures
Contracts. The Income Fund and the Pennsylvania Bond Fund may purchase and sell
interest rate futures contracts and options on interest rate futures contracts
as a substitute for a comparable market position or to hedge against adverse
movements in interest rates.

To the extent such Fund has invested in interest rate futures contracts or
options on interest rate futures contracts as a substitute for a comparable
market position, the Fund will be subject to the investment risks of having
purchased the securities underlying the contract.

The Income Fund and the Pennsylvania Bond Fund may each also purchase call
options on interest rate futures contracts to hedge against a decline in
interest rates and may purchase put options on interest rate futures contracts
to hedge its portfolio securities against the risk of rising interest rates.

If a Fund has hedged against the possibility of an increase in interest rates
adversely affecting the value of securities held in that Fund's portfolio and
rates decrease instead, such Fund will lose part or all of the benefit of the
increased value of the securities which it has hedged because it will have
offsetting losses in its futures positions. In addition, in such situations, if
the Fund has insufficient cash, it may have to sell securities to meet daily
variation margin requirements at a time when it may be disadvantageous to do so.
These sales of securities may, but will not necessarily, be at increased prices
which reflect the decline in interest rates.

The Income Fund and the Pennsylvania Bond Fund may sell call options on
interest rate futures contracts to partially hedge against declining prices of
its portfolio securities. If the futures price at expiration of the option is
below the exercise price, the Fund will retain the full amount of the option
premium which provides a partial hedge against any decline that may have
occurred in that Fund's portfolio holdings. A Fund may sell put options on
interest rate futures contracts to hedge against increasing prices of the
securities which are deliverable upon exercise of the futures contracts. If the
futures price at expiration of the option is higher than the exercise price, the
Fund will retain the full amount of the option premium which provides a partial
hedge against any increase in the price of securities which the Fund intends to
purchase. If a put or call option sold by a Fund is exercised, the Fund will
incur a loss which will be reduced by the amount of the premium it receives.
Depending on the degree of correlation between changes in the value of its
portfolio securities and changes in the value of its futures positions, a Fund's
losses from existing options on futures may to some extent be reduced or
increased by changes in the value of its portfolio securities.

The Income Fund and the Pennsylvania Bond Fund also may each sell options on
interest rate futures contracts as part of closing purchase transactions to
terminate its options positions. No assurance can be given that such closing
transactions can be effected or that there will be a correlation between price
movements in the options on interest rate futures and price movements in that
Fund's portfolio securities which are the subject of the hedge. In addition, a
Fund's purchase of such options will be based upon predictions as to anticipated
interest rate trends, which could prove to be inaccurate.

35
<PAGE> 36

securities in an amount equal to the total market value of such futures
contracts, less the initial margin deposited therefor.

The following risks and techniques apply exclusively to the Pennsylvania Bond
Fund.

Risks of Non-Diversification. Potential Shareholders should consider the fact
that the Pennsylvania Bond Fund's portfolio consists primarily of securities
issued by the Commonwealth of Pennsylvania (the "Commonwealth"), its
municipalities and authorities and should realize that the Pennsylvania Bond
Fund's performance is closely tied to general economic conditions within the
Commonwealth as a whole and to economic conditions within particular industries
and geographic areas located within the Commonwealth.

Although the General Fund of the Commonwealth (the principal operating fund of
the Commonwealth) experienced deficits in fiscal 1990 and 1991, tax increases
and spending decreases have resulted in surpluses the last four years; as of
June 30, 1996, the General Fund had a surplus of $635.2 million. The deficit in
the Commonwealth's unreserved/undesignated funds also has been eliminated.

Pennsylvania's economy historically has been dependent upon heavy industry,
but has diversified recently into various services, particularly into medical
and health services, education and financial services. Agricultural industries
continue to be an important part of the economy, including not only the
production of diversified food and livestock products, but substantial economic
activity in agribusiness and food-related industries. Service industries
currently employ the greatest share of nonagricultural workers, followed by the
categories of trade and manufacturing. Future economic difficulties in any of
these industries could have an adverse impact on the finances of the
Commonwealth or its municipalities, and could adversely affect the market value
of the Pennsylvania Exempt Securities in the Pennsylvania Bond Fund or the
ability of the respective obligors to make payments of interest and principal
due on such Securities.

Certain litigation is pending against the Commonwealth that could adversely
affect the ability of the Commonwealth to pay debt service on its obligations
including suits relating to the following matters: (i) the ACLU has filed suit
in federal court demanding additional funding for child welfare services; the
Commonwealth settled a similar suit in the Commonwealth Court of Pennsylvania
and is seeking the dismissal of the federal suit, inter alia because of that
settlement. After its earlier denial of class certification was reversed by the
Third Circuit Court of Appeals, the district court granted class certification
to the ACLU and the parties are proceeding with discovery. (No available
estimate of potential liability); (ii) in 1987, the Supreme Court of
Pennsylvania held the statutory scheme for county funding of the judicial system
to be in conflict with the constitution of the Commonwealth, but stayed judgment
pending enactment by the legislature of funding consistent with the opinion, and
the legislature has yet to consider legislation implementing the judgment. In
1997, the Court established a tripartite committee to develop an implementation
plan; (iii) litigation has been filed in both state and federal court by an
association of rural and small schools and several individual school districts
and parents challenging the constitutionality of the Commonwealth's system for
funding local school districts--the federal case has been stayed pending the
resolution of the state case, and the trial, briefing and argument have been
completed as of September, 1997, and the presiding judge has taken the case
under advisement (no available estimates of potential liability);

36
<PAGE> 37

(iv) Envirotest/Synterra Partners ("Envirotest") has filed suit against the
Commonwealth asserting that it sustained damages in excess of $350 million, as a
result of investments it made in reliance on a contract to conduct emissions
testing before the emission testing program was suspended. Envirotest has
entered into a Standstill Agreement with the Commonwealth pursuant to which
Envirotest will receive $145 million over four years through 1998; (v) the
Commonwealth of Pennsylvania, its governor, the City of Philadelphia and its
mayor were joined in an enforcement action commenced in 1973 against the School
District of Philadelphia pursuant to the Pennsylvania Human Relations Act. The
enforcement action was pursued to remedy unintentional segregation in the public
schools in Philadelphia. The Supreme Court of Pennsylvania has outlined a
briefing schedule to resolve this matter (no available estimates of potential
liability); and (vi) in 1997, a group including residents, non-profit groups,
the City of Philadelphia and the School District of Philadelphia brought an
action seeking a declaratory judgment against the Commonwealth for failing to
fulfill its obligation to provide an adequate educational system for the City of
Philadelphia (no available estimates of potential liability).

Although there can be no assurance that such conditions will continue, the
Commonwealth's general obligation bonds are currently rated AA-by Standard &
Poor's Corporation ("S&P") and A1 by Moody's, and Philadelphia's and
Pittsburgh's general obligation bonds are currently rated BBB- and BBB+
respectively by S&P and Baa and Baa1 respectively by Moody's.

The City of Philadelphia (the "City") experienced a series of General Fund
deficits for Fiscal Years 1988 through 1992 and, while its general financial
situation has improved, the City is still seeking a long-term solution for its
economic difficulties. The audited balance of the City's General Fund as of June
30, 1996 was a surplus of $118.5 million up from a surplus of approximately
$80.5 million as of June 30, 1995.

In recent years an authority of the Commonwealth, the Pennsylvania
Intergovernmental Cooperation Authority ("PICA"), has issued approximately $1.76
billion of Special Revenue Bonds on behalf of the City to cover budget
shortfalls, to eliminate projected deficits and to fund capital spending. PICA
provides assistance regarding the City's finances. The City is currently
operating under a five year plan approved by PICA in 1996. PICA's power to issue
further bonds to finance capital projects expired on December 31, 1994. PICA's
authority to issue bonds to finance cash flow deficits expired December 31,
1996, and its authority to refund existing debt will not expire.

The Pennsylvania Bond Fund's classification as "non-diversified" means that
the proportion of the Pennsylvania Bond Fund's assets that may be invested in
the securities of a single issuer is not limited by the 1940 Act. However, the
Pennsylvania Bond Fund intends to conduct its operations so as to qualify as a
"regulated investment company" for purposes of the Internal Revenue Code of
1986, as amended (the "Code"), which requires the Pennsylvania Bond Fund
generally to invest as of the end of each fiscal quarter, with respect to 50% of
its total assets, not more than 5% of such assets in the obligations of a single
issuer; as to the remaining 50% of its total assets, the Pennsylvania Bond Fund
is not so restricted. In no event, however, may the Pennsylvania Bond Fund
invest more than 25% of its total assets in the obligations of any one issuer as
of the end of each fiscal quarter. Since a relatively high percentage of the
Pennsylvania Bond Fund's assets may be invested in the obligations of a limited
number of issuers, some of which may be within the same economic sector, the
Pennsylvania Bond Fund's portfolio securities may be more susceptible to any
single economic, political or regulatory occurrence than the portfolio
securities of a diversified investment company.

Municipal Lease Obligations. Certain municipal lease/purchase obligations in
which the Pennsylvania Bond Fund may invest may contain "non-appropriation"
clauses which provide that

37
<PAGE> 38

the municipality has no obligation to make lease payments in future years unless
money is appropriated for such purpose on a yearly basis. Although
"non-appropriation" lease/purchase obligations are secured by the leased
property, disposition of the leased property in the event of foreclosure might
prove difficult. In evaluating the credit quality of a municipal lease/purchase
obligation that is unrated, the Sub-Advisor will consider, on an ongoing basis,
a number of factors including the likelihood that the issuing municipality will
discontinue appropriating funding for the leased property.

The following risk applies to the Lifestyle Funds.

Affiliated Persons. In managing the Funds, the Advisor and Sub-Advisor will
have the authority to select and substitute Underlying Funds. The Advisor and
Sub-Advisor are subject to conflicts of interest in allocating Fund assets among
the various Underlying Funds both because the fees payable to it and/or its
affiliates by some Underlying Funds are higher than the fees payable by other
Underlying Funds and because the Advisor and Sub-Advisor and their affiliates
are also responsible for managing the Underlying Funds. The Trustees and
officers of the Trust may also have conflicting interests in fulfilling their
fiduciary duties to both the Funds and the Underlying Funds.

PORTFOLIO TURNOVER

The portfolio turnover rate for each Fund is calculated by dividing the lesser
of a Fund's purchases or sales of portfolio securities for the year by the
monthly average value of the portfolio securities. The Commission requires that
the calculation exclude all securities whose remaining maturities at the time of
acquisition are one year or less. The portfolio turnover rate for the
International Equity Fund, Lifestyle Conservative Growth Fund, Lifestyle
Moderate Growth Fund and Lifestyle Growth Fund for each Fund's first fiscal
period ending June 30, 1999, is estimated to be 40%, 30%, 30% and 30%,
respectively. The portfolio turnover rate for each of the Funds may vary greatly
from year to year, as well as within a particular year, and may also be affected
by cash requirements for redemptions of Shares. High portfolio turnover rates
will generally result in higher transaction costs, including brokerage
commissions, to a Fund and may result in additional tax consequences to a Fund's
Shareholders. Portfolio turnover will not be a limiting factor in making
investment decisions. Portfolio turnover information is set forth above under
"FINANCIAL HIGHLIGHTS."

INVESTMENT RESTRICTIONS

Each Fund is subject to a number of investment restrictions that may be
changed only by a vote of a majority of the outstanding Shares of that Fund (as
defined under "GENERAL INFORMATION--Miscellaneous" herein).

The Established Growth Fund, the Aggressive Growth Fund, the Emerging Growth
Fund, the International Equity Fund, the Income Fund, the Government Securities
Fund and the Lifestyle Funds will not:

1. Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. Government (and "regulated investment companies" as
defined in the Code for each Lifestyle Fund and the International Equity Fund),
its agencies or instrumentalities, if, immediately after such purchase, more
than 5% of the Fund's total assets would be invested in such issuer or the Fund
would hold more than 10% of the outstanding voting securities of the issuer,
except that 25% or less of the Fund's total assets may be invested without
regard to such limitations. There is no limit to the percentage of assets that
may be invested in U.S. Treasury bills, notes, or other obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.

2. Purchase any securities which would cause more than 25% of the Fund's
total assets at the time of purchase to be invested in securities of one or more
issuers conducting their principal

38
<PAGE> 39

business activities in the same industry, provided that (a) there is no
limitation with respect to obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, and repurchase agreements secured
by obligations of the U.S. Government, its agencies or instrumentalities (and
"regulated investment companies" as defined in the Code for each Lifestyle Fund
and the International Equity Fund); (b) wholly owned finance companies will be
considered to be in the industries of their parents if their activities are
primarily related to financing the activities of their parents; (c) with respect
to the Established Growth Fund, the Emerging Growth Fund, the International
Equity Fund, the Income Fund and the Government Securities Fund, utilities will
be divided according to their services (for example, gas, gas transmission,
electric and gas, electric, and telephone will each be considered a separate
industry); and (d) with respect to the Aggressive Growth Fund and Emerging
Growth Fund, technology companies will be divided according to their services
(for example, medical devices, biotechnology, semi-conductor, software and
communications will each be considered a separate industry).

The Pennsylvania Bond Fund will not purchase securities of any one issuer,
other than obligations issued or guaranteed by the U.S. Government, its agencies
or instrumentalities, if at the end of each fiscal quarter, (a) more than 5% of
the Fund's total assets (taken at current value) would be invested in such
issuer (except that up to 50% of the Fund's total assets may be invested without
regard to such 5% limitation), and (b) more than 25% of its total assets (taken
at current value) would be invested in securities of a single issuer. There is
no limit to the percentage of assets that may be invested in U.S. Treasury
bills, notes, or other obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities. For purposes of this limitation, a security
is considered to be issued by the governmental entity (or entities) whose assets
and revenues back the security, or, with respect to a private activity bond that
is backed only by the assets and revenues of a non-governmental user, such
non-governmental user.

In addition, each Fund will not:

1. Borrow money or issue senior securities except that each Fund may enter
into reverse repurchase agreements and may otherwise borrow money or issue
senior securities as and to the extent permitted by the 1940 Act or any rule,
order or interpretation thereunder. (The 1940 Act currently permits each Fund to
borrow up to one-third the value of its total assets at the time of such
borrowing.)

2. Make loans, except that the Fund may purchase or hold debt instruments
and lend portfolio securities in accordance with its investment objective and
policies, make time deposits with financial institutions and enter into
repurchase agreements.

The following additional investment restriction may be changed without the
vote of a majority of the outstanding Shares of a Fund: each Fund may not
purchase or otherwise acquire any security if, as a result, more than 15% of its
net assets would be invested in securities that are illiquid.

VALUATION OF SHARES

The net asset value of each Fund is determined and its Shares are priced as
of the close of regular trading on the New York Stock Exchange (the "Exchange")
(generally 4:00 p.m. Eastern time) on each Business Day of that Fund. The time
at which the Shares of the Funds are priced is hereinafter referred to as the
"Valuation Time." A "Business Day" of a Fund is a day on which the Exchange is
open for trading and any other day (other than a day on which no Shares of the
Fund are tendered for redemption and no order to purchase any Shares of the Fund
is received) during which there is sufficient trading in portfolio instruments
such that the Fund's net asset value per share might be materially affected. The
Exchange will not be open in observance of the following holidays: New Year's
Day, Martin Luther King, Jr. Day, President's Day, Good Friday,

39
<PAGE> 40

Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas. Net asset
value per share for purposes of pricing purchases and redemptions is calculated
by dividing the value of all securities and other assets belonging to a Fund,
less the liabilities charged to that Fund, by the number of that Fund's
outstanding Shares.

The net asset value per share for each Fund will fluctuate as the value of its
investments changes.

The Lifestyle Funds value investments in mutual fund securities at their
redemption price, which is net asset value. The portfolio securities of the
Established Growth, Aggressive Growth, Emerging Growth, International Equity,
Income, Government Securities and Pennsylvania Bond Funds for which market
quotations are readily available are valued based upon their current available
prices in the principal market in which such securities normally are traded;
unlisted securities for which market quotations are readily available are valued
at such market values; and other securities, including restricted securities and
other securities for which market quotations are not readily available, and
other assets are valued at fair value by the Fund's Sub-Advisor under procedures
established by, and under the supervision of the Trust's Board of Trustees.
Securities may be valued by an independent pricing service approved by the
Trust's Board of Trustees. Debt Securities of the Established Growth, Aggressive
Growth, Emerging Growth, International Equity, Income, Government Securities and
Pennsylvania Bond Funds with remaining maturities of 60 days or less may be
valued based upon the amortized cost method.

HOW TO PURCHASE AND REDEEM SHARES

DISTRIBUTOR

Shares in the Funds are sold on a continuous basis by the Trust's distributor,
BISYS (the "Distributor"). The principal office of the Distributor is 3435
Stelzer Road, Columbus, Ohio 43219. If you wish to purchase Shares, telephone
the Trust at (800) 766-3960.

SPECIAL RESTRICTIONS--THE EMERGING GROWTH FUND

Prospective investors should be aware that management may consider closing the
Emerging Growth Fund to new Shareholders at the end of the 90th calendar day
after the Emerging Growth Fund reaches $300 million in total assets. No
investments by new Shareholders will be accepted after such closure. Depending
upon market conditions and the availability of suitable investments for the
Emerging Growth Fund, investments from new Shareholders may be accepted. The
time period for any such investments by new Shareholders will be determined by
the Fund's Sub-Advisor based primarily on the ability to effectively invest the
Emerging Growth Fund's available cash. There is no limitation on purchases of
the Emerging Growth Fund's Shares through the reinvestment of dividends and
capital gains distributions paid by the Emerging Growth Fund.

The Emerging Growth Fund reserves the right to modify or eliminate
restrictions on the sale of its Shares if such action is in the interest of the
Emerging Growth Fund's Shareholders.

EMPLOYEE BENEFIT PLANS

Purchases, exchanges and redemptions of Shares through an employee benefit
plan may be subject to different requirements and limitations imposed by
employers than those discussed below. Investors should consult their employer
for more information on how to purchase, exchange and redeem Shares of the Funds
through their employer's plan.

PURCHASES OF SHARES

Shares may be purchased through procedures established by the Distributor in
connection with the requirements of qualified accounts maintained by or on
behalf of certain persons ("Customers") by the Advisor, its affiliates or their
correspondent entities (collectively, "Entities").

40
<PAGE> 41

Shares of the Funds sold to the Entities acting in a fiduciary, advisory,
custodial, agency, or other similar capacity on behalf of Customers will
normally be held of record by the Entities. With respect to Shares of a Fund so
sold, it is the responsibility of the particular Entity to transmit purchase or
redemption orders to the Distributor and to deliver federal funds for purchase
on a timely basis. Beneficial ownership of Shares will be recorded by the
Entities and reflected in the account statements provided by the Entities to
Customers.

Investors may also purchase Shares of the Funds by completing and signing an
Account Registration Form and mailing it, together with a check (or other
negotiable bank draft or money order) in at least the minimum initial purchase
amount, payable to the applicable Fund, to The Governor Funds, P.O. Box 182707,
Columbus, Ohio 43218-2707. Subsequent purchases of Shares of a Fund may be made
at any time by mailing a check (or other negotiable bank draft or money order)
payable to the Trust, to the above address.

If an Account Registration Form has been previously received by the Trust,
investors may also purchase Shares by wiring funds to the Funds' custodian.
Prior to wiring any such funds and in order to ensure that wire orders are
invested promptly, investors must call the Trust at (800) 766-3960 to obtain
instructions regarding the bank account number into which the funds should be
wired and other pertinent information.

Shares of the Funds are purchased at the net asset value per share (see
"VALUATION OF SHARES") next determined after receipt by the Distributor, its
agents or broker-dealers with whom it has an agreement of an order in good form
to purchase Shares plus any applicable sales charge as described below.
Purchases of Shares of a Fund will be effected only on a Business Day (as
defined in "VALUATION OF SHARES") of that Fund.

For an order for the purchase of Shares of a Fund that is placed through a
broker-dealer, the applicable public offering price will be the net asset value
as so determined (plus any applicable sales charge), but only if the
broker-dealer receives the order and transmits it to the Distributor prior to
the Valuation Time for that day. The broker-dealer is responsible for
transmitting such orders by the Valuation Time. If the broker-dealer fails to do
so, the investor's right to that day's closing price must be settled between the
investor and the broker-dealer. If the broker-dealer receives the order after
the Valuation Time for that day, the price will be based on the net asset value
determined as of the Valuation Time for the next Business Day.

MINIMUM INVESTMENT

Except as otherwise discussed below under "Auto Invest Plan," the minimum
investment is $1,000 for the initial purchase of Shares of a Fund by an investor
and $25 for subsequent purchases of Shares of that Fund. The initial minimum
investment amount is reduced to $250 for employees of the Advisor, Sub-Advisors,
Keystone or any of their affiliates.

Depending upon the terms of a particular Customer's account, the Entities or
their affiliates may charge a Customer account fees for automatic investment and
other cash management services provided in connection with an investment in a
Fund. Information concerning these services and any charges will be provided by
the Entities. This Prospectus should be read in conjunction with any such
information received from the Entities or their affiliates.

The Trust reserves the right to reject any order for the purchase of its
Shares in whole or in part, including purchases made with foreign checks and
third party checks not originally made payable to the order of the investor.

Every Shareholder will receive a confirmation of each new transaction in his
or her account, which will also show the total number of Shares owned by the
Shareholder and the number of

41
<PAGE> 42

Shares being held in safekeeping by the Transfer Agent for the account of the
Shareholder. Reports of purchases and redemptions of Shares by Entities on
behalf of their Customers will be sent by the Entities to their Customers.
Shareholders may rely on these statements in lieu of certificates. Certificates
representing Shares will not be issued.

AUTO INVEST PLAN

The Governor Funds Auto Invest Plan enables Shareholders to make regular
monthly or quarterly purchases of Shares of the Funds through automatic
deduction from their bank accounts, provided that the Shareholder's bank is a
member of the Federal Reserve and the Automated Clearing House (ACH) system.
With Shareholder authorization the Transfer Agent will deduct the amount
specified (subject to the applicable minimums) from the Shareholder's bank
account which will automatically be invested in Shares of the designated Fund at
the public offering price next determined after receipt of payment by the
Transfer Agent. The required minimum initial investment when opening an account
using the Auto Invest Plan is $250; the minimum amount for subsequent
investments is $25. To participate in the Auto Invest Plan, Shareholders should
complete the appropriate section of the Account Registration Form or a
supplemental sign-up form which can be acquired by calling the Trust at (800)
766-3960. For a Shareholder to change the Auto Invest instructions, the request
must be made in writing to the Trust at: 3435 Stelzer Road, Columbus, Ohio
43219.

The Trust may eliminate or change the Auto Invest Plan at any time or from
time to time without notice thereof.

GOVERNOR FUNDS INDIVIDUAL RETIREMENT ACCOUNT ("IRA")

A Governor Funds IRA enables individuals, even if they participate in an
employer-sponsored retirement plan, to establish their own retirement program.
Governor Funds IRA contributions may be tax-deductible and earnings are tax
deferred. Under the Tax Reform Act of 1986, the tax deductibility of IRA
contributions is restricted or eliminated for individuals who participate in
certain employer pension plans and whose annual income exceeds certain limits.
Existing IRAs and future contributions up to the IRA maximums, whether
deductible or not, still earn income on a tax-deferred basis.

All Governor Funds IRA distribution requests must be made in writing to the
Distributor. Any deposits to a Governor Funds IRA must distinguish the type and
year of the contributions.

For more information on the Governor Funds IRAs call the Trust at (800)
766-3960. Investment in Shares of the Governor Funds Pennsylvania Municipal Bond
Fund or any other tax-exempt fund would not be appropriate for a Governor Funds
IRA. Shareholders are advised to consult a tax advisor on Governor Funds IRA
contribution and withdrawal requirements and restrictions.

IN-KIND PURCHASES

Payment of Shares of a Fund may, in the discretion of the Advisor, be made in
the form of securities that are permissible investments for that Fund as
described in this Prospectus. For further information about this form of
payment, contact the Advisor. In connection with an in-kind securities payment,
a Fund will require, among other things, that the securities be valued on the
date of purchase in accordance with the pricing methods used by the Fund and
that the Fund receive satisfactory assurances that it will have good and
marketable title to the securities received by it; that the securities be in
proper form of transfer to the Fund; and that adequate information be provided
concerning the basis and other tax matters relating to the securities.

SALES CHARGES

The public offering price of Shares of each Fund equals net asset value plus a
sales charge in accordance with the tables below. BISYS receives this sales
charge as Distributor and reallows a

42
<PAGE> 43

portion of it as dealer discounts and brokerage commissions. However, the
Distributor, in its sole discretion may pay certain dealers all or part of the
portion of the sales charge it receives. The broker or dealer who receives a
reallowance in excess of 90% of the sales charge may be deemed to be an
"underwriter" for purposes of the Securities Act of 1933.

THE ESTABLISHED GROWTH FUND, AGGRESSIVE GROWTH FUND, EMERGING GROWTH FUND,
INTERNATIONAL EQUITY FUND, INCOME FUND, PENNSYLVANIA BOND FUND AND LIFESTYLE
FUNDS.

<TABLE>
<CAPTION>
DEALER
DISCOUNTS
AMOUNT OF SALES CHARGE AND BROKERAGE
TRANSACTION AT AS % OF NET SALES CHARGE AS COMMISSIONS AS
PUBLIC OFFERING AMOUNT % OF PUBLIC % OF PUBLIC
PRICE INVESTED OFFERING PRICE OFFERING PRICE
--------------- ------------ --------------- --------------
<S> <C> <C> <C>
Less than $100,000... 4.71% 4.50% 4.05%
$100,000 but less
than $250,000...... 3.63 3.50 3.15
$250,000 but less
than $500,000...... 2.56 2.50 2.25
$500,000 but less
than $1,000,000.... 1.52 1.50 1.35
$1,000,000 or more... 0 0 0
</TABLE>

THE GOVERNMENT SECURITIES FUND

<TABLE>
<CAPTION>
DEALER
DISCOUNTS
AMOUNT OF SALES CHARGE AND BROKERAGE
TRANSACTION AT AS % OF NET SALES CHARGE AS COMMISSIONS AS
PUBLIC OFFERING AMOUNT % OF PUBLIC % OF PUBLIC
PRICE INVESTED OFFERING PRICE OFFERING PRICE
--------------- ------------ --------------- --------------
<S> <C> <C> <C>
Less than $100,000... 3.09% 3.00% 2.70%
$100,000 but less
than $250,000...... 2.56 2.50 2.25
$250,000 but less
than $500,000...... 2.04 2.00 1.80
$500,000 but less
than $1,000,000.... 1.52 1.50 1.35
$1,000,000 or more... 0 0 0
</TABLE>

The Distributor and/or its affiliates pay additional compensation from time to
time, out of its assets and not as an additional charge to the Funds, to certain
institutions and other persons in connection with the sale of shares of the
Funds. Subject to applicable regulations of the National Association of
Securities Dealers, Inc., the Distributor and/or its affiliates may also
contribute to various cash incentive arrangements to promote the sale of shares.
This additional compensation can vary among such institutions depending upon
such factors as the amounts their customers have invested (or may invest) in the
Funds, the particular program involved, or the amount of reimbursable expenses.

SALES CHARGE WAIVERS

The Distributor will waive sales charges for the purchase of Shares of a Fund
by or on behalf of (1) purchasers for whom Keystone, the Advisor, one of their
affiliates or another financial institution acts in a fiduciary, advisory,
agency, custodial (other than individual retirement accounts), or similar
capacity, (2) officers, trustees, directors, advisory board members, employees
and retired employees (including spouses, children and parents of the foregoing)
of Keystone, the Advisor, the Trust, BISYS and any affiliated company thereof,
(3) investors who purchase Shares with the proceeds from a distribution from the
Advisor, Keystone or an affiliate trust or agency account, (4) brokers, dealers
and agents who have a sales agreement with the Distributor, and their employees
(and their spouses and children under 21), and (5) investment advisors or
financial planners regulated by a federal or state governmental authority who
are purchasing Shares for their own account or for an account for which they are
authorized to make investment decisions (i.e., a discretionary account) and who
charge a management, consulting or other fee for their services, and clients of
such investment advisors or financial planners who place trades for their own
accounts if the accounts are linked to the master account of such investment
advisor or financial planner on the books and records of a broker or agent. The
Distributor may change or eliminate the foregoing waivers at any time or from
time to time without notice thereof. The Distributor may also periodically waive
all or a portion of the sales charge for all investors with respect to a Fund.

In addition, the Distributor may waive sales charges for the purchase of a
Fund's Shares with the proceeds from the recent redemption of shares of a
non-money market fund that imposes

43
<PAGE> 44

a sales charge. The purchase must be made within 60 days of the redemption, and
the Distributor must be notified in writing by the investor, or by his financial
institution, at the time the purchase is made. A copy of the investor's account
statement showing such redemption must accompany such notice.

CONCURRENT PURCHASES

For purposes of qualifying for a lower sales charge, investors have the
privilege of combining concurrent purchases of a Fund and one or more of the
other funds of the Trust sold with a sales charge and advised by the Advisor or
Martindale Andres ("Governor Load Funds"). For example, if a Shareholder
concurrently purchases Shares in the Established Growth Fund at the total public
offering price of $50,000 and Shares in another Governor Load Fund at the total
public offering price of $50,000, the sales charge for such shares of the
Established Growth Fund would be that applicable to a $100,000 purchase as shown
in the table above. This privilege, however, may be modified or eliminated at
any time or from time to time by the Trust without notice thereof.

LETTER OF INTENT

An investor may obtain a reduced sales charge by means of a written Letter of
Intent which expresses the intention of such investor to purchase Shares of a
Fund at a designated total public offering price within a designated 13-month
period. Each purchase of Shares under a Letter of Intent will be made at the net
asset value plus the sales charge applicable at the time of such purchase to a
single transaction of the total dollar amount indicated in the Letter of Intent.
A Letter of Intent may include purchases of Shares made not more than 90 days
prior to the date such investor signs a Letter of Intent; however, the 13-month
period during which the Letter of Intent is in effect will begin on the date of
the earliest purchase to be included. This program may be modified or eliminated
at any time or from time to time by the Trust without notice. For further
information about letters of intent, interested investors should contact the
Trust at (800) 766-3960.

A Letter of Intent is not a binding obligation upon the investor to purchase
the full amount indicated. The minimum initial investment under a Letter of
Intent is 5% of such amount. Shares purchased with the first 5% of such amount
will be held in escrow (while remaining registered in the name of the investor)
to secure payment of the higher sales charge applicable to the Shares actually
purchased if the full amount indicated is not purchased, and such escrowed
Shares will be involuntarily redeemed to pay the additional sales charge, if
necessary. Dividends on escrowed Shares, whether paid in cash or reinvested in
additional Shares, are not subject to escrow. The escrowed Shares will not be
available for disposal by the investor until all purchases pursuant to the
Letter of Intent have been made or the higher sales charge has been paid. When
the full amount indicated has been purchased, the escrow will be released. An
adjustment will be made to reflect any reduced sales charge applicable to Shares
purchased during the 90-day period prior to the date the Letter of Intent was
entered into at the conclusion of the 13-month period and in the form of
additional Shares credited to the Shareholder's account at the then current
public offering price applicable to a single purchase of the total amount of the
total purchases. Additionally, if the total purchases within the 13-month period
exceed the amount specified, a similar adjustment will be made to reflect
further reduced sales charges applicable to such purchases, if any.

RIGHT OF ACCUMULATION

Pursuant to the right of accumulation, investors are permitted to purchase
Shares of a Fund at the public offering price applicable to the total of (a) the
total public offering price of the Shares of the Fund then being purchased plus
(b) an amount equal to the then current net asset value of the purchaser's
combined holdings of the Shares of all Governor Load Funds. The "pur-
44
<PAGE> 45

chaser's combined holdings" described in the preceding sentence shall include
the combined holdings of the purchaser, the purchaser's spouse and children
under the age of 21 and the purchaser's retirement plan accounts. To receive the
applicable public offering price pursuant to the right of accumulation,
Shareholders must, at the time of purchase, give the Transfer Agent sufficient
information to permit confirmation of qualification. This right of accumulation,
however, may be modified or eliminated at any time or from time to time by the
Trust without notice.

EXCHANGE PRIVILEGE

Shares of a Fund may be exchanged for Shares of a money market fund of the
Trust or any other Governor Load Fund if the amount to be exchanged meets the
applicable minimum investment requirements and the exchange is made in states
where it is legally authorized. Each exchange will be made at respective net
asset values except that a sales charge, equal to the difference, if any,
between the sales charge payable upon the purchase of shares of the Fund of the
Trust to be acquired in the exchange and the sales charge previously paid on the
Shares to be exchanged, will be assessed. In determining the sales charge
previously paid on the Shares to be exchanged, such Shares may include Shares
which were acquired through a previous exchange for shares on which a sales
charge was paid. Under such circumstances, the Shareholder must notify the Trust
that a sales charge was originally paid and provide the Trust with sufficient
information to permit confirmation of the Shareholder's right not to pay a sales
charge.

An exchange is considered a sale of Shares for federal income tax purposes.
However, a Shareholder may not include any sales charge on Shares of a Fund as a
part of the cost of those Shares for purposes of calculating the gain or loss
realized on an exchange of those Shares within 90 days of their purchase.

The Trust may at any time modify or terminate the foregoing exchange
privileges. The Trust, however, will give Shareholders 60 days' advance written
notice of any such modification.

A Shareholder wishing to exchange his or her Shares may do so by contacting
the Trust at (800) 766-3960 or by providing written instructions to the Trust.
Any Shareholder who wishes to make an exchange should obtain and review the
current prospectus of the fund in which he or she wishes to invest before making
the exchange. For a discussion of risks associated with unauthorized telephone
exchanges, see "Redemption by Telephone" below.

