ARMADA FUNDS, 497, 1997-03-10

ARMADA FUNDS
497, 1997-03-10

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<PAGE> 1

PROSPECTUS ARMADA

September 30, 1996 FUNDS

(As Revised March 10, 1997) MONEY

MARKET
ARMADA MONEY MARKET FUND
SERIES
ARMADA GOVERNMENT FUND

ARMADA TREASURY FUND ARMADA FUNDS LOGO
Financial Power Close at Hand
ARMADA TAX EXEMPT FUND

ARMADA PENNSYLVANIA TAX EXEMPT FUND

<PAGE> 2

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Expense Table............................................................................. 2
Financial Highlights...................................................................... 4
Introduction.............................................................................. 9
Investment Objectives and Policies........................................................ 9
Investment Limitations.................................................................... 16
Yield and Performance Information......................................................... 19
Pricing of Shares......................................................................... 19
How to Purchase and Redeem Shares......................................................... 20
Distribution Agreement.................................................................... 25
Shareholder Services Plan................................................................. 25
Dividends and Distributions............................................................... 26
Taxes..................................................................................... 26
Management of the Trust................................................................... 28
Description of the Trust and its Shares................................................... 30
Custodian and Transfer Agent.............................................................. 31
Expenses.................................................................................. 31
Miscellaneous............................................................................. 32
</TABLE>

- - SHARES OF THE ARMADA FUNDS ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED OR OTHERWISE SUPPORTED BY, NATIONAL CITY BANK; NATIONAL
CITY BANK OF COLUMBUS; NATIONAL CITY BANK OF KENTUCKY; NATIONAL ASSET
MANAGEMENT CORPORATION, THEIR PARENT COMPANY OR ANY OF THEIR AFFILIATES OR ANY
BANK.
- - SHARES OF THE ARMADA FUNDS ARE NOT INSURED OR GUARANTEED BY THE U.S.
GOVERNMENT, FDIC, OR ANY GOVERNMENTAL AGENCY OR STATE.
- - AN INVESTMENT IN THE ARMADA FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.

National City Bank and certain of its affiliates serve as investment advisers to
Armada Funds for which they receive an investment advisory fee. Past performance
is not indicative of future performance, and the investment return will
fluctuate, so that you may have a gain or loss when you sell your shares.

There can be no assurances the Armada Money Market, Government, Treasury, Tax
Exempt or Pennsylvania Tax Exempt Funds will be able to maintain a stable net
asset value of $1 per share. An investment in these funds is neither insured nor
guaranteed by the U.S. Government.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST
OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE TRUST
OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
<PAGE> 3

ARMADA FUNDS
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Oaks, Pennsylvania 19456 If you purchased your shares through NatCity Investments,
Inc. (formerly National City Investments Corporation),
please call your Investment Consultant for information.
For current performance, fund information, account
redemption information, and to purchase shares, please
call 1-800-622-FUND(3863).
</TABLE>

This Prospectus describes shares in the following five investment funds
(the "Funds") of Armada Funds (the "Trust"), each having its own investment
objective and policies:

Money Market Fund's investment objective is to seek as high a level of
current income as is consistent with liquidity and stability of principal. The
Fund invests in "money market" instruments such as bank certificates of deposit,
bankers' acceptances, and commercial paper (including variable and floating rate
notes) in addition to obligations issued or guaranteed by the U.S. government,
its agencies or instrumentalities and repurchase agreements relating to such
obligations.

Government Fund's investment objective is to seek as high a level of
current income as is consistent with liquidity and stability of principal. The
Fund invests in obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities and repurchase agreements relating to such
obligations.

Treasury Fund's investment objective is to seek as high a level of current
income as is consistent with liquidity and stability of principal. The Fund
invests in U.S. Treasury bills and notes and other direct obligations of the
U.S. Treasury.

Tax Exempt Fund's investment objective is to provide as high a level of
current interest income exempt from federal income tax as is consistent with
liquidity and stability of principal. The Fund invests in tax-exempt obligations
having remaining maturities of 397 calendar days or less, although variable and
floating rate instruments may bear longer maturities.

Pennsylvania Tax Exempt Fund's investment objective is to provide current
income exempt from regular federal income and Pennsylvania personal income
taxes, consistent with stability of principal. The Fund invests primarily in
high quality debt obligations issued by or on behalf of the Commonwealth of
Pennsylvania and its political subdivisions and financing authorities.
All securities or instruments in which the Funds invest have remaining
maturities of 397 calendar days or less, although variable and floating rate
instruments and securities underlying certain repurchase agreements may bear
longer maturities.
National City Bank ("National City"), National City Bank of Columbus
("National City Columbus") and National City Bank of Kentucky ("National City
Kentucky") serve as investment advisers to the Money Market, Government,
Treasury and Tax Exempt Funds; National City serves as investment adviser to the
Pennsylvania Tax Exempt Fund. These investment advisers are referred to herein
individually as an "adviser" and collectively as the "advisers." Weiss, Peck &
Greer, L.L.C. ("sub-adviser") serves as the investment sub-adviser to the
Pennsylvania Tax Exempt Fund.
SEI Financial Services Company (the "Distributor"), serves as the Trust's
sponsor and distributor. Each Fund pays a fee to the Distributor for
distributing its shares. See "Distribution Agreement."
This Prospectus sets forth concisely the information about the Funds that a
prospective investor should consider before investing. Investors should
carefully read this Prospectus and retain it for future reference. Additional
information about the Funds, contained in a Statement of Additional Information,
has been filed with the Securities and Exchange Commission ("SEC") and is
available upon request without charge by contacting the Trust at its telephone
number or address shown above. The Statement of Additional Information bears the
same date as this Prospectus and is incorporated by reference in its entirety
into this Prospectus.

SHARES OF THE TRUST ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED OR OTHERWISE SUPPORTED BY, NATIONAL CITY BANK, NATIONAL CITY BANK OF
COLUMBUS, NATIONAL CITY BANK OF KENTUCKY, THEIR PARENT COMPANY OR ANY OF THEIR
AFFILIATES, AND ARE NOT FEDERALLY INSURED OR GUARANTEED BY THE U.S. GOVERNMENT,
FEDERAL DEPOSIT INSURANCE CORPORATION, OR ANY GOVERNMENTAL AGENCY OR STATE.
INVESTMENT IN THE TRUST INVOLVES RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.

THERE CAN BE NO ASSURANCE THAT THE FUNDS WILL BE ABLE TO MAINTAIN A STABLE
NET ASSET VALUE OF $1.00 PER SHARE.

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

September 30, 1996

(As Revised March 10, 1997)
<PAGE> 4

EXPENSE TABLE

<TABLE>
<CAPTION>
MONEY MONEY
MARKET MARKET GOVERNMENT GOVERNMENT TREASURY
RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL
SHARES(1) SHARES SHARES(1) SHARES SHARES(1)
------------- ------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Charge Imposed on Purchases....... None None None None None
Sales Charge Imposed on Reinvested
Dividends............................. None None None None None
Deferred Sales Charge................... None None None None None
Exchange Fee............................ None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net
assets)
Management Fees (after fee waivers)(2).. .25% .25% .25% .25% .25%
12b-1 Fees (after fee waivers)(2,3)..... .05% .05% .05% .05% .05%
Other Expenses.......................... .18% .08% .20% .10% .24%
----- ----- ----- ----- -----
TOTAL FUND OPERATING EXPENSES
(after fee waivers)(2)............ .48% .38% .50% .40% .54%
=========== =========== =========== ============= =============
</TABLE>

<TABLE>
<CAPTION>
PENNSYLVANIA PENNSYLVANIA
TREASURY TAX EXEMPT TAX EXEMPT TAX EXEMPT TAX EXEMPT
INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL
SHARES SHARES(1) SHARES SHARES(1) SHARES
------------- ----------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Charge Imposed on Purchases....... None None None None None
Sales Charge Imposed on Reinvested
Dividends............................. None None None None None
Deferred Sales Charge................... None None None None None
Exchange Fee............................ None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net
assets)
Management Fees (after fee waivers)(2).. .25% .15% .15% .15% .15%
12b-1 Fees (after fee waivers)(2,3)..... .05% .05% .05% .05% .05%
Other Expenses.......................... .14% .24% .14% .24% .14%
----- ----- ----- ----- -----
TOTAL FUND OPERATING EXPENSES
(after fee waivers)(2)........... .44% .44% .34% .44% .34%
=========== =========== =========== ============= =============
</TABLE>

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

1 The Trust has implemented a Shareholder Services Plan (the "Services Plan")
with respect to Retail shares in each of the Funds. Pursuant to the Services
Plan, the Trust enters into shareholder servicing agreements with certain
financial institutions under which they agree to provide shareholder
administrative services to their customers who beneficially own Retail shares
in consideration for the payment of up to .10% (on an annualized basis) of the
net asset value of such shares. For further information concerning the
Services Plan, see "Shareholder Services Plan."

2 The expense information in the table relating to each Fund has been restated
to reflect current fees. For the current fiscal year, the Investment Advisers
will voluntarily waive fees in the amount of .10% of the average daily net
assets of the Money Market and Government Funds, .05% of the average daily net
assets of the Treasury Fund, .20% of the average daily net assets of the Tax
Exempt Fund and .25% of the average daily net assets of the Pennsylvania Tax
Exempt Fund (the Investment Advisers are entitled to receive an advisory fee,
computed daily and payable monthly, at the annual rate of .35% of the average
daily net assets of each of the Money Market, Government and Tax Exempt Funds,
.30% of the average daily net assets of the Treasury Fund and .40% of the
average daily net assets of the Pennsylvania Tax Exempt Fund pursuant to their
Advisory Agreement with the Trust). Without such fee waivers, Total Fund
Operating Expenses would be .58% and.48% for the Retail and Institutional
shares of the Money Market Fund, respectively, .60% and .50% for the Retail
and Institutional shares of the Government Fund, respectively, .59% and .49%
for the Retail and Institutional Shares of the Treasury Fund, respectively,
.64% and .54% for the Retail and Institutional shares of the Tax Exempt Fund,
respectively, and .69% and .59% for the Retail and Institutional shares of the
Pennsylvania Tax

2
<PAGE> 5

Exempt Fund, respectively. Additionally, waivers of 12b-1 fees are expected to
be in effect during the current fiscal year. If the maximum distribution fee
permitted under the 12b-1 Plan were imposed, Total Fund Operating Expenses would
be .63% and .53%, .65% and .55%, .64% and .54%, .69% and .59% and .74% and .64%
for the Retail and Institutional shares of the Money Market Fund, Government
Fund, Treasury Fund, Tax Exempt Fund and Pennsylvania Tax Exempt Fund,
respectively.

3 The Funds have in effect 12b-1 Plans pursuant to which each Fund may bear fees
in an amount of up to .10% of average daily net assets. As a result of the
payment of 12b-1 fees, long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charge permitted by the National
Association of Securities Dealers, Inc. ("NASD"). The NASD has adopted rules
which generally limit the aggregate payments under the Trust's Service and
Distribution Plan ("Distribution Plan") and Services Plan to a certain
percentage of total new gross share sales, plus interest. The Trust would stop
accruing 12b-1 and related fees if, to the extent, and for as long as, such
limit would otherwise be exceeded.
- ---------------

For example, you would pay the following expenses on a hypothetical $1,000
investment, assuming: (1) a 5% annual return (a hypothetical return required by
SEC regulations); and (2) the redemption of your investment at the end of the
following time periods (none of the Funds charges a redemption fee):

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Money Market Retail Shares............................. $5 $ 15 $ 27 $ 60
Money Market Institutional Shares...................... $4 $ 12 $ 21 $ 48
Government Retail Shares............................... $5 $ 16 $ 28 $ 63
Government Institutional Shares........................ $4 $ 13 $ 22 $ 51
Treasury Retail Shares................................. $6 $ 17 $ 30 $ 68
Treasury Institutional Shares.......................... $5 $ 14 $ 25 $ 55
Tax Exempt Retail Shares............................... $5 $ 14 $ 25 $ 55
Tax Exempt Institutional Shares........................ $3 $ 11 $ 19 $ 43
Pennsylvania Tax Exempt Retail Shares.................. $5 $ 14 $ 25 $ 55
Pennsylvania Tax Exempt Institutional Shares........... $3 $ 11 $ 19 $ 43
</TABLE>

THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATES OF RETURN. ACTUAL EXPENSES AND RATES OF RETURN MAY BE GREATER
OR LESS THAN THOSE SHOWN.

The purpose of this Expense Table is to assist an investor in understanding
the various costs and expenses that an investor in the Trust will bear directly
or indirectly. For more complete descriptions of these costs and expenses, see
"Financial Highlights," "Management of the Trust" and "Distribution Agreement"
in this Prospectus and the financial statements and related notes incorporated
by reference into the Statement of Additional Information for the Money Market,
Government, Treasury, Tax Exempt and Pennsylvania Tax Exempt Funds. Any fees
that are charged by affiliates of the advisers or other institutions directly to
their customer accounts for services related to an investment in shares of any
of the Funds are in addition to and not reflected in the fees and expenses
described above.

3
<PAGE> 6

FINANCIAL HIGHLIGHTS

(For a Fund share outstanding throughout each period)

MONEY MARKET FUND

The following information has been derived from financial statements audited
by Ernst & Young LLP, independent auditors, whose report is incorporated by
reference in the Statement of Additional Information. It should be read in
conjunction with the financial statements and related notes which are
incorporated by reference in the Statement of Additional Information.
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
1996 1996 1995 1995 1994 1994
INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL
------------- -------- ------------- -------- ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------- -------- ------------- -------- ------------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income....... .0532 .0522 .0500 .0490 .0287 .0277
LESS DISTRIBUTIONS
Dividends from Net
Investment Income......... (.0532) (.0522) (.0500) (.0490) (.0287) (.0277)
------------- -------- ------------- -------- ------------- -------
Net Asset Value, End of
Period...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== ========= =========== ========= =========== ========
TOTAL RETURN................. 5.45% 5.35% 5.11% 5.01% 2.91% 2.81%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
(000s).................... $ 1,344,414 $343,087 $ 1,083,243 $175,192 $ 743,377 $67,229
Ratio of Expenses to Average
Net Assets (after fee
waivers).................. .37%(5) .47%(6) .37%(5) .47%(6) .43%(5) .53%(6)
Ratio of Net Investment
Income to Average Net
Assets (after fee
waivers).................. 5.30%(5) 5.18%(6) 5.07%(5) 5.12%(6) 2.94%(5) 2.78%(6)

<CAPTION>
YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED YEAR
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, ENDED
1993 1993 1992 1992 1991 1991(2) MAY 31,
INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL 1990
------------- ------- -------------- ------- -------------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------- ------- ------- ------- ------- ------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income....... .0289 .0279 .0451 .0441 .0710 0092 .0836
LESS DISTRIBUTIONS
Dividends from Net
Investment Income......... (.0289) (.0279) (.0451) (.0441) (.0710) (.0092) (.0836)
------------- ------- ------- ------- ------- ------- --------
Net Asset Value, End of
Period...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== ======== =========== ======== =========== ======== =========
TOTAL RETURN................. 2.93% 2.82% 4.59% 4.50% 7.34% 5.64%(3) 8.69%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
(000s).................... $ 399,191 $57,710 $352,578 $28,497 $322,943 $22,658 $365,468
Ratio of Expenses to Average
Net Assets (after fee
waivers).................. .43% .53% .43% .53% .42% .52%(3) .42%
Ratio of Net Investment
Income to Average Net
Assets (after fee
waivers).................. 2.89% 2.79% 4.51% 4.41% 7.52% 6.03%(3) 8.37%

YEAR YEAR PERIOD
ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31,
1989 1988 1987(1)
-------- -------- --------
<S> <C> <C> <C>
Net Asset Value,
Beginning of Period......... $ 1.00 $ 1.00 $ 1.00
-------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income....... .0835 .0666 .0429
LESS DISTRIBUTIONS
Dividends from Net
Investment Income......... (.0835) (.0666) (.0429)
-------- -------- --------
Net Asset Value, End of
Period...................... $ 1.00 $ 1.00 $ 1.00
========= ========= =========
TOTAL RETURN................. 8.66% 6.87% 5.93%(3)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
(000s).................... $387,631 $370,064 $210,660
Ratio of Expenses to Average
Net Assets (after fee
waivers).................. .44% .44%(4) .36%(3,4)
Ratio of Net Investment
Income to Average Net
Assets (after fee
waivers).................. 8.35% 6.69%(4) 5.85%(3,4)
</TABLE>

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

1 The Money Market Fund commenced operations on September 3, 1986.

2 Retail class commenced operations on April 1, 1991.

3 Annualized.

4 The operating expense ratio and net investment income ratio before fee waivers
by the Investment Advisers for the year ended May 31, 1988 were .45% and
6.68%, respectively, and for the period ended May 31, 1987 were .48% and
5.73%, respectively.

5 The operating expense ratio and net investment income ratio before fee waivers
by the Investment Advisers and Custodian for the Institutional class for the
years ended May 31, 1996 and 1995 would have been .48% and 5.19% and .48% and
4.96%, respectively. The operating expense ratio and net investment income
ratio before fee waivers by the Investment Advisers for the Institutional
class for the year ended May 31, 1994 would have been .45% and 2.92%.

6 The operating expense ratio and net investment income ratio before fee waivers
by the Investment Advisers and Custodian for the Retail class for the years
ended May 31, 1996 and 1995 would have been .58% and 5.07% and .58% and 5.01%,
respectively. The operating expense ratio and net investment income ratio
before fee waivers by the Investment Advisers for the Retail class for the
year ended May 31, 1994 would have been .55% and 2.76%.

4
<PAGE> 7

FINANCIAL HIGHLIGHTS

(For a Fund share outstanding throughout each period)

GOVERNMENT FUND

Net Investment Income........... .0528 .0518 .0486 .0476 .0287 .0277

LESS DISTRIBUTIONS
Dividends from Net Investment
Income.......................... (.0528) (.0518) (.0486) (.0476) (.0287) (.0277)
------ -------- ------ ------- ------ -------
Net Asset Value, End of Period... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== ======== =========== ======= =========== =======
TOTAL RETURN..................... 5.41% 5.31% 4.97% 4.87% 2.91% 2.80%

RATIOS/SUPPLEMENTAL DATA

Net Assets, End of Period
(000s)........................ $ 741,894 $131,194 $ 618,058 $19,174 $ 768,337 $6,945

Ratio of Expenses to Average Net
Assets (after fee waivers).... .36%(4) .46%(5) .39%(4) .51%(5) .42%(4) .52%(5)

Ratio of Net Investment Income
to Average Net Assets (after
fee waivers).................. 5.27%(4) 5.13%(5) 4.83%(4) 5.01%(5) 2.92%(4) 2.75%(5)

<CAPTION>
YEAR YEAR PERIOD
YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
1993 1993 1992 1992 1991 19912
INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL
------------- ------- -------------- ------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period.......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------- ------ ------- ------ ----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income........... .0287 .0277 .0456 .0446 .0695 .0093
LESS DISTRIBUTIONS
Dividends from Net Investment
Income.......................... (.0287) (.0277) (.0456) (.0446) (.0695) (.0093)
------ ------- ------ ------- ------ ----------
Net Asset Value, End of Period... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== ======= =========== ======= =========== ==========
TOTAL RETURN..................... 2.91% 2.81% 4.65% 4.55% 7.17% 5.63%(3)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
(000s)........................ $ 272,809 $11,050 $148,389 $2,234 $136,376 $ 3,671
Ratio of Expenses to Average Net
Assets (after fee waivers).... .45%(4) .55%(5) .45%(4) .55%(5) .45%(4) .55%(3,5)
Ratio of Net Investment Income
to Average Net Assets (after
fee waivers).................. 2.84%(4) 2.74%(5) 4.49%(4) 4.39%(5) 6.81%(4) 5.47%(3,5)

YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
1990 1989 1988 1987(1)
-------- -------- ------- --------
Net Asset Value, Beginning of
Period.......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income........... .0821 .0807 .0640 .0144
LESS DISTRIBUTIONS
Dividends from Net Investment
Income.......................... (.0821) (.0807) (.0640) (.0144)
-------- -------- ------- -------
Net Asset Value, End of Period... $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======= =======
TOTAL RETURN..................... 8.53% 8.38% 6.59% 5.98%(3)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
(000s)........................ $110,675 $ 74,684 $62,963 $37,028
Ratio of Expenses to Average Net
Assets (after fee waivers).... .45%(4) .45%(4) .41%(4) .35%(3,4)
Ratio of Net Investment Income
to Average Net Assets (after
fee waivers).................. 8.16%(4) 8.20%(4) 6.42%(4) 5.86%(3,4)
</TABLE>

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

1 The Government Fund commenced operations on March 3, 1987.

2 Retail class commenced operations on April 1, 1991.

3 Annualized.

4 The operating expense ratio and net investment income ratio before fee waivers
by the Investment Advisers and Custodian for the Institutional class for the
years ended May 31, 1996 and 1995 would have been .47% and 5.16% and .50% and
4.72%, respectively. The operating expense ratio and net investment income
ratio before fee waivers by the Investment Advisers for the Institutional
class for the years ended May 31, 1994, 1993, 1992, 1991, 1990, 1989 and 1988
and for the period ended 1987 would have been .44% and 2.90%, .46% and 2.82%,
.46% and 4.48%, .47% and 6.79%, .46% and 8.15%, .48% and 8.17%, .55% and
6.28%, and .78% and 5.43%, respectively.

5 The operating expense ratio and net investment income ratio before fee waivers
by the Investment Advisers and Custodian for the Retail class for the years
ended May 31, 1996 and 1995 would have been .57% and 5.02% and .63% and 4.90%,
respectively. The operating expense ratio and net investment income ratio
before fee waivers by the Investment Advisers for the Retail class for the
years ended May 31, 1994, 1993 and 1992 and for the period ended May 31, 1991
would have been .54% and 2.73%, .56% and 2.72%, .56% and 4.38%, and .56% and
5.46%, respectively.

5
<PAGE> 8

FINANCIAL HIGHLIGHTS

(For a Fund share outstanding throughout each period)

TREASURY FUND

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED PERIOD ENDED PERIOD ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
1996 1996 1995 1995
INSTITUTIONAL RETAIL INSTITUTIONAL(1) RETAIL(2)
-------------- ---------- ---------------- ------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period............ $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------------- ---------- ------------- ------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income......................... .0496 .0486 .0456 .0232
LESS DISTRIBUTIONS
Dividends from Net Investment Income.......... (.0496) (.0486) (.0456) (.0232)
-------------- ---------- ------------- ------------
Net Asset Value, End of Period.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00
============= ========= =========== ============
TOTAL RETURN.................................... 5.07% 4.97% 4.86%(3) 5.41%(3)
RATIO/SUPPLEMENTAL DATA
Net Assets, End of Period (000's)............. $312,255 $ 4,355 $ 142,877 $ 366
Ratio of Expenses to Average Net Assets
(after fee waivers)........................ .41%(4) .52%(5) .43%(3,4) .56%(3,5)
Ratio of Net Investment Income to Average
Net Assets (after fee waivers)............. 4.88%(4) 4.77%(5) 4.78%(3,4) 5.35%(3,5)
</TABLE>

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

1 Institutional class commenced operations on June 16, 1994.

2 Retail class commenced operations on December 22, 1994.

3 Annualized.

4 The operating expense ratio and net investment income ratio before fee waivers
by the Investment Advisers and Custodian for the Institutional class for the
year ended May 31, 1996 and for the period ended May 31, 1995 would have been
.47% and 4.82% and .49% and 4.72%, respectively.

