ALLEGIANCE INVESTMENT TRUST, N-1A, 1998-12-31

ALLEGIANCE INVESTMENT TRUST
N-1A, 1998-12-31

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POWER OF ATTORNEY
FOR
SECURITIES AND EXCHANGE COMMISSION
AND RELATED FILINGS

The undersigned Officers and Trustee of ALLEGIANCE INVESTMENT TRUST
(the "Trust") hereby appoints JULIE ALLECTA and DAVID A. HEARTH (with full power
to each of them to act alone), their attorneys-in-fact and agents, in all
capacities, to execute and to file any documents relating to the Registration
Statement on Forms N-8A, N-1A and N-14 under the Investment Company Act of 1940,
under the Securities Act of 1933 of the Trust and under the laws of all states
and other domestic and foreign jurisdictions, including any and all amendments
thereto, covering the registration and the sale of shares by the Trust,
including all exhibits and any and all documents required to be filed with
respect thereto with any regulatory authority, including applications for
exemptive orders, rulings or filings of proxy materials. The undersigned grants
to each of said attorneys full authority to do every act necessary to be done in
order to effectuate the same as fully, to all intents and purposes, as she or he
could do if personally present, thereby ratifying all that said
attorneys-in-fact and agents may lawfully do or cause to be done by virtue
hereof.

The undersigned Officers and Trustee hereby execute this Power of
Attorney as of this 2nd day of September, 1998.

/s/ Richard A. Snyders
-----------------------------------
Richard A. Snyders
President, Chief Executive Officer,
Principal Executive Officer and
Sole Trustee

/s/ Charles L. Bock
-----------------------------------
Charles L. Bock
Secretary, Treasurer, and Principal
Financial and Accounting Officer
<PAGE>
As filed with the Securities and Exchange Commission on December 31, 1998
File Nos. 333-_______
811-_______
================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. __
Post-Effective Amendment No. __
and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. ____

ALLEGIANCE INVESTMENT TRUST
(Exact Name of Registrant as Specified in its Charter)

800 North Brand Boulevard, Suite 800
Glendale, California 91203
(Address of Principal Executive Office)

(800) 247-5331
(Registrant's Telephone Number, Including Area Code)

RICHARD A. SNYDERS, PRESIDENT AND CHIEF EXECUTIVE OFFICER
800 North Brand Boulevard, Suite 800
Glendale, California 91203
(Name and Address of Agent for Service)

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

Approximate Date of Proposed Public Offering:
As soon as practicable after the date hereof.

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

It is proposed that this filing will become effective:

[ ] immediately upon filing pursuant to Rule 485(b)
[ ] on _____________ pursuant to Rule 485(b)
[ ] 60 days after filing pursuant to Rule 485(a)(1)
[ ] 75 days after filing pursuant to Rule 485(a)(2)
[ ] on ______________ pursuant to Rule 485(a)

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

Please Send Copy of Communications to:

DAVID A. HEARTH, ESQ.
Paul, Hastings, Janofsky & Walker LLP
345 California Street
San Francisco, California 94104
(415) 835-1600

================================================================================
<PAGE>
ALLEGIANCE INVESTMENT TRUST

CONTENTS OF REGISTRATION STATEMENT

This registration statement contains the following documents:

Facing Sheet

Contents of Registration Statement

Cross-Reference Sheet for
Allegiance American Value Fund
Allegiance Intermediate-Term Bond Fund
Allegiance California Tax-Free Intermediate Bond Fund

Part A - Combined Prospectus for
Allegiance American Value Fund
Allegiance Intermediate-Term Bond Fund
Allegiance California Tax-Free Intermediate Bond Fund

Part B - Combined Statement of Additional Information for
Allegiance American Value Fund
Allegiance Intermediate-Term Bond Fund
Allegiance California Tax-Free Intermediate Bond Fund

Part C - Other Information

Signature Page

Exhibits
<PAGE>
ALLEGIANCE INVESTMENT TRUST

CROSS REFERENCE SHEET

FORM N-1A

PART A: INFORMATION REQUIRED IN PROSPECTUS
(COMBINED PROSPECTUS)

N-1A Location in the Registration
Item No. Item Statement by Heading
- -------- ---- --------------------

1. Front and Back Cover Pages Front and Back Cover Pages

2. Risk/Return Summary: "What Is The Fund's Goal?,"
Investments, Risks, and "What Are The Fund's Main
Investment Strategies?,"
Performance "What Are The Primary Risks of
Investing in The Fund?,"
"Who May Want to Invest?" and
"How Has The Fund Performed?"

3. Risk/Return Summary: "What Are the Fees and Expenses of
Fee Table The Fund"

4. Investment Objectives, "More About The Funds"
Principal Investment
Strategies, and
Related Risks

5. Management's Discussion of Not Applicable
Fund Performance

6. Management, Organization "Management," "Other Information
and Capital Structure Concerning The Funds"

7. Shareholder Information "Shareholder Services," "Pricing of
Fund Shares," "Distributions,"
"Federal Tax Considerations"

8. Distribution Arrangements "Other Information Concerning
The Funds"
9. Financial Highlights
Information Not Applicable
<PAGE>

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

PART A

COMBINED PROSPECTUS

---------------------------------------------------------------------
<PAGE>
[LOGO / SERVICE MARK]

BOND AND TAX-EXEMPT INCOME FUNDS

Allegiance Intermediate-Term Bond Fund
Allegiance California Tax-Free Intermediate Bond Fund

STOCK FUND

Allegiance American Value Fund

AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE
COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.

________________, 1999

<PAGE>
TABLE OF CONTENTS

Page
----

ALLEGIANCE INTERMEDIATE-TERM BOND FUND........................................1
What Is The Fund's Goal?.............................................1
What Are The Fund's Main Investment Strategies?......................1
What Are The Primary Risks of Investing in The Fund?.................2
Who May Want to Invest?..............................................3
How Has The Fund Performed?..........................................3
What Are The Fees And Expenses of The Fund?..........................3
Example of Fund Expenses.............................................4

ALLEGIANCE CALIFORNIA TAX-FREE INTERMEDIATE BOND FUND.........................5
What Is the Fund's Goal?.............................................5
What Are the Fund's Main Investment Strategies?......................5
What Are The Primary Risks of Investing The Fund?....................6
Who May Want to Invest?..............................................7
How Has The Fund Performed?..........................................7
What Are the Fees and Expenses of the Fund?..........................7
Example of Fund Expenses.............................................8

ALLEGIANCE AMERICAN VALUE FUND................................................9
What Is the Fund's Goal?.............................................9
What Are the Fund's Main Investment Strategies?......................9
What Are The Primary Risks of Investing in The Fund?................10
Who May Want to Invest?.............................................10
How Has The Fund Performed?.........................................11
What Are The Fees And Expenses of The Fund?.........................11
Example of Fund Expenses............................................12

MANAGEMENT...................................................................13
The Adviser.........................................................13
Portfolio Managers..................................................13

SHAREHOLDER SERVICES.........................................................14
How to Reach The Funds..............................................14
Types of Accounts...................................................14
How to Open an Account..............................................15
How to Purchase Shares..............................................15
How to Sell Shares..................................................17
Shareholder Services And Policies...................................19

PRICING OF FUND SHARES.......................................................21

DISTRIBUTIONS................................................................21
Bond Funds And Tax-Exempt Income Funds..............................21
Stock Fund..........................................................21
All Funds...........................................................21

i
<PAGE>
FEDERAL TAX CONSIDERATIONS...................................................22

MORE ABOUT THE FUNDS.........................................................23
Principal Investment Strategies.....................................23
Year 2000...........................................................23

OTHER INFORMATION CONCERNING THE FUNDS.......................................23
Distribution Arrangements...........................................23
Shareholder Servicing Agents........................................24
Administrative Services.............................................25
Organization and Description of Shares..............................25

ii
<PAGE>
ALLEGIANCE INTERMEDIATE-TERM BOND FUND

WHAT IS THE FUND'S GOAL?

The Fund's goal is to provide investors with maximum current income and, as a
secondary goal, to preserve investors' capital.

The Fund seeks to achieve its goal by investing primarily in BONDS. What is a
BOND? A BOND, which is also called a DEBT SECURITY or DEBT OBLIGATION, is like a
loan. The issuer of the bond, which could be the U.S. government, a corporation,
or a city or state, borrows money from investors and agrees to pay back the loan
amount (the PRINCIPAL) on a certain date (the MATURITY DATE). Usually, the
issuer also agrees to pay interest on certain dates during the period of the
loan. Some bonds, such as ZERO COUPON BONDS, do not pay interest, but instead
pay back more at maturity than the original loan. Most bonds pay a fixed rate of
interest (or income), but some bonds' interest rates may change based on market
or other factors.

What does it mean to "PRESERVE CAPITAL"? CAPITAL, also called PRINCIPAL, refers
to the amount of money that you invest in the Fund. If you choose to have your
dividends and other distributions reinvested in additional shares of the Fund,
the amount of the dividends or other distributions will be added to your initial
investment to increase the amount of your CAPITAL. If the price of the Fund's
shares or net asset value (NAV) increases because of increases in the value of
the securities in the Fund, your CAPITAL will also increase. If, however, the
value of the Fund's investments go down and the price of the Fund's shares
decreases, you will lose some of your CAPITAL. A fund that seeks to PRESERVE
CAPITAL or PRINCIPAL tries to avoid decreases in its share price so that you do
not lose money.

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

The Fund invests at least 65% of its total assets in investment-grade debt
securities including U.S. government bonds, corporate bonds and mortgage-related
securities, asset-backed securities -- bonds backed by the income stream from
sources such as car loans or credit-card payments -- and money market
securities.

Investment-grade bonds are those rated within the four highest grades by rating
agencies such a Standard & Poor's (at least BBB), Moody's (at least BAA) or
Fitch (at least BAA), although there is always a risk of default. From time to
time, the Fund may also invest in unrated bonds that the portfolio manager
believes are comparable to investment-grade securities.

The Fund may invest in Yankee bonds which are dollar-denominated bonds issued in
the U.S. by foreign borrowers. Yankee bonds may offer higher income than bonds
issued by U.S. borrowers. The Fund may also invest in bonds issued by non-U.S.
issuers and payable in foreign currencies.

The Fund may include bonds of any maturity, but generally the portfolio's
average weighted maturity is normally expected to be between five and ten years.
Typically, a lower maturity means that the bond or portfolio has less
sensitivity to interest rates. The Fund invests in bonds that the portfolio
manager believes offer attractive yields and are undervalued relative to issues
of similar credit quality and interest rate sensitivity.

The Fund may also invest, as a hedging strategy, in a limited amount of futures
contracts or options on futures contracts. The Fund may only use futures
contracts and options on futures contracts in an effort to offset unfavorable
changes in the value of securities held by the Fund for investment purposes.

1
<PAGE>
WHAT ARE THE PRIMARY RISKS OF INVESTING IN THE FUND?

The primary risks of investing in the Fund and the factors most likely, in the
opinion of the Adviser, to adversely affect your investment are described below.
As with any mutual fund (other than a money market fund), the share price of the
Fund and its yield will change daily because of changes in interest rates and
other market conditions and factors. You may lose money if you invest in this
Fund. Please note that there are many other factors not listed here that could
reduce the value of your investment, and that could prevent the Fund from
achieving its objectives. The primary risks of investing in the Fund are:

+ Interest Rate Risk: Bond prices usually rise when interest rates fall
and fall when interest rates rise. Longer term bonds and zero coupon
bonds are generally more sensitive to (that is, their value is more
affected by) interest rate changes than shorter term bonds. Generally,
the longer the average maturity of the bonds in the Fund, the more the
Fund's share price will fluctuate in response to interest rate
changes.

+ Credit Risk: Although the Fund invests primarily in investment-grade
securities, these securities may have some credit risk. Some issuers
may not make payments on debt securities held by the Fund. Or, an
issuer may also suffer deterioration in its financial condition that
could lower the credit quality of a security, leading to greater
volatility in the price of the security and in shares of the Fund. A
decrease in the quality rating of a bond can affect the bond's
liquidity and make it more difficult for the Fund to sell the bond at
what the Adviser believes is a fair price.

+ Prepayment Risk: The issuers of securities held by the Fund may be
able to prepay principal due on the securities, particularly during
periods of declining interest rates. Securities subject to prepayment
risk generally offer less potential for gains when interest rates
decline, and may offer a greater potential for loss when interest
rates rise. In addition, rising interest rates may cause prepayments
to occur at a slower than expected rate, thereby effectively
lengthening the maturity of the security, and making the security more
sensitive to interest rate changes. Prepayment risk is a major risk of
mortgage-backed securities.

+ Special Risks Associated with Mortgage-Backed Securities: The Fund
will receive payments on its mortgage-backed securities that are part
interest and part return of principal. These payments may vary based
on the rate at which homeowners pay off their loans. When a homeowner
makes a prepayment, the Fund receives a larger portion of its
principal investment back, which means that there will be a decrease
in monthly interest payments. Some mortgage securities may have
structures that make their reaction to interest rates and other
factors difficult to predict, making their prices very volatile.

+ Foreign Securities: Investments in foreign securities may involve
risks in addition to those of U.S. investments, including increased
political and economic risk and exposure to currency fluctuations.

2
<PAGE>
The use of futures and options on futures, which are commonly referred
to as derivatives, may produce a loss for the Fund, even when used
only for hedging purposes.

An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency.

WHO MAY WANT TO INVEST?

This Fund may be appropriate for investors who are:

+ seeking a higher level of current income than is available
from a money market fund;

+ able to tolerate moderate risk and some fluctuations in value;
and

+ not seeking absolute principal stability like a money market
fund could offer.

HOW HAS THE FUND PERFORMED?

The Fund is new and does not have a full calendar year of investment returns as
of the date of this Prospectus.

WHAT ARE THE FEES AND EXPENSES OF THE FUND?

The Table below describes the fees and expenses that you may pay if you buy and
hold shares of this Fund.

SHAREHOLDER FEES (fees paid directly from your investment)

Maximum Sales Charge (Load) Imposed on Purchases NONE
Maximum Deferred Sales Charge (Load) NONE
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends NONE
Redemption Fee NONE
Exchange Fee NONE

3
<PAGE>
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets). Because
this Fund is a new fund, the following percentages reflect expenses that are
expected to be incurred by the Fund and deducted from Fund assets.

Management Fees 0.30%
Distribution (12b-1) Fees 0.25%
Administrative Services Fees 0.10%*
Other Expenses None
Total Annual Operating Expenses 0.65%

* The Administrative Services Fee compensates the Adviser for
retaining other service providers needed by the Fund and paying
all operating costs of the Fund, regardless whether those costs
are more or less than this Fee.

EXAMPLE OF FUND EXPENSES

This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:

1 Year 3 Years
------ -------
$66 $208

4
<PAGE>
ALLEGIANCE CALIFORNIA
TAX-FREE INTERMEDIATE BOND FUND

WHAT IS THE FUND'S GOAL?

The Fund's goal is to provide investors with maximum current income exempt from
both federal and California personal income taxes while striving to preserve
investors' capital.

The Fund seeks to achieve its goal by investing primarily in California
MUNICIPAL SECURITIES. What are MUNICIPAL SECURITIES? MUNICIPAL SECURITIES are
DEBT OBLIGATIONS of states, cities, towns, and other political subdivisions,
agencies or public authorities that pay interest that is exempt from federal
income tax. MUNICIPAL SECURITIES are often issued to raise money for public
services and projects such as schools, hospitals and public transportation
systems. Some MUNICIPAL SECURITIES (for example, INDUSTRIAL DEVELOPMENT BONDS)
may be backed by private companies and used to provide financing for corporate
facilities or other private projects. MUNICIPAL SECURITIES issued by entities
within California are also exempt from California's personal income taxes.
MUNICIPAL SECURITIES may be in the form of BONDS, NOTES and COMMERCIAL PAPER,
may have a fixed or floating rate of interest, or be issued as ZERO COUPON
BONDS.

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

The Fund, in an effort to preserve capital and lessen credit risk, invests at
least 80% of its total assets in intermediate-term, investment-grade municipal
bonds. Issuers of these securities are generally located in California.
Investment-grade bonds are those rated within the four highest grades by rating
agencies such as Standard and Poor's (at least BBB), Moody's (BAA) or Fitch (at
least BAA), although there is always a risk of default. From time to time, the
Fund may also invest in unrated bonds that the portfolio manager believes are
comparable to investment-grade securities. Certain securities held by the Fund
may be covered by municipal bond insurance.

The Fund may also invest in limited amounts in municipal securities that are
exempt from federal income tax, but not exempt from California taxes, as well as
taxable debt securities such as U.S. government obligations, corporate bonds,
money market instruments and repurchase agreements.

5
<PAGE>
The Fund may also invest, as a hedging strategy, in a limited amount of futures
contracts or options on futures contracts. The Fund may only use futures
contracts and options on futures contracts in an effort to offset unfavorable
changes in the value of securities held by the Fund for investment purposes.

WHAT ARE THE PRIMARY RISKS OF INVESTING THE FUND?

The primary risks of investing in the Fund and the factors most likely, in the
opinion of the Adviser, to adversely affect your investment are described below.
As with any mutual fund (other than a money market fund), the share price of the
Fund and its yield will change daily based on changes in interest rates and
other market conditions and factors. You may lose money if you invest in the
Fund. Please note that there are many other factors not listed here that could
reduce the value of your investment, and that could prevent the Fund from
achieving its objectives. The primary risks of investing in the Fund are:

+ Interest Rate Risk: The prices of municipal securities and other debt
securities usually rise when interest rates fall and fall when
interest rates rise. Longer term bonds and zero coupon bonds are
generally more sensitive to (that is, their value is more affected by)
interest rate changes than shorter term bonds. Generally, the longer
the average maturity of the bonds in the Fund, the more the Fund's
share price will fluctuate in response to interest rate changes.

+ Credit Risk: Although the Fund invests primarily in investment-grade
securities, these securities may have some credit risk. Some issuers
may not make payments on the municipal or other debt securities held
by the Fund. Or, an issuer may suffer deterioration in its financial
condition that could lower the credit quality of a security, leading
to greater volatility in the price of the security and in shares of
the Fund. A decrease in the quality rating of a bond can affect the
bond's liquidity and make it more difficult for the Fund to sell the
bond at what the Adviser believes in a fair price.

+ Municipal Market Risk: There are special factors that may affect the
value of municipal securities and, as a result, the Fund's share
price. These factors include political or legislative changes,
uncertainties related to the tax status of the securities or the
rights of investors in the securities.

+ Lack of Diversification: The Fund is not diversified, which means it
may invest a relatively high percentage of its assets in the
obligations of a limited number of issuers. As a result, the Fund may
be more susceptible to any single economic, political or regulatory
occurrence. The Fund is also particularly susceptible to events
affecting issuers in California. In particular, the Fund will be
vulnerable to any development in California's economy that may weaken
or jeopardize the ability of California municipal-bond issuers to pay
interest and principal on their bonds. As a result, the Fund's shares
may fluctuate more widely in value than those of a fund investing in
municipal bonds from a number of different

6
<PAGE>
states. You should consider the greater risk of investing in a single
state fund compared to more diversified mutual funds.

+ Futures and Options on Futures: Although the Fund will use futures and
options on futures for hedging purposes only, the hedging strategy may
not be successful if the portfolio manager is unable to accurately
predict movements in the prices of individual securities held by the
Fund, or if the strategy does not correlate well with the Fund's
investments. The use of futures and options on futures, which are
commonly referred to as derivatives, may produce a loss for the Fund,
even when used only for hedging purposes.

An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency.

WHO MAY WANT TO INVEST?

The Fund may be appropriate for investors who are:

+ seeking current income that is exempt from federal income tax and
California personal income taxes;

+ seeking a higher tax-equivalent yield than is available from
shorter-term tax-exempt securities or money market funds;

+ able to tolerate moderate risk and some fluctuations in value; and

+ not seeking absolute principal stability like a money market fund
could offer.

THE FUND IS NOT AN APPROPRIATE INVESTMENT FOR
TAX-SHELTERED ACCOUNTS SUCH AS IRAS. THE FUND
ALONE DOES NOT PROVIDE A BALANCED INVESTMENT
PLAN.

HOW HAS THE FUND PERFORMED?

The Fund is new and does not have a full calendar year of investment returns as
of the date of this Prospectus.

WHAT ARE THE FEES AND EXPENSES OF THE FUND?

The Table below describes the fees and expenses that you may pay if you buy and
hold shares of this Fund.

7
<PAGE>
SHAREHOLDER FEES (fees paid directly from your investment)

Maximum Sales Charge (Load) Imposed on Purchases NONE
Maximum Deferred Sales Charge (Load) NONE
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends NONE
Redemption Fee NONE
Exchange Fee NONE

ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets). Because
this Fund is a new fund, the following percentages reflect expenses that are
expected to be incurred by the Fund and deducted from Fund assets.

Management Fees 0.30%
Distribution (12b-1) Fees 0.25%
Administrative Services* 0.10%*
Other Expenses None
Total Annual Operating Expenses 0.65%

* The Administrative Services Fee compensates the Adviser for
retaining other service providers needed by the Fund and
paying all operating costs of the Fund, regardless whether
those costs are more or less than this Fee.

EXAMPLE OF FUND EXPENSES

This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.

1 Year 3 Years
------ -------
$66 $208

8
<PAGE>
ALLEGIANCE AMERICAN VALUE FUND

WHAT IS THE FUND'S GOAL?

The Fund's goal is to provide investors with long-term growth of capital and
above average current income with investments primarily in equity securities of
U.S. companies.

A fund that seeks long-term GROWTH OF CAPITAL seeks to increase the value of
your investment over a period of three to seven years. CAPITAL, also called
PRINCIPAL, refers to the amount of money that you invest in a fund. If the price
of the Fund's shares or net asset value (NAV) goes up because of an increase in
the value of the securities in the Fund, your CAPITAL will also grow or
appreciate. If, however, the price of the Fund's shares decreases because of a
decline in the value of securities in the Fund, you will lose some of your
CAPITAL. If you choose to have your dividends and other distributions reinvested
in additional shares of the Fund, the amount of the dividends or other
distributions will be added to your initial investment and increase the amount
of your CAPITAL.

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

The Fund seeks to achieve its goal by investing at least 65% of its total assets
in equity securities of companies based in the U.S.

The Adviser will try to identify equity securities that it believes are
undervalued relative to each company's asset value and its potential earnings
and dividends. There can be no assurance, however, that the Adviser's judgment
about the higher potential value of an equity security will ever be reflected in
the market price of that security.

The Fund seeks to provide a greater yield (or current income) than the average
yield of Standard and Poor's 500 Composite Index stocks by investing in
dividend-paying U.S. companies. This Fund will typically invest in companies
with a market capitalization of at least $200 million. From time to time, the
Fund may also invest in companies with smaller capitalizations. In addition to
common stocks, the Fund may invest in other securities including convertible
debt securities and preferred stock.

What is CAPITALIZATION? CAPITALIZATION or MARKET CAPITALIZATION is the total
value of a company's stock in the marketplace or on a stock exchange. For
example, a company that has issued one million shares that are currently selling
for $50 per share would have a CAPITALIZATION of $50 million.

In selecting investments for the Fund, the Adviser generally seeks companies it
believes exhibit characteristics of financial soundness and are undervalued by
the market. In seeking to identify financially sound companies, the Fund's
Adviser looks for companies with strongly capitalized balance sheets, an ability
to generate substantial cash flow, relatively low levels of leverage, an ability
to meet debt service requirements and a history of paying dividends. In seeking
to identify undervalued companies, the Adviser looks for companies with
substantial tangible assets such as land, timber, oil and other natural
resources, or important brand names, patents, franchises or other intangible
assets which may have greater value than what is reflected in the company's
financial statements. The Fund's Adviser will often select investments for the
Fund which are considered to be unattractive by other investors or are unpopular
with the financial press.

9
<PAGE>
WHAT ARE THE PRIMARY RISKS OF INVESTING IN THE FUND?

By investing in stocks, the Fund may expose you to certain market risks that
could cause you to lose money, particularly a sudden decline in a holding's
share price or an overall decline in the stock market. As with any stock fund,
the value of your investment will fluctuate on a day-to-day basis with movements
in the stock market, as well as in response to activities of individual
companies. Increased interest rates may reduce the value of your investment in
this Fund. Although the Fund seeks to provide a consistent level of income to
shareholders, its yield may fluctuate significantly in the short term.

The primary risks of investing in the Fund are:

+ Market Risk: This is the risk that the price of a security will rise
or fall because of changing economic, political or market conditions,
or because of a company's individual situation.

+ Smaller Companies: The securities of smaller companies may have more
risks than those of larger companies -- they may be more susceptible
to market downturns, and their prices may be more volatile.

+ Foreign Securities: Although the fund emphasizes investments in stocks
of U.S. companies, it also may invest up to 20% of its total assets in
foreign securities, including American Depositary Receipts (ADRs). The
Fund expects that its investments in foreign issuers, if any, will
generally be in companies that generate substantial revenues from U.S.
operations and that are listed on U.S. securities exchanges. Because
foreign securities are normally denominated and traded in foreign
currencies, the value of the Fund's foreign investments may be
influenced by currency exchange rates and exchange control
regulations. There may be less information publicly available about
foreign issuers than U.S. issuers, and they are not generally subject
to accounting, auditing and financial reporting standards and
practices comparable to those in the U.S. Foreign securities may be
less liquid and more volatile than comparable U.S. securities.

+ Interest Rate Risk: In general, the prices of debt securities rise
when interest rates fall and the prices of debt securities fall when
interest rates rise. However, the stock market and stocks that pay
dividends also can be affected.

+ Special characteristics of convertible securities: Convertible
securities are subject to the market risk of stocks, while also
subject to interest rate risk and the credit risk of the issuers. Call
provisions may allow the issuer to repay the debt before it matures.

An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency.

WHO MAY WANT TO INVEST?

This Fund may be appropriate for investors who are:

+ seeking long-term capital appreciation while also desiring a minimal
level of current income;

+ willing to leave their money invested in the Fund for at least three
years;

+ able to tolerate a substantial loss in the value of their investment;

+ not seeking absolute principal stability.

10
<PAGE>
THE FUND ALONE DOES NOT PROVIDE A BALANCED INVESTMENT PLAN.

HOW HAS THE FUND PERFORMED?

The Fund is new and does not have a full calendar year of investment returns as
of the date of this Prospectus.

WHAT ARE THE FEES AND EXPENSES OF THE FUND?

The Table below describes the fees and expenses that you may pay if you buy and
hold shares of this Fund.

SHAREHOLDER FEES (fees paid directly from your investment)

Maximum Sales Charge (Load) Imposed on Purchases NONE
Maximum Deferred Sales Charge (Load) NONE
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends NONE
Redemption Fee NONE
Exchange Fee NONE

Management Fees 0.70%
Distribution (12b-1) Fees 0.25%
Administrative Services Fees 0.35%*
Other Expenses None
TOTAL (before reimbursements and reduction) 1.30%

11
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EXAMPLE OF FUND EXPENSES

This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.

1 Year 3 Years
------ -------
$132 $411

12
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MANAGEMENT

THE ADVISER

The investment adviser for the Funds is Van Deventer & Hoch (the "Adviser"). The
Adviser serves as the investment adviser under an Investment Advisory Agreement
and has overall responsibility for investment decisions of the Funds, subject to
the oversight of the Board of Trustees. For more than a quarter century, Van
Deventer & Hoch has provided investment management and related services to
individuals, institutions, and charitable organizations. As of , Van Deventer &
Hoch managed approximately $ on behalf of some investors. Van Deventer & Hoch is
one of fewer than 200 registered investment advisers admitted to the Investment
Counsel Association of America, which mandates strict requirements for
professional and financial responsibility.

The Adviser is an SEC-registered investment adviser. The Adviser is 50% owned by
Putnam, Lovell & Thornton and 50% by members of the Adviser's management team.
The Adviser is headquartered at 800 North Brand Boulevard, Suite 300, Glendale,
California 91203.

The following chart shows the expected investment management fees to be paid by
each Fund.

Management fees paid
(expressed as an annual
percentage of average
net assets)
----------------------
Intermediate-Term Bond Fund .30%

California Tax-Free Intermediate Bond Fund .30

American Value Fund .70

PORTFOLIO MANAGERS

INTERMEDIATE BOND FUND AND CALIFORNIA FUND. [BIOGRAPHICAL INFORMATION TO COME.]

AMERICAN VALUE FUND. Richard Trautwein, Executive Vice President of the Adviser,
is responsible for the day-to-day management of this Fund's portfolio. Mr.
Trautwein serves as Executive Vice President of Van Deventer & Hoch. Mr.
Trautwein joined Van Deventer & Hoch in 1972. He has served the firm in various
capacities and is currently a member of the Investment Policy Committee. Mr.
Trautwein earned an undergraduate degree in Finance at the University of
California at Los Angeles and a graduate degree in Business Administration at
the University of Southern California.

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<PAGE>
SHAREHOLDER SERVICES

This section describes how to do business with the Funds and the services that
are available to shareholders.

HOW TO REACH THE FUNDS

BY TELEPHONE _____________
Call for account or Fund information
Monday through Friday __ a.m. to __ p.m.(Pacific time)

BY REGULAR MAIL Allegiance Investment Trust
c/o

BY OVERNIGHT Allegiance Investment Trust
COURIER c/o

TYPES OF ACCOUNTS

If you are investing in the Funds for the first time, you will need to establish
an account. You may establish the following types of accounts by completing an
account application. To obtain an application, call ___________________.

+ INDIVIDUAL OR JOINT OWNERSHIP. Individual accounts are owned by one
person. Joint accounts have two or more owners.

+ GIFT OR TRANSFER TO MINOR (UGMA OR UTMA). A UGMA (Uniform Gifts to
Minors Act) or UTMA (Uniform Transfers to Minors Act) account is an
account maintained by a custodian for the benefit of a minor. To open
a UGMA or UTMA account, you must include the minor's social security
number on the application.

+ TRUST. A trust can open an account. The name of each trustee, the name
of the trust and the date of the trust agreement must be included on
the application.

+ CORPORATIONS, PARTNERSHIPS AND OTHER LEGAL ENTITIES. Corporations,
partnerships and other legal entities may also open an account. The
application and resolution form must be signed by a general partner of
the partnership or an authorized officer of the corporation or other
legal entity.

+ RETIREMENT. If you are eligible, you may set up your account under a
tax-sheltered retirement plan, such as an Individual Retirement
Account. Call _____________ for more information.

14
<PAGE>
HOW TO OPEN AN ACCOUNT

Complete and sign the appropriate account application. Please be sure to provide
your social security or taxpayer identification number on the application. Make
your check payable to Allegiance Investment Trust. Send all items to the
following address:

BY REGULAR MAIL Allegiance Investment Trust
c/o

BY OVERNIGHT COURIER Allegiance Investment Trust
c/o

You may also purchase shares through certain financial institutions. These
institutions may have their own procedures for buying and selling shares, and
may charge fees. Contact your financial institution for more information.

HOW TO PURCHASE SHARES

Shares of the Funds are sold on a continuous basis and may be purchased from the
Distributor or a broker-dealer or financial institution that has an agreement
with the Distributor. Purchases may be made Monday through Friday, except on
certain holidays.

Each Fund's share price, called net asset value per share, is calculated every
business day. Each Fund's shares are sold without a sales charge. Shares are
purchased at net asset value the next time it is calculated after your
investment is received and accepted by the Distributor. Purchase orders though
securities brokers, dealers and other financial intermediaries are effected at
the next-determined net asset value after receipt of the order by such agent
before each Fund's daily cutoff time. Orders received after that time will be
purchased at the next-determined net asset value. To the extent that these
agents perform shareholder servicing activities for the Funds, they may receive
fees from the Funds for such services. For information on how shares are priced,
please see "Pricing of Fund Shares" below.

NEW PURCHASES. If you are new to the Funds, complete and sign an account
application and mail it along with your check. To establish the telephone
purchase option on your new account, complete the "Telephone Transfer
Authorization" section on the application and attach a check or savings
withdrawal slip from your bank account which you have "voided" by the word
"VOID" across the front.

If you wish to open an account by debiting your checking or savings account,
please attach a "voided" check or savings withdrawal slip, and complete the
"Bank Wire and Electronic Transfer" section of the application.

If you are investing through a tax-sheltered retirement plan for the first time,
you will need a special application. Retirement investing also involves its own
investment procedures. Call _____________ for more information.

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<PAGE>
ADDITIONAL PURCHASES. If you already have money invested in a Fund, you can
invest additional money in that Fund in the following ways:

BY MAIL. Complete the remittance slip attached at the bottom of your
confirmation statement. If your investment is in a retirement account,
please indicate whether the purchase is a rollover or a current or prior
year contribution. Send your check and remittance slip or written
instructions to one of the addresses listed above under "How To Open An
Account."

BY TELEPHONE. This service allows you to purchase additional shares quickly
and conveniently through an electronic transfer of money. When you make an
additional purchase by telephone, the Funds will automatically deduct money
from your predesignated bank account for the desired amount. If you have
not established the telephone purchase option, call ___________________ to
request the appropriate form.

BY WIRE. Purchases may also be made by wiring money from your bank account
to your Allegiance Fund account. Each time you wish to send a wire, you
must call _____________ before you send money to receive wiring
instructions.

AUTOMATIC INVESTMENT PROGRAM. Automatic investing is an easy way to add to
your account on a regular basis. Allegiance Investment Trust offer an
automatic investment plan to help you achieve your financial goals as
simply and conveniently as possible. Please note that there is a $100
minimum investment. Call the Transfer Agent at _____________ for
information.

PAYING FOR SHARES. Please note the following:

+ Purchases may be made by check, wire transfer and electronic transfer.
When purchases are made by check, redemptions will not be allowed
until the check clears, which may take 15 calendar days or longer. In
addition, the redemption shares purchased through Automated Clearing
House ("ACH") will not be allowed until your payment clears, which may
take seven business days or longer.

+ All purchases must be made in U.S. dollars.

+ Checks must be drawn on U.S. banks and must be payable to Allegiance
Investment Trust. Checks that are not made payable directly to
Allegiance Investment Trust ("third party checks") are not accepted.

+ Cash and credit card checks are not accepted.

+ If a check does not clear your bank, the Funds reserve the right to
cancel the purchase.

+ If the Funds are unable to debit your predesignated bank account on
the day you purchase shares, they may make additional attempts or
cancel the purchase.

If your purchase is canceled, you will be responsible for any losses or fees
imposed by your bank and losses that may be incurred as a result of any decline
in the value of the canceled purchase. The Funds have the authority to redeem
shares in your account(s) to cover any losses due to changes in share price. The
Funds reserve the right to reject any specific purchase or exchange request.

16
<PAGE>
MINIMUM INVESTMENTS. The following minimums apply unless they are waived by the
Distributor.

To open an account $2,500
For tax-sheltered retirement plans 1,000
To add to an account 100
Through automatic investment plans 100
Minimum account balance 500
For tax-sheltered retirement plans 500

HOW TO SELL SHARES

Selling your shares in a Fund is called a "redemption" because the Fund buys
back its shares. On any business day, you may sell (redeem) all or a portion of
your shares. If the shares being sold were recently purchased by check,
telephone or through an automatic investment program, the Funds may delay the
mailing of your redemption check for up to ten business days after purchase to
allow the purchase to clear.

Your transaction will be processed at net asset value the next time it is
calculated after the Funds receive your redemption request in good order. You
may gain or lose money when you redeem your shares. Please note that a
redemption is treated as a sale for tax purposes, and could result in taxable
gain or loss in a non-tax-sheltered account.

BY MAIL. To redeem all or part of your shares by mail, please send your request
in writing to the address listed above under "How To Open An Account" and
include the following information (please refer to "Signature Guarantees" below
if your redemption request is over $100,000):

+ the name of the Fund(s),
+ the account number(s),
+ the amount of money or number of shares being redeemed,
+ the name(s) on the account,
+ the signature(s) of all registered account owners, and
+ your daytime telephone number.

Signature requirements vary based on the type of account you have:

+ INDIVIDUAL, JOINT TENANTS, TENANTS-IN-COMMON: Written instructions
must be signed by each shareholder exactly as the names appear on the
account.

+ UGMA OR UTMA: Written instructions must be signed by the custodian as
it appears on the account.

+ SOLE PROPRIETOR, GENERAL PARTNER: Written instructions must be signed
by an authorized individual as it appears on the account.

+ CORPORATION, ASSOCIATION: Written instructions must be signed by the
person(s) authorized to act on the account. A certified copy of the
corporate resolution, authorizing the signer to act, must accompany
the request.

17
<PAGE>
+ TRUST: Written instructions must be signed by the trustee(s). If the
name of the current trustee(s) does not appear on the account, a
certified certificate of incumbency dated within 60 days must also be
submitted.

+ RETIREMENT: Written instructions must be signed by the account owner.
Call the Transfer Agent at _____________ for more information.

BY TELEPHONE. If you selected this option on your account application, you may
make redemptions from your account by calling the Transfer Agent at_____________
unless you have notified the Transfer Agent of an address change within the
preceding 30 days. Telephone redemption in excess of $25,000 will only be made
by wire to a bank account on record with the Funds. Unless an investor indicates
otherwise on the account application, the Funds will be authorized to act upon
redemption and transfer instructions received by telephone from a shareholder,
or any person claiming to act as his or her representative, who can provide the
Funds with his or her account registration and address as its appears on the
Funds' records. The Funds require that requests for redemptions of over $100,000
be in writing with signatures guaranteed (see below). You may not close your
account by telephone.

SYSTEMATIC WITHDRAWAL PLAN. Under this plan, you may redeem $50 or more monthly,
quarterly or semi-annually. A minimum account balance of $5,000 is required to
establish an automatic withdrawal plan. For more information or to sign up for
this service, please call the Transfer Agent at _____________.

THROUGH YOUR INVESTMENT REPRESENTATIVE. Your investment representative must
receive your request before the close of regular trading on the New York Stock
Exchange to receive that day's net asset value. Your investment representative
will be responsible for furnishing all necessary documentation to the Transfer
Agent, and may charge you for its services.

PAYMENT OF REDEMPTION PROCEEDS. Payments may be made by check, wire transfer or
electronic transfer.

+ BY CHECK. Redemption proceeds will be sent to the shareholder(s) on
our records at the address on our records within seven days after
receipt of a valid redemption request.

+ BY WIRE. If you have selected this option on your application, your
redemption proceeds will be wired directly into your designated bank
account normally on the next business day after receipt of your
redemption request is received. There is no limitation on redemptions
by wire; however, there is a $12 fee for each wire and your bank may
charge an additional fee to receive the wire. If you would like to
establish this option on an existing account, please call the Transfer
Agent at _____________ to sign up for this service. Wire redemptions
are not available for retirement accounts.

+ BY ELECTRONIC TRANSFER. If you have established this option, your
redemption proceeds will be transferred electronically to your
predesignated bank account. To establish this option on an existing
account, please call the Transfer Agent at ________________ to request
the appropriate form.

18
<PAGE>
SIGNATURE GUARANTEES. In addition to the signature requirements described above,
a signature guarantee is required if:

+ You would like the check made payable to anyone other than the
shareholder(s) on our records.

+ You would like the check mailed to an address other than the address
on our records.

+ You would like the check mailed to an address on our records that has
changed in the past 30 days.

+ Your redemption request is over $100,000.

The Funds may also require signature guarantees for other redemptions. A
signature guarantee assures that a signature is genuine and protects
shareholders from unauthorized account transfers. Banks, savings and loan
associations, trust companies, credit unions, broker-dealers and member firms of
a national securities exchange may guarantee signatures. Call your financial
institution to determine if it has this capability.

SHAREHOLDER SERVICES AND POLICIES

EXCHANGES. On any business day, you may exchange all or a portion of your shares
into any other fund in the Allegiance Investment Trust family. To make
exchanges, please follow the procedures under "How To Sell Shares." Exchanges
are processed at the net asset value next calculated after an exchange request
in good order is received and approved. Please read the prospectus for the Fund
into which you are exchanging. The Funds reserve the right to reject any
exchange request or to change or terminate the exchange privilege at any time.
An exchange is the sale of shares of one Fund and purchase of shares of another,
and could result in taxable gain or loss in a non-tax-sheltered account.