REDEMPTION OF SHARES

Shares may ordinarily be redeemed by mail or by telephone. However, all or
part of a Customer's Shares may be redeemed in accordance with instructions and
limitations pertaining to his or her account at an Entity. For example, if a
Customer has agreed with an Entity to maintain a minimum balance in his or her
account with the Entity, and the balance in that account falls below that
minimum, the Customer may be obliged to redeem, or the Entity may redeem on
behalf of the Customer, all or part of the Customer's Shares of a Fund to the
extent necessary to maintain the required minimum balance.

Redemption By Mail

45
<PAGE> 46

ten request therefor must be received by the Transfer Agent. In connection with
such request, the Transfer Agent will require a signature guarantee by an
eligible guarantor institution. For purposes of this policy, the term "eligible
guarantor institution" shall include banks, brokers, dealers, credit unions,
securities exchanges and associations, clearing agencies and savings
associations as those terms are defined in the Securities Exchange Act of 1934.
The Transfer Agent reserves the right to reject any signature guarantee if (1)
it has reason to believe that the signature is not genuine, (2) it has reason to
believe that the transaction would otherwise be improper, or (3) the guarantor
institution is a broker or dealer that is neither a member of a clearing
corporation nor maintains net capital of at least $100,000.

Redemption by Telephone

If a Shareholder has so designated on the Account Registration Form, a
Shareholder may request a redemption of his or her Shares by telephoning the
Transfer Agent and having the payment of redemption requests sent electronically
directly to a domestic commercial bank account previously designated by the
Shareholder on the Account Registration Form. A shareholder may also have such
payment mailed directly to the Shareholder at the Shareholder's address as
recorded by the Transfer Agent. However, this option may be suspended for a
period of 30 days following a telephonic address change. Under most
circumstances, such payments will be transmitted on the next Business Day
following receipt of a valid request for redemption. Such wire redemption
requests may be made by the Shareholder by telephone to the Trust. The Trust may
reduce the amount of a wire redemption payment by the then-current wire
redemption charge of the Funds' custodian. There is currently no charge for
having payment of redemption requests mailed or sent electronically to a
designated bank account. For telephone redemptions, call the Trust at (800)
766-3960.

Neither the Trust, the Funds nor their service providers will be liable for
any loss, damages, expense or cost arising out of any telephone redemption
effected in accordance with the Trust's telephone redemption procedures, acting
upon instructions reasonably believed to be genuine. The Trust will employ
procedures designed to provide reasonable assurance that instructions by
telephone are genuine; if these procedures are not followed, the Trust, the
Funds or their service providers may be liable for any losses due to
unauthorized or fraudulent instructions. These procedures include recording all
phone conversations, sending confirmations to Shareholders within 72 hours of
the telephone transaction, verification of account name and account number or
tax identification number, and sending redemption proceeds only to the address
of record or to a previously authorized bank account. If, due to temporary
adverse conditions, Shareholders are unable to effect telephone transactions,
Shareholders may also mail the redemption request to the Trust at the address
shown on the front page of this Prospectus.

AUTO WITHDRAWAL PLAN

The Auto Withdrawal Plan enables Shareholders of a Fund, with an account
balance in such Fund of $5,000 or more, to make regular monthly or quarterly
redemptions of Shares. With Shareholder authorization, the Transfer Agent will
automatically redeem Shares at the net asset value on the dates of the
withdrawal and have a check in the amount specified mailed to the Shareholder.
The required minimum withdrawal is $50 monthly. To participate in the Auto
Withdrawal Plan, Shareholders should call (800) 766-3960 for more information.
Purchases of additional Shares, including use of the Auto Invest Plan described
above, concurrent with withdrawals may be disadvantageous to certain
Shareholders because of tax liabilities and sales charges. For a Shareholder to
change the Auto Withdrawal instructions, the request must be made in writing to
the Trust.

46
<PAGE> 47

PAYMENTS TO SHAREHOLDERS

Redemption orders are effected at the net asset value per share next
determined after the Shares are properly tendered for redemption, as described
above. Payment to Shareholders for Shares redeemed will be made within seven
days after receipt by the Distributor of the request for redemption. However, to
the greatest extent possible, each Fund will attempt to honor requests from
Shareholders for next day payments upon redemption of Shares if the request for
redemption is received by the Distributor before the Valuation Time on a
Business Day or, if the request for redemption is received after the Valuation
Time, to honor requests for payment on the second Business Day. Each Fund will
attempt to so honor redemption requests unless it would be disadvantageous to a
Fund or the Shareholders of that Fund to sell or liquidate portfolio securities
in an amount sufficient to satisfy requests for payments in that manner.

At various times, the Trust may be requested to redeem Shares for which it has
not yet received good payment. In such circumstances, the Trust may delay the
forwarding of proceeds for up to 10 days or more until payment has been
collected for the purchase of such Shares. The Trust intends to pay cash for all
Shares redeemed, but under abnormal conditions which make payment in cash
unwise, the Trust may make payment wholly or partly in readily marketable
portfolio securities at their then market value equal to the redemption price.
In such cases, an investor may incur brokerage costs in converting such
securities to cash.

Due to the relatively high cost of handling small investments, the Trust
reserves the right to redeem, at net asset value, the Shares of a Fund of any
Shareholder if, because of redemptions of Shares by or on behalf of the
Shareholder (but not as a result of a decrease in the market price of such
Shares, the deduction of any sales charge or the establishment of an account
with less than $1,000 using the Auto Invest Plan), the account of such
Shareholder has a value of less than $1,000 ($250 if the Shareholder is an
employee of the Advisor or one of its affiliates). Accordingly, an investor
purchasing Shares of a Fund in only the minimum investment amount may be subject
to such involuntary redemption if he or she thereafter redeems some of his or
her Shares. Before the Trust exercises its right to redeem such Shares and to
send the proceeds to the Shareholder, the Shareholder will be given notice that
the value of the Shares in his or her account is less than the minimum amount
and will be allowed at least 60 days to make an additional investment in an
amount which will increase the value of the account to at least $1,000 ($250 if
the Shareholder is an employee of the Advisor or one of its affiliates).

See "ADDITIONAL PURCHASE AND REDEMPTION INFORMATION" in the Statement of
Additional Information for examples of when the Trust may suspend the right of
redemption.

DIVIDENDS AND TAXES

DIVIDENDS

Dividends are declared and paid semi-annually for the Emerging Growth Fund,
annually for the International Equity Fund, monthly for the Income, Government
Securities, and Pennsylvania Bond Funds and quarterly for the other Funds. Such
dividends are declared at the close of business on the day of declaration
consisting of an amount of accumulated undistributed net income of that Fund as
determined necessary or appropriate by the appropriate officers of the Trust.
Shareholders will automatically receive all income dividends and capital gains
distributions in additional full and fractional Shares of that Fund at the net
asset value as of the date of payment, unless the Shareholder elects to receive
dividends or distributions in cash. Such election, or any revocation thereof,
must be made in writing to the Transfer Agent at 3435 Stelzer Road, Columbus,
Ohio 43219, and will become effective with respect to dividends and
distributions having record dates after its receipt by the Transfer Agent.

47
<PAGE> 48

Distributable net realized capital gains, if any, for a Fund are distributed
at least annually. Dividends are paid in cash not later than seven Business Days
after a Shareholder's complete redemption of his or her Shares in that Fund.

If a Shareholder elects to receive distributions in cash, and checks (1) are
returned and marked as "undeliverable" or (2) remain uncashed for six months,
the Shareholder's cash election will be changed automatically and future
dividend and capital gains distributions will be reinvested in that Fund at the
per share net asset value determined as of the date of payment of the
distribution. In addition, any undeliverable checks or checks that remain
uncashed for six months will be canceled and will be reinvested in that Fund at
the per share net asset value determined as of the date of cancellation.

FEDERAL TAXES

Each Fund contemplates declaring as dividends each year all or substantially
all of its taxable income, including its net capital gain (the excess of
long-term capital gain over short-term capital loss). You will be subject to
income tax on these distributions regardless whether they are paid in cash or
reinvested in additional Shares. Distributions attributable to the net capital
gain of a Fund will be taxable to you as long-term capital gain, regardless of
how long you have held your Shares. Other Fund distributions will generally be
taxable as ordinary income. You will be notified annually of the tax status of
distributions to you.

You should note that if you purchase Shares just prior to a distribution, the
purchase price will reflect the amount of the upcoming distribution, but you
will be taxable on the entire amount of the distribution received, even though,
as an economic matter, the distribution simply constitutes a return of capital.
This is known as "buying into a dividend."

You will recognize taxable gain or loss on a sale, exchange or redemption of
your Shares, including an exchange for Shares of another Fund, based on the
difference between your tax basis in the Shares and the amount you receive for
them. (To aid in computing your tax basis, you generally should retain your
account statements for the periods during which you held Shares.) Any loss
realized on Shares held for six months or less will be treated as a long-term
capital loss to the extent of any capital gain dividends that were received on
the Shares.

The one major exception to these tax principles is that distributions on, and
sales, exchanges and redemptions of, Shares held in an IRA (or other
tax-qualified plan) will not be currently taxable.

The International Equity Fund. It is expected that the International Equity
Fund will be subject to foreign withholding taxes with respect to dividends or
interest received from sources in foreign countries. The International Equity
Fund may make an election to treat a proportionate amount of such taxes as
constituting a distribution to each Shareholder, which would allow each
Shareholder either (1) to credit such proportionate amount of taxes against U.S.
federal income tax liability or (2) to take such amount as an itemized
deduction.

The Pennsylvania Bond Fund. It is expected that the Pennsylvania Bond Fund
will distribute dividends derived from interest earned on Exempt Securities, and
these "exempt interest dividends" will be exempt income for Shareholders for
federal income tax purposes. However, distributions, if any, derived from net
capital gains of the Pennsylvania Bond Fund will generally be taxable to you as
capital gains. Dividends, if any, derived from taxable interest income will be
taxable to you as ordinary income.

Interest on indebtedness incurred by a Shareholder to purchase or carry shares
of the Pennsylvania Bond Fund generally will not be deductible for federal
income tax purposes.

You should note that a portion of the exempt-interest dividends paid by the
Pennsylvania Bond Fund may constitute an item of tax preference
48
<PAGE> 49

for purposes of determining federal alternative minimum tax liability.
Exempt-interest dividends will also be considered along with other adjusted
gross income in determining whether any Social Security or railroad retirement
payments received by you are subject to federal income taxes.

If you receive an exempt-interest dividend with respect to any Share and the
Share is held by you for six months or less, any loss on the sale or exchange of
the Share will be disallowed to the extent of such dividend amount.

Shareholders will not be subject to Pennsylvania Personal Income Tax on
distributions from the Pennsylvania Bond Fund attributable to interest income
from Pennsylvania Exempt Securities or from obligations of the United States,
its territories and certain of its agencies and instrumentalities ("Federal
Exempt Securities"). However, Pennsylvania Personal Income Tax will apply to
distributions to Pennsylvania Shareholders from the Pennsylvania Bond Fund
attributable to gain realized on the disposition of any investment, including
Exempt Securities, or to interest income from investments other than Exempt
Securities. Pennsylvania Shareholders also will be subject to the Pennsylvania
Personal Income tax on any gain they realize on the disposition of Shares in the
Pennsylvania Bond Fund.

Distributions attributable to interest from Exempt Securities is not subject
to the Philadelphia School District Net Income Tax. However, for Philadelphia
residents, distributions attributable to gain from the disposition of Exempt
Securities are subject to the Philadelphia School District Net Income Tax,
except that distributions attributable to gain on any investment held for more
than six months are exempt. A Shareholder's gain on the disposition of Shares in
the Pennsylvania Bond Fund that he or she has held for more than six months will
not be subject to the Philadelphia School District Net Income Tax.

The foregoing is only a summary of certain tax considerations under current
law, which may be subject to change in the future. You should consult your tax
adviser for further information regarding federal, state, local and/or foreign
tax consequences relevant to your specific situation.

MANAGEMENT OF THE TRUST

TRUSTEES OF THE TRUST

Overall responsibility for management of the Trust rests with its Board of
Trustees. Unless so required by the Trust's Agreement and Declaration of Trust
or By-Laws or by Delaware law, at any given time all of the Trustees may not
have been elected by the shareholders of the Trust. The Trust will be managed by
the Trustees in accordance with the laws of Delaware governing business trusts.
The Trustees, in turn, elect the officers of the Trust to supervise its
day-to-day operations.

The Trustees of the Trust receive fees and are reimbursed for their expenses
in connection with each meeting of the Board of Trustees they attend. However,
no officer or employee of Keystone, BISYS Fund Services, Inc., the sole general
partner of BISYS, BISYS, BISYS Ohio or their affiliates receives any
compensation from the Trust for acting as a Trustee of the Trust. The officers
of the Trust receive no compensation directly from the Trust for performing the
duties of their offices. The Advisor, BISYS Ohio and their affiliates receive
fees from each Fund for providing certain services as Co-Administrators.

ADVISORS

Governors Group Advisors, Inc. is the investment adviser of each Fund. The
Advisor is a wholly owned subsidiary of Keystone Financial, Inc., 1 Keystone
Plaza, Harrisburg, Pennsylvania 17101. The Advisor was organized in 1998 and has
not previously served as the investment advisor to a registered open-end
management investment company.

orders for all purchases and sales of its portfolio securities, and maintain
each Fund's records relating to such purchases and sales.

The Advisor has entered into a Sub-Advisory Agreement with Martindale Andres &
Company, Inc. (the "Sub-Advisor"), Four Falls Corporate Center, Suite 200, West
Conshohocken, Pennsylvania 19428. The Sub-Advisor is also a wholly owned
subsidiary of Keystone. The Sub-Advisor was organized in 1989 and was acquired
by Keystone in December 1995. Subject to the supervision of the Advisor and the
Board of Trustees of the Trust and in accordance with the investment objective
and restrictions of each Fund, the Sub-Advisor manages each Fund other than the
International Equity Fund, makes decisions with respect to and places orders for
all purchases and sales of its portfolio securities, and maintains each such
Fund's records relating to such purchases and sales.

William C. Martindale, Jr. is responsible for the day-to-day management of the
Established Growth Fund's portfolio and the Aggressive Growth Fund's portfolio
and has over 25 years of equity investment experience. Mr. Martindale also
managed the corresponding CIF of the Aggressive Growth Fund since July 1, 1994.
Mr. Martindale co-founded the Sub-Advisor in 1989 and serves as its Chief
Investment Officer. Prior to 1989, Mr. Martindale served in various
investment-related capacities with Dean Witter Reynolds.

Robert M. Mitchell is responsible for the day-to-day management of the
Emerging Growth Fund's portfolio. Mr. Mitchell reports to and is supervised by
William C. Martindale, Jr. Mr. Mitchell is a portfolio manager/research analyst
specializing in small and emerging growth companies. Mr. Mitchell joined the
Sub-Advisor in July, 1995 after attaining his MBA degree from Indiana
University's Kelley School of Business. Prior to graduate school, Mr. Mitchell
worked at the U.S. Department of Justice, Antitrust Division, where he analyzed
the economic and financial characteristics of various industries and businesses.

Colleen M. Marsh is primarily responsible for the day-to-day management of the
Income Fund's portfolio. Ms. Marsh is a senior portfolio manager in the fixed
income division of the Sub-Advisor. She has over 12 years of experience managing
fixed income portfolios and funds for clients. She spent the first 10 years of
her investment management career with Keystone, and has managed the Intermediate
Term Income Fund (a predecessor CIF to the Income Fund) for Keystone over this
time period.

Mr. James H. Somers is primarily responsible for the day-to-day management of
the Government Securities Fund's portfolio. Mr. Somers joined the Sub-Advisor as
a portfolio manager in September, 1995. From 1991 to September, 1995, Mr. Somers
was president and owner of his own money management firm. Prior thereto and for
five years he was a Vice President of Kidder Peabody & Company in New York.

Mr. Robert Andres is primarily responsible for the day-to-day management of
the Pennsylvania Bond Fund's portfolio. Mr. Andres co-founded the Sub-Advisor in
1989 and serves as its President and Chief Operating Officer. Prior thereto, he
served as President of Merrill Lynch Mortgage Capital Corporation and manager of
Merrill Lynch's secondary corporate bond trading division. He has had more than
30 years of broad based experience with respect to fixed-income securities,
including more than 20 years in trading, sales and investment management of
municipal securities.

Mr. Mark Stevenson, CFA, is primarily responsible for the day-to-day
management of the Lifestyle Funds' portfolios. Mr. Stevenson has been with the
Sub-Advisor since 1990, and for the past five years has managed retirement plan
and personal trust assets for the Sub-Advisor's clients.

The Advisor also has entered into a Sub-Advisory Agreement with Brinson
Partners, Inc., 209 South LaSalle Street, Chicago, Illinois 60604 (the

50
<PAGE> 51

"International Equity Fund Sub-Advisor" or collectively with the Sub-Advisor,
the "Sub-Advisors") on behalf of the International Equity Fund. The
International Equity Fund Sub-Advisor is a wholly owned subsidiary of UBS AG.
The International Equity Fund Sub-Advisor was organized in 1989 and was acquired
by Swiss Bank Corporation, a predecessor company of UBS AG. Subject to the
supervision of the Advisor and the Board of Trustees of the Trust and in
accordance with the investment objective and restrictions of the International
Equity Fund, the International Equity Fund Sub-Advisor manages the International
Equity Fund, makes decisions with respect to and places orders for all purchases
and sales of its portfolio securities, and maintains the records relating to
such purchases and sales.

The International Equity Fund Sub-Advisor's Global Equity Committee is
responsible for the day-to-day management of the International Equity Fund's
portfolio. The Global Equity Committee is co-chaired by Richard Carr, Managing
Director, who has more than 33 years experience in the investment industry, and
Jeff Diermeier, Managing Director, who has more than 23 years experience in the
investment industry.

For the services provided and expenses assumed pursuant to its respective
agreements the Advisor is entitled to receive an advisory fee from the
Established Growth, Aggressive Growth, Emerging Growth, International Equity,
Income, Government Securities, Pennsylvania Bond, Lifestyle Conservative Growth,
Lifestyle Moderate Growth and Lifestyle Growth Funds, computed daily and paid
monthly, at the annual rate of 0.75%, 1.00%, 1.25%, 0.75%, 0.60%, 0.60%, 0.60%,
0.25%, 0.25% and 0.25% of such Funds' respective average daily net assets. The
exact amount of the sub-advisory fee will be an amount agreed to by the Advisor,
the particular Sub-Advisor and the Trust from time to time, and may be in an
amount up to the amount of the advisor's fee. Initially, the Sub-Advisor will be
paid at the annual rates of 0.40%, 0.50%, 0.50%, 0.30%, 0.30%, 0.30%, 0.05%,
0.05%, and 0.05% of the average daily net assets of the Established Growth,
Aggressive Growth, Emerging Growth, Income, Government Securities, Pennsylvania
Bond, Lifestyle Conservative Growth, Lifestyle Moderate Growth and Lifestyle
Growth Funds, respectively. Initially, the International Equity Fund Sub-Advisor
will be paid at an annual rate of 0.40% of the first $50 million of the
International Equity Fund's average daily net assets, 0.35% of the next $150
million of such Fund's average daily net assets and 0.30% of such Fund's average
daily net assets in excess of $200 million. The sub-advisory fees paid by
Advisor to the Sub-Advisors have no effect on the investment advisory fees
payable by the Funds to the Advisor. For the fiscal year or period ended June
30, 1998, the Established Growth, Aggressive Growth, Income, Government
Securities and Pennsylvania Bond Funds paid their then adviser, Martindale
Andres, an advisory fee at an annual rate of 0.93%, 0.53%, 0.30%, 0.14% and
0.30%, respectively, of such Funds' respective average daily net assets.

The Advisor and Sub-Advisors may periodically voluntarily reduce all or a
portion of its advisory and sub-advisory fee with respect to one or more of the
Funds to increase the net income of that Fund available for distribution as
dividends. The Advisor and Sub-Advisors may not seek reimbursement of such
voluntarily reduced fees after the end of the fiscal year in which the fees were
reduced. The reduction of such fee will cause the yield and total return of that
Fund to be higher than they would otherwise be in the absence of such a
reduction.

ADMINISTRATORS AND DISTRIBUTOR

BISYS Ohio and the Advisor (collectively, the "Administrators") serve as each
Fund's administrators. BISYS acts as the Trust's principal underwriter and
distributor (the "Distributor"). BISYS, BISYS Ohio and its affiliated companies,
including BISYS Fund Services, Inc., are wholly owned by The BISYS Group, Inc.,
a publicly-held company which is a provider of information processing, loan
servicing and 401(k) administration and recordkeeping services to and through
banking and other financial organizations.

51
<PAGE> 52

The Administrators generally assist in all aspects of each Fund's
administration and operation. For expenses assumed and services provided as
administrator pursuant to its management and administration agreement with the
Trust, the Administrators are entitled jointly to annual fees, computed daily
and paid periodically, calculated at an annual rate of 0.15% of each Fund's
(other than the Lifestyle Funds) average daily net assets. The Administrators
may periodically voluntarily reduce all or a portion of their administration fee
with respect to one or more of the Funds to increase the net income of that Fund
available for distribution as dividends. The Administrators may not seek
reimbursement of such reduced fees after the end of the fiscal year in which the
fees were reduced. The voluntary reduction of such fee will cause the yield and
total return of that Fund to be higher than they would otherwise be in the
absence of such a fee reduction. For the fiscal year or period ended June 30,
1998, the Established Growth, Aggressive Growth, Income, Government Securities
and Pennsylvania Bond Funds paid their then administrator, BISYS, an
administration fee at the annual rate of 0.115% of each Fund's respective
average daily net assets.

The Distributor acts as agent for the Funds in the distribution of their
Shares and, in such capacity, solicits orders for the sale of Shares,
advertises, and pays the costs of advertising, office space and its personnel
involved in such activities. The Distributor receives no compensation under its
Distribution Agreement with the Trust, but is reimbursed for certain expenses by
the Lifestyle Funds under the Distribution Plan. See "Administrative Services
and Distribution Plans."

EXPENSES

The Advisor, Sub-Advisors and the Administrators each bear all expenses in
connection with the performance of their services as investment advisors and
administrators, respectively, other than the cost of securities (including
brokerage commissions, if any) purchased for the Funds. Each Fund will bear the
following expenses relating to its operations: organizational expenses, taxes,
interest, any brokerage fees and commissions, fees and expenses of the Trustees
of the Trust, Commission fees, state securities qualification fees, costs of
preparing and printing prospectuses for regulatory purposes and for distribution
to the Fund's current shareholders, outside auditing and legal expenses,
advisory fees, fees and out-of-pocket expenses of the custodian, fund accountant
and Transfer Agent, costs for independent pricing services, certain insurance
premiums, costs of maintenance of the Trust's existence, costs of shareholders'
reports and meetings, expenses incurred under the Administrative Services Plan
described below and any extraordinary expenses incurred in the Fund's operation.

ADMINISTRATIVE SERVICES AND DISTRIBUTION PLANS

The Trust has adopted an Administrative Services Plan (the "Services Plan")
pursuant to which each Fund is authorized to pay compensation to banks and other
financial institutions (each a "Service Organization"), which may include the
Advisor, Sub-Advisors, Keystone and its banking affiliates, Entities, and BISYS,
which agree to provide certain ministerial, record keeping and/or administrative
support services for their customers or account holders (collectively,
"customers") who are the beneficial or record owner of Shares of that Fund. In
consideration for such services, a Service Organization receives a fee from each
Fund, computed daily and paid monthly, at an annual rate of up to 0.25% of the
average daily net asset value of Shares of that Fund owned beneficially or of
record by such Service Organization's customers for whom the Service
Organization provides such services.

statements to customers showing their positions in the Shares of the Funds,
providing sub-accounting with respect to Shares beneficially owned by such
customers, providing customers with a service that invests the assets of their
accounts in Shares of a Fund pursuant to specific or pre-authorized
instructions. As of the date hereof, no such servicing agreements have been
entered into by the Trust on behalf of either Fund.

The Trust has adopted a Distribution Plan under Rule 12b-1 under the 1940 Act
(the "12b-1 Plan") pursuant to which each Lifestyle Fund is authorized to
reimburse the Distributor. Amounts paid to the Distributor under the Trust's
12b-1 Plan may be used by the Distributor to cover expenses that are related to
(i) the distribution of Shares of the Lifestyle Funds, (ii) ongoing servicing
and/or maintenance of the accounts of shareholders of the Lifestyle Funds, (iii)
payments to institutions for selling Shares of the Lifestyle Funds, and (iv)
sub-transfer agency services, subaccounting services or administrative services
related to the sale of the Shares of the Lifestyle Funds, all as set forth in
the Trust's 12b-1 Plan. Under the 12b-1 Plan, each Lifestyle Fund may reimburse
the Distributor at an annual rate of up to 0.50% of the average daily net asset
value of each Lifestyle Fund's Shares. The Distributor may delegate some or all
of these functions to another organization. See "How to Purchase
Shares--Purchases Through Intermediaries."

BANKING LAWS

The Advisor and Sub-Advisors believe that they possess the legal authority to
perform the investment advisory and administration services for each Fund
contemplated by its investment advisory and administration agreement with the
Trust, as described in this Prospectus, without violation of applicable banking
laws and regulations. Future changes in Federal or state statutes and
regulations relating to permissible activities of banks or bank holding
companies and their subsidiaries and affiliates as well as further judicial or
administrative decisions or interpretations of present and future statutes and
regulations could change the manner in which the Advisor and Sub-Advisors could
continue to perform such services for the Funds. See "MANAGEMENT AND SERVICE
PROVIDERS OF THE TRUST--Glass-Steagall Act" in the Statement of Additional
Information for further discussion of applicable law and regulations.

GENERAL INFORMATION

DESCRIPTION OF THE TRUST AND ITS SHARES

The Trust was organized as a Delaware business trust on September 3, 1998. The
Trust consists of twelve funds, each having its own class(es) of shares. Each
share represents an equal proportionate interest in a fund with other shares of
the same fund, and is entitled to such dividends and distributions out of the
income earned on the assets belonging to the fund as are declared at the
discretion of the Trustees (see "Miscellaneous" below). The other funds of the
Trust are the Governor Prime Money Market Fund and the Governor U.S. Treasury
Obligations Money Market Fund.

Shareholders are entitled to one vote for each full share held and
proportionate fractional votes for fractional shares held, and will vote in the
aggregate and not by fund except as otherwise expressly required by law. For
example, Shareholders of a Fund will vote in the aggregate with other
shareholders of the Trust with respect to the election of Trustees. However,
Shareholders of that Fund will vote as a fund, and not in the aggregate with
other shareholders of the Trust, for purposes of approval or amendment of the
Fund's investment advisory agreement.

Overall responsibility for the management of each Fund is vested in the Board
of Trustees of the Trust. See "MANAGEMENT OF THE TRUST--Trustees of the Trust"
in the Statement of Additional Information. Individual Trustees are elected by
the shareholders of the Trust, although Trustees may, under certain circum-
53
<PAGE> 54

stances, fill vacancies, including vacancies created by expanding the size of
the Board. Trustees may be removed by the Board of Trustees or shareholders in
accordance with the provisions of the Agreement and Declaration of Trust and
By-Laws of the Trust and Delaware law. See "ADDITIONAL
INFORMATION--Miscellaneous" in the Statement of Additional Information for
further information.

An annual or special meeting of shareholders to conduct necessary business is
not required by the Agreement and Declaration of Trust, the 1940 Act or other
authority except, under certain circumstances, to elect Trustees, amend the
Agreement and Declaration of Trust, the investment advisory agreement or a
Fund's fundamental policies and to satisfy certain other requirements. To the
extent that such a meeting is not required, the Trust does not intend to have an
annual or special meeting of shareholders.

As of October 28, 1998, Keystone possessed, on behalf of its or its
affiliates' underlying accounts, voting or investment power with respect to more
than 25% of the outstanding Shares of each Fund other than the International
Equity and Lifestyle Funds and the Distributor owned 100% of the outstanding
Shares of the International Equity and Lifestyle Funds.

CUSTODIAN

The Bank of New York serves as the custodian for each Fund.

TRANSFER AGENCY AND FUND ACCOUNTING SERVICES

BISYS Fund Services, Inc., 3435 Stelzer Road, Columbus, Ohio 43219, serves as
the Funds' transfer agent pursuant to a Transfer Agency Agreement with the Trust
and receives a fee for such services. BISYS Fund Services, Inc. also provides
certain accounting services for the Funds pursuant to a Fund Accounting
Agreement and receives a fee from the Trust for such services computed at an
annual rate of 0.03% (0.04% for the International Equity Fund) of the Trust's
average daily net assets up to $2 billion and 0.02% (0.03% for the International
Equity Fund) of the Trust's average daily net assets of $2 billion or more
subject to a minimum annual fee of $30,000 ($40,000 for the International Equity
Fund and $35,000 for the Pennsylvania Bond Fund). See "MANAGEMENT AND SERVICE
PROVIDERS OF THE TRUST--Transfer Agency and Fund Accounting Services" in the
Statement of Additional Information for further information. For the fiscal year
or period ended June 30, 1998, the Established Growth, Aggressive Growth,
Income, Government Securities and Pennsylvania Bond Funds paid BISYS Fund
Services, Inc. an accounting service fee of 0.03% of each Fund's respective
average daily net assets.

MISCELLANEOUS

Shareholders will receive unaudited semi-annual reports and annual reports
audited by independent public accountants.

As used in this Prospectus and in the Statement of Additional Information,
"assets belonging to the fund" means the consideration received by a fund upon
the issuance or sale of shares in the fund, together with all income, earnings,
profits, and proceeds derived from the investment thereof, including any
proceeds from the sale, exchange, or liquidation of such investments, and any
funds or amounts derived from any reinvestment of such proceeds, and any general
assets of the Trust not readily identified as belonging to a particular fund
that are allocated to such fund by the Trust's Board of Trustees. The Board of
Trustees may allocate such general assets in any manner it deems fair and
equitable. Determinations by the Board of Trustees of the Trust as to the timing
of the allocation of general liabilities and expenses and as to the timing and
allocable portion of any general assets with respect to the Funds are
conclusive.

As used in this Prospectus and in the Statement of Additional Information, a
"vote of a majority of the outstanding Shares" of a Fund means the affirmative
vote, at a meeting of Shareholders duly called, of the lesser of (a) 67% or more
of
54
<PAGE> 55

the votes of Shareholders of that Fund present at a meeting at which the holders
of more than 50% of the votes attributable to Shareholders of record of such
Fund are represented in person or by proxy, or (b) the holders of more than 50%
of the outstanding votes of Shareholders of that Fund.

Inquiries regarding the Funds may be directed in writing to the Trust at 3435
Stelzer Road, Columbus, Ohio 43219, or by calling toll free (800) 766-3960.

55
<PAGE> 56

INVESTMENT ADVISOR

Governors Group Advisors, Inc.
23 Front Street
Harrisburg, Pennsylvania 17101

SUB-ADVISORS
Martindale Andres & Company, Inc.
Four Falls Corporate Center, Suite 200
West Conshohocken, Pennsylvania 19428

Brinson Partners, Inc.
209 South LaSalle Street
Chicago, Illinois 60604

CO-ADMINISTRATORS
BISYS Fund Services Ohio, Inc.
3435 Stelzer Road
Columbus, Ohio 43219

Governors Group Advisors, Inc.
23 Front Street
Harrisburg, Pennsylvania 17101

DISTRIBUTOR

BISYS Fund Services

3435 Stelzer Road
Columbus, Ohio 43219

LEGAL COUNSEL
Drinker Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107

AUDITORS
KPMG Peat Marwick LLP
Two Nationwide Plaza, Suite 1600
Columbus, Ohio 43215

<TABLE>
<CAPTION>
PAGE
TABLE OF CONTENTS ----
<S> <C>
PROSPECTUS SUMMARY............................ 3
BACKGROUND INFORMATION........................ 5
FEE TABLE..................................... 6
FINANCIAL HIGHLIGHTS.......................... 8
PERFORMANCE INFORMATION....................... 10
INVESTMENT OBJECTIVES AND POLICIES............ 11
INVESTMENT RESTRICTIONS....................... 38
VALUATION OF SHARES........................... 39
HOW TO PURCHASE AND REDEEM SHARES............. 40
DIVIDENDS AND TAXES........................... 47
MANAGEMENT OF THE TRUST....................... 49
GENERAL INFORMATION........................... 53
</TABLE>

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS
OR ITS DISTRIBUTOR, BISYS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY
THE FUND OR BY BISYS IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY
BE MADE.