5 The operating expense ratio and net investment income ratio before fee waivers
by the Investment Advisers and Custodian for the Retail class for the year
ended May 31, 1996 and for the period ended May 31, 1995 would have been .58%
and 4.71% and .63% and 5.28%, respectively.

6
<PAGE> 9

FINANCIAL HIGHLIGHTS

(For a Fund share outstanding throughout each period)

TAX EXEMPT FUND

The following information has been derived from financial statements audited
by Ernst & Young LLP, independent auditors, whose reports are incorporated by
reference in the Statement of Additional Information. It should be read in
conjunction with the financial statements and related notes which are
incorporated by reference in the Statement of Additional Information.
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
1996 1996 1995 1995 1994 1994
INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL
------------- ------- ------------- ------- ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- ------- -------- ------- -------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income....... .0334 .0324 .0309 .0299 .0204 .0194
LESS DISTRIBUTIONS
Dividends from Net
Investment Income......... (.0334) (.0324) (.0309) (.0299) (.0204) (.0194)
-------- ------- -------- ------- -------- -------
Net Asset Value, End of
Period...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======= ======== ======= ======== =======
TOTAL RETURN................. 3.40% 3.29% 3.14% 3.04% 2.06% 1.96%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
(000s).................... $ 261,808 $85,928 $ 172,643 $51,916 $ 139,015 $17,819
Ratio of Expenses to Average
Net Assets (after fee
waivers).................. .30%(4) .40%(5) .35%(4) .46%(5) .33%(4) .43%(5)
Ratio of Net Investment
Income to Average Net
Assets (after fee
waivers).................. 3.33%(4) 3.23%(5) 3.15%(4) 3.17%(5) 2.05%(4) 1.94%(5)

<CAPTION>
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED YEAR
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, ENDED
1993 1993 1992 1992 1991 1991(2) MAY 31,
INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL 1990
------------- ------- ------------- ------- ------------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- ------ -------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income....... .0216 .0206 .0351 .0341 .0517 .0069 .0581
LESS DISTRIBUTIONS
Dividends from Net
Investment Income......... (.0216) (.0206) (.0351) (.0341) (.0517) (.0069) (.0581)
------- ------- ------- ------- ------- ------ -------
Net Asset Value, End of
Period...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= ====== =======
TOTAL RETURN................. 2.18% 2.07% 3.57% 3.47% 5.29% 4.24%(3) 5.96%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
(000s).................... $58,928 $17,791 $60,079 $10,745 $63,559 $4,922 $73,265
Ratio of Expenses to Average
Net Assets (after fee
waivers).................. .36%(4) .46%(5) .28%(4) .38%(5) .20%(4) .28%(3,5) .21%(4)
Ratio of Net Investment
Income to Average Net
Assets (after fee
waivers).................. 2.16%(4) 2.06%(5) 3.45%(4) 3.35%(5) 5.14%(4) 4.15%(3,5) 5.82%(4)

PERIOD
ENDED
MAY 31,
19891
-------
Net Asset Value, Beginning of
Period...................... $ 1.00
-------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income....... .0513
LESS DISTRIBUTIONS
Dividends from Net
Investment Income......... (.0513)
-------
Net Asset Value, End of
Period...................... $ 1.00
=======
TOTAL RETURN................. 6.03%(3)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
(000s).................... $87,770
Ratio of Expenses to Average
Net Assets (after fee
waivers).................. .31%(3,4)
Ratio of Net Investment
Income to Average Net
Assets (after fee
waivers).................. 5.93%(3,4)
</TABLE>

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

1 The Tax Exempt Fund commenced operations on July 20, 1988.

2 Retail class commenced operations on April 1, 1991.

3 Annualized.

4 The operating expense ratio and net investment income ratio before fee waivers
by the Investment Advisers and Custodian for the Institutional class for the
years ended May 31, 1996 and 1995 would have been .51% and 3.12% and .56% and
2.94%, respectively. The operating expense ratio and net investment income
ratio before fee waivers by the Investment Advisers for the Institutional
class for the years ended May 31, 1994, 1993, 1992, 1991, 1990, and the period
ended May 31, 1989 would have been .53% and 1.85%, .56% and 1.96%, .54% and
3.20%, .55% and 4.79%, .27% and 5.76%, and .51% and 5.73%, respectively.

5 The operating expense ratio and net investment income ratio before fee waivers
by the Investment Advisers and Custodian for the Retail class for the years
ended May 31, 1996 and 1995 would have been .61% and 3.02% and .67% and 2.96%,
respectively. The operating expense ratio and net investment income ratio
before fee waivers by the Investment Advisers for the Retail class for the
years ended May 31, 1994, 1993, 1992, and for the period ended May 31, 1991
would have been .63% and 1.74%, .66% and 1.86%, .64% and 3.10%, and .63% and
3.80%, respectively.

7
<PAGE> 10

FINANCIAL HIGHLIGHTS

(For a Fund share outstanding throughout the period)

PREDECESSOR PENNSYLVANIA TAX EXEMPT FUND

The Fund commenced operations on August 8, 1994 as a separate investment
portfolio (the "Predecessor Pennsylvania Tax Exempt Fund") of Inventor Funds,
Inc., which was organized as a Maryland corporation. On September 9, 1996, the
Fund was reorganized as a new portfolio of the Trust. Prior to the
reorganization, the Predecessor Pennsylvania Tax Exempt Fund offered and sold
Retail Shares that were similar to the Fund's Retail Shares.

The financial highlights presented below set forth certain information
concerning the investment results of the Predecessor Pennsylvania Tax Exempt
Fund's Retail Shares (the series that is similar to the Retail Shares of the
Pennsylvania Tax Exempt Fund) for the fiscal period from May 1, 1996 to May 31,
1996, the fiscal year ended April 30, 1996 and the fiscal period ended April 30,
1995. As part of the reorganization, the fiscal year of the Predecessor
Pennsylvania Tax Exempt Fund was changed to coincide with the Trust's May 31
fiscal year. A one-month financial report representing the Predecessor
Pennsylvania Tax Exempt Fund's operations from May 1, 1996 through May 31, 1996
is being presented. The information was derived from financial statements
audited by Coopers & Lybrand L.L.P., independent accountants for the Predecessor
Pennsylvania Tax Exempt Fund, whose reports thereon are contained in Inventor
Funds' Annual Reports to Shareholders for the fiscal year ended April 30, 1996
and the period ended May 31, 1996. Such financial highlights should be read in
conjunction with the financial statements and notes thereto contained in
Inventor Funds' Annual Reports to Shareholders and incorporated by reference
into the Statement of Additional Information relating to the Pennsylvania Tax
Exempt Fund.

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

1 Commenced operations on August 8, 1994. The Fund did not offer Institutional
shares during the period covered by the Financial Highlights.

2 Not annualized.

3 The operating expense ratio and the net investment income ratio before fee
waivers by the investment adviser for the fiscal period ended May 31, 1996,
the year ended April 30, 1996 and for the period ended April 30, 1995 would
have been 0.97% and 2.82%, 0.96% and 2.88%, and 1.04% and 2.72%, respectively.

4 Annualized.

8
<PAGE> 11

INTRODUCTION

The Trust is an open-end management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"). Each Fund consists
of a separate pool of assets with separate investment objectives and policies as
described below under "Risk Factors, Investment Objectives and Policies." Each
Fund is classified as a diversified investment company under the 1940 Act.

Shares of each Fund have been classified into two separate
classes -- Retail shares and Institutional shares. Retail shares and
Institutional shares represent equal pro rata interests in a Fund except that,
as described more fully under "Shareholder Services Plan," the Trust has
implemented the Services Plan with respect to Retail shares in the Funds. Under
the Services Plan, only the beneficial owners of Retail shares bear the expenses
of shareholder administrative services which are provided by financial
institutions for their benefit (not to exceed .10% annually). See "Shareholder
Services Plan," "Dividends and Distributions" and "Description of the Trust and
Its Shares" for a description of the impact that the Services Plan may have on
holders of Retail shares.

INVESTMENT OBJECTIVES AND POLICIES

The investment objective of a Fund may not be changed without the vote of
the holders of a majority of its outstanding shares (as defined in
"Miscellaneous"). Except as noted below under "Investment Limitations," a Fund's
investment policies, however, may be changed without a vote of shareholders.
There can be no assurance that a Fund will achieve its objective.

Each Fund will only purchase "eligible securities" that present minimal
credit risks as determined by the advisers pursuant to guidelines established by
the Trust's Board of Trustees. Eligible securities generally include (i) U.S.
government obligations, (ii) securities that are rated (at the time of purchase)
by nationally recognized statistical rating organizations ("Rating Agencies") in
the two highest rating categories for such securities, and (iii) certain
securities that are not so rated but are of comparable quality to rated eligible
securities as determined by the advisers. See "Risk Factors, Investment
Objectives and Policies" in the Statement of Additional Information for a more
complete description of eligible securities. A description of ratings is also
contained in the Statement of Additional Information.

Each Fund's assets have remaining maturities of 397 calendar days or less
(except for certain variable and floating rate instruments and securities
underlying certain repurchase agreements) as defined by the SEC and each Fund's
dollar-weighted average portfolio maturity may not exceed 90 days.

MONEY MARKET FUND

The investment objective of the Money Market Fund is to seek as high a
level of current income as is consistent with liquidity and stability of
principal. The Fund seeks to achieve its objective by investing in "money
market" instruments such as certificates of deposit and other obligations issued
by domestic and foreign banks, and commercial paper (including variable and
floating rate instruments) rated high quality by an unaffiliated Rating Agency,
or determined to be of comparable quality by the advisers. The Money Market Fund
may also invest in obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities, and repurchase agreements issued by financial
institutions such as banks and broker-dealers. See "Common Investment Policies
of the Funds -- Money Market Instruments."

GOVERNMENT FUND

The investment objective of the Government Fund is to seek as high a level
of current income as is consistent with liquidity and stability of principal.
The Fund seeks to achieve its objective by investing in obligations issued or
guaranteed as to payment of principal and interest by the U.S. government, its
agencies or instrumentalities, and repurchase agree-

9
<PAGE> 12

ments issued by financial institutions such as banks and broker-dealers. See
"Common Investment Policies of the Funds -- Government Obligations."

TREASURY FUND

The investment objective of the Treasury Fund is to seek as high a level of
current income as is consistent with liquidity and stability of principal. The
Fund seeks to achieve its objective by investing exclusively in direct
obligations of the U.S. Treasury, such as Treasury bills and notes. See "Common
Investment Policies of the Funds."

TAX EXEMPT FUND

The investment objective of the Tax Exempt Fund is to provide as high a
level of current interest income exempt from federal income tax as is consistent
with liquidity and stability of principal. The Fund seeks to achieve its
objective by investing substantially all of its assets in a diversified fund of
obligations issued by or on behalf of states, territories and possessions of the
United States, the District of Columbia and their political subdivisions,
agencies, instrumentalities and authorities, the interest on which, in the
opinion of counsel issued on the date of the issuance thereof, is exempt from
regular federal income tax ("Municipal Securities").

Under normal market conditions, at least 80% of the value of the Tax Exempt
Fund's total assets will be invested in Municipal Securities. This policy is
fundamental and may not be changed without the affirmative vote of the holders
of a majority of the Fund's outstanding shares (as defined under
"Miscellaneous"). The Fund may hold uninvested cash reserves pending investment,
during temporary defensive periods or if, in the opinion of the advisers,
desirable tax-exempt obligations are unavailable. There is no percentage
limitation on the amount of assets which may be held uninvested during temporary
defensive periods; however, uninvested cash reserves will not earn income. See
"Common Investment Policies of the Funds."

Although the Tax Exempt Fund may invest 25% or more of its net assets in
(a) Municipal Securities whose issues are in the same state, (b) Municipal
Securities the interest on which is paid solely from revenues of similar
projects, and (c) private activity bonds (described below), it does not
presently intend to do so unless in the opinion of its advisers the investment
is warranted. To the extent that the Fund's assets are invested in Municipal
Securities that are payable from the revenues of similar projects or are issued
by issuers located in the same state or are invested in private activity bonds,
the Fund will be subject to the peculiar risks presented by the laws and
economic conditions relating to such states, projects and bonds to a greater
extent than it would be if its assets were not so invested.

PENNSYLVANIA TAX EXEMPT FUND

The investment objective of the Pennsylvania Tax Exempt Fund is to provide
current income exempt from regular federal income tax and Pennsylvania personal
income taxes, consistent with stability of principal. It is a fundamental policy
of the Fund to use its best efforts to maintain a constant net asset value of
$1.00 per share.

The Pennsylvania Tax Exempt Fund invests primarily in debt obligations
issued by or on behalf of the Commonwealth of Pennsylvania and its political
subdivisions and financing authorities, and obligations of the United States,
including territories and possessions of the United States, the income from
which is, in the opinion of qualified legal counsel, exempt from federal regular
income tax and Pennsylvania state income tax imposed upon non-corporate
taxpayers ("Pennsylvania Municipal Securities"). As a matter of fundamental
policy, the Fund invests its assets so that at least 80% of its annual interest
income is not only exempt from regular federal income tax and Pennsylvania
personal income taxes, but is not considered a preference item for purposes of
the alternative minimum tax.

The Pennsylvania Tax Exempt Fund is concentrated in securities issued by
the Commonwealth of Pennsylvania or entities within the Commonwealth of
Pennsylvania, and therefore investment in the Fund may be riskier than an
investment in other types of money market funds.

10
<PAGE> 13

The Fund may invest in variable and floating rate obligations, may purchase
securities on a "when-issued" basis and reserves the right to engage in
transactions involving stand-by commitments and repurchase agreements. The Fund
may invest up to 100% of its assets in securities which pay interest exempt only
from federal taxes and in taxable securities, during temporary defensive periods
when, in the opinion of the sub-adviser, Pennsylvania Municipal Securities of
sufficient quality are unavailable. There is no percentage limitation on the
amount of assets which may be held uninvested during temporary defensive
periods; however, uninvested cash reserves will not earn income. See "Other
Investment Policies."

Special Risk Considerations -- Pennsylvania Tax Exempt Fund

Pennsylvania's economy historically has been dependent upon heavy industry,
but has diversified recently into various services, particularly into medical
and health services, education and financial services. Agricultural industries
continue to be an important part of the economy, including not only the
production of diversified food and livestock products, but substantial economic
activity in agribusiness and food-related industries. Service industries
currently employ the greatest share of non-agricultural workers, followed by the
categories of trade and manufacturing. Future economic difficulties in any of
these industries could have an adverse impact on the finances of the
Commonwealth or its municipalities, and could adversely affect the ability of
the respective obligors to make payments of interest and principal due on the
obligations held by the Fund, and the market values of these obligations. Rising
unemployment, a relatively high proportion of persons 65 and older in the
Commonwealth of Pennsylvania and court ordered increases in healthcare
reimbursement rates place increased pressures on the tax resources of the
Commonwealth and its municipalities. The Commonwealth has sold a substantial
amount of bonds over the past several years, but the debt burden remains
moderate. The recession in the early 1990s affected Pennsylvania's economic
base, with income and job growth at levels below national averages. Employment
growth has shifted to the trade and service sectors, with losses in more
high-paid manufacturing positions. A new governor took office in January 1995,
but the Commonwealth has continued to show fiscal restraint.

COMMON INVESTMENT POLICIES OF THE FUNDS

Illiquid Securities

The Funds will not knowingly invest more than 10% of the value of their
respective net assets in securities that are illiquid. Each Fund may purchase
securities which are not registered under the Securities Act of 1933, as amended
(the "1933 Act") but which can be sold to "qualified institutional buyers" in
accordance with Rule 144A under the 1933 Act. Any such security will not be
considered illiquid so long as it is determined by the Board of Trustees or the
advisers, or sub-adviser in the case of the Pennsylvania Tax Exempt Fund, acting
under guidelines approved and monitored by the Board, that an adequate trading
market exists for that security. This investment practice could have the effect
of increasing the level of illiquidity in a Fund during any period that
qualified institutional buyers become uninterested in purchasing these
restricted securities. The ability to sell to qualified institutional buyers
under Rule 144A is a recent development, and it is not possible to predict how
this market will develop. The Board will carefully monitor any investment by a
Fund in these securities.

Risk Factors Associated with Derivative Instruments

Since their inception, the Funds have emphasized safety and high credit
quality. This requires that market risk or interest rate risk, as well as credit
risk, be held to minimal levels. The advisers have determined that many types of
floating rate instruments, commonly referred to as "derivatives," are considered
to be potentially volatile. These derivative instruments are structured in a way
that may not allow them to reset to par at an interest rate adjustment date.
Accordingly, the advisers have adopted the following policies on behalf of the
Funds.

11
<PAGE> 14

The following types of derivative instruments ARE NOT permitted investments
for the Funds:

- - leveraged or deleveraged floaters (whose interest rate reset provisions are
based on a formula that magnifies the effect of changes in interest rates)

- - range floaters (which do not pay interest if market interest rates move
outside of a specified range)

- - dual index floaters (whose interest rate reset provisions are tied to more
than one index so that a change in the relationship between these indices may
result in the value of the instrument falling below face value)

- - inverse floaters (which reset in the opposite direction of their index)

- - any other structured instruments having cash flow characteristics that can
create potential market volatility similar to the "floaters" listed above

Additionally, the Funds may not invest in instruments indexed to longer
than one-year rates, or in instruments whose interest rate reset provisions are
tied to an index that materially lags short-term interest rates, such as "COFI
floaters."

At the present time, the only derivative investments that have been
determined to be suitable for investment by the Funds are:

- - securities based on short-term, fixed-rate contracts; and

- - floating-rate or variable-rate securities whose interest rates reset based on
changes in standard money market rate indices such as U.S. government Treasury
bills, London Interbank Offered Rate, published commercial paper rates, or
federal funds rates.

The risk to the Funds due to the use of these derivatives will be limited
to the principal invested in such instruments. The advisers, or sub-adviser in
the case of the Pennsylvania Tax Exempt Fund, will evaluate the risks presented
by the derivative instruments purchased by the Funds, and will determine, in
connection with their day-to-day management of the Funds, how they will be used
in furtherance of the Funds' investment objectives.

Repurchase and Reverse Repurchase Agreements

The Money Market and Government Funds may agree to purchase portfolio
securities subject to the seller's agreement to repurchase them at a mutually
agreed-upon date and price ("repurchase agreements"). These Funds may enter into
repurchase agreements only with financial institutions such as banks and
broker-dealers which are deemed to be creditworthy by the advisers, pursuant to
guidelines approved by the Trust's Board of Trustees. None of the Funds may
enter into repurchase agreements with the advisers, Distributor, or any of their
affiliates. Although the securities subject to repurchase agreements may bear
maturities exceeding 397 days, the Funds presently intend to enter only into
repurchase agreements which terminate within seven days after notice by the
Funds. If a Fund were to enter into repurchase agreements which provide for a
notice period greater than seven days in the future, the Fund would do so only
if such investment, together with other illiquid securities, did not exceed 10%
of the Fund's net assets.

The seller under a repurchase agreement will be required to maintain the
value of the securities which a Fund holds subject to the agreement at not less
than the repurchase price, marked to market daily, by providing additional
securities or other collateral to the Fund if necessary. If the seller defaulted
on its repurchase obligation, the Fund holding such obligation would suffer a
loss to the extent that the proceeds from a sale of the underlying securities
(including accrued interest) were less than the repurchase price (including
accrued interest) under the agreement. In the event that such a defaulting
seller filed for bankruptcy or became insolvent, disposition of such securities
by the Fund might be delayed pending court action. Further, it is uncertain
whether the Trust would be entitled, as against a claim by such seller or its
receiver or trustee in bankruptcy, to retain the underlying securities.

The Money Market and Government Funds may also borrow funds for temporary
purposes by entering into reverse repurchase agreements. Pursuant to such
agreements the Funds will sell portfolio securities to financial institutions
such as banks and

12
<PAGE> 15

broker-dealers and agree to repurchase them at a particular date and price.
Reverse repurchase agreements involve the risk that the market value of the
securities sold by a Fund may decline below the price of the securities it is
obligated to repurchase.

Lending Portfolio Securities

In order to generate additional income, the Money Market, Government and
Treasury Funds may, from time to time, lend their portfolio securities to
broker-dealers, banks or other institutional borrowers. A Fund must receive 100%
collateral in the form of cash or U.S. government securities. This collateral
must be valued daily by the advisers, and the borrower will be required to
provide additional collateral should the market value of the loaned securities
increase. During the time portfolio securities are on loan, the borrower pays
the Fund involved any dividends or interest paid on such securities. Loans are
subject to termination by the Funds or the borrower at any time. While a Fund
does not have the right to vote securities on loan, it intends to terminate the
loan and regain the right to vote if this is considered important with respect
to the investment. A Fund will only enter into loan arrangements with
broker-dealers, banks or other institutions which the advisers have determined
are creditworthy under guidelines established by the Trust's Board of Trustees.

Variable and Floating Rate Obligations

The Money Market, Government, Tax Exempt and Pennsylvania Tax Exempt Funds
may purchase variable and floating rate demand obligations (including variable
amount master demand notes) which are unsecured instruments that permit the
indebtedness thereunder to vary and provide for periodic adjustments in the
interest rate. A Fund, however, may invest in such obligations which have a
stated maturity in excess of 397 days only if the Fund may demand repayment at
intervals in accordance with guidelines established by the Board of Trustees.
Because variable and floating rate obligations are direct lending arrangements
between the purchasing Fund and the issuer, they are not normally traded.
Although there may be no active secondary market in such instruments, a Fund may
demand payment of principal and accrued interest at a time specified in the
instrument or may resell them to a third party. Such obligations may be backed
by bank letters of credit or guarantees issued by banks, other financial
institutions or the U.S. government, its agencies or instrumentalities. The
quality of any letter of credit or guarantee will be rated high quality or, if
unrated, will be determined to be of comparable quality by the advisers, or sub-
adviser in the case of the Pennsylvania Tax Exempt Fund. Variable and floating
rate obligations entered into by the Government Fund, such as Student Loan
Marketing Association variable rate obligations, may have a more active
secondary market because they are issued or guaranteed by the U.S. government or
its agencies or instrumentalities. In the event an issuer of a variable or
floating rate obligation defaulted on its payment obligation, a Fund might be
unable to dispose of the instrument because of the absence of a secondary market
and could, for this or other reasons, suffer a loss to the extent of the
default.

Money Market Instruments

The Money Market Fund may invest in "money market" instruments, including
bank obligations and commercial paper. The Pennsylvania Tax Exempt Fund may also
invest, from time to time, a portion of its assets for temporary defensive or
other purposes in such taxable money market instruments.

Bank obligations include bankers' acceptances, negotiable certificates of
deposit, and non-negotiable time deposits issued for a definite period of time
and earning a specified return by a U.S. bank which is a member of the Federal
Reserve System. Bank obligations also include U.S. dollar denominated bankers'
acceptances, certificates of deposit and time deposits issued by foreign
branches of U.S. banks or foreign banks. Investment in bank obligations is
limited to the obligations of financial institutions having more than $1 billion
in total assets at the time of purchase. The Money Market Fund may also make
interest bearing savings deposits in commercial and savings banks not in excess
of 5% of its total assets. Investment in non-negotiable time de-

13
<PAGE> 16

posits is limited to no more than 5% of the Fund's total assets at the time of
purchase.