REDEMPTION PROCEEDS. The Funds' policy is to pay redemption proceeds in cash,
but the Funds reserve the right to change this policy and to pay in-kind in
certain cases by delivering to you investment securities equal to the redemption
price. In these cases, you might have to pay brokerage costs when converting the
securities to cash. The right of any shareholder to receive redemption proceeds
may be suspended, or payment may be postponed, in certain circumstances. These
circumstances include any period the New York Stock Exchange is closed (other
than weekends or holidays) or trading on the Exchange is restricted, any period
when an emergency exists and any time the Securities and Exchange Commission
allows mutual funds to delay payments for the protection of investors.

TAXPAYER IDENTIFICATION NUMBER. On the account application or other appropriate
form, you will be asked to certify that your social security or taxpayer
identification number is correct and that you are not subject to backup
withholding for failing to report income to the IRS. If you are subject to
backup withholding or you did not certify your taxpayer identification number,
the IRS requires the Funds to withhold 31% of any dividends and redemption or
exchange proceeds. The Funds reserve the right to reject any application that
does not include a certified social security or taxpayer identification number.

SHARE OWNERSHIP. The Funds keep a record of the ownership of their shares and
share certificates are not issued.

19
<PAGE>
INVOLUNTARY REDEMPTIONS. If your account balance falls below $500 due to
redemption, exchanges, or if you purchase through the Automatic Investment Plan
and fail to meet the Fund's investment minimum within a twelve-month period, you
will be given at least 60 days to re-establish the minimum balance. If you do
not, your account may be closed and the proceeds sent to you.

TELEPHONE TRANSACTIONS. You may buy, sell or exchange shares by telephone if you
selected this option on your account application. If you wish to establish this
option on an existing account, please call _____________ to request the
appropriate form. The Funds and their agents will not be responsible for any
losses that may result from acting on wire or telephone instructions that it
reasonably believes to be genuine. The Funds and their agents will each follow
reasonable procedures to confirm that instructions received by telephone are
genuine, which may include taping telephone conversations. It may be difficult
to reach the Funds by telephone during periods of unusual market activity.

ADDRESS CHANGES. To change the address on your account, call _____________ or
send a written request signed by all account owners. Include the name of your
Fund(s), the account numbers(s), the name(s) on the account and both the old and
new addresses.

NAME/ACCOUNT OWNERSHIP CHANGES. To change the name on an account, the shares are
generally transferred to a new account. In some cases, certain legal documents
may be required. For more information, call _____________. If your shares are
held by a financial institution, contact that financial institution for
ownership changes.

STATEMENTS AND REPORTS. The Funds will send you a confirmation statement after
every transaction that affects your account balance or your account
registration. If you are enrolled in an automatic investment program and invest
on a monthly basis, you will receive quarterly confirmations. Information about
the tax status of income dividends and capital gains distributions will be
mailed to shareholders early each year.

Financial reports for the Funds, which include a list of the Funds' portfolio
holdings, will be mailed twice each year to all shareholders.

20
<PAGE>
PRICING OF FUND SHARES

The net asset value per share (NAV) of each Fund is calculated on each day the
New York Stock Exchange is open. The NAV is the value of a single share of a
Fund. Each of these Funds' NAV is calculated at the close of business of the New
York Stock Exchange, normally 4:00 p.m. Eastern time. The NAV is generally based
on the market value of the securities held in the Fund, or, if market values are
not available, the fair value of securities is determined using procedures that
the Board of Trustees has approved.

Foreign securities are valued based on quotations from the primary market in
which they are traded, and are converted from the local currency into U.S.
dollars using current exchange rates. Foreign securities may trade in their
primary markets on weekends or other days when the Fund does not price its
shares. Therefore, the NAV of any Fund holding foreign securities may change on
days when shareholders will not be able to buy or sell their Fund shares.

DISTRIBUTIONS

As a Fund shareholder, you are entitled to your share of the Fund's net income
and gains on its investments. Each Fund passes substantially all of its earnings
along to its investors as distributions. When a Fund earns dividends from stocks
and interest from bonds and other debt securities and distributes these earnings
to shareholders, it is called a DIVIDEND DISTRIBUTION. A Fund realizes capital
gains when it sells securities for a higher price than it paid. When these gains
are distributed to shareholders, it is called a CAPITAL GAIN DISTRIBUTION.
Dividend distributions may be made several times a year, while capital gain
distributions are generally made annually.

BOND FUNDS AND TAX-EXEMPT INCOME FUNDS

Your dividend distributions are declared each day, starting the day after you
purchase your shares, although they are paid to your account on the first
business day of each month that you are a shareholder.

STOCK FUND

[If you are a shareholder in the American Value Fund, your dividend
distributions, if any, will be paid quarterly, generally on the last day of
March, June, September and December.]

ALL FUNDS

You will receive distributions from a Fund in additional shares of that Fund
unless you choose to receive your distributions in cash. If you wish to change
the way in which you receive dividends, you should call the Transfer Agent at
(800) 347-7003 for instructions.

If you have elected to receive dividends and/or distributions in cash, and the
postal or other delivery service returns your check to the Funds as
undeliverable, you will not receive interest on amounts represented by the
uncashed checks.

21
<PAGE>
FEDERAL TAX CONSIDERATIONS

Your investment in a Fund will have tax consequences that you should consider.
Some of the more common federal tax consequences are described here, but you
should consult your tax adviser about your own particular situation.

TAXES ON DISTRIBUTIONS. You will generally have to pay federal income tax on all
Fund distributions except for certain dividend distributions from the California
Tax-Free Intermediate Bond Fund (the "California Fund"). Your distributions will
be taxed in the same manner whether you receive the distributions in cash or
additional shares of the Fund. Distributions that are derived from net long-term
capital gains generally will be taxed as long-term capital gains. The rate of
tax will generally depend on how long the Fund held the securities on which it
realized the gains. All other distributions, including short-term capital gains,
generally will be taxed as ordinary income.

The Bond Fund expects that its distributions will consist primarily of ordinary
income. The American Value Fund expects that its distributions will consist of
both net long-term capital gains and ordinary income

The California Fund intends to pay what the IRS calls "exempt-interest
dividends" to shareholders by maintaining, as of the close of each quarter of
its taxable year, at least 50% of the value of its assets in municipal bonds. If
the Fund satisfies this requirement, any distributions paid to shareholders from
its net investment income will be exempt from federal income tax, to the extent
that it derives its net investment income from interest on municipal bonds. Any
distributions paid from other sources of net investment income, such as market
discounts on certain municipal bonds, will be treated as ordinary income by the
IRS. Exempt-interest dividends will not necessarily be exempt from state and
local income taxes. You generally are required to report all Fund distributions,
including exempt-interest dividends, on your federal income tax return.

TAXES ON SALE OR EXCHANGE. If you sell your shares of a Fund (including the
California Fund), or exchange them for shares of another Fund, you generally
will be subject to tax on any taxable gain. Your taxable gain is computed by
subtracting your tax basis in the shares from the redemption proceeds (in the
case of a sale) or the value of the shares received (in the case of an
exchange). Because your tax basis depends on the original purchase price and on
the price at which any dividends may have been reinvested, you should be sure to
keep your account statements so that you or your tax preparer will be able to
determine whether a sale or exchange will result in a taxable gain.

"BUYING A DIVIDEND". If you buy shares in the American Value Fund just before
the Fund makes any distribution, or if you buy shares in the Bond Fund or
California Fund just prior to a capital gain distribution, you will receive some
of the purchase price back in the form of a taxable distribution.

LOAN INTEREST. If you borrow money to purchase or hold shares of the California
Fund, interest on your loan may not be deductible.

TAX WITHHOLDING. If you are not a U.S. citizen or resident, or if you are
subject to "backup withholding," the Funds may be required to withhold a portion
of your distributions and, in some cases, redemption proceeds, as a payment of
federal income tax.

The above is only a summary of certain federal income tax consequences of
investing in the Funds. You should consult your tax adviser to determine the
precise effect of an investment in the Funds on your particular tax situation

22
<PAGE>
(including possible liability for state and local taxes and, for foreign
shareholders, U.S. withholding taxes).

MORE ABOUT THE FUNDS

PRINCIPAL INVESTMENT STRATEGIES

The principal investment strategies of the Funds are strategies that, in the
opinion of the Adviser, are most likely to be important in trying to achieve the
Funds' investment objectives. Of course, there can be no assurance that a Fund
will achieve its investment objective. Please note that the Funds may also use
strategies and invest in securities that are not described in this Prospectus,
but which are described in the Statement of Additional Information.

Investors should note that during periods of unusual economic or market
conditions or for temporary defensive purposes or liquidity, a Fund may invest
without limit in cash and in U.S. dollar-denominated high quality money market
instruments and other short-term securities. These investments may result in a
lower yield and have less potential for capital appreciation than would be
available from investments typically held by a Fund and may prevent the Fund
from achieving its investment objective.

Each Fund is actively managed, and the portfolio managers may trade securities
frequently, resulting, from time to time, in an annual portfolio turnover rate
of over 100%. Trading securities may produce capital gains, which are taxable to
shareholders when distributed. Active trading may also increase the amount of
mark-ups and fees to broker-dealers that a Fund pays when it buys and sells
securities.

YEAR 2000

The date-related computer issue known as the "Year 2000 problem" could have an
adverse impact on the quality of services provided to the Funds and their
shareholders. However, the Funds understand that their key service providers
- -- including the Adviser and its affiliates -- are taking steps to address the
issue. In addition, the Year 2000 problem may adversely affect the issuers in
which the Funds invest. For example, issuers may incur substantial costs to
address the problem. They may also suffer losses caused by corporate and
governmental data processing errors. The Funds and their Adviser will continue
to monitor developments relating to this issue.

OTHER INFORMATION CONCERNING THE FUNDS

DISTRIBUTION ARRANGEMENTS

The Funds' distributor is First Fund Distributors, Inc. (the "Distributor"), an
affiliate of Investment Company Administration Corporation, the Funds'
administrator. The Distributor's principal place of business is located at 4455
East Camelback Road, Suite 261E, Phoenix, Arizona 85018.

The Funds do not charge any sales loads, deferred sales loads or other fees in
connection with the purchase of shares. Each Fund has adopted a plan under Rule
12b-1 ("Plan"). The Plan allows a Fund to use part of the Fund's assets (up to
.25% of its average daily net assets) for the sale and distribution of its
shares, including advertising, marketing and other promotional activities.
Expenses permitted to be paid by the Funds under their Plan include:
preparation, printing and mailing prospectuses; shareholder reports such as

23
<PAGE>
semi-annual and annual reports, performance reports and newsletters; sales
literature and other promotional material to prospective investors; direct mail
solicitation; advertising; public relations; compensation of sales personnel;
advisers or other third parties for their assistance with respect to the
distribution of the Funds' shares; payments to financial intermediaries for
shareholder support; administrative and accounting services with respect to the
shareholders of the Funds; and such other expenses as may be approved from time
to time by the Board of Trustees.

Because these fees are paid out of assets of the Funds, over time these fees
will increase the cost of your investment and may cost you more than paying
other types of sales charges.

The Plan allows excess distribution expenses to be carried forward by the
Adviser, as Distribution Coordinator, and resubmitted in a subsequent fiscal
year provided that (i) distribution expenses cannot be carried forward for more
than three years following initial submission; (ii) the Board of Trustees has
made a determination at the time of initial submission that the distribution
expenses are appropriate to be carried forward; and (iii) the Board of Trustees
makes a further determination, at the time any distribution expenses which have
been carried forward are resubmitted for payment, to the effect that payment at
the time is appropriate, consistent with the objectives of the Plan and the
current best interest of shareholders.

SHAREHOLDER SERVICING AGENTS

The Funds has entered into shareholder servicing agreement with certain
shareholder servicing agents (including the Adviser) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own shares of the Funds. These services include
assisting with purchase and redemption transactions, maintaining shareholder
accounts and records, furnishing customer statements, transmitting shareholder
reports and communications to customers and other similar shareholder liaison
services. For performing these services, each shareholder servicing agent
receives an annual fee up to 0.25% of the average daily net assets of shares of
the Funds held by investors for whom the servicing agent maintains a servicing
relationship. Shareholder servicing agents may subcontract with other parties
for shareholder support services.

Shareholder servicing agents may offer additional services to their customers,
such as pre-authorized or systematic purchase and redemption plans. Each
shareholder servicing agent may establish its own terms and conditions,
including limitations on the amounts of subsequent transactions, with respect to
such services. Certain shareholder servicing agents may (although they are not
required by the Funds to do so) credit to the accounts of their customers from
whom they are already receiving other fees an amount not exceeding such other
fees or the fees for their services as shareholder servicing agents.

The Adviser and certain broker-dealers and other shareholder servicing agents
may, at their own expense, provide gifts, such as computer software packages,
guides and books related to investment or additional Fund shares valued up to
[$100] to their customers who invest in the Funds.

The Adviser may, from time to time, at its own expense out of compensation
retained by it from the Funds or other sources available to it, make additional
payments to certain selected dealers or other shareholder servicing agents for
performing administrative services for their customers. These services include
maintaining account records, processing orders to purchase, redeem and exchange
Fund shares and responding to certain customer inquiries. This compensation does
not represent an additional expense to the Fund or its shareholders, since it
will be paid by the Adviser.

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<PAGE>
ADMINISTRATIVE SERVICES

The Adviser has retained Investment Company Administration, L.L.C. ("ICA") to
prepare various federal and state regulatory filings, reports and returns for
the Funds, to prepare reports and materials to be supplied to Trustees, to
monitor the activities of the Funds' custodian, shareholder servicing agent and
accountants, and to coordinate the preparation and payment of Fund expenses and
review the Funds' expense accruals. The Adviser pays ICA's fees out of the
Administrative Services Fee.

_____________________ acts as the Funds' custodian and fund accountant. The
Adviser also pays the custodian's fees out of the Administrative Services Fee.

The Adviser pays the other expenses incurred in the Funds' operations out of the
Administrative Services Fee. These expenses include registration fees; expenses
of the Funds' custodian for all services to the Funds, including safekeeping of
funds and securities and maintaining required books and accounts; expenses of
preparing and mailing reports to investors and to government offices and
commissions; expenses of meetings of investors; fees and expenses of independent
accountants, of legal counsel and of any transfer agent, registrar or dividend
disbursing agent of the Funds; insurance premiums; and expenses of calculating
the net asset value of, and the net income on, shares of the Funds. The Funds
remain responsible for their proportionate share of the compensation paid to the
disinterested Trustees, interest and taxes.

ORGANIZATION AND DESCRIPTION OF SHARES

Allegiance Investment Trust is an open-end investment company organized as a
Delaware business trust on October 15, 1997 (the "Trust"). The Trust has
reserved the right to create and issue additional series and classes. Each share
of a series of class represents an equal proportionate interest in that series
of class with each other share of that series or class. The share of each series
or class participate equally in the earnings, dividends and assets of the
particular series or class. Shares have no preemptive or conversion rights.
Shares when issued are fully paid and non-assessable, except as set forth below.
Shareholders are entitled to one vote for each dollar of net asset value of
shares held, and each fractional share shall be entitled to a proportionate
fractional vote.

The business and affairs of the Trust are managed under the general direction
and supervision of its Board of Trustees. The Trust is not required to hold
annual meetings of shareholders but will hold special meetings of shareholders
of all series or classes when in the judgment of the Trustees it is necessary or
desirable to submit matters for a shareholder vote. The Trustees will promptly
call a meeting of shareholders to remove a trustee(s) when requested to do so in
writing by record holders of not less than 10% of all outstanding shares of the
Trust.

25
<PAGE>
Allegiance Investment Trust
800 North Brand Boulevard, Suite 800
Glendale, CA 91203

You can find more information about the Funds' investment policies in the
Statement of Additional Information (SAI), incorporated by reference in this
prospectus, which is available free of charge.

To request a free copy of the SAI, call us at ______________. If you have access
to the Internet, you can view the SAI at the Security and Exchange Commission
(SEC) Web site at WWW.SEC.GOV. You may also visit the SEC's Public Reference
Room by calling 800.SEC.0330 OR request a copy by writing to the Public
Reference Section of the SEC, Washington, D.C., 20549-6009. The SEC charges a
duplicating fee for this service.

You can find further information about the Funds in our annual and semiannual
shareholder reports, which discuss the market conditions and investment
strategies that significantly affected each Fund's performance during the
previous fiscal period. To request a free copy of the most recent annual or
semiannual report, please call us at _____________.

SEC File No. 811-_____

26
<PAGE>

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

PART B

COMBINED STATEMENT OF ADDITIONAL INFORMATION

---------------------------------------------------
<PAGE>
PART B: INFORMATION REQUIRED IN
STATEMENT OF ADDITIONAL INFORMATION
(COMBINED STATEMENT OF ADDITIONAL INFORMATION)

N-1A Location in the Registration
Item No. Item Statement by Heading
- -------- ---- ----------------------------

10. Cover Page and Table of Cover Page, Table of Contents
Contents

11. Fund History "Trust History"

12. Description of the Fund and Its "Description of the Trust and its
Investments and Risks Investment Risks"

13. Management of the Fund "Management"

14. Control Persons and Principal "Control Persons and Principal
Holders of Securities Holders of Securities"

15. Investment Advisory and Other "Investment Advisory and Other
Services Services"

16. Brokerage Allocation and "Brokerage Allocation and Other
Other Practices Practices"

17. Capital Stock and Other "Description of Shares; Voting
Securities Rights and Liabilities"

18. Purchase, Redemption and "Purchase, Redemption and Pricing
Pricing of Shares of Shares"

19. Taxation of the Fund "Taxes," "Foreign Shareholders"

20. Underwriters "Investment Advisory and Other
Services"

21. Calculation of Performance Data "Performance Information"

22. Financial Statements "Financial Statements"
<PAGE>
Statement of
Additional Information

____________, 1999

ALLEGIANCE INVESTMENT TRUST

Allegiance American Value Fund
Allegiance Intermediate-Term Bond Fund
Allegiance California Tax-Free Intermediate Bond Fund

This Statement of Additional Information provides information regarding
the activities and operations of the mutual funds listed above, and should be
read together with the Funds' Prospectus dated ____________, 1998. You may
obtain a Prospectus without charge by calling 1-800-________.

Certain financial information included in the Annual Report to
shareholders is incorporated by reference into this Statement of Additional
Information.

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT
A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS ONLY IF PRECEDED
OR ACCOMPANIED BY A CURRENT PROSPECTUS.
<PAGE>
TABLE OF CONTENTS
Page
----

TRUST HISTORY.................................................................1

DESCRIPTION OF THE TRUST AND ITS INVESTMENTS AND RISKS........................1
CLASSIFICATION.......................................................1
INVESTMENT STRATEGIES AND RISKS......................................1
FUND POLICIES.......................................................22
TEMPORARY DEFENSIVE POSITION........................................25
PORTFOLIO TURNOVER..................................................25

MANAGEMENT...................................................................26
MANAGEMENT INFORMATION..............................................27
COMPENSATION........................................................27

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES..........................28
PRINCIPAL HOLDERS...................................................28

INVESTMENT ADVISORY AND OTHER SERVICES.......................................28
INVESTMENT ADVISER..................................................28
SERVICE MARKS.......................................................28
DISTRIBUTOR.........................................................29
ADMINISTRATIVE SERVICES.............................................30
THE ADMINISTRATOR...................................................30
DIVIDEND DISBURSING AGENT AND TRANSFER AGENT........................31
COUNSEL AND INDEPENDENT ACCOUNTANTS.................................31

BROKERAGE ALLOCATION AND OTHER PRACTICES.....................................32
BROKERAGE TRANSACTIONS..............................................32
BROKERAGE SELECTION.................................................32

DESCRIPTION OF SHARES; VOTING RIGHTS AND LIABILITIES.........................34

PURCHASE, REDEMPTION AND PRICING OF SHARES...................................35
DETERMINATION OF NET ASSET VALUE....................................35
PURCHASE AND REDEMPTION OF SHARES...................................37
SYSTEMATIC WITHDRAWAL PLAN..........................................38
REDEMPTION IN KIND..................................................38

TAXES........................................................................39
TAX STATUS OF THE FUNDS.............................................39
TAXATION OF FUND DISTRIBUTIONS......................................39

i
<PAGE>
ADDITIONAL INFORMATION FOR
SHAREHOLDERS OF THE TAX-FREE FUND.................................42
ADDITIONAL INFORMATION RELATING
TO FUND INVESTMENTS...............................................42
ADDITIONAL INFORMATION RELATING
TO FOREIGN INVESTMENTS............................................43

FOREIGN SHAREHOLDERS.........................................................44
BACKUP WITHHOLDING..................................................44

PERFORMANCE INFORMATION......................................................44
CALCULATION OF YIELD................................................44
CALCULATION OF TOTAL RETURN.........................................45

FINANCIAL STATEMENTS.........................................................47

Appendix A: Certain Information concerning California
Appendix B: Description of Securities Ratings
Appendix C: Taxable Equivalent Yields

ii
<PAGE>
TRUST HISTORY

ALLEGIANCE INVESTMENT TRUST (the "Trust") is an open-end management
investment company established under Delaware law (under its predecessor name,
Van Deventer & Hoch Funds) as a Delaware business trust on October 15, 1997. Its
name was changed to Allegiance Investment Trust on September 2, 1998.

DESCRIPTION OF THE TRUST AND ITS INVESTMENTS AND RISKS

CLASSIFICATION

The Agreement and Declaration of Trust, which is the governing document
for the Trust, permits the Trust to offer separate portfolios, or funds, with
shares of beneficial interest and different classes of shares of each fund. The
Trust currently has three active series (the "Funds"). Each Fund (other than the
Allegiance California Tax-Free Intermediate Bond Fund) is a diversified mutual
fund.

This Statement of Additional Information relates to the following
Funds:

+ Allegiance American Value Fund (the "American Fund"
or the "Stock Fund")
+ Allegiance Intermediate-Term Bond Fund (the "Bond
Fund")
+ Allegiance California Tax-Free Intermediate Bond Fund
(the "Tax-Free Fund")

Van Deventer & Hoch (the "Adviser") is the investment adviser for each
Fund. First Fund Distributors, Inc. (the "Distributor") is the distributor of
shares of each Fund.

As required by law, the Trust, the Adviser, the Distributor, and the
Trust's administrator each has adopted codes of ethics concerning certain
activities of officers, trustees or directors and employees. Copies of these
codes of ethics have been filed with the Securities and Exchange Commission (the
"SEC").

INVESTMENT STRATEGIES AND RISKS

The principal investment policies and strategies of each Fund are
described in the Prospectus by which shares of that Fund are offered. The
achievement of each Fund's investment objective will depend upon market
conditions generally and on the Adviser's analytical and portfolio management
skills. The permitted investments and investment techniques described below, in
alphabetical order, supplements the information contained in the Prospectus.

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<PAGE>
SPECIAL INVESTMENT STRATEGIES AND RISKS

The TAX-FREE FUND has a fundamental policy of investing at least 80
percent of its net assets under normal market conditions in obligations issued
by or on behalf of the State of California, the interest on which, in the
opinion of counsel for the issuer, is exempt from federal income tax and not
included as a preference item under the alternative minimum tax. The Tax-Free
Fund may comply with this policy, or with any of its other policies as to
investing in securities the interest on which is exempt from taxation in
California, by investing in a partnership, trust, regulated investment company
or other entity which invests in such municipal securities. If so, the Tax-Free
Fund's investment in such entity shall be deemed an investment in the underlying
municipal securities in the same proportion as such entity's investment in such
municipal securities bears to its net assets. The Tax-Free Fund is not suitable
for investors who cannot benefit from the tax-exempt character of its dividends,
such as IRAs, qualified retirement plans or tax-exempt entities.

Appendix A contains information concerning California. The Tax-Free
Fund is particularly susceptible to events affecting issuers in California.

Appendix B describes the ratings assigned to securities by certain
securities rating organizations.

Appendix C describes the yield investors need to achieve from a taxable
investment to equal the yield from a tax-exempt investment. The taxable
equivalent yields tables do not predict the yield of the Tax-Free Fund.

PORTFOLIO SECURITIES

AMERICAN, EUROPEAN AND CONTINENTAL DEPOSITARY RECEIPTS

American Depositary Receipts ("ADRs") are securities, typically issued
by a U.S. financial institution, that evidence ownership interests in a security
or a pool of securities issued by a foreign issuer. European Depositary Receipts
("EDRs"), which are sometimes referred to as Continental Depositary Receipts
("CDRs"), are securities, typically issued by a non-U.S. financial institution,
that evidence ownership interests in a security or a pool of securities issued
by either a U.S. or foreign issuer. ADRs, EDRs and CDRs may be available for
investment through "sponsored" or "unsponsored" facilities. A sponsored facility
is established jointly by the issuer of the security underlying the receipt and
a depositary, whereas an unsponsored facility may be established by a depositary
without participation by the issuer of the receipt's underlying security.
Holders of an unsponsored depositary receipt generally bear all the costs of the
unsponsored facility and the depositary of an unsponsored facility frequently is
under no obligation to distribute shareholder communications received from the
issuer of the deposited security or to pass voting rights through to the holders
of the receipts in respect to the deposited securities.

-2-
<PAGE>
ASSET-BACKED SECURITIES

In addition to mortgage-backed securities, the Funds may invest in
asset-backed securities including company receivables, truck and auto loans,
leases, and credit card receivables. These issues may be traded over-the-counter
and typically have a short to intermediate maturity structure depending on the
paydown characteristics of the underlying financial assets which are passed
through to the security holder. The Bond Fund will normally limit its
investments in asset-backed securities to 25% of its total assets and the other
Funds will limit their investments to 5% of their total assets.

Asset-backed securities present certain risks. For instance, in the
case of credit card receivables, these securities may not have the benefit of
any security interest in the related collateral. Credit card receivables are
generally unsecured and the debtors are entitled to the protection of a number
of state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts owed on the credit cards, thereby reducing the
balance due. Most issuers of automobile receivables permit the servicers to
retain possession of the underlying obligations. If the servicer were to sell
these obligations to another party, there would be a risk that the purchaser
would acquire an interest superior to that of the holders of the related
automobile receivables. In addition, because of the large number of vehicles
involved in a typical issuance and technical requirements under state laws, the
trustee for the holders of the automobile receivables may not have a proper
security interest in all of the obligations backing such receivables. Therefore,
there is the possibility that recoveries on repossessed collateral may not, in
some cases, be available to support payments on these securities. The underlying
assets (E.G., loans) are also subject to prepayments which shorten the
securities' weighted-average life and may lower their return.

Asset-backed securities are often backed by a pool of assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors on underlying assets to make payments, the
securities may contain elements of credit support which fall into two
categories: (i) liquidity protection and (ii) protection against losses
resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the receipt of payments
on the underlying pool occurs in a timely fashion. Protection against losses
resulting from ultimate default ensures payment through insurance policies or
letters of credit obtained by the issuer or sponsor from third parties. A Fund
will not pay any additional or separate fees for credit support. The degree of
credit support provided for each issue is generally based on historical
information respecting the level of credit risk associated with the underlying
assets. Delinquency or loss in excess of that anticipated or failure of the
credit support could adversely affect the return on an investment in such a
security.

BANK OBLIGATIONS

Bank obligations include certificates of deposit, time deposits
(including Eurodollar time deposits), and bankers' acceptances and other
short-term debt obligations issued by domestic banks, foreign subsidiaries or

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<PAGE>
foreign branches of domestic banks, domestic and foreign branches of foreign
banks, domestic savings and loan associations, and other banking institutions.
The Funds have established certain minimum credit quality standards for bank
obligations in which they invest.

The Funds are not prohibited from investing in obligations of banks
that are clients of the Distributor. However, the purchase of shares of the
Funds by such banks or by their customers will not be a consideration in
determining which bank obligations the Funds will purchase.

BANKERS' ACCEPTANCES

A banker's acceptance is a bill of exchange or time draft drawn on and
accepted by a commercial bank. It is used by corporations to finance the
shipment and storage of goods and to furnish dollar exchange. Maturities are
generally six months or less.

CERTIFICATES OF DEPOSIT

A certificate of deposit is a negotiable interest-bearing instrument
with a specific maturity. Certificates of deposit are issued by banks and
savings and loan institutions in exchange for the deposit of funds and normally
can be traded in the secondary market before maturity.

COMMERCIAL PAPER

Commercial paper is the term used to designate unsecured short-term
promissory notes issued by corporations and other entities. Maturities on these
issues vary from one to 270 days.

COMMON AND PREFERRED STOCK

Common stocks are generally more volatile than other securities.
Preferred stocks share some of the characteristics of both debt and equity
investments and are generally preferred over common stocks with respect to
dividends and in liquidation.

CONVERTIBLE SECURITIES

Convertible securities have characteristics similar to both fixed
income and equity securities. Because of the conversion feature, the market
value of convertible securities tends to move together with the market value of
the underlying stock. The value of convertible securities is also affected by
prevailing interest rates, the credit quality of the issuer, and any call
provisions. Convertible securities include both debt obligations and preferred
stock.

-4-
<PAGE>
FOREIGN CURRENCY EXCHANGE TRANSACTIONS

Because investments in foreign companies usually involve currencies of
foreign countries, the value of the assets of a Fund with investments in foreign
companies as measured in U.S. dollars may be affected favorably or unfavorably
by changes in foreign currency exchange rates and exchange control regulations.
Although such Fund's assets are valued daily in terms of U.S. dollars, the Fund
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. A Fund may conduct its foreign currency exchange transactions
on a spot basis or for settlement on a future date (i.e., a "forward foreign
currency" contract or "forward" contract). A Fund may convert currency on a spot
basis from time to time, and investors should be aware of the costs of currency
conversion. Although foreign exchange dealers do not charge a fee for
conversion, they do realize a profit based on the difference (the "spread")
between the prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the Fund at one rate,
while offering a lesser rate of exchange should the Fund desire to resell that
currency to the dealer. The Funds do not currently intend to speculate in
foreign currency exchange rates or forward contracts.

FOREIGN SECURITIES

Each Fund, except for the Tax-Free Fund, may invest in certain
obligations or securities of foreign issuers. Permissible investments include
obligations of foreign branches of U.S. banks and of foreign banks, including
certificates of deposit and time deposits (including Eurodollar time deposits).

Investing in securities issued by companies whose principal business
activities are outside the United States may involve significant risks not
present in domestic investments. For example, the value of securities
denominated in foreign currencies and of dividends and interest paid with
respect to those securities, will fluctuate based on the relative strength of
the U.S. dollar. In addition, there is generally less publicly available
information about foreign companies, particularly those not subject to the
disclosure and reporting requirements of the U.S. securities laws. Foreign
issuers are generally not bound by uniform accounting, auditing and financial
reporting requirements comparable to those applicable to domestic issuers.
Investments in foreign securities also involve the risk of possible adverse
changes in investment or exchange control regulations, expropriation or
confiscatory taxation, limitation on the removal of funds or other assets of a
Fund, political or financial instability or diplomatic and other developments
which would affect such investments. Further, economies of particular countries
or areas of the world may differ favorably or unfavorably from the economy of
the U.S.

It is anticipated that in most cases the best available market for
foreign securities would be on exchanges or in over-the-counter markets located
outside the U.S. Foreign stock markets, while growing in volume and
sophistication, are generally not as developed as those in the U.S., and
securities of some foreign issuers (particularly those located in developing
countries) may be less liquid and more volatile than securities of comparable
U.S. companies. Foreign security trading practices, including those involving
securities settlement where a Fund's assets may be released prior to receipt of
payment, may expose a Fund to increased risk in the event of a failed trade or
the insolvency of a foreign broker-dealer. In addition, foreign brokerage
commissions are generally higher than commissions on securities traded in the

-5-
<PAGE>
U.S. and may be non-negotiable. In general, there is less overall governmental
supervision and regulation of foreign securities exchanges, brokers and listed
companies than in the U.S.

A Fund may invest in foreign securities markets that impose
restrictions on transfer of the proceeds from that market to the United States
or to United States persons. Although securities subject to these transfer
restrictions may be marketable abroad, they may be less liquid than foreign
securities that are not subject to such restrictions.

Foreign issuers of securities or obligations are often subject to
accounting treatment and engage in business practices different from those
respecting domestic issuers of similar securities or obligations. Foreign
branches of U.S. banks and foreign banks may be subject to less stringent
reserve requirements than those applicable to domestic branches of U.S. banks.

The Stock Fund and the Bond Fund may invest in securities issued by
entities based in developing countries throughout the world. All of the risks of
investing in securities of foreign issuers are heightened for securities of
issuers in developing countries, and extreme volatility can be associated with
these investments. Such investments may also entail higher custodial fees and
sales commissions than domestic investments.

FORWARD COMMITMENTS OR PURCHASES ON A WHEN-ISSUED BASIS

Each Fund may invest up to 25 percent of its assets in forward
commitments or commitments to purchase securities on a when-issued basis.
Forward commitments or purchases of securities on a when-issued basis are
transactions where the price of the securities is fixed at the time of the
commitment and delivery and payment normally take place beyond conventional
settlement time after the date of commitment to purchase. The Funds will make
commitments to purchase obligations on a when-issued basis only with the
intention of actually acquiring the securities, but may sell them before the
settlement date. The when-issued securities are subject to market fluctuation,
and no interest accrues on the security to the purchaser during this period. The
payment obligation and the interest rate that will be received on the securities
are each fixed at the time the purchaser enters into the commitment. Purchasing
obligations on a when-issued basis is a form of leveraging and can involve a
risk that the yields available in the market when the delivery takes place may
actually be higher than those obtained in the transaction itself. In that case,
there could be an unrealized loss at the time of delivery.

While awaiting delivery of securities purchased on a when-issued basis,
a Fund will establish a segregated account consisting of liquid securities equal
to the amount of the commitments to purchase securities on such basis. If the
value of these assets declines, the Fund will place additional liquid assets in
the account on a daily basis so that the value of the assets in the account is
equal to the amount of the commitments.

-6-
<PAGE>
FUTURES CONTRACTS

Subject to applicable laws, each Fund may enter into bond and interest
rate futures contracts. The Funds intend to use futures contracts only for bona
fide hedging purposes. Futures contracts provide for the future sale by one
party and purchase by another party of a specified amount of a specified
security at a specified future time and at a specified price. A "sale" of a
futures contract entails a contractual obligation to deliver the underlying
securities called for by the contract, and a "purchase" of a futures contract
entails a contractual obligation to acquire such securities, in each case in
accordance with the terms of the contract. Futures contracts must be executed
through a futures commission merchant, or brokerage firm, which is a member of
an appropriate exchange designated as a "contract market" by the Commodity
Futures Trading Commission ("CFTC").

When a Fund purchases or sells a futures contract, the Trust must
allocate assets of that Fund as an initial deposit on the contract. The initial
deposit may be as low as approximately 5 percent or less of the value of the
contract. The futures contract is marked to market daily thereafter and the Fund
may be required to pay or entitled to receive additional "variation margin,"
based on decrease or increase in the value of the futures contract.

Futures contracts call for the actual delivery or acquisition of
securities, or in the case of futures contracts based on indices, the making or
acceptance of a cash settlement at a specified future time. However, the
contractual obligation is usually fulfilled before the date specified in the
contract by closing out the futures contract position through the purchase or
sale, on a commodities exchange, of an identical futures contract. Positions in
futures contracts may be closed out only if a liquid secondary market for such
contract is available, and there can be no assurance that such a liquid
secondary market will exist for any particular futures contract.

A Fund's ability to hedge effectively through transactions in futures
contracts depends on, among other factors, the Adviser's judgment as to the
expected price movements in the securities underlying the futures contracts. In
addition, it is possible in some circumstances that a Fund would have to sell
securities from its poadvantageous to do so.

-7-
<PAGE>
GUARANTEED INVESTMENT CONTRACTS (GIC)

A GIC is a contract between an insurance company and, generally, an
institutional investor that guarantees the investor a specified interest rate
for a specific period and the return of the investor's principal.

LOAN PARTICIPATIONS

Loan participations are interests in loans which are administered by
the lending bank or agent for a syndicate of lending banks, and sold by the
lending bank or syndicate member. The Funds may purchase interests only in loan
participations issued by a bank in the United States with assets exceeding $1
billion and for which the underlying loan is issued by borrowers in whose
obligations the Funds may invest. Because the intermediary bank does not
guarantee a loan participation in any way, a loan participation is subject to
the credit risk generally associated with the underlying corporate borrower. In
addition, in the event the underlying corporate borrower defaults, a Fund may be
subject to delays, expenses and risks that are greater than those that would
have been involved if the Fund had purchased a direct obligation (such as
commercial paper) of the borrower. Under the terms of a loan participation, the
purchasing Fund may be regarded as a creditor of the intermediary bank so that
the Fund may also be subject to the risk that the issuing bank may become
insolvent.

MONEY MARKET FUNDS

A money market fund is an investment company that limits its
investments to high quality money market instruments with a weighted-average
maturity of 90 days or less. Each of the Funds may invest in money market funds,
but not more than 5 percent of its assets in any one money market fund or more
than 10 percent of its assets in other investment companies, including money
market funds. When a Fund invests in a money market fund, a shareholder bears
not only his or her proportionate share of the Fund's expenses, but also
indirectly his or her share of the expenses of the money market fund, including
management fees.

MORTGAGE "DOLLAR ROLL" TRANSACTIONS

The Bond Fund may enter into mortgage "dollar roll" transactions
pursuant to which the Fund sells mortgage-backed securities for delivery in the
future and simultaneously contracts to repurchase substantially similar
securities on a specified future date. At the time the Fund enters into a dollar
roll transaction, it causes its custodian to segregate liquid assets such as
cash, U.S. Government securities or other liquid equity or debt securities
having a value equal to the purchase price for the similar security (including
accrued interest) and subsequently marks the assets to market daily to ensure
that full collateralization is maintained.

During the roll period, the Fund forgoes principal and interest paid on
the mortgage-backed securities. The Fund is compensated for the lost interest by
the difference between the current sales price and the lower price for the
future purchase (often referred to as the "drop") as well as by the interest

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<PAGE>
earned on the cash proceeds of the initial sale. The Fund may also be
compensated by receipt of a commitment fee.

MORTGAGE-BACKED SECURITIES

Each of the Funds may invest in mortgage-backed securities, which are
securities representing interests in pools of mortgage loans. Interests in pools
of mortgage-related securities differ from other forms of debt securities which
normally provide for periodic payment of interest in fixed amounts with
principal payments at maturity or specified call dates. Instead, these
securities provide a monthly payment which consists of both interest and
principal payments. In effect, these payments are a "pass-through" of the
monthly payments made by the individual borrowers on their mortgage loans, net
of any fees paid to the issuer or guarantor of such securities. Additional
payments are caused by prepayments of principal resulting from the sale,
refinancing or foreclosure of the underlying property, net of fees or costs
which may be incurred. The market value and interest yield of these instruments
can vary due to market interest rate fluctuations and early prepayments of
underlying mortgages.

The principal governmental issuers or guarantors of mortgage-backed
securities are the Government National Mortgage Association ("GNMA"), Federal
National Mortgage Association ("FNMA"), and Federal Home Loan Mortgage
Corporation ("FHLMC"). Obligations of GNMA are backed by the full faith and
credit of the United States Government while obligations of FNMA and FHLMC are
supported by the respective agency only. These are described below.