OB-1617

GOVERNOR FUNDS LOGO

THE ESTABLISHED GROWTH FUND

THE AGGRESSIVE GROWTH FUND

THE EMERGING GROWTH FUND

THE INTERNATIONAL EQUITY FUND

THE INTERMEDIATE TERM INCOME FUND

THE LIMITED DURATION
GOVERNMENT SECURITIES FUND

THE PENNSYLVANIA MUNICIPAL BOND FUND

THE LIFESTYLE
CONSERVATIVE GROWTH FUND

THE LIFESTYLE MODERATE GROWTH FUND

THE LIFESTYLE GROWTH FUND

GOVERNORS GROUP
ADVISORS, INC.
INVESTMENT ADVISER

MARTINDALE
ANDRES & COMPANY, INC.
INVESTMENT SUB-ADVISER

BRINSON PARTNERS, INC.
INVESTMENT SUB-ADVISER
Prospectus dated

January 4, 1999

<PAGE> 57

PRIME MONEY MARKET FUND
U.S. TREASURY OBLIGATIONS MONEY MARKET FUND

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

3435 Stelzer Road
Columbus, Ohio 43219
For current yield, purchase, and redemption
information, call (800) 766-3960.

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

Governor Funds (the "Trust") is an open-end management investment company. The
Trust includes the Prime Money Market Fund (the "Prime Money Market Fund") and
the U.S. Treasury Obligations Money Market Fund (the "Treasury Money Market
Fund"), each of which is a diversified portfolio of the Trust. (The Prime Money
Market Fund and the Treasury Money Market Fund are hereinafter jointly referred
to as the "Funds" and individually as a "Fund.") The Trustees of the Trust have
divided each Fund's beneficial ownership into an unlimited number of
transferable units called shares (the "Shares"). This Prospectus describes the
Investor Shares of the Prime Money Market Fund and U.S. Treasury Obligations
Fund and the S Shares of the Prime Money Market Fund. S Shares are offered to
customers who purchase such shares through cash management services, such as a
sweep account ("Sweep Account") offered by Keystone Financial, Inc. ("Keystone")
or any of its banking affiliates, and certain other financial services
organizations, such as banks or broker-dealers ("Service Organizations"). A
Sweep Account combines a deposit account (the "Transaction Account") with a
daily sweep of balances to or from the Prime Money Market Fund's S Shares.
Keystone, its banking affiliates or Service Organizations, as applicable, are
responsible for providing persons investing in S Shares through a Sweep Account
with Sweep Account materials (the "Sweep Materials") describing the various
features and operations of the Sweep Account. The Sweep Materials should be
reviewed in conjunction with this Prospectus.

This Prospectus sets forth concisely the information about each of the Funds
and the Trust that a prospective investor ought to know before investing.
Investors should read this Prospectus and retain it for future reference.

THE SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, THE ADVISORS, KEYSTONE OR ANY OF THEIR AFFILIATES. SUCH SHARES ARE
NOT FEDERALLY INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENTAL
AGENCY, AND AN INVESTMENT IN EITHER FUND INVOLVES CERTAIN INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. EACH FUND SEEKS TO MAINTAIN A CONSTANT
NET ASSET VALUE OF $1.00 PER SHARE, BUT THERE CAN BE NO ASSURANCE THAT NET ASSET
VALUE WILL NOT VARY.

The date of this Prospectus is January 4, 1999.

<PAGE> 58

Governors Group Advisors, Inc., 23 Front Street, Harrisburg, Pennsylvania (the
"Advisor"), which is a wholly owned subsidiary of Keystone, acts as the
investment advisor to each of the Funds. Martindale Andres & Company, Inc., West
Conshohocken, Pennsylvania (the "Sub-Advisor" and collectively with the Advisor,
the "Advisors"), which is a wholly owned subsidiary of Keystone, acts as the
investment sub-advisor to each of the Funds.

<PAGE> 59

PROSPECTUS SUMMARY

SHARES OFFERED: Investor Shares of beneficial interest of the Prime Money
Market Fund and the Treasury Money Market Fund, and S Shares of the Prime Money
Market Fund, two separate investment funds of Governor Funds, a Delaware
business trust (the "Trust").

OFFERING PRICE: The public offering price of each Fund is equal to the net
asset value per share which the Funds will seek to maintain at $1.00 per Share.
(See "HOW TO PURCHASE AND REDEEM SHARES.")

TYPE OF COMPANY: Each Fund is a diversified series of an open-end,
management investment company.

INVESTMENT OBJECTIVES: For each Fund, current income with liquidity and
stability of principal.

INVESTMENT POLICIES: The PRIME MONEY MARKET FUND invests in high-quality
money market instruments and other instruments of high quality.

Under normal market conditions, the TREASURY MONEY MARKET FUND will invest
at least 65% of its total assets in securities issued by the U.S. Treasury and
in repurchase agreements secured by such Treasury securities.

All securities or instruments in which each Fund invests have or are deemed
to have remaining maturities of 397 days (13 months) or less, although
instruments subject to repurchase agreements may bear longer maturities.

RISK FACTORS AND SPECIAL CONSIDERATIONS: An investment in each of the Funds
is subject to certain risks, including interest rate risk, as set forth in
detail under "INVESTMENT OBJECTIVES AND POLICIES--Risk Factors and Investment
Techniques." As with other mutual funds, there can be no assurance that either
Fund will achieve its investment objectives. Each Fund, to the extent set forth
under "INVESTMENT OBJECTIVES AND POLICIES," may engage in the following
practices: the use of repurchase agreements and reverse repurchase agreements,
the purchase of securities on a when-issued or delayed-delivery basis and the
lending of portfolio securities.

INVESTMENT ADVISOR: Governors Group Advisors, Inc. (the "Advisor").

INVESTMENT SUB-ADVISOR: Martindale Andres & Company, Inc. (the
"Sub-Advisor").

DIVIDENDS: Dividends from net income are declared daily and generally paid
monthly. Net realized capital gains, if any, are distributed at least annually
for each of the Funds.

DISTRIBUTOR: BISYS Fund Services ("BISYS").

3
<PAGE> 60

CERTAIN FINANCIAL INFORMATION

Shares of the Prime Money Market Fund have been classified into two classes
of Shares--Investor Shares and S Shares. Shares of the Treasury Money Market
Fund have been classified into one class of Shares--Investor Shares. Shares of
each class in a Fund represent equal, pro rata interests in the investments held
by that Fund and are identical in all respects, except that Shares of each class
bear separate shareholder administrative servicing fees, and enjoy certain
exclusive voting rights on matters relating to these fees. As a result of
payments for shareholder administrative servicing fees that may be made in
differing amounts, the net investment income of Investor Shares and S Shares in
the Prime Money Market Fund can be expected, at any given time to be different.

The Prime Money Market Fund and the Treasury Money Market Fund commenced
operations on October 7, 1996 and July 1, 1997, respectively, as separate
investment portfolios (sometimes referred to as "predecessor funds") of The
Sessions Group, which was organized as an Ohio business trust. On or about
February 2, 1999, those Funds are expected to be reorganized as portfolios of
the Trust. Prior to the reorganization, the Prime Money Market Fund and the
Treasury Money Market Fund offered and sold shares of beneficial interest that
were similar to the Trust's Investor Shares. S Shares had not been offered to
the public prior to the date of this prospectus.

4
<PAGE> 61

FEE TABLE

<TABLE>
<CAPTION>
PRIME MONEY TREASURY
MARKET FUND MONEY
-------------------- MONEY MARKET
INVESTOR ---------------
SHARES S SHARES INVESTOR SHARES
-------- -------- ---------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of
offering price).......................................... None None None
ESTIMATED ANNUAL FUND OPERATING EXPENSES (as a percentage
of average net assets)
Management Fees After Voluntary Fee Waivers................ 0.20%(1) 0.20%(1) 0.20%(2)
12b-1 Fees................................................. None None None
Other Expenses............................................. 0.28 0.52 0.53
---- ---- ----
Estimated Total Fund Operating Expenses
After Voluntary Fee Waivers.............................. 0.48(1) 0.72%(1) 0.73%(2)
==== ==== ====
</TABLE>

Example. You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
Prime Money Market Fund
Investor Shares........................................ $5 $15
S Shares............................................... $7 $23
Treasury Money Market Fund
Investor Shares........................................ $7 $23
</TABLE>

The purpose of the above table is to assist a potential purchaser of Shares of
the Funds in understanding the various costs and expenses that an investor in
that Fund will bear directly or indirectly. Such expenses do not include any
fees charged by the Advisor or any of its affiliates to its customer accounts
which may have invested in Shares of the Funds. The table sets forth estimated
management fees and other expenses of Investor Shares of the Funds and estimated
management fees and other expenses of S Shares of the Prime Money Market Fund.
The Total Fund Operating Expenses were 0.48% and 0.71% for the Investor Shares
of the Prime Money Market Fund and Treasury Money Market Fund, respectively, for
the fiscal year ended June 30, 1998. S Shares of the Prime Money Market Fund had
not been offered to the public prior to the date of this prospectus. See
"MANAGEMENT OF THE TRUST" and "GENERAL INFORMATION" for a more complete
discussion of the annual operating expenses of the Funds. THE FOREGOING EXAMPLE
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
- ---------------

(1) The Advisor has agreed voluntarily to reduce its investment advisory fee to
0.20% and the Administrator has agreed voluntarily to reduce its
administration fee to 0.115% for the Prime Money Market Fund. Absent such
voluntary fee waivers, which may be reduced or terminated at any time upon
notice to Shareholders, Management Fees for Investor Shares and S Shares of
the Prime Money Market Fund would be 0.40% and Estimated Total Fund
Operating Expenses for Investor Shares and S Shares of the Prime Money
Market Fund would be 0.72% and 0.96%, respectively.

(2) The Advisor has agreed voluntarily to reduce such fee to 0.20%, and the
Administrator has agreed voluntarily to reduce its administration fee to
0.115%. Absent such voluntary fee waivers, which may be reduced or
terminated at any time upon notice to Shareholders, Management Fees and
Estimated Total Fund Operating Expenses for the Treasury Money Market Fund
would be 0.40% and 0.97%, respectively.

5
<PAGE> 62

FINANCIAL HIGHLIGHTS

The Funds are two separate funds of the Trust. The table below sets forth
certain information concerning the investment results of the Funds derived from
the financial statements (the "Financial Statements") included in the Annual
Report to Shareholders for the year ended June 30, 1998 for the Funds'
predecessor funds. The Financial Highlights contained in the following table
have been audited by KPMG Peat Marwick LLP, independent certified public
accountants for the Funds. The following tables should be read in conjunction
with the Financial Statements and notes thereto. As of the date of this
prospectus, S Shares of the Prime Money Market Fund had not been offered for
sale to the public.

<TABLE>
<CAPTION>
TREASURY MONEY
PRIME MONEY MARKET FUND MARKET FUND
----------------------------------------- ----------------
FISCAL PERIOD FROM FISCAL YEAR
YEAR ENDED OCTOBER 7, 1996 THROUGH ENDED
JUNE 30, 1998 JUNE 30, 1998(A) JUNE 30, 1998(A)
------------- ------------------------ ----------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD...... $ 1.00 $ 1.00 $ 1.00
Investment Activities:
Net investment income................... 0.05 0.04 0.05
Net realized and unrealized gain (loss)
on investments....................... -- -- --
-------- -------- -------
Total from Investment Activities.......... 0.05 0.04 0.05
Distributions from:
Net investment income................... (0.05) (0.04) (0.05)
Net realized gains...................... -- -- --
-------- -------- -------
Total Distributions..................... (0.05) (0.04) (0.05)
-------- -------- -------
Net change in net asset value per
share:.................................. -- -- --
-------- -------- -------
NET ASSET VALUE, END OF PERIOD............ $ 1.00 $ 1.00 $ 1.00
======== ======== =======
TOTAL RETURN.............................. 5.19% 3.73%(b) 4.78%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, at end of period (000)........ $217,861 $ 95,850 $23,520
Ratio of expenses to average net assets... 0.48% 0.36%(c) 0.71%
Ratio of net investment income to average
net assets.............................. 5.14% 5.02%(c) 4.64%
Ratio of expenses to average net
assets*................................. 0.76% 0.70%(c) 1.07%
Ratio of net investment income to average
net assets*............................. 4.86% 4.68%(c) 4.28%
</TABLE>

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

* During the period certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
rates would have been as indicated.

(a) The Prime Money Market and Treasury Money Market Funds commenced operations
on October 7, 1996 and July 1, 1997, respectively.

(b) Not annualized.

6
<PAGE> 63

PERFORMANCE INFORMATION

From time to time performance information for the Funds showing their average
annual total return, seven-day yield, seven-day effective yield and/or 30-day
yield may be presented in advertisements, sales literature and shareholder
reports. Yield quotations are computed separately for Investor Shares and S
Shares. SUCH PERFORMANCE FIGURES ARE BASED ON HISTORICAL PERFORMANCE AND ARE NOT
INTENDED TO INDICATE FUTURE PERFORMANCE. Average annual total return will be
calculated for the period since commencement of operations for the applicable
Fund and will include the performance of its predecessor fund. S Shares had not
commenced operations as of the date of this prospectus. Accordingly, the
performance results attributed to S Shares prior to when they commenced
operations are those of Investor Shares for that period. Average annual total
return is measured by comparing the value of an investment in a particular Share
of the Fund at the beginning of the relevant period to the redeemable value of
the investment at the end of the period (assuming immediate reinvestment of any
dividends or capital gains distributions), which figure is then annualized.

The seven-day yield of a particular Share of the Fund refers to the income
generated by an investment therein over a seven-day period (which period will be
stated in the advertisement). This income is then "annualized." That is, the
amount of income generated by the investment during that week is assumed to be
generated each week over a 52-week period and is shown as a percentage of the
investment. The seven-day effective yield is calculated similarly but, when
annualized, the income earned by an investment in particular Shares of a Fund is
assumed to be reinvested. The seven-day effective yield is slightly higher than
the seven-day yield because of the compounding effect of this assumed
reinvestment. The Funds may also present a 30-day yield which is calculated
similarly to the seven-day yield but instead refers to a 30-day period rather
than a seven-day period.

Investors may also judge the performance of the Funds by comparing or
referencing it to the performance of other mutual funds with comparable
investment objectives and policies through various mutual fund or market indices
and to data prepared by various services, which indices or data may be published
by such services or by other services or publications. In addition to
performance information, general information about the Funds that appears in
such publications may be included in advertisements, sales literature and
reports to Shareholders.

Yield and total return are generally functions of market conditions, interest
rates, types of investments held, and operating expenses. Consequently, current
yields and total return will fluctuate and are not necessarily representative of
future results. Any fees charged by Keystone or by any of its affiliates,
including the Advisors, to its customer accounts which may have invested in
Shares of the Funds will not be included in performance calculations; such fees,
if charged, will reduce the actual performance from that quoted. In addition, if
the Advisor, BISYS Ohio or BISYS voluntarily reduces all or part of its fees for
a Fund, as discussed below, the yield and total return for that Fund will be
higher than they would otherwise be in the absence of such voluntary fee
reductions.

Further information about the performance of the Funds is contained in that
Fund's Annual Report to Shareholders which may be obtained without charge by
contacting the Trust at (800) 766-3960.

INVESTMENT OBJECTIVES AND POLICIES

IN GENERAL

The investment objective of each of the Funds is to seek current income with
liquidity and stability of principal. The investment objectives of each Fund are
non-fundamental policies and as such may be changed by the Trust's Trustees
without the vote of the Shareholders of that Fund. There can be no assurance
that the investment objectives of either Fund will be achieved.

7
<PAGE> 64

As money market funds, each Fund invests exclusively in United States
dollar-denominated instruments which the Advisor or Sub-Advisor determines
present minimal credit risks. In addition, such investments, at the time of
acquisition, subject to certain exceptions, must be rated by at least two
nationally recognized statistical rating organizations ("NRSROs") (e.g.,
Standard & Poor's Corporation and Moody's Investors Service, Inc.) (or by the
only NRSRO providing a rating) in one of the two highest rating categories for
short-term debt obligations or, if unrated, are determined by the Advisor or
Sub-Advisor to be of comparable quality. Each Fund is also required to diversify
its investments so that, except for United States Government securities and
certain other exceptions, not more than five percent of its total assets is
invested in the securities of any one issuer, not more than five percent of its
total assets is invested in securities of issuers rated by the NRSROs at the
time of investment in the second highest rating category for short-term debt
obligations or, if unrated, deemed by the Advisor or Sub-Advisor to be of
comparable quality ("Second Tier Securities") and not more than the greater of
one percent of total assets or one million dollars is invested in the securities
of one issuer that are Second Tier Securities. All securities or instruments in
which the Funds invest have or are deemed to have remaining maturities of 397
calendar days or less. The dollar-weighted average maturity of the securities in
each Fund will not exceed 90 days.

THE PRIME MONEY MARKET FUND

Subject to the foregoing general limitations, the Prime Money Market Fund
invests in the following types of securities.

The Prime Money Market Fund may invest in a variety of U.S. Treasury
obligations, differing in their interest rates, maturities, and times of
issuance, and other obligations issued or guaranteed by the U.S. Government or
its agencies or instrumentalities (collectively, "Government Obligations").
Obligations of certain agencies and instrumentalities of the U.S. Government,
such as the Government National Mortgage Association and the Export-Import Bank
of the United States, are supported by the full faith and credit of the U.S.
Treasury; others, such as those of the Federal National Mortgage Association,
are supported by the right of the issuer to borrow from the Treasury; others,
such as those of the Student Loan Marketing Association, are supported by the
discretionary authority of the U.S. Government to purchase the agency's
obligations; still others, such as those of the Federal Farm Credit Banks or the
Federal Home Loan Mortgage Corporation, are supported only by the credit of the
instrumentality. No assurance can be given that the U.S. Government would
provide financial support to U.S. Government-sponsored agencies or
instrumentalities if it is not obligated to do so by law. The Prime Money Market
Fund will invest in the obligations of such agencies or instrumentalities only
when the Advisor believes that the credit risk with respect thereto is minimal.

The Prime Money Market Fund may invest in bankers' acceptances guaranteed by
domestic and foreign banks if at the time of investment the guarantor bank has
capital, surplus, and undivided profits in excess of $100,000,000 (as of the
date of its most recently published financial statements). The Prime Money
Market Fund may also invest in certificates of deposit and time deposits of
domestic and foreign banks and savings and loan associations if (a) at the time
of investment the depositor institution has capital, surplus, and undivided
profits in excess of $100,000,000 (as of the date of their most recently
published financial statements) or (b) the principal amount of the instrument is
insured in full by the Federal Deposit Insurance Corporation.

The Prime Money Market Fund may also invest in Eurodollar Certificates of
Deposit ("ECDs") which are U.S. dollar denominated certificates of deposit
issued by offices of foreign and domestic banks located outside the United
States; Eurodollar Time Deposits ("ETDs") which are U.S. dollar denominated
deposits in a foreign branch of a U.S. bank or a foreign bank; Canadian Time
Deposits ("CTDs") which are essentially the same as
8
<PAGE> 65

ETDs except they are issued by Canadian offices of major Canadian banks; and
Yankee Certificates of Deposit ("Yankee CDs") which are certificates of deposit
issued by U.S. branches of a foreign bank denominated in U.S. dollars and held
in the United States. Under normal market conditions, the Prime Money Market
Fund will not invest more than 20% of its total assets in such foreign
securities (including Canadian Commercial Paper and Europaper as defined below).

The Prime Money Market Fund will not invest in time deposits with maturities
in excess of seven days which are subject to penalties upon early withdrawal if,
in the aggregate with other illiquid securities held by the Prime Money Market
Fund, such deposits exceed 10% of such Fund's net assets. Such time deposits
include ETDs and CTDs but do not include certificates of deposit.

The Prime Money Market Fund may invest in short-term promissory notes issued
by corporations (including variable amount master demand notes) and in municipal
obligations rated at the time of purchase by one or more appropriate NRSROs in
one of the two highest rating categories for short-term debt obligations or, if
not rated, determined by the Advisor or Sub-Advisor to be of comparable quality
to instruments that are so rated. Instruments may be purchased in reliance upon
a rating only when the rating organization is not affiliated with the issuer or
guarantor of the instrument. For a description of the rating symbols of the
NRSROs, see the Appendix to the Statement of Additional Information. The Prime
Money Market Fund may also invest in Canadian Commercial Paper ("CCP"), which is
U.S. dollar denominated commercial paper issued by a Canadian corporation or a
Canadian subsidiary of a U.S. corporation, and in Europaper, which is U.S.
dollar denominated commercial paper of a foreign issuer which, in each case, is
rated at the time of purchase by one or more appropriate NRSROs in one of the
two highest rating categories for short-term debt obligations or, if not rated,
determined by the Advisor or Sub-Advisor to be of comparable quality to
instruments that are so rated.

The Prime Money Market Fund may also invest in corporate debt securities with
remaining maturities of 397 days or less although at the time of issuance such
securities had maturities exceeding 397 days. The Prime Money Market Fund may
invest in such securities so long as comparable securities of such issuer have
been rated in the highest rating category for short-term debt obligations by the
appropriate NRSROs or are otherwise deemed to be eligible for purchase by the
Prime Money Market Fund in accordance with the guidelines adopted by the Trust's
Board of Trustees.

Variable amount master demand notes in which the Prime Money Market Fund may
invest are unsecured demand notes that permit the indebtedness thereunder to
vary and that provide for periodic adjustments in the interest rate according to
the terms of the instrument. Because master demand notes are direct lending
arrangements between the Prime Money Market Fund and the issuer, they are not
normally traded. Although there is no secondary market in the notes, the Prime
Money Market Fund may demand payment of principal and accrued interest at any
time. While the notes are not typically rated by NRSROs, issuers of variable
amount master demand notes (which are normally manufacturing, retail, financial,
and other business concerns) must satisfy the same criteria as set forth above
for commercial paper. The Advisor or Sub-Advisor will consider the earning
power, cash flow, and other liquidity ratios of the issuers of such notes and
will continuously monitor their financial status and ability to meet payment on
demand. In determining dollar-weighted average portfolio maturity, a variable
amount master demand note will be deemed to have a maturity equal to the period
of time remaining until the principal amount can be recovered from the issuer
through demand. The Prime Money Market Fund may purchase variable amount master
demand notes with face maturities in excess of 397 days only so long as the
Prime Money Market Fund may demand payment at any time on no more than 30 days'
notice or at specified intervals
9
<PAGE> 66

not exceeding 397 days and upon no more than 30 days' notice.

The Prime Money Market Fund may purchase asset-backed securities, which are
securities issued by special purpose entities whose primary assets consist of a
pool of mortgages, loans, receivables or other assets, primarily automobile and
credit card receivables and home equity loans. Payment of principal and interest
may depend largely on cash flows generated by the assets backing the securities
and, in certain cases, supported by letters of credit, surety bonds or other
forms of credit or liquidity enhancements. The value of asset-backed securities
also may be affected by the creditworthiness of the servicing agent for the pool
of assets, the originator of the loans or receivables or the financial
institution providing the credit support.

The Prime Money Market Fund may also acquire variable and floating rate notes
issued by both governmental and non-governmental issuers, subject to the Prime
Money Market Fund's investment objective, policies and restrictions.

THE TREASURY MONEY MARKET FUND

Subject to the above limitations, under normal market conditions, the Treasury
Money Market Fund will invest at least 65% of its total assets in the following
types of securities: direct obligations issued by the U.S. Treasury including
bills, notes and bonds which differ from each other only in interest rates,
maturities and times of issuance; U.S. Treasury securities that have been
stripped of their unmatured interest coupons (which typically provide for
interest payments semi-annually); interest coupons that have been stripped from
such U.S. Treasury securities; receipts and certificates for such stripped debt
obligations and stripped coupons (collectively, "Stripped Treasury Securities");
and in repurchase agreements backed by such securities. Stripped Treasury
Securities will include (1) coupons that have been stripped from U.S. Treasury
bonds, which may be held through the Federal Reserve Bank's book-entry system
called "Separate Trading of Registered Interest and Principal of Securities"
("STRIPS") or through a program entitled "Coupon Under Book-Entry Safekeeping"
("CUBES").

Treasury bills have maturities of one year or less; Treasury notes have
maturities of one to ten years; and Treasury bonds generally have maturities of
greater than ten years. Stripped Treasury Securities are sold at a deep discount
because the buyer of those securities receives only the right to receive a
future fixed payment (representing principal or interest) on the security and
does not receive any rights to periodic interest payments on the security. The
Treasury Money Market Fund may engage in other investment techniques described
below.

The Treasury Money Market Fund may also invest up to 35% of its total assets
in Government Obligations which are backed by the full faith and credit of the
U.S. Treasury and in repurchase agreements backed by such securities. Such
securities include those of the Government National Mortgage Association and the
Export-Import Bank of the United States.

RISK FACTORS AND INVESTMENT TECHNIQUES

Like any investment program, an investment in either Fund entails certain
risks. Since each Fund invests in debt securities, investors are exposed to
interest rate risk, i.e., fluctuations in the market value of debt securities.
Debt securities' prices are influenced primarily by changes in the level of
interest rates. When interest rates rise, the prices of debt securities
generally fall; conversely, when interest rates fall, debt securities' prices
generally rise. There have been in the recent past extended periods of cyclical
increases in interest rates that have caused significant declines in the prices
of certain debt securities.

The Trust will attempt to maintain the net asset value per share of each of
the Funds at $1.00, but there can be no assurance that either Fund will be able
to do so.

10
<PAGE> 67

Each Fund may invest in certain variable or floating rate securities as
described above. Such instruments may be considered to be "derivatives." A
derivative is generally defined as an instrument whose value is based upon, or
derived from, some underlying index, reference rate (e.g., interest rates),
security, commodity or other asset. There is no limit as to the portion of a
Fund's portfolio that may be invested in any such derivatives at any one time.

Variable and Floating Rate Securities. Securities purchased by the Funds may
include variable and floating rate obligations. A variable rate obligation is
one whose terms provide for the adjustment of its interest rate on set dates and
which, upon such adjustment, can reasonably be expected to have a market value
that approximates its amortized cost. A floating rate obligation is one whose
terms provide for the adjustment of its interest rate whenever a specified
interest rate changes and which, at any time, can reasonably be expected to have
a market value that approximates its amortized cost.

In the event the interest rate of a variable or floating rate obligation is
established by reference to an index or an interest rate that may from time to
time lag behind other market interest rates, there is the risk that the market
value of such obligation, on readjustment of its interest rate, will not
approximate its amortized cost which could adversely affect such Fund's ability
to maintain a stable net asset value. In such an instance, the Advisor or
Sub-Advisor will seek to sell such security to the extent it can do so in an
orderly fashion given current market conditions.

Such securities which are not Government Obligations are frequently not rated
by NRSROs; however, unrated variable and floating rate notes purchased by a Fund
will be determined by the Advisor or Sub-Advisor to be of comparable quality at
the time of purchase to rated instruments eligible for purchase under such
Fund's investment policies. In making such determinations, the Advisor or
Sub-Advisor will consider the earning power, cash flow and other liquidity
ratios of the issuers of such notes (such issuers include financial,
merchandising, bank holding and other companies) and will continuously monitor
their financial condition. Although there may be no active secondary market with
respect to a particular variable or floating rate security purchased by a Fund,
such Fund may resell the security at any time to a third party. The absence of
an active secondary market, however, could make it difficult for a Fund to
dispose of a variable or floating rate security in the event the issuer of the
note defaulted on its payment obligations and the Fund could, as a result or for
other reasons, suffer a loss to the extent of the default. Variable or floating
rate securities may be secured by bank letters of credit.

To the extent that a Fund holds a security for which it is not entitled to
receive the principal amount within seven days of demand and for which no
readily available market exists, such a security will be treated as an illiquid
security for purposes of calculation of the 10% limitation on such securities as
set forth below.

Repurchase Agreements. Securities held by each Fund may be subject to
repurchase agreements. Under the terms of a repurchase agreement, a Fund would
acquire securities, in exchange for cash, from banks and/or registered
broker-dealers which the Advisor or Sub-Advisor deems creditworthy under
guidelines approved by the Trust's Board of Trustees. The seller agrees to
repurchase such securities at a mutually agreed date and price. The repurchase
price generally equals the price paid by the Fund plus interest negotiated on
the basis of current short-term rates, which may be more or less than the rate
on the underlying portfolio securities. Securities subject to repurchase
agreements must be of the same type and quality as those in which such Fund may
invest directly. Repurchase agreements are considered to be loans by a Fund
under the Investment Company Act of 1940, as amended (the "1940 Act"). For
further information about repurchase agreements and the related risks, see
"INVESTMENT OBJECTIVES AND POLICIES--Additional Information on Portfolio Instru-

11
<PAGE> 68

ments--Repurchase Agreements" in the Statement of Additional Information.

Reverse Repurchase Agreements. Each Fund may borrow funds by entering into
reverse repurchase agreements in accordance with the investment restrictions
described below. Pursuant to such agreements, a Fund would sell portfolio
securities to financial institutions such as banks and broker-dealers, and agree
to repurchase them at a mutually agreed-upon date and price. At the time a Fund
enters into a reverse repurchase agreement, it will place in a segregated
custodial account assets such as Government Obligations consistent with such
Fund's investment restrictions having a value equal to the repurchase price
(including accrued interest), and will continually monitor the account to ensure
that such equivalent value is maintained at all times. Reverse repurchase
agreements involve the risk that the market value of the securities sold by a
Fund may decline below the price at which such Fund is obligated to repurchase
the securities. Reverse repurchase agreements are considered to be borrowings by
a Fund under the 1940 Act and therefore a form of leverage. A Fund may
experience a negative impact on its net asset value if interest rates rise
during the term of a reverse repurchase agreement. The Funds generally will
invest the proceeds of such borrowings only when such borrowings will enhance
the Fund's liquidity or when the Fund reasonably expects that the interest
income to be earned from the investment of the proceeds is greater than the
interest expense of the transaction. For further information about reverse
repurchase agreements, see "INVESTMENT OBJECTIVES AND POLICIES--Additional
Information on Portfolio Instruments--Reverse Repurchase Agreements" in the
Statement of Additional Information.

Foreign Investments. Investments in foreign securities (including ECDs, ETDs,
CTDs, Yankee CDs, CCP and Europaper) may subject the Prime Money Market Fund to
investment risks that differ in some respects from those related to investments
in securities of U.S. domestic issuers. Such risks include future adverse
political and economic developments, the possible imposition of withholding
taxes on interest or other investment income, possible seizure, nationalization,
or expropriation of foreign deposits or investments, the possible establishment
of exchange controls or taxation at the source, less stringent disclosure
requirements, less liquid or developed securities markets or the adoption of
other foreign governmental restrictions which might adversely affect the payment
of principal or interest on such securities or the purchase or sale thereof. In
addition, foreign branches of U.S. banks and foreign banks may be subject to
less stringent reserve requirements and to different accounting, auditing,
reporting, and recordkeeping standards than those applicable to domestic
branches of U.S. banks.

Restricted Securities. Securities in which the Prime Money Market Fund may
invest include securities issued by corporations without registration under the
Securities Act of 1933, as amended (the "1933 Act"), such as securities issued
in reliance on the so-called "private placement" exemption from registration
which is afforded by Section 4(2) of the 1933 Act ("Section 4(2) securities").
Section 4(2) securities are restricted as to disposition under the Federal
securities laws, and generally are sold to institutional investors such as the
Prime Money Market Fund who agree that they are purchasing the securities for
investment and not with a view to public distribution. Any resale must also
generally be made in an exempt transaction. Section 4(2) securities are normally
resold, if at all, to other institutional investors through or with the
assistance of the issuer or investment dealers who facilitate the resale of such
Section 4(2) securities, thus providing some liquidity.

Pursuant to procedures adopted by the Board of Trustees of the Trust, the
Advisor or Sub-Advi-

12
<PAGE> 69

sor may determine Section 4(2) securities to be liquid if such securities are
eligible for resale under Rule 144A under the 1933 Act and are readily saleable.
Rule 144A permits the Prime Money Market Fund to purchase securities which have
been privately placed and resell such securities to certain qualified
institutional buyers without restriction. For purposes of determining whether a
Rule 144A security is readily saleable, and therefore liquid, the Advisor or
Sub-Advisor must consider, among other things, the frequency of trades and
quotes for the security, the number of dealers willing to purchase or sell the
security, the number of potential purchasers and dealer undertakings to make a
market in the security, and the nature of the security and marketplace trades of
such security. However, investing in Rule 144A securities, even if such
securities are initially determined to be liquid, could have the effect of
increasing the level of the Prime Money Market Fund's illiquidity to the extent
that qualified institutional buyers become, for a time, uninterested in
purchasing these securities.

Securities Lending. In order to generate additional income, each Fund may,
from time to time, lend its portfolio securities to broker-dealers, banks, or
institutional borrowers of securities. A Fund must receive 100% collateral in
the form of cash or U.S. Government securities. This collateral will be valued
daily by the Advisor or Sub-Advisor. Should the market value of the loaned
securities increase, the borrower must furnish additional collateral to the
Fund. During the time portfolio securities are on loan, the borrower pays the
Fund any dividends or interest received on such securities. Loans are subject to
termination by a Fund or the borrower at any time. While a Fund does not have
the right to vote securities on loan, each Fund intends to terminate the loan
and regain the right to vote if that is considered important with respect to the
investment. In the event the borrower would default in its obligations, a Fund
bears the risk of delay in recovery of the portfolio securities and the loss of
rights in the collateral. A Fund will enter into loan agreements only with
broker-dealers, banks, or other institutions that the Advisor or Sub-Advisor has
determined are creditworthy under guidelines established by the Trust's Board of
Trustees. Neither Fund will lend more than 33% of the total value of its
portfolio securities at any one time.

When-Issued or Delayed-Delivery Securities. Each Fund may purchase securities
on a when-issued or delayed-delivery basis. These transactions are arrangements
in which a Fund purchases securities with payment and delivery scheduled for a
future time. Each Fund will engage in when-issued and delayed-delivery
transactions only for the purpose of acquiring portfolio securities consistent
with and in furtherance of its investment objective and policies, not for
investment leverage, although such transactions represent a form of leveraging.
When-issued or delayed-delivery securities are securities purchased for delivery
beyond the normal settlement date at a stated price and yield and thereby
involve a risk that the yield obtained in the transaction will be less than
those available in the market when delivery takes place. A Fund will generally
not pay for such securities or start earning interest or dividends on them until
they are received on the settlement date. When a Fund agrees to purchase such
securities, however, its custodian will set aside cash or liquid securities
equal to the amount of the commitment in a separate account. Securities
purchased on a when-issued or delayed-delivery basis are recorded as an asset
and are subject to changes in the value based upon changes in the general level
of interest rates. In when-issued and delayed-delivery transactions, a Fund
relies on the seller to complete the transaction; the seller's failure to do so
may cause that Fund to miss a price or yield considered to be advantageous.