Investments in commercial paper and other short-term promissory notes
issued by corporations (including variable and floating rate instruments) must
be rated at the time of purchase "A-2" or better by Standard & Poor's Ratings
Group ("S&P"), "Prime-2" or better by Moody's Investors Service, Inc.
("Moody's"), "F-2" or better by Fitch Investors Service, L.P. ("Fitch"), "Duff
2" or better by Duff & Phelps Credit Rating Co. ("Duff"), or "A2" or better by
IBCA, Inc. or, if not rated, determined by the advisers to be of comparable
quality pursuant to guidelines approved by the Trust's Board of Trustees.
Investments may also include corporate notes. In addition, the Money Market Fund
may invest in Canadian Commercial Paper ("CCP"), which is U.S. dollar
denominated commercial paper issued by a Canadian corporation or a Canadian
counterpart of a U.S. corporation, and in Europaper, which is U.S. dollar
denominated commercial paper of a foreign issuer. The Money Market Fund may
acquire zero coupon obligations, which have greater price volatility than coupon
obligations and which will not result in the payment of interest until maturity.

Investments in the obligations of foreign branches of U.S. banks, foreign
banks and other foreign issuers may subject the Money Market Fund
to additional investment risks, including future political and economic
developments, the possible imposition of withholding taxes on interest income,
possible seizure or nationalization of foreign deposits, the possible
establishment of exchange controls, or the adoption of other foreign
governmental restrictions which might adversely affect the payment of principal
and interest on such obligations. In addition, foreign branches of U.S. banks
and foreign banks may be subject to less stringent reserve requirements and to
different accounting, auditing, reporting, and recordkeeping standards than
those applicable to domestic branches of U.S. banks. The Money Market Fund will
invest in the obligations of foreign banks or foreign branches of U.S. banks
only when the advisers believe that the credit risk with respect to the
instrument is minimal.

The Money Market Fund may also make limited investments in guaranteed
investment contracts ("GICs") issued by U.S. insurance companies. The Fund will
purchase a GIC only when the advisers have determined, under guidelines
established by the Board of Trustees, that the GIC presents minimal credit risks
to the Fund and is of comparable quality to instruments that are rated high
quality by certain nationally recognized statistical rating organizations.

Government Obligations

The Treasury Fund may only invest in direct obligations of the U.S.
Treasury. The other Funds may invest in these obligations and other obligations
issued or guaranteed by the U.S. government, its agencies and instrumentalities.
Obligations of certain agencies and instrumentalities of the U.S. government,
such as the Government National Mortgage Association, are supported by the full
faith and credit of the U.S. Treasury; others, such as those of the
Export-Import Bank of the United States, are supported by the right of the
issuer to borrow from the Treasury; others, such as those of the Federal
National Mortgage Association, are supported by the discretionary authority of
the U.S. government to purchase the agency's obligations; still others, such as
those of the Student Loan Marketing Association, are supported only by the
credit of the instrumentality. No assurance can be given that the U.S.
government would provide financial support to U.S. government-sponsored
instrumentalities if it is not obligated to do so by law. Some of these
investments may be variable or floating rate instruments. See "Variable and
Floating Rate Obligations."

Types of Municipal Securities

The two principal classifications of municipal bonds are "general
obligation" bonds and "revenue" bonds. General obligation securities are secured
by the issuer's pledge of its full faith, credit and taxing power for the
payment of principal and interest. Revenue or "special obligation" securities
are payable only from the revenues derived from a particular facility or class
of facilities or, in some cases, from the proceeds of a specific excise tax or
other specific

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<PAGE> 17

revenue source such as the user of the facility being financed. "Private
activity" bonds are revenue securities normally issued by industrial development
authorities to finance privately-owned facilities and are backed by private
entities. Any private activity bonds (including industrial development bonds)
held by a Fund are not payable from revenues of the issuer. Consequently, the
credit quality of private activity bonds is usually directly related to the
credit standing of the corporate or other user of the facility involved. Private
activity bonds are included in the terms "Municipal Securities" and
"Pennsylvania Municipal Securities" only if the interest paid thereon is exempt
from regular federal income tax and not treated as a specific tax preference
item under the federal alternative minimum tax. See "Taxes."

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

In addition, the Tax Exempt Fund may purchase short-term Tax Anticipation
Notes, Bond Anticipation Notes, Revenue Anticipation Notes, and other forms of
short-term loans. Such notes are issued with a short-term maturity in
anticipation of the receipt of tax or other funds, the proceeds of bonds or
other revenues. Municipal Securities purchased by the Tax Exempt Fund may
include variable and floating rate instruments (described below). The Tax Exempt
Fund may also acquire zero coupon obligations, which have greater price
volatility than coupon obligations and which will not result in the payment of
interest until maturity.

Certain municipal obligations may be accompanied by a guaranty, letter of
credit or insurance. The Pennsylvania Tax Exempt Fund typically evaluates the
credit quality and ratings of such "credit enhanced" securities based upon the
financial condition and ratings of the party providing the credit enhancement
(the "credit enhancer"), in addition to the issuer. The bankruptcy, receivership
or default of the credit enhancer will adversely affect the quality and
marketability of the underlying security.

Municipal leases are obligations issued by state and local governments or
authorities to finance the acquisition of equipment and facilities and may be
considered to be illiquid. They may take the form of a lease, an installment
purchase contract, a conditional sales contract, or a participation certificate
in any of the above. Municipal lease obligations typically are not backed by the
municipality's credit, and their interest may become taxable if the lease is
assigned. Under guidelines established by the Board of Trustees, the credit
quality of municipal leases will be determined on an ongoing basis, including an
assessment of the likelihood that a lease will be canceled.

Participation interests are interests in Municipal Securities from
financial institutions such as commercial and investment banks, savings and loan
associations and insurance companies. These interests may take the form of
participations, beneficial interests in a trust, partnership interests or any
other form of indirect ownership that allows the Pennsylvania Tax Exempt Fund to
treat the income from the investment as exempt from federal income tax. This
Fund invests in these participation interests in order to obtain credit
enhancement or demand features that would not be available through direct
ownership of the underlying Municipal Securities.

A participation interest may be in the form of "certificates of
participation" which represents undivided proportional interests in lease
payments by a governmental or nonprofit entity. The municipal leases underlying
the certificates of participation in which the Pennsylvania Tax Exempt Fund
invests will be subject to the same quality rating standards applicable to
Municipal Securities.

Stand-by Commitments

The Tax Exempt and Pennsylvania Tax Exempt Funds may acquire stand-by
commitments with respect to Municipal Securities. Under a stand-by commitment, a
dealer agrees to purchase at the Fund's option specified Municipal Securities

15
<PAGE> 18

at a specified price. Stand-by commitments must be of high quality as determined
by any Rating Agency, or, if not rated, must be deemed to be of comparable
quality. The Funds acquire stand-by commitments solely to facilitate fund
liquidity and do not intend to exercise their rights thereunder for trading
purposes.

Tax-Exempt Derivatives and Other Municipal Securities

The Tax Exempt and Pennsylvania Tax Exempt Funds may invest in tax-exempt
derivative securities relating to Municipal Securities, including tender option
bonds, participations, beneficial interests in trusts and partnership interests.
(See generally "Risk Factors Associated with Derivative Instruments" above.)

Opinions relating to the validity of Municipal Securities and to the
exemption of interest thereon from federal income tax are rendered by bond
counsel to the respective issuers at the time of issuance, and opinions relating
to the validity of and the tax-exempt status of payments received by the Tax
Exempt Fund and Pennsylvania Tax Exempt Fund from tax-exempt derivative
securities are rendered by counsel to the respective sponsors of such
securities. The Funds and their investment advisers, and sub-adviser, will rely
on such opinions and will not review independently the underlying proceedings
relating to the issuance of Municipal Securities, the creation of any tax-exempt
derivative securities, or the bases for such opinions.

When-Issued Securities

The Tax Exempt and Pennsylvania Tax Exempt Funds may purchase securities on
a "when-issued" or delayed delivery basis. These transactions are arrangements
in which a Fund purchases securities with payment and delivery scheduled for a
future time. These transactions involve the risk that the price or yield
obtained may be less favorable than the price or yield available when delivery
takes place. The Funds expect that commitments to purchase when-issued
securities will not exceed 25% of the value of its total assets under normal
market conditions. The Funds do not intend to purchase when-issued securities
for speculative purposes but only for the purpose of acquiring portfolio
securities. In when-issued and delayed delivery transactions, each Fund relies
on the seller to complete the transaction; its failure to do so may cause the
Fund to miss a price or yield considered to be attractive. For further
information, see "Risk Factors, Investment Objectives, and Policies" in the
Statement of Additional Information.

Securities of Other Investment Companies

Subject to 1940 Act limitations and pursuant to applicable SEC
requirements, each Fund may invest in securities issued by other investment
companies (including other investment companies advised by the advisers) which
invest in high-quality, short-term debt securities and which determine their net
asset value per share based on the amortized cost or penny-rounding method. As a
shareholder of another investment company, a Fund would bear, along with other
shareholders, its pro rata portion of that company's expenses, including
advisory fees. These expenses would be in addition to the advisory and other
expenses that the Fund bears directly in connection with its own operations.
Investment companies in which the Funds may invest may also impose a sales or
distribution charge in connection with the purchase or redemption of their
shares and other types of commissions or charges. Such charges will be payable
by the Fund and, therefore, will be borne indirectly by its shareholders.

INVESTMENT LIMITATIONS

Each Fund is subject to a number of investment limitations. The following
investment limitations are matters of fundamental policy and may not be changed
with respect to a particular Fund without the affirmative vote of the holders of
a majority of the Fund's outstanding shares (as defined under "Miscellaneous").
(Other investment limitations that also cannot be changed without a vote of

16
<PAGE> 19

shareholders are contained in the Statement of Additional Information under
"Risk Factors, Investment Objectives and Policies.")

No Fund may:

1. Make loans, except that each Fund may purchase or hold debt instruments
in accordance with its investment objective and policies, and each Fund (other
than the Tax Exempt and Pennsylvania Tax Exempt Funds) may lend portfolio
securities and each Fund (other than the Tax Exempt Fund) may enter into
repurchase agreements in accordance with its investment objective and policies.

2. (a) This paragraph does not apply to the Pennsylvania Tax Exempt Fund.
Borrow money or issue senior securities, except that each Fund may borrow from
banks for temporary purposes and each Fund (other than the Tax Exempt Fund) may
enter into reverse repurchase agreements for temporary purposes in amounts not
in excess of 10% of the value of its total assets at the time of such borrowing;
or mortgage, pledge, or hypothecate any assets except in connection with any
such borrowing and in amounts not in excess of the lesser of the dollar amounts
borrowed or 10% of the value of the Fund's total assets at the time of such
borrowing (provided that each Fund other than the Tax Exempt Fund may invest in
reverse repurchase agreements in accordance with its investment objective and
policies). Borrowings are intended solely to facilitate the orderly sale of
portfolio securities to accommodate abnormally heavy redemption requests and not
for leverage purposes. A Fund will not purchase securities while borrowings
(including reverse repurchase agreements) in excess of 5% of the Fund's net
assets are outstanding.

(b) The Pennsylvania Tax Exempt Fund may not borrow money or issue senior
securities, except that the Fund may borrow from anyone for temporary purposes
in amounts not in excess of 5% of the value of its total assets at the time of
such borrowing; or the Fund may borrow from a bank for non-temporary purposes,
provided that the borrowing does not exceed 33 1/3% of the Fund's net assets. To
the extent that a bank borrowing exceeds 5% of the Fund's total assets, asset
coverage of at least 300% is required. The Fund will not purchase securities
while outstanding borrowings equal or exceed 5% of the Fund's total assets.

3. Invest more than 10% of the value of its net assets in illiquid
securities, including repurchase agreements with remaining maturities in excess
of seven days (other than the Tax Exempt Fund), non-negotiable time deposits
(other than the Tax Exempt Fund), and other securities which are not readily
marketable.

4. Purchase securities of other investment companies except in connection
with a merger, consolidation, acquisition or reorganization or where otherwise
permitted by the 1940 Act (but only in securities of other investment companies
which seek to maintain a constant net asset value per share and which are
permitted themselves to invest only in securities which may be acquired by the
Fund).

Additional investment limitations which are matters of fundamental policy
are as follows:

5. The Money Market, Government and Treasury Funds will limit their
respective purchases of the securities of any one issuer (other than U.S.
government obligations and customary demand deposits) to 5% of their respective
total assets, except that each Fund may invest more than 5% but no more than 25%
of its total assets in "First Tier Securities" of one issuer for a period of up
to three business days. First Tier Securities include "eligible securities"
(defined above under "Risk Factors, Investment Objectives and Policies") that

(a) if rated by more than one Rating Agency, are rated (at the time of
purchase) by two or more Rating Agencies in the highest rating category for
such securities

(b) if rated by only one Rating Agency, are rated by such Rating
Agency in its highest rating category for such securities

(c) have no short term rating but have been issued by an issuer that
has other outstanding short term obligations that have been rated in
accordance with (a) or (b) above and are comparable in priority and
security to such securities

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<PAGE> 20

(d) are certain unrated securities that have been determined by the
advisers to be of comparable quality to such securities pursuant to
guidelines established by the Trust's Board of Trustees

6. The Money Market, Government and Treasury Funds will limit their
purchases of "Second Tier Securities," which are eligible securities other than
First Tier Securities, to 5% of their respective total assets.

7. The Money Market, Government and Treasury Funds will limit their
purchases of Second Tier Securities of one issuer to the greater of 1% of its
total assets or $1 million.

8. Neither the Money Market Fund nor the Pennsylvania Tax Exempt Fund may
purchase any securities which would cause 25% or more of the value of their
respective total assets at the time of such purchase to be invested in the
securities of one or more issuers conducting their principal business activities
in the same industry, provided, that

(a) there is no limitation with respect to obligations issued or
guaranteed by the U.S. government, or its agencies or instrumentalities or
by domestic branches of U.S. banks and repurchase agreements secured by
such obligations

(b) wholly owned finance companies will be considered to be in the
industries of their parents if their activities are primarily related to
financing the activities of the parents

(c) utilities will be classified according to their services, for
example, gas, gas transmission, electric and gas, electric, and telephone
each will be considered a separate industry

(d) with respect to the Pennsylvania Tax Exempt Fund, there is no
limitation with respect to securities issued by state and local governments

9. The Government Fund may not purchase securities other than obligations
issued or guaranteed by the U.S. government, its agencies or instrumentalities
(some of which may be subject to repurchase agreements) and securities of other
investment companies as permitted by investment limitation No. 4 above.

10. The Treasury Fund may not purchase securities other than direct
obligations of the U.S. Treasury, such as Treasury bills and notes and
securities of other investment companies as permitted by investment limitation
No. 4 above.

11. The Tax Exempt Fund may not purchase any securities other than
obligations the interest on which is exempt from federal income tax, stand-by
commitments with respect to such obligations, and securities of other investment
companies as permitted by investment limitation No. 4 above.

12. The Tax Exempt Fund may not purchase securities of any one issuer
(other than obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities) if, immediately after and as a result of such
purchase, more than 5% of the value of its total assets would be invested in
such issuer, except that up to 25% of the value of its total assets may be
invested without regard to this 5% limitation.

If a percentage limitation is satisfied at the time of investment, a later
increase or decrease in such percentage resulting from a change in value of a
Fund's securities will not constitute a violation of such limitation for
purposes of the 1940 Act. If a Fund exceeds the limitation on the holding of
illiquid securities it will sell illiquid securities as necessary to maintain
the required liquidity when the advisers believe that it is in the best
interests of the Fund to do so.

In order to permit the sale of the Funds' shares in certain states, the
Trust may make commitments more restrictive than the investment policies and
limitations described above. Should the Trust determine that any such commitment
is no longer in a Fund's best interests, it will revoke the commitment by
terminating sales of the Fund's shares to investors residing in the state
involved.

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<PAGE> 21

YIELD AND PERFORMANCE INFORMATION

From time to time, the Trust may quote in advertisements or in reports to
shareholders each Fund's "yield" and "effective yield" and the Tax Exempt and
Pennsylvania Tax Exempt Funds' "tax-equivalent yield" for Institutional shares
and Retail shares. The "yield" quoted in advertisements refers to the income
generated by an investment in a class of shares of a Fund over a seven-day
period identified in the advertisement. This income is then "annualized." The
amount of income so generated by the investment during that week is assumed to
be generated each week over a 52-week period and is shown as a percentage of the
investment. The "effective yield" for a class of shares is calculated similarly
but, when annualized, the income earned by an investment in the class is assumed
to be reinvested. An effective yield for a class of shares will be slightly
higher than its yield because of the compounding effect of the assumed
reinvestment. The Tax Exempt and Pennsylvania Tax Exempt Funds' "tax-equivalent
yield" for a class of shares, which shows the level of taxable yield necessary
to produce an after-tax equivalent to the Funds' tax-free yield for that class,
may also be quoted from time to time. It is calculated by increasing the yield
(calculated as above) for a class of shares by the amount necessary to reflect
the payment of federal income tax and state income tax at stated tax rates. The
Tax Exempt and Pennsylvania Tax Exempt Funds' tax-equivalent yield for a class
of shares will always be higher than its yield.

Investors may compare the performance of each class of shares of a Fund to
the performance of other mutual funds with comparable investment objectives, to
various mutual fund or market indices, and to data or rankings prepared by
independent services such as Lipper Analytical Services, Inc. or other financial
or industry publications that monitor the performance of mutual funds.
Comparisons may also be made to indices or data published in IBC's Money Fund
Report, a nationally recognized money market fund reporting service, Money
Magazine, Forbes, Barron's, The Wall Street Journal, The New York Times,
Business Week, U.S.A. Today, CDA/Weisenberger, The American Banker, Morningstar,
Incorporated and other publications of a local, regional or financial industry
nature.

The performance of each class of shares of the Funds is based on historical
earnings and will fluctuate and is not intended to indicate future performance.
Performance data may not provide a basis for comparison with bank deposits and
other investments which provide a fixed yield for a stated period of time. Yield
will be affected by fund quality, composition, maturity, market conditions and
the level of operating expenses for the class of shares. From time to time, the
advisers may voluntarily waive their investment advisory fees in order to reduce
such operating expenses, which will have the effect of enhancing the yield. Any
fees charged by financial institutions (as described in "How to Purchase and
Redeem Shares") are not included in the computation of performance data but will
reduce a shareholder's net return on an investment in a Fund.

Shareholders should note that the yield of the Retail shares will be
reduced by the amount of the shareholder servicing fees that are payable under
the Services Plan. See "Shareholder Services Plan."

Further information about the performance of the Funds is available in the
annual and semi-annual reports to shareholders. Shareholders may obtain these
materials from the Trust free of charge by calling 1-800-622-FUND(3863).

PRICING OF SHARES

For purposes of pricing purchase and redemption orders, the net asset
values per share of the Money Market, Government, Treasury and Pennsylvania Tax
Exempt Funds are calculated as of 1:00 p.m. and as of the close of trading on
the New York Stock Exchange (the "Exchange") (generally, 4:00 p.m. Eastern Time)
on each business day as described below. The net asset value per share of the
Tax Exempt Fund is calculated as of 12:00 noon and as of the close of trading on
the Exchange

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<PAGE> 22

(generally, 4:00 p.m. Eastern Time) on each business day as described below. Net
asset value per share is determined on each business day, except those holidays
which the Exchange, or banks and trust companies which are affiliated with
National City Corporation (the "Banks"), observe (currently New Year's Day, Dr.
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving Day and
Christmas Day) ("Business Day"). Net asset value per share of a particular class
in a Fund is calculated by dividing the value of all securities and other assets
belonging to a Fund allocable to such class, less the liabilities charged to
that class, by the number of the outstanding shares of that class.

The assets in all of the Funds are valued based upon the amortized cost
method, which has been determined by the Trust's Board of Trustees to represent
the fair value of the Funds' investments. Amortized cost valuation involves
valuing an instrument at its cost initially and, thereafter, assuming a constant
amortization to maturity of any discount or premium. Although the Trust seeks to
maintain the net asset value per share of the Funds at $1.00, there can be no
assurance that the net asset value will not vary.

HOW TO PURCHASE AND REDEEM SHARES

DISTRIBUTOR

Shares in the Funds are sold on a continuous basis by the Trust's sponsor
and distributor. The Distributor is a registered broker/dealer with principal
offices located at Oaks, Pennsylvania 19456.

From time to time, the Distributor, at its expense, may offer promotional
incentives to dealers. As of the date of this Prospectus, the Distributor
intends to offer certain promotional incentives, including trips and monetary
awards to NatCity Investments, Inc. and other affiliates of National City.

PURCHASE OF RETAIL SHARES

Retail shares are sold to the public ("Investors") primarily through
financial institutions such as banks, brokers and dealers. Investors may
purchase Retail shares directly in accordance with the procedures set forth
below or through procedures established by their financial institutions in
connection with the requirements of their accounts. Financial institutions may
charge certain account fees depending on the type of account the Investor has
established with the institution. (For information on such fees, the Investor
should review his agreement with the institution or contact it directly.) In
addition, certain financial institutions may enter into shareholder servicing
agreements with the Trust whereby a financial institution would perform various
administrative support services for its customers who are the beneficial owners
of Retail shares and would receive fees from the Funds for such services of up
to .10% (on an annualized basis) of the average daily net asset value of such
shares. See "Shareholder Services Plan." To purchase shares, Investors should
call 1-800-622-FUND(3863) or visit their local NatCity Investments, Inc. office:

<TABLE>
<S> <C>
Akron 1-800-229-0295
Cleveland 1-800-624-6450
Columbus 1-800-345-0278
Dayton 1-800-755-8723
Indianapolis 1-800-826-2868
Louisville 1-800-727-5656
Pittsburgh 1-800-282-1078
Toledo 1-800-331-8275
Youngstown 1-800-742-4098
</TABLE>

With respect to the Money Market, Government and Treasury Funds, shares may
be purchased in conjunction with an individual retirement account ("IRA") and
rollover IRAs where a designated custodian acts as custodian. Investors should
contact NatCity Investments, Inc., the Distributor, or their financial
institutions for information as to applications and annual fees. Investors
should also consult their tax advisers to determine whether the benefits of an
IRA are available or appropriate.

The minimum investment for the initial purchase of Retail shares in a Fund
is $2,500, except for purchases for an IRA or other retirement plan in which
event the minimum initial investment is $500. All subsequent investments for
Retail

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<PAGE> 23

shares and IRAs are subject to a minimum investment of $250. Investments made in
Retail shares by a sweep program described below or through a monthly savings
program described below are not subject to the minimum initial and subsequent
investment requirements or any minimum account balance requirements described in
"Other Redemption Information" below. Purchases for an IRA through the monthly
savings program will be considered as contributions for the year in which the
purchases are made.

Customers of Banks may purchase Retail shares through procedures
established by the Banks or their financial institutions in connection with the
requirements of their customer accounts. These procedures may include
instructions under which a Bank or financial institution may automatically
"sweep" a customer account and invest amounts agreed to by the Bank or financial
institution and the customer in additional Retail shares of a Fund. Customers
may obtain information relating to the requirements of such accounts from their
Banks or financial institutions.