Government National Mortgage Association. GNMA is a wholly owned
corporate instrumentality of the U.S. Government within the Department
of Housing and Urban Development. The National Housing Act of 1934, as
amended (the "Housing Act"), authorizes GNMA to guarantee the timely
payment of the principal of, and interest on, securities that are based
on and backed by a pool of specified mortgage loans. For these types of
securities to qualify for a GNMA guarantee, the underlying collateral
must be mortgages insured by the FHA under the Housing Act, or Title V
of the Housing Act of 1949, as amended ("VA Loans"), or be pools of
other eligible mortgage loans. The Housing Act provides that the full
faith and credit of the U.S. Government is pledged to the payment of
all amounts that may be required to be paid under any guarantee. In
order to meet its obligations under a guarantee, GNMA is authorized to
borrow from the U.S. Treasury with no limitations as to amount.

GNMA pass-through securities may represent a proportionate interest in
one or more pools of the following types of mortgage loans: (1)
fixed-rate level payment mortgage loans; (2) fixed-rate graduated
payment mortgage loans; (3) fixed-rate growing equity mortgage loans;
(4) fixed-rate mortgage loans secured by manufactured (mobile) homes;
(5) mortgage loans on multifamily residential properties under
construction; (6) mortgage loans on completed multifamily projects; (7)
fixed-rate mortgage loans as to which escrowed funds are used to reduce
the borrower's monthly payments during the early years of the mortgage
loans ("buydown" mortgage loans); (8) mortgage loans that provide for

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<PAGE>
adjustments on payments based on periodic changes in interest rates or
in other payment terms of the mortgage loans; and (9) mortgage-backed
serial notes.

Federal National Mortgage Association. FNMA is a federally chartered
and privately owned corporation established under the Federal National
Mortgage Association Charter Act. FNMA was originally organized in 1938
as a U.S. Government agency to add greater liquidity to the mortgage
market. FNMA was transformed into a private sector corporation by
legislation enacted in 1968. FNMA provides funds to the mortgage market
primarily by purchasing home mortgage loans from local lenders, thereby
providing them with funds for additional lending. FNMA acquires funds
to purchase loans from investors that may not ordinarily invest in
mortgage loans directly, thereby expanding the total amount of funds
available for housing.

Each FNMA pass-through security represents a proportionate interest in
one or more pools of FHA Loans, VA Loans or conventional mortgage loans
(that is, mortgage loans that are not insured or guaranteed by any U.S.
Government agency). The loans contained in those pools consist of one
or more of the following: (1) fixed-rate level payment mortgage loans;
(2) fixed-rate growing equity mortgage loans; (3) fixed-rate graduated
payment mortgage loans; (4) variable-rate mortgage loans; (5) other
adjustable-rate mortgage loans; and (6) fixed-rate mortgage loans
secured by multifamily projects.

Federal Home Loan Mortgage Corporation. FHLMC is a corporate
instrumentality of the United States established by the Emergency Home
Finance Act of 1970, as amended. FHLMC was organized primarily for the
purpose of increasing the availability of mortgage credit to finance
needed housing. The operations of FHLMC currently consist primarily of
the purchase of first lien, conventional, residential mortgage loans
and participation interests in mortgage loans and the resale of the
mortgage loans in the form of mortgage-backed securities.

The mortgage loans underlying FHLMC securities typically consist of
fixed-rate or adjustable-rate mortgage loans with original terms to
maturity of between 10 and 30 years, substantially all of which are
secured by first liens on one-to-four-family residential properties or
multifamily projects. Each mortgage loan must include whole loans,
participation interests in whole loans and undivided interests in whole
loans and participation in another FHLMC security.

Even if the U.S. government or one of its agencies guarantees principal
and interest payments of a mortgage-backed security, the market price of a
mortgage-backed security is not insured and may be subject to market volatility.
When interest rates decline, mortgage-backed securities experience higher rates
of prepayment because the underlying mortgages are refinanced to take advantage
of the lower rates. The prices of mortgage-backed securities may not increase as
much as prices of other debt obligations when interest rates decline, and
mortgage-backed securities may not be an effective means of locking in a
particular interest rate. In addition, any premium paid for a mortgage-backed
security may be lost when it is prepaid. When interest rates go up,

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mortgage-backed securities experience lower rates of prepayment. This has the
effect of lengthening the expected maturity of a mortgage-backed security. As a
result, prices of mortgage-backed securities may decrease more than prices of
other debt obligations when interest rates go up.

Each of the Funds may also invest in mortgage-backed securities which
are rated in one of the four top categories by Standard and Poor's Rating
Services ("S&P"), Moody's Investors Service, Inc. ("Moody's") or Fitch IBCA,
Inc. ("Fitch IBCA"), or, if not rated by S&P, Moody's or Fitch IBCA, of
comparable quality as determined by the Adviser to the Fund. Two principal types
of mortgage-backed securities are collateralized mortgage obligations ("CMOs")
and real estate mortgage investment conduits ("REMICs"). REMICs, which were
authorized under the Tax Reform Act of 1986, are private entities formed for the
purpose of holding a fixed pool of mortgages secured by an interest in real
property. REMICs are similar to CMOs in that they issue multiple classes of
securities.

CMOs are securities collateralized by mortgages, mortgage pass-through
certificates, mortgage pay-through bonds (bonds representing an interest in a
pool of mortgages where the cash flow generated from the mortgage collateral
pool is dedicated to bond repayment), and mortgage-backed bonds (general
obligations of the issuers payable out of the issuers' general funds and
additionally secured by a first lien on a pool of single family detached
properties). Many CMOs are issued with a number of classes or series which have
different maturities and are retired in sequence.

Each class of a CMO is issued at a specific fixed or floating coupon
rate and has a stated maturity or final distribution date. Principal prepayments
on the collateral pool may cause the various classes of a CMO to be retired
substantially earlier than their stated maturities or final distribution dates.
The principal of and interest on the collateral pool may be allocated among the
several classes of a CMO in a number of different ways. Generally, the purpose
of the allocation of the cash flow of a CMO to the various classes is to obtain
a more predictable cash flow to some of the individual tranches than exists with
the underlying collateral of the CMO. As a general rule, the more predictable
the cash flow is on a CMO tranche, the lower the anticipated yield will be on
that tranche at the time of issuance relative to prevailing market yields on
mortgage-related securities. Certain classes of CMOs may have priority over
others with respect to the receipt of prepayments on the mortgages.

Investors purchasing such CMOs in the shortest maturities receive or
are credited with their pro rata portion of the scheduled payments of interest
and principal on the underlying mortgages plus all unscheduled prepayments of
principal up to a predetermined portion of the total CMO obligation. Until that
portion of such CMO obligations is repaid, investors in the longer maturities
receive interest only. Accordingly, the CMOs in the longer maturity series are
less likely than other mortgage pass-through certificates to be prepaid prior to
their stated maturity. Although some of the mortgages underlying CMOs may be
supported by various types of insurance, and some CMOs may be backed by GNMA
certificates or other mortgage pass- through certificates issued or guaranteed

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by U.S. Government agencies or instrumentalities, the CMOs themselves are not
generally guaranteed.

A Fund may invest in, among other things, "parallel pay" CMOs and
Planned Amortization Class CMOs ("PAC Bonds"). Parallel pay CMOs are structured
to provide payments of principal on each payment date to more than one class.
These simultaneous payments are taken into account in calculating the stated
maturity date or final distribution date of each class which, like the other CMO
structures, must be retired by its stated maturity date or final distribution
date, but may be retired earlier. PAC Bonds are parallel pay CMOs that generally
require payments of a specified amount of principal on each payment date; the
required principal payment on PAC Bonds have the highest priority after interest
has been paid to all classes.

OPTIONS

The Stock Fund and the Bond Fund may, for hedging purposes and in order
to generate additional income, write call options on a covered basis, provided
that the aggregate value of such options may not exceed 10 percent of the Fund's
net assets as of the time the Fund enters into such options.

The purchaser of a call option has the right to buy, and the writer (in
this case a Fund) of a call option has the obligation to sell, an underlying
security at a specified exercise price during a specified option period. The
advantage to a Fund of writing covered calls is that the Fund receives a premium
for writing the call, which is additional income. However, if the security rises
in value and the call is exercised, the Fund may not participate fully in the
market appreciation of the security.

During the option period, a covered call option writer may be assigned
an exercise notice by the broker/dealer through whom such call option was sold,
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upothe writer effects a closing
purchase transaction.

A closing purchase transaction is one in which a Fund, when obligated
as a writer of an option, terminates its obligation by purchasing an option of
the same series as the option previously written. A closing purchase transaction
cannot be effected with respect to an option once the Fund writing the option
has received an exercise notice for such option. Closing purchase transactions
will ordinarily be effected to realize a profit on an outstanding call option,
to prevent an underlying security from being called, to permit the sale of the
underlying security or to enable a Fund to write another call option on the
underlying security with either a different exercise price or different
expiration date or both. The Fund may realize a net gain or loss from a closing
purchase transaction depending upon whether the net amount of the original
premium received on the call option is more or less than the cost of effecting
the closing purchase transaction. Any loss incurred in a closing purchase
transaction may be partially or entirely offset by the premium received from a

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sale of a different call option on the same underlying security. Such a loss may
also be wholly or partially offset by unrealized appreciation in the market
value of the underlying security. Conversely, a gain resulting from a closing
purchase transaction could be offset in whole or in part by a decline in the
market value of the underlying security.

If a call option expires unexercised, a Fund will realize a short-term
capital gain in the amount of the premium on the option, less the commission
paid. Such a gain, however, may be offset by depreciation in the market value of
the underlying security during the option period. If a call option is exercised,
the Fund will realize a gain or loss from the sale of the underlying security
equal to the difference between (a) the cost of the underlying security and (b)
the proceeds of the sale of the security, plus the amount of the premium on the
option, less the commission paid.

The market value of a call option generally reflects the market price
of the underlying security. Other principal factors affecting market value
include supply and demand, interest rates, the price volatility of the
underlying security and the time remaining until the expiration date.

The Stock Fund and the Bond Fund will write call options only on a
covered basis, which means that the Fund will own the underlying security
subject to a call option at all times during the option period. Unless a closing
purchase transaction is effected, the Fund would be required to continue to hold
a security which it might otherwise wish to sell, or deliver a security it would
want to hold. Options written by a Fund will normally have expiration dates
between one and nine months from the date written. The exercise price of a call
option may be below, equal to or above the current market value of the
underlying security at the time the option is written.

A Fund may also purchase put and call options. Put options are
purchased to hedge against a decline in the value of securities held in the
Fund's portfolio. If such a decline occurs, the put options will permit the Fund
to sell the securities underlying such options at the exercise price, or to
close out the options at a profit. The premium paid for a put or a call option
plus any transaction costs will reduce the benefit, if any, realized by the Fund
upon exercise of the option, and, unless the price of the underly, the option
may expire worthless to the Fund. In addition, in the event that the price of
the security in connection with which an option was purchased moves in a
direction favorable to the Fund, the benefits realized by the Fund as a result
of such favorable movement will be reduced by the amount of the premium paid for
the option and related transaction costs.

OPTIONS ON FUTURES CONTRACTS

The Funds may also, subject to any applicable laws, purchase and write
options on futures contracts for hedging purposes only. The holder of a call
option on a futures contract has the right to purchase the futures contract, and

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the holder of a put option on a futures contract has the right to sell the
futures contract, in either case at a fixed exercise price up to a stated
expiration date or, in the case of certain options, on a stated date. Options on
futures contracts, like futures contracts, are traded on contract markets.

The writing of a call option on a futures contract constitutes a
partial hedge against declining prices of the securities deliverable on exercise
of the futures contract. A Fund will receive an option premium when it writes
the call, and, if the price of the futures contract at expiration of the option
is below the option exercise price, the Fund will retain the full amount of this
option premium, which provides a partial hedge against any decline that may have
occurred in the Fund's portfolio holdings. Similarly, the writing of a put
option on a futures contract constitutes a partial hedge against increasing
prices of the securities deliverable upon exercise of the futures contract. If a
Fund writes an option on a futures contract and that option is exercised, the
Fund may incur a loss, which loss will be reduced by the amount of the option
premium received, less related transaction costs. A Fund's ability to hedge
effectively through transactions in options on futures contracts depends on,
among other factors, the degree of correlat held by the Fund and changes in the
value of its futures positions. This correlation cannot be expected to be exact,
and the Fund bears a risk that the value of the futures contract being hedged
will not move in the same amount, or even in the same direction, as the hedging
instrument. Thus it may be possible for a Fund to incur a loss on both the
hedging instrument and the futures contract being hedged.

The ability of a Fund to engage in options and futures strategies
depends also upon the availability of a liquid market for such instruments.
There can be no assurance that such a liquid market will exist for such
instruments.

OPTIONS ON STOCK INDICES

The Stock Fund may engage in transactions involving options on stock
indices. A stock index assigns relative values to the common stocks included in
the index, and the index fluctuates with changes in the market values of the
underlying common stocks. The Stock Fund will not engage in transactions in
options on stock indices for speculative purposes but only to protect
appreciation attained, to offset capital losses and to take advantage of the
liquidity available in the option markets. The aggregate premium paid on all
options on stock indices will not exceed 5 percent of the total assets of the
Stock Fund.

Options on stock indices are similar to options on stocks but have
different delivery requirements. Stock options provide the right to take or make
delivery of the underlying stock at a specified price. A stock index option
gives the holder the right to receive a cash "exercise settlement amount" equal
to (i) the amount by which the fixed exercise price of the option exceeds (in
the case of a put) or is less than (in the case of a call) the closing value of
the underlying index on the date of exercise, multiplied by (ii) a fixed "index
multiplier." Receipt of this cash amount will depend upon the closing level of
the stock index upon which the option is based being greater than the exercise
price of the option. The amount of cash received will be equal to such

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difference between the closing price of the index and exercise price of the
option expressed in dollars times a specified multiple. The writer of the option
is obligated, in return for the option premium received, to make delivery of
this amount. Gain or loss to the Fund on transactions in stock index options
will depend on price movements in the stock market generally (or in a particular
industry or segment of the market) rather than price movements of individual
securities.

As with stock options, the Fund may offset its position in stock index
options prior to expiration by entering into a closing transaction on an
exchange or it may let the option expire unexercised.

A stock index fluctuates with changes in the market values of the stock
included in the index. Some stock index options are based on a broad market
index such as the Standard & Poor's 500 or the New York Stock Exchange Composite
Index, or a narrower market index such as the Standard & Poor's 100. Indices are
also based on an industry or market segment such as the AMEX Oil and Gas Index
or the Computer and Business Equipment Index. Options on stock indices are
currently traded on the following exchanges, among others: The Chicago Board
Options Exchange, New York Stock Exchange and American Stock Exchange.

A Fund's ability to hedge effectively all or a portion of its
securities through transactions in options on stock indices depends on the
degree to which price movements in the underlying index correlate with price
movements in the securities held by the Fund. Since the Fund will not duplicate
all of the components of an index, the correlation will not be exact.
Consequently, the Fund bears the risk that the prices of the securities being
hedged will not move in the same amount as the hedging instrument. It is also
possible that there may be a negative correlation between the index or other
securidged securities which would result in a loss on both such securities and
the hedging instrument.

Positions in stock index options may be closed out only on an exchange
which provides a secondary market. There can be no assurance that a liquid
secondary market will exist for any particular stock index option. Thus, it may
not be possible to close such an option. The inability to close options
positions could have an adverse impact on a Fund's ability to effectively hedge
its securities. The Fund will enter into an option position only if there
appears to the Adviser of such Fund, at the time of investment, to be a liquid
secondary market for such options.

OTHER INVESTMENT COMPANIES

Subject to applicable statutory and regulatory limitations, assets of
each Fund may be invested in shares of other investment companies (such as
mutual funds) and foreign investment trusts. Those investment companies and
investment trusts must invest in securities in which the Funds can invest in a
manner consistent with the Funds' investment objectives. A Fund's purchase of
investment company securities may result in the duplication of management fees
and expenses.

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RECEIPTS

Receipts are interests in separately traded interest and principal
component parts of U.S. Treasury obligations that are issued by banks and
brokerage firms and are created by depositing U.S. Treasury obligations into a
special account at a custodian bank. The custodian holds the interest and
principal payments for the benefit of the registered owners of the certificates
or receipts. Receipts include Treasury Receipts ("TRs"), Treasury Investment
Growth Receipts ("TIGRs") and Certificates of Accrual on Treasury Securities
("CATS"). TRS, TIGRs and CATS are sold as zero coupon securities.

REPURCHASE AGREEMENTS

Each Fund may enter into repurchase agreements. A Fund's repurchase
agreements will generally involve a short-term investment in a U.S. Government
security or other high-grade liquid debt security, with the seller (a primary
securities dealer recognized by the Federal Reserve Bank of New York or a
national member bank as defined in Section 3(d)(1) of the Federal Deposit
Insurance Act, as amended) of the underlying security agreeing to repurchase it
at a mutually agreed-upon time and price (including principal and interest). The
repurchase price is generally higher than the purchase price, the difference
being interest income to that Fund. Alternatively, the purchase and repurchase
prices may be the same, with interest at a stated rate due to a Fund together
with the repurchase price on the date of repurchase. In either case, the income
to a Fund is unrelated to the interest rate on the underlying security.

Under each repurchase agreement, the seller is required to maintain the
value of the securities subject to the repurchase agreement at not less than
their repurchase price. The Adviser, acting under the supervision of the Board,
reviews on a periodic basis the suitability and creditworthiness, and the value
of the collateral, of those sellers with whom the Funds enter into repurchase
agreements to evaluate potential risk. All repurchase agreements will be made
pursuant to procedures adopted and regularly reviewed by the Board.

The Funds generally will enter into repurchase agreements of short
maturities, from overnight to one week, although the underlying securities will
generally have longer maturities. The Funds regard repurchase agreements with
maturities in excess of seven days as illiquid. A Fund may not invest more than
15% of the value of its net assets in illiquid securities, including repurchase
agreements with maturities greater than seven days.

For purposes of the Investment Company Act of 1940 ("Investment Company
Act"), a repurchase agreement is deemed to be a collateralized loan from a Fund
to the seller of the security subject to the repurchase agreement. It is not
clear whether a court would consider the security acquired by a Fund subject to
a repurchase agreement as being owned by that Fund or as being collateral for a
loan by that Fund to the seller. If bankruptcy or insolvency proceedings are

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commenced with respect to the seller of the security before its repurchase, a
Fund may encounter delays and incur costs before being able to sell t decline in
price of the security. If a court characterizes such a transaction as a loan and
a Fund has not perfected a security interest in the security, that Fund may be
required to return the security to the seller's estate and be treated as an
unsecured creditor. As such, a Fund would be at risk of losing some or all of
the principal and income involved in the transaction. As with any unsecured debt
instrument purchased for a Fund, the Adviser seeks to minimize the risk of loss
through repurchase agreements by analyzing the creditworthiness of the seller of
the security.

Apart from the risk of bankruptcy or insolvency proceedings, a Fund
also runs the risk that the seller may fail to repurchase the security. However,
each Fund always requires collateral for any repurchase agreement to which it is
a party in the form of securities acceptable to it, the market value of which is
equal to at least 100% of the amount invested by the Fund plus accrued interest,
and each Fund makes payment against such securities only upon physical delivery
or evidence of book entry transfer to the account of its custodian bank. If the
market value of the security subject to the repurchase agreement becomes less
than the repurchase price (including interest), a Fund, pursuant to its
repurchase agreement, may require the seller of the security to deliver
additional securities so that the market value of all securities subject to the
repurchase agreement equals or exceeds the repurchase price (including interest)
at all times.

RESTRICTED SECURITIES

Restricted securities are securities that may not be sold to the public
without registration under the Securities Act of 1933 (the "1933 Act") absent an
exemption from registration. Many restricted securities are illiquid but the
Adviser may determine that at the time of investment such securities are not
illiquid (generally, an illiquid security is one that cannot be disposed of
within seven days in the ordinary course of business at its full value), based
on guidelines which are the responsibility of and are periodically reviewed by
the Board of Trustees. Under these guidelines, the Adviser will consider the
frequency of trades and quotes for the security, the number of dealers in, and
potential purchasers for, the securities, dealer undertakings to make a market
in the security, and the nature of the security and of the marketplace trades.
In purchasing such restricted securities, the intention of the Adviser is to
rely upon the exemption from registration provided by Rule 144A promulgated
under the 1933 Act. Restricted securities not determined to be liquid may be
purchased subject to each Fund's limitation on all illiquid securities (15
percent of net assets of the Funds).

A Fund may purchase restricted securities that are not registered for
sale to the general public if it is determined that there is a dealer or
institutional market in the securities. In that case, the securities will not be
treated as illiquid for purposes of the Fund's investment limitation described
above. The Trustees will review these determinations. These securities are known
as "Rule 144A securities" because they are traded under Rule 144A of the 1933
Act among qualified institutional buyers.

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REVERSE REPURCHASE AGREEMENTS

Reverse repurchase agreements involve the sale of securities held by a
Fund and the agreement by the Fund to repurchase the securities at an
agreed-upon price, date and interest payment. When a Fund enters into reverse
repurchase transactions, securities of a dollar amount equal in value to the
securities subject to the agreement will be maintained in a segregated account
with the Fund's custodian. Such assets are marked to market daily to ensure that
full collateralization is maintained. The segregation of assets could impair the
Fund's ability to meet its current obligations or impede investment management
if a large portion of the Fund's assets are involved. Reverse repurchase
agreements are considered to be a form of borrowing.

A Fund may use the proceeds of reverse purchase agreements to provide
liquidity to meet redemption requests when sale of the Fund's securities is
disadvantageous.

SECURITIES LENDING

Each Fund may lend securities pursuant to agreements requiring that the
loans be continuously secured by liquid securities, as collateral equal to 100%
of the market value at all times of the securities lent. Such loans will not be
made if, as a result, the aggregate amount of all outstanding securities loans
for the Fund exceed 30 percent of a Fund's total assets. A Fund will continue to
receive interest on the securities lent while simultaneously earning interest on
the investment of the collateral. However, a Fund will normally pay lending fees
to such broker-dealers and related expenses from the interest earned on invested
collateral. There may be risks of delay in receiving additional collateral or
risks of delay in recovery of the securities or even loss of rights in the
collateral should the borrower of the securities fail financially. However,
loans are made only to borrowers deemed by the Adviser to a Fund to be of good
standing and when, in the judgment of the Adviser, the consideration which can
be earned currently from such securities loans justifies the attendant risk. Any
loan may be terminated by either party upon reasonable notice to the other
party. A Fund may use the Distributor or a broker/dealer affiliate of an Adviser
as a broker in these transactions.

SECURITIES RATED BAA OR BBB

The Funds may purchase the lowest categories of investment grade
securities, meaning those rated BAA by Moody's or BBB by Standard & Poor's,
which may have poor protection of payment of principal and interest.

STRIPS

Each of the Funds may invest in Separately Traded Interest and
Principal Securities ("STRIPS"), which are component parts of U.S. Treasury
Securities traded through the Federal Reserve Book-Entry System. The Adviser to
a Fund will purchase only those STRIPS that it determines are liquid or, if
illiquid, do not violate such Fund's investment policy concerning investments in
illiquid securities. While there is no limitation on the percentage of any other
Fund's assets that may be comprised of STRIPS, the Adviser to each Fund will
monitor the level of such holdings to avoid the risk of impairing shareholders'
redemption rights. The interest-only component is extremely sensitive to the

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rate of principal payments on the underlying obligation. The market value of the
principal-only component generally is unusually volatile in response to changes
in interest rates.

TAX-EXEMPT SECURITIES

Municipal Notes and Bonds

The Bond Fund and the Tax-Free Fund may invest in municipal notes,
which include but are not limited to general obligation notes, tax anticipation
notes (notes sold to finance working capital needs of the issuer in anticipation
of receiving taxes on a future date), revenue anticipation notes (notes sold to
provide needed cash prior to receipt of expected non-tax revenues from a
specific source), bond anticipation notes, certificates of indebtedness, demand
notes and construction loan notes. A Fund's investment in any of the notes
described above will be limited to those obligations which are rated (i) MIG-2
or VMIG-2 or better at the time of investment by Moody's, (ii) SP-2 or better at
the time of investment by S&P, or (iii) F-2 or better at the time of investment
by Fitch IBCA, or which, if not rated by Moody's, S&P or Fitch IBCA, are of at
least comparable quality, as determined by the Adviser to the Fund. Municipal
bonds, in which these same Funds may invest, must be rated BBB or better by S&P
or Fitch IBCA or BAA or better by Moody's at the time of investment or, if not
rated by Moody's, S&P or Fitch IBCA, must be determined by the Adviser to the
Funds to have essentially the same characteristics and quality as bonds having
the above ratings. Bonds rated BBB by S&P or Fitch IBCA or BAA by Moody's may
have speculative characteristics. The Adviser to these Funds may purchase
industrial development and pollution control bonds for these Funds if the
interest paid thereon is exempt from federal income tax. These bonds are issued
by or on behalf of public authorities to raise money to finance various
privately-operated facilities for business and manufacturing, housing, sports,
and pollution control. These bonds may also be used to finance public facilities
such as airports, mass transit systems, ports, and parking. The payment of the
principal and interest on such bonds is dependent solely on the ability of the
facility's user to meet its financial obligations and the pledge, if any, of
real and personal property so financed as security for such payment.

Municipal securities also include participations in municipal leases.
These are undivided interests in a portion of an obligation in the form of a
lease or installment purchase issued by a state or local government to acquire
equipment or facilities. Municipal leases frequently have special risks not
normally associated with general obligation bonds or revenue bonds. Leases and
installment purchase or conditional sale contracts (which normally provide for
title to the leased asset to pass eventually to the governmental issuer) have
evolved as a means for governmental issuers to acquire property and equipment
without meeting the constitutional and statutory requirements for the issuance
of debt. The debt-issuance limitations are deemed to be inapplicable because of
the inclusion in many leases or contracts of "non-appropriation" clauses that
provide that the governmental issuer has no obligation to make future payments
under the lease or contract unless money is appropriated for such purpose by the
appropriate legislative body on a yearly or other periodic basis. Although the
obligations will be secured by the leased equipment or facilities, the

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disposition of the property in the event of non-appropriation or foreclosure
might, in some cases, prove difficult. In light of these concerns, the Trust has
adopted and follows procedures for determining whether municipal lease
securities purchased by a Fund are liquid and for monitoring the liquidity of
municipal lease securities held in the Fund's portfolio. The procedures require
that a number of factors be used in evaluating the liquidity of a municipal
lease security, including the frequency of trades and quotes for the security,
the number of dealers willing to purchase or sell the security and the number of
other potential purchasers, the willingness of dealers to undertake to make a
market in the security, the nature of the marketplace in which the security
trades, the credit quality of the security, and other factors which the Adviser
to the Fund may deem relevant.

Tax-exempt commercial paper in which the Tax-Free Fund may invest will
be limited to investments in obligations which are rated at least A-2 by S&P,
Prime-2 by Moody's, or F-2 by Fitch IBCA, at the time of investment or which are
of comparable quality as determined by the Adviser to the Fund.

The Tax-Free Fund may invest in floating rate notes. Investments in
such floating rate instruments will normally involve industrial development or
revenue (now known as "private activity") bonds which provide that the rate of
interest is set as a specific percentage of a designated base rate (such as the
prime rate) at a major commercial bank, and that a Fund can demand payment of
the obligation at all times or at stipulated dates on short notice (not to
exceed 30 days) at par plus accrued interest. For purposes of determining the
maturity of these obligations, the Fund may use the longer of (a) the period
required before the Fund is entitled to prepayment under such obligations or (b)
the period remaining until the next interest rate adjustment date. Such
obligations are frequently secured by letters of credit or other credit support
arrangements provided by banks. The quality of the underlying credit or of the
bank, as the case may be, must in the Adviser's opinion be equivalent to the
long-term bond or commercial paper ratings on securities in which the Fund may
invest. The Adviser to the Fund will monitor the earning power, cash flow and
liquidity ratios of the issuers of floating rate instruments and the ability of
an issuer of a demand instrument to pay principal and interest on demand. The
Adviser may also purchase other types of tax-exempt instruments for the Fund as
long as they are of a quality equivalent to the bonds or commercial paper in
which the Fund may invest.

STANDBY COMMITMENTS

Funds investing in municipal securities may acquire such securities
subject to a "standby commitment." The Adviser to these Funds has the authority
to purchase for these Funds securities at a price which would result in a yield
to maturity lower than that generally offered by the seller at the time of
purchase when they can simultaneously acquire the right to sell the securities
back to the seller, the issuer, or a third party (the "writer") at an
agreed-upon price at any time during a stated period or on a certain date. Such
a right is generally denoted as a "standby commitment" or a "put." The purpose
of engaging in transactions involving puts is to maintain flexibility and
liquidity to permit the Fund to meet redemptions and remain as fully invested as

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possible in municipal securities. The Funds reserve their right to engage in put
transactions. The right to put the securities depends on the writer's ability to
pay for the securities at the time the put is exercised. Each Fund would limit
its put transactions to institutions which the Adviser to such Fund believes
present minimum credit risks. The Adviser would use its best efforts initially
to determine and to continue to monitor the financial strength of the sellers of
the options by evaluating their financial statements and such other information
as is available in the marketplace. It may, however, be difficult to monitor the
financial strength of the writers because adequate current financial information
may not be available. In the event that any writer is unable to honor a put for
financial reasons, the Fund would be a general creditor (i.e., on a parity with
all other unsecured creditors) of the writer. Furthermore, particular provisions
of the contract between the Fund and the writer may excuse the writer from
repurchasing the securities. For example, a change in the published rating of
the underlying municipal securities or any similar event that has an adverse
effect on the issuer's credit or a provision in the contract that the put will
not be exercised except in certain special cases (e.g., to maintain fund
liquidity). The Fund could, however, at any time sell the underlying security in
the open market or wait until the security matures, at which time it should
realize the full par value of the security.

Municipal securities purchased subject to a put may be sold to third
persons at any time, even though the put is outstanding, but the put itssecurity
as originally issued, may not be marketable or otherwise assignable. Therefore,
the put would have value only to the Fund. Sale of the securities to third
parties or lapse of time with the put unexercised may terminate the right to put
the securities. Prior to the expiration of any put option, the Fund could seek
to negotiate terms for the extension of such an option. If such a renewal cannot
be negotiated on terms satisfactory to the Fund, the Fund could, of course, sell
the security. The maturity of the underlying security will generally be
different from that of the put.

For the purpose of determining the "maturity" of securities purchased
subject to an option to put, and for the purpose of determining the
dollar-weighted average maturity of a Fund including such securities, "maturity"
will be considered to be the first date on which the Fund has the right to
demand payment from the writer of the put although the final maturity of the
security is later than such date.

TIME DEPOSITS

A time deposit is a non-negotiable receipt issued by a bank in exchange
for the deposit of funds. Like a certificate of deposit, it earns a specified
rate of interest over a definite period of time; however, it cannot be traded in
the secondary market. Time deposits with a withdrawal penalty are considered to
be illiquid securities.

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<PAGE>
VARIABLE AMOUNT MASTER DEMAND NOTES

Each Fund may invest in variable amount master demand notes which may
or may not be backed by bank letters of credit. These notes permit the
investment of fluctuating amounts at varying market rates of interest pursuant
to direct arrangements between the Trust, as lender, on behalf of a Fund and the
borrower. Such notes provide that the interest rate on the amount outstanding
varies on a daily, weekly or monthly basis depending upon a stated short-term
interest rate index. Both the lender and the borrower have the right to reduce
the amount of outstanding indebtedness at any time. There is no secondary market
for the notes. It is not generally contemplated that such instruments will be
traded.

WARRANTS

A warrant is an instrument issued by a corporation which gives the
holder the right to subscribe to a specified amount of the corporation's capital
stock at a set price for a specified period of time. Each of the Stock Funds may
invest up to 5% of its net assets in warrants. Included in this limitation may
be warrants not listed on the New York Stock Exchange or American Stock
Exchange.

ZERO COUPON SECURITIES

A zero coupon security pays no interest or principal to its holder
during its life. A zero coupon security is sold at a discount, frequently
substantial, and redeemed at face value at its maturity date. The market prices
of zero coupon securities are generally more volatile than the market prices of
securities of similar maturity that pay interest periodically, and zero coupon
securities are likely to react more to interest rate changes than non-zero
coupon securities with similar maturity and credit qualities.

FUND POLICIES

FUNDAMENTAL POLICIES

The following are fundamental policies of each Fund and may not be
changed without approval by holders of a majority of the outstanding voting
securities of that Fund, which as used in this Statement of Additional
Information means the vote of the lesser of (i) 67 percent or more of the
outstanding voting securities of the Fund present at a meeting at which the
holders of more than 50 percent of the outstanding voting securities of the Fund
are present or represented by proxy, or (ii) more than 50 percent of the
outstanding voting securities of the Fund. The term "voting securities" as used
in this paragraph has the same meaning as in the Investment Company Act of 1940,
as amended (the "Investment Company Act").

1. A Fund may not purchase any securities which would cause more than 25
percent of the total assets of the Fund to be invested in the
securities of one or more issuers conducting their principal business
activities in the same industry. This limitation does not apply to

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<PAGE>
investments in obligations issued or guaranteed by the U.S. Government
or its agencies and instrumentalities and repurchase agreements
involving such securities. For purposes of this limitation, (i) utility
companies will be divided according to their services; for example,
gas, gas transmission, electric and telephone will each be considered a
separate industry; (ii) financial service companies will be classified
according to the end users of their services; for example, automobile
finance, bank finance and diversified finance will each be considered a
separate industry; (iii) supranational entities will be considered to
be a separate industry; and (iv) loan participations are considered to
be issued by both the issuing bank and the underlying corporate
borrower. Otherwise, for purposes of this restriction, each Fund
generally relies on the U.S. Office of Management and Budget's Standard
Industrial Classifications.

2. A Fund may not make loans, except that a Fund may (a) purchase or hold
debt instruments in accordance with its investment objective and
policies; (b) enter into repurchase agreements; and (c) engage in
securities lending as described in the Prospectus and in this Statement
of Additional Information.

3. A Fund may not acquire more than 10 percent of the voting securities of
any one issuer (except securities issued or guaranteed by the United
States, its agencies or instrumentalities and repurchase agreements
involving such securities) or invest more than 5 percent of the total
assets of the Fund in the securities of an issuer (except securities
issued or guaranteed by the United States, its agencies or
instrumentalities and repurchase agreements involving such securities);
provided, that (a) the foregoing limitation shall not apply to the
Tax-Free Fund and (b) the foregoing limitation shall not apply to 25
percent of the total assets of the Stock Fund and the Bond Fund.

4. A Fund may not borrow, except that a Fund may borrow money from banks
and may enter into reverse repurchase agreements, in either case in an
amount not to exceed 33-1/3 percent of that Fund's total assets and
then only as a temporary measure for extraordinary or emergency
purposes (which may include the need to meet shareholder redemption
requests). This borrowing provision is included solely to facilitate
the orderly sale of Fund securities to accommodate heavy redemption
requests if they should occur and is not for investment purposes. A
Fund will not purchase any securities for its portfolio at any time at
which its borrowings equal or exceed 10 percent of its total assets
(taken at market value), and any interest paid on such borrowings will
reduce income. Transactions that are fully collateralized in a manner
that does not involve the prohibited issuance of a "senior security"
within the meaning of Section 18(f) of the 1940 Act shall not be
regarded as borrowings for the purposes of this restriction.

5. A Fund may not pledge, mortgage or hypothecate assets except to secure
temporary borrowings permitted by (5) above, except as permitted with
respect to securities lending.

6. A Fund may not purchase or sell real estate, including real estate
limited partnership interests, commodities and commodities contracts,
but excluding interests in a pool of securities that are secured by

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<PAGE>
interests in real estate. However, subject to its permitted
investments, any Fund may invest in companies that invest in real
estate, commodities or commodities contracts. Each Fund may invest in
futures contracts and options thereon to the extent described in the
Prospectus and elsewhere in this Statement of Additional Information.

7. A Fund may not act as an underwriter of securities of other issuers,
except as it may be deemed an underwriter under federal securities laws
in selling a security held by the Fund.

8. A Fund may not purchase securities of other investment companies except
as permitted by the Investment Company Act and the rules and
regulations thereunder. Under these rules and regulations, each Fund is
prohibited from acquiring the securities of other investment companies
if, as a result of such acquisition, (a) such Fund owns more than 3
percent of the total voting stock of the company; (b) securities issued
by any one investment company represent more than 5 percent of the
total assets of such Fund; or (c) securities (other than treasury
stock) issued by all investment companies represent more than 10
percent of the total assets of such Fund. A Fund's purchase of such
investment company securities results in the layering of expenses, such
that shareholders would indirectly bear a proportionate share of the
operating expenses of such investment companies, including advisory
fees.

It is the position of the SEC's staff that certain non-governmental
issuers of CMOs and REMICs constitute investment companies pursuant to
the Investment Company Act and either (a) investments in such
instruments are subject to the limitations set forth above or (b) the
issuers of those instruments have received orders from the Securities
and Exchange Commission exempting such instruments from the definition
of investment company.

9. A Fund may not issue senior securities, as defined in the Investment
Company Act, except that this restriction shall not be deemed to
prohibit that Fund from (a) making any permitted borrowings, mortgages
or pledges, (b) entering into permissible repurchase and dollar roll
transactions, or (c) entering other borrowings as permitted by rule,
regulation or order of the SEC.

NON-FUNDAMENTAL POLICIES

The following policies are not fundamental and may be changed by the
Board of Trustees with respect to any Fund without approval by the shareholders
of that Fund:

1. Each Stock Fund may invest in warrants in an amount not exceeding 5
percent of the Fund's net assets as valued at the lower of cost or
market value; included in these amounts may be warrants not listed on
the New York Stock Exchange or American Stock Exchange.

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<PAGE>
2. No Fund may invest in illiquid securities, including (under current SEC
interpretations) restricted securities (excluding liquid Rule
144A-eligible restricted securities as defined below), securities which
are not otherwise readily marketable, repurchase agreements that mature
in more than seven days and over-the-counter options (and securities
underlying such options) in an amount exceeding, in the aggregate, 15
percent of that Fund's net assets.

The foregoing limitation does not apply to restricted securities,
including those issued pursuant to Rule 144A under the 1933 Act, if it
is determined by or under procedures established by the Board of
Trustees of the Trust that, based on trading markets for the specific
restricted security in question, such security is not illiquid.

3. A Fund may not invest in companies for the purpose of exercising
control or management of the issuers.

4. A Fund may not make short sales of securities, maintain a short
position or purchase securities on margin, except that the Trust may
obtain short-term credits as necessary for the clearance of security
transactions.

5. A Fund may not write or purchase puts, calls, or other options or
combinations thereof, except that each Fund may write covered call
options with respect to any or all of the securities it holds, subject
to any limitations described in the Prospectus or elsewhere in this
Statement of Additional Information and each Fund may purchase and sell
other options as described in the Prospectus.

The foregoing percentages will apply at the time of the purchase of a
security and shall not be considered violated unless an excess occurs
or exists immediately after and as a result of a purchase of such
security.

TEMPORARY DEFENSIVE POSITION

During periods of unusual economic or market conditions or for
temporary defensive purposes or liquidity, each Fund may invest without limit in
cash and in U.S. dollar-denominated high quality money market and short-term
instruments. These investments may result in a lower yield than would be
available from investments with a lower quality or longer term. A temporary
defensive may also prevent a Fund from obtaining its investment objective.

PORTFOLIO TURNOVER

The frequency of each Fund's portfolio transactions -- the portfolio
turnover rate -- will vary from year to year depending on market conditions.
Each Fund will engage in portfolio trading if the Adviser believes a
transaction, net of costs (including custodial charges), will help it achieve
its investment objective. Before the Stock Fund invests in both equity and debt

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<PAGE>
securities, this policy will apply with respect to both the equity and debt
portions of the portfolio.

Below are some basic principles with respect to portfolio turnover
rate:

+ A 100% turnover rate indicates that the equivalent of all of the Fund's
assets have been sold and reinvested in a year;

+ The amount of brokerage commissions will tend to increase as the level
of portfolio activity increases; and

+ High portfolio turnover may result in the realization of substantial
net capital gains or losses.

Because the Funds are new, portfolio turnover rate for each Fund is not
available as of the date of this Statement of Additional Information.