Investment Company Securities. Each Fund may also invest in the securities of
other investment companies in accordance with the limitations of the 1940 Act
and any exemptions therefrom. Each Fund intends to invest, for purposes of
short-term cash management, in money market mutual funds which invest in the
same securities in which such Fund may invest. A Fund will incur

13
<PAGE> 70

additional expenses due to the duplication of fees and expenses as a result of
investing in mutual funds. Additional restrictions on the Funds' investments in
the securities of other mutual funds are contained in the Statement of
Additional Information.

Year 2000. Like other investment companies, financial and business
organizations and individuals around the world, the Funds could be affected
adversely if the computer systems used by the Advisor, Sub-Advisor, the Funds'
other service providers, and others do not properly process and calculate
date-related information and data from and after January 1, 2000. This is
commonly known as the "Year 2000 Problem." The Advisor, Sub-Advisor, and the
Funds' other service providers have informed the Trust that they are taking
steps to address the Year 2000 Problem with respect to the computer systems that
they use. At this time, however, there can be no assurance that these steps will
be sufficient to avoid any adverse impact on the Funds as a result of the Year
2000 Problem.

INVESTMENT RESTRICTIONS

1. Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities, if,
immediately after such purchase, more than 5% of the Fund's total assets would
be invested in such issuer or the Fund would hold more than 10% of the
outstanding voting securities of the issuer, except that 25% or less of the
Fund's total assets may be invested without regard to such limitations. There is
no limit to the percentage of assets that may be invested in U.S. Treasury
bills, notes, or other obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities.

2. Purchase any securities which would cause more than 25% of the Fund's total
assets at the time of purchase to be invested in securities of one or more
issuers conducting their principal business activities in the same industry,
provided that (a) there is no limitation with respect to obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities, and
repurchase agreements secured by obligations of the U.S. Government, its
agencies or instrumentalities; (b) with respect to the Prime Money Market Fund
there is no limitation with respect to domestic bank certificates of deposit or
bankers' acceptances, and repurchase agreements secured by bank instruments; (c)
wholly owned finance companies will be considered to be in the industries of
their parents if their activities are primarily related to financing the
activities of their parents; and (d) utilities will be divided according to
their services. For example, gas, gas transmission, electric and gas, electric,
and telephone will each be considered a separate industry.

3. Borrow money or issue senior securities except that each Fund may enter
into reverse repurchase agreements and may otherwise borrow money or issue
senior securities as and to the extent permitted by the 1940 Act or any rule,
order or interpretation thereunder. (The 1940 Act currently permits each Fund to
borrow up to one-third the value of its total assets at the time of such
borrowing.) So long as the Fund's borrowings, including reverse repurchase
agreements and dollar roll agreements, exceed 5% of such Fund's total assets,
the Fund will not acquire any portfolio securities.

4. Make loans, except that the Fund may purchase or hold debt instruments and
lend portfolio securities in accordance with its investment objective and
policies, make time deposits with financial institutions and enter into
repurchase agreements.

The following additional investment restriction may be changed without the
vote of a majority of the outstanding Shares of the applicable Fund.
14
<PAGE> 71

Each Fund may not purchase or otherwise acquire any security if, as a result,
more than 10% of its net assets would be invested in securities that are
illiquid. For purposes of this investment restriction, illiquid securities
include securities which are not readily marketable and repurchase agreements
with maturities in excess of seven days.

VALUATION OF SHARES

The net asset value of each Fund is determined and its Shares are priced as of
12:00 noon (Eastern time) and the close of regular trading on the New York Stock
Exchange (the "Exchange") (generally 4:00 p.m. Eastern time) on each Business
Day of that Fund. The times at which the Shares of a Fund are priced are
hereinafter referred to as the "Valuation Times." A "Business Day" of a Fund is
a day on which the Exchange is open for trading and any other day (other than a
day on which no Shares of that Fund are tendered for redemption and no order to
purchase any Shares of that Fund is received) during which there is sufficient
trading in portfolio instruments such that the Fund's net asset value per share
might be materially affected. The Exchange will not be open in observance of the
following holidays: New Year's Day, Martin Luther King, Jr. Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas. Net asset value per share for purposes of pricing purchases and
redemptions is calculated by dividing the value of all securities and other
assets belonging to a Fund, less the liabilities charged to that Fund, by the
number of that Fund's outstanding Shares. The net asset value of each class of a
Fund is calculated separately.

The assets in each of the Funds are valued based upon the amortized cost
method which the Trustees of the Trust believe fairly reflects the market-based
net asset value per share. Pursuant to the rules and regulations of the
Commission regarding the use of the amortized cost method, each Fund maintains a
dollar-weighted average portfolio maturity of 90 days or less. Although the
Trust seeks to maintain each Fund's net asset value per share at $1.00, there
can be no assurance that net asset value will not vary.

HOW TO PURCHASE AND REDEEM SHARES

DISTRIBUTOR

Shares of the Funds are sold on a continuous basis by the Trust's distributor,
BISYS (the "Distributor"). The principal office of the Distributor is 3435
Stelzer Road, Columbus, Ohio 43219. If you wish to purchase Shares, telephone
the Trust at (800) 766-3960.

EMPLOYEE BENEFIT PLANS

PURCHASES OF SHARES

Investor Shares may be purchased through procedures established by the
Distributor in connection with the requirements of qualified accounts maintained
by or on behalf of certain persons ("Customers") by the Advisor, Sub-Advisor,
their affiliates or their correspondent entities (collectively, "Entities").

Investor Shares of the Funds sold to the Entities acting in a fiduciary,
advisory, custodial, agency, or other similar capacity on behalf of Customers
will normally be held of record by the Entities. With respect to Investor Shares
of the Funds so sold, it is the responsibility of the particular Entity to
transmit purchase or redemption orders to the Distributor and to deliver federal
funds for purchase on a timely basis. Beneficial ownership of Investor Shares
will be recorded by the Entities and reflected in the account statements
provided by the Entities to Customers.

15
<PAGE> 72

Investors may also purchase Investor Shares of either Fund by completing and
signing an Account Registration Form and mailing it, together with a check (or
other negotiable bank draft or money order) in at least the minimum initial
purchase amount, payable to the appropriate Fund, to Governor Funds, P.O. Box
182707, Columbus, Ohio 43218-2707. Subsequent purchases of Investor Shares of
that Fund may be made at any time by mailing a check (or other negotiable bank
draft or money order) payable to the Trust, to the above address.

If an Account Registration Form has been previously received by the Trust,
investors may also purchase Investor Shares by wiring funds to the Funds'
custodian. Prior to wiring any such funds and in order to ensure that wire
orders are invested promptly, investors must call the Trust at (800) 766-3960 to
obtain instructions regarding the bank account number into which the funds
should be wired and other pertinent information.

An order to purchase Shares of a Fund will be deemed to have been received by
the Distributor only when federal funds with respect thereto are available to
the Fund's custodian for investment. Federal funds are monies credited to a
bank's account with a Federal Reserve Bank. Payment for an order to purchase
Shares of a Fund which is transmitted by federal funds wire will be available
the same day for investment by that Fund's custodian, if received prior to the
last Valuation Time (see "VALUATION OF SHARES"). Payments transmitted by other
means (such as by check drawn on a member of the Federal Reserve System) will
normally be converted into federal funds within two banking days after receipt.
The Trust strongly recommends that investors of substantial amounts use federal
funds to purchase Shares. Shares of the Funds purchased before 12:00 noon,
Eastern Time, begin earning dividends on the same Business Day. Shares of the
Funds purchased after 12:00 noon, Eastern Time, begin earning dividends on the
next Business Day. All Shares of the Funds continue to earn dividends through
the day before their redemption.

PURCHASE OF S SHARES

S Shares of the Prime Money Market Fund are offered to customers of Keystone,
any of its banking affiliates or Service Organizations that establish cash
management services, such as a Sweep Account with Keystone, any of its
affiliates or a Service Organization. Each Sweep Account combines a Transaction
Account with a periodic sweep of balance to or from the Prime Money Market Fund.
Investors may open a Sweep Account by completing and signing the appropriate
Sweep Materials. The Sweep Materials contain important information about the
various features and operations of the Sweep Account and should be reviewed in
conjunction with this Prospectus.

S Shares may be purchased on any Business Day by making a deposit into your
Transaction Account. On each Business Day that Keystone, any of its banking
affiliates or a Service Organization is open for business, Keystone, any of its
banking affiliates or a Service Organization computes the net amount of all
deposits, withdrawals, charges and credits made to and from a Transaction
Account in accordance with their Sweep Account procedures (the "Net Sweep
Amount"). If deposits and credits exceed withdrawals and charges, you authorize
Keystone, any of its banking affiliates or a Service Organization, on your
behalf, to transmit a purchase order to the Prime Money Market Fund in your
Sweep Account in the amount of that day's Net Sweep Amount in accordance with
the Sweep Account procedures of Keystone, any of its banking affiliates or a
Service Organization. Your purchase order will be made effective and full and
fractional S Shares will be purchased at the net asset value per Share next
determined after receipt by the Trust. It is the responsibility of Keystone, any
of its banking affiliates or a Service Organization to transmit orders for the
purchases of S Shares by its customers to the Transfer Agent and deliver
required funds on a timely basis, in accordance with the procedures stated
above. Share

16
<PAGE> 73

purchases and redemptions executed through Keystone, any of its banking
affiliates or a Service Organization are executed only on Business Days that
Keystone, any of its banking affiliates or a Service Organization, respectively,
is open for business. Contact Keystone, any of its banking affiliates or your
Service Organization for additional information about Keystone's, any of its
banking affiliates', or the Service Organizations' Sweep Account procedures.

MINIMUM INVESTMENT

Except as otherwise discussed below under "Auto Invest Plan," the minimum
investment is $1,000 for the initial purchase of Shares of either Fund by an
investor and $25 for subsequent purchases of Shares of that Fund.

The initial minimum investment amount is reduced to $250 for employees of the
Advisor, Sub-Advisor, Keystone or any of their affiliates.

Depending upon the terms of a particular Customer's account, the Entities or
their affiliates may charge a Customer account fees for automatic investment and
other cash management services provided in connection with an investment in the
Funds. Information concerning these services and any charges will be provided by
the Entities. This Prospectus should be read in conjunction with any such
information received from the Entities or their affiliates.

The Trust reserves the right to reject any order for the purchase of Shares in
whole or in part, including purchases made with foreign checks and third party
checks not originally made payable to the order of the investor.

Every Shareholder will receive a confirmation of each new transaction in his
or her account, which will also show the total number of Shares owned by the
Shareholder and the number of Shares being held in safekeeping by the Transfer
Agent for the account of the Shareholder. Reports of purchases and redemptions
of Shares by Entities on behalf of their Customers will be sent by the Entities
to their Customers. Shareholders may rely on these statements in lieu of
certificates. Certificates representing Shares will not be issued.

AUTO INVEST PLAN

The Governor Funds Auto Invest Plan enables Shareholders to make regular
monthly or quarterly purchases of Investor Shares of the Funds through automatic
deduction from their bank accounts, provided that the Shareholder's bank is a
member of the Federal Reserve and the Automated Clearing House (ACH) system.
With Shareholder authorization the Transfer Agent will deduct the amount
specified (subject to the applicable minimums) from the Shareholder's bank
account which will automatically be invested in Investor Shares of the
designated Fund at the public offering price next determined after receipt of
payment by the Transfer Agent. The required minimum initial investment when
opening an account using the Auto Invest Plan is $250; the minimum amount for
subsequent investments is $25. To participate in the Auto Invest Plan,
Shareholders should complete the appropriate section of the Account Registration
Form or a supplemental sign-up form which can be acquired by calling the Trust
at (800) 766-3960. For a Shareholder to change the Auto Invest instructions, the
request must be made in writing to the Trust at: 3435 Stelzer Road, Columbus,
Ohio 43219.

The Trust may eliminate or change the Auto Invest Plan at any time or from
time to time without notice thereof.

GOVERNOR FUNDS INDIVIDUAL RETIREMENT ACCOUNT ("IRA")

tain employer pension plans and whose annual income exceeds certain limits.
Existing IRAs and future contributions up to the IRA maximums, whether
deductible or not, still earn income on a tax-deferred basis.

All Governor Funds IRA distribution requests must be made in writing to the
Distributor. Any deposits to a Governor Funds IRA must distinguish the type and
year of the contributions.

IN-KIND PURCHASES

Payment for Shares of either Fund may, in the discretion of the Advisor or
Sub-Advisor, be made in the form of securities that are permissible investments
for that Fund as described in this Prospectus. For further information about
this form of payment, contact the Advisor or Sub-Advisor. In connection with an
in-kind securities payment, the applicable Fund will require, among other
things, that the securities be valued on the date of purchase in accordance with
the pricing methods used by that Fund and that the Fund receive satisfactory
assurances that it will have good and marketable title to the securities
received by it; that the securities be in proper form of transfer to the Fund;
and that adequate information be provided concerning the basis and other tax
matters relating to the securities.

GENERAL

Shares of each Fund are purchased at the net asset value per share (see
"VALUATION OF SHARES") next determined after receipt by the Distributor, its
agents or broker-dealers with whom it has an agreement of an order in good form
to purchase Shares. Purchases of Shares of a Fund will be effected only on a
Business Day (as defined in "VALUATION OF SHARES") of that Fund.

There is no sales charge imposed by either Fund in connection with the
purchase of its Shares.

EXCHANGE PRIVILEGE

Shares of the Funds may be exchanged for Shares of any other Fund of the Trust
if the amount to be exchanged meets the applicable minimum investment
requirements and the exchange is made in states where it is legally authorized.
Each exchange will be made at respective net asset values except that a sales
charge, equal to the difference, if any, between the sales charge payable upon
the purchase of shares of the Fund of the Trust to be acquired in the exchange
and the sales charge previously paid on the Shares to be exchanged, will be
assessed. In determining the sales charge previously paid on the Shares to be
exchanged, such Shares may include Shares which were acquired through a previous
exchange for shares on which a sales charge was paid. Under such circumstances,
the Shareholder must notify the Trust that a sales charge was originally paid
and provide the Trust with sufficient information to permit confirmation of the
Shareholder's right not to pay a sales charge.

An exchange is considered a sale of Shares for federal income tax purposes.
18
<PAGE> 75

The Trust may at any time modify or terminate the foregoing exchange
privileges. The Trust, however, will give Shareholders 60 days' advance written
notice of any such modification.

REDEMPTION OF INVESTOR SHARES

Investor Shares may ordinarily be redeemed by mail or by telephone. However,
all or part of a Customer's Investor Shares may be redeemed in accordance with
instructions and limitations pertaining to his or her account at an Entity. For
example, if a Customer has agreed with an Entity to maintain a minimum balance
in his or her account with the Entity, and the balance in that account falls
below that minimum, the Customer may be obliged to redeem, or the Entity may
redeem on behalf of the Customer, all or part of the Customer's Investor Shares
of a Fund to the extent necessary to maintain the required minimum balance.
Also, Investor Shares may be redeemed using the check writing feature described
below.

Redemption by Mail

A written request for redemption must be received by the Trust, at the address
shown on the front page of this Prospectus, in order to honor the request. The
Transfer Agent will require a signature guarantee by an eligible guarantor
institution. The signature guarantee requirement will be waived if the following
conditions apply: (1) the redemption check is payable to the Shareholder(s) of
record, and (2) the redemption check is mailed to the Shareholder(s) at the
address of record or mailed or wired to a commercial bank account previously
designated on the Account Registration Form. There is no charge for having
redemption proceeds mailed to a designated bank account. To change the address
to which a redemption check is to be mailed, a written request therefor must be
received by the Transfer Agent. In connection with such request, the Transfer
Agent will require a signature guarantee by an eligible guarantor institution.
For purposes of this policy, the term "eligible guarantor institution" shall
include banks, brokers, dealers, credit unions, securities exchanges and
associations, clearing agencies and savings associations as those terms are
defined in the Securities Exchange Act of 1934. The Transfer Agent reserves the
right to reject any signature guarantee if (1) it has reason to believe that the
signature is not genuine, (2) it has reason to believe that the transaction
would otherwise be improper, or (3) the guarantor institution is a broker or
dealer that is neither a member of a clearing corporation nor maintains net
capital of at least $100,000.

Redemption by Telephone

If a Shareholder has so designated on the Account Registration Form, a
Shareholder may request a redemption of his or her Investor Shares by
telephoning the Trust and having the payment of redemption proceeds sent
electronically directly to a domestic commercial bank account previously
designated by the Shareholder on the Account Registration Form. A shareholder
may also have such payment mailed directly to the Shareholder at the
Shareholder's address as recorded by the Transfer Agent. However, this option
may be suspended for a period of 30 days following a telephonic address change.
Under most circumstances, such payments will be transmitted on the next Business
Day following receipt of a valid request for redemption. The Trust may reduce
the amount of a wire redemption payment by the then-current wire redemption
charge of the Funds' custodian. There is currently no charge for having payment
of redemption requests mailed or sent electronically to a
19
<PAGE> 76

designated bank account. For telephone redemptions, call the Trust at (800)
766-3960.

AUTO WITHDRAWAL PLAN

The Auto Withdrawal Plan enables Shareholders of a Fund, with an account
balance in such Fund of $5,000 or more, to make regular monthly or quarterly
redemptions of Investor Shares. With Shareholder authorization, the Transfer
Agent will automatically redeem Shares at the net asset value on the dates of
the withdrawal and have a check in the amount specified mailed to the
Shareholder. The required minimum withdrawal is $50 monthly. To participate in
the Auto Withdrawal Plan, Shareholders should call (800) 766-3960 for more
information. For a Shareholder to change the Auto Withdrawal instructions, the
request must be made in writing to the Trust.

CHECK-WRITING REDEMPTION PROCEDURE

The Transfer Agent will provide any Shareholder of a Fund who so requests with
a supply of checks, imprinted with the Shareholder's name, which may be drawn
against that Fund's account maintained by The Bank of New York (the "Bank"), for
redemption of Investor Shares. These checks may be made payable to the order of
any person in any amount not less than $500. To participate in this procedure,
an investor must complete the Check-Writing Redemption Form available from the
Transfer Agent. When a check is presented to the Bank for payment, the Transfer
Agent (as the Shareholder's agent) will cause the applicable Fund to redeem
sufficient Investor Shares in the Shareholder's account to cover the amount of
the check. Shares continue earning daily dividends until the day on which the
check is presented to the Bank for payment. Cancelled checks will be returned to
the Shareholder. Due to the delay caused by the requirement that redemptions be
priced at the next computed net asset value, the Bank will only accept for
payment checks presented through normal bank clearing channels. Shareholders
should not attempt to withdraw the full amount of an account or to close out an
account by using this procedure.

No charge will be made to a Shareholder for participation in the check-writing
redemption procedure or for the clearance of any checks. However, a
Shareholder's account may be subject to charges for copies, returned checks
and/or returned items of deposit.

In order to stop payment on a check, the Shareholder must notify the Trust in
writing before the check has been presented to the Bank for payment. A charge
may be deducted from the Shareholder's account for each stop payment order.

REDEMPTION OF S SHARES

If, on any Business Day that Keystone, any of its banking affiliates and the
particular Service Organization are open for business, withdrawals and charges
to your Sweep Account, including with-

20
<PAGE> 77

out limitation check transactions, exceed deposits and credits, Keystone, any of
its banking affiliates or the particular Service Organization, as applicable,
will transmit a redemption order on your behalf to the Prime Money Market Fund
in the dollar amount of that day's Net Sweep Amount. If your Sweep Account with
Keystone, any of its banking affiliates or the particular Service Organization,
as applicable, is closed as described in the Sweep Materials, Keystone, any of
its banking affiliates or the particular Service Organization, as applicable,
will normally transmit a redemption request on your behalf to the Prime Money
Market Fund for the balance of the S Shares of the Prime Money Market Fund held
through your Sweep Account. Redemptions are effected by the Trust on a Business
Day at the net asset value per share next determined after receipt of the
redemption order by the Trust. It is the responsibility of Keystone, any of its
banking affiliates or the particular Service Organization to transmit the
redemption order and credit its customer's Transaction Account with the
redemption proceeds on a timely basis. Keystone, any of its banking affiliates
or the Service Organization may withhold redemption proceeds pending check
collection or processing or other reasons all as set forth more fully in the
Sweep Materials.

DIVIDENDS AND TAXES

PAYMENTS TO SHAREHOLDERS

Redemption orders are effected at the net asset value per share next
determined after the Shares are properly tendered for redemption, as described
above. Payment to Shareholders for Shares redeemed will be made within seven
days after receipt by the Distributor of the request for redemption. However, to
the greatest extent possible, each Fund will attempt to honor requests from
Shareholders for same day payments upon redemption of Shares if the request for
redemption is received by the Distributor before 12:00 noon, Eastern Time, on a
Business Day or, if the request for redemption is received after 12:00 noon,
Eastern Time, to honor requests for payment on the next Business Day. The Funds
will attempt to so honor redemption requests unless it would be disadvantageous
to that Fund or its Shareholders to sell or liquidate portfolio securities in an
amount sufficient to satisfy requests for payments in that manner.

At various times, the Trust may be requested to redeem Shares for which it has
not yet received good payment. In such circumstances, the Trust may delay the
forwarding of proceeds for up to 15 days or more until payment has been
collected for the purchase of such Shares. During the period of any such delay,
Shares to be redeemed would continue to receive daily dividends as declared
until execution of the redemption. The Trust intends to pay cash for all Shares
redeemed, but under abnormal conditions which make payment in cash unwise, the
Trust may make payment wholly or partly in portfolio securities at their then
market value equal to the redemption price. In such cases, an investor may incur
brokerage costs in converting such securities to cash.

Due to the relatively high cost of handling small investments, the Trust
reserves the right to redeem, at net asset value, the Shares of a Fund of any
Shareholder if, because of redemptions of Shares by or on behalf of the
Shareholder (but not as a result of the establishment of an account with less
than $1,000 using the Auto Invest Plan), the account of such Shareholder has a
value of less than $1,000 ($250 if the Shareholder is an employee of the
Advisor, Sub-Advisor or one of its affiliates). Accordingly, an investor
purchasing Shares of a Fund in only the minimum investment amount may be subject
to such involuntary redemption if he or she thereafter redeems some of his or
her Shares. Before the Trust exercises its right to redeem such Shares and to
send the proceeds to the Shareholder, the Shareholder will be given notice that
the value of the Shares in his or her account is less than the minimum amount
and will be allowed at least 60 days to make an additional investment in an
amount which will increase the value of the account to at least $1,000 ($250 if
the Shareholder is an em-
21
<PAGE> 78

ployee of the Advisor, Sub-Advisor or one of its affiliates).

See "ADDITIONAL PURCHASE AND REDEMPTION INFORMATION" in the Statement of
Additional Information for examples of when the Trust may suspend the right of
redemption or redeem shares involuntarily in light of the Trust's
responsibilities under the 1940 Act.

DIVIDENDS

The net income of the Shares of each Fund is declared daily and such dividends
are generally paid monthly. Shareholders of both Funds will automatically
receive all income dividends and capital gains distributions in additional full
and fractional Shares of the appropriate Fund at the net asset value as of the
date of payment, unless the Shareholder elects to receive dividends or
distributions in cash. Such election, or any revocation thereof, must be made in
writing to the Transfer Agent at 3435 Stelzer Road, Columbus, Ohio 43219, and
will become effective with respect to dividends and distributions having record
dates after its receipt by the Transfer Agent.

Distributable net realized capital gains, if any, for the Funds are
distributed at least annually. Dividends are paid in cash not later than seven
Business Days after a Shareholder's complete redemption of his or her Shares in
a Fund.

Dividends on each Share of a Fund are determined in the same manner and are
paid in the same amounts irrespective of class, except that the Investor Shares
and the S Shares of the Prime Money Market Fund bear all expenses of its
Administrative Services Plan.

If a Shareholder elects to receive distributions in cash, and checks (1) are
returned and marked as "undeliverable" or (2) remain uncashed for six months,
the Shareholder's cash election will be changed automatically and future
dividend and capital gains distributions will be reinvested in the applicable
Fund at the per share net asset value determined as of the date of payment of
the distribution. In addition, any undeliverable checks or checks that remain
uncashed for six months will be canceled and will be reinvested in that Fund at
the per share net asset value determined as of the date of cancellation.

FEDERAL TAXES

Each Fund's distributions will generally be taxable to shareholders. Each Fund
expects that all, or substantially all, of its distributions will consist of
ordinary income. You will be subject to income tax on these distributions
regardless whether they are paid in cash or reinvested in additional shares. The
one major exception to these tax principles is that distributions on shares held
in an IRA (or other tax-qualified plan) will not be currently taxable.

You should consult your tax adviser for further information regarding federal,
state and local tax consequences with respect to your specific situation.

You will be advised at least annually as to the federal income tax
consequences of distributions made to you during the year.

MANAGEMENT OF THE TRUST

TRUSTEES OF THE TRUST

22
<PAGE> 79

filiates receives any compensation from the Trust for acting as a Trustee of the
Trust. The officers of the Trust receive no compensation directly from the Trust
for performing the duties of their offices. The Advisor and BISYS Ohio receive
fees from each Fund for providing certain services as Co-Administrators.

ADVISORS

Governors Group Advisors, Inc. is the investment adviser of each Fund. The
Advisor is a wholly owned subsidiary of Keystone Financial, Inc., 1 Keystone
Plaza, Harrisburg, Pennsylvania 17101 ("Keystone"). The Advisor was organized in
1998 and has not previously served as the investment adviser to a registered
open-end management investment company.

Subject to the general supervision of the Board of Trustees of the Trust and
in accordance with the investment objective and restrictions of each Fund, the
Advisor has agreed to manage each Fund, make decisions with respect to and place
orders for all purchases and sales of its portfolio securities, and maintain
each Fund's records relating to such purchases and sales.

The Advisor has entered into a Sub-Advisory Agreement with Martindale Andres &
Company, Inc. (the "Sub-Advisor"), Four Falls Corporate Center, Suite 200, West
Conshohocken, Pennsylvania 19428. The Sub-Advisor is also a wholly owned
subsidiary of Keystone. The Sub-Advisor was organized in 1989 and was acquired
by Keystone in December 1995. Subject to the supervision of the Advisor and the
Board of Trustees of the Trust and in accordance with the investment objective
and restrictions of each Fund, the Sub-Advisor manages each Fund, makes
decisions with respect to and places orders for all purchases and sales of its
portfolio securities, and maintains each Fund's records relating to such
purchases and sales.

For the services provided and expenses assumed pursuant to their respective
Agreements: the Advisor is entitled to receive an advisory fee from each Fund,
computed daily and paid monthly, at the annual rate of 0.40% of such Fund's
average daily net assets; and the Sub-Advisor is entitled to receive from the
Advisor a sub-advisory fee, computed daily and paid monthly, at an annual rate
of up to 0.40% of each Fund's average daily net assets. The exact amount of the
sub-advisory fee will be an amount agreed to by the Advisor, the Sub-Advisor and
the Trust from time to time, and shall initially be at the annual rate of 0.20%
and 0.10%, respectively, of the Prime Money Market Fund's and Treasury Money
Market Fund's respective average daily net assets. The sub-advisory fees paid by
the Advisor to the Sub-Advisor have no effect on the investment advisory fees
payable by the Funds to the Advisor. For the fiscal year or period ended June
30, 1998, the Prime Money Market Fund and Treasury Money Market Fund paid their
then adviser, Martindale Andres & Company, Inc., an advisory fee at an annual
rate of 0.20% and 0.10% of such Funds' respective average daily net assets.

The Advisor and Sub-Advisor may periodically voluntarily reduce all or a
portion of its advisory and sub-advisory fee with respect to one or more of the
Funds to increase the net income of that Fund available for distribution as
dividends. The Advisor and Sub-Advisor may not seek reimbursement of such
voluntarily reduced fees after the end of the fiscal year in which the fees were
reduced. The reduction of such fee will cause the yield and total return of that
Fund to be higher than they would otherwise be in the absence of such a
reduction.

ADMINISTRATORS AND DISTRIBUTOR

BISYS Ohio and the Advisor (collectively, the "Administrators") serve as each
Fund's administrators. BISYS acts as the Trust's principal underwriter and
distributor (the "Distributor"). BISYS, BISYS Ohio and their affiliated
companies, including BISYS Fund Services, Inc., are wholly owned by The BISYS
Group, Inc., a publicly-held company which is a provider of information
processing, loan servicing and 401(k) administration and recordkeeping services
to and through banking and other financial organizations.
23
<PAGE> 80

The Administrators generally assist in all aspects of each Fund's
administration and operation. For expenses assumed and services provided as
administrator pursuant to its management and administration agreement with the
Trust, the Administrators are entitled jointly to annual fees, computed daily
and paid periodically, calculated at an annual rate of 0.15% of that Fund's
average daily net assets. The Administrators may periodically voluntarily reduce
all or a portion of their administration fee with respect to one or more of the
Funds to increase the net income of that Fund available for distribution as
dividends. The Administrators may not seek reimbursement of such reduced fees
after the end of the fiscal year in which the fees were reduced. The voluntary
reduction of such fee will cause the yield and total return of that Fund to be
higher than they would otherwise be in the absence of such a fee reduction. For
the fiscal year or period ended June 30, 1998, the Prime Money Market Fund and
Treasury Money Market Fund each paid their then administrator, BISYS, an
administration fee at the annual rate of 0.115% of the respective average daily
net assets of each Fund.

EXPENSES

The Advisors and the Administrators bear all expenses in connection with the
performance of their services as investment advisers and administrators,
respectively, other than the cost of securities (including brokerage
commissions, if any) purchased for the Funds. Each Fund will bear the following
expenses relating to its operations: organizational expenses, taxes, interest,
any brokerage fees and commissions, fees and expenses of the Trustees of the
Trust, Commission fees, state securities qualification fees, costs of preparing
and printing prospectuses for regulatory purposes and for distribution to the
Fund's current shareholders, outside auditing and legal expenses, advisory fees,
fees and out-of-pocket expenses of the custodian, fund accountant and Transfer
Agent, costs for independent pricing services, certain insurance premiums, costs
of maintenance of the Trust's existence, costs of shareholders' reports and
meetings, expenses incurred under the Administrative Services Plan described
below and any extraordinary expenses incurred in the Fund's operation.

ADMINISTRATIVE SERVICES PLAN

The Trust has adopted an Administrative Services Plan (the "Services Plan")
pursuant to which each Fund is authorized to pay compensation to banks and other
financial institutions (each a "Service Organization"), which may include the
Advisors, Keystone and its banking affiliates, Entities, and BISYS, which agree
to provide certain ministerial, record keeping and/or administrative support
services for their customers or account holders (collectively, "customers") who
are the beneficial or record owner of Investor Shares or S Shares of that Fund.
In consideration for such services, a Service Organization receives a fee from
each Fund, computed daily and paid monthly, at an annual rate of up to .25% of
the average daily net asset value of Shares of that Fund owned beneficially or
of record by such Service Organization's customers for whom the Service
Organization provides such services.

The servicing agreements adopted under the Services Plan (the "Servicing
Agreements") require the Service Organizations receiving such compensation to
perform certain ministerial, record keeping and/or administrative support
services with respect to the beneficial or record owners of Shares of the Funds,
such as processing dividend and distribution payments from the Funds on behalf
of customers, providing periodic statements to customers showing their positions
in the Shares of the Funds, providing sub-accounting with respect to Shares
beneficially owned by such customers, providing customers with a service that
invests the assets of their ac-
24
<PAGE> 81

counts in Shares of the Funds pursuant to specific or pre-authorized
instructions and developing, maintaining and supporting systems to support cash
management services such as Sweep Accounts for S Shares. Each class of Shares
bears its own expenses under the Services Plan.

SERVICE ORGANIZATIONS

The Trust understands that Service Organizations providing such administrative
services may also charge fees to their customers beneficially owning Shares.
These fees would be in addition to any amount which may be received by such a
Service Organization under its Servicing Agreement with the Trust. Customers of
such a Service Organization receiving servicing fees should read this Prospectus
and the terms governing their accounts with their Service Organization.

BANKING LAWS

The Advisors believe that they possess the legal authority to perform the
investment advisory and administration services for each Fund contemplated by
its investment advisory and administration agreements with the Trust, as
described in this Prospectus, without violation of applicable banking laws and
regulations. Future changes in Federal or state statutes and regulations
relating to permissible activities of banks or bank holding companies and their
subsidiaries and affiliates as well as further judicial or administrative
decisions or interpretations of present and future statutes and regulations
could change the manner in which the Advisors could continue to perform such
services for the Funds. See "MANAGEMENT AND SERVICE PROVIDERS OF THE
TRUST--Glass-Steagall Act" in the Statement of Additional Information for
further discussion of applicable law and regulations.

GENERAL INFORMATION

DESCRIPTION OF THE TRUST AND ITS SHARES

The Trust was organized as a Delaware business trust on September 3, 1998. The
Trust consists of twelve funds, each having its own class(es) of shares. Each
share represents an equal proportionate interest in a fund with other shares of
the same class of shares of the fund, and is entitled to such dividends and
distributions out of the income earned on the assets belonging to the same class
of shares of the fund as are declared at the discretion of the Trustees (see
"Miscellaneous" below). The other funds of the Trust are the Established Growth,
Aggressive Growth, Emerging Growth, International Equity, Intermediate Term
Income, Limited Duration Government Securities, Pennsylvania Municipal Bond,
Lifestyle Conservative Growth, Lifestyle Moderate Growth and Lifestyle Growth
Funds.