Under a monthly savings program, Investors may add to their investment in
the Retail shares of a Fund, in a consistent manner each month, with a minimum
amount of $50. Funds may be automatically withdrawn from a shareholder's
checking or savings account available through an investor's financial
institution and invested in additional shares at the net asset value per share
next determined after an order is received by the Trust. An Investor may apply
for participation in a monthly program by completing an application obtained
through a financial institution, such as banks, brokers, or dealers selling
Retail shares of the Funds, or by calling 1-800-622-FUND (3863). The program may
be modified or terminated by an Investor on 30 days written notice or by the
Trust at any time.

All shareholders of record will receive confirmations of share purchases
and redemptions. Financial institutions will be responsible for transmitting
purchase and redemption orders to the Trust's transfer agent, State Street Bank
and Trust Company (the "Transfer Agent"), on a timely basis.

The Trust reserves the right to reject any purchase order.

PURCHASE OF INSTITUTIONAL SHARES

Institutional shares are sold primarily to Banks, as well as NAM customers
that are large institutions ("Customers"). Depending on the terms governing the
particular account, the Banks or NAM may impose account charges such as account
maintenance fees, compensating balance requirements or other charges based upon
account transactions, assets or income which will have the effect of reducing
the net return on a shareholder's investment in a Fund. There is no minimum
investment.

Customers may purchase Institutional shares through procedures established
by the Banks or NAM in connection with the requirements of their Customer
accounts. These procedures may include instructions under which a Bank or NAM
may automatically "sweep" a Customer's account not less frequently than weekly
and invest amounts in excess of a minimum balance agreed to by the Bank or NAM
and the Customer in additional Institutional shares of a Fund. Customers should
obtain information relating to the requirements of such accounts from their
Banks or NAM.

If participating in an Asset Diversification Account, under a monthly
savings program, Customers may add to their investment in the Institutional
shares of a Fund, in a consistent manner each month, with a minimum amount of
$50. Monies may be automatically withdrawn from a Customer's checking or savings
account available through a Customer's financial institution and invested in
additional shares at the net asset value per share next determined after an
order is received by the Trust. A Customer may apply for participation in a
monthly program through the Customer's Bank or NAM, by completing an
application. The program may be modified or terminated by the Customer on 30
days written notice or by the Trust at any time.

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<PAGE> 24

record by the Banks or NAM. Confirmations of share purchases and redemptions
will be sent to the Banks and NAM. Beneficial ownership of Institutional shares
will be recorded by the Banks or NAM or the Transfer Agent and reflected in the
account statements provided by them to their Customers.

The Trust reserves the right to reject any purchase order.

EFFECTIVE TIME OF PURCHASES

Purchase orders for shares of the Money Market, Government and Treasury
Funds which are received by the Transfer Agent on any Business Day prior to
12:00 noon (Eastern Time) are priced at the net asset value per share next
determined after receipt of the order by the Transfer Agent. Purchase orders
received between 12:00 noon and 2:00 p.m. (Eastern Time) are priced at the net
asset value per share determined at the close of trading on the New York Stock
Exchange. Purchase orders received before 2:00 p.m. (Eastern Time) are processed
on the day of receipt. Purchase orders received by the Transfer Agent after 2:00
p.m. (Eastern Time) will be executed on the following Business Day at the
previous day's net asset value per share.

Purchase orders for shares of the Tax Exempt and Pennsylvania Tax Exempt
Funds which are received by the Transfer Agent on any Business Day prior to
12:00 noon (Eastern Time) are priced at the net asset value per share next
determined after receipt of the order by the Transfer Agent and processed that
day. Purchase orders received by the Transfer Agent after 12:00 noon (Eastern
Time) will be executed on the following business day at the previous day's net
asset value per share.

Purchases will be effected only when Federal funds or other funds are
immediately available to the Trust's custodian to make the purchase on the day
the Transfer Agent receives the purchase order. Orders for which funds have not
been received by the Transfer Agent by the prescribed deadline on a given day
will not be accepted and notice thereof will be given promptly to the Bank or
financial institution. In accordance with this policy, purchase orders which are
accompanied by a check will be executed on the second Business Day following
receipt of the order at the previous day's net asset value per share.

REDEMPTION OF RETAIL SHARES

Redemption orders must be placed in writing or by telephone to the same
financial institution that placed the original purchase order. It is the
responsibility of the financial institutions to transmit redemption orders to
the Transfer Agent. Investors who purchased shares directly from the Trust may
redeem shares in any amount by calling 1-800-622-FUND(3863). Redemption proceeds
are paid by check or credited to the Investor's account with his financial
institution.

REDEMPTION OF INSTITUTIONAL SHARES

Customers may redeem all or part of their Institutional shares in
accordance with instructions and limitations pertaining to their accounts at the
Banks. It is the responsibility of the Banks to transmit redemption orders to
the Transfer Agent and credit their Customers' accounts with the redemption
proceeds on a timely basis. Redemption orders are effected at the net asset
value per share next determined after receipt of the order by the Transfer
Agent. No charge for wiring redemption payments is imposed by the Trust,
although Banks may charge their Customers' accounts for services. Information
relating to such services and charges, if any, is available from the Banks.

If a Customer has agreed with a particular Bank to maintain a minimum
balance in his account at the Bank and the balance in such account falls below
that minimum, the Customer may be obliged to redeem all or part of his
Institutional shares to the extent necessary to maintain the required minimum
balance. Customers who have instructed that automatic purchases and redemptions
be made for their accounts receive monthly confirmations of share transactions.

WRITTEN REDEMPTION PROCEDURES

A shareholder of record may redeem shares in any amount by sending a
written request to the Armada Funds, P.O. Box 8421, Boston, Massachusetts
02266-8421. Redemption requests must be

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<PAGE> 25

signed by each shareholder, including each joint owner on redemption requests
for joint accounts, in the exact manner as the Fund account is registered, and
must state the number of shares or the amount to be redeemed and identify the
shareholder account number and tax identification number. For a redemption
amount of $10,000 or more, each signature on the written request must be
guaranteed by a commercial bank or trust company which is a member of the
Federal Reserve System or FDIC, a member firm of a national securities exchange
or a savings and loan association. A signature guaranteed by a savings bank or
notarized by a notary public is not acceptable. For a redemption amount less
than $10,000, no signature guarantee is needed. The Trust may require additional
supporting documents for redemptions made by corporations, fiduciaries,
executors, administrators, trustees, guardians and institutional investors.

TELEPHONE REDEMPTION PROCEDURES

A shareholder of record also may redeem shares in any amount by calling
1-800-622-FUND (3863) provided the appropriate election was made on the
shareholder's account application.

During periods of unusual economic or market changes, telephone redemptions
may be difficult to implement. In such event, shareholders should mail their
redemption requests to their financial institutions or the Trust at the address
shown above. Neither the Trust nor its Transfer Agent will be responsible for
the authenticity of instructions received by telephone that are reasonably
believed to be genuine. In attempting to confirm that telephone instructions are
genuine, the Trust and its Transfer Agent will use such procedures as are
considered reasonable, including recording those instructions and requesting
information as to account registration (such as the name in which an account is
registered, the account number and recent transactions in the account). To the
extent that the Trust and its Transfer Agent fail to use reasonable procedures
to verify the genuineness of telephone instructions, they may be liable for such
instructions that prove to be fraudulent and unauthorized. In all other cases,
shareholders will bear the risk of loss for fraudulent telephone transactions.
The Trust reserves the right to refuse a telephone redemption if it believes it
is advisable to do so. Procedures for redeeming Retail shares by telephone may
be modified or terminated at any time by the Trust or the Transfer Agent.

OPTION TO MAKE SYSTEMATIC WITHDRAWALS

The Trust has available a Systematic Withdrawal Plan (the "Plan") for a
shareholder who owns shares of any Fund held on the Trust's transfer agent's
system. The Plan allows the shareholder to have a fixed minimum sum of $250
distributed at regular intervals. The shareholder's account must have a minimum
value of $5,000 to be eligible for the Plan. Additional information regarding
this service may be obtained from an investor's finan-
cial institution or the Transfer Agent at 1-800-622-FUND(3863).

CHECKWRITING APPLICABLE TO RETAIL SHARES

Checkwriting is available from certain institutions with respect to the
Funds. No charge for the use of the checkwriting privilege is currently imposed
by the Trust, although a charge may be imposed in the future. With this service,
a shareholder may write a check in an amount of $250 or more. To obtain checks,
a shareholder must complete the signature card that accompanies the account
application. To establish this checkwriting service after opening an account in
one or more of the Funds, the shareholder must contact the Trust by calling
1-800-622-FUND(3863) or by sending a written request to the Armada Funds, P.O.
Box 8421, Boston Massachusetts 02266-8421 to obtain an application. A signature
guarantee may be required. A shareholder will receive daily dividends declared
on the shares to be redeemed up to the day that a check is presented to the
Custodian for payment. Upon 30 days written notice to shareholders, the
checkwriting privilege may be modified or terminated. An investor cannot close
an account in a Fund by writing a check.

OTHER REDEMPTION INFORMATION

With respect to the Money Market, Government and Treasury Funds, redemption
orders are

23
<PAGE> 26

effected at the net asset value per share next determined after acceptance of
the order by the Transfer Agent. Payment for redemption orders received by the
Transfer Agent on a Business Day before 1:00 p.m. (Eastern Time) will be wired
the same day to the Bank or financial institution placing the order. Payment for
redemption orders which are received between 1:00 p.m. (Eastern Time) and the
close of business or on a non-Business Day will normally be wired to the Bank or
financial institution on the next Business Day, provided that the Trust reserves
the right to wire redemption proceeds within seven days after receiving the
redemption orders if, in the judgment of the advisers, an earlier payment could
adversely affect the Trust.

With respect to the Tax Exempt and Pennsylvania Tax Exempt Funds,
redemption orders are effected at the net asset value per share next determined
after acceptance of the order by the Transfer Agent. Payment for redemption
orders received by the Transfer Agent on a Business Day before 12:00 noon
(Eastern Time) will be wired the same day to the Bank or financial institution
placing the order. Payment for redemption orders which are received between
12:00 noon (Eastern Time) and the close of business or on a non-Business Day
will normally be wired to the Bank or financial institution on the next Business
Day, provided that the Trust reserves the right to wire redemption proceeds
within seven days after receiving the redemption orders if, in the judgment of
the advisers, an earlier payment could adversely affect the Trust.

Due to the relatively high cost of maintaining small accounts, the Trust
reserves the right to redeem, at net asset value, any account maintained by a
shareholder that has a value of less than $1,000 due to redemptions where the
shareholder does not increase the amount in the account to at least $1,000 upon
60 days notice.

If any portion of the shares to be redeemed represents an investment made
by personal check, the Trust reserves the right to delay payment of the
redemption proceeds until the Transfer Agent is reasonably satisfied that the
check has been collected, which could take up to 15 calendar days from the date
of purchase. A shareholder who anticipates the need for more immediate access to
his investment should purchase shares by Federal funds, bank wire, or by
certified or cashier's check. Financial institutions normally impose a charge in
connection with the use of bank wires, as well as certified checks, cashier's
checks and Federal funds.

The Trust may also redeem shares involuntarily or make payment for
redemption in securities if it appears appropriate to do so in light of the
Trust's responsibilities under the 1940 Act. See "Net Asset Value" in the
Statement of Additional Information.

Payment to shareholders for shares redeemed will be made within seven days
after receipt of the request for redemption.

EXCHANGE PRIVILEGE APPLICABLE TO RETAIL SHARES

The Trust offers an exchange program whereby Investors who own Retail
shares of the Funds (each a "no load Fund") may exchange those Retail shares for
Retail shares of an investment fund offered by the Trust which is sold with a
sales charge (each a "load Fund") subject to payment of the applicable sales
charge. (However, shareholders exchanging Retail shares of a no load Fund which
were received in a previous exchange transaction involving Retail shares of a
load Fund will not be required to pay an additional sales charge upon the
reinvestment of the equivalent amount into the Retail shares of a load Fund.)
Shareholders may also exchange Retail shares of a no load Fund for Retail shares
of another no load Fund at the net asset value per share without payment of a
sales charge. Shareholders contemplating an exchange should carefully review the
Prospectus of the Fund into which the exchange is being considered. An Armada
Funds Prospectus may be obtained from NatCity Investments, Inc., an Investor's
financial institution or by calling 1-800-622-FUND(3863).

24
<PAGE> 27

mit exchange requests to the Transfer Agent. Investors who purchased shares
directly from the Trust should transmit exchange requests directly to the
Transfer Agent. Exchange requests for the Money Market, Government and Treasury
Funds received by the Transfer Agent prior to 1:00 p.m. (Eastern Time) will be
processed as of the close of business on the day of receipt; such requests
received by the Transfer Agent after 1:00 p.m. (Eastern Time) will be processed
on the next Business Day. Exchange requests for the Tax Exempt and Pennsylvania
Tax Exempt Funds received by the Transfer Agent prior to 12:00 noon (Eastern
Time) will be processed as of the close of business on the day of receipt;
requests received by the Transfer Agent after 12:00 noon (Eastern Time) will be
processed on the next Business Day. The Trust reserves the right to reject any
exchange request. During periods of unusual economic or market changes,
telephone exchanges may be difficult to implement. In such event, an Investor
should mail the exchange request to his financial institution, and an Investor
who directly purchased shares from the Trust should mail the exchange request to
the Transfer Agent. The exchange privilege may be modified or terminated at any
time upon 60 days' notice to shareholders.

SYSTEMATIC EXCHANGE PROGRAM APPLICABLE TO RETAIL SHARES

Shares of a Fund may also be purchased through automatic monthly deductions
from a shareholder's account from any Armada money market fund. Under a
systematic exchange program, a shareholder enters an agreement to purchase
shares of one or more specified Funds over a specified period of time, and
initially purchases shares of one Armada money market fund in an amount equal to
the total amount of the investment. On a monthly basis, a specified dollar
amount of shares of the Armada money market fund is exchanged for shares of the
Funds specified.

The systematic exchange program of investing a fixed dollar amount at
regular intervals over time has the effect of reducing the average cost per
share of the Funds. This effect also can be achieved through the systematic
investment program described previously in this prospectus. Because purchases of
Retail Shares are subject to an initial sales charge, it may be beneficial for
an investor to execute a Letter of Intent in connection with the systematic
exchange program. A shareholder may apply for participation in this program
through his or her financial institution or by calling 1-800-622-FUND (3863).

DISTRIBUTION AGREEMENT

Under the Trust's Distribution Agreement and related Distribution Plan
adopted pursuant to Rule 12b-1 under the 1940 Act, the Trust compensates the
Distributor for services provided and expenses assumed in providing such fund
advertising, marketing, prospectus printing and other distribution services up
to a maximum of .10% per annum of the average net assets of the fund, inclusive
of an annual base fee of $1,250,000 plus incentive fees related to asset growth.
Such fees are payable monthly and accrued daily among the investment funds with
respect to which the Distributor is distributing shares.

SHAREHOLDER SERVICES PLAN

25
<PAGE> 28

dend payments from the Funds on behalf of customers, providing information
periodically to customers showing their position in Retail shares, and providing
sub-transfer agent services or the information necessary for sub-transfer agent
services with respect to Retail shares beneficially owned by customers. Since
financial institutions may charge their customers fees depending on the type of
customer account the Investor has established, beneficial owners of Retail
shares should read this Prospectus in light of the terms and fees governing
their accounts with financial institutions.

DIVIDENDS AND DISTRIBUTIONS

On each day that the net asset values per share of the Funds are
determined, each Fund declares a dividend from net investment income as of the
close of business on the day of declaration. Net investment income for dividend
purposes consists of (a) interest accrued and discount earned (including both
original issue and market discount) on the Fund's assets, (b) less amortization
of market premium on such assets, and the accrued expenses of the Fund. Fund
shares begin earning dividends on the day the purchase order is executed and
continue earning dividends through and including the day before the redemption
order for the shares is executed.

Dividends are paid monthly by check, or by wire transfer if requested in
writing by the shareholder to his Bank or financial institution, within five
Business Days after the end of each calendar month or within five Business Days
after a shareholder's complete redemption of his shares in a Fund.

Shareholders of the Funds may elect to have their dividends reinvested in
additional full and fractional Fund shares of the same class of any Armada Funds
at the net asset value of such shares on the payment date. Shareholders must
make such election, or any revocation thereof, in writing to their Banks or
financial institutions. The election will become effective with respect to
dividends paid after its receipt.

Under the Services Plan, the amount of each Fund's net investment income
available for distribution to the holders of Retail shares is reduced by the
amount of shareholder servicing fees payable to financial institutions under the
Services Plan.

TAXES

IN GENERAL

Each of the Funds intends to qualify as a separate "regulated investment
company" under the Internal Revenue Code of 1986, as amended (the "Code"). Such
qualification relieves each Fund of liability for federal income tax to the
extent its earnings are distributed in accordance with the Code.

Qualification as a regulated investment company under the Code for a
taxable year requires, among other things, that each Fund distribute to its
shareholders an amount equal to at least the sum of 90% of its investment
company taxable income and 90% of its net tax-exempt interest income, if any,
for such year. In general, a Fund's investment company taxable income will be
the sum of its net investment income and the excess of any net short-term
capital gain for the taxable year over the net long-term capital loss, if any,
for such year. Since all of each Fund's net investment income is expected to be
derived from earned interest, it is anticipated that no part of any distribution
will be eligible for the dividends received deduction for corporations.

The Money Market, Government and Treasury Funds intend to distribute
substantially all of their respective investment company taxable income and net
tax-exempt interest income each year. Such dividends will be taxable as ordinary
income to each Fund's shareholders who are not currently exempt from federal
income taxes, whether such income is received in cash or reinvested in
additional shares. (Federal income taxes for distributions to an IRA

26
<PAGE> 29

or to a qualified retirement plan are deferred under the Code.)

The Tax Exempt and Pennsylvania Tax Exempt Funds intend to distribute
substantially all of their respective net tax-exempt income (such distributions
are known as "exempt-interest dividends") and investment company taxable income
(if any) each taxable year. Exempt-interest dividends may be treated by
shareholders as items of interest excludable from their gross income under
Section 103(a) of the Code unless under the circumstances applicable to the
particular shareholder the exclusion would be disallowed. See the Statement of
Additional Information under "Additional Information Concerning Taxes." To the
extent, if any, dividends paid to each Fund's shareholders are derived from
taxable income or from net long-term capital gains, such dividends will not be
exempt from federal income tax and may also be subject to state and local taxes.
The Funds do not intend to earn any investment company taxable income or net
long-term capital gains.

Dividends declared in October, November or December of any year payable to
shareholders of record on a specified date before the end of the year will be
deemed to have been received by shareholders and paid by a Fund on December 31
of such year in the event such dividends are actually paid during January of the
following year.

If the Tax Exempt and Pennsylvania Tax Exempt Funds should hold certain
private activity bonds issued after August 7, 1986, shareholders must include,
as an item of tax preference, the portion of dividends paid by the Tax Exempt
Fund that is attributable to interest on such bonds in their federal alternative
minimum taxable income for purposes of determining liability (if any) for the
alternative minimum tax applicable to individuals and corporations. Corporate
shareholders must also take all exempt-interest dividends into account in
determining certain adjustments for federal alternative minimum tax purposes.
Shareholders receiving Social Security benefits should note that all
exemptinterest dividends will be taken into account in determining the
taxability of such benefits.

PENNSYLVANIA TAXES

Under current Pennsylvania law, shareholders will not be subject to
Pennsylvania Personal Income Tax on distributions from the Pennsylvania Tax
Exempt Fund attributable to interest income from obligations of the Commonwealth
of Pennsylvania or its political subdivisions, the United States, its
territories or certain of its agencies and instrumentalities ("Exempt
Securities"). However, Pennsylvania Personal Income Tax will apply to
distributions from the Pennsylvania Tax Exempt Fund attributable to gain
realized on the disposition of any investment, including Exempt Securities, or
to interest income from investments other than Exempt Securities. Shareholders
also will be subject to the Pennsylvania Personal Income Tax in the unlikely
event that they realize any gain on the disposition of shares in the Fund.

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

Shareholders are not subject to the county personal property tax imposed on
residents of Pennsylvania by the Act of June 17, 1913, P.L. 507, as amended to
the extent that the Fund is comprised of Exempt Securities.

MISCELLANEOUS

Shareholders of the Funds will be advised at least annually as to the
federal income tax and, in the case of the Pennsylvania Tax Exempt Fund,
Pennsylvania income tax consequences, of distributions made to them each year.
Shareholders are advised to consult their tax advisers concerning the
application of state and local taxes, other than Pennsylvania taxes, which may
differ from the tax consequences described above.

27
<PAGE> 30

The foregoing discussion is based on tax laws and regulations which were in
effect as of the date of this Prospectus; such laws and regulations may be
changed by legislative or administrative actions. The discussion is not intended
as a substitute for careful tax planning. Accordingly, potential investors in
the Funds should consult their tax advisers with specific reference to their own
tax situation.

MANAGEMENT OF THE TRUST

BOARD OF TRUSTEES

The business and affairs of the Trust are managed under the direction of
the Trust's Board of Trustees. The trustees of the Trust, their addresses,
principal occupations during the past five years, other affiliations and the
compensation paid by the Trust and the fees and reimbursed expenses they receive
in connection with each meeting of the Board of Trustees they attend are
included in the Statement of Additional Information.

INVESTMENT ADVISERS

National City, National City Columbus and National City Kentucky serve as
investment advisers to the Money Market Fund, Government Fund, Treasury Fund and
Tax Exempt Fund. National City serves as investment adviser to the Pennsylvania
Tax Exempt Fund. The advisers are wholly owned subsidiaries of National City
Corporation. The advisers provide trust and banking services to individuals,
corporations, and institutions both nationally and internationally, including
investment management, estate and trust administration, financial planning,
corporate trust and agency, and personal and corporate banking. The advisers are
member banks of the Federal Reserve System and the Federal Deposit Insurance
Corporation.

On June 30, 1996, the Trust Departments of National City, National City
Columbus and National City Kentucky had approximately $8.7 billion, $1.6 billion
and $5.1 billion, respectively, in assets under management, and National City,
National City Columbus and National City Kentucky had approximately $16.8
billion, $10.7 billion and $11.9 billion, respectively, in total trust assets.
The principal offices for each of the investment advisers are as follows:

National City
1900 East Ninth Street
Cleveland, Ohio 44114

National City Columbus
155 East Broad Street
Columbus, Ohio 43251

National City Kentucky
National City Tower
101 South Fifth Street
Louisville, Kentucky 40202

Subject to the general supervision of the Trust's Board of Trustees and in
accordance with each Fund's investment policies, the advisers have agreed to
manage the Funds, make decisions with respect to and place orders for all
purchases and sales of the Funds' securities, and maintain the Trust's records
relating to such purchases and sales. For the services provided and expenses
assumed pursuant to the Advisory Agreement, the advisers are entitled to receive
an advisory fee, computed daily and payable monthly, at the annual rate of .35%
of the average net assets of the Money Market Fund, .35% of the average net
assets of the Government Fund, .30% of the average net assets of the Treasury
Fund, .35% of the average net assets of the Tax Exempt Fund, and .40% of the
average net assets of the Pennsylvania Tax Exempt Fund. The advisers may from
time to time waive all or a portion of the advisory fee payable by one or more
of the Funds.