MANAGEMENT

TRUSTEES

The management and affairs of the Trust are supervised by the Trustees
under the laws of the Commonwealth of Delaware governing business trusts.
Subject to the provisions of the Declaration of Trust, the Trustees of the Trust
are responsible for the overall management of the Funds, including establishing
the Funds' policies, general supervision and review of their investment
activities. The officers, who administer the Funds' daily operations, are
appointed by the Board of Trustees.

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<PAGE>
MANAGEMENT INFORMATION

The Trustees and executive officers of the Trust and their principal
occupations are set forth below. An asterisk indicates a Trustee who may be
deemed to be an "interested person" (as defined in the Investment Company Act)
of the Trust.

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Name, Address, and Age Position(s) Held with the Trust Principal Occupation During Past 5
Years
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
*RICHARD A. SNYDERS (Age 53) Chairman of the Board of Trustees, President, Van Deventer & Hoch
800 North Brand Boulevard, Suite 300 President, Chief Executive Officer, (investment adviser). Mr. Snyder
Glendale, California 91203 and Principal Executive Officer joined the firm in 1984.
- -----------------------------------------------------------------------------------------------------------------------
Trustee
- -----------------------------------------------------------------------------------------------------------------------
Trustee
- -----------------------------------------------------------------------------------------------------------------------
Trustee
- -----------------------------------------------------------------------------------------------------------------------
*CHARLES L. BOCK (Age 41) Secretary, Treasurer, Principal Chief Financial Officer and Compliance
800 North Brand Boulevard, Suite 300 Financial Officer and Principal Officer, Van Deventer & Hoch
Glendale, California 91203 Accounting Officer (investment adviser). Mr. Bock joined
the firm in 1988.
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>

COMPENSATION

The following table sets forth certain information regarding the
expected compensation of the Trust's Trustees for the fiscal year ending
[December 31, 1999]. The Trust pays the fees for unaffiliated Trustees.

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Pension or Total Compensation
Aggregate Retirement Benefits Estimated Annual from the Trust and the
Name of Trustee Compensation Accrued as Part of Benefits Upon Funds Paid to
From the Trust Fund Expenses Retirement Trustees
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RICHARD A. SNYDERS None None None None
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

The Officers of the Trust receive no compensation from the Trust for
serving in such capacity. Compensation of officers of the Trust who are employed
by the Administrator is paid by the Administrator.

The Declaration of Trust provides that the Trust will indemnify its
Trustees and officers as described below under "Trustee and Shareholder
Liability -- Limitation of Trustees' Liability."

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<PAGE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

PRINCIPAL HOLDERS

The Adviser and its affiliates own substantially all of the Funds'
outstanding shares as a result of their initial investment in the Funds. For a
period several months following commencement of operations of each Fund, a
control person of or affiliate of the Fund (such as the Adviser) is expected to
own 25 percent or more of its outstanding shares.

INVESTMENT ADVISORY AND OTHER SERVICES

INVESTMENT ADVISER

The Trust has entered into an Investment Advisory Agreement ("Advisory
Agreement") with Van Deventer & Hoch with respect to each Fund. The Advisory
Agreement with Van Deventer & Hoch for the Funds is dated as of __________,
1999. Van Deventer & Hoch is referred to in this Statement of Additional
Information as the "Adviser."

Van Deventer & Hoch is entitled to receive investment advisory fees,
which are accrued daily and payable monthly, of 0.30% of each of the Bond and
Tax-Free Fund's average daily net assets and 0.70% of the Stock Fund's average
daily net assets. Because the Funds are new, no investment advisory fees have
been incurred as of the date of this Statement of Additional Information.

The continuance of the Advisory Agreement, after the first two years,
must be specifically approved at least annually (i) by the vote of the Trustees,
and (ii) by the vote of a majority of the Trustees who are neither parties to
the Advisory Agreement nor "interested persons" of any party thereto, cast in
person at a meeting called for the purpose of voting on such approval. The
Advisory Agreement will terminate automatically if it is assigned, and is
terminable at any time without penalty by the Trustees of the Trust or with
respect to any Fund, by a majority of the outstanding shares of that Fund, on
not less than 30 nor more than 60 days' written notice to the Adviser, or by the
Adviser on 90 days' written notice to the Trust.

The Advisory Agreement provides that neither the Adviser nor its
personnel shall be liable (1) for any error of judgment or mistake of law; (2)
for any loss arising out of any investment; or (3) for any act or omission in
the execution of security transactions for the Trust or any Fund, except that
the Adviser and its personnel shall not be protected against any liability to
the Trust, any Fund or its shareholders by reason of willful misfeasance, bad
faith or gross negligence on its or their part in the performance of its or
their duties or from reckless disregard of its or their obligations or duties
thereunder.

SERVICE MARKS

The name ALLEGIANCE INVESTMENT TRUST [SERVICE MARK] is the property of
the Adviser and is used by permission of the Adviser . In the event that the
Advisory Agreement with Van Deventer & Hoch is terminated, the Trust has agreed
to discontinue use of the servicemark and logo.

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<PAGE>
DISTRIBUTOR

First Fund Distributors, Inc. (the "Distributor") and the Trust are
parties to a distribution agreement ("Distribution Agreement"), dated as of
_________________, 1999. The Distributor has its principal business offices at
4455 East Camelback Road, Suite 261E, Phoenix, Arizona 85018.

The Trust has adopted a distribution plan dated as of ________________,
1999 (the "Plan") with respect to the Stock Fund, the Bond Fund and the Tax-Free
Fund. The Plan has been adopted pursuant to Rule 12b-1 under the Investment
Company Act.

The Distribution Agreement and the Plan provide that the Trust will pay
the Adviser, as the Distribution Coordinator, a fee calculated daily and paid
monthly at an annual rate of 0.25% of the average daily net assets of each of
the Stock Fund, the Bond Fund and the Tax-Free Fund. The Adviser can use these
fees to compensate broker/dealers and service providers (including each Adviser
and its affiliates) which provide administrative and/or distribution services to
holders of these shares or their customers who beneficially own these shares.
Because the Funds are new, no fees have been paid to the Adviser as provided by
the Plan.

The Distribution Agreement is renewable annually and may be terminated
by the Distributor, by the Trustees of the Trust who are not interested persons
and have no financial interest in the Plans or any related agreement ("Qualified
Trustees"), or with respect to any particular Fund or class of shares, by a
majority vote of the outstanding shares of that Fund or such class of shares, as
applicable, for which the Distribution Agreement is in effect upon not more than
60 days' written notice by either party.

The Trust has adopted the Plan in accordance with the provisions of
Rule 12b-1 under the Investment Company Act, which regulates circumstances under
which an investment company may, directly or indirectly, bear expenses relating
to the distribution of its shares. Continuance of the Plan must be approved
annually by a majority of the Trustees of the Trust and by a majority of the
Qualified Trustees. The Plan requires that quarterly written reports of money
spent under such Plan and of the purposes of such expenditures be furnished to
and reviewed by the Trustees. Expenditures may include (1) the cost of
prospectuses, reports to shareholders, sales literature and other materials for
potential investors; (2) advertising; (3) expenses incurred in connection with
the promotion and sale of the Trust's shares, including the Adviser's expenses
for travel, communication, and compensation and benefits for sales personnel;
and (4) any other expenses reasonably incurred in connection with the
distribution and marketing of the shares subject to approval of a majority of
the Qualified Trustees. The Plan may not be amended to materially increase the
amount that may be spent under the Plan without approval by a majority of the
outstanding shares of the Funds or the class of shares which are subject to such
Plan. All material amendments of the Plan require approval by a majority of the
Trustees of the Trust and of the Qualified Trustees.

From time to time, the Adviser may provide incentive compensation to
its own employees and employees of banks, broker-dealers and investment
counselors in connection with the sale of shares of the funds. Promotional
incentives such as cash or other compensation, including merchandise, airline
vouchers, trips and vacation packages will be offered uniformly to all program

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<PAGE>
participants and may be predicated upon the amount of shares of the Funds sold
by the participant, subject to applicable legal requirements.

ADMINISTRATIVE SERVICES

The Trust, on behalf of the Funds, has entered into an Administrative
Services Agreement with the Adviser, dated _________, 1999 (the "Administrative
Services Agreement"). Each Fund pays the Adviser an Administrative Services Fee,
accrued daily and paid monthly at the following annual rates: the Stock Fund
(0.35%); the Bond Fund (0.10%); and the Tax-Free Fund (0.10%). The fee payable
to the Adviser by each Fund under the Administrative Services Agreement is the
only fee or expense payable by the fund for the following ordinary services: all
administrative services, primarily by retaining the Subadministrator, as
described below, custody and transfer agency services by retaining the Custodian
and Transfer Agent named below, and all other ordinary services and operating
expenses (other than brokerage commissions, dealer mark-ups, taxes, interest and
extraordinary items).

The Administrative Services Fee paid to the Adviser effectively limits
each Fund's operating expenses. The Adviser may potentially earn greater profits
under the Administrative Services Agreement if assets of the Funds grow
sufficiently large to reduce actual operating expenses to less than the
Adviser's Administrative Services Fee. The Board of Trustees will consider the
level of profitability of the Administrative Services Fee in its decision to
renew the Advisory Agreement.

THE ADMINISTRATOR

The Adviser and Investment Company Administration, L.L.C. (the
"Subadministrator") are parties to a subadministration agreement (the
"Subadministration Agreement") with respect to the Funds. The Subadministration
Agreement provides that the Subadministrator shall not be liable for any error
of judgment or mistake of law or for any loss suffered by the Trust in
connection with the matters to which the Subadministration Agreement relates,
except a loss that results from willful misfeasance, bad faith or gross
negligence on the part of the Subadministrator in the performance of its duties
or from reckless disregard by it of its duties and obligations under the
Subadministration Agreement. The Subadministration Agreement renews each year
unless terminated according to its terms. The Adviser pays the
Subadministrator's fee out of the Administrative Services Fee.

Under the Subadministration Agreement, the Subadministrator provides
administrative and fund accounting services to the Funds, including, among other
responsibilities, coordinating the negotiation of contracts and fees with, and
the monitoring of performance and billing of, the Funds' independent contractors
and agents; preparation for signature by an officer of the Trust of all
documents required to be filed for compliance by the Trust and the Funds with
applicable laws and regulations excluding those of the securities laws of
various states; arranging for the computation or performance of data, including
net asset value and yield; responding to shareholder inquiries; and arranging
for the maintenance of books and records of the Funds, and providing, at its own
expense, office facilities, equipment and personnel necessary to carry out its
business. In this capacity, the Subadministrator does not have any
responsibility or authority for the management of the Funds, the determination

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<PAGE>
of investment policy, or for any matter pertaining to the distribution of Fund
shares.

Because the Funds are new, no fees have been paid to the
Subadministrator.

DIVIDEND DISBURSING AGENT AND TRANSFER AGENT

[name, address] is the Funds' dividend disbursing and
______________________, and the transfer agent. The Adviser pays the dividend
disbursing and transfer agent out of the Administrative Services Fee.

CUSTODIAN

Pursuant to a Custodian Agreement, _______________________________,
_____________________________ acts as custodian of the Funds' assets (the
"Custodian"). The Custodian's responsibilities include holding and administering
the Funds' cash and securities, handling the receipt and delivery of securities,
furnishing a statement of all transactions and entries for the account of each
Fund, and furnishing the Funds with such other reports covering securities held
by it or under its control as may be agreed upon from time to time. The
Custodian and its agents (including foreign sub-custodians) may make
arrangements with the Depository Trust Company and other foreign or domestic
depositories or clearing agencies, including the Federal Reserve Bank and any
foreign depository or clearing agency, whereby certain securities may be
deposited for the purpose of allowing transactions to be made by bookkeeping
entry without physical delivery of such securities, subject to such restrictions
as may be agreed upon by the Custodian and the Funds. Fund securities may be
held by a sub-custodian bank approved by the Trustees. The Custodian does not
determine the investment policies of the Funds or decide which securities the
Funds will buy or sell. The Adviser pays the Custodian's fees out of the
Administrative Services Fee.

COUNSEL AND INDEPENDENT ACCOUNTANTS

Paul, Hastings, Janofsky & Walker LLP, 345 California Street, San
Francisco, California 94104, is counsel for the Funds. McGladrey & Pullen LLP,
555 Fifth Avenue, 8th Floor, New York, New York 10017-2416, serves as
independent auditor for each Fund providing audit and accounting services
including: (i) examination of the annual financial statements, (ii) assistance
and consultation with respect to the preparation of filings with the Securities
and Exchange Commission, and (iii) preparation of annual income tax returns.

BROKERAGE ALLOCATION AND OTHER PRACTICES

BROKERAGE TRANSACTIONS

Specific decisions to purchase or sell securities for a Fund are made
by a portfolio manager who is an employee of the Adviser, and who is appointed
and supervised by the senior officers of the Adviser. A portfolio manager may
serve other clients of the Adviser or of an affiliate of the Adviser in a
similar capacity.

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<PAGE>
Subject to policies established by the Trustees, the Adviser to a Fund
is responsible for placing the orders to execute transactions for such Fund. In
placing orders, it is the policy of the Trust for the Adviser to seek to obtain
the best net results taking into account such factors as price (including the
applicable dealer spread), the size, type and difficulty of the transaction
involved, the firm's general execution and operational facilities, and the
firm's risk in positioning the securities involved. While the Adviser seeks
reasonably competitive spreads or commissions, the Trust will not necessarily be
paying the lowest spread or commission available.

Bonds and debentures are usually traded over-the-counter, but may be
traded on an exchange. Where possible, the Adviser will deal directly with the
dealers who make a market in the securities involved except in those
circumstances where the Adviser believes better prices and execution are
available elsewhere. Such dealers usually are acting as principal for their own
account. On occasion, securities may be purchased directly from the issuer. The
cost of executing transactions for the Funds will primarily consist of dealer
spreads and brokerage and underwriting commissions.

BROKERAGE SELECTION

The Adviser selects brokers or dealers to execute transactions for the
purchase or sale of securities for the Funds on the basis of the Adviser's
judgment of their professional capability to provide the service. The primary
consideration is to have brokers or dealers execute transactions at the best
price and execution. Best price and execution refers to many factors, including
the price paid or received for a security, the commission charged, the
promptness and reliability of execution, the confidentiality and placement
accorded the order and other factors affecting the overall benefit obtained by
the account on the transaction. The Adviser's determination of what are
reasonably competitive rates is based upon the professional knowledge of the
Adviser's portfolio managers as to rates paid and charged for similar
transactions throughout the securities industry. In some instances, a Fund pays
a minimal share transaction cost when the transaction presents no difficulty.
Some trades are made on a net basis where a Fund either buys securities directly
from the dealer or sells them to the dealer. In these instances, there is no
direct commission charged but there is a spread (the difference between the buy
and sell price) which is the equivalent of a commission.

The Adviser may allocate, out of all commission business generated by
the funds and accounts under its management, brokerage business to brokers or
dealers who provide brokerage and research services. These research services
include advice, either directly or through publications or writings, as to the
value of securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities or purchasers or sellers of
securities; furnishing analyses and reports concerning issuers, securities or
industries; providing information on economic factors and trends; assisting in
determining portfolio strategy; providing computer software used in securities
analyses; and providing fund performance evaluation and technical market
analyses. Such services are used by the Adviser in connection with its
investment decision-making process with respect to one or more portfolios under

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<PAGE>
its management and may not be used exclusively with respect to the fund or
account generating the brokerage. Not all brokerage and research services are
useful or of value in advising any particular Fund.

As provided in the Securities Exchange Act of 1934 (the "1934 Act"),
higher commissions may be paid to broker/dealers who provide brokerage and
research services than to broker/dealers who do not provide such services if
such higher commissions are deemed reasonable in relation to the value of the
brokerage and research services provided. Although transactions are directed to
broker/dealers who provide such brokerage and research services, the commissions
paid to such broker/dealers are not, in general, expected to be higher than
commissions that would be paid to broker/dealers not providing such services.
Further, in general, any such commissions are reasonable in relation to the
value of the brokerage and research services provided. Unless otherwise directed
by the Trust, a commission higher than one charged elsewhere will not be paid to
a broker/dealer solely because it provided research services to the Adviser.

Investment decisions for the Funds are made independently from those of
other client accounts of the Adviser or its affiliates, and suitability is
always a paramount consideration. Nevertheless, it is possible that at times the
same securities will be acceptable for one or more Funds and for one or more of
such client accounts. The Adviser and its personnel may have interests in one or
more of those client accounts, either through direct investment or because of
management fees based on gains in the account. The Adviser has adopted
allocation procedures to ensure the fair allocation of securities and prices
between the Funds and the Adviser's various other accounts. These procedures
emphasize the desirability of bunching trades and price averaging (see below) to
achieve objective fairness among clients advised by the same portfolio manager
or portfolio team. Where trades cannot be bunched, the procedures specify
alternatives designed to ensure that buy and sell opportunities are allocated
fairly and that, over time, all clients are treated equitably. The Adviser's
trade allocation procedures also seek to ensure reasonable efficiency in client
transactions, and they provide portfolio managers with reasonable flexibility to
use allocation methodologies that are appropriate to their investment discipline
on client accounts.

To the extent any of the Adviser's client accounts and a Fund seek to
acquire the same security at the same general time (especially if that security
is thinly traded or is a small-cap stock), that Fund may not be able to acquire
as large a portion of such security as it desires, or it may have to pay a
higher price or obtain a lower yield for such security. Similarly, a Fund may
not be able to obtain as high a price for, or as large an execution of, an order
to sell any particular security at the same time. If one or more of such client
accounts simultaneously purchases or sells the same security that a Fund is
purchasing or selling, each day's transactions in such security generally will
be allocated between that Fund and all such client accounts in a manner deemed
equitable by the Adviser, taking into account the respective sizes of the
accounts, the amount being purchased or sold and other factors deemed relevant
by the Adviser. In many cases, a Fund's transactions are bunched with the
transactions for other client accounts. It is recognized that in some cases this
system could have a detrimental effect on the price or value of the security
insofar as that Fund is concerned. In other cases, however, it is believed that

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the ability of the Fund to participate in volume transactions may produce better
executions for that Fund.

Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc., and subject to seeking best price and execution, the
Adviser may place orders for a Fund with broker/dealers who have agreed to
defray certain Trust expenses such as custodian fees, and may, at the request of
the Distributor, give consideration to sales of shares of the Trust as a factor
in the selection of brokers and dealers to execute Fund transactions.

DESCRIPTION OF SHARES; VOTING RIGHTS AND LIABILITIES

The Trust's Declaration of Trust permits the Trust to offer separate
portfolios, or funds, of shares of beneficial interest. The Declaration of Trust
authorizes the issuance of an unlimited number of shares of each series and
authorizes the division of shares of each series into classes. Each share of
each series represents an equal proportionate interest in that series, with each
other share of that class. Shareholders of each series are entitled, upon
liquidation or dissolution, to a pro rata share in the net assets of that series
that are available for distribution to shareholders, except to the extent of
different expenses borne by different classes as noted above. Shareholders have
no preemptive right or other right to receive, purchase or subscribe for any
additional shares or other securities issued by the Trust. Currently, the Trust
has three active series of shares, each of which is a Fund, par value $0.01 per
share. All consideration received by the Trust for shares of any series and all
assets in which such consideration is invested belong to that series and are
subject to the liabilities related thereto. Share certificates will not be
issued.

Shares of each series of the Trust are entitled to vote separately to
approve advisory agreements or changes in investment policies, but shares of all
series of the Trust vote together in the election or selection of Trustees and
accountants.

The Declaration of Trust may be amended as authorized by vote of
shareholders of the Trust. Matters not affecting all series or classes of shares
shall be voted on only by the shares of the series or classes affected. Shares
of the Trust may be voted in person or by proxy, and any action taken by
shareholders may be taken without a meeting by written consent of a majority of
shareholders entitled to vote on the matter.

The Trust is an entity of the type commonly known as a "Delaware
business trust." The Declaration of Trust expressly states that neir to bind any
shareholder personally.

The Declaration of Trust provides that the Trustees shall not be
responsible or liable in any event for any neglect or wrongdoing of any officer,
agent, employee, investment adviser or administrator, principal underwriter or
custodian, nor shall any Trustee be responsible for the act or omission of any
other Trustee, and no Trustee shall be liable to the Trust or any Shareholder.
The Declaration of Trust also provides that the Trust will indemnify its
Trustees and officers against liabilities and expenses incurred in connection
with actual or threatened litigation in which they may be involved because of
their offices with the Trust unless it is determined, in the manner provided in

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the Declaration of Trust, that they have not acted in good faith in the
reasonable belief that their actions were in the best interests of the Trust.
However, nothing in the Declaration of Trust shall protect or indemnify a
Trustee against any liability for his or her willful misfeasance, bad faith,
gross negligence or reckless disregard of his or her duties.

PURCHASE, REDEMPTION AND PRICING OF SHARES

DETERMINATION OF NET ASSET VALUE

The net asset value per share of a Fund is calculated as follows: all
liabilities incurred or accrued are deducted from the valuation of total assets,
which include accrued but undistributed income; the resulting net assets are
divided by the number of shares of that Fund outstanding at the time of the
valuation and the result (adjusted to the nearest cent) is the net asset value
per share.

The net asset value of the shares of each Fund is determined on each
day on which the New York Stock Exchange ("NYSE") is open. This determination is
made once during each such day, as of 4:00 P.M.(Eastern Time) or earlier when
trading closes earlier with respect to each Fund. It is expected that the NYSE
will be closed on Saturdays and Sundays and for New Year's Day, Martin Luther
King Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas. The Tax-Free and Bond Fund will not
determine their net asset values on bank holidays. The national bank holidays,
in addition to New Year's Day, Martin Luther King Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas, include January 2, Good Friday, Columbus Day, Veteran's Day and
December 26. The Funds may, but do not expect to, determine the net asset values
of their shares on any day when the NYSE is not open for trading if there is
sufficient trading in their portfolio securities on such days to affect
materially per-share net asset value.

Generally, trading in and valuation of foreign securities is
substantially completed each day at various times prior to the close of the
NYSE. In addition, trading in and valuation of foreign securities may not take
place on every day in which the NYSE is open for trading. Furthermore, trading
takes place in various foreign markets on days in which the NYSE is not open for
trading and on which the Funds' net asset values are not calculated.
Occasionally, events affecting the values of such securities in U.S. dollars on
a day on which a Fund calculates its net asset value may occur between the times
when such securities are valued and the close of the NYSE that will not be
reflected in the computation of that Fund's net asset value unless the Board or
its delegates deem that such events would materially affect the net asset value,
in which case an adjustment would be made.

Generally, the Funds' investments are valued at market value or, in the
absence of a market value, at fair value as determined in good faith by the
Adviser pursuant to procedures approved by or under the direction of the Board.

The Funds' securities, including ADRs, EDRs and CDRs, which are traded
on securities exchanges are valued at the last sale price on the exchange on
which such securities are traded, as of the close of business on the day the

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securities are being valued or, lacking any reported sales, at the mean between
the last available bid and asked price. Securities that are traded on more than
one exchange are valued on the exchange determined by the Adviser to be the
primary market. Securities traded in the over-the-counter market are valued at
the mean between the last available bid and asked price prior to the time of
valuation. Securities and assets for which market quotations are not readily
available (including restricted securities which are subject to limitations as
to their sale) are valued at fair value as determined in good faith by or under
the direction of the Board.

Short-term debt obligations with remaining maturities in excess of 60
days are valued at current market prices, as discussed above. Short-term
securities with 60 days or less remaining to maturity are, unless conditions
indicate otherwise, amortized to maturity based on their cost to a Fund if
acquired within 60 days of maturity or, if already held by a Fund on the 60th
day, based on the value determined on the 61st day.

Corporate debt securities, mortgage-related securities and asset-backed
securities held by the Funds are valued on the basis of valuations provided by
dealers in those instruments, by an independent pricing service, approved by the
appropriate Board, or at fair value as determined in good faith by procedures
approved by the Board. Any such pricing service, in determining value, will use
information with respect to transactions in the securities being valued,
quotations from dealers, market transactions in comparable securities, analyses
and evaluations of various relationships between securities and
yield-to-maturity information.

An option that is written by a Fund is generally valued at the last
sale price or, in the absence of the last sale price, the last offer price. An
option that is purchased by a Fund is generally valued at the last sale price
or, in the absence of the last sale price, the last bid price. The value of a
futures contract equals the unrealized gain or loss on the contract that is
determined by marking the contract to the current settlement price for a like
contract on the valuation date of the futures contract if the securities
underlying the futures contract experience significant price fluctuations after
the determination of the settlement price. When a settlement price cannot be
used, futures contracts will be valued at their fair market value as determined
by or under the direction of the Board.

If any securities held by a Fund are restricted as to resale or do not
have readily available market quotations, the Adviser determines their fair
value, following procedures approved by the Board. The Trustee periodically
reviews such valuations and valuation procedures. The fair value of such
securities is generally determined as the amount which a Fund could reasonably
expect to realize from an orderly disposition of such securities over a
reasonable period of time. The valuation procedures applied in any specific
instance are likely to vary from case to case. However, consideration is
generally given to the financial position of the issuer and other fundamental
analytical data relating to the investment and to the nature of the restrictions
on disposition of the securities (including any registration expenses that might
be borne by a Fund in connection with such disposition). In addition, specific
factors are also generally considered, such as the cost of the investment, the
market value of any unrestricted securities of the same class (both at the time
of purchase and at the time of valuation), the size of the holding, the prices

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of any recent transactioh securities and any available analysts' reports
regarding the issuer.

Any assets or liabilities initially expressed in terms of foreign
currencies are translated into U.S. dollars at the official exchange rate or,
alternatively, at the mean of the current bid and asked prices of such
currencies against the U.S. dollar last quoted by a major bank that is a regular
participant in the foreign exchange market or on the basis of a pricing service
that takes into account the quotes provided by a number of such major banks. If
neither of these alternatives is available or both are deemed not to provide a
suitable methodology for converting a foreign currency into U.S. dollars, the
Board in good faith will establish a conversion rate for such currency.

All other assets of the Funds are valued in such manner as the Board in
good faith deems appropriate to reflect their fair value.

PURCHASE AND REDEMPTION OF SHARES

Shares of the Fund are sold on a continuous basis and may be purchased
from the Distributor or a broker-dealer or financial institution that has an
agreement with the Distributor. Purchases may be made Monday through Friday,
except on certain holidays. Shares are purchased at net asset value the next
time it is calculated after your investment is received and accepted by the
Distributor.

On any business day, shareholders may redeem all or a portion of their
shares. If the shares being redeemed were purchased by check, telephone or
through an automatic investment program, the Funds may delay the mailing of the
redemption check for up to 10 business days after purchase to allow the purchase
to clear. The redemption will be processed at net asset value the next time it
is calculated after the redemption request in good order is received. A
redemption is treated as a sale for tax purposes, and could result in taxable
gain or loss in a non-tax-sheltered account.

The Trust reserves the right to suspend the right of redemption and/or
to postpone the date of payment upon redemption for any period on which trading
on the New York Stock Exchange is restricted, or during the existence of an
emergency (as determined by the Securities and Exchange Commission by rule or
regulation upon application by a Fund pursuant to Section 22(e) of the
Investment Company Act) as a result of which disposal or valuation of a Fund's
securities is not reasonably practicable, or for such other periods as the
Securities and Exchange Commission has permitted by order. The Trust also
reserves the right to suspend sales of shares of any Fund for any period during
which the New York Stock Exchange, the Adviser, the Administrator or the
Custodian is not open for business.

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SYSTEMATIC WITHDRAWAL PLAN

A shareholder may direct the shareholder servicing agent to send him or
her regular monthly, quarterly, or semi-annual payments, as designated on the
Account Application and based upon the value of his or her account. Each payment
under a Systematic Withdrawal Plan ("SWP") must be at least $50, except in
certain limited circumstances. Such payments are drawn from the proceeds of the
redemption of shares held in the shareholder's account (which would be a return
of principal and, if reflecting a gain, would be taxable). To the extent that
redemptions for such periodic withdrawals exceed dividend income reinvested in
the account, such redemptions will reduce, and may eventually exhaust, the
number of shares in the shareholder's account. All dividend and capital gain
distributions for an account with a SWP will be reinvested in additional full
and fractional shares of the applicable Fund at the net asset value in effect at
the close of business on the record date for such distributions.

To initiate a SWP, shares having an aggregate value of at least $5,000
must be held on deposit by the shareholder servicing agent. The shareholder, by
written instruction to the shareholder servicing agent, may deposit into the
account additional shares of the applicable Fund, change the payee, or change
the dollar amount of each payment. The shareholder servicing agent may charge
the account for services rendered and expenses incurred beyond those normally
assumed by the applicable Fund with respect to the liquidation of shares.

No charge is currently assessed against the account, but one could be
instituted by the shareholder servicing agent on 60 days' notice in writing to
the shareholder in the event that the applicable Fund ceases to assume the cost
of these services. Any Fund may terminate any SWP for an account if the value of
the account falls below $5,000 as a result of share redemptions (other than as a
result of a SWP) or an exchange of shares of the Fund for shares of another
Fund. Any such plan may be terminated at any time by either the shareholder or
the applicable Fund.

REDEMPTION IN KIND

It is currently the Trust's policy to pay for the redemptions of shares
of the Funds in cash. The Trust retains the right, however, subject to the Rule
18f-1 notice described below, to alter this policy to provide for redemptions in
whole or in part by a distribution in kind of securities held by the Funds, in
lieu of cash. Shareholders may incur brokerage charges and tax liabilities on
the sale of any such securities so received in payment of redemptions.

The Trust filed a Notification of Election pursuant to Rule 18f-1 under
the Investment Company Act with the Securities and Exchange Commission which
commits the Funds to pay in cash all requests for redemptions by any shareholder
of record, limited in amount with respect to each shareholder during any 90-day
period to the lesser of: (i) $250,000, or (ii) one percent of the net asset
value of the Fund at the beginning of such period.

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TAXES

TAX STATUS OF THE FUNDS

Each Fund is organized as a series of a Delaware business trust and is
treated as a separate entity for federal income tax purposes under Subchapter M
of the Internal Revenue Code of 1986, as amended (the "Code"). Each Fund has
elected to be treated, and intends to qualify each year, as a "regulated
investment company" under Subchapter M by meeting all applicable requirements of
Subchapter M.

In order to qualify as a regulated investment company under Subchapter
M, each Fund must, among other things, (a) derive at least 90% of its gross
income each year from dividends, interest, payments with respect to loans of
stock and securities, gains from the sale or other disposition of stock or
securities or foreign currency gains related to investments in stocks or other
securities, or other income (generally including gains from options, futures or
forward contracts) derived with respect to the business of investing in stock,
securities or currency; and (b) diversify its holdings so that, at the end of
each fiscal quarter, (i) at least 50% of the market value of its assets is
represented by cash, cash items, U.S. Government securities, securities of other
regulated investment companies and other securities limited, for purposes of
this calculation, in the case of other securities of any one issuer to an amount
not greater than 5% of that Fund's assets or 10% of the voting securities of the
issuer, and (ii) not more than 25% of the value of its assets is invested in the
securities of any one issuer (other than U.S. Government securities or
securities of other regulated investment companies). As such, and by complying
with the applicable provisions of the Code, a Fund will not be subject to
federal income tax on taxable income (including realized capital gains) that is
distributed to shareholders in accordance with the timing requirements of the
Code. If a Fund is unable to meet certain requirements of the Code, it may be
subject to taxation as a corporation.

Because each Fund intends to distribute all of its net investment
income and net realized capital gains to shareholders in accordance with the
timing requirements imposed by the Code, it is not expected that the Funds will
be required to pay any federal income or excise taxes, although a Fund's
foreign-source income may be subject to foreign taxes. If a Fund should fail to
qualify as a "regulated investment company" in any year, the Fund would incur a
regular corporate federal income tax upon its taxable income and the Fund's
distributions would generally be taxable as ordinary dividend income to its
shareholders.

No Fund will be subject to any Delaware income or excise taxes as long
as it qualifies as a separate regulated investment company under the Code.

TAXATION OF FUND DISTRIBUTIONS

DISTRIBUTIONS -- GENERAL. The Funds intend to declare and pay dividends
and other distributions, as stated in the Prospectus. In order to avoid the
payment of any federal excise tax based on net income, each Fund must declare on
or before December 31 of each year, and pay on or before January 31 of the
following year, distributions at least equal to 98% of its ordinary income for

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that calendar year and at least 98% of the excess of any capital gains over any
capital losses realized in the one-year period ending October 31 of that year,
together with any undistributed amounts of ordinary income and capital gains (in
excess of capital losses) from the previous calendar year.

Any Fund dividend that is declared in October, November, or December of
a calendar year, that is payable to shareholders of record in such a month, and
that is paid the following January will be treated as if received by the
shareholders on December 31 of the year in which the dividend is declared. Each
Fund will notify shareholders regarding the federal tax status of distributions
after the end of each calendar year. Dividends and other distributions will be
reinvested in additional shares of the applicable Fund unless the shareholder
has otherwise indicated. Investors have the right to change their elections with
respect to the reinvestment of dividends and distributions by notifying the
Transfer Agent in writing, but any such change will be effective only as to
dividends and other distributions for which the record date is seven or more
business days after the Transfer Agent has received the written request.

The Funds receive income in the form of dividends and interest earned
on their investments in securities. This income, less the expenses incurred in
their operations, is the Funds' net investment income, substantially all of
which will be declared as dividends to the Funds' shareholders. Shareholders of
Funds other than the Tax-Free Fund will have to pay federal income taxes and may
be subject to state or local income taxes on the dividends and capital gain
distributions they receive from those Funds. Dividends from ordinary income and
any distributions from net short-term capital gains are taxable to shareholders
as ordinary income for federal income tax purposes, whether paid in cash or in
additional shares. Distributions of net capital gains (the excess of net
long-term capital gains over net short-term capital losses), whether paid in
cash or in additional shares, are taxable to shareholders as long-term capital
gains for federal income tax purposes without regard to the length of time the
shareholders have held their shares. Such capital gains will generally be
taxable to shareholders as if the shareholders had directly realized gains from
the same sources from which they were realized by the Funds.

Because the Bond Fund and the Tax-Free Fund do not expect to earn any
dividend income, it is expected that none of their distributions will qualify
for the dividends received deduction for corporations. A portion of the Stock
Funds' ordinary income dividends (but none of their capital gain distributions)
is normally eligible for the dividends received deduction for corporations if
the recipient otherwise qualifies for that deduction with respect to its holding
of Fund shares. Availability of the deduction for particular corporate
shareholders is subject to certain limitations, and deducted amounts may be
subject to the alternative minimum tax or result in certain basis adjustments.

Distributions of net capital gains and net short-term capital gains
from the Bond Fund or Tax-Free Fund, and any distributions from the Stock Fund,
will reduce the distributing Fund's net asset value per share. Shareholders who
buy shares just before the record date for any such distribution may pay the
full price for the shares and then effectively receive a portion of the purchase
price back as a taxable distribution.

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Distributions of a Fund that are derived from interest on obligations
of the U.S. Government and certain of its agencies and instrumentalities (but
generally not from capital gains realized upon the disposition of such
obligations) may be exempt from state and local taxes. Each Fund intends to
advise shareholders of the extent, if any, to which their respective
distributions consist of such interest. Shareholders are urged to consult their
tax advisers regarding the possible exclusion of such portion of their dividends
for state and local income tax purposes.

DISTRIBUTIONS BY THE TAX-FREE FUND. [UPDATE FOR CALIFORNIA] The portion
of the Tax-Free Fund's distributions of net investment income that is
attributable to interest from tax-exempt securities will be designated by that
Fund as an "exempt-interest dividend" under the Code and will generally be
exempt from federal income tax in the hands of shareholders so long as at least
50% of the total value of the Fund's assets consists of tax-exempt securities at
the close of each quarter of the Fund's taxable year. However, distributions of
tax-exempt interest earned from certain securities may be treated as an item of
tax preference for shareholders under the federal alternative minimum tax, and
all exempt-interest dividends may increase a corporate shareholder's alternative
minimum tax. The percentage of income designated as tax-exempt will be applied
uniformly to all distributions by the Tax-Free Fund of net investment income
made during each fiscal year of the Fund and may differ from the percentage of
distributions consisting of tax-exempt interest in any particular month.
Shareholders are required to report exempt-interest dividends received from the
Tax-Exempt-Income Fund on their federal income tax returns.

Shareholders of the Tax-Free Fund will have to pay federal income taxes
and may be subject to state or local income taxes on the non exempt-interest
dividends (including dividends from earnings from taxable securities and
repurchase transactions) and capital gain distributions they receive from the
Fund under rules corresponding to those set forth in the preceding section. The
exemption of exempt-interest dividends for federal income tax purposes does not
necessarily result in exemption under the tax laws of any state or local taxing
authority.

Interest on indebtedness incurred or continued by a shareholder to
purchase or carry shares of the Tax-Free Fund is not deductible for federal
income tax purposes. Under regulations used by the IRS for determining when
borrowed funds are considered used for the purposes of purchasing or carrying
particular assets, the purchase of shares may be considered to have been made
with borrowed funds even though the borrowed funds are not directly traceable to
the purchase of shares of the Fund. California personal income tax law restricts
the deductibility of interest on indebtedness incurred by a shareholder to
purchase or carry shares of a fund paying dividends exempt from California
personal income tax, as well as the allowance of losses realized upon a sale or
redemption of shares, in substantially the same manner as federal tax law.

From time to time, proposals have been introduced before Congress for
the purpose of restricting or eliminating the federal income tax exemption for
interest on municipal securities. It can be expected that similar proposals may
be introduced in the future. Proposals by members of state legislatures may also
be introduced which could affect the state tax treatment of the Tax-Free Fund's
distributions. If such proposals were enacted, the availability of municipal
securities for investment by the Fund and the value of its portfolios would be

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affected. In such event, the Fund would reevaluate its investment objectives and
policies.

DISPOSITION OF SHARES. [UPDATE] In general, any gain or loss realized
upon a taxable disposition of shares of a Fund by a shareholder that holds such
shares as a capital asset will be treated as long-term capital gain or loss if
the shares have been held for more than twelve months and otherwise as
short-term capital gain or loss. A long-term capital gain realized by an
individual, estate, or trust may be eligible for reduced tax rates if the shares
were held for more than 18 months. In the case of the Tax-Free Fund, any loss
realized upon a disposition of shares held for six months or less will be
disallowed to the extent of any exempt-interest dividends received with respect
to those shares. In the case of all the Funds, any loss realized upon the
disposition of shares in a Fund held for six months or less will (if not
disallowed as described in the preceding sentence) be treated as a long-term
capital loss to the extent of any distributions of net capital gain made with
respect to those shares. Any loss realized upon a disposition of shares may also
be disallowed under rules relating to wash sales.

ADDITIONAL INFORMATION FOR
SHAREHOLDERS OF THE TAX-FREE FUND

Interest on indebtedness incurred by shareholders to purchase or carry
shares of a Tax-Free Fund will not be deductible for federal income tax
purposes. Exempt-interest dividends are taken into account in calculating the
amount of social security and railroad retirement benefits that may be subject
to federal income tax. Up to 85% of social security or railroad retirement
benefits may be included in federal (but not California) taxable income for
benefit recipients whose adjusted gross income (including income from tax-exempt
sources such as tax-exempt bonds and the Tax-Free Fund) plus 50% of their
benefits exceeding certain base amounts. Income from the Fund is included in the
calculation of whether a recipient's income exceeds these base amounts, but is
not taxable directly.

Entities or persons who are "substantial users" (or persons related to
"substantial users") of facilities financed by private activity bonds should
consult their tax advisers before purchasing shares of the Tax-Free Fund.