Shareholders are entitled to one vote for each full share held and
proportionate fractional votes for fractional shares held, and will vote in the
aggregate and not by fund except as otherwise expressly required by law. For
example, Shareholders of the Prime Money Market Fund will vote in the aggregate
with other shareholders of the Trust with respect to the election of Trustees.
However, Shareholders of that Fund will vote as a fund, and not in the aggregate
with other shareholders of the Trust, for purposes of approval or amendment of
the Prime Money Market Fund's investment advisory agreement. Similarly, only
holders of Shares of a particular class of the Prime Money Market Fund will vote
on matters pertaining to that class under the Services Plan.

Overall responsibility for the management of each Fund is vested in the Board
of Trustees of the Trust. See "MANAGEMENT OF THE TRUST--Trustees of the Trust."
Individual Trustees are elected by the shareholders of the Trust, although
Trustees may, under certain circumstances, fill vacancies, including vacancies
created by expanding the size of the Board. Trustees may be removed by the Board
of Trustees or shareholders in accordance with the provisions of the Agreement
and Declaration of Trust and By-Laws of the Trust and Delaware law. See
"ADDITIONAL INFORMATION-- Miscellaneous" in the Statement of Additional
Information for further information.

25
<PAGE> 82

CUSTODIAN

The Bank of New York serves as the custodian for each Fund.

TRANSFER AGENCY AND FUND ACCOUNTING SERVICES

BISYS Fund Services, Inc., 3435 Stelzer Road, Columbus, Ohio 43219, serves as
the Funds' transfer agent pursuant to a Transfer Agency Agreement with the Trust
and receives a fee for such services. BISYS Fund Services, Inc. also provides
certain accounting services for the Funds pursuant to a Fund Accounting
Agreement and receives a fee from the Trust for such services for all the
Trust's funds computed at an annual rate of 0.03% (0.04% for the International
Equity Fund) of the Trust's average daily net assets up to $2 billion and 0.02%
(0.03% for the International Equity Fund) of the Trust's average daily net
assets of $2 billion or more, subject to a minimum annual fee of $30,000
($40,000 for the International Equity Fund and $35,000 for the Pennsylvania
Municipal Bond Fund). See "MANAGEMENT AND SERVICE PROVIDERS OF THE
TRUST--Transfer Agency and Fund Accounting Services" in the Statement of
Additional Information for further information. For the fiscal year ended June
30, 1998, the Prime Money Market and Treasury Money Market Funds paid BISYS Fund
Services, Inc. an accounting services fee of 0.03% of each Fund's respective
average daily net assets.

MISCELLANEOUS

Shareholders will receive unaudited semi-annual reports and annual reports
audited by independent public accountants.

As used in this Prospectus and in the Statement of Additional Information, a
"vote of a majority of the outstanding Shares" of a Fund or a class of Shares of
a Fund means the affirmative vote, at a meeting of Shareholders duly called, of
the lesser of (a) 67% or more of the votes of Shareholders of that Fund or that
class of Shares of that Fund present at a meeting at which the holders of more
than 50% of the votes attributable to Shareholders of record of such Fund or
such class of Shares of such Fund are represented in person or by proxy, or (b)
the holders of more than 50% of the outstanding votes of Shareholders of that
Fund or that class of Shares of that Fund.

Inquiries regarding the Funds may be directed in writing to the Trust at 3435
Stelzer Road, Columbus, Ohio 43219, or by calling toll free (800) 766-3960.

26
<PAGE> 83

INVESTMENT ADVISOR
Governors Group Advisors, Inc.
23 Front Street
Harrisburg, Pennsylvania 17101

INVESTMENT SUB-ADVISOR
Martindale Andres & Company, Inc.
Four Falls Corporate Center, Suite 200
West Conshohocken, Pennsylvania 19428

CO-ADMINISTRATORS
Governors Group Advisors, Inc.
23 Front Street
Harrisburg, Pennsylvania 17101

BISYS Fund Services Ohio, Inc.
3435 Stelzer Road
Columbus, Ohio 43219

DISTRIBUTOR

BISYS Fund Services

3435 Stelzer Road
Columbus, Ohio 43219

LEGAL COUNSEL
Drinker Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107

AUDITORS
KPMG Peat Marwick LLP
Two Nationwide Plaza, Suite 1600
Columbus, Ohio 43215

<TABLE>
<CAPTION>
PAGE
TABLE OF CONTENTS ----
<S> <C>
PROSPECTUS SUMMARY......................... 3
FEE TABLE.................................. 5
FINANCIAL HIGHLIGHTS....................... 6
PERFORMANCE INFORMATION.................... 7
INVESTMENT OBJECTIVES AND POLICIES......... 7
INVESTMENT RESTRICTIONS.................... 14
VALUATION OF SHARES........................ 15
HOW TO PURCHASE AND REDEEM SHARES.......... 15
DIVIDENDS AND TAXES........................ 21
MANAGEMENT OF THE TRUST.................... 22
GENERAL INFORMATION........................ 25
</TABLE>

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS
OR THEIR DISTRIBUTOR, BISYS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY
THE FUNDS OR BY BISYS IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.

OB-1618

GOVERNOR FUNDS LOGO

PRIME
MONEY
MARKET FUND
INVESTOR AND S SHARES

U.S. TREASURY
OBLIGATIONS MONEY
MARKET FUND
INVESTOR SHARES

GOVERNORS GROUP
ADVISORS, INC.
INVESTMENT ADVISOR

MARTINDALE
ANDRES & COMPANY, INC.
INVESTMENT SUB-ADVISOR
Prospectus dated

January 4, 1999

<PAGE> 84

PRIME MONEY MARKET FUND
U.S. TREASURY OBLIGATIONS MONEY MARKET FUND
ESTABLISHED GROWTH FUND
AGGRESSIVE GROWTH FUND
EMERGING GROWTH FUND
INTERNATIONAL EQUITY FUND
INTERMEDIATE TERM INCOME FUND
LIMITED DURATION GOVERNMENT SECURITIES FUND
PENNSYLVANIA MUNICIPAL BOND FUND
LIFESTYLE CONSERVATIVE GROWTH FUND
LIFESTYLE MODERATE GROWTH FUND
LIFESTYLE GROWTH FUND

Twelve Investment Portfolios of

GOVERNOR FUNDS

Statement of Additional Information

January 4, 1999

This Statement of Additional Information is not a prospectus, but should
be read in conjunction with the prospectuses (the "Prospectuses") of the Prime
Money Market Fund, U.S. Treasury Obligations Money Market Fund (the "Treasury
Money Market Fund"), Established Growth Fund, Aggressive Growth Fund,
International Equity Fund, Emerging Growth Fund, Intermediate Term Income Fund
(the "Income Fund"), Limited Duration Government Securities Fund (the
"Government Securities Fund"), Pennsylvania Municipal Bond Fund (the
"Pennsylvania Bond Fund"), Lifestyle Conservative Growth Fund, Lifestyle
Moderate Growth Fund and Lifestyle Growth Fund, each dated as of the date
hereof. The Prime Money Market Fund, Treasury Money Market Fund, Established
Growth Fund, Aggressive
<PAGE> 85

Growth Fund, International Equity Fund, Emerging Growth Fund, Income Fund,
Government Securities Fund, Pennsylvania Bond Fund, and the Lifestyle Funds are
hereafter collectively referred to as the "Funds" and individually as a "Fund."
The Funds are funds of Governor Funds, a Delaware business trust (the "Trust").
This Statement of Additional Information is incorporated in its entirety into
each Fund's Prospectus. Copies of the Funds' Prospectuses may be obtained by
writing the Trust at 3435 Stelzer Road, Columbus, Ohio 43219, or by telephoning
toll free (800) 766-3960.

Page 2
<PAGE> 86
TABLE OF CONTENTS
Page

GOVERNOR FUNDS ........................................................... 1
INVESTMENT OBJECTIVES AND POLICIES ....................................... 1
Additional Information on Portfolio Instruments .......................... 1
Investment Restrictions ..................................................14
Portfolio Turnover .......................................................15
NET ASSET VALUE ..........................................................16
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION ...........................16
MANAGEMENT AND SERVICE PROVIDERS OF THE TRUST ............................17
Trustees and Officers ....................................................17
Investment Advisor and Investment Subadvisors ............................18
Portfolio Transactions ...................................................19
Administrators ...........................................................22
Glass-Steagall Act .......................................................24
Distributor ..............................................................24
Administrative Services and Distribution Plans ...........................24
Custodian ................................................................25
Transfer Agency and Fund Accounting Services .............................25
Auditors .................................................................27
Legal Counsel ............................................................28
ADDITIONAL INFORMATION ...................................................28
Description of Shares ....................................................28
Vote of a Majority of the Outstanding Shares .............................30
Additional General Tax Information .......................................30
Seven-Day and 30-Day Yields of the Prime Money Market Fund and the
Treasury Money Market Fund .........................................30
30-Day Yield of the Funds ................................................30
Calculation of Total Return ..............................................32
Distribution Rates .......................................................33
Performance Comparisons ..................................................33
Miscellaneous ............................................................34
FINANCIAL STATEMENTS .....................................................36
APPENDIX A ...............................................................A-1
APPENDIX B ...............................................................B-1

i
<PAGE> 87
STATEMENT OF ADDITIONAL INFORMATION

GOVERNOR FUNDS

Governor Funds (the "Trust") is an open-end management investment company
which currently offers twelve separate investment portfolios. This Statement of
Additional Information covers all of those portfolios: the Prime Money Market
Fund, Treasury Money Market Fund, Established Growth Fund, Aggressive Growth
Fund, Emerging Growth Fund, International Equity Fund, Income Fund, Government
Securities Fund, Lifestyle Conservative Growth Fund, Lifestyle Moderate
Growth Fund, Lifestyle Growth Fund, each of which is considered to be a
diversified portfolio, and the Pennsylvania Bond Fund, which is considered to be
a non-diversified portfolio. The Prime Money Market, Treasury Money Market,
Established Growth, Aggressive Growth, Emerging Growth, Income, Government
Securities and Pennsylvania Bond Funds commenced operations on October 7, 1996,
July 1, 1997, December 2, 1996, February 3, 1997, July 1, 1998, December 2,
1996, July 1, 1997, and October 1, 1996, respectively, as separate investment
portfolios ("Predecessor Funds") of The Sessions Group, which was organized as
an Ohio business trust. On or about February 2, 1999, those Funds are expected
to be reorganized as portfolios of the Trust. This Statement of Additional
Information reflects that reorganization.

Much of the information contained in this Statement of Additional
Information expands upon subjects discussed in the Prospectuses. Capitalized
terms not defined herein are defined in the relevant Prospectus. No investment
in Shares of any Fund should be made without first reading such Fund's
Prospectus.

INVESTMENT OBJECTIVES AND POLICIES

Additional Information on Portfolio Instruments

The following policies supplement the investment objectives and policies
of the Funds as set forth in their respective Prospectuses.

Bank Obligations. Each Fund, other than the Treasury Money Market Fund and
the Government Securities Fund, may invest in bank obligations such as bankers'
acceptances, certificates of deposit, and demand and time deposits.

Bankers' acceptances are negotiable drafts or bills of exchange typically
drawn by an importer or exporter to pay for specific merchandise, which are
"accepted" by a bank, meaning, in effect, that the bank unconditionally agrees
to pay the face value of the instrument on maturity. Bankers' acceptances
invested in by the Funds will be those guaranteed by domestic and foreign banks
having, at the time of investment, capital, surplus, and undivided profits in
excess of $100,000,000 (as of the date of their most recently published
financial statements).

Certificates of deposit are negotiable certificates issued against funds
deposited in a commercial bank or a savings and loan association for a definite
period of time and earning a specified return. Certificates of deposit and
demand and time deposits will be those of domestic and foreign banks and savings
and loan associations, if (a) at the time of investment the depository
institution has capital, surplus, and undivided profits in excess of
$100,000,000 (as of the date of its most recently published financial
statements), or (b) the principal amount of the instrument is insured in full by
the Federal Deposit Insurance Corporation.

-1-
<PAGE> 88
The Prime Money Market Fund, Established Growth Fund, Aggressive Growth
Fund, Emerging Growth Fund, International Equity Fund, and the Income Fund may
also invest in Eurodollar Certificates of Deposit, which are U.S. dollar
denominated certificates of deposit issued by offices of foreign and domestic
banks located outside the United States; Yankee Certificates of Deposit, which
are certificates of deposit issued by a U.S. branch of a foreign bank
denominated in U.S. dollars and held in the United States; Eurodollar Time
Deposits ("ETDs"), which are U.S. dollar denominated deposits in a foreign
branch of a U.S. bank or a foreign bank; and Canadian Time Deposits, which are
basically the same as ETDs except they are issued by Canadian offices of major
Canadian banks.

Commercial Paper. Commercial paper consists of unsecured promissory notes
issued by corporations. Except as noted below with respect to variable amount
master demand notes, issues of commercial paper normally have maturities of less
than nine months and fixed rates of return.

The Funds, other than the Treasury Money Market Fund and the Government
Securities Fund, will purchase commercial paper consisting of issues rated at
the time of purchase by one or more nationally recognized statistical rating
organizations ("NRSRO") (e.g., Standard & Poor's Corporation ("S&P") and Moody's
Investors Service, Inc. ("Moody's")) in one of the two highest rating categories
for short-term debt obligations. Each such Fund may also invest in commercial
paper that is not rated but that is determined by the Sub-Advisor to be of
comparable quality to instruments that are so rated by an NRSRO. For a
description of the rating symbols of the NRSROs, see the Appendix. The Prime
Money Market Fund may also invest, subject to the foregoing quality criteria, in
Canadian Commercial Paper, which is commercial paper issued by a Canadian
corporation or a Canadian counterpart of a U.S. corporation ("CCP"), and in
Europaper, which is U.S. dollar denominated commercial paper of a foreign
issuer.

Variable Amount Master Demand Notes. Variable amount master demand notes
in which the Prime Money Market Fund, the Income Fund, the Government Securities
Fund and the Pennsylvania Bond Fund may invest are unsecured demand notes that
permit the indebtedness thereunder to vary and provide for periodic adjustments
in the interest rate according to the terms of the instrument. Because master
demand notes are direct lending arrangements between a Fund and the issuer, they
are not normally traded. Although there is no secondary market in the notes, the
Fund may demand payment of principal and accrued interest at any time within 30
days. While such notes are not typically rated by credit rating agencies,
issuers of variable amount master demand notes (which are normally
manufacturing, retail, financial and other business concerns), must satisfy, for
purchase by a Fund, the same criteria as set forth above for commercial paper.
The Sub-Advisor will consider the earning power, cash flow, and other liquidity
ratios of the issuers of such notes and will continuously monitor their
financial status and ability to meet payment on demand. In determining average
weighted portfolio maturity, a long-term variable amount master demand note will
be deemed to have a maturity equal to the longer of the period of time remaining
until the next interest rate adjustment or the period of time remaining until
the principal amount can be recovered from the issuer through demand.

Foreign Investment. Investments in securities issued by foreign branches
of U.S. banks, foreign banks, or other foreign issuers, including ADRs, may
subject the Prime Money Market Fund, Established Growth Fund, Aggressive Growth
Fund, Emerging Growth Fund, International Equity Fund and the Income Fund to
investment risks that differ in some respects from those related to investment
in obligations of U.S. domestic issuers or in U.S. securities markets. Such
risks include future adverse

-2-
<PAGE> 89
political and economic developments, possible seizure, nationalization, or
expropriation of foreign investments, less stringent disclosure requirements,
the possible establishment of exchange controls or taxation at the source, or
the adoption of other foreign governmental restrictions.

U.S. Government Obligations. Each Fund may invest in obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities, although
the Treasury Money Market Fund currently expects to invest only in those
obligations which are backed by the full faith and credit of the U.S.
Government. Obligations of certain agencies and instrumentalities of the U.S.
Government are supported by the full faith and credit of the U.S. Treasury;
others are supported by the right of the issuer to borrow from the Treasury;
others are supported by the discretionary authority of the U.S. Government to
purchase the agency's obligations; and still others are supported only by the
credit of the instrumentality. No assurance can be given that the U.S.
Government would provide financial support to U.S. Government-sponsored agencies
or instrumentalities if it is not obligated to do so by law.

Each Fund may also invest in the following types of U.S. Treasury
securities: direct obligations issued by the U.S. Treasury including bills,
notes and bonds which differ from each other only in interest rates, maturities
and times of issuance; U.S. Treasury securities that have been stripped of their
unmatured interest coupons (which typically provide for interest payments
semi-annually); interest coupons that have been stripped from such U.S. Treasury
securities; receipts and certificates for such stripped debt obligations and
stripped coupons (collectively, "Stripped Treasury Securities"); and in
repurchase agreements collateralized by such securities. Stripped Treasury
Securities will include (1) coupons that have been stripped from U.S. Treasury
bonds, which may be held through the Federal Reserve Bank's book-entry system
called "Separate Trading of Registered Interest and Principal of Securities"
("STRIPS") or through a program entitled "Coupon Under Book-Entry Safekeeping"
("CUBES").

Treasury bills have maturities of one year or less; Treasury notes have
maturities of one to ten years and Treasury bonds generally have maturities of
greater than ten years. Stripped Treasury Securities are sold at a deep discount
because the buyer of those securities receives only the right to receive a
future fixed payment (representing principal or interest) on the security and
does not receive any rights to periodic interest payments on the security.

Exempt Securities. As stated in its Prospectus, the assets of the
Pennsylvania Bond Fund will be primarily invested in Exempt Securities. Exempt
Securities include debt obligations issued by governmental entities to obtain
funds for various public purposes, such as the construction of a wide range of
public facilities, the refunding of outstanding obligations, the payment of
general operating expenses, and the extension of loans to other public
institutions and facilities. Private activity bonds that are issued by or on
behalf of public authorities to finance various privately-operated facilities
are included within the term Exempt Securities, only if the interest paid
thereon is exempt from both Pennsylvania income taxes and federal taxes,
although such interest may be treated as a preference item for purposes of the
federal alternative minimum tax.

Among other types of Exempt Securities, the Pennsylvania Bond Fund may
purchase short-term General Obligation Notes, Tax Anticipation Notes, Bond
Anticipation Notes, Revenue Anticipation Notes, Project Notes, Tax-Exempt
Commercial Paper, Construction Loan Notes and other forms of short-term
tax-exempt loans. Such instruments are issued with a short-term maturity in
anticipation of

-3-
<PAGE> 90
the receipt of tax funds, the proceeds of bond placements or other revenues. In
addition, the Pennsylvania Bond Fund may invest in other types of tax-exempt
instruments, such as municipal bonds, private activity bonds, and pollution
control bonds.

Project Notes are issued by a state or local housing agency and are sold
by the Department of Housing and Urban Development. While the issuing agency has
the primary obligation with respect to its Project Notes, they are also secured
by the full faith and credit of the United States through agreements with the
issuing authority which provide that, if required, the federal government will
lend the issuer an amount equal to the principal of and interest on the Project
Notes.

As described in the Prospectus of the Pennsylvania Bond Fund, the two
principal classifications of Exempt Securities consist of "general obligation"
and "revenue" issues. The Pennsylvania Bond Fund may also acquire "moral
obligation" issues, which are normally issued by special purpose authorities.
There are, of course, variations in the quality of Exempt Securities, both
within a particular classification and between classifications, and the yields
on Exempt Securities depend upon a variety of factors, including the financial
condition of the issuer, general conditions of the municipal bond market, the
size of a particular offering, the maturity of the obligation and the rating of
the issue. Ratings represent the opinions of an NRSRO as to the quality of
Exempt Securities. It should be emphasized, however, that ratings are general
and are not absolute standards of quality, and Exempt Securities with the same
maturity, interest rate and rating may have different yields, while Exempt
Securities of the same maturity and interest rate with different ratings may
have the same yield. Subsequent to purchase, an issue of Exempt Securities may
cease to be rated or its rating may be reduced below the minimum rating required
for purchase. The Sub-Advisor will consider such an event in determining whether
the Pennsylvania Bond Fund should continue to hold the obligation.

An issuer's obligations under its Exempt Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors, such as the federal bankruptcy code, and laws, if any,
which may be enacted by Congress or state legislatures extending the time for
payment of principal or interest, or both, or imposing other constraints upon
the enforcement of such obligations or upon the ability of municipalities to
levy taxes. The power or ability of an issuer to meet its obligations for the
payment of interest on and principal of its Exempt Securities may be materially
adversely affected by litigation or other conditions.

The Pennsylvania Bond Fund may also invest in municipal lease obligations
or installment purchase contract obligations. Municipal lease obligations or
installment purchase contract obligations (collectively, "lease obligations")
have special risks not ordinarily associated with Exempt Securities. Although
lease obligations do not constitute general obligations of the municipality for
which the municipality's taxing power is pledged, a lease obligation ordinarily
is based by the municipality's covenant to budget for, appropriate and make the
payments due under the lease obligation. However, certain lease obligations
contain "non-appropriation" clauses which provide that the municipality has no
obligation to make lease or installment purchase payments in future years unless
money is appropriated for such purpose on a yearly basis. Although
"non-appropriation" lease obligations are secured by the leased property,
disposition of the property in the event of foreclosure might prove difficult.
The staff of the Commission currently considers certain lease obligations to be
illiquid. Determination as to the liquidity of such securities is made by the
Sub-Advisor. The Pennsylvania Bond Fund will not invest

-4-
<PAGE> 91
more than 15% of the value of its net assets in lease obligations that are
illiquid and in other illiquid securities.

Variable and Floating Rate Securities. The Prime Money Market Fund, U.S.
Treasury Fund, Income Fund, Government Securities Fund and Pennsylvania Bond
Fund may acquire variable and floating rate securities, subject to such Fund's
investment objectives, policies and restrictions. A variable rate security is
one whose terms provide for the adjustment of its interest rate on set dates and
which, upon such adjustment, can reasonably be expected to have a market value
that approximates its par value or amortized cost, as the case may be. A
floating rate security is one whose terms provide for the adjustment of its
interest rate whenever a specified interest rate changes and which, at any time,
can reasonably be expected to have a market value that approximates its par
value or amortized cost, as the case may be. Such securities, that are not
obligations of the U.S. Government or its agencies or instrumentalities, are
frequently not rated by credit rating agencies; however, unrated variable and
floating rate securities purchased by a Fund will be determined by the
Sub-Advisor to be of comparable quality at the time of purchase to rated
instruments eligible for purchase under that Fund's investment policies. In
making such determinations, the Sub-Advisor will consider the earning power,
cash flow and other liquidity ratios of the issuers of such securities (such
issuers include financial, merchandising, bank holding and other companies) and
will continuously monitor their financial condition. Although there may be no
active secondary market with respect to a particular variable or floating rate
security purchased by a Fund, the Fund may resell the security at any time to a
third party. The absence of an active secondary market, however, could make it
difficult for the Fund to dispose of a variable or floating rate security in the
event the issuer of the security defaulted on its payment obligations and the
Fund could, as a result or for other reasons, suffer a loss to the extent of the
default. To the extent that there exists no readily available market for such
security and the Fund is not entitled to receive the principal amount of a
security within seven days, such a security will be treated as an illiquid
security for purposes of calculation of that Fund's limitation on investments in
illiquid securities, as set forth in its investment restrictions. Variable or
floating rate securities may be secured by bank letters of credit.

Variable or floating rate securities invested in by the Prime Money Market
Fund and the Treasury Money Market Fund may have maturities of more than 397
days, to the extent permitted under SEC regulations.

Restricted Securities. Securities in which the Prime Money Market Fund,
the Treasury Fund, Aggressive Growth Fund, the Emerging Growth Fund, the
International Equity Fund and the Income Fund may invest include securities
issued by corporations without registration under the Securities Act of 1933, as
amended (the "1933 Act"), such as securities issued in reliance on the so-called
"private placement" exemption from registration which is afforded by Section
4(2) of the 1933 Act ("Section 4(2) securities"). Section 4(2) securities are
restricted as to disposition under the Federal securities laws, and generally
are sold to institutional investors such as a Fund who agree that they are
purchasing the securities for investment and not with a view to public
distribution. Any resale must also generally be made in an exempt transaction.
Section 4(2) securities are normally resold to other institutional investors
through or with the assistance of the issuer or investment dealers who make a
market in such Section 4(2) securities, thus providing liquidity. Any such
restricted securities will be considered to be illiquid for purposes of a
Fund's limitations on investments in illiquid securities unless the
Sub-Advisor has determined such securities to be liquid.

-5-
<PAGE> 92

Mortgage-Backed and Asset-Backed Securities. The Income Fund and the
Government Securities Fund may, consistent with its investment objective and
policies, invest in mortgage-related securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities. In addition, the Income Fund
may also invest in mortgage-related securities issued by non-governmental
entities.

Mortgage-backed securities, for purposes of the Income Fund's and the
Government Securities Fund's Prospectus and this Statement of Additional
Information, represent pools of mortgage loans assembled for sale to investors
by various governmental agencies such as the Government National Mortgage
Association and government-related organizations such as the Federal National
Mortgage Association and the Federal Home Loan Mortgage Corporation, as well as
by non-governmental issuers such as commercial banks, savings and loan
institutions, mortgage bankers and private mortgage insurance companies in the
case of the Income Fund. Although certain mortgage-related securities are
guaranteed by a third party or otherwise similarly secured, the market value of
the security, which may fluctuate, is not so secured. If a Fund purchases a
mortgage-related security at a premium, that portion may be lost if there is a
decline in the market value of the security whether resulting from changes in
interest rates or prepayments in the underlying mortgage collateral. As with
other interest-bearing securities, the prices of such securities are inversely
affected by changes in interest rates. However, though the value of a
mortgage-related security may decline when interest rates rise, the converse is
not necessarily true, since in periods of declining interest rates the mortgages
underlying the securities are prone to prepayment, thereby shortening the
average life of the security and shortening the period of time over which income
at the higher rate is received. Conversely, when interest rates are rising, the
rate of prepayment tends to decrease, thereby lengthening the average life of
the security and lengthening the period of time over which income at the lower
rate is received. For these and other reasons, a mortgage-related security's
average maturity may be shortened or lengthened as a result of interest rate
fluctuations and, therefore, it is not possible to predict accurately the
security's return to a Fund. In addition, regular payments received in respect
of mortgage-related securities include both interest and principal. No assurance
can be given as to the return a Fund will receive when these amounts are
reinvested.

The Income Fund may invest in mortgage-backed securities which are
collateralized mortgage obligations ("CMOs") structured on pools of mortgage
pass-through certificates or mortgage loans. Mortgage-backed securities will be
purchased only if rated in the four highest bond rating categories assigned by
one or more appropriate NRSROs, or, if unrated, which the Sub-Advisor deems to
be of comparable quality to securities so rated.

There are a number of important differences among the agencies and
instrumentalities of the U.S. Government that issue mortgage-backed securities
and among the securities that they issue. Mortgage-related securities issued by
the Government National Mortgage Association ("GNMA") include GNMA Mortgage
Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as
to the timely payment of principal and interest by GNMA and such guarantee is
backed by the full faith and credit of the United States. GNMA is a wholly-owned
U.S. Government corporation within the Department of Housing and Urban
Development. GNMA certificates also are supported by the authority of GNMA to
borrow funds from the U.S. Treasury to make payments under its guarantee.
Mortgage-related securities issued by the Federal National Mortgage Association
("FNMA") include

-6-
<PAGE> 93
FNMA Guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes")
which are solely the obligations of the FNMA and are not backed by or entitled
to the full faith and credit of the United States. The FNMA is a
government-sponsored organization owned entirely by private stockholders. Fannie
Maes are guaranteed as to timely payment of the principal and interest by FNMA.
Mortgage-backed securities issued by the Federal Home Loan Mortgage Corporation
("FHLMC") include FHLMC Mortgage Participation Certificates (also known as
"Freddie Macs" or "PCs"). The FHLMC is a corporate instrumentality of the United
States, created pursuant to an Act of Congress, which is owned entirely by
Federal Home Loan Banks. Freddie Macs are not guaranteed by the United States or
by any Federal Home Loan Banks and do not constitute a debt or obligation of the
United States or of any Federal Home Loan Bank. Freddie Macs entitle the holder
to timely payment of interest, which is guaranteed by the FHLMC. The FHLMC
guarantees either ultimate collection or timely payment of all principal
payments on the underlying mortgage loans. When the FHLMC does not guarantee
timely payment of principal, FHLMC may remit the amount due on account of its
guarantee of ultimate payment of principal at any time after default on an
underlying mortgage, but in no event later than one year after it becomes
payable.

Mortgage-backed and asset-based securities have certain characteristics
which are different from traditional debt securities. Among the major
differences are that interest and principal payments are made more frequently,
usually monthly, and that principal may be prepaid at any time because the
underlying mortgage loans or other assets generally may be prepaid at any time.
As a result, if a Fund purchases such a security at a premium, a prepayment rate
that is faster than expected will reduce yield to maturity, while a prepayment
rate that is slower than expected will have the opposite effect of increasing
yield to maturity. Alternatively, if a Fund purchases these securities at a
discount, faster than expected prepayments will increase, while slower than
expected prepayments will reduce, yield to maturity. The Income Fund may invest
a portion of its assets in derivative mortgage-backed securities such as
stripped mortgage-backed securities which are highly sensitive to changes in
prepayment and interest rates.

Mortgage-backed securities and asset-backed securities, like all fixed
income securities, generally decrease in value as a result of increases in
interest rates. In addition, although generally the value of fixed-income
securities increases during periods of falling interest rates and, as stated
above, decreases during periods of rising interest rates, as a result of
prepayments and other factors, this is not always the case with respect to
mortgage-backed securities and asset-backed securities.

Although the extent of prepayments of a pool of mortgage loans depends on
various economic and other factors, as a general rule prepayments on fixed rate
mortgage loans will increase during a period of declining interest rates.
Accordingly, amounts available for reinvestment by a Fund are likely to be
greater during a period of declining interest rates and, as a result, likely to
be reinvested at lower interest rates than during a period of rising interest
rates. Asset-backed securities, although less likely to experience the same
prepayment rates as mortgage-backed securities, may respond to certain of the
same factors influencing prepayments, while at other times different factors,
such as changes in credit use and payment patterns resulting from social, legal
and economic factors, will predominate. Mortgage-backed securities and
asset-backed securities generally decrease in value as a result of increases in
interest rates and may benefit less than other fixed income securities from
declining interest rates because of the risk of prepayment.

-7-
<PAGE> 94
There are certain risks associated specifically with CMOs. CMOs issued by
private entities are not U.S. government securities and are not guaranteed by
any government agency, although the securities underlying a CMO may be subject
to a guarantee. Therefore, if the collateral securing the CMO, as well as any
third party credit support or guarantees, is insufficient to make payment, the
holder could sustain a loss. However, as stated above, the Income Fund will
invest only in CMOs which are rated in one of the four highest rating categories
by an NRSRO or, if unrated, are determined by the Sub-Advisor to be of
comparable quality. Also, a number of different factors, including the extent of
prepayment of principal of the underlying obligations, affect the availability
of cash for principal payments by the CMO issuer on any payment date and,
accordingly, affect the timing of principal payments on each CMO class.

Asset-backed securities involve certain risks that are not posed by
mortgage-backed securities, resulting mainly from the fact that asset-backed
securities do not usually contain the complete benefit of a security interest in
the related collateral. For example, credit card receivables generally are
unsecured, and the debtors are entitled to the protection of a number of state
and federal consumer credit laws, some of which may reduce the ability to obtain
full payment. In case of automobile receivables, due to various legal and
economic factors, proceeds from repossessed collateral may not always be
sufficient to support payments on these securities.

The cash flows and yields on IOs and POs are extremely sensitive to the
rate of principal payments (including prepayments) on the related underlying
obligations. For example, a rapid or slow rate of principal payments may have a
material adverse effect on the yield of IOs or POs, respectively. If the
underlying obligations experience greater than anticipated prepayments of
principal, an investor may fail to recoup fully its initial investment in an IO.
Furthermore, if the underlying obligations experience slower than anticipated
prepayments of principal, the yield of a PO will be affected more severely than
would be the case with a traditional mortgage-backed security. IOs and POs have
exhibited large price changes in response to changes in interest rates and are
considered to be volatile in nature.

When-Issued Securities. As discussed in the Prospectuses, each Fund may
purchase securities on a "when-issued" basis (i.e., for delivery beyond the
normal settlement date at a stated price and yield). When a Fund agrees to
purchase securities on a "when-issued" basis, the Fund's custodian will set
aside cash or liquid portfolio securities equal to the amount of the commitment
in a separate account. Normally, a Fund's custodian will set aside portfolio
securities to satisfy the purchase commitment, and in such a case, the Fund may
be required subsequently to place additional assets in the separate account in
order to assure that the value of the account remains equal to the amount of
that Fund's commitment. It may be expected that a Fund's net assets will
fluctuate to a greater degree when it sets aside portfolio securities to cover
such purchase commitments than when it sets aside cash. In addition, because a
Fund will set aside cash or liquid portfolio securities to satisfy its purchase
commitments in the manner described above, such Fund's liquidity and the ability
of the Sub-Advisor to manage it might be affected in the event its commitments
to purchase "when-issued" securities ever exceeded 25% of its total assets.
Under normal market conditions, however, each Fund's commitment to purchase
"when-issued" or "delayed-delivery" securities will not exceed 25% of its total
assets.

When a Fund engages in "when-issued" transactions, it relies on the seller
to consummate the trade. Failure of the seller to do so may result in that
Fund's incurring a loss or missing the opportunity to obtain a price considered
to be advantageous. Each Fund will engage in "when-issued" delivery transactions
only for the purpose of acquiring portfolio securities consistent with such
Fund's investment

-8-
<PAGE> 95
objectives and policies and not for investment leverage. If the Pennsylvania
Bond Fund sells a "when-issued" or "delayed-delivery" security before delivery,
any gain would not be tax-exempt.