AUTHORITY TO ACT AS INVESTMENT ADVISERS

28
<PAGE> 31

vestment company continuously engaged in the issuance of its shares, but (b) do
not prohibit such a bank holding company or affiliate from acting as investment
adviser, transfer agent, or custodian to such an investment company. The
advisers believe that they may perform the services contemplated by their
Advisory Agreements with the Trust as described in such agreements and this
Prospectus without violation of applicable banking laws or regulations. However,
there are no controlling judicial precedents and future changes in legal
requirements relating to the permissible activities of banks and their
affiliates, as well as future interpretations of present and future
requirements, that could prevent the advisers from continuing to perform
services for the Trust. If the advisers were prohibited from providing services
to the Funds, the Board of Trustees would consider selecting another qualified
firm. Any new investment advisory agreement would be subject to shareholder
approval.

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

If current restrictions preventing a bank or its affiliates from legally
sponsoring, organizing, controlling, or distributing shares of an investment
company were relaxed, the advisers, or an affiliate of the advisers, would
consider the possibility of offering to perform additional services for the
Trust. Legislation modifying such restrictions has been proposed in past
Sessions of Congress. It is not possible, of course, to predict whether or in
what form such legislation might be enacted or the terms upon which the
advisers, or such an affiliate, might offer to provide such services.

SUB-ADVISER

Weiss, Peck & Greer, L.L.C. serves as the investment sub-adviser to the
Pennsylvania Tax Exempt Fund under a sub-advisory agreement (the "Sub-Advisory
Agreement") with the adviser. The sub-adviser is a limited liability company
founded in 1970. The sub-adviser engages in investment management, venture
capital management and management buyouts. The sub-adviser has been active since
its founding in managing portfolios of tax exempt securities. On June 30, 1996,
total assets under management were approximately $12.7 billion, over $3.9
billion of which were tax-free money market instruments. The principal business
address of the sub-adviser is One New York Plaza, New York, New York 10004.

Pursuant to the Sub-Advisory Agreement and subject to the supervision of
the adviser and of the Trust's Board of Trustees and in accordance with the
Fund's investment policies, the sub-adviser has agreed to assist the adviser in
providing a continuous investment program for the Fund and, in determining
investments for the Fund, the sub-adviser will maintain the Trust's records
relating to purchases and sales effected by it. For the services provided and
expenses assumed pursuant to the Sub-Advisory Agreement, the sub-adviser is
entitled to an advisory fee, payable by the adviser, calculated daily and
payable monthly, at the annual rate of .05% of the average daily net assets of
the Fund. The sub-adviser may from time-to-time waive all or a portion of its
fee from the adviser.

ADMINISTRATOR

PFPC Inc. ("PFPC"), located at 400 Bellevue Parkway, Wilmington, Delaware
19809, serves as the administrator to the Funds. PFPC is an indirect,
wholly-owned subsidiary of PNC Bank Corp., a multi-bank holding company.

29
<PAGE> 32

maintain the required fidelity bond coverage; calculate the Funds' net asset
values per share, net income, and realized capital gains (losses); and generally
assist the Funds with respect to all aspects of their administration and
operation. PFPC is entitled to receive an administration fee, accrued daily and
paid monthly, computed on a combined basis for the Tax Exempt and Pennsylvania
Tax Exempt Funds and on a combined basis for all taxable money market funds at
an annual rate of .05% of the first $300,000,000 of aggregate net assets of the
Funds, .0325% of the next $300,000,000, .03% of the next $400,000,000, .025% of
the next $500,000,000, .02% of the next $1 billion of aggregate net assets and
.015% of aggregate net assets in excess of $2.5 billion. PFPC is also entitled
to be reimbursed for its out-of-pocket expenses incurred on behalf of the Trust.

DESCRIPTION OF THE TRUST AND ITS SHARES

The Trust was organized as a Massachusetts business trust on January 28,
1986. The Trust is a series fund authorized to issue 36 separate classes or
series of shares of beneficial interest ("shares"). Ten of these classes or
series, which represent interests in the Money Market Fund (Class A and Class
A-Special Series 1), Government Fund (Class B and Class B-Special Series 1),
Treasury Fund (Class C and Class C-Special Series 1), Tax Exempt Fund (Class D
and Class D-Special Series 1) and Pennsylvania Tax Exempt Fund (Class Q and
Class Q -- Special Series 1), are described in this Prospectus. Class A, Class
B, Class C, Class D and Class Q shares constitute the Institutional class or
series of shares; and Class A-Special Series 1, Class B-Special Series 1, Class
C-Special Series 1, Class D-Special Series 1 and Class Q-Special Series 1 shares
constitute the Retail class or series of shares. The other Funds of the Trust
are:

Equity Growth Fund
(Class H and Class H-Special Series 1)

Fixed Income Fund
(Class I and Class I-Special Series 1)

Ohio Tax Exempt Fund
(Class K and Class K-Special Series 1)

National Tax Exempt Fund
(Class L and Class L-Special Series 1)

Equity Income Fund
(Class M and Class M-Special Series 1)

Mid Cap Regional Fund
(Class N and Class N-Special Series 1)

Enhanced Income Fund
(Class O and Class O-Special Series 1)

Total Return Advantage Fund
(Class P and Class P-Special Series 1)

Intermediate Government Fund
(Class R and Class R-Special Series 1)

GNMA Fund
(Class S and Class S-Special Series 1)

Pennsylvania Municipal Fund
(Class T and Class T-Special Series 1)

Each share has no par value, represents an equal proportionate interest in
the investment fund with other shares of the same class or series outstanding,
and is entitled to such dividends and distributions out of the income earned on
the assets belonging to such class or series as are declared in the discretion
of the Trust's Board of Trustees. The Trust's Declaration of Trust authorizes
the Board of Trustees to classify or reclassify any unissued shares into any
number of additional classes of shares and to classify or reclassify any class
of shares into one or more series of shares.

30
<PAGE> 33

Trustees determines that the matter to be voted on affects only the interests of
the holders of a particular class or series of shares. Under the Services Plan,
only the holders of Retail shares in an investment fund are entitled to vote on
matters submitted to a vote of shareholders (if any) concerning the Services
Plan. Voting rights are not cumulative, and accordingly the holders of more than
50% of the aggregate shares of the Trust may elect all of the trustees
irrespective of the vote of the other shareholders.

As stated previously in the text of this document, the Trust is organized
as a trust under the laws of Massachusetts. Shareholders of such a trust may,
under certain circumstances, be held personally liable (as if they were
partners) for the obligations of the trust. The Declaration of Trust of the
Trust provides for indemnification out of the trust property for any shareholder
held personally liable solely by reason of his being or having been a
shareholder and not because of his acts or omissions or some other reason.

The Trust does not presently intend to hold annual meetings of shareholders
except as required by the 1940 Act or other applicable law. The Trust's Code of
Regulations provides that special meetings of shareholders shall be called at
the written request of shareholders entitled to cast at least 10% of the votes
entitled to be cast at such meeting. Such meeting may be called by shareholders
to consider the removal of one or more trustees. Shareholders will receive
shareholder communication assistance with respect to such matter as required by
the 1940 Act.

As of September 10, 1996, nine bank subsidiaries of National City
Corporation held beneficially or of record approximately 95.98%, 98.42%, 99.74%
and 100% of the outstanding Institutional shares of the Money Market,
Government, Treasury and Tax Exempt Funds, respectively, and one bank subsidiary
of National City Corporation held of record approximately 62.25% of the
outstanding Institutional shares of the Pennsylvania Tax Exempt Fund. Neither
National City, National City Columbus, nor National City Kentucky has any
economic interest in such shares which are held solely for the benefit of its
customers, but may be deemed to be a controlling person of the Funds within the
meaning of the 1940 Act by reason of its record ownership of such shares. The
names of beneficial owners and record owners who are controlling shareholders
under the 1940 Act may be found in the Statement of Additional Information.

CUSTODIAN AND TRANSFER AGENT

National City Bank serves as the custodian of the Trust's assets. State
Street Bank and Trust Company serves as the Trust's transfer and dividend
disbursing agent. Communications to the Transfer Agent should be directed to
P.O. Box 8421, Boston, Massachusetts 02266-8421. The fees payable by the Trust
for these services are described in the Statement of Additional Information.

EXPENSES

Except as noted below, the Trust's advisers bear all expenses in connection
with the performance of their services. Each Fund of the Trust bears its own
expenses incurred in its operations including: taxes; interest; fees (including
fees paid to its trustees and officers); SEC fees; state securities
qualification fees; costs of preparing and printing prospectuses for regulatory
purposes and for distribution to existing shareholders; expenses relating to the
Distribution Plan; advisory fees; administration fees and expenses; charges of
the custodian and Transfer Agent; certain insurance premiums; outside auditing
and legal expenses; costs of shareholders' reports and shareholder meetings; and
any extraordinary expenses. Each Fund also pays for brokerage fees and
commissions (if any) in connection with the purchase of its portfolio
securities. Under the Services Plan, the Retail shares in the Funds also bear
the expense of shareholder servicing fees.

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<PAGE> 34

MISCELLANEOUS

Shareholders will receive unaudited semi-annual reports and annual
financial statements audited by independent auditors.

Pursuant to Rule 17f-2, as National City Bank serves the Trust as both the
custodian and an investment adviser, a procedure has been established requiring
three annual verifications, two of which are to be unannounced, of all
investments held pursuant to the Custodian Services Agreement, to be conducted
by the Trust's independent auditors.

As used in this Prospectus, a "vote of the holders of a majority of the
outstanding shares" of the Trust or a particular investment fund means, with
respect to the approval of an investment advisory agreement, a distribution plan
or a change in a fundamental investment policy, the affirmative vote of the
lesser of (a) 50% or more of the outstanding shares of the Trust or such fund or
(b) 67% or more of the shares of the Trust or such fund present at a meeting if
more than 50% of the outstanding shares of the Trust or such fund are
represented at the meeting in person or by proxy.

The portfolio managers of the Funds and other investment professionals may
from time to time discuss in advertising, sales literature or other material,
including periodic publications, various topics of interest to shareholders and
prospective investors. The topics may include, but are not limited to, the
advantages and disadvantages of investing in tax-deferred and taxable
investments; Fund performance and how such performance may compare to various
market indices; shareholder profiles and hypothetical investor scenarios; the
economy; the financial and capital markets; investment strategies and
techniques; investment products and tax, retirement and investment planning.

Inquiries regarding the Trust or any of its investment funds may be
directed to 1-800-622-FUND(3863).

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<PAGE> 35
ARMADA FUNDS LOGO BULK RATE
Oaks, Pennsylvania, 19456 U.S. POSTAGE
PAID
CLEVELAND, OH
ARMADA FUNDS PERMIT NO. 1535

INVESTMENT ADVISERS

AFFILIATES OF
NATIONAL CITY
CORPORATION

National City Bank
1900 East Ninth Street
Cleveland, Ohio 44114

National City Bank of Columbus
155 East Broad Street
Columbus, Ohio 43251

National City Bank of Kentucky
101 South Fifth Street
Louisville, Kentucky 40202

NC-059 (3/97)

<PAGE> 36
ARMADA FUNDS

STATEMENT OF ADDITIONAL INFORMATION

SEPTEMBER 30, 1996
(AS REVISED MARCH 10, 1997)

MONEY MARKET FUND

GOVERNMENT FUND

TREASURY FUND

TAX EXEMPT FUND

PENNSYLVANIA TAX EXEMPT FUND

This Statement of Additional Information is not a prospectus but should be read
in conjunction with the current Prospectus for the above Funds of Armada Funds
(the "Trust"), dated September 30, 1996 (as revised March 10, 1997) (the
"Prospectus"). A copy of the Prospectus may be obtained by calling or writing
the Trust at 1-800-622-FUND, Oaks, Pennsylvania 19456.

<PAGE> 37

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

PAGE
----

STATEMENT OF ADDITIONAL INFORMATION ..................................... 1

RISK FACTORS, INVESTMENT OBJECTIVES AND POLICIES ........................ 1

NET ASSET VALUE ......................................................... 15

DIVIDENDS ............................................................... 16

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION .......................... 16

DESCRIPTION OF SHARES ................................................... 17

ADDITIONAL INFORMATION CONCERNING TAXES ................................. 19

TRUSTEES AND OFFICERS ................................................... 22

ADVISORY, SUB-ADVISORY, ADMINISTRATION, DISTRIBUTION, CUSTODIAN
SERVICES AND TRANSFER AGENCY AGREEMENTS ............................... 27

SHAREHOLDER SERVICES PLAN ............................................... 32

PORTFOLIO TRANSACTIONS .................................................. 32

AUDITORS ................................................................ 34

COUNSEL ................................................................. 35

STANDARDIZED YIELD QUOTATIONS ........................................... 35

MISCELLANEOUS ........................................................... 37

FINANCIAL STATEMENTS .................................................... 42

APPENDIX A .............................................................. A-1

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<PAGE> 38

STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------

This Statement of Additional Information should be read in conjunction with
the Prospectus of Armada Funds (the "Trust") that describes the Money Market,
Government, Treasury, Tax Exempt and Pennsylvania Tax Exempt Funds. The
information contained in this Statement of Additional Information expands upon
matters discussed in the Prospectus. No investment in shares of a Fund should be
made without first reading the Prospectus.

The Pennsylvania Tax Exempt Fund commenced operations on August 8, 1994 as
a separate investment portfolio (the "Predecessor Fund") of Inventor Funds, Inc,
which was organized as a Maryland corporation. On September 9, 1996, the
Predecessor Fund was reorganized as a new portfolio of the Trust. Prior to the
reorganization, the Predecessor Fund offered and sold shares of stock that were
similar to the Trust's Retail Shares of beneficial interest.

RISK FACTORS, INVESTMENT OBJECTIVES AND POLICIES
------------------------------------------------

ADDITIONAL INFORMATION ON FUND MANAGEMENT
- -----------------------------------------

Further information on the advisers' investment management strategies,
techniques, policies and related matters may be included from time to time in
advertisements, sales literature, communications to shareholders and other
materials. See also, "Standardized Yield Quotations" below.

Attached to this Statement of Additional Information is Appendix A which
contains descriptions of the rating symbols used by S&P, Fitch, Duff, IBCA and
Moody's for municipal bonds, short term notes and other securities which may be
held by the Funds.

ELIGIBLE SECURITIES
- -------------------

The Funds may purchase "eligible securities" that present minimal credit
risks as determined by the advisers pursuant to guidelines established by the
Trust's Board of Trustees. Eligible securities generally include: (1) securities
that are rated by two or more Rating Agencies (or the only Rating Agency which
has issued a rating) in one of the two highest rating categories for short term
debt securities; (2) securities that have no short term rating, if the issuer
has other outstanding short term obligations that are comparable in priority and
security as determined by the advisers ("Comparable Obligations") and that have
been rated in accordance with (1) above; (3) securities that have no short term
rating, but are determined to be of comparable quality to a security satisfying
(1) or (2) above, and the issuer does not have Comparable Obligations rated by a
Rating Agency; and (4) obligations that carry a demand feature that complies
with (1), (2)

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<PAGE> 39

or (3) above, and are unconditional (i.e., readily exercisable in the event of
default) or, if conditional, either they or the obligations of the issuer of the
demand obligation are (a) rated by two or more Rating Agencies (or the only
Rating Agency which has issued a rating) in one of the two highest categories
for long term debt obligations, or (b) determined by the advisers to be of
comparable quality to securities which are so rated. The Board of Trustees will
approve or ratify any purchases by the Money Market, Government, Treasury, Tax
Exempt and Pennsylvania Tax Exempt Funds of securities that are rated by only
one Rating Agency or that qualify under (3) above as long as required by
applicable regulations or Trust procedures.

VARIABLE AND FLOATING RATE INSTRUMENTS
- --------------------------------------

The Funds may purchase variable rate and floating rate obligations as
described in the Prospectus. The Trust's advisers will consider the earning
power, cash flows and other liquidity ratios of the issuers and guarantors of
such notes and will continuously monitor their financial status to meet payment
on demand. In determining average weighted portfolio maturity, a variable or
floating rate instrument issued or guaranteed by the U.S. Government or an
agency or instrumentality thereof will be deemed to have a maturity equal to the
period remaining until the obligation's next interest rate adjustment. Other
variable and floating rate obligations will be deemed to have a maturity equal
to the longer or shorter of the periods remaining to the next interest rate
adjustment or the demand notice period in accordance with applicable regulations
or Trust procedures.

Variable and floating rate obligations held by a Fund may have maturities
of more than 397 days, provided: (a) (i) the Fund is entitled to payment of
principal and accrued interest upon not more than 30 days' notice or at
specified intervals not exceeding one year (upon not more than 30 days' notice)
and (ii) the rate of interest on such instrument is adjusted automatically at
periodic intervals which normally will not exceed 31 days, but may extend up to
one year, or (b) if the obligation is an asset-backed security, and if permitted
under Trust procedures and applicable regulations, the security has a feature
permitting the holder unconditionally to receive principal and interest within
13 months of making demand.

GUARANTEED INVESTMENT CONTRACTS
- -------------------------------

As stated in the Prospectus, the Money Market Fund may invest in GICs
issued by insurance companies. Pursuant to such contracts, the Fund makes cash
contributions to a deposit fund of the insurance company's general account. The
insurance company then credits to the Fund on a monthly basis guaranteed
interest which is based on an index. The GICs provide that this guaranteed
interest will not be less than a certain minimum rate. The insurance company may
assess periodic charges against a GIC for

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<PAGE> 40

expense and service costs allocable to it, and the charges will be deducted from
the value of the deposit fund. The Fund will only purchase a GIC when the
advisers have determined, under guidelines established by the Board of Trustees,
that the GIC presents minimal credit risks to the Fund and is of comparable
quality to instruments that are rated high quality by Rating Agencies. The
Fund's investments in GICs will not exceed 10% of the Fund's net assets. In
addition, because the Fund may not receive the principal amount of a GIC from
the insurance company on seven days' notice or less, the GIC is considered an
illiquid investment, and, together with other instruments in the Fund which are
not readily marketable, will not exceed 10% of the Fund's net assets. The term
of a GIC will be one year or less. In determining average weighted portfolio
maturity, a GIC will be deemed to have a maturity equal to the period of time
remaining until the next readjustment of the guaranteed interest rate.

BANK OBLIGATIONS AND COMMERCIAL PAPER
- -------------------------------------

The Pennsylvania Tax Exempt and Money Market Funds may invest in bank
obligations. Bank obligations include bankers' acceptances generally having a
maturity of six months or less and negotiable certificates of deposit. Bank
obligations also include U.S. dollar denominated bankers' acceptances and
certificates of deposit. Investment in bank obligations is limited to the
obligations of financial institutions having more than $1 billion in total
assets at the time of purchase. For purposes of the Money Market Fund's
investment policy with respect to bank obligations, the assets of a bank or
savings institution will be deemed to include the assets of its domestic and
foreign branches.

Investments by the Pennsylvania Tax Exempt Fund include commercial paper
and other short term promissory notes issued by corporations, municipalities and
other entities (including variable and floating rate instruments).

REPURCHASE AGREEMENTS; REVERSE REPURCHASE AGREEMENTS;
- ----------------------------------------------------
LENDING OF PORTFOLIO SECURITIES
- -------------------------------

Securities held by the Fund may be subject to repurchase agreements. Under
the terms of a repurchase agreement, the Funds purchase securities from
financial institutions such as banks and broker-dealers which the Funds'
Advisers deem creditworthy under guidelines approved by the Board of Trustees,
subject to the seller's agreement to repurchase such securities at a mutually
agreed-upon date and price. The repurchase price generally equals the price paid
by the Fund plus interest negotiated on the basis of current short term rates,
which may be more or less than the rate on the underlying portfolio securities.
The seller under a repurchase agreement will be required to maintain the value
of collateral held pursuant to the agreement at not less than the repurchase
price (including accrued interest). If the seller were

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<PAGE> 41

to default on its repurchase obligation or become insolvent, the Fund holding
such obligation would suffer a loss to the extent that the proceeds from a sale
of the underlying portfolio securities were less than the repurchase price under
the agreement, or to the extent that the disposition of such securities by the
Fund were delayed pending court action. Although there is no controlling legal
precedent confirming that a Fund would be entitled, as against a claim by such
seller or its receiver or trustee in bankruptcy, to retain the underlying
securities, the Board of Trustees of the Trust believes that, under the regular
procedures normally in effect for custody of a Fund's securities subject to
repurchase agreements and under federal laws, a court of competent jurisdiction
would rule in favor of the Trust if presented with the question. Securities
subject to repurchase agreements will be held by the Trust's custodian or
another qualified custodian or in the Federal Reserve/Treasury book-entry
system. Repurchase agreements are considered to be loans by a Fund under the
1940 Act.

Reverse repurchase agreements are considered to be borrowings by the Funds
under the 1940 Act. Whenever a Fund enters into a reverse repurchase agreement
as described in the Prospectus, it will place in a segregated custodial account
liquid assets at least equal to the repurchase price marked to market daily
(including accrued interest) and will subsequently monitor the account to ensure
such equivalent value is maintained. Reverse repurchase agreements involve the
risk that the market value of the securities sold by the Portfolio may decline
below the price of the securities it is obligated to repurchase.

With respect to loans by the Government or Treasury Fund of its portfolio
securities as described in the Prospectus, the Fund would continue to accrue
interest on loaned securities and would also earn income on loans. Any cash
collateral received by the Funds in connection with such loans would be invested
in short-term U.S. Government obligations.

GOVERNMENT SECURITIES
- ---------------------

Examples of the types of U.S. Government obligations that may be held by
the Money Market, Government and Pennsylvania Tax Exempt Funds include, in
addition to U.S. Treasury Bills, the obligations of Federal Home Loan Banks,
Federal Farm Credit Banks, Federal Land Banks, the Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, Government National Mortgage Association,
General Services Administration, Student Loan Marketing Association, Central
Bank for Cooperatives, Federal Home Loan Mortgage Corporation, Federal
Intermediate Credit Banks and Maritime Administration. Some of these obligations
are supported by the full faith and credit of the U.S. Treasury, such as
obligations issued by the Government National Mortgage Association. Others, such
as those of the Export-Import Bank of the United

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<PAGE> 42

States, are supported by the right of the issuer to borrow from the U.S.
Treasury; others, such as those of the Federal National Mortgage Association,
are supported by the discretionary authority of the U.S. Government to purchase
the agency's obligations; and still others, such as those of the Student Loan
Marketing Association, are supported only by the credit of the agency or
instrumentality issuing the obligation. No assurance can be given that the U.S.
Government would provide financial support to U.S. Government-sponsored agencies
or instrumentalities if it is not obligated to do so by law. The Money Market,
Government and Tax Exempt Funds will invest in the obligations of such agencies
or instrumentalities only when the advisers believe that their credit risk with
respect thereto is minimal.