ADDITIONAL INFORMATION RELATING
TO FUND INVESTMENTS

The Funds' current dividend and accounting policies will affect the
amount, timing, and character of distributions to shareholders, and may make an
economic return of capital taxable to shareholders. Any investment by a Fund in
zero-coupon bonds, certain stripped securities including STRIPS, and certain
securities purchased at a market discount will cause the Fund to recognize
income prior to the receipt of cash payments with respect to those securities.
In order to distribute this income and avoid a tax on the Fund, a Fund may be
required to liquidate portfolio securities that it might otherwise have
continued to hold, potentially resulting in additional taxable gain or loss to
the Fund.

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An investment by a Fund in residual interests of a CMO that has elected
to be treated as a REMIC can create complex tax problems, especially if the Fund
has state or local governments or other tax-exempt organizations as
shareholders.

Fund transactions in options, futures contracts, forward contracts,
short sales "against the box," swaps and related transactions will be subject to
special tax rules that may affect the amount, timing, and character of Fund
income and distributions to shareholders. For example, certain positions held by
a Fund on the last business day of each taxable year will be marked to market
(treated as if closed out) on that day, and any gain or loss associated with the
positions will be treated as 60% long-term and 40% short-term capital gain or
loss. Certain positions held by a Fund that substantially diminish its risk of
loss with respect to other positions in its portfolio may constitute
"straddles," and may be subject to special tax rules that would cause deferral
of Fund losses, adjustments in the holding periods of Fund securities, and
conversion of short-term into long-term capital losses. Certain tax elections
exist for straddles that may alter the effects of these rules. The Funds will
limit their activities in options, futures contracts, forward contracts, swaps
and related transactions to the extent necessary to meet the requirements of
Subchapter M of the Code.

ADDITIONAL INFORMATION RELATING
TO FOREIGN INVESTMENTS

Special tax considerations apply with respect to a Fund's foreign
investments. Investment income received by a Fund from sources within foreign
countries may be subject to foreign taxes. The Funds do not expect to be able to
pass through to shareholders foreign tax credits or deductions with respect to
such foreign taxes. The United States has entered into tax treaties with many
foreign countries that may entitle the Funds to a reduced rate of tax or an
exemption from tax on such income. The Funds intend to qualify for treaty
reduced rates where available. It is not possible, however, to determine a
Fund's effective rate of foreign tax in advance since the amount of the Fund's
assets to be invested within various countries is not known.

Foreign exchange gains and losses realized by a Fund will generally be
treated as ordinary income and losses. Use of foreign currencies for non-hedging
purposes may be limited in order to avoid a tax on the applicable Fund.
Occasionally, a Fund may invest in stock of foreign issuers deemed to be
"passive foreign investment companies" for U.S. tax purposes. Any Fund making
such an investment may be liable for U.S. income taxes on certain distributions
and realized capital gains from stock of such issuers. Any Fund making such an
investment also may elect to mark to market its investments in "passive foreign
investment companies" on the last day of each taxable year, which may cause the
Fund to recognize ordinary income prior to the receipt of cash payments with
respect to those investments. In order to distribute that income and avoid a tax
on the Fund, such a Fund may be required to liquidate portfolio securities that
it might otherwise have continued to hold.

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FOREIGN SHAREHOLDERS

Taxable dividends and certain other payments to persons who are not
citizens or residents of the United States or U.S. entities ("Non-U.S. Persons")
are generally subject to U.S. tax withholding at a rate of 30%, although the 30%
rate may be reduced to the extent provided by an applicable tax treaty. The
Funds intend to withhold tax payments at the rate of 30% (or the lower treaty
rate) on taxable dividends and other payments to Non-U.S. Persons that are
subject to such withholding. Any amounts overwithheld may be recovered by such
persons by filing a claim for refund with the U.S. Internal Revenue Service
within the time period appropriate to such claims. Distributions received from
the Funds by Non-U.S. Persons also may be subject to tax under the laws of their
own jurisdictions.

BACKUP WITHHOLDING

The Funds or any securities dealer effecting a redemption of the Funds'
shares by a shareholder will be required to file information reports with the
IRS with respect to distributions and payments made to the shareholder. In
addition, the Funds will be required to withhold federal income tax at the rate
of 31% on taxable dividends, redemptions and other payments made to accounts of
individual or other non-exempt shareholders (including a Non-U.S. Person) who
have not furnished their correct taxpayer identification numbers and made
certain required certifications on the Account Application Form or with respect
to which a Fund or the securities dealer has been notified by the IRS that the
number furnished is incorrect or that the account is otherwise subject to
withholding. Backup withholding will not, however be applied to payments that
have been subject to 30% withholding.

PERFORMANCE INFORMATION

CALCULATION OF YIELD

THE BOND FUND AND THE TAX-FREE FUND. From time to time, the Trust may
advertise a 30- day yield for these Funds. These figures will be based on
historical earnings and are not intended to indicate future performance. The
yield of these Funds refers to the annualized net investment income per share
generated by an investment in the Funds over a specified 30-day period. The
yield is calculated by assuming that the income generated by the investment
during that 30-day period is generated over one year and is shown as a
percentage of the investment. In particular, yield will be calculated according
to the following formula prescribed by the SEC:

YIELD = 2[(((a-b)/cd) +1)(6) - 1]
Where:

a = dividends and interest earned during the period;
b = expenses accrued for the period (net of reimbursement);
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends; and
d = the maximum offering price per share on the last day of
the period.

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For the purpose of determining the interest earned (variable "a" in the
formula) on debt obligations that were purchases by these Funds at a discount or
premium, the formula generally calls for amortization of the discount or
premium. The amortization schedule will be adjusted monthly to reflect changes
in the market values of the debt obligations.

Investors should recognize that, in periods of declining interest
rates, these Funds' yields will tend to be somewhat higher than prevailing
market rates and, in periods of rising interest rates, will tend to be somewhat
lower. In addition, when interest rates are falling, monies received by these
Funds from the continuous sale of their shares will likely be invested in
instruments producing lower yields than the balance of their portfolio of
securities, thereby reducing the current yield of these Funds. In periods of
rising interest rates, the opposite result can be expected to occur.

THE TAX-FREE FUND. The Trust may also advertise a tax-equivalent yield
for the Tax-Free Fund. The tax-equivalent yield is determined by calculating the
rate of return that would have to be achieved on a fully-taxable investment to
produce the after-tax equivalent of a Fund's yield, assuming certain tax
brackets for a shareholder. The tax-equivalent yield quotation of a Fund will be
calculated by dividing that portion of the Fund's yield that is tax-exempt by 1
minus a stated income tax rate and adding the quotient to that portion, if any,
of the Fund's yield that is not tax-exempt. The tax-equivalent effective yield
is determined by dividing that portion of the Fund's effective yield that is
tax-exempt by 1 minus a stated income tax rate and adding the quotient to that
portion, if any, of the Fund's effective yield that is not tax-exempt. SEE
Appendix C for taxable equivalent yields.

Because the Funds are new, no yield data are available as of the date
of this Statement of Additional Information.

CALCULATION OF TOTAL RETURN

Average Annual Total Return. From time to time, the Trust may advertise
total return for a Fund. The total return of a Fund refers to the average
compounded rate of return on a hypothetical investment for designated time
periods (including, but not limited to, the period from which the Fund commenced
operations through the specified date), and assumes that the entire investment
is redeemed at the end of each period. Any statements of total return for a Fund
will be accompanied by information on that Fund's average annual compounded rate
of return over the most recent four calendar quarters and the period from that
Fund's inception of operations. The Funds may also advertise aggregate and
average total return information over different periods of time. A Fund's
"average annual total return" figures are computed according to a formula
prescribed by the SEC expressed as follows:

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P (1 + T)(n) = ERV
Where:

P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years; and
ERV = Ending Redeemable Value of a hypothetical $1,000
investment made at the beginning of a 1-, 5- or 10-year
period at the end of each respective period (or fractional
portion thereof), assuming reinvestment of all dividends and
distributions and complete redemption of the hypothetical
investment at the end of the measuring period.

AGGREGATE TOTAL RETURN. A Fund's "aggregate total return" figure
represents the cumulative change in the value of an investment in that Fund for
the specified period and are computed by the following formula prescribed by the
SEC:
ERV - P
-------
P

Where: P = a hypothetical initial payment of $1,000.
ERV = Ending Redeemable Value of a hypothetical $1,000
investment made at the beginning of a l-, 5- or 10-year
period at the end of a l-, 5- or 10-year period (or
fractional portion thereof), assuming reinvestment of all
dividends and distributions and complete redemption of the
hypothetical investment at the end of the measuring
period.

Each Fund's performance will vary from time to time depending upon
market conditions, the composition of its portfolio and its operating expenses.
Consequently, any given performance quotation should not be considered
representative of that Fund's performance for any specified period in the
future. In addition, because performance will fluctuate, it may not provide a
basis for comparing an investment in that Fund with certain bank deposits or
other investments that pay a fixed yield for a stated period of time. Investors
comparing that Fund's performance with that of other investment companies should
give consideration to the quality and maturity of the respective investment
companies' portfolio securities.

A Fund's performance may from time to time be compared to that of other
mutual funds tracked by mutual fund rating services, broad groups of comparable
mutual funds or unmanaged indices, which may assume investment of dividends but
generally do not reflect deductions for administrative and management costs. In
reports and other communications to shareholders or in advertising and sales
literature. The Funds may also show the historical performance of other
investment vehicles or groups of other mutual funds, and may compare tax
equivalent yields to taxable yields. Any given "performance" or performance
comparison should not be considered as representative of any performance in the
future. In addition, there may be differences between the Funds and the various
indexes and reporting services which may be quoted by the Funds.

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Because the Funds are new, no total return data are available as of the
date of this Statement of Additional Information.

FINANCIAL STATEMENTS

The Statement of Assets and Liabilities for the __________________ Fund
at ___________, 1999, together with notes thereto and Report of Independent
Auditors, are attached to this Statement of Additional Information.

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APPENDIX A

CERTAIN INFORMATION CONCERNING CALIFORNIA

The information set forth below is a general summary intended to give a
recent historical description. It is not a discussion of any specific factors
that may affect any particular issuer of California Municipal Securities. The
information is not intended to indicate continuing or future trends in the
condition, financial or otherwise, of California. Such information is derived
from official statements utilized in connection with securities offerings of the
State of California that have come to the attention of the Trust and were
available prior to the date of this Statement of Additional Information. Such
information has not been independently verified by the Tax-Free Fund.

Because the Tax-Free Fund expects to invest substantially all of its
assets in California Municipal Securities, the Fund will be susceptible to a
number of complex factors affecting the issuers of California Municipal
Securities, including national and local political, economic, social,
environmental and regulatory policies and conditions. The Fund cannot predict
whether or to what extent such factors or other factors may affect the issuers
of California Municipal Securities, the market value or marketability of such
securities or the ability of the respective issuers of such securities acquired
by the Fund to pay interest on, or principal of, such securities. The
creditworthiness of obligations issued by local California issuers may be
unrelated to the creditworthiness of obligations issued by the State of
California, and there is no responsibility on the part of the State of
California to make payments on such local obligations. There may be specific
factors that are applicable in connection with investment in the obligations of
particular issuers located within California, and it is possible the Fund will
invest in obligations of particular issuers as to which such specific factors
are applicable.

From mid-1990 to late 1993, California suffered the most severe
recession in the State since the 1930s. Construction, manufacturing (especially
aerospace), exports and financial services, among other industries, have been
severely affected. Since the start of 1994, however, California's economy has
been on a steady recovery. The rate of economic growth in California in 1997, in
terms of job gains, exceeded that of the rest of the United States. The State
added nearly 430,000 non-farm jobs during 1997. In 1996, California surpassed
its pre-recession employment peak of 12.7 million jobs. The unemployment rate,
while still higher than the national average, fell to 5.9% in early 1998,
compared to over 10 percent during the recession. Many of the new jobs were
created in such industries as computer services, software design, motion
pictures and high technology manufacturing. Business services, export trade and
other manufacturing also experienced growth. All major economic regions of the
State grew. The rate of employment growth for the Los Angeles region indicates
that its growth has almost caught up with that in the San Francisco bay region
on a population share basis. The unsettled financial situation occurring in
certain Asian economies may adversely affect the State's export-related
industries and, therefore, the State's rate of economic growth.

The recession severely affected State revenues while the State's health
and welfare costs were increasing. Consequently, the State had a lengthy period
of budget imbalance. The State's accumulated budget deficit approached $2.8

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billion at its peak at June 30, 1993. A consequence of the large budget deficits
has been that the State depleted its available cash resources and had to use a
series of external borrowings to meet its cash needs. With the end of the
recession, the State's financial condition has improved in the 1995-96, 1996-97
and 1997-98 fiscal years, with a combination of better than expected revenues,
slowdown in growth of social welfare programs, and continued spending restraint.
As of June 30, 1997, the State's budget reserve had a positive cash balance of
$461 million. No deficit borrowing has occurred at the end of the last three
fiscal years and the State's cash flow borrowing was limited to $3 billion in
1997-98.

In each of the 1995-96 and 1996-97 fiscal years, the State budget
contained the following major features:

1. Expenditures for K-14 schools grew significantly, as new revenues
were directed to school spending under Proposition 98;

2. The budgets restrained health and welfare spending levels and
attempted to reduce General Fund spending by calling for greater
support from the federal government. The State also attempted to
shift to the federal government a larger share of the cost of
incarceration and social services for illegal immigrants. Federal
support never reached the levels anticipated when the budgets were
enacted. These funding shortfalls were filled, however, by revenue
collections which exceeded expectations;

3. General Fund support for the University of California and California
State Universities grew by an average of 5.2 percent and 3.3 percent
per year, respectively, and there were no increases in student fees;

4. General Fund support for the Department of Corrections grew as
needed to meet increased prison population. No new prisons were
approved for construction, however; and

5. There were no tax increases and, starting January 1, 1997, there was
a 5 percent cut in corporate taxes. The suspension of the Renters
Tax Credit was continued.

As noted, the economy grew strongly during these fiscal years, and as a
result, the General Fund took in substantially greater tax revenues (around $2.2
billion in 1995-96 and $1.6 billion in 1996-97) than were initially planned when
the budgets were enacted. These additional funds were largely directed to school
spending as mandated by Proposition 98, and to make up shortfalls from reduced
federal health and welfare aid. The accumulated budget deficit from the
recession years was finally eliminated.

On August 18, 1997, the Governor signed the 1997-98 Budget Act. The
Budget Act anticipates General Fund revenues and transfers of $52.5 billion (a
6.8 percent increase over the final 1996-97 levels), and expenditures of $52.8
billion (an 8.0 percent increase from the 1996- 97 levels). On a budgetary
basis, the budget reserve (SFEU) is projected to decrease from $408 million at

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June 30, 1997 to $112 million at June 30, 1998. The Budget Act also includes
Special Fund expenditures of $14.4 billion (as against estimated Special Fund
revenues of $14.0 billion), and $2.1 billion of expenditures from various bond
funds. Following enactment of the Budget Act, the State implemented its annual
cash flow borrowing program, issuing $3 billion of notes which mature on June
30, 1998.

The following are major features of the 1997-98 Budget Act:

1. For the second year in a row, the Budget contains a large increase
in funding for K-14 education, reflecting strong revenues which have
exceeded initial budgeted amounts. Part of the nearly $1.75 billion
in increased spending is allocated to prior fiscal years;

2. The Budget Act reflects a $1.235 billion pension case judgment
payment, and returns funding of the State's pension contribution to
the quarterly basis existing prior to the deferral actions
invalidated by the courts;

3. Continuing the third year of a four-year "compact" which the State
Administration has made with higher education units, funding from
the General Fund for the University of California and California
State University has increased by about 6 percent ($121 million and
$107 million, respectively), and there was no increase in student
fees;

4. Because of the effect of the pension payment, most other State
programs were continued at 1996-97 levels;

5. Health and welfare costs are contained, continuing generally the
grant levels from prior years, as part of the initial implementation
of the new CalWORKs welfare reform program;

6. Unlike prior years, this Budget Act does not depend on uncertain
federal budget actions. About $300 million in federal funds, already
included in the federal fiscal year 1997 and 1998 budgets, are
included in the Budget Act, to offset incarceration costs for
illegal immigrants; and

7. The Budget Act contains no tax increases, and no tax reductions. The
Renters Tax Credit was suspended for another year, saving
approximately $500 million.

After enactment of the Budget Act, and prior to the end of the
Legislative Session on September 13, 1997, the Legislature and the Governor
reached certain agreements related to State expenditures and taxes. The
Legislature passed a bill restoring $203 million of education-related
expenditures which the Governor had vetoed in the original Budget Act, based on
agreement with the Governor on an education testing program. The Legislature
also passed a bill to restore $48 million of welfare cost savings which had been
part of earlier legislation vetoed by the Governor. The Legislature also passed
several bills encompassing a coordinated package of fiscal reforms, mostly to

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take effect after the 1997-98 Fiscal Year. Included in the legislation signed by
the Governor are a variety of phased-in tax cuts, conformity with certain
provisions of the federal tax reform law passed earlier in the year, and reform
of funding for county trial courts, with the State to assume greater financial
responsibility.

The May 1998 Revision to the Governor's proposed budget increases the
General Fund revenue forecast by nearly $1.8 billion in 1997-98 and $2.5 billion
in 1998-99. The May Revision provides for a balanced budget and a budget reserve
for economic uncertainties of $1.6 billion. In the May Revision the
administration proposed, among other things, a two-step reduction in the State's
vehicle license fee (VLF) which, when fully phased in, would reduce State
revenues by more than $3 billion annually. Since VLF is a primary source of
revenue for local governments, the May Revision proposed continuous
appropriation from the General Fund to replace that loss in revenues.

The VLF proposal met significant opposition in the Legislature and
continuing disagreement over the nature and extent of the proposed tax cut
delayed final adoption of the 1998-99 budget. Local government concern about the
potential impact of the VLF proposal on local government revenues underscores
the extent to which California county and other local government budgets are
affected by State budget decisions beyond their control.

In early August 1998, the Governor and leaders of the State Legislature
reached agreement on a $76 billion State budget that includes a $1.4 billion tax
cut. The main feature of the tax cut is a 25% reduction in the VLF, with future
reductions contingent upon higher than forecast State revenues. The budget
accord included significant additional funding for public schools and community
colleges intended, among other things, to increase the length of the California
school year and extend the class size reduction initiatives already under way.
The budget accord also included a 7.9% increase in welfare recipients' monthly
checks, as well as a variety of smaller tax credits and cuts, including an
increase in the income tax credit for dependents, a modest renters' credit and a
number of tax credits and cuts aimed at specific industries important to the
California economy. The budget must be approved by a two-thirds vote of the
State Senate and Assembly. The Governor may exercise a line-item veto to ensure
the final budget includes sufficient reserves.

In October 1997, the Governor issued Executive Order W-163-97 stating
that Year 2000 solutions would be a State priority and requiring each agency of
the State, no later than December 31, 1998, to address Year 2000 problems in
their essential systems and protect those systems from corruption by
non-compliant systems, in accordance with the Department of Information
Technology's California 2000 Program. There can be no assurance that steps being
taken by state or local government agencies with respect to the Year 2000
problem will be sufficient to avoid any adverse impact upon the budgets or
operations of those agencies or upon the California Trust.

Because of the deterioration in the State's budget and cash situation,
the State's credit ratings have been reduced. Since late 1991, all three major
nationally recognized statistical rating organizations have lowered their
ratings for general obligation bonds of the State from the highest ranking of

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"AAA" to "A+" by S&P, "A1" by Moody's and "A+" by Fitch Investors Services, Inc.
However, prior to the October 8, 1997, sale of $1 billion in general obligation
bonds, Fitch raised California's general obligation bond rating from "A+" to
"AA-", however S&P and Moody's did not follow suit, confirming those ratings at
"A+" and "A1", respectively. It is not presently possible to determine whether,
or the extent to which, Moody's, S&P or Fitch will change such ratings in the
future. It should be noted that the creditworthiness of obligations issued by
local California issuers may be unrelated to the creditworthiness of obligations
issued by the State, and there is no obligation on the part of the State to make
payment on such local obligations in the event of default.

Constitutional and Statutory Limitations. Article XIII A of the
California Constitution (which resulted from the voter approved Proposition 13
in 1978) limits the taxing powers of California public agencies. With certain
exceptions, the maximum AD VALOREM tax on real property cannot exceed one
percent of the "full cash value" of the property. Article XIII A also
effectively prohibits the levying of any other AD VALOREM property tax for
general purposes. One exception to Article XIII A permits an increase in AD
VALOREM taxes on real property in excess of one percent for certain bonded
indebtedness approved by two-thirds of the voters voting on the proposed
indebtedness. The "full cash value" of property may be adjusted annually to
reflect increases (not to exceed two percent) or decreases, in the consumer
price index or comparable local data, or to reflect reductions in property value
caused by substantial damage, destruction or other factors, or when there is a
"change in ownership" or "new construction."

Constitutional challenges to Article XIII A to date have been
unsuccessful. In 1992, the United States Supreme Court ruled that
notwithstanding the disparate property tax burdens that Proposition 13 might
place on otherwise comparable properties, those provisions of Proposition 13 do
not violate the Equal Protection Clause of the United States Constitution. In
response to the significant reduction in local property tax revenue caused by
the passage of Proposition 13, the State enacted legislation to provide local
governments with increased expenditures from the General Fund. This fiscal
relief has ended, however.

Article XIII B of the California Constitution generally limits the
amount of appropriations of the State and of local governments to the amount of
appropriations of the entity for such prior year, adjusted for changes in the
cost of living, population and the services that the government entity has
financial responsibility for providing. To the extent the "proceeds of taxes" of
the State and/or local government exceed its appropriations limit, the excess
revenues must be rebated. Certain expenditures, including debt service on
certain bonds and appropriations for qualified capital outlay projects, are not
included in the appropriations limit.

In 1986, California voters approved an initiative statute known as
Proposition 62. This initiative further restricts the ability of local
governments to raise taxes and allocate approved tax receipts. While some
decisions of the California Courts of Appeal have held that portions of
Proposition 6held Proposition 62's requirement that special taxes be approved by
a two-thirds vote of the voters voting in an election on the issue. This recent
decision may invalidate other taxes that have been imposed by local governments
in California and make it more difficult for local governments to raise taxes.

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In 1988 and 1990, California voters approved initiatives known as
Proposition 98 and Proposition 111, respectively. These initiatives changed the
State's appropriations limit under Article XIII B to (i) require that the State
set aside a prudent reserve fund for public education, and (ii) guarantee a
minimum level of State funding for public elementary and secondary schools and
community colleges.

In November 1996, California voters approved Proposition 218. The
initiative applied the provisions of Proposition 62 to all entities, including
charter cities. It requires that all taxes for general purposes obtain a simple
majority popular vote and that taxes for special purposes obtain a two-thirds
majority vote. Prior to the effectiveness of Proposition 218, charter cities
could levy certain taxes such as transient occupancy taxes and utility user's
taxes without a popular vote. Proposition 218 will also limit the authority of
local governments to impose property-related assessments, fees and charges,
requiring that such assessments be limited to the special benefit conferred and
prohibiting their use for general governmental services. Proposition 218 also
allows voters to use their initiative power to reduce or repeal
previously-authorized taxes, assessments, fees and charges.

The effect of constitutional and statutory changes and of budget
developments on the ability of California issuers to pay interest and principal
on their obligations remains unclear, and may depend on whether a particular
bond is a general obligation or limited obligation bond (limited obligation
bonds being generally less affected). There is no assurance that any California
issuer will make full or timely payments of principal or interest or remain
solvent. For example, in December 1994, Orange County filed for bankruptcy.

Certain tax-exempt securities in which the Tax-Free Intermediate Bond
Fund may invest may be obligations payable solely from the revenues of specific
institutions, or may be secured by specific properties, which are subject to
provisions of California law that could adversely affect the holders of such
obligations. For example, the revenues of California health care institutions
may be subject to state laws, and California law limits the remedies of a
creditor secured by a mortgage or deed of trust on real property.

In addition, it is impossible to predict the time, magnitude, or
location of a major earthquake or its effect on the California economy. In
January 1994, a major earthquake struck the Los Angeles area, causing
significant damage in a four-county area. The possibility exists that another
such earthquake could create a major dislocation of the California economy.

The Tax-Free Fund's concentration in California Municipal Securities
provides a greater level of risk than a fund that is diversified across numerous
states and municipal entities.

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APPENDIX B

DESCRIPTION OF SECURITIES RATINGS(1)

The ratings of Moody's Investors Service, Inc. ("Moody's"), Standard &
Poor's Rating Services ("S&P"), and Fitch IBCA, Inc. ("Fitch IBCA") represent
their opinions as to the quality of various debt securities, and are not
absolute standards of quality. Debt securities with the same maturity, coupon
and rating may have different yields, while debt securities of the same maturity
and coupon with different ratings may have the same yield. The ratings below are
as described by the rating agencies. Ratings are generally given to securities
at the time of issuance. While the rating agencies may, from time to time,
revise such ratings, they undertake no obligation to do so.

(1) As described by the rating agencies. Ratings are generally given to
securities at the time of issuance. While the rating agencies may, from
time to time, revise such ratings, they undertake no obligation to do
so.

DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S
FOUR HIGHEST BOND RATINGS

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

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

A Bonds which are rated A possess many favorable investments 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 which are rated Baa are considered as medium grade
obligations, since 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 greater length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as well.

Note: Those bonds in the Aa, A and Baa categories which Moody's believes
possess the strongest credit attributes are designated by the symbols
Aa1, A1 and Baa1.

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DESCRIPTION OF STANDARD & POOR'S RATING SERVICES
FOUR HIGHEST BOND RATINGS

AAA. An obligation rated AAA has the highest rating assigned by S&P.
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 issues only
in small degree. The obligor's capacity to meet its financial commitment on the
obligation is still strong.

A. An obligation rated A is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt 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.

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

DESCRIPTION OF FITCH IBCA, INC.'S
FOUR HIGHEST INTERNATIONAL LONG-TERM CREDIT RATINGS

When assigning ratings, Fitch IBCA considers the historical and
prospective financial condition, quality of management, and the operating
performance of the issuer and of any guarantor, any special features of a
specific issue or guarantee, the issue's relationship to other obligations of
the issuer, as well as developments in the economic and political environment
that might affect the issuer's financial strength and credit quality.

Variable rate demand obligations and other securities which contain a
demand feature will have a dual rating, such as "AAA/F1+." The first rating
denotes long-term ability to make principal and interest payments. The second
rating denotes ability to meet a demand feature in full and on time.

AAA Highest credit quality. "AAA" ratings denote the lowest expectation
of credit risk. They are assigned only in the case of exceptionally strong
capacity for timely payment of financial commitments. This capacity is highly
unlikely to be adversely affected by foreseeable events.

AA Very high credit quality. "AA" ratings denote a very low expectation
of credit risk. They indicate very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events.

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A High credit quality. "A" ratings denote a low expectation of credit
risk. The capacity for timely payment of financial commitments is considered
strong. This capacity may, nevertheless, be more vulnerable to changes in
circumstances or in economic conditions than is the case for higher ratings.

BBB Good credit quality. "BBB" ratings indicate that there is currently
a low expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the lowest
investment-grade category.

A plus (+) or minus (-) may be appended to a rating to denote relative
status within major rating categories. Such suffixes are not added to the "'AAA"
long-term category.

DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S
TWO HIGHEST RATINGS OF STATE AND MUNICIPAL NOTES

Moody's ratings for state and municipal short-term obligations are
designated Moody's Investment Grade ("MIG"). Such ratings recognize the
differences between short-term credit risk and long-term risk. Factors affecting
the liquidity of the borrower and short-term cyclical elements are critical in
short-term ratings, while other factors of major importance in bond risk, such
as long-term secular trends, may be less important over the short run.

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

MIG 2/VMIG 2. This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding group.

DESCRIPTION OF STANDARD & POOR'S RATING SERVICES
TWO HIGHEST RATINGS OF STATE AND MUNICIPAL NOTES

An S&P note rating reflects the liquidity factors and market access
risks unique to notes. Notes maturing in three years or less will likely receive
a note rating. Notes maturing beyond three years most likely receive a long-term
debt rating. The following criteria will be used in making that assessment:

Amortization schedule -- the larger the final maturity relative to
other maturities, the more likely it will be treated as a note.

Source of payment -- the more dependent the issue is on the market for
its refinancing, the more likely it will be treated as a note.

Note rating symbols are as follows:

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SP-1. Strong capacity to pay principal and interest. Issues determined
to possess very strong characteristics are given a plus (+) designation.

SP-2. Satisfactory capacity to pay principal and interest with some
vulnerability to adverse financial and economic changes over the term of the
notes.

DESCRIPTION OF STANDARD & POOR'S RATING SERVICES
RATINGS OF TAX-EXEMPT DEMAND BONDS

S&P assigns "dual" ratings to all debt issues that have a put or demand
feature as part of their structure.

The first rating addresses the likelihood of repayment of principal and
interest as due, and the second rating addresses only the demand feature. The
long-term debt rating symbols are used for bonds to denote the long-term
maturity and the commercial paper rating symbols for the put option (for
example, "AAA/A-1+"). With short-term demand debt, note rating symbols are used
with the commercial paper rating symbols (for example, "SP-1+/A-1+").

DESCRIPTION OF FITCH IBCA, INC.'S
TWO HIGHEST INTERNATIONAL SHORT-TERM CREDIT RATINGS

A short-term rating has a time horizon of less than 12 months for most
obligations, or up to three years for U.S. public finance securities, and thus
places greater emphasis on the liquidity necessary to meet financial commitments
in a timely manner.

F1 Highest credit quality. Indicates the strongest capacity for timely
payment of financial commitments; may have an added "+" to denote any
exceptionally strong credit feature.

F2 Good credit quality. 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.

DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S
TWO HIGHEST SHORT-TERM DEBT RATINGS

Moody's short-term debt ratings are opinions of the ability of issuers
to repay punctually short-term senior debt obligations having an original
maturity not in excess of one year.

PRIME-1. Issuers rated Prime-1 (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: (1) leading market positions in well-established industries;
(2) high rates of return on funds employed; (3) conservative capitalization
structure with moderate reliance on debt and ample asset protection; (4) broad
margins in earnings coverage of fixed financial charges and high internal cash
generation; and (5) well-established access to a range of financial markets and
assured sources of alternate liquidity.

-57-
<PAGE>
PRIME-2. Issuers rated Prime-2 (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.

DESCRIPTION OF STANDARD & POOR'S RATING SERVICES
TWO HIGHEST COMMERCIAL PAPER RATINGS

An 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.

A-1. A short-term obligation rated A-1 is rated in the highest category
by Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligations is still strong. Within this category, certain obligations are
designated with a plus sign (+). This indicates that the obligor's capacity to
meet its financial commitment on these obligations is extremely strong.

A-2. A short-term obligation rated A-2 is 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.

-58-
<PAGE>
APPENDIX C

TAXABLE EQUIVALENT YIELDS

These tables show the yield investors need to achieve from a taxable
investment to equal the yield from a tax-exempt investment. These tables do not
predict the yield of any Fund. They are accurate as of , 1999.

FEDERAL
Equivalent yields: Tax-exempt versus taxable securities

<TABLE>
<CAPTION>
Taxable Income A California Tax-Free Fund Yield of:
- --------------------------------- 1998 Federal --------------------------------------------------------
Single Joint Marginal Rate 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 7.0% 7.5%
- ------ ----- ------------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0-$24,000 $0-$40,100 15.00% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24% 8.82%

$24,001-$58,150 $40,101-$96,900 28.00% 5.56% 6.25% 6.94% 7.64% 8.33% 9.03% 9.72% 10.42%

$58,151-$121,300 $96,901-$147,700 31.00% 5.80% 6.52% 7.25% 7.97% 8.70% 9.42% 10.14% 10.87%

$121,301-$263,750 $147,701-$263,750 36.00% 6.25% 7.03% 7.81% 8.59% 9.38% 10.16% 10.94% 11.72%

over $263,750 over $263,750 39.60% 6.62% 7.45% 8.28% 9.11% 9.93% 10.76% 11.59% 12.42%
</TABLE>

CALIFORNIA
Equivalent yields: Tax-exempt versus taxable securities

<TABLE>
<CAPTION>
Taxable Income 1998 Combined A California Tax-Free Fund Yield of:
- ---------------- California ------------------------------------------------------------
and Federal 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 7.0% 7.5% 8.5%
Single Joint State Rate Federal Rate Tax Bracket ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C>
15.00%

28.00%

31.00%

36.00%

39.600%
</TABLE>

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<PAGE>
INVESTMENT ADVISERS ALLEGIANCE INVESTMENT TRUST

Van Deventer & Hoch Allegiance American Value Fund
800 North Brand Boulevard, Suite 300 Allegiance Intermediate-Term Bond Fund
Glendale, California 91203 Allegiance California Tax-Free
Intermediate Bond Fund

DISTRIBUTOR

First Fund Distributors, Inc.
4455 East Camelback Road, Suite 261E
Phoenix, Arizona 85018

ADMINISTRATOR

Investment Company Administration, L.L.C.
2020 E. Financial Way, Suite 100
Glendora, California 91741

LEGAL COUNSEL

Paul, Hastings, Janofsky & Walker LLP
345 California Street
San Francisco, California 94104

INDEPENDENT ACCOUNTANTS

McGladrey & Pullen LLP
555 Fifth Avenue, 8th Floor
New York, New York 10017-2416 STATEMENT OF ADDITIONAL INFORMATION

CUSTODIAN

________________, 1999

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

Allegiance Funds [SERVICE MARK]:
+ are not insured by the FDIC or any other governmental agency;
+ are not guaranteed by Van Deventer & Hoch or any of its
affiliates; and
+ involve investment risks, including possible loss of
principal.

-60-
<PAGE>

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

PART C

OTHER INFORMATION

---------------------------------------------------
<PAGE>
ALLEGIANCE INVESTMENT TRUST

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

FORM N-1A

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

PART C

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

ITEM 23. EXHIBITS

(a) Articles of Incorporation: Agreement and Declaration of Trust
dated September 2, 1998.
(b) By-Laws: By-Laws dated September 2, 1998.
(c) Instruments Defining Rights of Security Holder: Not applicable.
(d) Investment Advisory Contracts: Form of Investment Advisory
Agreement.
(e) Underwriting Contracts: To be filed by pre-effective amendment.
(f) Bonus or Profit Sharing Contracts: Not applicable.
(g) Custodian Agreements: To be filed by pre-effective amendment.
(h) Other Material Contracts:
(i) Form of Administrative Services Agreement
(i) Legal Opinion: Consent and Opinion of Counsel as to legality of
shares to be filed by pre-effective amendment.
(j) Other Opinions: Independent Auditors' Consent: Not applicable.
(k) Omitted Financial Statements: Not applicable.
(l) Initial Capital Agreements: Subscription Agreement for initial
shares to be filed by pre- effective amendment.
(m) Rule 12b-1 Plan: Form of Share Marketing Plan (Rule 12b-1 Plan)
to be filed by pre-effective amendment.
(n) Financial Data Schedule: Not applicable.
(o) 18f-3 Plan: Not applicable.

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.

Van Deventer & Hoch (the "Manager") is a partnership controlled by VDH
Holdings, Inc. ("VDH, Inc.") and Crestline Capital Partners, L.P. ("CCP"),
as general partners. Controlling shareholders of VDH, Inc. also serve as
officers of the Manager, including Richard A. Snyders, John L. Hoch,
Richard D. Trautwein, Allen H. Van Deventer, Donald F. Grannis and Jeff W.
Arnett. Highline Capital Advisors II, L.P. holds a majority limited partner
interest in CCP and is controlled by Donald H. Putnam, Jeffrey D. Lovell,
Mary Pat Thornton and Richard I. Morris, Jr.

ITEM 25. INDEMNIFICATION

Article VII of the Agreement and Declaration of Trust empowers the
Trustees of the Trust, to the full extent permitted by law, to purchase
with Trust assets insurance for indemnification from liability and to pay
for all expenses reasonably incurred or paid or expected to be paid by a
Trustee or officer in connection with any claim, action, suit or proceeding
in which he or she becomes involved by virtue of his or her capacity or
former capacity with the Trust.

C-1
<PAGE>
Article VI of the By-Laws of the Trust provides that the Trust shall
indemnify any person who was or is a party or is threatened to be made a
party to any proceeding by reason of the fact that such person is and other
amounts or was an agent of the Trust, against expenses, judgments, fines,
settlement and other amounts actually and reasonable incurred in connection
with such proceeding if that person acted in good faith and reasonably
believed his or her conduct to be in the best interests of the Trust.
Indemnification will not be provided in certain circumstances, however,
including instances of willful misfeasance, bad faith, gross negligence,
and reckless disregard of the duties involved in the conduct of the
particular office involved.

Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "1933 Act"), may be permitted to
the Trustees, officers and controlling persons of the Registrant pursuant
to the foregoing provisions or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the 1933 Act and
is, therefore, unenforceable in the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a Trustee, officer or controlling person of
the Registrant in the successful defense of any action, suit or proceeding)
is asserted by such Trustee, officer or controlling person in connection
with the securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in
the 1933 Act and will be governed by the final adjudication of such issue.

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER.

See information in Part A (Prospectus) and Part B (Statement of
Additional Information) for information on Messrs. Snyders and Bock.
Messrs. Putnam, Lovell, Morris and Ms. Thornton, who are indirect owners of
the Manager (through their interests in a limited partner of a general
partner of the Manager), also are principals in the investment banking firm
of Putnam, Lovell, de Guardiola & Thornton, which specializes in the
investment management industry.

ITEM 27. PRINCIPAL UNDERWRITER

(a) First Fund Distributors, Inc. currently serves as primary distributor of
the shares of:

Advisors Series Trust
Al Frank Fund (The)
American Trust Allegiance Fund
Avatar Advantage Balanced Fund (The)
Avatar Advantage Equity Allocation Fund (The)
Avatar Advantage International Equity Allocation Fund (The) Chase
Growth Fund Edgar Lomax Value Fund Information Tech 100 Mutual
Fund Kaminski Poland Fund Rockhaven Fund Rockhaven Premier
Dividend Fund Van Deventer & Hoch American Value Fund
Brandes Investment Trust
RNC Mutual Value Group, Inc.
PIC Investment Trust

C-2
<PAGE>
Professionally Managed Portfolios
Academy Value Fund
Avondale Total Return Fund
Boston Balanced Fund
Osterweis Fund
Perkins Discovery Fund
Perkins Opportunity Fund
ProConscience Women's Equity Mutual Fund
Trent Equity Fund
Leonetti Balanced Fund
Lighthouse Contrarian Fund
U.S. Global Leaders Growth Fund
Harris Bretall Sullivan & Smith Growth Equity Fund
Pzena Focused Value Fund
Titan Financial Services Fund
PGP Korea Growth Fund
PGP Asia Growth Fund
Guinness Flight Investment Funds
Jurika & Voyles Fund Group
Masters Select Investment Trust
Kayne Anderson Mutual Funds
O'Shaughnessy Funds, Inc.
Fleming Capital Mutual Fund Group, Inc.
Fremont Mutual Funds, Inc.
Rainier Investment Management Mutual Funds
The Purisima Funds
UBS Private Investor Funds

(b) The officers of First Fund Distributors, Inc. are:

Robert H. Wadsworth President and Treasurer
Eric Banhazl Vice President
Steven J. Paggioli Vice President and Secretary

Each officer's business address with the Distributor is 4455 E.
Camelback Rd., Suite 261-E, Phoenix, AZ 85018

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.

All accounts, books or other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the rules
promulgated thereunder are in the possession of the Registrant, at the
Registrant's corporate offices, except (1) records held and maintained by
_____________________ relating to its functions as custodian and (2)
records held and maintained by Investment Company Administration, L.L.C.,
as sub-administrator and fund accountant and, (3) records held
and maintained by _________________ relating to its functions as transfer
agent. The address for _________________ (custodian) is
_______________________________. The address for Investment Company
Administration, L.L.C. (sub-administrator and fund accountant) is 2020
E. Financial Way, Suite 100, Glendora, CA 91741. The address for
_________________ (transfer agent) is _______________________________.