Real Estate Investment Trusts. The Established Growth Fund, the Aggressive
Growth Fund and the Emerging Growth Fund may invest in equity REITs. REITs pool
investors' funds for investment primarily in commercial real estate properties.
Investment in REITs may subject the Funds to certain risks. REITs may be
affected by changes in the value of the underlying property owned by the trust.
REITs are dependent upon specialized management skill, may not be diversified
and are subject to the risks of financing projects. REITs are also subject to
heavy cash flow dependency, defaults by borrowers, self liquidation and the
possibility of failing to qualify for the beneficial tax treatment available to
REITs under the Internal Revenue Code and to maintain its exemption from the
1940 Act. As a shareholder in a REIT, each Fund would bear, along with other
shareholders, its pro rata portion of the REIT's operating expenses. These
expenses would be in addition to the advisory and other expenses each Fund bears
directly in connection with its own operations.

Repurchase Agreements. Securities held by each Fund may be subject to
repurchase agreements. Under the terms of a repurchase agreement, a Fund would
acquire securities from banks and registered broker-dealers which the
Sub-Advisor deems creditworthy under guidelines approved by the Trust's Board of
Trustees, subject to the seller's agreement to repurchase such securities at a
mutually agreed-upon date and price. The repurchase price would generally equal
the price paid by the Fund plus interest negotiated on the basis of current
short-term rates, which may be more or less than the rate on the underlying
portfolio securities. The seller under a repurchase agreement will be required
to maintain continually the value of collateral held pursuant to the agreement
at not less than the repurchase price (including accrued interest). This
requirement will be continually monitored by the Sub-Advisor. If the seller were
to default on its repurchase obligation or become insolvent, the Fund would
suffer a loss to the extent that the proceeds from a sale of the underlying
portfolio securities were less than the repurchase price under the agreement, or
to the extent that the disposition of such securities by such Fund were delayed
pending court action. Additionally, there is no controlling legal precedent
confirming that a Fund would be entitled, as against a claim by such seller or
its receiver or trustee in bankruptcy, to retain the underlying securities.
Securities subject to repurchase agreements will be held by the Fund's custodian
or another qualified custodian or in the Federal Reserve/Treasury book-entry
system.

Reverse Repurchase Agreements. As discussed in the Prospectuses, each Fund
may borrow funds by entering into reverse repurchase agreements in accordance
with its investment restrictions. Pursuant to such agreements, a Fund would sell
portfolio securities to financial institutions such as banks and broker-dealers,
and agree to repurchase the securities at a mutually agreed-upon date and price.
At the time a Fund enters into a reverse repurchase agreement, it will place in
a segregated custodial account assets such as U.S. Government securities or
other liquid securities consistent with that Fund's investment restrictions
having a value equal to the repurchase price (including accrued interest), and
will subsequently continually monitor the account to ensure that such equivalent
value is maintained at all times. Reverse repurchase agreements involve the risk
that the market value of the securities sold by a Fund may decline below the
price at which that Fund is obligated to repurchase the securities. Reverse
repurchase agreements are considered to be borrowings by a Fund under the 1940
Act and therefore a form of leveraging.

-9-
<PAGE> 96

Short Sales. Each of the Income Fund, the Government Securities Fund and
the Pennsylvania Bond Fund may from time to time sell securities short. Short
sales are effected when it is believed that the price of a particular security
will decline, and involves the sale of a security which the Fund does not

-10-
<PAGE> 97
own in the hope of purchasing the same security at a later date at a lower
price. To make delivery to the buyer, the Fund must borrow the security, and the
Fund is obligated to return the security to the lender, which is accomplished by
a later purchase of the security by that Fund. The frequency of short sales will
vary substantially in different periods, and it is not intended that any
specified portion of a Fund's assets will as a matter of practice be invested in
short sales.

At any time that a Fund has an open short sale position, such Fund is
required to segregate with its custodian (and to maintain such amount until the
Fund replaces the borrowed security) an amount of cash or U.S. Government
securities or other liquid securities equal to the difference between (i) the
current market value of the securities sold short and (ii) any cash or
securities required to be deposited with the broker in connection with the short
sale (not including the proceeds from the short sale). As a result of these
requirements, a Fund will not gain any leverage merely by selling short, except
to the extent that it earns interest on the immobilized cash or securities while
also being subject to the possibility of gain or loss from the securities sold
short. A Fund's possible losses may exceed the total amount of cash or liquid
securities deposited with the broker (not including the proceeds of the short
sale) and segregated by the Fund.

A Fund will incur a loss as a result of the short sale if the price of the
security increases between the date of the short sale and the date on which the
Fund purchases the security to replace the borrowed security. A Fund will
realize a gain if the security declines in price between those dates. The amount
of any gain will be decreased and the amount of any loss increased by any
premium or interest the Fund may be required to pay in connection with a short
sale. It should be noted that possible losses from short sales differ from those
that could arise from a cash investment in a security in that the former may be
limitless while the latter can only equal the total amount of the Fund's
investment in the security. For example, if a Fund purchases a $10 security
short, the most that can be lost is $10. However, if a Fund sells a $10 security
short, it may have to purchase the security for return to the lender when the
market value is $50, thereby incurring a loss of $40.

Hedging Transactions. Hedging transactions, including the use of options
and futures, in which certain of the Funds are authorized to engage as described
in their respective Prospectuses, have risks associated with them including
possible default by the other party to the transaction, illiquidity and, to the
extent the Sub-Advisor's view as to certain market movements is incorrect, the
risk that the use of such hedging transactions could result in losses greater
than if they had not been used.

Use of put and call options may result in losses to a Fund, force the sale
or purchase of portfolio securities at inopportune times or for prices higher
than (in the case of put options) or lower than (in the case of call options)
current market values, limit the amount of appreciation a Fund can realize on
its investments or cause a Fund to hold a security it might otherwise sell. The
use of options and futures transactions entails certain other risks. In
particular, the variable degree of correlation between price movements of
futures contracts and price movements in the related portfolio position of a
Fund create the possibility that losses on the hedging instrument may be greater
than gains in the value of such Fund's position. In addition, futures and
options markets may not be liquid in all circumstances and certain
over-the-counter options may have no markets. As a result, in certain markets,
the Funds might not be able to close out a transaction without incurring
substantial losses, if at all. Although the use of futures and options
transactions for hedging should tend to minimize the risk of loss due to a
decline in the value of the hedged position, at the same time they tend to limit
any potential gain which might result

-11-
<PAGE> 98
from an increase in value of such position. Finally, the daily variation margin
requirements for futures contracts would create a greater ongoing potential
financial risk than would purchases of options, where the exposure is limited to
the cost of the initial premium. Losses resulting from the use of hedging
transactions would reduce net asset value, and possible income, and such losses
can be greater than if the hedging transactions had not been utilized.

General Characteristics of Options. Put options and call options typically
have similar structural characteristics and operational mechanics regardless of
the underlying instrument on which they are purchased or sold. Thus, the
following general discussion relates to each of the particular types of options
discussed in greater detail in the applicable Prospectus and below. In addition,
many hedging transactions involving options require segregation of a Fund's
assets in special accounts, as described further below.

With certain exceptions, exchange-listed options generally settle by
physical delivery of the underlying security or currency, although in the future
cash settlement may become available. Index options are cash settled for the net
amount, if any, by which the option is "in-the-money" (i.e., where the value of
the underlying instrument exceeds, in the case of a call option, or is less
than, in the case of a put option, the exercise price of the option) at the time
the option is exercised. Frequently, rather than taking or making delivery of
the underlying instrument through the process of exercising the option, listed
options are closed by entering into offsetting purchase or sale transactions
that do not result in ownership of the new option. A Fund's ability to close out
its position as a purchaser or seller of a put or call option is dependent in
part, upon the liquidity of the option market. In addition, the hours of trading
for listed options may not coincide with the hours during which the underlying
financial instruments are traded. To the extent that the options markets close
before the markets for the underlying financial instruments, significant price
and rate movements can take place in the underlying markets that cannot be
reflected in the option markets.

Exchange-listed options generally have standardized terms and performance
mechanics unlike over-the-counter traded options. The Funds currently expect to
purchase and sell only exchange-traded options. Exchange-traded options
generally are guaranteed by the clearing agency which is the issuer or
counterparty to such options. This guarantee usually is supported by a daily
payment system (i.e., variation margin requirements) operated by the clearing
agency in order to reduce overall credit risk. As a result, unless the clearing
agency defaults, there is generally relatively little counterparty credit risk
associated with options purchased on an exchange.

All options written by a Fund must be "covered" (i.e., a Fund must own the
securities or futures contract subject to a call option or must meet the asset
segregation requirements) as long as the call is outstanding. Even though a Fund
will receive the option premium to help protect it against loss, a call option
written by a Fund exposes such Fund during the term of the option to possible
loss of opportunity to realize appreciation in the market price of the
underlying security or instrument and may require such Fund to hold a security
or instrument which it might otherwise have sold. With respect to put options
written by a Fund, such Fund will place liquid securities in a segregated
account to cover its obligations under such put option and will monitor the
value of the assets in such account and its obligations under the put option
daily.

-12-
<PAGE> 99
Futures Contracts. As discussed in the Prospectuses, the Established
Growth, Aggressive Growth, Emerging Growth, International Equity, Income, and
Pennsylvania Bond Funds may each enter into futures contracts. This investment
technique is designed primarily to act as a substitute for a position in the
underlying security and to hedge against anticipated future changes in market
conditions or interest rates which otherwise might adversely affect the value of
securities which such Fund holds or intends to purchase. For example, when
interest rates are expected to rise or market values of portfolio securities are
expected to fall, a Fund can seek through the sale of futures contracts to
offset a decline in the value of its portfolio securities. When interest rates
are expected to fall or market values are expected to rise, a Fund, through the
purchase of such contracts, can attempt to secure better rates or prices for
such Fund than might later be available in the market when it effects
anticipated purchases.

The acquisition of put and call options on futures contracts will,
respectively, give a Fund the right (but not the obligation), for a specified
price, to sell or to purchase the underlying futures contract, upon exercise of
the option, at any time during the option period.

Futures transactions involve brokerage costs and require a Fund to
segregate liquid assets, such as cash, U.S. Government securities or other
liquid obligations, to cover its performance under such contracts. A Fund may
lose the expected benefit of futures transactions if interest rates, securities
prices or foreign exchange rates move in an unanticipated manner. Such
unanticipated changes may also result in poorer overall performance than if such
Fund had not entered into any futures transactions. In addition, the value of a
Fund's futures positions may not prove to be perfectly or even highly correlated
with the value of its portfolio securities, limiting the Fund's ability to hedge
effectively against interest rate and/or market risk and giving rise to
additional risks. There is no assurance of liquidity in the secondary market for
purposes of closing out futures positions.

Regulatory Restrictions. To the extent required to comply with Securities
and Exchange Commission Release No. IC-10666, when purchasing a futures contract
or writing a put option, each Fund will maintain in a segregated account cash or
liquid securities equal to the value of such contracts.

To the extent required to comply with Commodity Futures Trading Commission
Regulation 4.5 and thereby avoid being classified as a "commodity pool
operator," a Fund will not enter into a futures contract or purchase an option
thereon if immediately thereafter the initial margin deposits for futures
contracts held by such Fund plus premiums paid by it for open options on futures
would exceed 5% of the liquidation value of such Fund's total assets after
taking into account unrealized profits and unrealized losses on any contracts
entered into. The Funds will not engage in transactions in futures contracts or
options thereon for speculation, but only to attempt to hedge against changes in
market conditions affecting the values of securities which such Fund holds or
intends to purchase.

Securities of Other Investment Companies. Each Fund may invest in
securities issued by other investment companies. In addition, each Fund, other
than the Prime Money Market Fund and the Treasury Money Market Fund, may invest
in money market funds advised by the Advisors. Each Fund other than the
Lifestyle Funds currently intends to limit its investments so that, as
determined immediately after a securities purchase is made: (a) not more than 5%
of the value of its total assets will be invested in the securities of any one
investment company; (b) not more than 10% of the value of its total assets will
be invested in the aggregate in securities of investment companies as a group;
and (c) not more than 3% of the outstanding voting stock of any one investment
company will be owned by such

-13-
<PAGE> 100
Fund. As a shareholder of another investment company, a Fund would bear, along
with other shareholders, its pro rata portion of that company's expenses,
including advisory fees. These expenses would be in addition to the advisory and
other expenses that such Fund bears directly in connection with its own
operations. Investment companies in which the Funds may invest may also impose a
sales or distribution charge in connection with the purchase or redemption of
their shares and other types of commissions or charges. Such charges will be
payable by such Fund and, therefore, will be borne directly by shareholders of
such Fund.

Investment Restrictions

The Funds' investment objectives are non-fundamental policies and may be
changed without a vote of the shareholders of the applicable Fund. In addition
to the fundamental investment policies listed in the Prospectuses, the following
investment restrictions may be changed only by a vote of the majority of the
outstanding Shares of a Fund (as defined under "ADDITIONAL INFORMATION - Vote of
a Majority of the Outstanding Shares").

In addition to the investment restrictions set forth in its respective
Prospectus, each Fund may not:

1. Purchase securities on margin, except for use of short-term credit
necessary for clearance of purchases of portfolio securities, except as may be
necessary to make margin payments in connection with derivative securities
transactions, and except to the extent disclosed in the current prospectus of
such Fund;

2. Underwrite the securities issued by other persons, except to the
extent that the Fund may be deemed to be an underwriter under certain securities
laws in the disposition of "restricted securities;"

3. Purchase or sell real estate (although investments in marketable
securities of companies engaged in such activities and securities secured by
real estate or interests therein are not prohibited by this restriction); and

4. Purchase or sell commodities or commodities contracts, except to the
extent disclosed in the current prospectus of such Fund.

The following additional investment restrictions may be changed without
the vote of a majority of the outstanding Shares of the Funds. Each Fund may
not:

1. Purchase securities of other investment companies, except (a) in
connection with a merger, consolidation, acquisition or reorganization, and (b)
to the extent permitted by the 1940 Act, or pursuant to any exemptions
therefrom;

2. Mortgage or hypothecate the Fund's assets in excess of one-third of
such Fund's total assets.

3. None of the Prime Money Market Fund, Treasury Money Market Fund,
Established Growth Fund, Aggressive Growth Fund, Emerging Growth Fund, or
International Equity Fund may

-14-
<PAGE> 101
engage in any short sales. However, each of the Income Fund, Government
Securities Fund and Pennsylvania Bond Fund may not engage in short sales of any
securities at any time if, immediately after and as a result of the short sale,
the market value of securities sold short by such Fund would exceed 25% of the
value of that Fund's total assets.

If any percentage restriction or requirement described above is satisfied
at the time of investment, a later increase or decrease in such percentage
resulting from a change in asset value will not constitute a violation of such
restriction or requirement. However, should a change in net asset value or other
external events cause a Fund's investments in illiquid securities to exceed the
limit set forth in that Fund's Prospectus for its investment in illiquid
securities, such Fund will act to cause the aggregate amount of such securities
to come within such limit as soon as reasonably practicable. In such an event,
however, no Fund would be required to liquidate any portfolio securities where
such Fund would suffer a loss on the sale of such securities.

The Underlying Funds in which the Lifestyle Funds may invest have adopted
certain investment restrictions which may be more or less restrictive than those
listed above, thereby allowing a Lifestyle Fund to participate in certain
investment strategies indirectly that may be prohibited under the fundamental
and non-fundamental investment restrictions and policies listed above.

Portfolio Turnover

The portfolio turnover rates for the Established Growth, Aggressive
Growth, Income, Government Securities and Pennsylvania Bond Funds for the fiscal
year or period ended June 30, 1998, are as follows:

<TABLE>
<CAPTION>
Fiscal Year or
Period Ended
June 30, 1998
<S> <C>
Established Growth Fund 6%
Aggressive Growth Fund 8%
Income Fund 218%
Government Securities Fund 482%
Pennsylvania Bond Fund 62%
</TABLE>

The Advisor does not currently expect the portfolio turnover rates for
the Emerging Growth, International Equity, Lifestyle Conservative Growth,
Lifestyle Moderate Growth and Lifestyle Growth Funds to exceed 75% for such
Fund's first fiscal period ending June 30, 1999. The portfolio turnover
rate for a Fund may vary greatly from year to year as well as within a
particular year, and may also be affected by cash requirements for redemptions
of Shares. High portfolio turnover rates will generally result in higher
transaction costs, including brokerage commissions, to a Fund and may result in
additional tax consequences to a Fund's Shareholders. Portfolio turnover will
not be a limiting factor in making investment decisions.

-15-
<PAGE> 102
NET ASSET VALUE

The Prime Money Market Fund and the Treasury Money Market Fund
(collectively, the "Money Market Funds" and individually, a "Money Market Fund")
have each elected to use the amortized cost method of valuation pursuant to Rule
2a-7 under the 1940 Act. This involves valuing an instrument at its cost
initially and thereafter assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the instrument. This method may result in periods during
which value, as determined by amortized cost, is higher or lower than the price
the Money Market Fund would receive if it sold the instrument.

Pursuant to Rule 2a-7, each Money Market Fund will maintain a
dollar-weighted average portfolio maturity appropriate to the Money Market
Fund's objective of maintaining a stable net asset value per share, provided
that neither Money Market Fund will purchase any security with a remaining
maturity of more than 397 days (thirteen months) (securities subject to
repurchase agreements may bear longer maturities) nor maintain a dollar-weighted
average portfolio maturity which exceeds 90 days. The Trust's Board of Trustees
has also undertaken to establish procedures reasonably designed, taking into
account current market conditions and the investment objective of the Money
Market Funds, to stabilize the net asset value per share of each Money Market
Fund for purposes of sales and redemptions at $1.00. These procedures include
review by the Trustees, at such intervals as they deem appropriate and
reasonable, to determine the extent, if any, to which the net asset value per
share of each Money Market Fund calculated by using available market quotations
deviates from $1.00 per Share. In the event such deviation exceeds one-half of
one percent, Rule 2a-7 requires that the Board of Trustees to promptly consider
what action, if any, should be initiated. If the Trustees believe that the
extent of any deviation from a Money Market Fund's $1.00 amortized cost price
per Share may result in material dilution or other unfair results to new or
existing investors, they shall cause the Fund to take such steps as they
consider appropriate to eliminate or reduce, to the extent reasonably
practicable, any such dilution or unfair results. These steps may include
selling portfolio instruments prior to maturity, shortening the average
portfolio maturity, withholding or reducing dividends, reducing the number of a
Money Market Fund's outstanding Shares without monetary consideration, or
utilizing a net asset value per share determined by using available market
quotations.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Shares of the Funds are sold on a continuous basis by BISYS, and BISYS has
agreed to use appropriate efforts to solicit all purchase orders. In addition to
purchasing Shares directly from BISYS, Shares may be purchased through
procedures established by BISYS in connection with the requirements of accounts
at the Advisor or the Advisor's affiliated entities or correspondents
(collectively, "Entities"). Customers purchasing Shares of the Funds may include
officers, directors, or employees of the Advisor or the Entities.

The Trust may suspend the right of redemption or postpone the date of
payment for Shares during any period when (a) trading on the Exchange is
restricted by applicable rules and regulations of the Commission, (b) the
Exchange is closed for other than customary weekend and holiday closings, (c)
the Commission has by order permitted such suspension, or (d) an emergency
exists as a result of which (i) disposal by the Trust of securities owned by it
is not reasonably practical, or (ii) it is not reasonably practical for the
Trust to determine the fair value of its net assets.

-16-
<PAGE> 103
MANAGEMENT AND SERVICE PROVIDERS OF THE TRUST

Trustees and Officers

Overall responsibility for management of the Trust rests with its Board of
Trustees. The Trustees elect the officers of the Trust to supervise actively its
day-to-day operations.

The names of the Trustees and officers of the Trust, their addresses, and
principal occupations during the past five years are as follows:

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME, ADDRESS AND AGE POSITION(S) HELD WITH THE TRUST DURING PAST 5 YEARS
<S> <C> <C>

Robert E. Leech* Chairman and Trustee From 1991 to present,
23 Front Street employee of Keystone
Harrisburg, PA 17101 Financial, Inc.
Age: 53

Lana Burkhardt* President and Trustee From 1992 to present,
23 Front Street employee of Keystone
Harrisburg, PA 17101 Financial, Inc.
Age: 41

John J. Bolger Trustee From 1998 to present,
Governor Funds retired; prior to that, Vice
3435 Stelzer Road President of Pennsylvania
Columbus, OH 43219 Bankers Association.
Age: 63

James L. Brock Trustee From 1996 to present, Dean
Governor Funds of Sigmund Weis School of
3435 Stelzer Road Business, prior to that, Vice
Columbus, OH 43219 President of Marketing at
Age: 54 Pacific Steel and Recycling
(distributor of steel and
agricultural products and
commercial/industrial
recycler of scrap metals and
fibers).

John S. Cramer Trustee From 1996 to present,
Governor Funds President and CEO of
3435 Stelzer Road Pinnacle Health System;
Columbus, OH 43219 prior to that, President and
Age: 56 CEO of Capital Health
System.

George R. Barr* Assistant Secretary From 1988 to present,
23 Front Street employee of Keystone
Harrisburg, PA 17101 Financial, Inc.
Age: 47

Michael A. Grunewald* Treasurer From 1992 to present,
3435 Stelzer Road employee of BISYS Fund
Columbus, OH 43219 Services Limited
Age: 28 Partnership.

Michael P. Malloy* Secretary From 1993 to present,
Drinker Biddle & Reath LLP partner in the law firm of
Philadelphia National Bank Drinker Biddle and Reath
Building LLP.
1345 Chestnut Street
Philadelphia, PA 19107
Age: 39

Alaina V. Metz* Assistant Secretary From 1995 to present,
3435 Stelzer Road employee of BISYS Fund
Columbus, Ohio 43219 Services Limited
Age: 31 Partnership; prior to that,
supervisor of Blue Sky
Compliance at Alliance
Capital Management, L.P.
(investment management firm).
</TABLE>

- --------------------
*Messrs. Barr, Grunewald, Leech and Malloy and Mesdames Burkhardt and
Metz are each considered to be an "interested person" of the Trust as defined in
the 1940 Act.

Messrs. Bolger, Brock and Cramer are members of the Audit, Valuation,
and Nominating Committees of the Board of Trustees. Mr. Cramer, Mr. Bolger, and
Mr. Brock each serves as Chairman of the Audit, Valuation, and Nominating
Committees, respectively. The Audit Committee, among other things, reviews
results of the annual audit and recommends to the Trust the firm to be selected
as independent auditors. The Valuation Committee reviews the pricing of certain
securities. The Nominating Committee recommends to the Board all persons to be
nominated as trustees of the Trust.

As of the date of this Statement of Additional Information, the Trust's
officers and trustees, as a group, own less than 1% of any Fund's outstanding
Shares.

The Trust pays each Trustee, other than officers or employees of the
Advisor, BISYS or BISYS Fund Services, Inc. or any of their affiliates, an
annual fee of $8,000, $2,000 for each regular Board meeting attended, and
out-of-pocket expenses incurred in attending Board meetings. The officers of the
Trust receive no compensation directly from the Trust for performing the duties
of their offices. The Advisors receive fees for acting as advisor and
sub-advisor. BISYS and the Advisor receive fees from each Fund for acting as
administrators, and may receive fees pursuant to the Administrative Services
Plan described below. BISYS may retain all or a portion of any sales load
imposed upon purchases of Shares. BISYS Fund Services, Inc. receives fees from
the Funds for acting as transfer agent and for providing certain fund accounting
services. Ms. Burkhardt and Messrs. Barr and Leech are employees of the Advisor
and Mr. Grunewald and Ms. Metz are employees of BISYS. Drinker Biddle & Reath
LLP, of which Mr. Malloy is a partner, receives legal fees as counsel to the
Trust.

-17-
<PAGE> 104
Investment Advisor and Investment Subadvisors

The Advisor may from time to time voluntarily reduce all or a portion of
its advisory fee with respect to a Fund to increase the net income of that Fund
available for distribution as dividends.

For the fiscal year or period ended June 30, 1998, the former advisor,
Martindale, Andres & Company, Inc., earned and voluntarily waived the amounts
indicated below with respect to its investment advisory services to the
Predecessor Funds pursuant to the prior Investment Advisory Agreement:

<TABLE>
<CAPTION>
Fiscal Year or Period Ended
June 30, 1998 (1)
--------------------------------------
Fees Earned Fees Waived
----------- -----------
<S> <C> <C>
Prime Money Market Fund $ 623,575 $311,790
Treasury Money Market Fund $ 98,397 $ 74,397
Established Growth Fund $1,680,122 $720,420
Aggressive Growth Fund $1,254,636 $593,310
Income Fund $1,431,762 $715,881
Government Securities Fund $ 198,771 $153,207
Pennsylvania Bond Fund $ 715,423 $357,712
</TABLE>

For the year or period ended June 30, 1997, the former adviser earned and
voluntarily waived the amounts indicated below with respect to its investment
advisory services to the indicated Funds pursuant to the Investment Advisory
Agreement:

<TABLE>
<CAPTION>
Fiscal Period Ended
June 30, 1997
-----------------------------------
Fees Earned Fees Waived
----------- -----------
<S> <C> <C>
Prime Money Market Fund $282,882 $236,280
Established Growth Fund $735,635 $558,942
Aggressive Growth Fund $385,280 $263,486
Income Fund $680,552 $529,626
Pennsylvania Bond Fund $506,296 $420,686
</TABLE>

-18-
<PAGE> 105

(1) Such Funds commenced operations October 7, 1996, July 1, 1997,
December 2, 1996, February 3, 1997, December 2, 1996, July 1, 1997 and
October 1, 1996, respectively.

For the fiscal year or period ended June 30, 1998, the Advisor had not
received any compensation under the Investment Advisory Agreement with respect
to the Emerging Growth Fund, International Equity Fund or the Lifestyle Funds
since those Funds had not commenced operations.

Unless sooner terminated, each of the Investment Advisory and Investment
Sub-Advisory Agreements will continue in effect with respect to a Fund until
June 30, 2000, and from year to year thereafter, for successive annual periods
ending on June 30, if, as to that Fund, such continuance is approved at least
annually by the Trust's Board of Trustees or by vote of a majority of the
outstanding Shares of that Fund (as defined under "GENERAL INFORMATION -
Miscellaneous" in such Fund's Prospectus), and a majority of the Trustees who
are not parties to the Investment Advisory Agreement or the particular
Investment Sub-Advisory Agreement or interested persons (as defined in the 1940
Act) of any party to the Investment Advisory Agreement or the particular
Investment Sub-Advisory Agreement by votes cast in person at a meeting called
for such purpose. The Investment Advisory Agreement and the Investment
Sub-Advisory Agreements each are terminable as to a Fund at any time on at least
60 days' written notice without penalty by the Trustees, by vote of a majority
of the outstanding Shares of that Fund, or by the Advisor or the Sub-Advisor.
The Investment Advisory Agreement and the Investment Sub-Advisory Agreements
also each terminate automatically in the event of its assignment, as defined
in the 1940 Act.

The Investment Advisory Agreement and the Investment Sub-Advisory
Agreements provide that the Advisor and the Sub-Advisors shall not be liable for
any error of judgment or mistake of law or for any loss suffered by a Fund in
connection with the performance of the Investment Advisory Agreement and the
Investment Sub-Advisory Agreements, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith, or gross negligence on the
part of the Advisor or the particular Sub-Advisor in the performance of its
duties, or from reckless disregard by the Advisor of its duties and obligations
thereunder.

Portfolio Transactions

Pursuant to the Investment Advisory and Investment Sub-Advisory
Agreements, the Advisor and Sub -- Advisors determine, subject to the general
supervision of the Board of Trustees of the Trust and in accordance with the
Funds' investment objectives and restrictions, which securities are to be
purchased and sold by each Fund, and which brokers and dealers are to be
eligible to execute the Funds' portfolio transactions. Purchases and sales of
portfolio securities with respect to the Prime Money Market, Treasury Money
Market, Income, Government Securities and Pennsylvania Bond Funds, usually are
principal transactions in which portfolio securities are normally purchased
directly from the issuer or from an underwriter or market maker for the
securities. Purchases from underwriters of portfolio securities generally
include a commission or concession paid by the issuer to the underwriter, and
purchases from dealers serving as market makers may include the spread between
the bid and asked price. Purchases and sales of portfolio securities with
respect to the Established Growth, Aggressive Growth, Emerging Growth and
International Equity Funds usually are effected on a national securities
exchange or in the over-the-counter market. Transactions on stock exchanges
involve the payment of

-19-
<PAGE> 106
negotiated brokerage commissions. Transactions in the over-the-counter market
are generally principal transactions with dealers.

Allocation of transactions, including their frequency, to various brokers
and dealers is determined by the Sub-Advisors in their best judgment and in a
manner deemed fair and reasonable to Shareholders. The primary consideration is
prompt execution of orders in an effective manner at the most favorable price.
Subject to this consideration, brokers and dealers who provide supplemental
investment research to the Advisor and/or Sub-Advisors may receive orders for
transactions on behalf of the Funds. The Advisor and/or Sub-Advisors are
authorized to pay a broker-dealer who provides such brokerage and research
services a commission for executing each such Fund's brokerage transactions
which is in excess of the amount of commission another broker would have charged
for effecting that transaction if, but only if, the Advisor or Sub-Advisors
determines in good faith that such commission was reasonable in relation to the
value of the brokerage and research services provided by such broker viewed in
terms of that particular transaction or in terms of all of the accounts over
which it exercises investment discretion. Any such research and other
statistical and factual information provided by brokers to a Fund or to the
Advisor or Sub-Advisors is considered to be in addition to and not in lieu of
services required to be performed by the Advisor or Sub-Advisors under its
agreement regarding management of the Fund. The cost, value and specific
application of such information are indeterminable and hence are not practicably
allocable among the Funds and other clients of the Advisor or Sub-Advisors who
may indirectly benefit from the availability of such information. Similarly, the
Funds may indirectly benefit from information made available as a result of
transactions effected for such other clients. Under the Investment Advisory and
Investment Sub-Advisory Agreements, the Advisor and/or Sub-Advisors are
permitted to pay higher brokerage commissions for brokerage and research
services in accordance with Section 28(e) of the Securities Exchange Act of
1934. In the event the Advisor and/or Sub-Advisors do follow such a practice, it
will do so on a basis which it believes is fair and equitable to the Trust and
the Funds.

The Advisor may direct brokerage transactions on behalf of the Established
Growth Fund, the Aggressive Growth Fund, the Emerging Growth Fund and the
International Equity Fund to Boston Institutional in return for research
services relating to equity securities including market information from
Bloomberg Financial Markets and equity analysis from Zacks Software. For the
fiscal period ended June 30, 1998, the amounts of such transactions and related
commissions on behalf of the Established Growth Fund were $9,446,185 and
$15,267, respectively, and on behalf of the Aggressive Growth Fund were
$5,083,071 and $13,815, respectively. There were no trades directed on behalf of
the Emerging Growth Fund for the fiscal year ended June 30, 1998.

While the Advisor and/or Sub-Advisors generally seek competitive
commissions, the Trust may not necessarily pay the lowest commission available
on each brokerage transaction, for reasons discussed above. Information so
received is in addition to and not in lieu of services required to be performed
by the Advisor and/or Sub-Advisors and does not reduce the advisory fees payable
to the Advisor and/or Sub-Advisors by a Fund. Such information may be useful to
the Advisor and/or Sub-Advisors in serving both the Fund and other clients and,
conversely, supplemental information obtained by the placement of business of
other clients may be useful to the Advisor and/or Sub-Advisors in carrying out
their obligations to a Fund.

-20-
<PAGE> 107

During the past fiscal period, no brokerage commissions were paid by the
Trust on behalf of the Prime Money Market Fund, the U.S. Treasury Money Market
Fund, the Pennsylvania Bond Fund or the Income Fund.

Except as permitted by applicable laws, rules and regulations, the Trust
will not, on behalf of a Fund, execute portfolio transactions through, acquire
portfolio securities issued by, make savings deposits in, or enter into
repurchase or reverse repurchase agreements with the Advisor, the Sub-Advisors,
Keystone, BISYS, or their affiliates, and will not give preference to the
Advisor's, the Sub-Advisors', or Keystone's correspondents with respect to such
transactions, securities, savings deposits, repurchase agreements, and reverse
repurchase agreements.

Investment decisions for each Fund are made independently from those for
other funds of the Trust or any other investment company or account managed by
the Advisor or Sub-Advisors. Any such other fund, investment company or account
may also invest in the same securities as the Trust on behalf of a Fund. When a
purchase or sale of the same security is made at substantially the same time on
behalf of a Fund and another fund of the Trust, investment company or account,
the transaction will be averaged as to price and available investments will be
allocated as to amount in a manner which the Advisor or Sub-Advisors believe to
be equitable to the Fund and such other fund, investment company or account. In
some instances, this investment procedure may adversely affect the price paid or
received by a Fund or the size of the position obtained by a Fund. To the extent
permitted by law, the Advisor or Sub-Advisors may aggregate the securities to be
sold or purchased for a Fund with those to be sold or purchased for other funds
of the Trust, investment companies or accounts in order to obtain best
execution. As provided by the Investment Advisory and Investment Sub-Advisory
Agreements, in making investment recommendations for the Funds, the Advisor or
Sub-Advisors will not inquire or take into consideration whether an issuer of
securities proposed for purchase or sale by the Trust is a customer of the
Advisor or Sub-Advisors, its parent or its subsidiaries or affiliates and, in
dealing with its customers, the Advisor or Sub-Advisors, its parent,
subsidiaries, and affiliates will not inquire or take into consideration whether
securities of such customers are held by the Funds or any other fund of the
Trust.