SECURITIES OF OTHER INVESTMENT COMPANIES
- ----------------------------------------

Each Fund may invest in securities issued by other investment companies
(including other investment companies advised by the advisers) which invest in
high quality, short term debt securities and which determine their net asset
value per share based on the amortized cost or penny-rounding method. Each Fund
currently intends to limit such investments so that, as determined immediately
after a securities purchase is made: (a) not more than 5% of the value of its
total assets will be invested in the securities of any one investment company;
(b) not more than 10% of the value of its total assets will be invested in the
aggregate in securities of investment companies as a group; (c) not more than 3%
of the outstanding voting stock of any one investment company will be owned by
the Fund; and (d) not more than 10% of the outstanding voting stock of any one
investment company will be owned in the aggregate by the Fund and other
investment companies advised by the advisers. Not more than 3% of the
outstanding voting stock of any one investment company will be owned by the
Pennsylvania Tax Exempt Fund. As a shareholder of another investment company, a
Fund would bear, along with other shareholders, its pro rata portion of that
company's expenses, including advisory fees. These expenses would be in addition
to the advisory and other expenses that a Fund bears directly in connection with
its own operations. Investment companies in which a Fund may invest may also
impose a sales or distribution charge in connection with the purchase or
redemption of their shares and other types of commissions or charges. Such
charges will be payable by the Fund and, therefore, will be borne indirectly by
its shareholders.

MUNICIPAL BONDS
- ---------------

As described in the Prospectus, the Tax Exempt and Pennsylvania Tax Exempt
Funds may purchase Municipal Bonds. The two principal classifications of
Municipal Bonds consist of "general obligation" and "revenue" issues though the
Tax Exempt Fund may include "moral obligation" issues though normally issued by
special purpose authorities. Municipal Bonds include debt

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<PAGE> 43

obligations issued by governmental entities to obtain funds for various public
purposes, including the construction of a wide range of public facilities, the
refunding of outstanding obligations, the payment of general operating expenses
and the extension of loans to public institutions and facilities. Municipal
Bonds in which the Fund invests must be rated A or better by S&P or Fitch or A
or better by Moody's at the time of investment or, if unrated must be deemed by
the sub-adviser to have essentially the same characteristics and quality as
bonds having the above ratings. The sub-adviser may purchase private activity
bonds if the interest paid is excludable from federal income tax. Private
activity bonds are issued by or on behalf of states or political subdivisions
thereof to finance privately owned or operated facilities for business and
manufacturing, housing, sports, and pollution control and to finance activities
of and facilities for charitable institutions. Private activity bonds are also
used to finance public facilities such as airports, mass transit systems, ports,
parking and low income housing. The payment of the principal and interest on
private activity bonds is dependent solely on the ability of the facility's user
to meet its financial obligations and may be secured by a pledge of real and
personal property so financed.

Pennsylvania municipal securities which are payable only from the revenues
derived from a particular facility may be adversely affected by Pennsylvania
laws or regulations which make it more difficult for the particular facility to
generate revenues sufficient to pay such interest and principal, including,
among others, laws and regulations which limit the amount of fees, rates or
other charges which may be imposed for use of the facility or which increase
competition among facilities of that type or which limit or otherwise have the
effect of reducing the use of such facilities generally, thereby reducing the
revenues generated by the particular facility. Pennsylvania municipal
securities, the payment of interest and principal on which is insured in whole
or in part by a Pennsylvania governmentally created fund, may be adversely
affected by Pennsylvania laws or regulations which restrict the aggregate
proceeds available for payment of principal and interest in the event of a
default on such municipal securities. Similarly, Pennsylvania municipal
securities, the payment of interest and principal on which is secured, in whole
or in part, by an interest in real property may be adversely affected by
Pennsylvania laws which limit the availability of remedies or the scope of
remedies available in the event of a default on such municipal securities.
Because of the diverse nature of such laws and regulations and the impossibility
of either predicting in which specific Pennsylvania municipal securities the
Pennsylvania Tax Exempt Fund will invest from time to time or predicting the
nature or extent of future changes in existing laws or regulations or the future
enactment or adoption of additional laws or regulations, it is not presently
possible to determine the impact of such laws and

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<PAGE> 44

regulations on the securities in which the Pennsylvania Tax Exempt Fund may
invest and, therefore, on the shares of that Fund.

There are, of course, variations in the quality of Municipal Bonds both
within a particular classification and between classifications, and the yields
on Municipal Bonds depend upon a variety of factors, including the financial
condition of the issuer, general conditions of the municipal bond market, the
size of a particular offering, the maturity of the obligation and the rating of
the issue. The ratings of Rating Agencies represent their opinions as to the
quality of Municipal Bonds. It should be emphasized, however, that ratings are
general and are not absolute standards of quality, and Municipal Bonds with the
same maturity, interest rate and rating may have different yields while
Municipal Bonds of the same maturity and interest rate with different ratings
may have the same yield. Subsequent to its purchase by either the Tax Exempt or
Pennsylvania Tax Exempt Fund, an issue of Municipal Bonds may cease to be rated
or its rating may be reduced below the minimum rating required for purchase by
the Tax Exempt or Pennsylvania Tax Exempt Funds. The Tax Exempt and Pennsylvania
Tax Exempt Funds' advisers will consider such an event in determining whether
those respective Funds should continue to hold the obligation.

The payment of principal and interest on most Municipal Bonds purchased by
the Tax Exempt and Pennsylvania Tax Exempt Funds will depend upon the ability of
the issuers to meet their obligations. An issuer's obligations under its
Municipal Bonds are subject to the provisions of bankruptcy, insolvency and
other laws affecting the rights and remedies of creditors, such as the Federal
Bankruptcy Code, and laws, if any, which may be enacted by federal or state
legislatures extending the time for payment of principal or interest, or both,
or imposing other constraints upon enforcement of such obligations or upon the
ability of municipalities to levy taxes. The power or ability of an issuer to
meet its obligations for the payment of interest on and principal of its
Municipal Bonds may be materially adversely affected by litigation or other
conditions.

Certain Municipal Bonds held by the Tax Exempt or Pennsylvania Tax Exempt
Fund may be insured at the time of issuance as to the timely payment of
principal and interest. The insurance policies will usually be obtained by the
issuer of the Municipal Bond at the time of its original issuance. In the event
that the issuer defaults on interest or principal payments, the insurer of the
bond is required to make payment to the bondholders upon proper notification.
There is, however, no guarantee that the insurer will meet its obligations. In
addition, such insurance will not protect against market fluctuations caused by
changes in interest rates and other factors. The Tax Exempt and Pennsylvania Tax
Exempt Funds may, from time to time, invest more than 25% of their assets in
Municipal Bonds covered by insurance policies.

-7-

<PAGE> 45

Municipal notes in which the Pennsylvania Tax Exempt Fund may invest
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. The Pennsylvania Tax Exempt Fund's
investments in any of the notes described above will be limited to those
obligations (i) where both principal and interest are backed by the full faith
and credit of the United States, (ii) which are rated MIG-2 or V-MIG-2 or better
at the time of investment by Moody's, (iii) which are rated SP-2 or better at
the time of investment by S&P, (iv) which are rated F-1 at the time of
investment by Fitch, or (v) which, if not rated, are of equivalent quality in
the sub-adviser's judgment.

OTHER TAX-EXEMPT INSTRUMENTS
- ----------------------------

Tax-exempt commercial paper will be limited to investments in obligations
which are rated at least A-2 by S&P, F-2 by Fitch or Prime-2 by Moody's at the
time of investment or which are of equivalent quality as determined by the
sub-adviser. Other types of tax-exempt instruments which are permissible
investments for the Fund include floating rate notes. Investments in such
floating rate instruments will normally involve industrial development or
revenue 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 the 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. The Fund must use the shorter of the period required before a
Fund is entitled to prepayment under such obligations or the period remaining
until the next interest rate adjustment date for purposes of determining the
maturity. 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 sub-adviser's opinion be
equivalent to the long-term bond or commercial paper ratings stated above. The
sub-adviser will monitor the earning power, cash flow and liquidity ratios of
the issuers of such instruments and the ability of an issuer of a demand
instrument to pay principal and interest on demand. The sub-adviser may purchase
other types of tax-exempt instruments as long as they are of a quality
equivalent to the bond or commercial paper ratings stated above.

STAND-BY COMMITMENTS
- --------------------

The Tax Exempt and Pennsylvania Tax Exempt Funds may acquire stand-by
commitments (also known as put options) with respect to Municipal Bonds held in
its portfolio. The Tax Exempt

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<PAGE> 46

and Pennsylvania Tax Exempt Funds expect that stand-by commitments will
generally be available without the payment of any direct or indirect
consideration. However, if necessary or advisable, the Tax Exempt and
Pennsylvania Tax Exempt Funds may pay for a stand-by commitment either
separately in cash or by paying a higher price for portfolio securities which
are acquired subject to the commitment (thus reducing the yield to maturity
otherwise available for the same securities). The Tax Exempt and Pennsylvania
Tax Exempt Funds will not acquire stand-by commitments unless immediately after
the acquisition, not more than 5% of their respective total assets will be
invested in instruments subject to a demand feature, or in stand-by commitments,
with the same institution.

The Tax Exempt and Pennsylvania Tax Exempt Funds' right to exercise
stand-by commitments will be unconditional and unqualified. A stand-by
commitment will be transferable by either of those Funds only with the
underlying Municipal Bonds which may be sold to a third party at any time. Until
either Fund exercises its stand-by commitment, it owns the securities in its
portfolio which are subject to the commitment.

The amount payable to the Tax Exempt and Pennsylvania Tax Exempt Funds upon
their exercise of a stand-by commitment will normally be (i) the respective
Fund's acquisition cost of the Municipal Bonds (excluding any accrued interest
which that Fund paid on its acquisition), less any amortized market premium or
plus any amortized market or original issue discount during the period the
respective Fund owned the securities, plus (ii) all interest accrued on the
securities since the last interest payment date during that period. Under normal
market conditions, in determining net asset value the Tax Exempt and
Pennsylvania Tax Exempt Funds value the underlying Municipal Bonds on an
amortized cost basis. Accordingly, the amount payable by a dealer upon exercise
of a stand-by commitment will normally be substantially the same as the
portfolio value of the underlying Municipal Bonds.

The Tax Exempt and Pennsylvania Tax Exempt Funds intend to enter into
stand-by commitments only with dealers, banks and broker-dealers which, in the
advisers' opinion, present minimal credit risks. The Tax Exempt and Pennsylvania
Tax Exempt Funds' reliance upon the credit of these dealers, banks and
broker-dealers will be secured by the value of the underlying Municipal Bonds
that are subject to the commitment. Thus, the risk of loss to the Tax Exempt and
Pennsylvania Tax Exempt Funds in connection with a stand-by commitment will not
be qualitatively different from the risk of loss faced by a person that is
holding securities pending settlement after having agreed to sell the securities
in the ordinary course of business.

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<PAGE> 47

WHEN-ISSUED SECURITIES
- ----------------------

The Pennsylvania Tax Exempt Fund may purchase Municipal Bonds on a
"when-issued" basis (i.e., for delivery beyond the normal settlement date at a
stated price and yield). When the Pennsylvania Tax Exempt Fund agrees to
purchase when-issued securities, the custodian sets aside cash or liquid
portfolio securities equal to the amount of the commitment in a separate
account. Normally, the custodian will set aside portfolio securities to satisfy
a purchase commitment, and in such a case the Pennsylvania Tax Exempt Fund may
be required subsequently to place additional assets in the separate account in
order to ensure that the value of the account remains equal to the amount of
that Fund's commitment, marked to market daily. It is likely that the
Pennsylvania Tax Exempt Fund's net assets will fluctuate to a greater degree
when it sets aside portfolio securities to cover such purchase commitments than
when it sets aside cash. Because the Pennsylvania Tax Exempt Fund will set aside
cash or liquid assets to satisfy its purchase commitments in the manner
described, that Fund's liquidity and ability to manage its portfolio might be
affected in the event its commitments to purchase when-issued securities ever
exceeded 25% of the value of its total assets.

When the Pennsylvania Tax Exempt Fund engages in when-issued transactions,
it relies on the seller to consummate the trade. Failure of the seller to do so
may result in the Pennsylvania Tax Exempt Fund incurring a loss or missing an
opportunity to obtain a price considered to be advantageous.

ADDITIONAL INVESTMENT LIMITATIONS
- ---------------------------------

In addition to the investment limitations disclosed in the Prospectus, the
Funds are subject to the following investment limitations which may be changed
with respect to a particular Fund only by a vote of the holders of a majority of
such Fund's outstanding shares (as defined under "Miscellaneous" in the
Prospectus).

No Fund may:

1. Purchase securities on margin, make short sales of securities, or
maintain a short position, except, in the case of the Pennsylvania Tax Exempt
Fund, to obtain short-term credits as necessary for the clearance of security
transactions in accordance with its investment objective.

2. Act as an underwriter of securities within the meaning of the Securities
Act of 1933 except insofar as it might be deemed to be an underwriter upon
disposition of certain portfolio securities acquired within the limitation on
purchases of restricted securities.

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<PAGE> 48

3. Purchase or sell real estate, except that each Fund may invest in
securities secured by real estate or interests therein or issued by companies or
investment trusts which invest in real estate or interests therein. The
Pennsylvania Tax Exempt Fund will not purchase or sell real estate limited
partnership interests.

4. Purchase or sell commodities or commodity contracts or invest in oil,
gas, or other mineral exploration or development programs, except, to the extent
appropriate to its investment objective, invest in securities issued by
companies which purchase or sell financial commodity contracts or invest in real
estate.

5. Write or purchase put options except stand-by commitments, call options,
straddles, spreads, or any combination thereof. This fundamental limitation does
not apply to the Pennsylvania Tax Exempt Fund.

6. Invest in any issuer for the purpose of exercising control or
management.

7. Purchase or retain securities of any issuer if the officers or trustees
of the Trust or the officers or directors of its investment advisers owning
beneficially more than one-half of 1% of the securities of such issuer together
own beneficially more than 5% of such securities. This fundamental limitation
does not apply to the Pennsylvania Tax Exempt Fund.

In addition, the Tax Exempt Fund may not invest in private activity bonds
where the payment of principal and interest are the responsibility of a company
(including its predecessors) with less than three years of continuous operation
and may not purchase common stock or voting securities, except it may purchase
securities of other investment companies which seek to maintain a constant net
asset value per share and which are permitted themselves to invest only in
securities which may be acquired by the Fund.

In addition, the Pennsylvania Tax Exempt Fund may Not:

1. Pledge, mortgage or hypothecate assets, except to secure borrowings
permitted by the Fund's investment limitations in aggregate amounts not to
exceed 33% of the Fund's total assets taken at current value at the time of
the incurrence of such loan.

2. Acquire more than 10% of the voting securities of any one issuer,
provided that this limitation shall apply only as to 75% of the Fund's net
assets.

3. Purchase securities of other investment companies, except as permitted
by the Investment Company Act of 1940 and the rules and regulations thereunder.

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<PAGE> 49

4. Issue senior securities (as defined in the Investment Company Act of
1940), except in connection with permitted borrowings as described above or as
permitted by rule, regulation or order of the Securities and Exchange
Commission.

* * *

With respect to investment limitation No. 5 in the Prospectus, the Trust
intends to treat unconditional bank letters or lines of credit, guarantees or
commitments to lend as separate securities for purposes of concentration.
Guarantees will only be treated as separate securities for diversification
purposes to the extent required by Rule 5b-2. Letters or lines of credit and
commitments to lend will not be treated as separate securities with regard to
diversification as the Trust does not consider these latter instruments to be
securities.

In addition, the Funds may not purchase common stocks, or voting securities
or state, municipal, or private activity bonds, except each Fund may purchase
securities of other investment companies which seek to maintain a constant net
asset value per share and which are permitted themselves to invest only in
securities which may be acquired by the Fund.

The following limitations, which apply to the Pennsylvania Tax Exempt Fund,
are considered non-fundamental and therefore may be changed without a
shareholder vote. The Fund may not purchase puts, calls, options or combinations
thereof, except that the Fund may purchase puts as described in its prospectus.

The Fund may not invest in illiquid securities in an amount exceeding, in
the aggregate, 10% of its net assets. If a Fund exceeds its limitation on the
holding of illiquid securities, it will sell illiquid securities as necessary to
maintain the required liquidity when the advisers believe that it is in the best
interests of the Fund to do so.

The foregoing percentages will apply at the time of purchase of a security.

SPECIAL RISK CONSIDERATIONS REGARDING INVESTMENT IN PENNSYLVANIA BONDS
- ----------------------------------------------------------------------

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

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<PAGE> 50

Although the General Fund of the Commonwealth (the principal operating fund
of the Commonwealth) experienced deficits in fiscal 1990 and 1991, tax increases
and spending deceases have resulted in surpluses the last four years; as of June
30, 1995, the General Fund had a surplus of $688.3 million. The deficit in the
Commonwealth's unreserved/undesignated funds also has been eliminated as of June
30, 1995.

Certain litigation is pending against the Commonwealth that could adversely
affect the ability of the Commonwealth to pay debt service on its obligations
including suit relating to the following matters: (i) the American Civil
Liberties Union ("ACLU") filed suit in federal court demanding additional
funding for child welfare services; the Commonwealth settled a similar suit in
the Commonwealth Court of Pennsylvania and is seeking the dismissal of the
federal suit, among other things, because of that settlement. After its earlier
denial of class certification was reversed by the Third Circuit Court of
Appeals, the district court granted class certification to the ACLU and the
parties are proceeding with discovery; (ii) in 1987, the Supreme Court of
Pennsylvania held the statutory scheme for country funding of the judicial
system to be in conflict with the constitution of the Commonwealth, but it
stayed judgment pending enactment by the legislature of funding consistent with
the opinion, and the legislature has yet to consider legislation implementing
the judgment. In 1992, a new action in mandamus was filed seeking to compel the
Commonwealth to comply with the original decision; (iii) litigation was filed in
both state and federal court by an association of rural and small schools and
several individual school districts and parents challenging the
constitutionality of the Commonwealth's system for funding local school
districts -- the federal case has been stayed pending the resolution of the
state case, and the state case is in the pre-trial stage, with trial scheduled
to commence in early 1997; (iv) Envirotest/Synterra Partners ("Envirotest")
filed suit against the Commonwealth asserting that it sustained damages in
excess of $350 million, as a result of investments it made in

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<PAGE> 51

reliance on a contract to conduct emissions testing before the emission testing
program was suspended. Envirotest entered into a Standstill Agreement with the
Commonwealth pursuant to which the parties will attempt to resolve Envirotest
will receive $145 million, with interest at 6 percent per annum; and in 1995,
the Commonwealth, the Governor of Pennsylvania, the City of Philadelphia and the
Mayor of Philadelphia were joined as additional respondents in an enforcement
action commenced in Commonwealth Court in 1973 by the Pennsylvania Human
Relations Commission against the School District of Philadelphia pursuant to the
Pennsylvania Human Relations Act. The Commonwealth and the City were joined to
determine their liability, if any, to pay additional costs necessary to remedy
segregation-related conditions found to exist in Philadelphia public schools. In
the fall of 1996, the State Supreme Court stayed the proceedings retained
jurisdiction over the matter.

A disaster emergency was declared by the Governor and a federal major
disaster declaration was made by the President of the United States for certain
counties in the Commonwealth for a blizzard and subsequent flooding in January
1996. The General Assembly authorized $123 million to provide for the
Commonwealth's share of the required match for federal public assistance and
disaster mitigation funds.

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

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

In recent years, an authority of the Commonwealth, the Pennsylvania
Intergovernmental Cooperation Authority ("PICA"), has issued approximately $1.7
billion of Special Revenue Bonds on behalf of the City to cover budget
shortfalls, to eliminate projected deficits and to fund capital spending. As one
of the conditions of issuing bonds on behalf of the City, PICA exercises
oversight of the City's finances. The City is currently operating under a five
year plan approved by PICA in 1995. PICA's power to issue further bonds to
finance capital projects expired on December 31, 1994. PICA may continue to
issue bonds to finance cash flow deficits until December 31, 1996, and its
authority to refund existing debt will not expire.

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<PAGE> 52

NET ASSET VALUE
---------------

The Trust uses the amortized cost method to value shares in the Funds.
Pursuant to this method, a security is valued at its cost initially and
thereafter a constant amortization to maturity of any discount or premium is
assumed, regardless of the impact of fluctuating interest rates on the market
value of the security. Where it is not appropriate to value a security by the
amortized cost method, the security will be valued either by market quotations,
or by fair value as determined by the Board of Trustees. While this method
provides certainty in valuation, it may result in periods during which value, as
determined by amortized cost, is higher or lower than the price each respective
Fund would receive if it sold the security. The value of the portfolio
securities held by each respective Fund will vary inversely to changes in
prevailing interest rates. Thus, if interest rates have increased from the time
a security was purchased, such security, if sold, might be sold at a price less
than its cost. Similarly, if interest rates have declined from the time a
security was purchased, such security, if sold, might be sold at a price greater
than its purchase cost. In either instance, if the security is held to maturity,
no gain or loss will be realized.

Each Fund invests only in high-quality instruments and maintains a
dollar-weighted average portfolio maturity appropriate to its objective of
maintaining a stable net asset value per share, provided that a Fund will
neither purchase any security deemed to have a remaining maturity of more than
397 calendar days within the meaning of the 1940 Act nor maintain a
dollar-weighted average portfolio maturity which exceeds 90 days. The Trust's
Board of Trustees has established procedures pursuant to rules promulgated by
the SEC, that are intended to help stabilize the net asset value per share of
each Fund for purposes of sales and redemptions at $1.00. These procedures
include review by the Board of Trustees, at such intervals as it deems
appropriate, to determine the extent, if any, to which the net asset value per
share of each Fund calculated by using available market quotations deviates from
$1.00 per share. In the event such deviation exceeds one-half of one percent,
the Board of Trustees will promptly consider what action, if any, should be
initiated. If the Board of Trustees believes that the extent of any deviation
from a Fund's $1.00 amortized cost price per share may result in material
dilution or other unfair results to investors or existing shareholders, it has
agreed to take such steps as it considers appropriate to eliminate or reduce, to
the extent reasonably practicable, any such dilution or unfair results. These
steps may include selling portfolio instruments prior to maturity; shortening
the average portfolio maturity; withholding or reducing dividends; redeeming
shares in kind; reducing the number of a Fund's outstanding shares without
monetary consideration; or utilizing a net asset value per share determined by
using available market quotations.

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<PAGE> 53

DIVIDENDS
---------

As stated, the Trust uses its best efforts to maintain the net asset value
per share of the Funds at $1.00. As a result of a significant expense or
realized or unrealized loss incurred by the Funds, it is possible that such
Fund's net asset value per share may fall below $1.00. Should the Trust incur or
anticipate any unusual or unexpected significant expense or loss which would
affect disproportionately the income of a Fund for a particular period, the
Board of Trustees would at that time consider whether to adhere to the present
dividend policy with respect to the Funds or to revise it in order to ameliorate
to the extent possible the disproportionate effect of such expense or loss on
the income of the Fund experiencing such effect. Such expense or loss may result
in a shareholder's receiving no dividends for the period in which he holds
shares of a Fund and/or in his receiving upon redemption a price per share lower
than the price he paid.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
----------------------------------------------

Shares in the Trust are sold on a continuous basis by SEI Financial
Services Company (the "Distributor"), which has agreed to use appropriate
efforts to solicit all purchase orders. The issuance of shares is recorded on
the books of the Trust. To change the commercial bank or account designated to
receive redemption proceeds, a written request must be sent to an investor's
financial institution at its principal office. Such requests must be signed by
each shareholder, with each signature guaranteed by a U.S. commercial bank or
trust company or by a member firm of a national securities exchange. Guarantees
must be signed by an authorized signatory and "Signature Guaranteed" must appear
with the signature. An investor's financial institution may request further
documentation from corporations, executors, administrators, trustees or
guardians, and will accept other suitable verification arrangements from foreign
investors, such as consular verification.