C-3
<PAGE>
ITEM 29. MANAGEMENT SERVICES.

All management-related service contracts are discussed in Parts A and
B.

ITEM 30. UNDERTAKINGS.

(a) Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's last
annual report to shareholders, upon request and without charge.

(b) Registrant has undertaken to comply with Section 16(a) of the
Investment Company Act which requires the prompt convening of a
meeting of shareholders to elect trustees to fill existing
vacancies in the Registrant's Board of Trustees if less than a
majority of the trustees has been elected to such position by
shareholders. Registrant has also undertaken promptly to call a
meeting of shareholders for the purpose of voting on the question
of removal of any Trustee or Trustees when requested in writing
to do so by the record holders of not less than 10 percent of the
Registrant's outstanding shares and to assist its shareholders in
communicating with other shareholders in accordance with the
requirements of Section 16(c) of the Investment Company Act.

C-4
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Glendale, the State of California, on the 30th day of December, 1998.

ALLEGIANCE INVESTMENT TRUST

By: /s/ Richard A. Snyders*
Richard A. Snyders
President and Chief Executive Officer
(Principal Executive Officer)

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.

/s/ Richard A. Snyders Sole Trustee December 30th, 1998
- -------------------------
Richard A. Snyders

/s/ Charles L. Bock Treasurer and December 30th, 1998
- ------------------------- Secretary (Principal
Charles L. Bock Financial and Accounting
Officer)

*/s/ David A. Hearth
- ---------------------------
by David A. Hearth,
pursuant to Power of
Attorney filed herewith

C-5
<PAGE>
File Nos. 811-________________
333-________________

ALLEGIANCE INVESTMENT TRUST

LIST OF EXHIBITS

23(a) Agreement and Declaration of Trust dated September 2, 1998

23(b) By-Laws dated September 2, 1998

23(d) Form of Investment Advisory Agreement

23(h) Form of Administrative Services Agreement

AGREEMENT AND DECLARATION OF TRUST

ALLEGIANCE INVESTMENT TRUST

a Delaware Business Trust

Principal Place of Business:

Van Deventer & Hoch
800 North Brand Boulevard, Suite 300
Glendale, California 91203
<PAGE>
TABLE OF CONTENTS

ALLEGIANCE INVESTMENT TRUST

AGREEMENT AND DECLARATION OF TRUST

Page

ARTICLE I Name and Definitions............................................1

1. Name.................................................................1
2. Definitions..........................................................1
(a) Trust...........................................................1
(b) Trust Property..................................................1
(c) Trustees........................................................1
(d) Shares..........................................................2
(e) Shareholder.....................................................2
(f) Person..........................................................2
(g) Investment Company Act..........................................2
(h) Commission and Principal Underwriter............................2
(i) Declaration of Trust............................................2
(j) By-Laws.........................................................2
(k) Interested Person...............................................2
(l) Investment Adviser..............................................2
(m) Series..........................................................2

ARTICLE II Purpose of Trust................................................2

ARTICLE III Shares..........................................................3

1. Division of Beneficial Interest......................................3
2. Ownership of Shares..................................................3
3. Investments in the Trust.............................................3
4. Status of Shares and Limitation of
Personal Liability.................................................4
5. Power of Board of Trustees to Change
Provisions Relating to Shares......................................4
6. Establishment and Designation of Series..............................4
(a) Assets With Respect to a Particular Series......................5
(b) Liabilities Held With Respect to a
Particular Series.............................................5
(c) Dividends, Distributions, Redemptions
and Repurchases...............................................6

-i-
<PAGE>
(d) Voting..........................................................6
(e) Equality........................................................6
(f) Fractions.......................................................6
(g) Exchange Privilege..............................................6
(h) Combination of Series...........................................6
(i) Elimination of Series...........................................6
7. Indemnification of Shareholders......................................7

ARTICLE IV The Board of Trustees...........................................7

1. Number, Election and Tenure..........................................7
2. Effect of Death, Resignation, etc., of a Trustee.....................7
3. Powers...............................................................8
4. Payment of Expenses by the Trust....................................10
5. Payment of Expenses by Shareholders.................................10
6. Ownership of Assets of the Trust....................................11
7. Service Contracts...................................................11

ARTICLE V Shareholders' Voting Powers and Meetings.......................12

1. Voting Powers.......................................................12
2. Voting Power and Meetings...........................................13
3. Quorum and Required Vote............................................13
4. Action by Written Consent...........................................13
5. Record Dates........................................................13
6. Additional Provisions...............................................14

ARTICLE VI Net Asset Value, Distributions,
and Redemptions..............................................14

1. Determination of Net Asset Value, Net
Income and Distributions..........................................14
2. Redemptions and Repurchases.........................................14
3. Redemptions at the Option of the Trust..............................15

ARTICLE VII Compensation and Limitation of
Liability of Trustees........................................15

1. Compensation........................................................15
2. Indemnification and Limitation of Liability.........................15
3. Trustee's Good Faith Action, Expert
Advice, No Bond or Surety.........................................15
4. Insurance...........................................................16

ARTICLE VIII Miscellaneous..................................................16

-ii-
<PAGE>
1. Liability of Third Persons Dealing with Trustees................16
2. Termination of Trust or Series..................................16
3. Merger and Consolidation........................................16
4. Amendments......................................................17
5. Filing of Copies, References, Headings..........................17
6. Applicable Law..................................................17
7. Provisions in Conflict with Law or Regulations..................17
8. Business Trust Only.............................................18
9. Use of the Identifying Words "Allegiance Investment Trust" .....18

-iii-
<PAGE>
AGREEMENT AND DECLARATION OF TRUST

ALLEGIANCE INVESTMENT TRUST

WHEREAS, THIS AGREEMENT AND DECLARATION OF TRUST is made and
entered into as of the date set forth below by the Trustees named hereunder for
the purpose of forming a Delaware business trust in accordance with the
provisions hereinafter set forth.

NOW, THEREFORE, the Trustees hereby direct that a Certificate
of Trust be filed with Office of the Secretary of State of the State of Delaware
and do hereby declare that the Trustees will hold IN TRUST all cash, securities
and other assets which the Trust now possesses or may hereafter acquire from
time to time in any manner and manage and dispose of the same upon the following
terms and conditions for the pro rata benefit of the holders of Shares in this
Trust.

ARTICLE I

Name and Definitions

Section 1. Name. This Trust shall be known as Allegiance
Investment Trust, and the Trustees shall conduct the business of the Trust under
that name or any other name as they may from time to time determine.

Section 2. Definitions. Whenever used herein, unless otherwise
required by the context or specifically provided:

(a) The "Trust" refers to the Delaware business trust
established by this Agreement and Declaration of Trust, as amended from time to
time;

(b) The "Trust Property" means any and all property, real or
personal, tangible or intangible, which is owned or held by or for the account
of the Trust, including without limitation the rights referenced in Article
VIII, Section 9 hereof;

(c) "Trustees" refers to the persons who have signed this
Agreement and Declaration of Trust, so long as they continue in office in
accordance with the terms hereof, and all other persons who may from time to
time be duly elected or appointed to serve on the Board of Trustees in
accordance with the provisions hereof, and reference herein to a Trustee or the
Trustees shall refer to such person or persons in their capacity as trustees
hereunder;

(d) "Shares" means the shares of beneficial interest into
which the beneficial interest in the Trust shall be divided from time to time
and includes fractions of Shares as well as whole Shares;

-1-
<PAGE>
(e) "Shareholder" means a record owner of outstanding Shares;

(f) "Person" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures, estates and other entities,
whether or not legal entities, and governments and agencies and political
subdivisions thereof, whether domestic or foreign;

(g) The "Investment Company Act" refers to the Investment
Company Act of 1940, as amended, and the Rules and Regulations thereunder, all
as amended from time to time;

(h) The terms "Commission" and "Principal Underwriter" shall
have the meanings given them in the Investment Company Act;

(i) "Declaration of Trust" shall mean this Agreement and
Declaration of Trust, as amended or restated from time to time;

(j) "By-Laws" shall mean the By-Laws of the Trust as amended
from time to time and incorporated herein by reference;

(k) The term "Interested Person" has the meaning given it in
the Investment Company Act;

(l) "Investment Adviser" or "Manager" means a party furnishing
services to the Trust pursuant to any contract described in Article IV, Section
7(a) hereof; and

(m) "Series" refers to each Series of Shares established and
designated under or in accordance with the provisions of Article III.

ARTICLE II

Purpose of Trust

The purpose of the Trust is to conduct, operate and carry on
the business of a management investment company registered under the Investment
Company Act through one or more Series investing primarily in securities.

ARTICLE III

Section 1. Division of Beneficial Interest. The beneficial
interest in the Trust shall at all times be divided into an unlimited number of
Shares, with a par value of $ .01 per Share. The Trustees may authorize the
division of Shares into separate Series and the division of Series into separate
classes of Shares. The different Series shall be established and designated, and
the variations in the relative rights and preferences as between the different
Series shall be fixed and determined, by the Trustees. If only one or no Series
(or classes) shall be established, the Shares shall have the rights and

-2-
<PAGE>
preferences provided for herein and in this Article III, Section 6 hereof to the
extent relevant and not otherwise provided for herein, and all references to
Series (and classes) shall be construed (as the context may require) to refer to
the Trust.

Subject to the provisions of Section 6 of this Article III,
each Share shall have voting rights as provided in Article V hereof, and holders
of the Shares of any Series shall be entitled to receive dividends when, if and
as declared with respect thereto in the manner provided in Article VI, Section 1
hereof. No Share shall have any priority or preference over any other Share of
the same Series with respect to dividends or distributions upon termination of
the Trust or of such Series made pursuant to Article VIII, Section 2 hereof. All
dividends and distributions shall be made ratably among all Shareholders of a
particular class of a particular Series and, if no classes, of a particular
Series from the assets held with respect to such Series according to the number
of Shares of such class of such Series or of such Series held of record by such
Shareholder on the record date for any dividend or distribution or on the date
of termination, as the case may be. Shareholders shall have no preemptive or
other right to subscribe to any additional Shares or other securities issued by
the Trust or any Series.he Shares of any particular Series into a greater or
lesser number of Shares of that Series without thereby materially changing the
proportionate beneficial interest of the Shares of that Series in the assets
held with respect to that Series or materially affecting the rights of Shares of
any other Series.

Section 2. Ownership of Shares. The ownership of Shares shall
be recorded on the books of the Trust or a transfer or similar agent for the
Trust, which books shall be maintained separately for the Shares of each Series
(or class of each Series). No certificates certifying the ownership of Shares
shall be issued except as the Board of Trustees may otherwise determine from
time to time. The Trustees may make such rules as they consider appropriate for
the transfer of Shares of each Series (or class of each Series) and similar
matters. The record books of the Trust as kept by the Trust or any transfer or
similar agent, as the case may be, shall be conclusive as to the identity of the
Shareholders of each Series (or class of each Series) and as to the number of
Shares of each Series (or class) held from time to time by each.

Section 3. Investments in the Trust. Investments may be
accepted by the Trust from such Persons, at such times, on such terms, and for
such consideration as the Trustees from time to time may authorize.

Section 4. Status of Shares and Limitation of Personal
Liability. Shares shall be deemed to be personal property giving only the rights
provided in this instrument. Every Shareholder, by virtue of having become a
Shareholder, shall be held to have expressly assented and agreed to the terms
hereof and to have become a party hereto. The death of a Shareholder during the
existence of the Trust shall not operate to terminate the Trust, nor entitle the
representative of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Truunder this Trust.
Ownership of Shares shall not entitle the Shareholder to any title in or to the
whole or any part of the Trust Property or right to call for a partition or
division of the same or for an accounting, nor shall the ownership of Shares
constitute the Shareholders as partners. Neither the Trust nor the Trustees, nor
any officer, employee or agent of the Trust shall have any power to bind

-3-
<PAGE>
personally any Shareholder, nor, except as specifically provided herein, to call
upon any Shareholder for the payment of any sum of money or assessment
whatsoever other than such as the Shareholder may at any time personally agree
to pay.

Section 5. Power of Board of Trustees to Change Provisions
Relating to Shares. Notwithstanding any other provision of this Declaration of
Trust and without limiting the power of the Board of Trustees to amend the
Declaration of Trust as provided elsewhere herein, the Board of Trustees shall
have the power to amend this Declaration of Trust, at any time and from time to
time, in such manner as the Board of Trustees may determine in their sole
discretion, without the need for Shareholder action, so as to add to, delete,
replace or otherwise modify any provisions relating to the Shares contained in
this Declaration of Trust, provided that before adopting any such amendment
without Shareholder approval the Board of Trustees shall determine that it is
consistent with the fair and equitable treatment of all Shareholders or that
Shareholder approval is not otherwise required by the Investment Company Act or
other applicable law. If Shares have been issued, Shareholder approval shall be
required to adopt any amendments to this Declaration of Trust that would
adversely affect to a material degree the rights and preferences of the Shares
of any Series (or class of any Series) or to increase or decrease the par value
of the Shares of any Series (or class of any Series).

Subject to the foregoing Paragraph, the Board of Trusthe
provisions set forth in paragraphs (a) through (i) of Section 6 of this Article
III.

Section 6. Establishment and Designation of Series. The
establishment and designation of any Series (or class) of Shares shall be
effective upon the resolution by a majority of the then Trustees, adopting a
resolution that sets forth such establishment and designation and the relative
rights and preferences of such Series (or class). Each such resolution shall be
incorporated herein by reference upon adoption.

Shares of each Series (or class) established pursuant to this
Section 6, unless otherwise provided in the resolution establishing such Series,
shall have the following relative rights and preferences:

(a) Assets Held with Respect to a Particular Series. All
consideration received by the Trust for the issue or sale of Shares of a
particular Series, together with all assets in which such consideration is
invested or reinvested, all income, earnings, profits, and proceeds thereof from
whatever source derived, including, without limitation, any proceeds derived
from the sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the same may be,
shall irrevocably be held with respect to that Series for all purposes, subject
only to the rights of creditors, and shall be so recorded upon the books of
account of the Trust. Such consideration, assets, income, earnings, profits and
proceeds thereof, from whatever source derived, including, without limitation,
any proceeds derived from the sale, exchange or liquidation of such assets, and
any funds or payments derived from any reinvestment of such proceeds, in
whatever form the same may be, are herein referred to as "assets held with
respect to" that Series. In the event that there are any assets, income,

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earnings, profits and proceeds thereof, funds or payments which are not readily
identifiable as assTrustees shall allocate such General Assets to, between or
among any one or more of the Series in such manner and on such basis as the
Trustees, in their sole discretion, deem fair and equitable, and any General
Asset so allocated to a particular Series shall be held with respect to that
Series. Each such allocation by the Trustees shall be conclusive and binding
upon the Shareholders of all Series for all purposes.

(b) Liabilities Held With Respect to a Particular Series. The
assets of the Trust held with respect to each particular Series shall be charged
against the liabilities of the Trust held with respect to that Series and all
expenses, costs, charges and reserves attributable to that Series, and any
general liabilities of the Trust which are not readily identifiable as being
held with respect to any particular Series shall be allocated and charged by the
Trustees to and among any one or more of the Series in such manner and on such
basis as the Trustees in their sole discretion deem fair and equitable. The
liabilities, expenses, costs, charges, and reserves so charged to a Series are
herein referred to as "liabilities held with respect to" that Series. Each
allocation of liabilities, expenses, costs, charges and reserves by the Trustees
shall be conclusive and binding upon the holders of all Series for all purposes.
All Persons who have extended credit which has been allocated to a particular
Series, or who have a claim or contract which has been allocated to any
particular Series, shall look, and shall be required by contract to look
exclusively, to the assets of that particular Series for payment of such credit,
claim, or contract. In the absence of an express contractual agreement so
limiting the claims of such creditors, claimants and contract providers, each
creditor, claimant and contract provider will be deemed nevertheless to have
impliedly agreed to such limitation unless an express provision to the contrary
has been incorporated in the writtee claimant relationship.

(c) Dividends, Distributions, Redemptions and Repurchases.
Notwithstanding any other provisions of this Declaration of Trust, including,
without limitation, Article VI, no dividend or distribution including, without
limitation, any distribution paid upon termination of the Trust or of any Series
(or class) with respect to, nor any redemption or repurchase of, the Shares of
any Series (or class) shall be effected by the Trust other than from the assets
held with respect to such Series, nor, except as specifically provided in
Section 7 of this Article III, shall any Shareholder of any particular Series
otherwise have any right or claim against the assets held with respect to any
other Series except to the extent that such Shareholder has such a right or
claim hereunder as a Shareholder of such other Series. The Trustees shall have
full discretion, to the extent not inconsistent with the Investment Company Act,
to determine which items shall be treated as income and which items as capital;
and each such determination and allocation shall be conclusive and binding upon
the Shareholders.

(d) Voting. All Shares of the Trust entitled to vote on a
matter shall vote separately by Series (and, if applicable, by class): that is,
the Shareholders of each Series (or class) shall have the right to approve or
disapprove matters affecting the Trust and each respective Series (or class) as
if the Series (or classes) were separate companies. There are, however, two
exceptions to voting by separate Series (or classes). First, if the Investment
Company Act requires all Shares of the Trust to be voted in the aggregate
without differentiation between the separate Series (or classes), then all the

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Trust's Shares shall be entitled to vote on the basis of one vote for each
dollar of net asset value per share. Second, if any matter affects only the
interests of some but not all Series (or classes), then only the Shareholders of
such affected Series (or classes) shall be entitled to vote on the matter.

(e) Equality. All the Shares of each particular Series shall
represent an equal proportionate interest in the assets held with respect to
that Series (subject to the liabilities held with respect to that Series and
such rights and preferences as may have been established and designated with
respect to classes of Shares within such Series), and each Share of any
particular Series shall be equal to each other Share of that Series.

(f) Fractions. Any fractional Share of a Series shall carry
proportionately all the rights and obligations of a whole share of that Series,
including rights with respect to voting, receipt of dividends and distributions,
redemption of Shares and termination of the Trust.

(g) Exchange Privilege. The Trustees shall have the authority
to provide that the holders of Shares of any Series shall have the right to
exchange said Shares for Shares of one or more other Series of Shares in
accordance with such requirements and procedures as may be established by the
Trustees.

(h) Combination of Series. The Trustees shall have the
authority, without the approval of the Shareholders of any Series unless
otherwise required by applicable law, to combine the assets and liabilities held
with respect to any two or more Series into assets and liabilities held with
respect to a single Series.

(i) Elimination of Series. At any time that there are no
Shares outstanding of any particular Series (or class) previously established
and designated or such other time and such manner not prohibited by the
Investment Company Act or other applicable law, the Trustees may by resolution
of a majority of the then Trustees abolish that Series (or class) and rescind
the establishment and designation thereof.

Section 7. Indemnification of Shareholders. If any Shareholder
or former Shareholder shall be exposed to liability by reason of a claim or
demand relating to his or her being or having been a Shareholder, and not
because of his or her acts or omissions, the Shareholder or former Shareholder
(or his or her heirs, executors, administrators, or other legal representatives
or in the case of a corporation or other entity, its corporate or other general
successor) shall be entitled to be held harmless from and indemnified out of the
assets of the applicable Series of the Trust against all loss and expense
arising from such claim or demand.

ARTICLE IV

The Board of Trustees

Section 1. Number, Election and Tenure. The number of Trustees
constituting the Board of Trustees shall be fixed from time to time by a written
instrument signed, or by resolution approved at a duly constituted meeting, by a

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majority of the Board of Trustees, provided, however, that the number of
Trustees shall in no event be fewer than one (1) nor more than fifteen (15). The
Board of Trustees, by action of a majority of the then Trustees at a duly
constituted meeting, may fill vacancies in the Board of Trustees or remove
Trustees with or without cause. Each Trustee shall serve during the continued
lifetime of the Trust until he or she dies, resigns, is declared bankrupt or
incompetent by a court of appropriate jurisdiction, or is removed, or, if
sooner, until the next meeting of Shareholders called for the purpose of
electing Trustees and until the election and qualification of his or her
successor. Any Trustee may resign at any time by written instrument signed by
him or her and delivered to any officer of the Trust or to a meeting of the
Trustees. Such resignation shall be effective upon receipt unless specified to
be effective at some other time. Except to the extent expressly provided in a
written agreement with the Trust, no Trustee resigning and no Trustee removed
shall have any right to any compensation for any period following his or her
resignation or removal, or any right to damages on account of such removal. The
Shareholders may fix the number of Trustees and elect Trustees at any meeting of
Shareholders called by the Trustees for that purpose. Any Trustee may be removed
at any meeting of Shareholders by a vote of two-thirds of the outstanding Shares
of the Trust. A meeting of Shareholders for the purpose of electing or removing
one or more Trustees may be called (i) by the Trustees upon their own vote, or
(ii) upon the demand of Shareholders owning 10% or more of the Shares of the
Trust in the aggregate.

Section 2. Effect of Death, Resignation, etc. of a Trustee.
The death, declination, resignation, retirement, removal, or incapacity of one
or more Trustees, or all of them, shall not operate to annul the Trust or to
revoke any existing agency created pursuant to the terms of this Declaration of
Trust. Whenever a vacancy in the Board of Trustees shall occur, until such
vacancy is filled as provided in this Article IV, Section l, the Trustees in
office, regardless of their number, shall have all the powers granted to the
Trustees and shall discharge all the duties imposed upon the Trustees by this
Declaration of Trust. As conclusive evidence of such vacancy, a written
instrument certifying the existence of such vacancy may be executed by an
officer of the Trust or by a majority of the Board of Trustees. In the event of
the death, declination, resignation, retirement, removal, or incapacity of all
the then Trustees within a short period of time and without the opportunity for
at least one Trustee being able to appoint additional Trustees to fill
vacancies, the Trust's Investment Adviser(s) are empowered to appoint new
Trustees subject to the provisions of Section 16(a) of the Investment Company
Act.

Section 3. Powers. Subject to the provisions of this
Declaration of Trust, the business of the Trust shall be managed by the Board of
Trustees, and such Board shall have all powers necessary or convenient to carry
out that responsibility, including the power to engage in securities
transactions of all kinds on behalf of the Trust. Without limiting the
foregoing, the Trustees may: adopt By-Laws not inconsistent with this
Declaration of Trust providing for the regulation and management of the affairs
of the Trust and may amend and repeal them to the extent that such By-Laws do
not reserve that right to the Shareholders; fill vacancies in or remove from
their number, and may elect and remove such officers and appoint and terminate
such agents as they consider appropriate; appoint from their own number and
establish and terminate one or more committees consisting of two or more
Trustees, which may exercise the powers and authority of the Board of Trustees
to the extent that the Trustees determine; employ one or more custodians of the
assets of the Trust and may authorize such custodians to employ subcustodians
and to deposit all or any part of such assets in a system or systems for the
central handling of securities or with a Federal Reserve Bank; retain a transfer

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agent or a shareholder servicing agent, or both; provide for the issuance and
distribution of Shares by the Trust directly or through one or more Principal
Underwriters or otherwise; redeem, repurchase and transfer Shares pursuant to
applicable law; set record dates for the determination of Shareholders with
respect to various matters; declare and pay dividends and distributions to
Shareholders of each Series from the assets of such Series; and, in general,
delegate such authority as they consider desirable to any officer of the Trust,
to any committee of the Trustees and to any agent or employee of the Trust or to
any such custodian, transfer or shareholder servicing agent, or Principal
Underwriter. Any determination as to what is in the interests of the Trust made
by the Trustees in good faith shall be conclusive. In construing the provisions
of this Declaration of Trust, the presumption shall be in favor of a grant of
power to the Trustees. Unless otherwise specified or required by law, any action
by the Board of Trustees shall be deemed effective if approved or taken by a
majority of the Trustees then in office.

Without limiting the foregoing, the Trust shall have power and
authority:

(a) To invest and reinvest cash, to hold cash uninvested, and
to subscribe for, invest in, reinvest in, purchase or otherwise acquire, own,
hold, pledge, sell, assign, transfer, exchange, distribute, write options on,
lend or otherwise deal in or dispose of contracts for the future acquisition or
delivery of fixed income or other securities, and securities of every nature and
kind, including, without limitation, all types of bonds, debentures, stocks,
negotiable or non-negotiable instruments, obligations, evidences of
indebtedness, certificates of deposit or indebtedness, commercial paper,
repurchase agreements, bankers' acceptances, and other securities of any kind,
issued, created, guaranteed, or sponsored by any and all Persons, including,
without limitation, states, territories, and possessions of the United States
and the District of Columbia and any political subdivision, agency, or
instrumentality thereof, any foreign government or any political subdivision of
the U.S. Government or any foreign government, or any international
instrumentality, or by any bank or savings institution, or by any corporation or
organization organized under the laws of the United States or of any state,
territory, or possession thereof, or by any corporation or organization
organized under any foreign law, or in "when issued" contracts for any such
securities, to change the investments of the assets of the Trust; and to
exercise any and all rights, powers, and privileges of ownership or interest in
respect of any and all such investments of every kind and description,
including, without limitation, the right to consent and otherwise act with
respect thereto, with power to designate one or more Persons, to exercise any of
said rights, powers, and privileges in respect of any of said instruments;

(b) To sell, exchange, lend, pledge, mortgage, hypothecate,
lease, or write options with respect to or otherwise deal in any property rights
relating to any or all of the assets of the Trust or any Series;

(c) To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities or property; and to execute
and deliver proxies or powers of attorney to such person or persons as the
Trustees shall deem proper, granting to such person or persons such power and
discretion with relation to securities or property as the Trustees shall deem
proper;

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(d) To exercise powers and right of subscription or otherwise
which in any manner arise out of ownership of securities;

(e) To hold any security or property in a form not indicating
any trust, whether in bearer, unregistered or other negotiable form, or in its
own name or in the name of a custodian or subcustodian or a nominee or nominees
or otherwise;

(f) To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or issuer of any
security which is held in the Trust; to consent to any contract, lease,
mortgage, purchase or sale of property by such corporation or issuer; and to pay
calls or subscriptions with respect to any security held in the Trust;

(g) To join with other security holders in acting through a
committee, depositary, voting trustee or otherwise, and in that connection to
deposit any security with, or transfer any security to, any such committee,
depositary or trustee, and to delegate to them such power and authority with
relation to any security (whether or not so deposited or transferred) as the
Trustees shall deem proper, and to agree to pay, and to pay, such portion of the
expenses and compensation of such committee, depositary or trustee as the
Trustees shall deem proper;

(h) To compromise, arbitrate or otherwise adjust claims in
favor of or against the Trust or any matter in controversy, including but not
limited to claims for taxes;

(i) To enter into joint ventures, general or limited
partnerships and any other combinations or associations;

(j) To borrow funds or other property in the name of the Trust
exclusively for Trust purposes;

(k) To endorse or guarantee the payment of any notes or other
obligations of any Person; to make contracts of guaranty or suretyship, or
otherwise assume liability for payment thereof;

(l) To purchase and pay for entirely out of Trust Property
such insurance as the Trustees may deem necessary or appropriate for the conduct
of the business, including, without limitation, insurance policies insuring the
assets of the Trust or payment of distributions and principal on its portfolio
investments, and insurance policies insuring the Shareholders, Trustees,
officers, employees, agents, investment advisers, principal underwriters, or
independent contractors of the Trust, individually against all claims and
liabilities of every nature arising by reason of holding Shares, holding, being
or having held any such office or position, or by reason of any action alleged
to have been taken or omitted by any such Person as Trustee, officer, employee,
agent, investment adviser, principal underwriter, or independent contractor,
including any action taken or omitted that may be determined to constitute
negligence, whether or not the Trust would have the power to indemnify such
Person against liability; and

(m) To adopt, establish and carry out pension, profit-sharing,
share bonus, share purchase, savings, thrift and other retirement, incentive and
benefit plans, trusts and provisions, including the purchasing of life insurance

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and annuity contracts as a means of providing such retirement and other
benefits, for any or all of the Trustees, officers, employees and agents of the
Trust.

The Trust shall not be limited to investing in obligations
maturing before the possible termination of the Trust or one or more of its
Series. The Trust shall not in any way be bound or limited by any present or
future law or custom in regard to investment by fiduciaries. The Trust shall not
be required to obtain any court order to deal with any assets of the Trust or
take any other action hereunder.

Section 4. Payment of Expenses by the Trust. The Trustees are
authorized to pay or cause to be paid out of the principal or income of the
Trust, or partly out of the principal and partly out of income, as they deem
fair, all expenses, fees, charges, taxes and liabilities incurred or arising in
connection with the Trust, or in connection with the management thereof,
including, but not limited to, the Trustees' compensation and such expenses and
charges for the services of the Trust's officers, employees, investment adviser
or manager, principal underwriter, auditors, counsel, custodian, transfer agent,
Shareholder servicing agent, and such other agents or independent contractors
and such other expenses and charges as the Trustees may deem necessary or proper
to incur.

Section 5. Payment of Expenses by Shareholders. The Trustees
shall have the power, as frequently as they may determine, to cause each
Shareholder, or each Shareholder of any particular Series, to pay directly, in
advance or arrears, for charges of the Trust's custodian or transfer,
Shareholder servicing or similar agent, an amount fixed from time to time by the
Trustees, by setting off such charges due from such Shareholder from r of shares
in the account of such Shareholder by that number of full and/or fractional
Shares which represents the outstanding amount of such charges due from such
Shareholder.

Section 6. Ownership of Assets of the Trust. Title to all of
the assets of the Trust shall at all times be considered as vested in the Trust,
except that the Trustees shall have power to cause legal title to any Trust
Property to be held by or in the name of one or more of the Trustees, or in the
name of the Trust, or in the name of any other Person as nominee, on such terms
as the Trustees may determine. The right, title and interest of the Trustees in
the Trust Property shall vest automatically in each Person who may hereafter
become a Trustee. Upon the resignation, removal or death of a Trustee, he or she
shall automatically cease to have any right, title or interest in any of the
Trust Property, and the right, title and interest of such Trustee in the Trust
Property shall vest automatically in the remaining Trustees. Such vesting and
cessation of title shall be effective whether or not conveyancing documents has
been executed and delivered.

Section 7. Service Contracts.

(a) Subject to such requirements and restrictions as may be
set forth in the ByLaws, the Trustees may, at any time and from time to time,
contract for exclusive or nonexclusive advisory, management and/or
administrative services for the Trust or for any Series with any corporation,
trust, association or other organization; and any such contract may contain such

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other terms as the Trustees may determine, including without limitation,
authority for the Investment Adviser or administrator to determine from time to
time without prior consultation with the Trustees what investments shall be
purchased, held, sold or exchanged and what portion, if any, of the assets of
the Trust shall be held uninvested and to make changes in the Trust's
investments, or such other activities as may specifically be delegated to such
party.

(b) The Trustees may also, at any time and from time to time,
contract with any corporation, trust, association or other organization,
appointing it exclusive or nonexclusive distributor or Principal Underwriter for
the Shares of one or more of the Series (or classes) or other securities to be
issued by the Trust. Every such contract shall comply with such requirements and
restrictions as may be set forth in the By-Laws; and any such contract may
contain such other terms as the Trustees may determine.

(c) The Trustees are also empowered, at any time and from time
to time, to contract with any corporations, trusts, associations or other
organizations, appointing it or them the custodian, transfer agent and/or
shareholder servicing agent for the Trust or one or more of its Series. Every
such contract shall comply with such requirements and restrictions as may be set
forth in the By-Laws or stipulated by resolution of the Trustees.

(d) The Trustees are further empowered, at any time and from
time to time, to contract with any entity to provide such other services to the
Trust or one or more of the Series, as the Trustees determine to be in the best
interests of the Trust and the applicable Series.

(e) The fact that:

(i) any of the Shareholders, Trustees, or officers of
the Trust is a shareholder, director, officer, partner,
trustee, employee, investment adviser, manager, principal
underwriter, distributor, or affiliate or agent of or for any
corporation, trust, association, or other organization, or for
any parent or affiliate of any organization with which an
advisory, management or administration contract, or principal
underwriter's or distributor's contract, or transfer,
shareholder servicing or other type of service contract may
have been or may hereafter be made, or that any such
organization, or any parent or affiliate thereof, is a
Shareholder or has an interest in the Trust, or

(ii) any corporation, trust, association or other
organization with which an advisory, management or
administration contract or principal underwriter's or
distributor's contract, or transfer, shareholder servicing or
other type of service contract may have been or may hereafter
be made also has an advisory, management or administration
contract, or principal underwriter's or distributor's
contract, or transfer, shareholder servicing or other service
contract with one or more other corporations, trusts,
associations, or other organizations, or has other business or
interests,

shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same, or create any liability or accountability to the Trust or its

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Shareholders, provided approval of each such contract is made pursuant to the
requirements of the Investment Company Act.

ARTICLE V

Shareholders' Voting Powers and Meetings

Section 1. Voting Powers. Subject to the provisions of Article
III, Section 6(d), the Shareholders shall have power to vote only (i) for the
election or removal of Trustees as provided in Article IV, Section 1, and (ii)
with respect to such additional matters relating to the Trust as may be required
by this Declaration of Trust, the By-Laws or any registration of the Trust with
the Commission (or any successor agency) or any state, or as the Trustees may
consider necessary or desirable. As appropriate, voting may be by Series (or
class). Each dollar of net asset value of a Share shall be entitled to one vote
as to any matter on which it is entitled to vote and each fractional Share shall
be entitled to a proportionate fractional vote. There shall be no cumulative
voting in the election of Trustees. Shares may be voted in person or by proxy. A
proxy with respect to Shares held in the name of two or more persons shall be
valid if executed by any one of them unless at or prior to exercise of the proxy
the Trust receives a specific written notice to the contrary from any one of
them. A proxy purporting to be executed by or on behalf of a Shareholder shall
be deemed valid unless challenged at or prior to its exercise and the burden of
proving invalidity shall rest on the challenger.

Section 2. Voting Power and Meetings. Meetings of the
Shareholders may be called by the Trustees for the purpose of electing Trustees
as provided in Article IV, Section l and for such other purposes as may be
prescribed by law, by this Declaration of Trust or by the By-Laws. Meetings of
the Shareholders may also be called by the Trustees from time to time for the
purpose of taking action upon any other matter deemed by the Trustees to be
necessary or desirable. A meeting of Shareholders may be held at any place
designated by the Trustees. Written notice of any meeting of Shareholders shall
be given or caused to be given by the Trustees by mailing such notice at least
seven (7) days before such meeting, postage prepaid, stating the time and place
of the meeting, to each Shareholder at the Shareholder's address as it appears
on the records of the Trust. Whenever notice of a meeting is required to be
given to a Shareholder under this Declaration of Trust or the By-Laws, a written
waiver thereof, executed before or after the meeting by such Shareholder or his
or her attorney thereunto authorized and filed with the records of the meeting,
shall be deemed equivalent to such notice.

Section 3. Quorum and Required Vote. Except when a larger
quorum is required by applicable law, by the By-Laws or by this Declaration of
Trust, forty percent (40%) of the dollar-weighted voting power of Shares
entitled to vote shall constitute a quorum at a Shareholders' meeting. When any
one or more Series (or classes) is to vote as a single class separate from any
other Shares, forty percent (40%) of the Shares of each such Series (or classes)
entitled to vote shall constitute a quorum at a Shareholder's meeting of that
Series. Any meeting of Shareholders may be adjourned from time to time by a
majority of the votes properly cast upon the question of adjourning a meeting to
another date and time, whether or not a quorum is present, and the meeting may
be held as adjourned within a reasonable time after the date set for the

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original meeting without further notice. Subject to the provisions of Article
III, Section 6(d), when a quorum is present at any meeting, a majority of the
Shares voted shall decide any questions and a plurality shall elect a Trustee,
except when a larger vote is required by any provision of this Declaration of
Trust or the By-Laws or by applicable law.

Section 4. Action by Written Consent. Any action taken by
shareholders may be taken without a meeting if Shareholders holding a majority
of the Shares entitled to vote on the matter (or such larger proportion thereof
as shall be required by any express provision of this Declaration of Trust or by
the By-Laws or by applicable law) and holding a majority (or such larger
proportion as aforesaid) of the Shares of any Series (or class) entitled to vote
separately on the matter consent to the action in writing and such written
consents are filed with the records of the meetings of Shareholders. Such
consent shall be treated for all purposes as a vote taken at a meeting of
Shareholders.

Section 5. Record Dates. For the purpose of determining the
Shareholders of any Series (or class) who are entitled to vote or act at any
meeting or any adjournment thereof, the Trustees may from time to time fix a
time, which shall be not more than ninety (90) days before the date of any
meeting of Shareholders, as the record date for determining the Shareholders of
such Series (or class) having the right to notice of and to vote at such meeting
and any adjournment thereof, and in such case only Shareholders of record on
such record date shall have such right, notwithstanding any transfer of shares
on the books of the Trust after the record date. For the purpose of determining
the Shareholders of any Series (or class) who are entitled to receive payment of
any dividend or of any other distribution, the Trustees may from time to time
fix a date, which shall be before the date for the payment of such dividend or
such other payment, as the record date for determining the Shareholders of such
Series (or class) having the right to receive such dividend or distribution.
Without fixing a record date the Trustees may for voting and/or distribution
purposes close the register or transfer books for one or more Series for all or
any part of the period between a record date and a meeting of Shareholders or
the payment of a distribution. Nothing in this Section shall be construed as
precluding the Trustees from setting different record dates for different Series
(or classes).

Section 6. Additional Provisions. The By-Laws may include
further provisions for Shareholders' votes and meetings and related matters.

ARTICLE VI

Net Asset Value, Distributions and Redemptions

Section 1. Determination of Net Asset Value, Net Income and
Distributions. Subject to Article III, Section 6 hereof, the Trustees, in their
absolute discretion, may prescribe and shall set forth in the By-laws or in a
duly adopted vote of the Trustees such bases and time for determining the
per-Share net asset value of the Shares of any Series or net income attributable
to the Shares of any Series, or the declaration and payment of dividends and
distributions on the Shares of any Series, as they may deem necessary or
desirable.

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Section 2. Redemptions and Repurchases. The Trust shall
purchase such Shares as are offered by any Shareholder for redemption, upon the
presentation of a proper instrument of transfer together with a request directed
to the Trust or a Person designated by the Trust that the Trust purchase such
Shares or in accordance with such other procedures for redemption as the
Trustees may from time to time authorize; and the Trust will pay therefor the
net asset value thereof, in accordance with the By-Laws and applicable law.
Payment for said Shares shall be made by the Trust to the Shareholder within
seven days after the date on which the request is made in proper form. The
obligation set forth in this Section 2 is subject to the provision that in the
event that any time the New York Stock Exchange (the "Exchange") is closed for
other than weekends or holidays, or if permitted by the Rules of the Commission
during periods when trading on the Exchange is restricted or during any
emergency which makes it impracticable for the Trust to dispose of the
investments of the applicable Series or to determine fairly the value of the net
assets held with respect to such Series or during any other period permitted by
order of the Commission for the protection of investors, such obligations may be
suspended or postponed by the Trustees.

The redemption price may in any case or cases be paid wholly
or partly in kind if the Trustees determine that such payment is advisable in
the interest of the remaining Shareholders of the Series for which the Shares
are being redeemed. Subject to the foregoing, the fair value, selection and
quantity of securities or other property so paid or delivered as all or part of
the redemption price may be determined by or under authority of the Trustees. In
no case shall the Trust be liable for any delay of any corporation or other
Person in transferring securities selected for delivery as all or part of any
payment in kind.

Section 3. Redemptions at the Option of the Trust. The Trust
shall have the right, at its option and at any time, to redeem Shares of any
Shareholder at the net asset value thereof as described in Section 1 of this
Article VI: (i) if at such time such Shareholder owns Shares of any Series
having an aggregate net asset value of less than an amount determined from time
to time by the Trustees prior to the acquisition of said Shares; or (ii) to the
extent that such Shareholder owns Shares of a particular Seriing Shares of that
Series determined from time to time by the Trustees; or (iii) to the extent that
such Shareholder owns Shares equal to or in excess of a percentage, determined
from time to time by the Trustees, of the outstanding Shares of the Trust or of
any Series; or (iv) in connection with the elimination of a series under Section
6(i) of Article III or Section 2 of Article VIII.