For the fiscal year ended June 30, 1998, the Established Growth and Income
Funds held securities of their regular brokers or dealers, as defined in Rule
10b-1 under the 1940 Act, or their parent companies. As of June 30, 1998, the
Established Growth Fund held $11,879,000 of equity securities of Morgan Stanley
Dean Witter Discover & Co. and the Income Fund held $8,070,000 of debt
securities of Lehman Brothers Holding.

-21-
<PAGE> 108
Administrators

BISYS Fund Services Ohio, Inc. and the Advisor serve as administrators
(the "Administrators") to the Funds pursuant to a Management and Administration
Agreement (the "Administration Agreement"). The Administrators assist in
supervising all operations of the Funds (other than those performed by the
Advisor under the Investment Advisory Agreements, by the Sub-Advisors under the
Investment Sub-Advisory Agreements, by The Bank of New York under the Custody
Agreement, by BISYS Fund Services, Inc. under the Transfer Agency Agreement and
Fund Accounting Agreement and by BISYS under the Distribution Agreement).

Under the Administration Agreement, the Administrators have agreed to
maintain office facilities; furnish statistical and research data, clerical,
certain bookkeeping services and stationery and office supplies; prepare the
periodic reports to the Commission on Form N-SAR or any replacement forms
therefor; compile data for, prepare for execution by the Funds and file all of
the Funds' federal and state tax returns and required tax filings other than
those required to be made by the Funds' custodian and Transfer Agent; prepare
compliance filings pursuant to state securities laws with the advice of the
Trust's counsel; assist to the extent requested by the Trust with the Trust's
preparation of its Annual and Semi-Annual Reports to Shareholders and its
Registration Statement (on Form N-1A or any replacement therefor); compile data
for, prepare and file timely Notices to the Commission required pursuant to Rule
24f-2 under the 1940 Act; keep and maintain the financial accounts and records
of the Funds, including calculation of daily expense accruals; determine the
actual variance from $1.00 of the Prime Money Market Fund's and the Treasury
Money Market Fund's net asset value per share; and generally assist in all
aspects of the Funds' operations other than those performed by the Advisor under
the Investment Advisory Agreement, by the Sub-Advisors under the Investment
Sub-Advisory Agreements, by The Bank of New York under the Custody Agreement, by
BISYS Fund Services, Inc. under the Transfer Agency Agreement and Fund
Accounting Agreement, and by BISYS under the Distribution Agreement. Under the
Administration Agreement, the Administrators may delegate all or any part of
their responsibilities thereunder.

For the fiscal year or period ended June 30, 1998, BISYS, the Trust's
former administrator, earned the following amounts with respect to its
administration services to the Funds indicated below pursuant to the prior
Administration Agreement:

<TABLE>
<CAPTION>
Fiscal Period Ended
June 30, 1998(1)
-------------------
<S> <C>

Prime Money Market Fund $179,279
Treasury Money Market Fund $ 28,247
Established Growth Fund $257,620
Aggressive Growth Fund $144,284
Income Fund $274,422
</TABLE>

-22-
<PAGE> 109
<TABLE>
<CAPTION>
Fiscal Period Ended
June 30, 1998(1)
-------------------

<S> <C>
Government Securities Fund $ 38,098
Pennsylvania Bond Fund $137,123
</TABLE>

- -------------------------
(1) Such Funds commenced operations October 7, 1996, July 1, 1997, December 2,
1996, February 3, 1997, December 2, 1996, July 1, 1997 and October 1,
1996, respectively.

For the fiscal period ended June 30, 1997, the former administrator earned
the following amounts with respect to its administrative services to the
Predecessor Funds indicated below pursuant to the prior Administration
Agreement:

<TABLE>
<CAPTION>
Fiscal Period Ended
June 30, 1997
-------------------
<S> <C>
Prime Money Market Fund $ 81,328
Established Growth Fund $112,311
Aggressive Growth Fund $ 44,692
Income Fund $129,863
Pennsylvania Bond Fund $ 97,040
</TABLE>

Unless sooner terminated as provided therein, the Administration Agreement
has an initial term expiring on June 30, 2001, and thereafter shall be
renewed automatically for successive one-year terms, unless written notice not
to renew is given by the non-renewing party to the other party at least 60 days
prior to the expiration of the then-current term. The Administration Agreement
is terminable with respect to a Fund upon mutual agreement of the parties to the
Administration Agreement; through a failure to renew at the end of a one-year
term; upon 180 days' written notice by the Trust after the initial term but only
in connection with the reorganization of the Funds into another registered
management investment company; and for cause (as defined in the Administration
Agreement) by the party alleging cause, on not less than 60 days' notice by the
Trust's Board of Trustees or by the Administrators.

The Administration Agreement provides that neither Administrator shall be
liable for any error of judgment or mistake of law or any loss suffered by a
Fund in connection with the matters to which the Administration Agreement
relates, except for a loss resulting from willful misfeasance, bad faith, or
negligence on its part in the performance of its duties, or from the reckless
disregard by it of its obligations and duties thereunder.

-23-
<PAGE> 110
Glass-Steagall Act

The Advisor and Martindale, Andres & Company, Inc. each believes that it
possesses the legal authority to perform the services for the Funds contemplated
by the relevant Prospectuses, this Statement of Additional Information and the
Investment Advisory and Sub-Advisory Agreements and the Administration Agreement
without violation of applicable statutes and regulations. Future changes in
either Federal or state statutes and regulations relating to the permissible
activities of banks or bank holding companies and the subsidiaries or affiliates
of those entities, as well as further judicial or administrative decisions or
interpretations of present and future statutes and regulations, could prevent or
restrict the Advisor from continuing to perform such services for the Trust. In
addition, current state securities laws on the issue of the registration of
banks as brokers or dealers may differ from the interpretation of federal law,
and banks and financial institutions may be required to register as dealers
pursuant to the laws of a specific state. Depending upon the nature of any
changes in the services which could be provided by the Advisors, the Board of
Trustees of the Trust would review the Trust's relationship with the Advisors
and consider taking all action necessary in the circumstances.

Should future legislative, judicial, or administrative action prohibit or
restrict the proposed activities of the Advisors and/or their affiliated and
correspondent banks in connection with Customer purchases of Shares of a Fund,
those banks might be required to alter materially or discontinue the services
offered by them to Customers. It is not anticipated, however, that any change in
the Trust's method of operations would affect its net asset value per share or
result in financial losses to any Customer.

Distributor

BISYS serves as agent for each Fund in the distribution of its Shares
pursuant to a Distribution Agreement (the "Distribution Agreement"). Unless
otherwise terminated, the Distribution Agreement has an initial term expiring on
June 30, 2000, and thereafter shall be renewed automatically for successive
annual periods ending June 30, if approved at least annually (i) by the Trust's
Board of Trustees or by the vote of a majority of the outstanding Shares of the
Funds, and (ii) by the vote of a majority of the Trustees of the Trust who are
not parties to the Distribution Agreement or interested persons (as defined in
the 1940 Act) of any party to the Distribution Agreement, cast in person at a
meeting called for the purpose of voting on such approval. The Distribution
Agreement also terminates automatically in the event of any assignment, as
defined in the 1940 Act.

Administrative Services and Distribution Plans

The Administrative Services and Distribution Plans ("the Plans") have been
approved by the Board of Trustees of the Trust, including a majority of the
Trustees who are not interested persons of the Trust (as defined in the 1940
Act) and who have no direct or indirect financial interest in the operation of
the Plans or in any Agreements thereunder (the "Disinterested Trustees"). The
Plans may be terminated as to a Fund by a vote of a majority of the
Disinterested Trustees. The Trustees review quarterly a written report of the
amounts expended pursuant to the Plans and the purposes for which such
expenditures were made. The Plans may be amended by a vote of the Trustees,
provided that any material amendments also require the vote of a majority of the
Disinterested Trustees. For so long as the Plans are in effect, selection and
nomination of those Disinterested Trustees shall be committed to the discretion
of the Trust's Disinterested Trustees. All Agreements may be terminated at any
time without the payment of any penalty by a vote of a majority of the
Disinterested Trustees. The Plans will continue in effect for successive
one-year periods, provided that each such continuance is specifically approved
by a majority of the Board of Trustees, including a majority of the
Disinterested Trustees.

-24-
<PAGE> 111

Custodian

The Bank of New York, 48 Wall Street, New York, New York, 10286, serves as
custodian (the "Custodian") to the Funds pursuant to the Custody Agreement. The
Custodian's responsibilities include safeguarding and controlling each Fund's
cash and securities, handling the receipt and delivery of securities, and
collecting interest and dividends on each Fund's investments.

Transfer Agency and Fund Accounting Services

BISYS Fund Services, Inc. serves as transfer agent and dividend disbursing
agent (the "Transfer Agent") for the Funds pursuant to the Transfer Agency
Agreement. Pursuant to such Agreement, the Transfer Agent, among other things,
performs the following services in connection with the Funds' Shareholders of
record: maintenance of shareholder records for each of the Funds' Shareholders
of record; processing Shareholder purchase and redemption orders; processing
transfers and exchanges of Shares of the Funds on the Shareholder files and
records; processing dividend payments and reinvestments; and assistance in the
mailing of Shareholder reports and proxy solicitation materials. For such
services the Transfer Agent receives a fee based on the number of shareholders
of record.

In addition, BISYS Fund Services, Inc. provides certain fund accounting
services to each of the Funds pursuant to a Fund Accounting Agreement. BISYS
Fund Services, Inc. receives a fee from the Trust for such services for all the
Trust's funds computed at an annual rate of three one-hundredths of one percent
(.03%) (.04% for the International Equity Fund) of the Trust's average daily net
assets up to $2 billion and .02% (.03% for the International Equity Fund) of the
Trust's average daily net assets of $2 billion or more, subject to a minimum
annual fee of $30,000 ($40,000 for the International Equity Fund and $35,000 for
the Pennsylvania Bond Fund). Under such Agreement, BISYS Fund Services, Inc.
maintains the accounting books and records for the Funds, including journals
containing an itemized daily record of all purchases and sales of portfolio
securities, all receipts and disbursements of cash and all other debits and
credits, general and auxiliary ledgers reflecting all asset, liability, reserve,
capital, income and expense accounts, including interest accrued and interest
received,

-25-
<PAGE> 112
and other required separate ledger accounts; maintains a monthly trial balance
of all ledger accounts; performs certain accounting services for the Funds,
including calculation of the net asset value per share, calculation of the
dividend and capital gain distributions, if any, and of yield, reconciliation of
cash movements with the Funds' custodian, and verification and reconciliation
with the Funds' custodian of all daily trade activity; provides certain reports;
obtains dealer quotations, prices from a pricing service or matrix prices on all
portfolio securities in order to mark the portfolio to the market; and prepares
an interim balance sheet, statement of income and expense, and statement of
changes in net assets for the Funds.

Unless sooner terminated as provided therein, the Fund Accounting
Agreement has an initial term expiring on June 30, 2001, and thereafter shall
be renewed automatically for successive one-year terms, unless written notice
not to renew is given by the non-renewing party to the other party at least 60
days prior to the expiration of the then-current term. The Fund Accounting
Agreement is terminable with respect to a Fund upon mutual agreement of the
parties to the Fund Accounting Agreement; upon 180 days' written notice by the
Trust after the initial term but only in connection with the reorganization of
the Funds into another registered management investment company; and for cause
(as defined in the Fund Accounting Agreement) by the party alleging cause, on
not less than 60 days' notice by the Trust's Board of Trustees or by BISYS Fund
Services, Inc.

The Fund Accounting Agreement provides that BISYS Fund Services, Inc.
shall not be liable for any error of judgment or mistake of law or any loss
suffered by a Fund in connection with the matters to which the Fund Accounting
Agreement relates, except a loss resulting from willful misfeasance, bad faith,
or negligence in the performance of its duties, or from the reckless disregard
by BISYS Fund Services, Inc. of its obligations and duties thereunder.

For the fiscal year or period ended June 30, 1998, BISYS Fund Services,
Inc. earned the amounts indicated below with respect to its fund accounting
services to the indicated Funds.

-26-
<PAGE> 113
<TABLE>
<CAPTION>
Fiscal Year or Period
Ended
June 30, 1998(1)
---------------------
<S> <C>
Prime Money Market Fund $47,847
Treasury Money Market Fund $30,875
Established Growth Fund $70,172
Aggressive Growth Fund $41,513
Income Fund $75,419
Government Securities Fund $32,239
Pennsylvania Bond Fund $43,737
</TABLE>

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

(1) Such Funds commenced operations October 7, 1996, July 1, 1997, December 2,
1996, February 3, 1997, December 2, 1996, July 1, 1997 and October 1,
1996, respectively.

For the fiscal period ended June 30, 1997, BISYS Fund Services, Inc.
earned the amounts indicated below with respect to its fund accounting services
to the indicated Funds.

<TABLE>
<CAPTION>
Fiscal Period Ended
June 30, 1997
-------------------
<S> <C>
Prime Money Market Fund $ 21,776
Established Growth Fund $ 31,176
Aggressive Growth Fund $ 13,033
Income Fund $ 35,604
Pennsylvania Bond Fund $ 30,096
</TABLE>

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

Auditors

The financial statements for the Predecessor Prime Money Market,
Pennsylvania Bond, Established Growth, Income, Aggressive Growth, Treasury Money
Market, and Government Securities Funds as of June 30, 1998, and for the periods
indicated therein, have been audited by KPMG Peat Marwick LLP, as set forth in
their report appearing with the aforementioned financial statements incorporated
by reference herein, and are incorporated by reference herein in reliance upon
such report and on the authority of such firm as experts in auditing and
accounting.

-27-
<PAGE> 114

Legal Counsel

Drinker Biddle & Reath LLP, 1345 Chestnut Street, Suite 1100,
Philadelphia, Pennsylvania 19107 is counsel to the Trust and will pass upon the
legality of the Shares offered hereby.

ADDITIONAL INFORMATION

Description of Shares

The Trust is a Delaware business trust. The Trust was organized
on September 3, 1998.

Under the Agreement and Declaration of Trust, the beneficial interest in
the Trust may be divided into an unlimited number of full and fractional
transferable shares. The Agreement and Declaration of Trust authorizes the Board
of Trustees to classify or reclassify any unissued shares of the Trust into one
or more additional classes by setting or changing in any one or more respects,
their respective designations, preferences, conversion or other rights, voting
powers, restrictions, limitations, qualifications and terms and conditions of
redemption. Pursuant to such authority, the Board of Trustees has authorized the
issuance of two classes of shares: Investor Shares, representing interests in
each Fund; and S Shares representing interests in the Prime Money Market Fund.
The Trustees may classify or reclassify any particular class of shares into one
or more series.

Each share of the Trust has a par value of $0.0001, represents an equal
proportionate interest in the Funds, and is entitled to such dividends and
distributions of the income earned on the particular Fund's assets as are
declared at the discretion of the Trustees. Shares of the Funds have no
preemptive rights and only such conversion or exchange rights as the Board of
Trustees may grant in its discretion. When issued for payment as described in
the Prospectuses, each Fund's Shares will be fully paid and non-assessable by
the Trust. In the event of the termination of the Trust or the Funds,
shareholders of the Funds would be entitled to receive the assets available for
distribution belonging to the particular Class of Shares of the particular Fund,
and a proportionate distribution of any general assets not belonging to any
particular portfolio which are available for distribution. Shareholders of the
Funds are entitled to participate in the net distributable assets of the Funds
on liquidation, based on the number of shares of the particular class of Shares
of the particular Fund that are held by each of them.

There will normally be no meetings of shareholders for the purpose of
electing Trustees unless and until such time as less than a majority of the
Trustees holding office have been elected by shareholders, at which time the
Trustees then in office will call a shareholders meeting for the election of
Trustees. Shares of the Trust have noncumulative voting rights and, accordingly,
the holders of more than 50% of the Trust's outstanding shares (irrespective of
class) may elect all of the Trustees. Except as set forth above and in the
Prospectuses, the Trustees will continue to hold office and may appoint
successor Trustees.

The Agreement and Declaration of Trust authorizes the Board of Trustees,
without shareholder approval, to issue shares to a party or parties and for such
amount and type of consideration and on such terms, subject to

-28-
<PAGE> 115

applicable law, as the Trustees may deem appropriate. The Board of Trustees may
issue fractional shares and shares held in the treasury. The Board of Trustees
has full power and authority, in their sole discretion, and without obtaining
shareholder approval, to divide or combine the shares or any class or series
thereof into a greater or lesser number, to classify or reclassify any issued
shares or any class or series thereof into one or more classes or series of
shares, and to take such other action with respect to the Trust's shares as the
Board of Trustees may deem desirable. The Agreement and Declaration of Trust
authorizes the Trustees without shareholder approval to cause the Trust, or any
series thereof, to merge or consolidate with any corporation, association, trust
or other organization or sell or exchange all or substantially all of the
property belonging to the Trust or any series thereof. The Agreement and
Declaration of Trust permits the termination of the Trust or of any series or
class of the Trust by the Trustees without shareholder approval.

The Agreement and Declaration of Trust provides that the Trustees
and officers, when acting in their capacity as such, will not be personally
liable to any person other than the Trust or a beneficial owner for any act,
omission or obligation of the Trust, or any Trustee or any officer of the Trust.
Neither a Trustee nor an officer of the Trust shall be liable for any act or
omission in his capacity as Trustee or as an officer of the Trust, or for any
act or omission of any officer (or other officer) or employee of the Trust or of
any other person or party, provided that the Agreement and Declaration of Trust
does not protect any Trustee or officer against any liability to the Trust or to
shareholders of record to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee or the duties of such
officer.

Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Trust shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each fund or class affected by the matter. For purposes of determining whether
the approval of a majority of the outstanding shares of a fund or class will be
required in connection with a matter, a fund or class will be deemed to be
affected by a matter unless it is clear that the interests of each fund or class
in the matter are identical, or that the matter does not affect any interest of
the fund. Under Rule 18f-2, the approval of an investment advisory agreement or
any change in a fundamental investment policy would be effectively acted upon
with respect to a fund only if approved by a majority of the outstanding shares
of such fund. However, Rule 18f-2 also provides that the election of Trustees
may be effectively acted upon by shareholders of the Trust voting without regard
to series.

-29-
<PAGE> 116

As of January 4, 1999, the name, address and percentage of the
outstanding shares held by other investors who may have owned of record 5% or
more of the outstanding shares of a particular class of a predecessor Fund were
as follows:

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C> <C>
PRIME MONEY MARKET KEYSTONE FINANCIAL INC. 61.71%
CASH
1315 ELEVENTH AVE., P.O. BOX 2450
ALTOONA, PA 16601
- --------------------------------------------------------------------------------
PRIME MONEY MARKET BISYS FUND SERVICES 27.78%
FBO KEYSTONE FINANCIAL SWEEP
CUSTOMERS
3435 STELZER ROAD
COLUMBUS, OH 43219
- --------------------------------------------------------------------------------
PRIME MONEY MARKET NATIONAL FINANCIAL SERVICES CORP. 8.88%
ONE WORLD FINANCIAL CENTER
200 LIBERTY ST.
NEW YORK, NY 10281
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS KEYSTONE FINANCIAL INC. 75.44%
MONEY MARKET CASH
1315 ELEVENTH AVE., P.O. BOX 2450
ALTOONA, PA 16601
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS NATIONAL FINANCIAL SERVICES CORP. 16.44%
MONEY MARKET ONE WORLD FINANCIAL CENTER
200 LIBERTY ST.
NEW YORK, NY 10281
- --------------------------------------------------------------------------------
PENNSYLVANIA MUNICIPAL BOND KEYSTONE FINANCIAL INC. 97.07%
CASH
1315 ELEVENTH AVE., P.O. BOX 2450
ALTOONA, PA 16601
- --------------------------------------------------------------------------------
INCOME KEYSTONE FINANCIAL INC. 98.40%
CASH
1315 ELEVENTH AVE., P.O. BOX 2450
ALTOONA, PA 16601
- --------------------------------------------------------------------------------
ESTABLISHED GROWTH KEYSTONE FINANCIAL INC. 24.53%
REINVEST
1315 ELEVENTH AVE., P.O. BOX 2450
ALTOONA, PA 16601
- --------------------------------------------------------------------------------
ESTABLISHED GROWTH KEYSTONE FINANCIAL INC. 73.10%
CASH
1315 ELEVENTH AVE., P.O. BOX 2450
ALTOONA, PA 16601
- --------------------------------------------------------------------------------
AGGRESSIVE GROWTH KEYSTONE FINANCIAL INC. 66.00%
REINVEST
1315 ELEVENTH AVE., P.O. BOX 2450
ALTOONA, PA 16601
- --------------------------------------------------------------------------------
AGGRESSIVE GROWTH KEYSTONE FINANCIAL INC. 29.90%
REINVEST
1315 ELEVENTH AVE., P.O. BOX 2450
ALTOONA, PA 16601
- --------------------------------------------------------------------------------
GOVERNMENT SECURITIES KEYSTONE FINANCIAL INC. 99.55%
CASH
1315 ELEVENTH AVE., P.O. BOX 2450
ALTOONA, PA 16601
- --------------------------------------------------------------------------------
EMERGING GROWTH KEYSTONE FINANCIAL INC. 78.05%
CASH
1315 ELEVENTH AVE., P.O. BOX 2450
ALTOONA, PA 16601
- --------------------------------------------------------------------------------
EMERGING GROWTH KEYSTONE FINANCIAL INC. 10.23%
REINVEST
1315 ELEVENTH AVE., P.O. BOX 2450
ALTOONA, PA 16601
- --------------------------------------------------------------------------------
</TABLE>

Vote of a Majority of the Outstanding Shares

As used in the Prospectuses and this Statement of Additional Information,
a "vote of a majority of the outstanding Shares" of the Trust, a Fund or a class
means the affirmative vote, at a meeting of Shareholders duly called, of the
lesser of (a) 67% or more of the votes of Shareholders of the Trust, Fund or
that class present at a meeting at which the holders of more than 50% of the
votes attributable to Shareholders of record of such Trust, Fund, or class are
represented in person or by proxy, or (b) the holders of more than 50% of the
outstanding votes of Shareholders of that Trust, Fund or class.

Additional General Tax Information

Each Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, and to invest all, or substantially
all, of its assets in debt obligations the interest on which is exempt for
federal income tax purposes, so that a fund itself generally will be relieved of
federal income and excise taxes. If a Fund were to fail to so qualify: (1) the
fund would be taxed on its taxable income at regular corporate rates without any
deduction for distributions to shareholders; and (2) shareholders would be taxed
as if they received ordinary dividends, although corporate shareholders could be
eligible for the dividends received deduction.

In order for the Pennsylvania Bond Fund to pay tax-exempt dividends for
any taxable year, at least 50% of the aggregate value of the Fund's assets at
the close of each quarter of the Fund's taxable year must consist of
exempt-interest obligations.

Seven-Day and 30-Day Yields of the Prime Money Market Fund and the Treasury
Money Market Fund

The standardized seven-day yield for the Prime Money Market Fund and the
Treasury Money Market Fund is computed by determining the net change, exclusive
of capital changes, in the value of a hypothetical preexisting account in that
Fund having a balance of one Share at the beginning of the period, subtracting a
hypothetical charge reflecting deductions from Shareholder accounts, and
dividing the difference by the value of the account at the beginning of the base
period to obtain the base period return, and then multiplying the base period
return by (365/7). The net change in the account value of the Fund includes the
value of additional Shares purchased with dividends from the original Share,
dividends declared on both the original Share and any such additional Shares,
and all fees, other than nonrecurring account or sales charges, that are charged
to all Shareholder accounts in proportion to the length of the base period and
assuming such Fund's average account size. The capital changes to be excluded
from the calculation of the net change in account value are realized gains and
losses from the

-30-
<PAGE> 117
sale of securities and unrealized appreciation and depreciation. The 30-day
yield is calculated as described above except that the base period is 30 days
rather than seven days.

The effective yield for Shares of the Prime Money Market Fund and the
Treasury Money Market Fund is computed by compounding the base period return, as
calculated above, by adding 1 to the base period return raising the sum to a
power equal to 365 divided by seven and subtracting 1 from the result.

For the seven-day period ended June 30, 1998, the seven-day yield and
seven-day effective yield for Investor Shares of the Prime Money Market Fund
were 5.09% and 5.22%, respectively. For the 30-day period ended June 30, 1998,
the yield and effective yield for Investor Shares of the Prime Money Market
Fund were 5.06% and 5.18%, respectively.

For the seven-day period ended June 30, 1998, the Treasury Money Market
Fund's seven-day yield and seven-day effective yield were 4.78% and 4.90%,
respectively. For the 30-day period ended June 30, 1998, the yield and effective
yield for the Treasury Money Market Fund were 4.73% and 4.84%, respectively.

30-Day Yield of the Funds

As summarized in the Prospectuses under the heading "PERFORMANCE
INFORMATION," the yield of the Funds will be computed by annualizing net
investment income per share for a recent 30-day period and dividing that amount
by the Fund Share's maximum offering price (reduced by any undeclared earned
income expected to be paid shortly as a dividend) on the last trading day of
that period. Net investment income will reflect amortization of any market value
premium or discount of fixed income securities (except for obligations backed by
mortgages or other assets) and may include recognition of a pro rata portion of
the stated dividend rate of dividend paying portfolio securities. The yield of a
Fund will vary from time to time depending upon market conditions, the
composition of the Fund's portfolio and operating expenses of the Trust
allocated to such Fund. These factors and possible differences in the methods
used in calculating yield should be considered when comparing a Fund's yield to
yields published for other investment companies and other investment vehicles.
Yield should also be considered relative to changes in the value of a Fund's
Shares and to the relative risks associated with the investment objectives and
policies of that Fund.

In addition, tax equivalent yields are computed by dividing that portion
of the Pennsylvania Bond Fund's yield (as computed above) which is tax-exempt by
one minus a stated income tax rate and adding that result to that portion, if
any, of the yield of the Pennsylvania Bond Fund which is not tax-exempt.

For the 30-day period ended June 30, 1998, the yields for the Income Fund
and the Pennsylvania Bond Fund were 5.38% and 4.04%, respectively, assuming the
imposition of the maximum sales charge, and 5.64% and 4.23%, respectively,
excluding the effect of a sales charge. For the same period, the tax equivalent
yields for the Pennsylvania Bond Fund, assuming a 39.6% federal tax rate, were
6.69%, assuming the imposition of the maximum sales charge, and 7.00%,
excluding the effect of a sales charge.

-31-
<PAGE> 118

For the 30-day period ended June 30, 1998, the yields for the Government
Securities Fund were 4.99% assuming the imposition of the maximum sales charge,
and 5.15% excluding the effect of a sales charge.

Calculation of Total Return

As summarized in the Prospectuses under the heading "PERFORMANCE
INFORMATION," average annual total return is a measure of the change in value of
an investment in a Fund over the period covered, which assumes any dividends or
capital gains distributions are reinvested in that Fund immediately rather than
paid to the investor in cash. Average annual total return will be calculated by:
(1) adding to the total number of Shares purchased by a hypothetical $1,000
investment in a Fund (less the maximum sales charge, if any), all additional
Shares which would have been purchased if all dividends and distributions paid
or distributed during the period had been immediately reinvested; (2)
calculating the value of the hypothetical initial investment of $1,000 as of the
end of the period by multiplying the total number of Shares owned at the end of
the period by the net asset value per share on the last trading day of the
period; (3) assuming redemption at the end of the period; and (4) dividing this
account value for the hypothetical investor by the initial $1,000 investment and
annualizing the result for periods of less than one year. A Fund, however, may
also advertise aggregate total return in addition to or in lieu of average
annual total return. Aggregate total return is a measure of the change in value
of an investment in a Fund over the relevant period and is calculated similarly
to average annual total return except that the result is not annualized.

For the one year period ended June 30, 1998, and the period from
commencement of operations to June 30, 1998, the average annual total returns
for the Funds (other than the Emerging Growth, International Equity and
Lifestyle Funds), including the performance of any Fund's Predecessor Fund and
predecessor CIF (which CIF performance has been restated to reflect the
estimated fees for such Fund for the current fiscal for 1998 and 1997 year), are
as follows:

-32-
<PAGE> 119
<TABLE>
<CAPTION>
Average Annual Total Return
-------------------------------------------------
With Maximum Sales Load(1) Without Sales Load
-------------------------- --------------------
Since Since
Fund 1 Year Inception(2) 1 Year Inception(2)
- --------------------- ------- --------------- ------ ------------
<S> <C> <C> <C> <C>

Prime Money Market* N/A N/A 5.19% 5.17%
Treasury Money Market* N/A N/A 4.78% 4.78%
Established Growth 22.21% 28.49% 27.92% 30.20%
Aggressive Growth 7.68% 17.24% 12.72% 18.62%
Income 5.01% 4.07% 9.95% 7.14%
Government Securities 2.22% 3.89% 5.39% 5.10%
Pennsylvania Bond 1.17% 2.93% 5.89% 5.67%
</TABLE>

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

* The Prime Money Market and Treasury Money Market Funds do not have sales
loads.

(1) The maximum sales load for the Established Growth Fund, Emerging Growth
Fund, Aggressive Growth Fund, Income Fund and Pennsylvania Bond Fund, is
4.50%. The maximum sales load for the Government Securities Fund is 3.00%.

(2) Commenced operations October 7, 1996, July 1, 1997, January 1, 1995 (the
Established Growth Fund's predecessor CIF), July 1, 1994 (the Aggressive
Growth Fund's predecessor CIF), December 2, 1996, July 1, 1997, and
October 1, 1996, respectively.

Past performance is no guarantee as to future performance.

Distribution Rates

The Funds may from time to time advertise current distribution rates which
are calculated in accordance with the method disclosed in the Prospectus.

Performance Comparisons

Investors may judge the performance of the Funds by comparing them to the
performance of other mutual funds or mutual fund portfolios with comparable
investment objectives and policies through various mutual fund or market indices
such as those prepared by Dow Jones & Co., Inc. and S&P and to data prepared by
Lipper Analytical Services, Inc., a widely recognized independent service which
monitors the performance of mutual funds. Comparisons may also be made to
indices or data published in Money Magazine, Forbes, Barron's, The Wall Street
Journal, Morningstar, Inc., Ibbotson Associates,

-33-
<PAGE> 120

CDA/Wiesenberger, The New York Times, Business Week, U.S.A. Today and local
periodicals. In addition to performance information, general information about
the Funds that appears in a publication such as those mentioned above may be
included in advertisements, sales literature and reports to shareholders. The
Funds may also include in advertisements and reports to shareholders information
discussing the performance of the Advisor or Sub-Advisors in comparison to other
investment Advisors and to other institutions.

From time to time, the Trust may include the following types of
information in advertisements, supplemental sales literature and reports to
Shareholders: (1) discussions of general economic or financial principles (such
as the effects of inflation, the power of compounding and the benefits of dollar
cost averaging); (2) discussions of general economic trends; (3) presentations
of statistical data to supplement such discussions; (4) descriptions of past or
anticipated portfolio holdings for the Funds; (5) descriptions of investment
strategies for the Funds; (6) descriptions or comparisons of various investment
products, which may or may not include the Funds; (7) comparisons of investment
products (including the Funds) with relevant market or industry indices or other
appropriate benchmarks; (8) discussions of fund rankings or ratings by
recognized rating organizations; and (9) testimonials describing the experience
of persons that have invested in a Fund. The Trust may also include
calculations, such as hypothetical compounding examples, which describe
hypothetical investment results in such communications. Such performance
examples will be based on an express set of assumptions and are not indicative
of the performance of a Fund.

Current yields or total return will fluctuate from time to time and are
not necessarily representative of future results. Accordingly, a Fund's yield or
total return may not provide for comparison with bank deposits or other
investments that pay a fixed return for a stated period of time. Yield and total
return are functions of a Fund's quality, composition and maturity, as well as
expenses allocated to that Fund. Fees imposed upon Customer accounts by the
Advisor, Sub-Advisors, their affiliates or their affiliated or correspondent
banks for cash management services or other services will reduce a Fund's
effective yield and total return to Customers. The current yield and performance
of the Funds may be obtained by calling the Trust at 1-800-766-3960.

Miscellaneous

Individual Trustees are generally elected by the shareholders and, subject
to removal by the vote of two-thirds of the Board of Trustees, serve for a term
lasting until the next meeting of shareholders at which Trustees are elected.
Such meetings are not required to be held at any specific intervals. Generally,
shareholders owning not less than a majority of the outstanding shares of the
Trust entitled to vote may cause the Trustees to call a special meeting.

-34-
<PAGE> 121
The Trust is registered with the Commission as a management investment
company. Such registration does not involve supervision by the Commission of the
management or policies of the Trust.

The Prospectuses and this Statement of Additional Information omit certain
of the information contained in the Registration Statement filed with the
Commission. Copies of such information may be obtained from the Commission upon
payment of the prescribed fee.

The Prospectuses and this Statement of Additional Information are not an
offering of the securities herein described in any state in which such offering
may not lawfully be made. No salesman, dealer, or other person is authorized to
give any information or make any representation other than those contained in
the Prospectuses and this Statement of Additional Information.

-35-
<PAGE> 122
FINANCIAL STATEMENTS

The Financial Statements for the predecessor funds for the Prime Money
Market, Treasury Money Market, Established Growth, Aggressive Growth, Income,
Government Securities and Pennsylvania Bond Funds for the fiscal period or year
ended June 30, 1998 and the financial highlights for each of the respective
periods presented, appearing in the 1998 Annual Report to Shareholders of The
Sessions Group, and the report thereon of KPMG Peat Marwick LLP, the Trust's
independent accountants, also appearing therein, are incorporated by reference
in this Statement of Additional Information. No other parts of the 1998 Annual
Report to Shareholders of The Sessions Group are incorporated herein.