The Trust may suspend the right of redemption or postpone the date of
payment for more than seven days for shares during any period when (a) trading
on the Exchange is restricted by applicable rules and regulations of the SEC;
(b) the Exchange is closed for other than customary weekend and holiday
closings; (c) the SEC has by order permitted such suspension; or (d) an
emergency exists as determined by the SEC.

EXCHANGE PRIVILEGE
- ------------------

Investors may exchange all or part of their Retail shares as described in
the Prospectus. Any rights an Investor may have (or have waived) to reduce the
sales load applicable to an

-16-

<PAGE> 54

exchange, as may be provided in a Fund Prospectus, will apply in connection with
any such exchange. The exchange privilege may be modified or terminated at any
time upon 60 days' notice to shareholders.

By use of the exchange privilege, the Investor authorizes the Trust's
Transfer Agent or his financial institution to act on telephonic or written
instructions from any person representing himself or herself to be the
shareholder and believed by the Transfer Agent or the financial institution to
be genuine. The Investor or his financial institution must notify the Transfer
Agent of his prior ownership of Retail shares and account number. The Transfer
Agent's records of such instructions are binding.

DESCRIPTION OF SHARES
---------------------

The Trust is a Massachusetts business trust. The Trust's Declaration of
Trust authorizes the Board of Trustees to issue an unlimited number of shares of
beneficial interest and to classify or reclassify any unissued shares of the
Trust into one or more additional classes or series by setting or changing in
any one or more respects their respective preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption. Pursuant to such
authority, the Board of Trustees has authorized the issuance of 36 classes of
shares. Ten of these classes, which represent interests in the Money Market Fund
(Class A and Class A - Special Series 1), Government Fund (Class B and Class B -
Special Series 1), Treasury Fund (Class C and Class C - Special Series 1), Tax
Exempt Fund (Class D and Class D - Special Series 1) and Pennsylvania Tax Exempt
Fund (Class Q and Class Q - Special Series 1) are described in this Statement of
Additional Information and the related Prospectus.

Shares have no preemptive rights and only such conversion or exchange
rights as the Board of Trustees may grant in its discretion. When issued for
payment as described in the Prospectus, the Trust's shares will be fully paid
and non-assessable. In the event of a liquidation or dissolution of the Trust or
an individual Fund, shareholders of a Fund are entitled to receive the assets
available for distribution belonging to the particular Fund, and a proportionate
distribution, based upon the relative asset values of the respective Funds, of
any general assets of the Trust not belonging to any particular Fund which are
available for distribution.

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<PAGE> 55

majority of the outstanding shares of each investment fund affected by such
matter. Rule 18f-2 further provides that an investment fund is affected by a
matter unless the interests of each fund in the matter are substantially
identical or the matter does not affect any interest of the fund. Under the
Rule, the approval of an investment advisory agreement or any change in a
fundamental investment policy would be effectively acted upon with respect to an
investment fund only if approved by a majority of the outstanding shares of such
fund. However, the Rule also provides that the ratification of the appointment
of independent public accountants, the approval of principal underwriting
contracts, and the election of trustees may be effectively acted upon by
shareholders of the Trust voting without regard to a particular fund. In
addition, shareholders of each class in a particular investment fund have equal
voting rights except that only Retail shares of an investment fund will be
entitled to vote on matters submitted to a vote of shareholders (if any)
relating to shareholder servicing fees that are allocable to such shares.

Although the following types of transactions are normally subject to
shareholder approval, the Board of Trustees may, under certain limited
circumstances, (a) sell and convey the assets of an investment fund to another
management investment company for consideration which may include securities
issued by the purchaser and, in connection therewith, to cause all outstanding
shares of such fund involved to be redeemed at a price which is equal to their
net asset value and which may be paid in cash or by distribution of the
securities or other consideration received from the sale and conveyance; (b)
sell and convert an investment fund's assets into money and, in connection
therewith, to cause all outstanding shares of such fund involved to be redeemed
at their net asset value; or (c) combine the assets belonging to an investment
fund with the assets belonging to another investment fund of the Trust, if the
Board of Trustees reasonably determines that such combination will not have a
material adverse effect on shareholders of any fund participating in such
combination, and, in connection therewith, to cause all outstanding shares of
any fund to be redeemed at their net asset value or converted into shares of
another class of the Trust shares at net asset value. In the event that shares
are redeemed in cash at their net asset value, a shareholder may receive in
payment for such shares an amount that is more or less than his original
investment due to changes in the market prices of the fund's securities. The
exercise of such authority by the Board of Trustees will be subject to the
provisions of the 1940 Act, and the Board of Trustees will not take any action
described in this paragraph unless the proposed action has been disclosed in
writing to the fund's shareholders at least 30 days prior thereto.

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<PAGE> 56

ADDITIONAL INFORMATION CONCERNING TAXES
---------------------------------------

The following summarizes certain additional tax considerations generally
affecting the Trust and its shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Trust or its shareholders or possible legislative changes, and
the discussion here and in the Prospectus is not intended as a substitute for
careful tax planning. Potential investors should consult their tax advisers with
specific reference to their own tax situation.

GENERAL
- -------

Each Fund of the Trust will be treated as a separate corporate entity under
the Code and intends to qualify as a regulated investment company. In order to
qualify for tax treatment as a regulated investment company under the Code, each
Fund must satisfy, in addition to the distribution requirement described in the
Prospectus and above, certain requirements with respect to the source of its
income during a taxable year. At least 90% of the gross income of each Fund must
be derived from dividends, interest, payments with respect to securities loans,
gains from the sale or other disposition of stocks, securities or foreign
currencies, and other income (including but not limited to gains from options,
futures, or forward contracts) derived with respect to the Fund's business of
investing in such stock, securities or currencies. The Treasury Department may
by regulation exclude from qualifying income foreign currency gains which are
not directly related to the Fund's principal business of investing in stock or
securities, or options and futures with respect to stock or securities. Any
income derived by a Fund from a partnership or trust is treated as derived with
respect to a Fund's business of investing in stock, securities or currencies
only to the extent that such income is attributable to items of income which
would have been qualifying income if realized by the Fund in the same manner as
by the partnership or trust.

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<PAGE> 57

upon maturity or disposition of a security held for less than three months will
not be treated as gross income derived from the sale or other disposition of
such security within the meaning of this requirement. However, any other income
which is attributable to realized market appreciation will be treated as gross
income from the sale or other disposition of securities for this purpose.

A 4% non-deductible excise tax is imposed on regulated investment companies
that fail to currently distribute an amount equal to specified percentages of
their ordinary taxable income and capital gain net income (excess of capital
gains over capital losses). Each Fund intends to make sufficient distributions
or deemed distributions of its ordinary taxable income and any capital gain net
income each calendar year to avoid liability for this excise tax.

If for any taxable year a Fund does not qualify for federal tax treatment
as a regulated investment company, all of such Fund's taxable income will be
subject to federal income tax at regular corporate rates without any deduction
for distributions to its shareholders. In such event, dividend distributions
(including amounts derived from interest on Municipal Bonds with respect to the
Tax Exempt and Pennsylvania Tax Exempt Funds) would be taxable as ordinary
income to the Fund's shareholders to the extent of the Fund's current and
accumulated earnings and profits, and would be eligible for the dividends
received deduction for corporations.

Each Fund may be required in certain cases to withhold and remit to the
U.S. Treasury 31% of taxable dividends or gross proceeds realized upon sale paid
to shareholders who have failed to provide a correct tax identification number
in the manner required, or who are subject to withholding by the Internal
Revenue Service for failure to properly include on their return payments of
taxable interest or dividends, or who have failed to certify to the Fund that
they are not subject to backup withholding when required to do so or that they
are "exempt recipients."

Depending upon the extent of a Fund's activities in states and localities
in which its offices are maintained, in which its agents or independent
contractors are located or in which it is otherwise deemed to be conducting
business, such Fund may be subject to the tax laws of such states or localities.
In addition, in those states and localities which have income tax laws, the
treatment of a Fund and its shareholders under such laws may differ from their
treatment under federal income tax laws. Under state or local law, distributions
of net investment income may be taxable to shareholders as dividend income even
though a substantial portion of such distributions may be derived from interest
on U.S. Government obligations which, if realized directly, would be exempt from
such income taxes. Shareholders are advised to consult their tax advisers
concerning the application of state and local taxes.

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<PAGE> 58

TAX EXEMPT FUND AND PENNSYLVANIA TAX EXEMPT FUND
- ------------------------------------------------

As described above and in the Prospectus, the Tax Exempt and Pennsylvania
Tax Exempt Funds is designed to provide investors with tax-exempt interest
income. Neither the Tax Exempt Fund nor the Pennsylvania Tax Exempt Fund is
intended to constitute a balanced investment program and is not designed for
investors seeking capital appreciation or maximum tax-exempt income irrespective
of fluctuations in principal. Shares of the Tax Exempt Fund would not be
suitable for tax-exempt institutions and may not be suitable for retirement
plans qualified under Section 401 of the Code, H.R. 10 plans and IRAs since such
plans and accounts are generally tax-exempt and, therefore, would not gain any
additional benefit from the Tax Exempt and Pennsylvania Tax Exempt Funds'
dividends being tax-exempt.

The policy of the Tax Exempt and Pennsylvania Tax Exempt Funds is to pay
each year as federal exempt-interest dividends substantially all the Tax Exempt
and Pennsylvania Tax Exempt Funds' Municipal Bond interest income net of certain
deductions. In order for the Tax Exempt and Pennsylvania Tax Exempt Funds to pay
federal exempt-interest dividends with respect to any taxable year, at the close
of each taxable quarter at least 50% of the aggregate value of their respective
portfolios must consist of tax-exempt obligations. An exempt-interest dividend
is any dividend or part thereof (other than a capital gain dividend) paid by the
Tax Exempt or Pennsylvania Tax Exempt Fund and designated as an exempt-interest
dividend in a written notice mailed to shareholders not later than 60 days after
the close of the Tax Exempt and Pennsylvania Tax Exempt Funds' taxable year.
However, the aggregate amount of dividends so designated by the Tax Exempt and
Pennsylvania Tax Exempt Funds cannot exceed the excess of the amount of interest
exempt from tax under Section 103 of the Code received by the Tax Exempt and
Pennsylvania Tax Exempt Funds during the taxable year over any amounts
disallowed as deductions under Sections 265 and 171(a)(2) of the Code. The
percentage of total dividends paid by the Tax Exempt and Pennsylvania Tax Exempt
Funds with respect to any taxable year which qualifies as federal exempt-
interest dividends will be the same for all shareholders receiving dividends
from either Fund with respect to such year.

The Tax Exempt and Pennsylvania Tax Exempt Funds do not expect to realize
long-term capital gains and, therefore, do not expect to distribute any capital
gain dividends.

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<PAGE> 59

Regulations to include a non-exempt person who regularly uses a part of such
facilities in his trade or business and whose gross revenues derived with
respect to the facilities financed by the issuance of bonds are more than 5% of
the total revenues derived by all users of such facilities, or who occupies more
than 5% of the usable area of such facilities or for whom such facilities or a
part thereof were specifically constructed, reconstructed or acquired. A
"related person" includes certain related natural persons, affiliated
corporations, partners and partnerships, and S corporations and their
shareholders.

Interest on indebtedness incurred by a shareholder to purchase or carry
Fund shares is not deductible for federal income tax purposes if the Tax Exempt
and Pennsylvania Tax Exempt Funds distribute exempt-interest dividends during
the shareholder's taxable year. In addition, if a shareholder holds Fund shares
for six months or less, any loss on the sale or exchange of those shares will be
disallowed to the extent of the amount of exempt-interest dividends received
with respect to the shares. The Treasury Department, however, is authorized to
issue regulations reducing the six months holding requirement to a period of not
less than the greater of 31 days or the period between regular dividend
distributions where the investment company regularly distributes at least 90% of
its net tax-exempt interest. No such regulations had been issued as of the date
of this Statement of Additional Information.

TRUSTEES AND OFFICERS
---------------------

The trustees and executive officers of the Trust, their addresses,
principal occupations during the past five years, and other affiliations are as
follows:

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<PAGE> 60

PRINCIPAL OCCUPATION
POSITION WITH DURING PAST 5 YEARS
NAME AND ADDRESS THE TRUST AND OTHER AFFILIATIONS
- ---------------- ------------------ ---------------------------

Robert D. Neary* Trustee, President Retired Co-Chairman of
32980 Creekside Drive and Chairman of the Ernst & Young, April 1984-
Pepper Pike, OH 44124 Board September 1993; Director,
Age 63 Cold Metal Products, Inc.,
since March 1994;
Director, Zurn Industries,
Inc. (plumbing products
and engineering and
construction services),
since June 1995.

Thomas R. Benua, Jr. Trustee Chairman, EBCO
564 Hackberry Drive Manufacturing Company and
Westerville, OH 43081 Subsidiaries (manufacture,
Age 51 sale and financing of
water coolers and
dehumidifiers), since
January 1996 and President,
January 1987 to January
1996; Vice President and
Executive Committee Member
of Ebtech Corp., (market and
sell bottled and
point-of-use coolers) since
March 1991.

Leigh Carter* Trustee Retired President and
13901 Shaker Blvd., #6B Chief Operating Officer,
Cleveland, OH 44120 BFGoodrich Company, August
Age 71 1986 to September 1990;
Director, Adams Express
Company (closed-end
investment company), since
April 1982; Director, Lamson
& Sessions Co. (producer of
electrical supplies for
construction, consumer power
and communications
industry), since April 1991;
Director, Petroleum &
Resources Corp., since April
1987; Director, Morrison
Products (manufacturer of
blower fans and air moving
equipment), since April
1983.

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<PAGE> 61

PRINCIPAL OCCUPATION
POSITION WITH DURING PAST 5 YEARS
NAME AND ADDRESS THE TRUST AND OTHER AFFILIATIONS
- ---------------- ------------------ ---------------------------

John F. Durkott Trustee President and Chief
8600 Allisonville Road Operating Officer,
Indianapolis, IN 46250 Kittle's Home Furnishings
Age 51 Center, Inc., since
January 1982; partner,
Kittles Bloomington Property
Company, since January 1981;
partner, KK&D (Affiliated
Real Estate Companies of
Kittle's Home Furnishings
Center), since January 1989.

Richard W. Furst, Dean Trustee Professor of Finance and
600 Autumn Lane Dean, Carol Martin Gatton,
Lexington, KY 40502 College of Business and
Age 58 Economics, University of
Kentucky, since 1981;
Director, The Seed
Corporation (restaurant
group), since 1990;
Director, Foam Design, Inc.
(manufacturer of industrial
and commercial foam
products), since 1993;
Director, Studio Plus
Hotels, Inc., since 1994.

J. William Pullen Trustee President and Chief
Whayne Supply Company Executive Officer, Whayne
1400 Cecil Avenue Supply Co. (engine and
P.O. Box 35900 heavy equipment
Louisville, KY 40232-5900 distribution), since 1986;
Age 57 President and Chief
Executive Officer, American
Contractors Rentals & Sales
(rental subsidiary of Whayne
Supply Co.), since 1988.

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<PAGE> 62

PRINCIPAL OCCUPATION
POSITION WITH DURING PAST 5 YEARS
NAME AND ADDRESS THE TRUST AND OTHER AFFILIATIONS
- ---------------- ------------------ ---------------------------

Richard B. Tullis Trustee Chairman Emeritus, Harris
5150 Three Village Drive Corporation (electronic
Lyndhurst, Ohio 44124 communication and
Age 82 information processing
equipment), since October
1985; Director, NACCO
Materials Handling Group,
Inc. (manufacturer of
industrial fork lift
trucks), since 1984;
Director, Hamilton
Beach/Proctor-Silex, Inc.
(manufacturer of household
appliances), since 1990;
Director, Waste-Quip, Inc.
(waste handling equipment),
since 1989.

W. Bruce McConnel, III Secretary Partner of the law firm
Philadelphia National Drinker Biddle & Reath,
Bank Building Philadelphia, Pennsylvania
Broad & Chestnut Sts.
Philadelphia, PA 19107
Age 52

Neal J. Andrews Treasurer Vice President and
PFPC Inc. Director of Investment
400 Bellevue Parkway Accounting, PFPC Inc.,
Wilmington, DE 19809 since 1992; prior thereto,
Age 31 Senior Auditor, Price
Waterhouse, LLP

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

* Messrs. Neary and Carter are considered by the Trust to be "interested
persons" of the Trust as defined in the 1940 Act.

Each trustee receives an annual fee of $7,500 plus $2,500 for each Board
meeting attended and reimbursement of expenses incurred in attending meetings.
The Chairman of the Board is entitled to receive an additional $2,500 per annum
for services in such capacity. For the year ended May 31, 1996, the Trust's
trustees and officers as a group received aggregate fees of $69,875. The
trustees and officers of the Trust own less than 1% of the shares of the Trust.

The following table summarizes the compensation for each of the Trustees of
the Trust for the fiscal year ended May 31, 1996:

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<PAGE> 63

<TABLE>
<CAPTION>
Pension or
Retirement Estimated
Aggregate Benefits Accrued Approval Total
Compensation as Part of Benefits Compensation
Name of from the Trust's Upon from the
Person, Position the Trust Expenses Retirement Trust
- ---------------- ---------- -------- --------- -----------

<S> <C> <C> <C> <C>
Robert D. Neary, Trustee, $0 $0 $0 $0
President and Chairman

Thomas R. Benua, Jr., Trustee $11,375 $0 $0 $11,375

Leigh Carter, Trustee $11,375 $0 $0 $11,375

John F. Durkott, Trustee $11,375 $0 $0 $11,375

Richard W. Furst, Trustee $11,375 $0 $0 $11,375

J. William Pullen, Trustee $11,375 $0 $0 $11,375

Richard B. Tullis, Trustee $13,000 $0 $0 $13,000

</TABLE>

SHAREHOLDER AND TRUSTEE LIABILITY
- ---------------------------------

Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable as partners for the obligations
of the trust. However, the Trust's Declaration of Trust provides that
shareholders shall not be subject to any personal liability for the acts or
obligations of the Trust, and that every note, bond, contract, order, or other
undertaking made by the Trust shall contain a provision to the effect that the
shareholders are not personally liable thereunder. The Declaration of Trust
provides for indemnification out of the trust property of any shareholder held
personally liable solely by reason of his being or having been a shareholder and
not because of his acts or omissions or some other reason. The Declaration of
Trust also provides that the Trust shall, upon request, assume the defense of
any claim made against any shareholder for any act or obligation of the Trust,
and shall satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Trust itself would be unable to meet its obligations.

The Declaration of Trust states further that no trustee, officer, or agent
of the Trust shall be personally liable for or on account of any contract, debt,
tort, claim, damage, judgment or decree arising out of or connected with the
administration or preservation of the trust estate or the conduct of any
business of the Trust; nor shall any trustee be personally liable to any person
for any action or failure to act except by reason of his own bad faith, willful
misfeasance, gross negligence, or reckless disregard of his duties as trustee.
The Declaration of Trust also provides that all persons having any claim against
the trustees or the Trust

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<PAGE> 64

shall look solely to the trust property for payment. With the exceptions stated,
the Declaration of Trust provides that a trustee is entitled to be indemnified
against all liabilities and expense, reasonably incurred by him in connection
with the defense or disposition of any proceeding in which he may be involved or
with which he may be threatened by reason of his being or having been a trustee,
and that the trustees, have the power, but not the duty, to indemnify officers
and employees of the Trust unless any such person would not be entitled to
indemnification had he been a trustee.

ADVISORY, SUB-ADVISORY, ADMINISTRATION, DISTRIBUTION, CUSTODIAN
SERVICES AND TRANSFER AGENCY AGREEMENTS
---------------------------------------

ADVISORY AND SUB-ADVISORY AGREEMENTS
- ------------------------------------

National City, National City Columbus and National City Kentucky serve as
investment advisers to the Money Market, Government, Treasury and Tax Exempt
Funds and National City serves as investment adviser to the Pennsylvania Tax
Exempt Fund, as described in the Prospectus. The advisers are affiliates of
National City Corporation, a bank holding company with $51 billion in assets,
and headquarters in Cleveland, Ohio and nearly 900 branch offices in four
states. Through its subsidiaries, National City Corporation has been managing
investments for individuals, pension and profit-sharing plans and other
institutional investors for over 75 years and currently manages over $36 billion
in assets. From time to time, the advisers may voluntarily waive fees or
reimburse the Trust for expenses.

Pursuant to the Advisory Agreement, the Trust incurred advisory fees in the
following amounts for the fiscal years ended May 31, 1996, 1995 and 1994: (i)
$3,686,919 (after waivers of $1,473,398), $2,827,383 (after waivers of
$1,128,026) and $1,641,794 (after waivers of $93,731), respectively, for the
Money Market Fund; (ii) $1,654,730 (after waivers of $661,292), $1,766,159
(after waivers of $706,463) and $1,710,854 (after waivers of $101,998),
respectively, for the Government Fund, and (iii) $444,402 (after waivers of
$592,531), $307,159 (after waivers of $410,198), and $142,221 (after waivers of
$190,015), respectively, for the Tax Exempt Fund. Advisory fees in the amounts
of $527,698 (after waivers of $105,510) and $313,967 (after waivers of $62,648)
were incurred for the fiscal year ended May 31, 1996 and for the period from
June 16, 1994 (commencement of operations) through May 31, 1995 with respect to
the Treasury Fund.

For the one-month period ended May 31, 1996, the fiscal year ended April
30, 1996 and for the period from August 8, 1994 (commencement of operations)
through April 30, 1995, Integra Trust Company ("Integra"), the investment
adviser to the Predecessor Fund, earned advisory fees of $26,907, $310,912 and
$76,582,

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<PAGE> 65

respectively, and Integra waived fees in the amount of $9,868, $110,272 and
$84,075, respectively.

Each Advisory Agreement provides that the advisers 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 performance of the Advisory Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the advisers in the performance of
their duties or from reckless disregard by them of their duties and obligations
thereunder. In addition, the advisers have undertaken in their Advisory
Agreements to maintain their policy and practice of conducting their Trust
Departments independently of their Commercial Departments.

The Advisory Agreement relating to the Money Market, Government, Treasury
and Tax Exempt Funds was approved by the shareholders of each Fund on September
26, 1990. The Advisory Agreement relating to the Pennsylvania Tax Exempt Fund
was approved by the sole shareholder prior to that Fund's commencement of
operations. Unless sooner terminated, the Advisory Agreement will continue in
effect with respect to a particular Fund until September 30, 1997, and from year
to year thereafter, subject to annual approval by the Trust's Board of Trustees,
or by a vote of a majority of the outstanding shares of such Fund (as defined in
the Funds' Prospectus) and a majority of the trustees who are not parties to the
Agreement or interested persons (as defined in the 1940 Act) of any party by
votes cast in person at a meeting called for such purpose. Each Advisory
Agreement may be terminated by the Trust or the advisers on 60 days written
notice, and the sub-adviser will terminate immediately in the event of its
assignment.

Weiss, Peck & Greer, L.L.C. ("the sub-adviser"), with principal offices at
One New York Plaza, New York, New York 10004, serves as sub-adviser to the
Pennsylvania Tax Exempt Fund. The sub-adviser is a professional investment
counselling firm that provides investment services to investment companies and
other entities.