ARTICLE VII

Compensation and Limitation of Liability of Trustees

Section 1. Compensation. The Trustees as such shall be
entitled to reasonable compensation from the Trust, and they may fix the amount
of such compensation. Nothing herein shall in any way prevent the employment of
any Trustee for advisory, management, legal, accounting, investment banking or
other services and payment for the same by the Trust.

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<PAGE>
Section 2. Indemnification and Limitation of Liability. The
Trustees shall not be responsible or liable in any event for any neglect or
wrong-doing of any officer, agent, employee, Investment Adviser or principal
underwriter of the Trust, nor shall any Trustee be responsible for the act or
omission of any other Trustee, and the Trust out of its assets shall indemnify
and hold harmless each and every Trustee from and against any and all claims,
demands and expenses (including attorneys' fees) whatsoever arising out of or
related to each Trustee's performance of his or her duties as a Trustee of the
Trust; provided that nothing herein contained shall indemnify, hold harmless or
protect any Trustee from or against any liability to the Trust or any
Shareholder to which he or she would otherwise be subject by reason of wilful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office.

Every note, bond, contract, instrument, certificate or
undertaking and every other act or thing whatsoever issued, executed or done by
or on behalf of the Trust or the Trustees or any of them in connection with the
Trust shall be conclusively deemed to have been issued, executed or done only in
or with respect to their or his or her capacity as Trustees or Trustee, and such
Trustees or Trustee shall not be personally liable thereon.

Section 3. Trustee's Good Faith Action, Expert Advice, No Bond
or Surety. The exercise by the Trustees of their powers and discretion hereunder
shall be binding upon everyone interested. A Trustee shall be liable to the
Trust and to any Shareholder solely for his or her own wilful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of Trustee, and shall not be liable for errors of judgment
or mistakes of fact or law. The Trustees may take advice of counsel or other
experts with respect to the meaning and operation of this Declaration of Trust,
and shall be under no liability for any act or omission in accordance with such
advice nor for failing to folloany bond as such, nor any surety if a bond is
required.

Section 4. Insurance. The Trustees shall be entitled and
empowered to the fullest extent permitted by law to purchase with Trust assets
insurance for liability and for all expenses reasonably incurred or paid or
expected to be paid by a Trustee or officer in connection with any claim,
action, suit or proceeding in which he or she becomes involved by virtue of his
or her capacity or former capacity with the Trust.

ARTICLE VIII

Miscellaneous

Section 1. Liability of Third Persons Dealing with Trustees.
No Person dealing with the Trustees shall be bound to make any inquiry
concerning the validity of any transaction made or to be made by the Trustees or
to see to the application of any payments made or property transferred to the
Trust or upon its order.

Section 2. Termination of Trust or Series. Unless terminated
as provided herein, the Trust shall continue without limitation of time. The

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<PAGE>
Trust may be terminated at any time by vote of a majority of the Shares of each
Series entitled to vote, voting separately by Series, or by the Trustees by
written notice to the Shareholders. Any Series may be terminated at any time by
vote of a majority of the Shares of that Series or by the Trustees by written
notice to the Shareholders of that Series.

Upon termination of the Trust (or any Series, as the case may
be), after paying or otherwise providing for all charges, taxes, expenses and
liabilities held, severally, with respect to each Series (or the applicable
Series, as the case may be), whether due or accrued or anticipated as may be
determined by the Trustees, the Trust shall, in accordance with such procedures
as the Trustees consider appropriate, reduce the remaining assets held,
severally, with respect to each Series (or the applicable Series, as the case
may be), to distributable form in cash or shares or other securities, or any
combination thereof, and distribute the proceeds held with respect to each
Series (or the applicable Series, as the case may be), to the Shareholders of
that Series, as a Series, ratably according to the number of Shares of that
Series held by the several Shareholders on the date of termination.

Section 3. Merger and Consolidation. The Trustees may cause
(i) the Trust or one or more of its Series to the extent consistent with
applicable law to be merged into or consolidated with another trust orr business
trust (or series thereof) created pursuant to this Section 3 of this Article
VIII, or (iii) the Shares to be exchanged under or pursuant to any state or
federal statute to the extent permitted by law. Such merger or consolidation,
Share conversion or Share exchange must be authorized by vote of a majority of
the outstanding Shares of the Trust, as a whole, or any affected Series, as may
be applicable; provided that in all respects not governed by statute or
applicable law, the Trustees shall have the power to prescribe the procedure
necessary or appropriate to accomplish a sale of assets, merger or consolidation
including the power to create one or more separate business trusts to which all
or any part of the assets, liabilities, profits or losses of the Trust may be
transferred and to provide for the conversion of Shares of the Trust or any
Series into beneficial interests in such separate business trust or trusts (or
series thereof).

Section 4. Amendments. This Declaration of Trust may be
restated and/or amended at any time by an instrument in writing signed by a
majority of the then Trustees and, if required, by approval of such amendment by
Shareholders in accordance with Article V, Section 3 hereof. Any such
restatement and/or amendment hereto shall be effective immediately upon
execution and approval. The Certificate of Trust of the Trust may be restated
and/or amended by a similar procedure, and any such restatement and/or amendment
shall be effective immediately upon filing with the Office of the Secretary of
State of the State of Delaware or upon such future date as may be stated
therein.

Section 5. Filing of Copies, References, Headings. The
original or a copy of this instrument and of each restatement and/or amendment
hereto shall be kept at the office of the Trust where it may be inspected by any
Shareholder. Anyone dealing with the Trust may rely on a certificate by an
officer of the Trust as to whether o as to any matters in connection with the
Trust hereunder; and, with the same effect as if it were the original, may rely
on a copy certified by an officer of the Trust to be a copy of this instrument

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<PAGE>
or of any such restatements and/or amendments. In this instrument and in any
such restatements and/or amendment, references to this instrument, and all
expressions like "herein," "hereof" and "hereunder," shall be deemed to refer to
this instrument as amended or affected by any such restatements and/or
amendments. Headings are placed herein for convenience of reference only and
shall not be taken as a part hereof or control or affect the meaning,
construction or effect of this instrument. Whenever the singular number is used
herein, the same shall include the plural; and the neuter, masculine and
feminine genders shall include each other, as applicable. This instrument may be
executed in any number of counterparts each of which shall be deemed an
original.

Section 6. Applicable Law. This Agreement and Declaration of
Trust is created under and is to be governed by and construed and administered
according to the laws of the State of Delaware and the Delaware Business Trust
Act, as amended from time to time (the "Business Trust Act"). The Trust shall be
a Delaware business trust pursuant to such Business Trust Act, and without
limiting the provisions hereof, the Trust may exercise all powers which are
ordinarily exercised by such a business trust.

Section 7. Provisions in Conflict with Law or Regulations.

(a) The provisions of the Declaration of Trust are
severable, and if the Trustees shall determine, with the advice of counsel, that
any of such provisions is in conflict with the Investment Company Act, the
regulated investment company provisions of the Internal Revenue Code or with
other applicable laws and regulations, the conflicting provision shall be deemed
never to have constituted a part of the Declaration of Trust; provided, however,
that such determination shall not affect any of the remaining provisions of the
Declaration of Trust or render invalid or improper any action taken or omitted
prior to such determination.

(b) If any provision of the Declaration of Trust
shall be held invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such jurisdiction and
shall not in any manner affect such provision in any other jurisdiction or any
other provision of the Declaration of Trust in any jurisdiction.

Section 8. Business Trust Only. It is the intention of the
Trustees to create a business trust pursuant to the Business Trust Act, and
thereby to create only the relationship of trustee and beneficial owners within
the meaning of such Business Trust Act between the Trustees and each
Shareholder. It is not the intention of the Trustees to create a general
partnership, limited partnership, joint stock association, corporation,
bailment, or any form of legal relationship other than a business trust pursuant
to such Act. Nothing in this Declaration of Trust shall be construed to make the
Shareholders, either by themselves or with the Trustees, partners or members of
a joint stock association.

Section 9. Use of the Identifying Words "Allegiance Investment
Trust" The identifying words "Allegiance Investment Trust" and all rights to the
use of such identifying words belong to Van Deventer & Hoch, the proposed
Investment Adviser of the Trust's Shares. Van Deventer & Hoch has licensed the
Trust to use the identifying words "Allegiance Investment Trust" in the Trust's

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name. If Van Deventer & Hoch or an affiliate of Van Deventer & Hoch is not
appointed or ceases to be the Investment Adviser of the Trust, the non-exclusive
license may be revoked by Van Deventer & Hoch, and the Trust and any series
thereof shall respectively cease using the identifying words "Allegiance
Investment Trust" unless otherwise consented to by Van Deventer & Hoch or any
successor to Van Deventer & Hoch's interests.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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<PAGE>
IN WITNESS WHEREOF, the Trustees named below do hereby make
and enter into this Declaration of Trust as of the 2nd day of September, 1998.

/s/ Richard A. Snyders
----------------------
Richard A. Snyders
Sole Initial Trustee

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BY-LAWS

FOR THE REGULATION, EXCEPT AS
OTHERWISE PROVIDED BY STATUTE OR THE
AGREEMENT AND DECLARATION OF TRUST, OF

ALLEGIANCE INVESTMENT TRUST
A DELAWARE BUSINESS TRUST

SEPTEMBER 2, 1998
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
OFFICES...............................................................1
Section 1. PRINCIPAL OFFICE..........................................1
Section 2. DELAWARE OFFICE...........................................1
Section 3. OTHER OFFICES.............................................1

ARTICLE II
MEETINGS OF SHAREHOLDERS..............................................1
Section 1. PLACE OF MEETING..........................................1
Section 2. CALL OF MEETING...........................................1
Section 3. NOTICE OF SHAREHOLDERS' MEETING...........................1
Section 4. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE..............2
Section 5. ADJOURNED MEETING; NOTICE.................................2
Section 6. VOTING....................................................2
Section 7. WAIVER OF NOTICE BY CONSENT OF ABSENT
SHAREHOLDERS..............................................3
Section 8. SHAREHOLDER ACTION BY WRITTEN CONSENT
WITHOUT A MEETING.........................................3
Section 9. RECORD DATE FOR SHAREHOLDER NOTICE,
VOTING AND GIVING CONSENTS................................4
Section 10. PROXIES...................................................4
Section 11. INSPECTORS OF ELECTION....................................4

ARTICLE III
TRUSTEES..............................................................5
Section 1. POWERS....................................................5
Section 2. NUMBER OF TRUSTEES........................................5
Section 3. VACANCIES.................................................6
Section 4. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE...............6
Section 5. REGULAR MEETINGS..........................................6
Section 6. SPECIAL MEETINGS..........................................6
Section 7. QUORUM....................................................7
Section 8. WAIVER OF NOTICE..........................................7
Section 9. ADJOURNMENT...............................................7
Section 10. NOTICE OF ADJOURNMENT.....................................7
Section 11. ACTION WITHOUT A MEETING..................................7
<PAGE>
Section 12. FEES AND COMPENSATION OF TRUSTEES.........................7
Section 13. DELEGATION OF POWER TO OTHER TRUSTEES.....................8

ARTICLE IV
COMMITTEES............................................................8
Section 1. COMMITTEES OF TRUSTEES....................................8
Section 2. MEETINGS AND ACTION OF COMMITTEES.........................9

ARTICLE V
OFFICERS..............................................................9
Section 1. OFFICERS..................................................9
Section 2. ELECTION OF OFFICERS......................................9
Section 3. SUBORDINATE OFFICERS......................................9
Section 4. REMOVAL AND RESIGNATION OF OFFICERS.......................9
Section 5. VACANCIES IN OFFICES.....................................10
Section 6. CHAIRMAN OF THE BOARD....................................10
Section 7. PRESIDENT................................................10
Section 8. VICE PRESIDENTS..........................................10
Section 9. SECRETARY................................................10
Section 10. TREASURER................................................11

ARTICLE VI
INDEMNIFICATION OF TRUSTEES, OFFICERS,
EMPLOYEES AND OTHER AGENTS...........................................11
Section 1. AGENTS, PROCEEDINGS AND EXPENSES.........................11
Section 2. ACTIONS OTHER THAN BY TRUST..............................12
Section 3. ACTIONS BY THE TRUST.....................................12
Section 4. EXCLUSION OF INDEMNIFICATION.............................12
Section 5. SUCCESSFUL DEFENSE BY AGENT..............................13
Section 6. REQUIRED APPROVAL........................................13
Section 7. ADVANCE OF EXPENSES......................................13
Section 8. OTHER CONTRACTUAL RIGHTS.................................14
Section 9. LIMITATIONS..............................................14
Section 10. INSURANCE................................................14
Section 11. FIDUCIARIES OF EMPLOYEE BENEFIT PLAN.....................14

ARTICLE VII
RECORDS AND REPORTS..................................................15
Section 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER.............15
Section 2. MAINTENANCE AND INSPECTION OF BY-LAWS....................15
Section 3. MAINTENANCE AND INSPECTION OF OTHER RECORDS..............15
Section 4. INSPECTION BY TRUSTEES...................................15
<PAGE>
Section 5. FINANCIAL STATEMENTS.....................................15

ARTICLE VIII
GENERAL MATTERS......................................................16
Section 1. CHECKS, DRAFTS, EVIDENCE OF INDEBTEDNESS.................16
Section 2. CONTRACTS AND INSTRUMENTS - HOW EXECUTED.................16
Section 3. CERTIFICATES FOR SHARES..................................16
Section 4. LOST CERTIFICATES........................................16
Section 5. REPRESENTATION OF SHARES OF OTHER
ENTITIES HELD BY TRUST...................................17
Section 6. FISCAL YEAR..............................................17

ARTICLE IX
AMENDMENTS...........................................................17
Section 1. AMENDMENT BY SHAREHOLDERS................................17
Section 2. AMENDMENT BY TRUSTEES....................................17
Section 3. INCORPORATION BY REFERENCE INTO AGREEMENT
AND DECLARATION OF TRUST OF THE TRUST....................17
<PAGE>
BY-LAWS
OF
ALLEGIANCE INVESTMENT TRUST
DELAWARE BUSINESS TRUST

ARTICLE I
OFFICES

Section 1. PRINCIPAL OFFICE. The Board of Trustees shall fix and, from
time to time, may change the location of the principal executive office of the
Allegiance Investment Trust (the "Trust") at any place within or outside the
State of Delaware.

Section 2. DELAWARE OFFICE. The Board of Trustees shall establish a
registered office in the State of Delaware and shall appoint as the Trust's
registered agent for service of process in the State of Delaware an individual
resident of the State of Delaware or a Delaware corporation or a corporation
authorized to transact business in the State of Delaware; in each case the
business office of such registered agent for service of process shall be
identical with the registered Delaware office of the Trust.

Section 3. OTHER OFFICES. The Board of Trustees may at any time
establish branch or subordinate offices at any place or places where the Trust
intends to do business.

ARTICLE II
MEETINGS OF SHAREHOLDERS

Section 1. PLACE OF MEETING. Meetings of shareholders shall be held at
any place designated by the Board of Trustees. In the absence of any such
designation, shareholders' meetings shall be held at the principal executive
office of the Trust.

Section 2. CALL OF MEETING. A meeting of the shareholders may be called
at any time by the Board of Trustees or by the Chairman of the Board or by the
President.

Section 3. NOTICE OF SHAREHOLDERS' MEETING. All notices of meetings of
shareholders shall be sent or otherwise given in accordance with Section 4 of
this Article II not fewer than seven (7) nor more than seventy-five (75) days
before the date of the meeting. The notice shall specify (i) the place, date and
hour of the meeting, and (ii) the general nature of the business to be
transacted. The notice of any meeting at which Trustees are to be elected also
shall include the name of any nominee or nominees who at the time of the notice
are intended to be presented for election.

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<PAGE>
If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a Trustee has a direct or indirect financial
interest, (ii) an amendment of the Agreement and Declaration of Trust of the
Trust, (iii) a reorganization of the Trust, or (iv) a voluntary dissolution of
the Trust, the notice shall also state the general nature of that proposal.

Section 4. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Notice of any
meeting of shareholders shall be given either personally or by first-class mail
or telegraphic or other written communication, charges prepaid, addressed to the
shareholder at the address of that shareholder appearing on the books of the
Trust or its transfer agent or given by the shareholder to the Trust for the
purpose of notice. If no such address appears on the Trust's books or is given,
notice shall be deemed to have been given if sent to that shareholder by
first-class mail or telegraphic or other written communication to the Trust's
principal executive office, or if published at least once-in a newspaper of
general circulation in the county where that office is located. Notice shall be
deemed to have been given at the time when delivered personally or deposited in
the mail or sent by telegram or other means of written communication.

If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the Trust is returned to the Trust by the
United States Postal Service marked to indicate that the Postal Service is
unable to deliver the notice to the shareholder at that address, all future
notices or reports shall be deemed to have been duly given without further
mailing if these shall be available to the shareholder on written demand of the
shareholder at the principal executive office of the Trust for a period of one
year from the date of the giving of the notice.

An affidavit of the mailing or other means of giving any notice of any
shareholder's meeting shall be executed by the Secretary, Assistant Secretary or
any transfer agent of the Trust giving the notice and shall be filed and
maintained in the minute book of the Trust.

Section 5. ADJOURNED MEETING; NOTICE. Any shareholder's meeting,
whether or not a quorum is present, may be adjourned from time to time by the
vote of the majority of the shares represented at that meeting, either in person
or by proxy.

When any meeting of shareholders is adjourned to another time or place,
notice need not be given of the adjourned meeting at which the adjournment is
taken, unless a new record date of the adjourned meeting is fixed or unless the
adjournment is for more than sixty (60) days from the date set for the original
meeting, in which case the Board of Trustees shall set a new record date. Notice
of any such adjourned meeting shall be given to each shareholder of record
entitled to vote at the adjourned meeting in accordance with the provisions of
Sections 3 and 4 of this Article II. At any adjourned meeting, the Trust may
transact any business which might have been transacted at the original meeting.

Section 6. VOTING. The shareholders entitled to vote at any meeting of
shareholders shall be determined in accordance with the provisions of the
Agreement and Declaration of Trust of the Trust, as in effect at such time. The

2
<PAGE>
shareholders' vote may be by voice vote or by ballot, provided, however, that
any election for Trustees must be by ballot if demanded by any shareholder
before the voting has begun. On any matter other than elections of Trustees, any
shareholder may vote part of the shares in favor of the proposal and refrain
from voting the remaining shares or, vote them against the proposal, but if the
shareholder fails to specify the number of shares which the shareholder is
voting affirmatively, it will be conclusively presumed that the shareholder's
approving vote is with respect to the total shares that the shareholder is
entitled to vote on such proposal.

Section 7. WAIVER OF NOTICE BY CONSENT OF ABSENT SHAREHOLDERS. The
transactions of the meeting of shareholders, however called and noticed and
wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice if a quorum be present either in person or by proxy and
if either before or after the meeting, each person entitled to vote who was not
present in person or by proxy signs a written waiver of notice or a consent to a
holding of the meeting or an approval of the minutes. The waiver of notice or
consent need not specify either the business to be transacted or the purpose of
any meeting of shareholders.

Attendance by a person at a meeting shall also constitute a waiver of
notice of that meeting, except when the person objects at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened and except that attendance at a meeting is not a waiver of
any right to object to the consideration of matters not included in the notice
of the meeting if that objection is expressly made at the beginning of the
meeting.

Section 8. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any
action which may be taken at any meeting of shareholders may be taken without a
meeting and without prior notice if a consent in writing setting forth the
action so taken is signed by the holders of outstanding shares having not less
than the minimum number of votes that would be necessary to authorize or take
that action at a meeting at which all shares entitled to vote on that action
were present and voted. All such consents shall be filed with the Secretary of
the Trust and shall be maintained in the Trust's records. Any shareholder giving
a written consent or the shareholder's proxy holders or a transferee of the
shares or a personal representative of the Shareholder or their respective Proxy
holders may revoke the consent by a writing received by the Secretary of the
Trust before written consents of the number of shares required to authorize the
proposed action have been filed with the Secretary.

If the consents of all shareholders entitled to vote have not been
solicited in writing and if the unanimous written consent of all such
shareholders shall hot have been received, the Secretary shall give prompt
notice of the action approved by the shareholders without a meeting. This notice
shall be given in the manner specified in Section 4 of this Article II. In the
case of approval of (i) contracts or transactions in which a Trustee has a
direct or, indirect financial interest, (ii) indemnification of agents of the
Trust, and (iii) a reorganization of the Trust, the notice shall be given at

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<PAGE>
least ten (10) days before the consummation of any action authorized by that
approval.

Section 9. RECORD DATE FOR SHAREHOLDER NOTICE, VOTING AND GIVING
CONSENTS. For purposes of determining the shareholders entitled to notice of any
meeting or to vote or entitled to give consent to action without a meeting, the
Board of Trustees may fix in advance a record date which shall not be more than
ninety (90) days nor fewer than seven (7) days before the date of any such
meeting as provided in the Agreement and Declaration of Trust of the Trust.

If the Board of Trustees does not so fix a record date:

(a) The record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at
the close of business on the business day next preceding the
day on which notice is given or if notice is waived, at the
close of business on the business day next preceding the day
on which the meeting is held.

(b) The record date for determining shareholders entitled to give
consent to action in writing without a meeting, (i) when no
prior action by the Board of Trustees has been taken, shall be
the day on which the first written consent is given, or (ii)
when prior action of the Board of Trustees has been taken,
shall be at the close of business on the day on which the
Board of Trustees adopt the resolution relating to that action
or the seventy-fifth day before the date of such other action,
whichever is later.

Section 10. PROXIES. Every person entitled to vote for Trustees or on
any other matter shall have the right to do so either in person or by one or
more agents authorized by a written proxy signed by the person and filed with
the Secretary of the Trust. A proxy shall be deemed signed if the shareholder's
name is placed on the proxy (whether by manual signature, typewriting,
telegraphic transmission or otherwise) by the shareholder or the shareholder's
attorney-in-fact. A validly executed proxy which does not state that it is
irrevocable shall continue in full force and effect unless (i) revoked by the
person executing it before the vote pursuant to that proxy by a writing
delivered to the Trust stating that the proxy is revoked or by a subsequent
proxy executed by, or attendance at the meeting and voting in person by the
person executing that proxy; or (ii) written notice of the death or incapacity
of the maker of that proxy is received by the Trust before the vote pursuant to
that proxy is counted; provided however, that no proxy shall be valid after the
expiration of eleven (11) months from the date of the proxy unless otherwise
provided in the proxy.

Section 11. INSPECTORS OF ELECTION. Before any meeting of shareholders,
the Board of Trustees may appoint any persons other than nominees for office to
act as inspectors of election at the meeting or its adjournment. If no
inspectors of election are so appointed, the chairman of the meeting may and on

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<PAGE>
the request of any shareholder or a shareholder's proxy shall, appoint
inspectors of election at the meeting. The number of inspectors shall be either
one (1) or three (3). If inspectors are appointed at a meeting on the request of
one or more shareholders or proxies, the holders of a majority of shares or
their proxies present at the meeting shall determine whether one (1) or three
(3) inspectors are to be appointed. If any person appointed as inspector fails
to appear or fails or refuses to act, the Chairman of the meeting may and on the
request of any shareholder or a shareholder's proxy, shall appoint a person to
fill the vacancy.

These inspectors shall:

(a) Determine the number of shares outstanding and the voting
power of each, the shares represented at the meeting, the
existence of a quorum and the authenticity, validity and
effect of proxies;

(b) Receive-votes, ballots or consents;

(d) Count and tabulate all votes or consents;

(e) Determine when the polls shall close;

(f) Determine the result; and

(g) Do any other acts that may be proper to conduct the election
or vote with fairness to all shareholders.

ARTICLE III
TRUSTEES

Section 1. POWERS. Subject to the applicable provisions of the
Agreement and Declaration of Trust of the Trust and these By-Laws relating to
action required to be approved by the shareholders or by the outstanding shares,
the business and affairs of the Trust shall be managed and all powers shall be
exercised by or under the direction of the Board of Trustees.

Section 2. NUMBER OF TRUSTEES. The exact number of Trustees within the
limits specified in the Agreement and Declaration of Trust of the Trust shall be
fixed from time to time by a written instrument signed or a resolution approved
at a duly constituted meeting by a majority of the Board of Trustees.

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<PAGE>
Section 3. VACANCIES. Vacancies in the Board of Trustees may be filled
by a majority of the remaining Trustees, though less than a quorum, or by a sole
remaining Trustee, unless the Board of Trustees calls a meeting of shareholders
for the purposes of electing Trustees. In the event that at any time less than a
majority of the Trustees holding office at that time were so elected by the
holders of the outstanding voting securities of the Trust, the Board of Trustees
shall forthwith cause to be held as promptly as possible, and in any event
within sixty (60) days, a meeting of such holders for the purpose of electing
Trustees to fill any existing vacancies in the Board of Trustees, unless such
period is extended by order of the United States Securities and Exchange
Commission. Notwithstanding the above, whenever and for so long as the Trust is
a participant in or otherwise has in effect a Plan under which the Trust may be
deemed to bear expenses of distributing its shares as that practice is described
in Rule 12b-1 under the Investment Company Act of 1940, then the selection and
nomination of the Trustees who are not interested persons of the Trust (as that
term is defined in the Investment Company Act of 1940) shall be, and is,
committed to the discretion of such disinterested Trustees.

Section 4. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. All meetings of
the Board of Trustees may be held at any place that has been designated from
time to time by resolution of' the Board. In the absence of such a designation,
regular meetings shall be held at the principal executive office of the Trust.
With the exception of meetings at which an Investment Management, Portfolio
Advisory Agreement or any Distribution Plan adopted pursuant to Rule 12b-1 is
approved by the Board, any meeting, regular or special, may be held by
conference telephone or similar communication equipment, so long as all Trustees
participating in the meeting can hear one another and all such Trustees shall be
deemed to be present in person at the meeting.

Section 5. REGULAR MEETINGS. Regular meetings of the Board of Trustees
shall be held without call at such time as shall from time to time be fixed by
the Board of Trustees. Such regular meetings may be held without notice.

Section 6. SPECIAL MEETINGS. Special meetings of the Board of Trustees
for any purpose or purposes may be called at any time by the Chairman of the
Board or the President or any Vice President or the Secretary or any two (2)
Trustees.

Notice of the time and place of special meetings shall be delivered
personally or by telephone to each Trustee or sent by first-class mail or
telegram, charges prepaid, addressed to each Trustee at that Trustee's address
as it is shown on the records of the Trust. In case the notice is mailed, it
shall be deposited in the United States mail at least seven (7) calendar days
before the time of the holding of the meeting. In case the notice is delivered
personally or by telephone or to the telegraph company or by express mail or
similar service, it shall be given at least forty-eight (48) hours before the
time of the holding of the meeting. Any oral notice given personally or by
telephone may be communicated either to the Trustee or to a person at the office
of the Trustee who the person giving the notice has reason to believe will
promptly communicate it to the Trustee. The notice need not specify the purpose

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of the meeting or the place if the meeting is to be held at the principal
executive office of the Trust.

Section 7. QUORUM. A majority of the authorized number of Trustees
shall constitute a quorum for the transaction of business, except to adjourn as
provided in Section 10 of this Article III. Every act or decision done or made
by a majority of the Trustees present at a meeting duly held at which a quorum
is present shall be regarded as the act of the Board of Trustees, subject to the
provisions of the Agreement and Declaration of Trust of the Trust. A meeting at
which a quorum is initially present may continue to transact business
notwithstanding the withdrawal of Trustees if any action taken is approved by a
least a majority of the required quorum for that meeting.

Section 8. WAIVER OF NOTICE. Notice of any meeting need not be given to
any Trustee who either before or after the meeting signs a written waiver of
notice, a consent to holding the meeting, or an approval of the minutes. The
waiver of notice or consent need not specify the purpose of the meeting. All
such waivers, consents, and approvals shall be filed with the records of the
Trust or made a part of the minutes of the meeting. Notice of a meeting shall
also be deemed given to any Trustee who attends the meeting without protesting
before or at its commencement the lack of notice to that Trustee.

Section 9. ADJOURNMENT. A majority of the Trustees present, whether or
not constituting a quorum, may adjourn any meeting to another time and place.

Section 10. NOTICE OF ADJOURNMENT. Notice of the time and place of
holding an adjourned meeting need not be given unless the meeting is adjourned
for more than forty-eight (48) hours, in which case notice of the time and place
shall be given before the time of the adjourned meeting in the manner specified
in Section 7 of this Article III to the Trustees who were present at the time of
adjournment.

Section 11. ACTION WITHOUT A MEETING. With the exception of the
approval of an Investment Management Agreement, Portfolio Advisory Agreement, or
any Distribution Plan adopted pursuant to Rule 12b-1, any action required or
permitted to be taken by the Board of Trustees may be taken without a meeting if
a majority of the members of the Board of Trustees shall individually or
collectively consent in writing to that action. Such action by written consent
shall have the same force and effect as a majority vote of the Board of
Trustees. Such written consent or consents shall be filed with the minutes of
the proceedings of the Board of Trustees.

Section 12. FEES AND COMPENSATION OF TRUSTEES. Trustees and members of
committees may receive such compensation, if any, for their services and such
reimbursement of expenses as may be fixed or determined by resolution of the
Board of Trustees. This Section 12 shall not be construed to preclude any

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Trustee from serving the Trust in any other capacity as an officer, agent,
employee, or otherwise and receiving compensation for those services.

Section 13. DELEGATION OF POWER TO OTHER TRUSTEES. Any Trustee may, by
power of attorney, delegate his power for a period not exceeding six (6) months
at any one time to any other Trustee or Trustees; provided that in no case shall
fewer than two (2) Trustees personally exercise the powers granted to the
Trustees under this Agreement and Declaration of Trust of the Trust except as
otherwise expressly provided herein or by resolution of the Board of Trustees.
Except where applicable law may require a Trustee to be present in person, a
Trustee represented by another Trustee pursuant to such power of attorney shall
be deemed to be present for purposes of establishing a quorum and satisfying the
required majority vote.

ARTICLE IV
COMMITTEES

Section 1. COMMITTEES OF TRUSTEES. The Board of Trustees may by
resolution adopted by a majority of the authorized number of Trustees designate
one or more committees, each consisting of two (2) or more Trustees, to serve at
the pleasure of the Board. The Board may designate one or more Trustees as
alternate members of any committee who may replace any absent member at any
meeting of the committee. Any committee to the extent provided in the resolution
of the Board, shall have the authority of the Board, except with respect to:

(a) the approval of any action which under applicable law also
requires shareholders' approval or approval of the outstanding
shares, or requires approval by a majority of the entire Board
or certain members of said Board;

(b) the filling of vacancies on the Board of Trustees or in any
committee;

(d) the amendment or repeal of the Agreement and Declaration of
Trust of the Trust or of the By-Laws or the adoption of new
By-Laws;

(e) the amendment or repeal of any resolution of the Board of
Trustees which by its express terms is not so amendable or
repealable;

(f) a distribution to the shareholders of the Trust, except at a
rate or in a periodic amount or within a designated range
determined by the Board of Trustees; or

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(g) the appointment of any other committees of the Board of
Trustees or the members of these committees.

Section 2. MEETINGS AND ACTION OF COMMITTEES. Meetings and action of
committees shall be governed by and held and taken in accordance with the
provisions of Article III of these By-Laws, with such changes in the context
thereof as are necessary to substitute the committee and its members for the
Board of Trustees and its members, except that the time of regular meetings of
committees may be determined either by resolution of the Board of Trustees or by
resolution of the committee. Special meetings of committees may also be called
by resolution of the Board of Trustees. Alternate members shall be given notice
of meetings of committees and shall have the right to attend all meetings of
committees. The Board of Trustees may adopt rules for the government of any
committee not inconsistent with the provisions of these By-Laws.

ARTICLE V
OFFICERS

Section 1. OFFICERS. The officers of the Trust shall be a President, a
Secretary, and a Treasurer. The Trust may also have, at the discretion of the
Board of Trustees, a Chairman of the Board, one or more Vice Presidents, one or
more Assistant Secretaries, one or more Assistant Treasurers, and such other
officers as may be appointed in accordance with the provisions of Section 3 of
this Article V. Any number of offices may be held by the same person.

Section 2. ELECTION OF OFFICERS. The officers of the Trust, except such
officers as may be appointed in accordance with the provisions of Section 3 or
Section 5 of this Article V, shall be chosen by the Board of Trustees, and each
shall serve at the pleasure of the Board of Trustees, subject to the rights, if
any, of an officer under any contract of employment.

Section 3. SUBORDINATE OFFICERS. The Board of Trustees may appoint and
may empower the President to appoint such other officers as the business of the
Trust may require, each of whom shall hold office for such period, have such
authority and perform such duties as are provided in these By-Laws or as the
Board of Trustees may from time to time determine.

Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights,
if any, of an officer under any contract of employment, any officer may be
removed, either with or without cause, by the Board of Trustees at any regular
or special meeting of the Board of Trustees or by the principal executive
officer or by such other officer upon whom such power of removal may be
conferred by the Board of Trustees.

Any officer may resign at any time by giving written notice to the
Trust. Any resignation shall take effect at the date of the receipt of that
notice or at any later time specified in that notice; and unless otherwise

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specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the Trust under any contract to which the officer is a party.

Section 5. VACANCIES IN OFFICES. A vacancy in any office because of
death, resignation, removal, disqualification or other cause shall be filled in
the manner prescribed in these By-Laws for regular appointment to that office.
The President may make temporary appointments to a vacant office pending action
by the Board of Trustees.

Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if such an
Officer is elected, shall, if present, preside at meetings of the Board of
Trustees, shall be the Chief Executive Officer of the Trust and shall, subject
to the control of the Board of Trustees, have general supervision, direction and
control of the business and the Officers of the Trust and exercise and perform
such other powers and duties as may be from time to time assigned to him by the
Board of Trustees or prescribed by the By-Laws.

Section 7. PRESIDENT. Subject to such supervisory powers, if any, as
may be given by the Board of Trustees to the Chairman of the Board, if there be
such an officer, the President shall be the chief operating officer of the Trust
and shall, subject to the control of the Board of Trustees and the Chairman,
have general supervision, direction and control of the business and the officers
of the Trust. He or she shall preside at all meetings of the shareholders and in
the absence of the Chairman of the Board or if there be none, at all meetings of
the Board of Trustees. He or she shall have the general powers and duties of
management usually vested in the office of President of a corporation and shall
have such other powers and duties as may be prescribed by the Board of Trustees
or these By-Laws.

Section 8. VICE PRESIDENTS. In the absence or disability of the
President, the Vice Presidents, if any, in order of their rank as fixed by the
Board of Trustees or if not ranked, the Executive Vice President (who shall be
considered first ranked) and such other Vice Presidents as shall be designated
by the Board of Trustees, shall perform all the duties of the President and when
so acting shall have all powers of and be subject to all the restrictions upon
the President. The Vice Presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Trustees or the President or the Chairman of the Board or by these
By-Laws.

Section 9. SECRETARY. The Secretary shall keep or cause to be kept at
the principal executive office of the Trust, or such other place as the Board of
Trustees may direct, a book of minutes of all meetings and actions of Trustees,
committees of Trustees and shareholders with the time and place of holding,
whether regular or special, and if special, how authorized, the notice given,
the names of those present at Trustees' meetings or committee meetings, the
number of shares present or represented at shareholders, meetings, and the
proceedings.

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The Secretary shall keep or cause to be kept at the principal executive
office of the Trust or at the office of the Trust's transfer agent or registrar,
a share register or a duplicate share register showing the names of all
shareholders and their addresses, the number and classes of shares held by each,
the number and date of certificates issued for the same and the number and date
of cancellation of every certificate surrendered for cancellation.

The Secretary shall give or cause to be given notice of all meetings of
the shareholders and of the Board of Trustees required to be given by these
By-Laws or by applicable law and shall have such other powers and perform such
other duties as may be prescribed by the Board of Trustees or by these By-Laws.

Section 10. TREASURER. The Treasurer shall be the chief financial
officer and chief accounting officer of the Trust and shall keep and maintain or
cause to be kept and maintained adequate and correct books and records of
accounts of the properties and business transactions of the Trust, including
accounts of its assets, liabilities, receipts, disbursements, gains, losses,
capital, retained earnings and shares. The books of account shall at all
reasonable times be open to inspection by any Trustee.

The Treasurer shall deposit all monies and other valuables in the name
and to the credit of the Trust with such depositories as may be designated by
the Board of Trustees. He shall disburse the funds of the Trust as may be
ordered by the Board of Trustees, shall render to the President and Trustees,
whenever they request it, an account of all of his transactions as chief
financial officer and of the financial condition of the Trust and shall have
other powers and perform such other duties as may be prescribed by the Board of
Trustees or these By-Laws.

ARTICLE VI
INDEMNIFICATION OF TRUSTEES, OFFICERS,
EMPLOYEES AND OTHER AGENTS

Section 1. AGENTS, PROCEEDINGS AND EXPENSES. For the purpose of this
Article, "agent" means any person who is or was a Trustee, officer, employee or
other agent of this Trust or is or was serving at the request of this Trust as a
Trustee, director, officer, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust or other enterprise or was a
Trustee, director, officer, employee or agent of a foreign or domestic
corporation which was a predecessor of another enterprise at the request of such
predecessor entity; "proceeding" means any threatened, pending or completed
action or proceeding, whether civil, criminal, administrative or investigative;
and "expenses" includes without limitation attorney's fees and any expenses of
establishing a right to indemnification under this Article.

Section 2. ACTIONS OTHER THAN BY TRUST. This Trust shall indemnify any
person who was or is a party or is threatened to be made a party to any
proceeding (other than an action by or in the right of this Trust) by reason of
the fact that such person is or was an agent of this Trust, against expenses,

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judgments, fines, settlements and-other amounts actually and reasonably incurred
in connection with such proceeding, if it is determined that person acted in
good faith and reasonably believed:

(a) in the case of conduct in his or her official capacity as a
Trustee of the Trust, that his or her conduct was in the
Trust's best interests, and

(b) in all other cases, that his or her conduct was at least not
opposed to the Trust's best interests, and

(c) in the case of a criminal proceeding, that he or she had no
reasonable cause to believe the conduct of that person was
unlawful.

The termination of any proceeding by judgment order, settlement,
conviction or upon a plea of nolo contendere or its equivalent shall not of
itself create a presumption that the person did not act in good faith and in a
manner which the person reasonably believed to be in the best interests of this
Trust or that the person had reasonable cause to believe that the person's
conduct was unlawful.

Section 3. ACTIONS BY THE TRUST. This Trust shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action by or in the right of this Trust to procure a
judgment in its favor by reason of the fact that that person is or was an agent
of this Trust, against expenses actually and reasonably incurred by that person
in connection with the defense or settlement of that action if that person acted
in good faith, in a manner that person believed to be in the best interests of
this Trust and with such care, including reasonable inquiry, as an ordinarily
prudent person in a like position would use under similar circumstances.

Section 4. EXCLUSION OF INDEMNIFICATION. Notwithstanding any provision
to the contrary contained herein, there shall be no right to indemnification for
any liability arising by reason of willful misfeasance, bad faith, gross
negligence, or the reckless disregard of the duties involved in the conduct of
the agent's office with this Trust.

No indemnification shall be made under Sections 2 or 3 of this Article:

(a) In respect of any claim, issue, or matter as to which that
person shall have been adjudged to be liable on the basis that
personal benefit was improperly received by him or her,
whether or not the benefit resulted from an action taken in
the person's official capacity; or

(b) In respect of any claim, issue or matter as to which that
person shall have been adjudged to be liable in the
performance of that person's duty to this Trust, unless and

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only to the extent that the court in which that action was
brought shall determine upon application that in view of all
the circumstances of the case, that person was not liable by
reason of the disabling conduct set forth in the preceding
paragraph and is fairly and reasonably entitled to indemnity
for the expenses which the court shall determine; or

(c) Of amounts paid in settling or otherwise disposing of a
threatened or pending action, with or without, court approval,
or of expenses incurred in defending a threatened or pending
action which is settled or otherwise disposed of without court
approval, unless the required approval set forth in Section 6
of this Article is obtained.