-36-
<PAGE> 123
APPENDIX A

COMMERCIAL PAPER RATINGS

A Standard & Poor's ("S&P") commercial paper rating is a current
assessment of the likelihood of timely payment of debt having an original
maturity of no more than 365 days. The following summarizes the rating
categories used by Standard and Poor's for commercial paper:

"A-1" - Obligations are rated in the highest category indicating
that the obligor's capacity to meet its financial commitment on the obligation
is strong. Within this category, certain obligations are designated with a plus
sign (+). This indicates that the obligor's capacity to meet its financial
commitment on the obligation on these obligations is extremely strong.

"A-2" - Obligations are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations in
higher rating categories. However, the obligor's capacity to meet its financial
commitment on the obligation is satisfactory.

"A-3" - Obligations exhibit adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.

"B" - Obligations are regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.

"C" - Obligations are currently vulnerable to nonpayment and are
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation.

"D" - The "D" rating, unlike other ratings, is not prospective;
rather, it is used only where a default has actually occurred--and not where a
default is only expected. S&P changes ratings to "D" either:

- On the day an interest and/or principal payment is due and is
not paid. An exception is made if there is a grace period and
S&P believes that a payment will be made, in which case the
rating can be maintained; or

- Upon voluntary bankruptcy filing or similar action. An
exception is made if S&P expects that debt service payments
will continue to be made on a specific issue. In the absence
of a payment default or bankruptcy filing, a technical default
(i.e., covenant violation) is not sufficient for assigning a
"D" rating.

Moody's commercial paper ratings are opinions of the ability of
issuers to repay punctually senior debt obligations not having an original
maturity in excess of one year, unless explicitly noted. The following
summarizes the rating categories used by Moody's for commercial paper:

A-1
<PAGE> 124
"Prime-1" - Issuers (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structure with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.

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

"Prime-3" - Issuers (or supporting institutions) have an acceptable
ability for repayment of senior short-term debt obligations. The effect of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.

"Not Prime" - Issuers do not fall within any of the Prime rating
categories.

The three rating categories of Duff & Phelps for investment grade
commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff & Phelps
employs three designations, "D-1+," "D-1" and "D-1-," within the highest rating
category. The following summarizes the rating categories used by Duff & Phelps
for commercial paper:

"D-1+" - Debt possesses the highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just below risk-free
U.S. Treasury short-term obligations.

"D-1" - Debt possesses very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor.

"D-1-" - Debt possesses high certainty of timely payment. Liquidity
factors are strong and supported by good fundamental protection factors. Risk
factors are very small.

"D-2" - Debt possesses good certainty of timely payment. Liquidity
factors and company fundamentals are sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital markets is good. Risk
factors are small.

"D-3" - Debt possesses satisfactory liquidity and other protection
factors qualify issues as investment grade. Risk factors are larger and subject
to more variation. Nevertheless, timely payment is expected.

"D-4" - Debt possesses speculative investment characteristics.
Liquidity is not sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high degree of
variation.

A-2
<PAGE> 125
"D-5" - Issuer has failed to meet scheduled principal and/or
interest payments.

Fitch IBCA short-term ratings apply to debt obligations that have
time horizons of less than 12 months for most obligations, or up to three years
for U.S. public finance securities. The following summarizes the rating
categories used by Fitch IBCA for short-term obligations:

"F1" - Securities possess the highest credit quality. This
designation indicates the strongest capacity for timely payment of financial
commitments and may have an added "+" to denote any exceptionally strong credit
feature.

"F2" - Securities possess good credit quality. This designation
indicates a satisfactory capacity for timely payment of financial commitments,
but the margin of safety is not as great as in the case of the higher ratings.

"F3" - Securities possess fair credit quality. This designation
indicates that the capacity for timely payment of financial commitments is
adequate; however, near-term adverse changes could result in a reduction to
non-investment grade.

"B" - Securities possess speculative credit quality this designation
indicates minimal capacity for timely payment of financial commitments, plus
vulnerability to near-term adverse changes in financial and economic conditions.

"C" - Securities possess high default risk. This designation
indicates that the capacity for meeting financial commitments is solely reliant
upon a sustained, favorable business and economic environment.

"D" - Securities are in actual or imminent payment default.

Thomson BankWatch short-term ratings assess the likelihood of an
untimely payment of principal and interest of debt instruments with original
maturities of one year or less. The following summarizes the ratings used by
Thomson BankWatch:

"TBW-1" - This designation represents Thomson BankWatch's highest
category and indicates a very high likelihood that principal and interest will
be paid on a timely basis.

"TBW-2" - This designation represents Thomson BankWatch's
second-highest category and indicates that while the degree of safety regarding
timely repayment of principal and interest is strong, the relative degree of
safety is not as high as for issues rated "TBW-1."

"TBW-3" - This designation represents Thomson BankWatch's lowest
investment-grade category and indicates that while the obligation is more
susceptible to adverse developments (both internal and external) than those with
higher ratings, the capacity to service principal and interest in a timely
fashion is considered adequate.

A-3
<PAGE> 126
"TBW-4" - This designation represents Thomson BankWatch's lowest
rating category and indicates that the obligation is regarded as non-investment
grade and therefore speculative.

CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS

The following summarizes the ratings used by Standard & Poor's for
corporate and municipal debt:

"AAA" - An obligation rated "AAA" has the highest rating assigned by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is extremely strong.

"AA" - An obligation rated "AA" differs from the highest rated
obligations only in small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong.

"A" - An obligation rated "A" is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rated categories. However, the obligor's capacity to meet
its financial commitment on the obligation is still strong.

"BBB" - An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.

Obligations rated "BB," "B," "CCC," "CC" and "C" are regarded as
having significant speculative characteristics. "BB" indicates the least degree
of speculation and "C" the highest. While such obligations will likely have some
quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.

"BB" - An obligation rated "BB" is less vulnerable to nonpayment
than other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to the obligor's inadequate capacity to meet its financial commitment on the
obligation.

"B" - An obligation rated "B" is more vulnerable to nonpayment than
obligations rated "BB", but the obligor currently has the capacity to meet its
financial commitment on the obligation. Adverse business, financial or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.

"CCC" - An obligation rated "CCC" is currently vulnerable to
nonpayment, and is dependent upon favorable business, financial and economic
conditions for the obligor to meet its financial commitment on the obligation.
In the event of adverse business, financial or economic conditions, the obligor
is not likely to have the capacity to meet its financial commitment on the
obligation.

"CC" - An obligation rated "CC" is currently highly vulnerable to
non-payment.

A-4
<PAGE> 127
"C" - The "C" rating may be used to cover a situation where a
bankruptcy petition has been filed or similar action has been taken, but
payments on this obligation are being continued.

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

"r" - This symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or volatility of
expected returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk--such as interest-only or
principal-only mortgage securities and obligations with unusually risky interest
terms, such as inverse floaters.

The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:

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

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

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

"Baa" - Bonds are considered as medium-grade obligations, (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great

A-5
<PAGE> 128
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

"Ba," "B," "Caa," "Ca," and "C" - Bonds that possess one of these
ratings provide questionable protection of interest and principal ("Ba"
indicates speculative elements; "B" indicates a general lack of characteristics
of desirable investment; "Caa" are of poor standing; "Ca" represents obligations
which are speculative in a high degree; and "C" represents the lowest rated
class of bonds). "Caa," "Ca" and "C" bonds may be in default.

Con. (---) - Bonds for which the security depends upon the
completion of some act or the fulfillment of some condition are rated
conditionally. These are bonds secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operating experience, (c)
rentals which begin when facilities are completed, or (d) payments to which some
other limiting condition attaches. Parenthetical rating denotes probable credit
stature upon completion of construction or elimination of basis of condition.

Note: Moody's applies numerical modifiers 1, 2, and 3 in each
generic rating classification from "Aa" through "Caa". The modifier 1 indicates
that the obligation ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking
in the lower end of its generic rating category.

The following summarizes the long-term debt ratings used by Duff &
Phelps for corporate and municipal long-term debt:

"AAA" - Debt is considered to be of the highest credit quality. The
risk factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.

"AA" - Debt is considered to be of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to time
because of economic conditions.

"A" - Debt possesses protection factors which are average but
adequate. However, risk factors are more variable and greater in periods of
economic stress.

"BBB" - Debt possesses below-average protection factors but such
protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.

"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of these
ratings is considered to be below investment grade. Although below investment
grade, debt rated "BB" is deemed likely to meet obligations when due. Debt rated
"B" possesses the risk that obligations will not be met when due. Debt rated
"CCC" is well below investment grade and has considerable uncertainty as to
timely payment of principal, interest or preferred dividends. Debt rated "DD" is
a defaulted debt obligation, and the rating "DP" represents preferred stock with
dividend arrearages.

To provide more detailed indications of credit quality, the "AA,"
"A," "BBB," "BB" and "B" ratings may be modified by the addition of a plus (+)
or minus (-) sign to show relative standing within these major categories.

A-6
<PAGE> 129
The following summarizes the ratings used by Fitch IBCA for
corporate and municipal bonds:

"AAA" - Bonds considered to be investment grade and of the highest
credit quality. These ratings denote the lowest expectation of investment risk
and are assigned only in case of exceptionally strong capacity for timely
payment of financial commitments. This capacity is very unlikely to be adversely
affected by foreseeable events.

"AA" - Bonds considered to be investment grade and of very high
credit quality. These ratings denote a very low expectation of investment risk
and indicate very strong capacity for timely payment of financial commitments.
This capacity is not significantly vulnerable to foreseeable events.

"A" - Bonds considered to be investment grade and of high credit
quality. These ratings denote a low expectation of investment risk and indicate
strong capacity for timely payment of financial commitments. This capacity may,
nevertheless, be more vulnerable to adverse changes in circumstances or in
economic conditions than is the case for higher ratings.

"BBB" - Bonds considered to be investment grade and of good credit
quality. These ratings denote that there is currently a low expectation of
investment risk. The capacity for timely payment of financial commitments is
adequate, but adverse changes in circumstances and in economic conditions are
more likely to impair this capacity.

"BB" - Bonds considered to be speculative. These ratings indicate
that there is a possibility of credit risk developing, particularly as the
result of adverse economic changes over time; however, business or financial
alternatives may be available to allow financial commitments to be met.
Securities rated in this category are not investment grade.

"B" - Bonds are considered highly speculative. These ratings
indicate that significant credit risk is present, but a limited margin of safety
remains. Financial commitments are currently being met; however, capacity for
continued payment is contingent upon a sustained, favorable business and
economic environment.

"CCC", "CC", "C" - Bonds have high default risk. Capacity for
meeting financial commitments is reliant upon sustained, favorable business or
economic developments. "CC" ratings indicate that default of some kind appears
probable, and "C" ratings signal imminent default.

"DDD," "DD" and "D" - Bonds are in default. Securities are not
meeting obligations and are extremely speculative. "DDD" designates the
highest potential for recovery on these securities, and "D" represents the
lowest potential for recovery.

To provide more detailed indications of credit quality, the Fitch
IBCA ratings from and including "AA" to "B" may be modified by the addition of a
plus (+) or minus (-) sign to show relative standing within these major rating
categories.

Thomson BankWatch assesses the likelihood of an untimely repayment
of principal or interest over the term to maturity of long term debt and
preferred stock which are issued by United States commercial banks, thrifts and
non-bank banks; non-United States banks; and broker-dealers. The following
summarizes the rating categories used by Thomson BankWatch for long-term debt
ratings:

A-7
<PAGE> 130
"AAA" - This designation indicates that the ability to repay
principal and interest on a timely basis is extremely high.

"AA" - This designation indicates a very strong ability to repay
principal and interest on a timely basis, with limited incremental risk compared
to issues rated in the highest category.

"A" - This designation indicates that the ability to repay principal
and interest is strong. Issues rated "A" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.

"BBB" - This designation represents the lowest investment-grade
category and indicates an acceptable capacity to repay principal and interest.
Issues rated "BBB" are more vulnerable to adverse developments (both internal
and external) than obligations with higher ratings.

"BB," "B," "CCC," and "CC," - These designations are assigned by
Thomson BankWatch to non-investment grade long-term debt. Such issues are
regarded as having speculative characteristics regarding the likelihood of
timely payment of principal and interest. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation.

"D" - This designation indicates that the long-term debt is in
default.

PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC" may
include a plus or minus sign designation which indicates where within the
respective category the issue is placed.

MUNICIPAL NOTE RATINGS

A Standard and Poor's rating reflects the liquidity concerns and
market access risks unique to notes due in three years or less. The following
summarizes the ratings used by Standard & Poor's Ratings Group for municipal
notes:

"SP-1" - The issuers of these municipal notes exhibit a strong
capacity to pay principal and interest. Those issues determined to possess very
strong characteristics are given a plus (+) designation.

"SP-2" - The issuers of these municipal notes exhibit satisfactory
capacity to pay principal and interest, with some vulnerability to adverse
financial and economic changes over the term of the notes.

"SP-3" - The issuers of these municipal notes exhibit speculative
capacity to pay principal and interest.

Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade ("MIG") and variable rate demand
obligations are designated Variable Moody's Investment Grade ("VMIG"). Such
ratings recognize the differences between short-term credit

A-8
<PAGE> 131
risk and long-term risk. The following summarizes the ratings by Moody's
Investors Service, Inc. for short-term notes:

"MIG-1"/"VMIG-1" - This designation denotes best quality. There is
present strong protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.

"MIG-2"/"VMIG-2" - This designation denotes high quality, with
margins of protection ample although not so large as in the preceding group.

"MIG-3"/"VMIG-3" - This designation denotes favorable quality, with
all security elements accounted for but lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection may be narrow and market
access for refinancing is likely to be less well established.

"MIG-4"/"VMIG-4" - This designation denotes adequate quality.
Protection commonly regarded as required of an investment security is present
and although not distinctly or predominantly speculative, there is specific
risk.

"SG" - This designation denotes speculative quality. Debt
instruments in this category lack of margins of protection.

Fitch IBCA and Duff & Phelps use the short-term ratings described
under Commercial Paper Ratings for municipal notes.

A-9
<PAGE> 132
APPENDIX B

As stated in the Prospectus, the Equity and Bond Funds, other than
the Colorado Tax-Exempt Fund may enter into futures contracts and options for
hedging purposes. Such transactions are described in this Appendix.

I. Interest Rate Futures Contracts.

Use of Interest Rate Futures Contracts. Bond prices are established
in both the cash market and the futures market. In the cash market, bonds are
purchased and sold with payment for the full purchase price of the bond being
made in cash, generally within five business days after the trade. In the
futures market, only a contract is made to purchase or sell a bond in the future
for a set price on a certain date. Historically, the prices for bonds
established in the futures markets have tended to move generally in the
aggregate in concert with the cash market prices and have maintained fairly
predictable relationships. Accordingly, the Funds may use interest rate futures
as a defense, or hedge, against anticipated interest rate changes and not for
speculation. As described below, this would include the use of futures contract
sales to protect against expected increases in interest rates and futures
contract purchases to offset the impact of interest rate declines.

The Funds presently could accomplish a similar result to that which
it hopes to achieve through the use of futures contracts by selling bonds with
long maturities and investing in bonds with short maturities when interest rates
are expected to increase, or conversely, selling short-term bonds and investing
in long-term bonds when interest rates are expected to decline. However, because
of the liquidity that is often available in the futures market the protection is
more likely to be achieved, perhaps at a lower cost and without changing the
rate of interest being earned by the Funds, through using futures contracts.

Description of Interest Rate Futures Contracts. An interest rate
futures contract sale would create an obligation by a Fund, as seller, to
deliver the specific type of financial instrument called for in the contract at
a specific future time for a specified price. A futures contract purchase would
create an obligation by a Fund, as purchaser, to take delivery of the specific
type of financial instrument at a specific future time at a specific price. The
specific securities delivered or taken, respectively, at settlement date, would
not be determined until at or near that date. The determination would be in
accordance with the rules of the exchange on which the futures contract sale or
purchase was made.

Although interest rate futures contracts by their terms call for
actual delivery or acceptance of securities, in most cases the contracts are
closed out before the settlement date without the making or taking of delivery
of securities. Closing out a futures contract sale is effected by a Fund
entering into a futures contract purchase for the same aggregate amount of the
specific type of financial instrument and the same delivery date. If the price
of the sale exceeds the price of the offsetting purchase, a Fund is immediately
paid the difference and thus realizes a gain. If the offsetting purchase price
exceeds the sale price, a Fund pays the difference and realizes a loss.
Similarly, the closing out of a futures contract purchase is effected by the
Fund entering into a futures contract sale. If the offsetting sale price exceeds
the purchase price, a Fund realizes a gain, and if the purchase price exceeds
the offsetting sale price, a Fund realizes a loss.

Interest rate futures contracts are traded in an auction environment
on the floors of several exchanges - principally, the Chicago Board of Trade and
the Chicago Mercantile Exchange and

B-1
<PAGE> 133
the New York Futures Exchange. The Fund would deal only in standardized
contract's on recognized exchanges. Each exchange guarantees performance under
contract provisions through a clearing corporation, a nonprofit organization
managed by the exchange membership.

A public market now exists in futures contracts covering various
financial instruments including long-term Treasury Bonds and Notes; Government
National Mortgage Association (GNMA) modified pass-through mortgage-backed
securities; three-month Treasury Bills; and ninety-day commercial paper. A Fund
may trade in any futures contract for which there exists a public market,
including, without limitation, the foregoing instruments.

II. Stock Index Futures Contracts.

General. A stock index assigns relative values to the stocks
included in the index and the index fluctuates with changes in the market values
of the stocks included. Some stock index futures contracts are based on broad
market indexes, such as the Standard & Poor's 500 or the New York Stock Exchange
Composite Index. In contrast, certain exchanges offer futures contracts on
narrower market indexes, such as the Standard & Poor's 100 or indexes based on
an industry or market segment, such as oil and gas stocks. Futures contracts are
traded on organized exchanges regulated by the Commodity Futures Trading
Commission. Transactions on such exchanges are cleared through a clearing
corporation, which guarantees the performance of the parties to each contract.

A Fund will sell index futures contracts in order to offset a
decrease in market value of its securities that might otherwise result from a
market decline. A Fund may do so either to hedge the value of its portfolio as a
whole, or to protect against declines, occurring prior to sales of securities,
in the value of the securities to be sold. Conversely, a Fund will purchase
index futures contracts in anticipation of purchases of securities. In a
substantial majority of these transactions, a Fund will purchase such securities
upon termination of the long futures position, but a long futures position may
be terminated without a corresponding purchase of securities.

In addition, a Fund may utilize stock index futures contracts in
anticipation of changes in the composition of its holdings. For example, in the
event that a Fund expects to narrow the range of industry groups represented in
its holdings it may, prior to making purchases of the actual securities,
establish a long futures position based on a more restricted index, such as an
index comprised of securities of a particular industry group. A Fund may also
sell futures contracts in connection with this strategy, in order to protect
against the possibility that the value of the securities to be sold as part of
the restructuring of its portfolio will decline prior to the time of sale.

III. Futures Contracts on Foreign Currencies.

A futures contract on foreign currency creates a binding obligation
on one party to deliver, and a corresponding obligation on another party to
accept delivery of, a stated quantity of a foreign currency, for an amount fixed
in U.S. dollars. Foreign currency futures may be used by a Fund to hedge against
exposure to fluctuations in exchange rates between the U.S. dollar and other
currencies arising from multinational transactions.

B-2
<PAGE> 134
IV. Margin Payments.

Unlike when a Fund purchases or sells a security, no price is paid
or received by a Fund upon the purchase or sale of a futures contract.
Initially, a Fund will be required to deposit with the broker or in a segregated
account with a Fund's custodian an amount of cash or cash equivalents, the value
of which may vary but is generally equal to 10% or less of the value of the
contract. This amount is known as initial margin. The nature of initial margin
in futures transactions is different from that of margin in security
transactions in that futures contract margin does not involve the borrowing of
funds by the customer to finance the transactions. Rather, the initial margin is
in the nature of a performance bond or good faith deposit on the contract which
is returned to a Fund upon termination of the futures contract assuming all
contractual obligations have been satisfied. Subsequent payments, called
variation margin, to and from the broker, will be made on a daily basis as the
price of the underlying instrument fluctuates making the long and short
positions in the futures contract more or less valuable, a process known as
"marking-to-market." For example, when a Fund has purchased a futures contract
and the price of the contract has risen in response to a rise in the underlying
instruments, that position will have increased in value and a Fund will be
entitled to receive from the broker a variation margin payment equal to that
increase in value. Conversely, where a Fund has purchased a futures contract and
the price of the futures contract has declined in response to a decrease in the
underlying instruments, the position would be less valuable and a Fund would be
required to make a variation margin payment to the broker. At any time prior to
expiration of the futures contract, the Advisor or Sub-Advisors may elect to
close the position by taking an opposite position, subject to the availability
of a secondary market, which will operate to terminate a Fund's position in the
futures contract. A final determination of variation margin is then made,
additional cash is required to be paid by or released to a Fund, and a Fund
realizes a loss or gain.

V. Risks of Transactions in Futures Contracts.

There are several risks in connection with the use of futures by a
Fund as a hedging device. One risk arises because of the imperfect correlation
between movements in the price of the future and movements in the price of the
securities which are the subject of the hedge. The price of the future may move
more than or less than the price of the securities being hedged. If the price of
the future moves less than the price of the securities which are the subject of
the hedge, the hedge will not be fully effective but, if the price of the
securities being hedged has moved in an unfavorable direction, a Fund would be
in a better position than if it had not hedged at all. If the price of the
securities being hedged has moved in a favorable direction, this advantage will
be partially offset by the loss on the future. If the price of the future moves
more than the price of the hedged securities, a Fund involved will experience
either a loss or gain on the future which will not be completely offset by
movements in the price of the securities which are the subject of the hedge. To
compensate for the imperfect correlation of movements in the price of securities
being hedged and movements in the price of futures contracts, a Fund may buy or
sell futures contracts in a greater dollar amount than the dollar amount of
securities being hedged if the volatility over a particular time period of the
prices of such securities has been greater than the volatility over such time
period of the future, or if otherwise deemed to be appropriate by the Advisor or
SubAdvisors. Conversely, a Fund may buy or sell fewer futures contracts if the
volatility over a particular time period of the prices of the securities being
hedged is less than the volatility over such time period of the futures contract
being used, or if otherwise deemed to be appropriate by Advisor or Subadvisors.
It is also possible that, where a Fund has sold futures to hedge its portfolio
against a decline in the market, the market may advance and the value of
securities held by a Fund may decline. If this occurred, a Fund would lose money
on the future and also experience a decline in value in its portfolio
securities.

B-3
<PAGE> 135
Where futures are purchased to hedge against a possible increase in
the price of securities or a currency before a Fund is able to invest its cash
(or cash equivalents) in securities (or options) in an orderly fashion, it is
possible that the market may decline instead; if a Fund then concludes not to
invest in securities or options at that time because of concern as to possible
further market decline or for other reasons, a Fund will realize a loss on the
futures contract that is not offset by a reduction in the price of securities
purchased.

In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in the futures and the
securities being hedged, the price of futures may not correlate perfectly with
movement in the cash market due to certain market distortions. Rather than
meeting additional margin deposit requirements, investors may close futures
contracts through off-setting transactions which could distort the normal
relationship between the cash and futures markets. Second, with respect to
financial futures contracts, the liquidity of the futures market depends on
participants entering into off-setting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced thus producing distortions. Third, from
the point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities market. Therefore,
increased participation by speculators in the futures market may also cause
temporary price distortions. Due to the possibility of price distortion in the
futures market, and because of the imperfect correlation between the movements
in the cash market and movements in the price of futures, a correct forecast of
general market trends or interest rate movements by the Advisor or Subadvisors
may still not result in a successful hedging transaction over a short time
frame.

Positions in futures may be closed out only on an exchange or board
of trade which provides a secondary market for such futures. Although the Funds
intend to purchase or sell futures only on exchanges or boards of trade where
there appear to be active secondary markets, there is no assurance that a liquid
secondary market on any exchange or board of trade will exist for any particular
contract or at any particular time. In such event, it may not be possible to
close a futures investment position, and in the event of adverse price
movements, the Funds would continue to be required to make daily cash payments
of variation margin. However, in the event futures contracts have been used to
hedge portfolio securities, such securities will not be sold until the futures
contract can be terminated. In such circumstances, an increase in the price of
the securities, if any, may partially or completely offset losses on the futures
contract. However, as described above, there is no guarantee that the price of
the securities will in fact correlate with the price movements in the futures
contract and thus provide an offset on a futures contract.

Further, it should be noted that the liquidity of a secondary market
in a futures contract may be adversely affected by "daily price fluctuation
limits" established by commodity exchanges which limit the amount of fluctuation
in a futures contract price during a single trading day. Once the daily limit
has been reached in the contract, no trades may be entered into at a price
beyond the limit, thus preventing the liquidation of open futures positions. The
trading of futures contracts is also subject to the risk of trading halts,
suspensions, exchange or clearing house equipment failures, government
intervention, insolvency of a brokerage firm or clearing house or other
disruptions of normal trading activity, which could at times make it difficult
or impossible to liquidate existing positions or to recover excess variation
margin payments.

B-4
<PAGE> 136
Successful use of futures by the Funds is also subject to the
Advisor's or Subadvisors' ability to predict correctly movements in the
direction of the market. For example, if a Fund has hedged against the
possibility of a decline in the market adversely affecting securities held in
its portfolio and securities prices increase instead, a Fund will lose part or
all of the benefit to the increased value of its securities which it has hedged
because it will have offsetting losses in its futures positions. In addition, in
such situations, if a Fund has insufficient cash, it may have to sell securities
to meet daily variation margin requirements. Such sales of securities may be,
but will not necessarily be, at increased prices which reflect the rising
market. A Fund may have to sell securities at a time when it may be
disadvantageous to do so.

VI. Options on Futures Contracts.

The Funds may purchase options on the futures contracts described
above. A futures option gives the holder, in return for the premium paid, the
right to buy (call) from or sell (put) to the writer of the option a futures
contract at a specified price at any time during the period of the option. Upon
exercise, the writer of the option is obligated to pay the difference between
the cash value of the futures contract and the exercise price. Like the buyer or
seller of a futures contract, the holder, or writer, of an option has the right
to terminate its position prior to the scheduled expiration of the option by
selling, or purchasing, an option of the same series, at which time the person
entering into the closing transaction will realize a gain or loss.

Investments in futures options involve some of the same
considerations that are involved in connection with investments in futures
contracts (for example, the existence of a liquid secondary market). In
addition, the purchase or sale of an option also entails the risk that changes
in the value of the underlying futures contract will not be fully reflected in
the value of the option purchased. Depending on the pricing of the option
compared to either the futures contract upon which it is based, or upon the
price of the securities being hedged, an option may or may not be less risky
than ownership of the futures contract or such securities. In general, the
market prices of options can be expected to be more volatile than the market
prices on the underlying futures contract. Compared to the purchase or sale of
futures contracts, however, the purchase of call or put options on futures
contracts may frequently involve less potential risk to the Funds because the
maximum amount at risk is the premium paid for the options (plus transaction
costs). The writing of an option on a futures contract involves risks similar to
those risks relating to the sale of futures contracts. Although permitted by
their fundamental investment policies, the Funds do not currently intend to
write futures options during the current fiscal year, and will not do so in the
future absent any necessary regulatory approvals.

VII. Accounting and Tax Treatment.

Accounting for futures contracts and options will be in accordance
with generally accepted accounting principles.

Generally, futures contracts held by the Funds at the close of the
Funds' taxable year will be treated for federal income tax purposes as sold for
their fair market value on the last business day of such year, a process known
as "mark-to-market." Forty percent of any gain or loss resulting from such
constructive sale will be treated as short-term capital gain or loss and sixty
percent of such gain or loss will be treated as long-term capital gain or loss
without regard to the length of time a Fund holds the futures contract ("the
40-60 rule"). The amount of any capital gain or loss actually realized by a Fund
in a subsequent sale or other disposition of those futures contracts will be
adjusted to reflect any capital

B-5
<PAGE> 137
gain or loss taken into account by a Fund in a prior year as a result of the
constructive sale of the contracts. With respect to futures contracts to sell,
which will be regarded as parts of a "mixed straddle" because their values
fluctuate inversely to the values of specific securities held by a Fund, losses
as to such contracts to sell will be subject to certain loss deferral rules
which limit the amount of loss currently deductible on either part of the
straddle to the amount thereof which exceeds the unrecognized gain (if any) with
respect to the other part of the straddle, and to certain wash sales
regulations. Under short sales rules, which will also be applicable, the holding
period of the securities forming part of the straddle will (if they have not
been held for the long-term holding period) be deemed not to begin prior to
termination of the straddle. With respect to certain futures contracts,
deductions for interest and carrying charges will not be allowed.
Notwithstanding the rules described above, with respect to futures contracts to
sell which are properly identified as such, a Fund may make an election which
will exempt (in whole or in part) those identified futures contracts from being
treated for federal income tax purposes as sold on the last business day of a
Fund's taxable year, but gains and losses will be subject to such short sales,
wash sales, loss deferral rules and the requirement to capitalize interest and
carrying charges. Under temporary regulations, a Fund would be allowed (in lieu
of the foregoing) to elect either (1) to offset gains or losses from portions
which are part of a mixed straddle by separately identifying each mixed straddle
to which such treatment applies, or (2) to establish a mixed straddle account
for which gains and losses would be recognized and offset on a periodic basis
during the taxable year. Under either election, the 40-60 rule will apply to the
net gain or loss attributable to the futures contracts, but in the case of a
mixed straddle account election, no more than 50% of any net gain may be treated
as long-term and no more than 40% of any net loss may be treated as short-term.
Options on futures contracts generally receive federal tax treatment similar to
that described above.

Certain foreign currency contracts entered into by the Funds may be
subject to the "mark-to-market" process. If the Fund makes a Capital Asset
Election with respect to such contracts, the contracts will be subject to the
40-60 rule, described above. Otherwise, such gain or loss will be treated as
100% ordinary gain or loss. To receive such federal income tax treatment, a
foreign currency contract must meet the following conditions: (1) the contract
must require delivery of a foreign currency of a type in which regulated futures
contracts are traded or upon which the settlement value of the contract depends;
(2) the contract must be entered into at arm's length at a price determined by
reference to the price in the interbank market; and (3) the contract must be
traded in the interbank market. The Treasury Department has broad authority to
issue regulations under the provisions respecting foreign currency contracts. As
of the date of this Statement of Additional Information, the Treasury has not
issued any such regulations. Foreign currency contracts entered into by a Fund
may result in the creation of one or more straddles for federal income tax
purposes, in which case certain loss deferral, short sales, and wash sales rules
and the requirement to capitalize interest and carrying charges may apply.

Some investments may be subject to special rules which govern the
federal income tax treatment of certain transactions denominated in terms of a
currency other than the U.S. dollar or determined by reference to the value of
one or more currencies other than the U.S. dollar. The types of transactions
covered by the special rules include the following: (i) the acquisition of, or
becoming the obligor under, a bond or other debt instrument (including, to the
extent provided in Treasury regulations, preferred stock); (ii) the accruing of
certain trade receivables and payables; and (iii) the entering into or
acquisition of any forward contract, futures contract, option and similar
financial instrument. However, regulated futures contracts and non-equity
options are generally not subject to the special currency rules if they are or
would be treated as sold for their fair market value at year-end under the
"mark-to-market" rules, unless an election is made to have such currency rules
apply. The disposition of a currency other than the U.S. dollar by a U.S.
taxpayer is also treated as a transaction subject to the special currency

B-6
<PAGE> 138
rules. With respect to transactions covered by the special rules, foreign
currency gain or loss is calculated separately from any gain or loss on the
underlying transaction and is normally taxable as ordinary gain or loss. A
taxpayer may elect to treat as capital gain or loss foreign currency gain or
loss arising from certain identified forward contracts, futures contracts and
options that are capital assets in the hands of the taxpayer and which are not
part of a straddle. In accordance with Treasury regulations, certain
transactions subject to the special currency rules that are part of a "section
988 hedging transaction" (as defined in the Code and the Treasury regulations)
will be integrated and treated as a single transaction or otherwise treated
consistently for purposes of the Code. "Section 988 hedging transactions" are
not subject to the mark-to-market or loss deferral rules under the Code. It is
anticipated that some of the non-U.S. dollar denominated investments and foreign
currency contracts that a Fund may make or may enter into will be subject to the
special currency rules described above. Gain or loss attributable to the foreign
currency component of transactions engaged in by the Funds which are not subject
to special currency rules (such as foreign equity investments other than certain
preferred stocks) will be treated as capital gain or loss and will not be
segregated from the gain or loss on the underlying transaction.

Under the federal income tax provisions applicable to regulated
investment companies, less than 30% of a company's gross income must be derived
from gains realized on the sale or other disposition of securities held for less
than three months. With respect to futures contracts and other financial
instruments subject to the "mark-to-market" rules, the Internal Revenue Service
has ruled in private letter rulings that a gain realized from such a futures
contract or financial instrument will be treated as being derived from a
security held for three months or more (regardless of the actual period for
which the contract or instrument is held) if the gain arises as a result of a
constructive sale under the "mark-to-market" rules, and will be treated as being
derived from a security held for less than three months only if the contract or
instrument is terminated (or transferred) during the taxable year (other than by
reason of the mark-to-market rules) and less than three months have elapsed
between the date the contract or instrument is acquired and the termination
date. In determining whether the 30% test is met for a taxable year, increases
and decreases in the value of the Funds' futures contracts and other investments
that qualify as part of a "designated hedge," as defined in the Code, may be
netted.

B-7