Section 5. SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent of
this Trust has been successful on the merits in defense of any proceeding
referred to in Sections 2 or 3 of this Article or in defense of any claim, issue
or matter therein, before the court or other body before whom the proceeding was
brought, the agent shall be indemnified against expenses actually and reasonably
incurred by the agent in connection therewith, provided that the Board of
Trustees, including a majority who are disinterested, non-party Trustees, also
determines that, based upon a review of the facts, the agent was not liable by
reason of the disabling conduct referred to in Section 4 of this Article.

Section 6. REQUIRED APPROVAL. Except as provided in Section 5 of this
Article, any indemnification under this Article shall be made by this Trust only
if authorized in the specific case on a determination that indemnification of
the agent is proper in the circumstances because the agent has met the
applicable standard of conduct set forth in Sections 2 or 3 of this Article and
is not prohibited from indemnification because of the disabling conduct set
forth in Section 4 of this Article, by:

(a) A majority vote of a quorum consisting of Trustees who are not
parties to the proceeding and are not interested persons of
the Trust (as defined in the Investment Company Act of 1940);
or

(b) A written opinion by an independent legal counsel.

Section 7. ADVANCE OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by this Trust before the final disposition of the
proceeding upon a written undertaking by or on behalf of the agent, to repay the
amount of the advance if it is ultimately determined that he or she is not
entitled to indemnification, together with at least one of the following as a
condition to the advance: (i) security for the undertaking; or (ii) the
existence of insurance protecting the Trust against losses arising by reason of
any lawful advances; or (iii) a determination by a majority of a quorum of
Trustees who are not parties to the proceeding and are not interested persons of

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the Trust, or by an independent legal counsel in a written opinion, based on a
review of readily available facts that there is reason to believe that the agent
ultimately will be found entitled to indemnification. Determinations and
authorizations of payments under this Section must be made in the manner
specified in Section 6 of this Article for determining that the indemnification
is permissible.

Section 8. OTHER CONTRACTUAL RIGHTS. Nothing contained in this Article
shall affect any right to indemnification to which persons other than Trustees
and officers of this Trust or any subsidiary hereof may be entitled by contract
or otherwise.

Section 9. LIMITATIONS. No indemnification or advance shall be made
under this Article, except as provided in Sections 5 or 6 in any circumstances
where it appears:

(a) that it would be inconsistent with a provision of the
Agreement and Declaration of Trust of the Trust, a resolution
of the shareholders, or an agreement in effect at the time of
accrual of the alleged cause of action asserted in the
proceeding in which the expenses were incurred or other
amounts were paid which prohibits or otherwise limits
indemnification; or

(b) that it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.

Section 10. INSURANCE. Upon and in the event of a determination by the
Board of Trustees of this Trust to purchase such insurance, this Trust shall
purchase and maintain insurance on behalf of any agent of this Trust against any
liability asserted against or incurred by the agent in such capacity or arising
out of the agent's status as such, but only to the extent that this Trust would
have the power to indemnify the agent against that liability under the
provisions of this Article and the Agreement and Declaration of Trust of the
Trust.

Section 11. FIDUCIARIES OF EMPLOYEE BENEFIT PLAN. This Article does not
apply to any proceeding against any Trustee, investment manager or other
fiduciary of an employee benefit plan in that person's capacity as such, even
though that person may also be an agent of this Trust as defined in Section 1 of
this Article. Nothing contained in this Article shall limit any right to
indemnification to which such a Trustee, investment manager, or other fiduciary
may be entitled by contract or otherwise which shall be enforceable to the
extent permitted by applicable law other than this Article.

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ARTICLE VII
RECORDS AND REPORTS

Section 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER. This Trust
shall keep at its principal executive office or at the office of its transfer
agent or registrar, if either be appointed and as determined by resolution of
the Board of Trustees, a record of its shareholders, giving the names and
addresses of all shareholders and the number and series of shares held by each
shareholder.

Section 2. MAINTENANCE AND INSPECTION OF BY-LAWS. The Trust shall keep
at its principal executive office the original or a copy of these By-Laws as
amended to date, which shall be open to inspection by the shareholders at all
reasonable times during office hours.

Section 3. MAINTENANCE AND INSPECTION OF OTHER RECORDS. The accounting
books and records and minutes of proceedings of the shareholders and the Board
of Trustees and any committee or committees of the Board of Trustees shall be
kept at such place or places designated by the Board of Trustees or in the
absence of such designation, at the principal executive office of the Trust. The
minutes shall be kept in written form and the accounting books and records shall
be kept either in written form or in any other form capable of being converted
into written form. The minutes and accounting books and records shall be open to
inspection upon the written demand of any shareholder or holder of a voting
trust certificate at any reasonable time during usual business hours for a
purpose reasonably related to the holder's interests as a shareholder or as the
holder of a voting trust certificate. The inspection may be made in person or by
an agent or attorney and shall include the right to copy and make extracts.

Section 4. INSPECTION BY TRUSTEES. Every Trustee shall have the
absolute right at any reasonable time to inspect all books, records, and
documents of every kind and the physical properties of the Trust. This
inspection by a Trustee may be made in person or by an agent or attorney and the
right of inspection includes the right to copy and make extracts of documents.

Section 5. FINANCIAL STATEMENTS. A copy of any financial statements and
any income statement of the Trust for each quarterly period of each fiscal year
and accompanying balance sheet of the Trust as of the end of each such period
that has been prepared by the Trust shall be kept on file in the principal
executive office of the Trust for at least twelve (12) months and each such
statement shall be exhibited at all reasonable times to any shareholder
demanding an examination of any such statement or a copy shall be mailed to any
such shareholder.

The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report, if any, of any independent
accountants engaged by the Trust or the certificate of an authorized officer of

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the Trust that the financial statements were prepared without audit from the
books and records of the Trust.

ARTICLE VIII
GENERAL MATTERS

Section 1. CHECKS, DRAFTS, EVIDENCE OF INDEBTEDNESS. All checks,
drafts, or other orders for payment of money, notes or other evidences of
indebtedness issued in the name of or payable to the Trust shall be signed or
endorsed in such manner and by such person or persons as shall be designated
from time to time in accordance with the resolution of the Board of Trustees.

Section 2. CONTRACTS AND INSTRUMENTS - HOW EXECUTED. The Board of
Trustees, except as otherwise provided in these By-Laws, may authorize any
officer or officers, agent or agents, to enter into any contract or execute any
instrument in the name of and on behalf of the Trust and this authority may be
general or confined to specific instances; and unless so authorized or ratified
by the Board of Trustees or within the agency power of an officer, no officer,
agent, or employee shall have any power or authority to bind the Trust by any
contract or engagement or to pledge its credit or to render it liable for any
purpose or for any amount.

Section 3. CERTIFICATES FOR SHARES. A certificate or certificates for
shares of beneficial interest in any series of the Trust may be issued to a
shareholder upon his request when such shares are fully paid. All certificates
shall be signed in the name of the Trust by the Chairman of the Board or the
President or Vice President and by the Treasurer or an Assistant Treasurer or
the Secretary or any Assistant Secretary, certifying the number of shares and
the series of shares owned by the shareholders. Any or all of the signatures on
the certificate may be facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed on a
certificate shall have ceased to be that officer, transfer agent, or registrar
before that certificate is issued, it may be issued by the Trust with the same
effect as if that person were an officer, transfer agent or registrar at the
date of issue. Notwithstanding the foregoing, the Trust may adopt and use a
system of issuance, recordation and transfer of its shares by electronic or
other means.

Section 4. LOST CERTIFICATES. Except as provided in this Section 4, no
new certificates for shares shall be issued to replace an old certificate unless
the latter is surrendered to the Trust and canceled at the same time. The Board
of Trustees may in case any share certificate or certificate for any other
security is lost, stolen, or destroyed, authorize the issuance of a replacement
certificate on such terms and conditions as the Board of Trustees may require,
including a provision for indemnification of the Trust secured by a bond or
other adequate security sufficient to protect the Trust against any claim that
may be made against it, including any expense or liability on account of the
alleged loss, theft, or destruction of the certificate or the issuance of the
replacement certificate.

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Section 5. REPRESENTATION OF SHARES OF OTHER ENTITIES HELD BY TRUST.
The Chairman of the Board, the President or any Vice President or any other
person authorized by resolution of the Board of Trustees or by any of the
foregoing designated officers, is authorized to vote or represent on behalf of
the Trust any and all shares of any corporation, partnership, trusts, or other
entities, foreign or domestic, standing in the name of the Trust. The authority
granted may be exercised in person or by a proxy duly executed by such
designated person.

Section 6. FISCAL YEAR. The fiscal year of the Trust shall be fixed and
refixed or changed from time to time by resolution of the Trustees. The fiscal
year of the Trust shall be the taxable year of each Series of The Trust.

ARTICLE IX
AMENDMENTS

Section 1. AMENDMENT BY SHAREHOLDERS. These By-Laws may be amended or
repealed by the affirmative vote or written consent of a majority of the
outstanding shares entitled to vote, except as otherwise provided by applicable
law or by the Agreement and Declaration of Trust of the Trust or these By-Laws.

Section 2. AMENDMENT BY TRUSTEES. Subject to the right of shareholders
as provided in Section 1 of this Article to adopt, amend or repeal By-Laws, and
except as otherwise provided by applicable law or by the Agreement and
Declaration of Trust of the Trust, these By-Laws may be adopted, amended, or
repealed by the Board of Trustees.

Section 3. INCORPORATION BY REFERENCE INTO AGREEMENT AND DECLARATION OF
TRUST OF THE TRUST. These By-Laws and any amendments thereto shall be
incorporated by reference to the Agreement and Declaration of Trust of the
Trust.

INVESTMENT ADVISORY AGREEMENT

THIS INVESTMENT ADVISORY AGREEMENT made as of the _____ day of _____,
1999, by and between ALLEGIANCE INVESTMENT TRUST, a Delaware business trust
(hereinafter called the "Trust"), on behalf of each series of the Trust listed
in Appendix A hereto, as may be amended from time to time (hereinafter referred
to individually as a "Fund" and collectively as the "Funds") and VAN DEVENTER &
HOCH, a California general partnership (hereinafter called the "Adviser").

WITNESSETH:

WHEREAS, the Trust is an open-end management investment company,
registered as such under the Investment Company Act of 1940, as amended (the
"1940 Act"); and

WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and is engaged in the business of
supplying investment advice, investment management and administrative services,
as an independent contractor; and

WHEREAS, the Trust desires to retain the Adviser to render advice and
services to the Funds pursuant to the terms and provisions of this Agreement,
and the Adviser is interested in furnishing this advice and these services;

NOW, THEREFORE, in consideration of the covenants and the mutual
promises hereinafter set forth, the parties hereto, intending to be legally
bound hereby, mutually agree as follows:

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1. Appointment of Adviser. The Trust hereby employs the Adviser and the
Adviser hereby accepts this employment, to render investment advice and
management services with respect to the assets of the Funds for the period and
on the terms set forth in this Agreement, subject to the supervision and
direction of the Trust's Board of Trustees.

2. Duties of Adviser.

(a) General Duties. The Adviser shall act as investment
Adviser to the Funds and shall supervise investments of the Funds on behalf of
the Funds in accordance with the investment objectives, programs and
restrictions of the Funds as provided in the Trust's governing documents,
including, without limitation, the Trust's Agreement and Declaration of Trust
and By-Laws, or otherwise and such other limitations as the Trustees may impose
from time to time in writing to the Adviser. Without limiting the generality of
the foregoing, the Adviser shall: (i) furnish the Funds with advice and
recommendations with respect to the investment of each Fund's assets and the
purchase and sale of portfolio securities for the Funds, including the taking of
such other steps as may be necessary to implement such advice and
recommendations; (ii) furnish the Funds with reports, statements and other data
on securities, economic conditions and other pertinent subjects which the
Trust's Board of Trustees may reasonably request; (iii) manage the investments
of the Funds, subject to the ultimate supervision and direction of the Trust's
Board of Trustees; (iv) provide persons satisfactory to the Trust's Board of
Trustees to act as officers and employees of the Trust and the Funds (such
officers and employees, as well as certain trustees, may be trustees, directors,
officers, partners, or employees of the Adviser or its affiliates) but not
including personnel to provide administrative services or distribution services
to the Fund; and (v) render to the Trust's Board of Trustees such periodic and

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special reports with respect to each Fund's investment activities as the Board
may reasonably request.

(b) Brokerage. The Adviser shall place orders for the purchase
and sale of securities either directly with the issuer or with a broker or
dealer selected by the Adviser. In placing each Fund's securities trades, the
Adviser agrees to seek overall best execution. Within the framework of this
policy, the Adviser will consider favorability of price and efficiency of
execution and may consider the financial responsibility, research and investment
information, and other services provided by brokers or dealers who may effect or
be a party to any such transaction or other transactions to which other clients
of the Adviser may be a party.

It is also understood that it is desirable for the Funds that the
Adviser have access to investment and market research and securities and
economic analyses provided by brokers and others. It is also understood that
brokers providing such services may execute brokerage transactions at a higher
cost to the Funds than might result from the allocation of brokerage to other
brokers solely on the basis of seeking the most favorable price and efficient
execution. Therefore, the purchase and sale of securities for the Funds may be
made with brokers who provide this research and analysis, subject to review by
the Trust's Board of Trustees from time to time with respect to the extent and
continuation of this practice to determine whether each Fund benefits, directly
or indirectly, from this practice. It is understood by both parties that the
Adviser may select broker-dealers for the execution of the Funds' portfolio
transactions that provide research and analysis as the Adviser may lawfully and
appropriately use in its investment management and advisory capacities, whether
or not such research and analysis may also be useful to the Adviser in
connection with its services to other clients.

3
<PAGE>
On occasions when the Adviser deems the purchase or sale of a security
to be in the best interest of one or more of the Funds as well as of other
clients, the Adviser, to the extent permitted by applicable laws and
regulations, may aggregate the securities to be so purchased or sold in order to
obtain the most favorable price or lower brokerage commissions and the most
efficient execution. In this event, allocation of the securities so purchased or
sold, as well as the expenses incurred in the transaction, will be made by the
Adviser in the manner it considers to be the most equitable and consistent with
its fiduciary obligations to the Funds and to such other clients.

(c) Administrative Services. The Adviser, pursuant to a
separate Administrative Services Agreement, shall supervise the administration
of the Funds' business affairs although the provision of administrative
services, to the extent not covered by subparagraphs (a) or (b) above, is not
the obligation of the Adviser under this Agreement.

3. Best Efforts and Judgment. The Adviser shall use its best judgment
and efforts in rendering the advice and services to the Funds as contemplated by
this Agreement.

4. Independent Contractor. The Adviser shall, for all purposes herein,
be deemed to be an independent contractor, and shall, unless otherwise expressly
provided and authorized to do so, have no authority to act for or represent the
Trust or the Funds in any way, or in any way be deemed an agent for the Trust or
for the Funds. It is expressly understood and agreed that the services to be
rendered by the Adviser to the Funds under the provisions of this Agreement are
not to be deemed exclusive, and the Adviser shall be free to render similar or
different services to others so long as its ability to render the services
provided for in this Agreement shall not be impaired thereby.

4
<PAGE>
5. Adviser's Personnel. The Adviser shall, at its own expense, maintain
such staff and employ or retain such personnel and consult with such other
persons as it shall from time to time determine to be necessary to the
performance of its obligations under this Agreement. Without limiting the
generality of the foregoing, the staff and personnel of the Adviser shall be
deemed to include persons employed or retained by the Adviser to furnish
statistical information, research, and other factual information, advice
regarding economic factors and trends, information with respect to technical and
scientific developments, and such other information, advice and assistance as
the Adviser or the Trust's Board of Trustees may desire and reasonably request.

6. Reports by Funds to Adviser. Each Fund will from time to time
furnish to the Adviser detailed statements of its investments and assets, and
information as to its investment objective and needs, and will make available to
the Adviser such financial reports, proxy statements, legal and other
information relating to each Fund's investments as may be in its possession or
available to it, together with such other information as the Adviser may
reasonably request.

5
<PAGE>
7. Expenses.

(a) With respect to the operation of each Fund, the Adviser is
responsible for (i) the compensation of any of the Trust's trustees, officers,
and employees who are affiliates of the Adviser (but not the compensation of
employees performing services in connection with expenses which are the Fund's
responsibility under Subparagraph 7(b) below), (ii) the expenses of printing and
distributing the Funds' prospectuses, statements of additional information, and
sales and advertising materials (but not the legal, auditing or accounting fees
attendant thereto) to prospective investors (but not to existing shareholders),
and (iii) providing office space and equipment reasonably necessary for the
operation of the Funds.

(b) Each Fund is responsible for and has assumed the
obligation for payment of all of its expenses, other than as stated in
Subparagraph 7(a) above or to the extent not covered under a separate agreement
for administrative services, including but not limited to: fees and expenses
incurred in connection with the issuance, registration and transfer of its
shares; brokerage and commission expenses; all expenses of transfer, receipt,
safekeeping, servicing and accounting for the cash, securities and other
property of the Trust for the benefit of the Funds including all fees and
expenses of its custodian, shareholder services agent and accounting services
agent; interest charges on any borrowings; costs and expenses of pricing and
calculating its daily net asset value and of maintaining its books of account
required under the 1940 Act; taxes, if any; expenditures in connection with
meetings of each Fund's Shareholders and Board of Trustees that are properly
payable by the Fund; salaries and expenses of officers and fees and expenses of
members of the Trust's Board of Trustees or members of any advisory board or
committee who are not members of, affiliated with or interested persons of the
Adviser; insurance premiums on property or personnel of each Fund which inure to

6
<PAGE>
its benefit, including liability and fidelity bond insurance; the cost of
preparing and printing reports, proxy statements, prospectuses and statements of
additional information of the Fund or other communications for distribution to
existing shareholders; legal, auditing and accounting fees; trade association
dues; fees and expenses (including legal fees) of obtaining and maintaining any
required registration or notification for its shares for sale under federal and
applicable state and foreign securities laws; all expenses of maintaining and
servicing shareholder accounts, including all charges for transfer, shareholder
recordkeeping, dividend disbursing, redemption, and other agents for the benefit
of the Funds, if any; and all other charges and costs of its operation plus any
extraordinary and non-recurring expenses, except as herein otherwise prescribed.

(c) To the extent the Adviser incurs any costs by assuming
expenses which are an obligation of a Fund as set forth herein, such Fund shall
promptly reimburse the Adviser for such costs and expenses, except to the extent
the Adviser has otherwise agreed to bear such expenses. To the extent the
services for which a Fund is obligated to pay are performed by the Adviser, the
Adviser shall be entitled to recover from such Fund to the extent of the
Adviser's actual costs for providing such services.

7
<PAGE>
8. Investment Advisory Fee.

(a) Each Fund shall pay to the Adviser, and the Adviser agrees
to accept, as full compensation for all investment management and advisory
services furnished or provided to such Fund pursuant to this Agreement, an
advisory fee as set forth in the Fee Schedule attached hereto as Appendix A, as
may be amended in writing from time to time by the Trust and the Adviser.

(b) The advisory fee shall be accrued daily by each Fund and
paid to the Adviser upon its request.

(c) The initial fee under this Agreement shall be payable on
the first business day of the first month following the effective date of this
Agreement and shall be prorated as set forth below. If this Agreement is
terminated before the end of any month, the fee to the Adviser shall be prorated
for the portion of any month in which this Agreement is in effect which is not a
complete month according to the proportion which the number of calendar days in
the month during which the Agreement is in effect bears to the number of
calendar days in the month, and shall be payable within ten (10) days after the
date of termination.

(d) The Adviser may reduce any portion of the compensation or
reimbursement of expenses due to it pursuant to this Agreement and may agree to
make payments to limit the expenses which are the responsibility of a Fund under
this Agreement. Any such reduction or payment shall be applicable only to such
specific reduction or payment and shall not constitute an agreement to reduce
any future compensation or reimbursement due to the Adviser hereunder or to
continue future payments. Any such reduction will be agreed to before the

8
<PAGE>
accrual of the related expense or fee and will be estimated daily and reconciled
and paid on a monthly basis.

(e) The Adviser may agree not to require payment of any
portion of the compensation or reimbursement of expenses otherwise due to it
pursuant to this Agreement before the time that compensation or reimbursement
has accrued as a liability of the Fund. Any such agreement shall be applicable
only with respect to the specific items covered thereby and shall not constitute
an agreement not to require payment of any future compensation or reimbursement
due to the Adviser hereunder.

9. Fund Share Activities of Advisers Partners, Officers and Employees.
The Adviser agrees that neither it nor any of its partners, officers or
employees shall take any short position in the shares of the Funds. This
prohibition shall not prevent the purchase of such shares by any of the officers
and partners or bona fide employees of the Adviser or any trust, pension,
profit-sharing or other benefit plan for such persons or affiliates thereof, at
a price not less than the net asset value thereof at the time of purchase, as
allowed pursuant to rules promulgated under the 1940 Act.

10. Conflicts with Trust's Governing Documents and Applicable Laws.
Nothing herein contained shall be deemed to require the Trust or the Funds to
take any action contrary to the Trust's Agreement and Declaration of Trust,
By-Laws, or any applicable statute or regulation, or to relieve or deprive the
Board of Trustees of the Trust of its responsibility for and control of the
conduct of the affairs of the Trust and Funds.

9
<PAGE>
11. Adviser's Liabilities.

(a) In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the obligations or duties hereunder on the
part of the Adviser, the Adviser shall not be subject to liability to the Trust
or the Funds or to any shareholder of the Funds for any act or omission in the
course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security by the
Funds.

(b) The Funds shall indemnify and hold harmless the Adviser,
its general partners and the shareholders, directors, officers and employees of
each of them (any such person, an "Indemnified Party") against any loss,
liability, claim, damage or expense (including the reasonable cost of
investigating and defending any alleged loss, liability, claim, damage or
expenses and reasonable counsel fees incurred in connection therewith) arising
out of the Indemnified Party's performance or non-performance of any duties
under this Agreement provided, however, that nothing herein shall be deemed to
protect any Indemnified Party against any liability to which such Indemnified
Party would otherwise be subject by reason of willful misfeasance, bad faith or
negligence in the performance of duties hereunder or by reason of reckless
disregard of obligations and duties under this Agreement.

(c) No provision of this Agreement shall be construed to
protect any Trustee or officer of the Trust, or partner or officer of the
Adviser, from liability in violation of Sections 17(h) and (i) of the 1940 Act.

12. Non-Exclusivity. The Trust's employment of the Adviser is not an
exclusive arrangement, and the Trust may from time to time employ other
individuals or entities to furnish it with the services provided for herein. In

10
<PAGE>
the event this Agreement is terminated with respect to any Fund, this Agreement
shall remain in full force and effect with respect to all other Funds listed on
Appendix A hereto, as the same may be amended.

13. Term. This Agreement shall become effective on the date that is the
latest of (1) the execution of this Agreement, (2) the approval of this
Agreement by the Board of Trustees of the Trust and (3) the approval of this
Agreement by the shareholders of each Fund in a special meeting of shareholders
of the Fund or by unanimous written consent if the Fund has no public
shareholders. This Agreement shall remain in effect for a period of two (2)
years, unless sooner terminated as hereinafter provided. This Agreement shall
continue in effect thereafter for additional periods not exceeding one (l) year
so long as such continuation is approved for each Fund at least annually by (i)
the Board of Trustees of the Trust or by the vote of a majority of the
outstanding voting securities of each Fund and (ii) the vote of a majority of
the Trustees of the Trust who are not parties to this Agreement nor interested
persons thereof, cast in person at a meeting called for the purpose of voting on
such approval.

14. Termination. This Agreement may be terminated by the Trust on
behalf of any one or more of the Funds at any time without payment of any
penalty, by the Board of Trustees of the Trust or by vote of a majority of the
outstanding voting securities of a Fund, upon sixty (60) days' written notice to
the Adviser, and by the Adviser upon sixty (60) days' written notice to a Fund.

15. Termination by Assignment. This Agreement shall terminate
automatically if it is transferred or assigned, as defined in the 1940 Act.

11
<PAGE>
16. Transfer, Assignment. This Agreement may not otherwise be
transferred, assigned, sold or in any manner hypothecated or pledged without the
affirmative vote or written consent of the holders of a majority of the
outstanding voting securities of each Fund.

17. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute or rule, or shall be otherwise
rendered invalid, the remainder of this Agreement shall not be affected thereby.

18. Definitions. The terms "majority of the outstanding voting
securities" and "interested persons" shall have the meanings as set forth in the
1940 Act.

19. Notice of Declaration of Trust. The Adviser agrees that the Trust's
obligations under this Agreement shall be limited to the Funds and to their
assets, and that the Adviser shall not seek satisfaction of any such obligation
from the shareholders of the Funds nor from any trustee, officer, employee or
agent of the Trust or the Funds.

20. Captions. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect.

21. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of California without giving effect to
the conflict of laws principles thereof; provided that nothing herein shall be
construed to preempt, or to be inconsistent with, any federal law, regulation or
rule, including the 1940 Act and the Investment Advisers Act of 1940 and any
rules and regulations promulgated thereunder.

12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested by their duly authorized officers, all on the day and
year first above written.

ALLEGIANCE INVESTMENT TRUST VAN DEVENTER & HOCH

By: ____________________________ By: __________________________________

Title: __________________________ Title: ________________________________

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<PAGE>
APPENDIX A

FUND AND FEE SCHEDULE

Fund Effective Date Advisory Fee
- ---- -------------- ------------

Allegiance American Value Fund __________, 1999 0.70% of net assets per
annum

Allegiance Intermediate-Term __________, 1999 0.30% of net assets per
Bond Fund annum

Allegiance California Tax-Free __________, 1999 0.30% of net assets per
Intermediate Bond Fund annum

ADMINISTRATIVE SERVICES AGREEMENT

THIS ADMINISTRATIVE SERVICES AGREEMENT made as of the _____ day of
_____, 1999, by and between ALLEGIANCE INVESTMENT TRUST, a Delaware business
trust (hereinafter called the "Trust"), on behalf of each series of the Trust
listed in Appendix A hereto, as may be amended from time to time (hereinafter
referred to individually as a "Fund" and collectively as the "Funds") and VAN
DEVENTER & HOCH, a California general partnership (hereinafter called the
"Administrator").

WITNESSETH:

WHEREAS, the Trust is an open-end management investment company,
registered as such under the Investment Company Act of 1940, as amended (the
"1940 Act"); and

WHEREAS, the Administrator is registered as an investment adviser under
the Investment Advisers Act of 1940, as amended, and is engaged in the business
of supplying investment advice, investment management and administrative
services, as an independent contractor; and

WHEREAS, the Trust desires to retain the Administrator to provide
administrative services to the Funds pursuant to the terms and provisions of
this Agreement, and the Administrator is interested in furnishing these
services;

NOW, THEREFORE, in consideration of the covenants and the mutual
promises hereinafter set forth, the parties hereto, intending to be legally
bound hereby, mutually agree as follows:

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<PAGE>
1. Appointment of Administrator. The Trust hereby employs the
Administrator and the Administrator hereby accepts this employment, to provide
services with respect to the assets of the Funds for the period and on the terms
set forth in this Agreement, subject to the supervision and direction of the
Trust's Board of Trustees.

2. Duties of Administrator. The Administrator shall act as the primary
administrator for the Funds and shall provide administrative services either
directly or through other service providers it may retain. These services shall
be performed in accordance with the requirements of the 1940 Act and other
applicable federal and state laws, the supervision of the Board of Trustees, the
Trust's governing documents, including, without limitation, the Trust's
Agreement and Declaration of Trust and By-Laws, or otherwise and such other
limitations as the Trustees may impose from time to time in writing to the
Administrator. Without limiting the generality of the foregoing, the
Administrator shall:

(a) Coordinate the organization of the Trust and the
preparation of all documents and compensate of all accountants, lawyers, and
other service providers to complete that organization, register the Trust, the
Funds and their shares as necessary with the Securities and Exchange Commission,
and perform everything else necessary or appropriate to permit the sale of
shares of the Funds in the U.S. and various states and jurisdictions thereof;

(b) Performance measurement and analysis, including furnishing
performance data, statistical data and research data;

(c) Tax and treasury services, including preparing and filing
various reports (including tax returns) or other documents required by federal,
state and other applicable laws and regulations other than those required to be

2
<PAGE>
filed by other service providers retained by the Administrator (such as the
custodian or transfer agent);

(d) Management of printing, including assisting in the
preparation and printing of all documents, prospectuses and reports sent to
shareholders;

(e) Financial reporting and assisting in the preparation of
financial statements;

(f) Assisting in the preparation of all agendas, notices and
minutes for meetings of the Trust's Board of Trustees or shareholders; assisting
in the preparation of supporting information for such meetings with regard to
the duties of the Administrator under this Agreement, and collection and
distribution of supporting information for such meetings with respect to the
duties performed by other persons who provide services to the Trusts;

(g) Developing and monitoring compliance procedures for each
Fund concerning, among other matters, adherence of each Fund to its investment
objectives, policies, restrictions, tax matters and applicable laws and
regulations;

(h) Blue sky filings and monitoring;

(i) Management of legal services;

(j) Trust and Fund accounting;

(k) Pricing each Fund's portfolio securities;

(l) Transfer agent and shareholder servicing agent;

(m) Custodian for each Fund's portfolio securities (only
through the retention of a qualified third-party eligible custodian);

3
<PAGE>
(n) The retention of all records required to be maintained by
the 1940 Act and the rules thereunder; and

(o) All other necessary and appropriate ordinary
administrative and operating functions.

In performing its duties under this Agreement, the Administrator will
consult with legal counsel to, and the independent public accountants for, the
Trust, as necessary and appropriate, on whose advice the Administrator shall be
entitled to rely. The Trust will furnish the Administrator from time to time
with copies of any documents that the Administrator may reasonably request and
that are necessary for it to perform its obligations and duties under this
Agreement and will notify the Administrator as soon as possible of any matter
materially affecting the performance by the Administrator of its services under
this Agreement.

3. Best Efforts and Judgment. The Administrator shall use its best
judgment and efforts in providing services to the Funds as contemplated by this
Agreement.

4. Independent Contractor. The Administrator shall, for all purposes
herein, be deemed to be an independent contractor, and shall, unless otherwise
expressly provided and authorized to do so, have no authority to act for or
represent the Trust or the Funds in any way, or in any way be deemed an agent
for the Trust or for the Funds. It is expressly understood and agreed that the
services to be rendered by the Administrator to the Funds under the provisions
of this Agreement are not to be deemed exclusive, and the Administrator shall be
free to render similar or different services to others so long as its ability to
render the services provided for in this Agreement shall not be impaired
thereby.

4
<PAGE>
5. Administrator's Personnel. The Administrator shall, at its own
expense, maintain such staff and employ or retain such personnel and consult
with such other persons as it shall from time to time determine to be necessary
to the performance of its obligations under this Agreement.

6. Reports by Funds to Administrator. Each Fund will from time to time
furnish to the Administrator detailed statements of its investments and assets,
and information as to its investment objective and needs, and will make
available to the Administrator such financial reports, proxy statements, legal
and other information relating to each Fund's investments as may be in its
possession or available to it, together with such other information as the
Administrator may reasonably request.

7. Expenses.

(a) With respect to the operation of each Fund, the
Administrator is responsible for (i) the compensation of any of the Trust's
trustees, officers, and employees who are affiliates of the Administrator, (ii)
fees and expenses incurred in connection with the issuance, registration and
transfer of its shares; (iii) all expenses of transfer, receipt, safekeeping,
servicing and accounting for the cash, securities and other property of the
Trust for the benefit of the Funds including all fees and expenses of its
custodian, shareholder services agent and accounting services agent; (iv) costs
and expenses of pricing and calculating its daily net asset value and of
maintaining its books of account required under the 1940 Act; (v) expenditures
in connection with meetings of each Fund's shareholders and Board of Trustees;
(vi) insurance premiums on property or personnel of each Fund which inure to its
benefit, including liability and fidelity bond insurance; (vii) the cost of
preparing and printing reports, proxy statements, prospectuses and statements of

5
<PAGE>
additional information of the Fund or other communications for distribution to
existing shareholders; (viii) legal, auditing and accounting fees; (ix) trade
association dues; (x) fees and expenses (including legal fees) of obtaining and
maintaining any required registration or notification for its shares for sale
under federal and applicable state and foreign securities laws; (xi) all
expenses of maintaining and servicing shareholder accounts, including all
charges for transfer, shareholder recordkeeping, dividend disbursing,
redemption, and other agents for the benefit of the Funds, if any; and (xii) all
other charges and costs of its operation.

(b) Each Fund is responsible for and has assumed the
obligation for payment of the following expenses: (i) brokerage and commission
expenses; (ii) interest charges on any borrowings by the Fund; (iii) taxes, if
any; (iv) compensation and expenses of members of the Trust's Board of Trustees
or members of any advisory board or committee who are not members of, affiliated
with or interested person of the Administrator; and (v) any extraordinary and
non-recurring expenses.

(c) To the extent the Administrator incurs any costs by
assuming expenses which are an obligation of a Fund as set forth herein, such
Fund shall promptly reimburse the Administrator for such costs and expenses,
except to the extent the Administrator has otherwise agreed to bear such
expenses. To the extent the services for which a Fund is obligated to pay are
performed by the Administrator, the Administrator shall be entitled to recover
from such Fund to the extent of the Administrator's actual costs for providing
such services.

6
<PAGE>
8. Administrative Fee.

(a) Each Fund shall pay to the Administrator, and the
Administrator agrees to accept, as full compensation for all administrative
services furnished or provided to such Fund pursuant to this Agreement, an
administrative fee as set forth in the Fee Schedule attached hereto as Appendix
A, as may be amended in writing from time to time by the Trust and the
Administrator.

(b) The management fee shall be accrued daily by each Fund and
paid to the Administrator upon its request.

(c) The initial fee under this Agreement shall be payable on
the first business day of the first month following the effective date of this
Agreement and shall be prorated as set forth below. If this Agreement is
terminated before the end of any month, the fee to the Administrator shall be
prorated for the portion of any month in which this Agreement is in effect which
is not a complete month according to the proportion which the number of calendar
days in the month during which the Agreement is in effect bears to the number of
calendar days in the month, and shall be payable within ten (10) days after the
date of termination.

(d) The Administrator may reduce any portion of the
compensation or reimbursement of expenses due to it pursuant to this Agreement
and may agree to make payments to limit the expenses which are the
responsibility of a Fund under this Agreement. Any such reduction or payment
shall be applicable only to such specific reduction or payment and shall not
constitute an agreement to reduce any future compensation or reimbursement due
to the Administrator hereunder or to continue future payments. Any such

7
<PAGE>
reduction will be agreed to before the accrual of the related expense or fee and
will be estimated daily and reconciled and paid on a monthly basis.

(e) The Administrator may agree not to require payment of any
portion of the compensation or reimbursement of expenses otherwise due to it
pursuant to this Agreement before the time that compensation or reimbursement
has accrued as a liability of the Fund. Any such agreement shall be applicable
only with respect to the specific items covered thereby and shall not constitute
an agreement not to require payment of any future compensation or reimbursement
due to the Administrator hereunder.

9. Conflicts with Trust's Governing Documents and Applicable Laws.
Nothing herein contained shall be deemed to require the Trust or the Funds to
take any action contrary to the Trust's Agreement and Declaration of Trust,
By-Laws, or any applicable statute or regulation, or to relieve or deprive the
Board of Trustees of the Trust of its responsibility for and control of the
conduct of the affairs of the Trust and Funds.

10. Administrator's Liabilities.

(a) In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the obligations or duties hereunder on the
part of the Administrator, the Administrator shall not be subject to liability
to the Trust or the Funds or to any shareholder of the Funds for any act or
omission in the course of, or connected with, rendering services hereunder or
for any losses that may be sustained in the purchase, holding or sale of any
security by the Funds.

(b) The Funds shall indemnify and hold harmless the
Administrator, its general partners and the shareholders, directors, officers
and employees of each of them (any such person, an "Indemnified Party") against

8
<PAGE>
any loss, liability, claim, damage or expense (including the reasonable cost of
investigating and defending any alleged loss, liability, claim, damage or
expenses and reasonable counsel fees incurred in connection therewith) arising
out of the Indemnified Party's performance or non-performance of any duties
under this Agreement provided, however, that nothing herein shall be deemed to
protect any Indemnified Party against any liability to which such Indemnified
Party would otherwise be subject by reason of willful misfeasance, bad faith or
negligence in the performance of duties hereunder or by reason of reckless
disregard of obligations and duties under this Agreement.

(c) No provision of this Agreement shall be construed to
protect any Trustee or officer of the Trust, or partner or officer of the
Administrator, from liability in violation of Sections 17(h) and (i) of the 1940
Act.

11. Non-Exclusivity. The Trust's employment of the Administrator is not
an exclusive arrangement, and the Trust may from time to time employ other
individuals or entities to furnish it with the services provided for herein. In
the event this Agreement is terminated with respect to any Fund, this Agreement
shall remain in full force and effect with respect to all other Funds listed on
Appendix A hereto, as the same may be amended.

12. Term. This Agreement shall become effective on the date that is the
latest of (1) the execution of this Agreement and, (2) the approval of this
Agreement by a majority of the Trustees and who are not interested persons of
the Trust and by the full Board of Trustees of the Trust. This Agreement shall
remain in effect for a period of two (2) years, unless sooner terminated as
hereinafter provided. This Agreement shall continue in effect thereafter for
additional periods not exceeding one (l) year so long as such continuation is
approved for each Fund at least annually by (i) the full Board of Trustees of

9
<PAGE>
the Trust and (ii) the vote of a majority of the Trustees of the Trust who are
not parties to this Agreement nor interested persons thereof.

14. Termination. This Agreement may be terminated by the Trust on
behalf of any one or more of the Funds at any time without payment of any
penalty, by the Board of Trustees of the Trust or by vote of a majority of the
outstanding voting securities of a Fund, upon sixty (60) days' written notice to
the Administrator, and by the Administrator upon sixty (60) days' written notice
to a Fund.

15. Transfer, Assignment. This Agreement may not be transferred,
assigned, sold or in any manner hypothecated or pledged without the written
consent of the Trust.

16. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute or rule, or shall be otherwise
rendered invalid, the remainder of this Agreement shall not be affected thereby.

17. Definitions. The term "interested persons" shall have the meaning
as set forth in the 1940 Act.

18. Notice of Declaration of Trust. The Administrator agrees that the
Trust's obligations under this Agreement shall be limited to the Funds and to
their assets, and that the Administrator shall not seek satisfaction of any such
obligation from the shareholders of the Funds nor from any trustee, officer,
employee or agent of the Trust or the Funds.

19. Captions. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect.

10
<PAGE>
20. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of California without giving effect to
the conflict of laws principles thereof; provided that nothing herein shall be
construed to preempt, or to be inconsistent with, any federal law, regulation or
rule, including the 1940 Act and the Investment Advisers Act of 1940 and any
rules and regulations promulgated thereunder.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested by their duly authorized officers, all on the day and
year first above written.

ALLEGIANCE INVESTMENT TRUST VAN DEVENTER & HOCH

By: ____________________________ By: __________________________________

Title: __________________________ Title: ________________________________

11
<PAGE>
APPENDIX A

FUND AND FEE SCHEDULE

Fund Effective Date Administrative Services

Allegiance American Value Fund ___________, 1999 0.35% of net assets per
annum

Allegiance Intermediate-Term
Bond Fund ___________, 1999 0.10% of net assets per
annum

Allegiance CaliforniaTax-Free
Intermediate Bond Fund ___________, 1999 0.10% of net asset per
annum