If expenses borne by a Fund in any fiscal year exceed expense limitations
imposed by applicable state securities regulations, the advisers will reimburse
the Trust for any such excess with respect to the Fund to the extent described
in any written undertaking provided by the advisers to such state. To the
Trust's knowledge, as of the date of this Statement of Additional Information,
the most restrictive expense limitation applicable to the Trust provides that
annual expenses (as defined by statute) may not exceed 2.5% of the first $30
million, 2% of the next $70 million and 1.5% of the remaining average net assets
of a particular Fund. Such amount, if any, will be estimated, reconciled and
paid on a monthly basis. The fees Banks may charge

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<PAGE> 66

to Customers for services provided in connection with their investments in the
Trust are not covered by the state securities expense limitations described
above.

ADMINISTRATION AND ACCOUNTING SERVICES AGREEMENT
- ------------------------------------------------

PFPC serves as the administrator and accounting agent to the Trust. The
services provided as administrator and accounting agent and current fees are
described in the Prospectus. Pursuant to the Administration and Accounting
Services Agreement, the Trust incurred the following fees to PFPC for the fiscal
years ended May 31, 1996, 1995 and 1994: (i) $421,493, $322,722 and $187,207,
respectively, for the Money Market Fund; (ii) $187,373, $210,983 and $177,152,
respectively, for the Government Fund; and (iii) $145,303, $102,395 and $40,149,
respectively, for the Tax Exempt Fund. Administration fees in the amounts of
$37,703 and $59,255 were incurred for the fiscal year ended May 31, 1996 and for
the period from June 16, 1994 (commencement of operations) through May 31, 1995
with respect to the Treasury Fund.

For the one-month period ended May 31, 1996, the fiscal year ended April
30, 1996 and for the period from August 8, 1994 (commencement of operations)
through April 30, 1995, SEI Financial Management Corporation, a wholly-owned
subsidiary of SEI Corporation, served as administrator to the Predecessor Fund
and earned the following fees: $8,969, $103,634 and $53,552, respectively.

DISTRIBUTION PLAN AND RELATED AGREEMENTS
- ----------------------------------------

The Distributor acts as distributor of the Funds' shares pursuant to its
Distribution Agreement with the Trust as described in the Prospectus. Shares are
sold on a continuous basis.

Pursuant to Rule 12b-1 of the 1940 Act, the Trust has adopted a
Distribution Plan (the "Plan") which permits the Trust to bear certain expenses
in connection with the distribution of its shares. As required by Rule 12b-1,
the Trust's 12b-1 Plan and related agreement have been approved, and are subject
to annual approval by, a majority of the Trust's Board of Trustees, and by a
majority of the trustees who are not interested persons of the Trust and have no
direct or indirect interest in the operation of the Plan or any agreement
related to the Plan, by vote cast in person at a meeting called for the purpose
of voting on the Plan and related agreement. In compliance with the Rule, the
trustees requested and evaluated information they thought necessary to an
informed determination of whether the Plan and related agreement should be
implemented, and concluded, in the exercise of reasonable business judgment and
in light of their fiduciary duties, that there is a reasonable likelihood that
the Plan and related agreement will benefit the Trust and its shareholders.

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<PAGE> 67

Rule 12b-1 also requires that persons authorized to direct the disposition
of monies payable by a fund (in the Trust's case, the Distributor) provide for
the trustees' review of quarterly reports on the amounts expended and the
purposes for the expenditures.

Any change in the Plan that would materially increase the distribution
expenses of a Fund requires approval by its shareholders, but otherwise, the
Plan may be amended by the trustees, including a majority of the disinterested
trustees who do not have any direct or indirect financial interest in the Plan
or related agreement. The Plan and related agreement may be terminated as to a
particular Fund by a vote of the Trust's disinterested trustees or by a vote of
the shareholders of the Fund, on not more than 60 days written notice. The
selection and nomination of disinterested trustees has been committed to the
discretion of such disinterested trustees as required by the Rule.

The Trust's Plan provides that each fund will compensate the Distributor
for distribution expenses in an amount not to exceed .10% of such fund's average
net assets. Distribution expenses payable by the Distributor pursuant to the
Plan include direct and indirect costs and expenses incurred in connection with
advertising and marketing a fund's shares, and direct and indirect costs and
expenses of preparing, printing and distributing its prospectuses to other than
current shareholders. The Plan provides that the Trust will pay the Distributor
an annual base fee of $1,250,000 plus incentive fees based upon asset growth
payable monthly and accrued daily by all of the Trust's investment funds with
respect to which the Distributor is distributing shares.

The Plan has been approved, and will continue in effect for successive one
year periods provided that such continuance is specifically approved by (1) the
vote of a majority of the trustees who are not parties to the Plan or interested
persons of any such party and who have no direct or indirect financial interest
in the Plan and (2) the vote of a majority of the entire Board of Trustees.

For the fiscal years ended May 31, 1996 and 1995, the Trust paid the
previous distributor, 440 Financial Distributors, Inc. ("440 Financial"),
$571,305 and $249,769 with respect to the Money Market Fund, $250,994 and
$157,521 with respect to the Government Fund, $72,631 and $29,798 with respect
to the Treasury Fund, and $117,429 and $60,363 with respect to the Tax Exempt
Fund under the Plan. Of the aggregate amount paid to 440 Financial by the Trust
with respect to the Money Market Fund, approximately $16,736 and $7,281 was
attributable to postage, $15,722 and $20,772 was attributable to communications
with shareholders, $430,828 and $129,536 was attributable to
advertisement/promotion and $108,019 and $92,179 was attributable to general
compensation to 440 Financial. Of the aggregate amount paid to 440 Financial by
the

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<PAGE> 68

Trust with respect to the Government Fund, approximately $7,705 and $4,745 was
attributable to postage, $7,238 and $14,141 was attributable to communications
with shareholders, $188,891 and $70,661 was attributable to advertisement/
promotion and $47,160 and $67,974 was attributable to general compensation to
440 Financial. Of the aggregate amount paid to 440 Financial by the Trust with
respect to the Treasury Fund, approximately $2,171 and $874 was attributable to
postage, $2,104 and $2,639 was attributable to communications with shareholders,
$52,764 and $13,157 was attributable to advertisement/promotion and $15,591 and
$13,128 was attributable to general compensation to 440 Financial. Of the
aggregate amount paid to 440 Financial by the Trust with respect to the Tax
Exempt Fund, approximately $3,344 and $1,351 was attributable to postage, $3,150
and $3,832 was attributable to communications with shareholders, $89,070 and
$37,510 was attributable to advertisement/promotion and $21,865 and $17,670 was
attributable to general compensation to 440 Financial.

Class A Shares of the Predecessor Fund were subject to a Plan adopted
pursuant to rule 12b-1 under the 1940 Act (the "Plan"). The Plan provided for
reimbursement to the Predecessor Fund's distributor of the Predecessor Fund's
distribution expenses, including (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
Inventor's shares including the distributor's expenses for travel,
communication, compensation and benefits for sales personnel; and (4) any other
expenses reasonably incurred in connection with the distribution and marketing
of Class A shares subject to approval by a majority of disinterested directors
of Inventor. For the years ended April 30, 1996 and 1995, the Fund paid $0 and
$0, respectively, in 12b-1 fees.

CUSTODIAN SERVICES AND TRANSFER AGENCY AGREEMENTS
- -------------------------------------------------

National City Bank serves as the Trust's custodian with respect to the
Funds. Under its Custodian Services Agreement, National City Bank has agreed to:
(i) maintain a separate account or accounts in the name of each Fund; (ii) hold
and disburse portfolio securities on account of each Fund; (iii) collect and
make disbursements of money on behalf of each Fund; (iv) collect and receive all
income and other payments and distributions on account of each Fund's portfolio
securities; (v) respond to correspondence by security brokers and others
relating to its duties; and (vi) make periodic reports to the Board of Trustees
concerning the Funds' operations. National City Bank is authorized to select one
or more banks or trust companies to serve as sub-custodian on behalf of the
Funds, provided that it shall remain responsible for the performance of all of
its duties under the Custodian Services Agreement and shall hold the Funds
harmless from the acts and omissions of any bank or trust company serving as
sub-custodian. The Funds reimburse National City Bank for its direct

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<PAGE> 69

and indirect costs and expenses incurred in rendering custodial services, except
that the costs and expenses borne by each Fund in any year may not exceed $.225
for each $1,000 of average gross assets of such Fund.

State Street Bank and Trust Company (the "Transfer Agent") serves as the
Trust's transfer agent and dividend disbursing agent with respect to the Funds.
Under its Transfer Agency Agreement, it has agreed to: (i) issue and redeem
shares of each Fund; (ii) transmit all communications by each Fund to its
shareholders of record, including reports to shareholders, dividend and
distribution notices and proxy materials for meetings of shareholders; (iii)
respond to correspondence by security brokers and others relating to its duties;
(iv) maintain shareholder accounts; and (v) make periodic reports to the Board
of Trustees concerning the Funds' operations. The Transfer Agent sends each
shareholder of record a monthly statement showing the total number of shares
owned as of the last business day of the month (as well as the dividends paid
during the current month and year), and provides each shareholder of record with
a daily transaction report for each day on which a transaction occurs in the
shareholder's account with each Fund.

SHAREHOLDER SERVICES PLAN
-------------------------

As stated in the Prospectus, the Trust has implemented the Services Plan
with respect to Retail shares in each of the Funds. Pursuant to the Services
Plan, the Trust may enter into agreements with financial institutions pertaining
to the provision of administrative services to their customers who are the
beneficial owners of Retail shares in consideration for the payment of up to
.10% (on an annualized basis) of the net asset value of such shares. Such
services may include: (i) aggregating and processing purchase and redemption
requests from customers; (ii) providing customers with a service that invests
the assets of their accounts in Retail shares; (iii) processing dividend
payments from the Fund; (iv) providing information periodically to customers
showing their position in Retail shares; (v) arranging for bank wires; (vi)
responding to customer inquiries relating to the services performed with respect
to Retail shares beneficially owned by customers; (vii) forwarding shareholder
communications; and (viii) other similar services requested by the Trust.
Agreements between the Trust and financial institutions will be terminable at
any time by the Trust without penalty.

PORTFOLIO TRANSACTIONS
----------------------

Pursuant to the Advisory Agreement, National City, National City Columbus
and National City Kentucky are responsible for, make decisions with respect to
and place orders for all

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<PAGE> 70

purchases and sales of portfolio securities for the Funds. Pursuant to the
Sub-Advisory Agreement with National City, the sub-adviser, is responsible for,
makes decisions with respect to and places orders for all purchases and sales of
portfolio securities for the Pennsylvania Tax Exempt Fund. The advisers and the
sub-adviser purchase portfolio securities either directly from the issuer or
from an underwriter or dealer making a market in the securities involved.
Purchases from an underwriter of portfolio securities include a commission or
concession paid by the issuer to the underwriter and purchases from dealers
serving as market makers may include the spread between the bid and asked price.
Transactions on stock exchanges involve the payment of negotiated brokerage
commissions. There is generally no stated commission in the case of securities
traded in the over-the-counter market, but the price includes an undisclosed
commission or mark-up.

While the advisers and the sub-adviser generally seek competitive spreads
or commissions, they may not necessarily allocate each transaction to the
underwriter or dealer charging the lowest spread or commission available on the
transaction. Allocation of transactions, including their frequency, to various
dealers is determined by the advisers in their best judgment and in a manner
deemed fair and reasonable to shareholders. The primary consideration is prompt
execution of orders in an effective manner at the most favorable price. Subject
to this consideration, dealers who provide supplemental investment research to
the advisers may receive orders for transactions by a Fund. Information so
received is in addition to and not in lieu of services required to be performed
by the advisers and does not reduce the fees payable to them by the Funds. Such
information may be useful to the advisers in serving both the Trust and other
clients, and, conversely, supplemental information obtained by the placement of
business of other clients may be useful to the advisers in carrying out its
obligations to the Trust.

While serving as advisers to the Trust, National City, National City
Columbus and National City Kentucky have agreed to maintain their policy and
practice of conducting their Trust Departments independently of their Commercial
Departments. In making investment recommendations for the Trust, Trust
Department personnel will not inquire or take into consideration whether the
issuer of securities proposed for purchase or sale for the Trust's account are
customers of the Commercial Departments. In dealing with commercial customers,
the Commercial Departments will not inquire or take into consideration whether
securities of those customers are held by the Trust.

Portfolio securities will not be purchased from or sold to the Trust's
advisers, the Distributor, or any "affiliated person" (as such term is defined
under the 1940 Act) of any of them acting as principal, except to the extent
permitted by the SEC. In addition, the Trust will not give preference to its
advisers'

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<PAGE> 71

correspondents with respect to such transactions, securities, savings deposits,
repurchase agreements and reverse repurchase agreements. Under certain
circumstances, the Trust may be at a disadvantage because of these limitations
compared with the portfolios of other investment companies with similar
objectives that are not subject to such limitations.

The Trust is required to identify any securities of its "regular brokers or
dealers" that it has acquired during its most recent fiscal year. At May 31,
1996, (a) the Money Market Fund had entered into repurchase transactions with
First Boston Corp. in the amount of $75,171,000 to be repurchased on June 3,
1996 at $75,204,514; (b) the Government Fund had entered into two repurchase
transactions with Prudential-Bache Securities both in the amount of $40,000,000
to be repurchased on June 3, 1996 and June 5, 1996 at $40,017,867 and
$40,014,144, respectively, and had entered into repurchase transactions with
Smith Barney Capital Corp. in the amount of $45,000,000 to be repurchased on
June 3, 1996 at 45,020,025. First Boston Corp., Prudential-Bache Securities and
Smith Barney Capital Corp. are considered "regular brokers or dealers" of the
Trust. CS First Boston Corp. and Smith Barney Shearson are the parents of First
Boston Corp. and Smith Barney Capital Corp., respectively.

Investment decisions for each Fund are made independently from those for
the other Funds and for other investment companies and accounts advised or
managed by the advisers. Such other Funds, investment companies and accounts may
also invest in the same securities as such Fund. When a purchase or sale of the
same security is made at substantially the same time on behalf of a Fund and
another investment company or account, the transaction will be averaged as to
price, and available investments allocated as to amount, in a manner which the
advisers believe to be equitable to the Fund and such other investment company
or account. In some instances, this investment procedure may adversely affect
the price paid or received by a Fund or the size of the position obtained or
sold by such Fund. To the extent permitted by law, the advisers may aggregate
the securities to be sold or purchased for a Fund with those to be sold or
purchased for other investment companies or accounts in order to obtain best
execution.

AUDITORS
--------

Ernst & Young LLP, independent auditors, with offices at Two Commerce
Square, 2001 Market Street, Suite 4000, Philadelphia, Pennsylvania 19103, serve
as independent auditors of the Trust. The financial statements, as of and for
the period ended May 31, 1996 for the Money Market, Government, Treasury and Tax
Exempt Funds, which are incorporated by reference in this Statement of
Additional Information, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report referred to

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<PAGE> 72

elsewhere herein, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.

COUNSEL
-------

STANDARDIZED YIELD QUOTATIONS
-----------------------------

"Yields," as described in the Prospectus, are calculated according to
formulas prescribed by the SEC. The standardized seven-day yield for a class of
Fund shares is computed by determining the net change, exclusive of capital
changes, in the value of a hypothetical pre-existing account in the class having
a balance of one share at the beginning of the period, subtracting a
hypothetical charge reflecting deductions from shareholder accounts, dividing
the difference by the value of the account at the beginning of the base period
to obtain the base period return, and then multiplying the base period return by
(365/7). The net change in the value of an account in a class includes the value
of additional shares purchased with dividends from the original share, and
dividends declared on both the original share and any such additional shares,
net of all fees, other than nonrecurring account or sales charges, that are
charged to all shareholder accounts in proportion to the length of the base
period and the class' mean or median account size. The capital changes to be
excluded from the calculation of the net change in account value are realized
gains and losses from the sale of securities and unrealized appreciation and
depreciation. The "effective yield" for a class of Fund shares is computed by
compounding the unannualized base period return (calculated as above) by adding
1 to the base period return, raising the sum to a power equal to 365 divided by
7, and subtracting 1 from the result.

The Tax Exempt and Pennsylvania Tax Exempt Funds' "tax-equivalent yields"
are computed by dividing the portion of those Funds' yields (calculated as
above) that is exempt from federal income tax by one minus a stated federal
income tax rate (using 39.6% tax bracket) and adding that figure to that
portion, if any, of the respective Fund's yield that is not exempt from federal
income tax.

For the seven-day period ended May 31, 1996, the yields of the Retail and
Institutional shares of the Money Market Fund, Government Fund, Treasury Fund
and Tax Exempt Fund were 4.91% and 5.01%, 4.88% and 4.96%, 4.53% and 4.63%, and
3.22% and 3.32%,

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<PAGE> 73

respectively, and their respective effective yields were 5.03% and 5.14%, 4.98%
and 5.08%, 4.63% and 4.74%, and 3.27% and 3.37%.

The Tax Exempt Fund's tax-equivalent yields (assuming a 39.6% federal tax
rate) for its Retail and Institutional shares for the fiscal year ended May 31,
1996 were 5.41% and 5.58%, respectively.

For the seven-day periods ended May 31, 1996 and April 30, 1996, the yields
of the Predecessor Fund were 3.16% and 3.32%, respectively, and its effective
yields were 3.21% and 3.38%, respectively.

The Predecessor Fund's tax-equivalent yields (assuming 39.6% federal and
2.8% state tax rates) for the one-month fiscal period ended May 31, 1996 and the
fiscal year ended April 30, 1996 were 5.48% and 5.02%, respectively. The
Predecessor Fund's tax-equivalent effective yield for the one-month fiscal
period ended May 31, 1996 was 5.57%.

The current yield for each class of shares in a Fund may be obtained by
calling the Trust at the telephone number provided on the cover page. Quoted
yields are not indicative of future yields. Yields will depend upon factors such
as fund maturity, the Fund's expenses and the types of instruments held by the
Fund.

The Funds may also from time to time include discussions or illustrations
of the effects of compounding in Materials. "Compounding" refers to the fact
that, if dividends or other distributions on a Fund investment are reinvested by
being paid in additional Fund shares, any future income or capital appreciation
of a Fund would increase the value, not only of the original Fund investment,
but also of the additional Fund shares received through reinvestment. As a
result, the value of the Fund investment would increase more quickly than if
dividends or other distributions had been paid in cash.

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<PAGE> 74

include in Materials charts, graphs or drawings which compare the investment
objective, return potential, relative stability and/or growth possibilities of
the Funds and/or other mutual funds, or illustrate the potential risks and
rewards of investment in various investment vehicles, including but not limited
to, stocks, bonds, Treasury securities and shares of a Fund and/or other mutual
funds. Materials may include a discussion of certain attributes or benefits to
be derived by an investment in a Fund and/or other mutual funds (such as value
investing, market timing, dollar cost averaging, asset allocation, constant
ratio transfer, automatic accounting rebalancing, the advantages and
disadvantages of investing in tax-deferred and taxable investments), shareholder
profiles and hypothetical investor scenarios, timely information on financial
management, tax and retirement planning and investment alternatives to
certificates of deposit and other financial instruments. Such Materials may
include symbols, headlines or other material which highlight or summarize the
information discussed in more detail therein.

MISCELLANEOUS
-------------

As used in the Prospectus, "assets belonging to a Fund" means the
consideration received by the Trust upon the issuance of shares in that
particular Fund, together with all income, earnings, profits, and proceeds
derived from the investment thereof, including any proceeds from the sale of
such investments, any funds or payments derived from any reinvestment of such
proceeds, and a portion of any general assets of the Trust not belonging to a
particular Fund. In determining a Fund's net asset value, assets belonging to a
particular Fund are charged with the liabilities in respect of that Fund.

The Trust bears all costs in connection with its organization, including
the fees and expenses of registering and qualifying its shares for distribution
under federal and state securities regulations. All organization expenses are
amortized on the straight-line method over a period of five years from the date
of commencement of operations.

As of September 10, 1996, the following bank subsidiaries of National City
Corporation held of record 5% or more of the outstanding Institutional shares of
the Money Market, Government, Treasury, Tax Exempt and Pennsylvania Tax Exempt
Funds acting as agent or custodian for their customers, but did not own such
shares beneficially:

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<PAGE> 75

PERCENTAGE OF OUTSTANDING
-------------------------
INSTITUTIONAL SHARES
--------------------

Money Tax Pennsylvania
Market Government Treasury Exempt Tax Exempt
Fund Fund Fund Fund Fund
------ ---------- -------- ------ ------------

<S> <C> <C> <C> <C> <C>
National City Bank, 5.03% -- 18.38% 7.13% --
Northeast
One Cascade Plaza
Akron, OH 44308

National City Bank of -- -- 7.30% --
Dayton
Gem Plaza, 6 N. Main
Dayton, OH 45412

National City Bank 39.09% 26.74% 7.50% 26.71% --
1900 East Ninth Street
Cleveland, OH 44114-3484

National City Bank of -- 6.59% 18.99% 25.38% --
Columbus
155 East Broad Street
Columbus, OH 43251

National City Bank of 14.07% 51.73% -- 16.24% --
Kentucky
National City Tower
101 South Fifth Street
Louisville, KY 40202

National City Bank of 8.67% 5.18% 35.73% 13.57% --
Indiana
101 W. Washington Street
Indianapolis, IN 46255

National City Bank, 5.48% -- -- -- --
Northwest
405 Madison Avenue
Toledo, OH 43603

National City Bank of 14.91% -- -- -- 86.90%
Pennsylvania
400 Fourth Avenue
Pittsburgh, PA 15222

</TABLE>

To the Trust's knowledge, no shareholder beneficially owned 5% or more of
the outstanding Institutional shares of the Money Market or Pennsylvania Tax
Exempt Funds as of September 11, 1996.

The following shareholders beneficially owned 5% or more of the outstanding
Institutional shares of the Government Fund as of September 11, 1996:

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<PAGE> 76

<TABLE>
<CAPTION>
Percentage of
Number of Outstanding
Institutional Institutional
Government Fund Shares Shares
- --------------- ------------- -------------

<S> <C> <C>
National City Corporation 171,436,586.43 21.69%
Anne Ruffing
1900 East Ninth Street
14th Floor
Cleveland, OH 44114

Deloitte Touche & Company 55,637,814.78 7.04%
Attn: Jim Carpenter
220 West Main Street
Suite 2100
Louisville, KY 40202

</TABLE>

The following shareholders beneficially owned 5% or more of the outstanding
Institutional shares of the Treasury Fund as of September 11, 1996:

<TABLE>
<CAPTION>
Percentage of
Number of Outstanding
Institutional Institutional
Treasury Fund Shares Shares
- ------------- ------------- -------------

<S> <C> <C>
Lincoln National Escrow 20,285,375.02 7.91%
Employers Health
c/o National City Bank of
Indiana
101 West Washington
Street, Suite 600E
Indianapolis, IN 46255

Lincoln National 24,467,618.68 6.56%
Investment Company
Attn: Pat Chasey
1300 South Clinton Street,
R2-01
Fort Wayne, IN 46802

</TABLE>

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<PAGE> 77

The following shareholders beneficially owned 5% or more of the outstanding
Institutional shares of the Tax Exempt Fund as of September 11, 1996:

<TABLE>
<CAPTION> Percentage of
Number of Outstanding
Institutional Institutional
Tax Exempt Fund Shares Shares
- --------------- ------------- -------------
<S> <C> <C>
American Electric Power 35,579,075.48 12.14%
Service Corp.
One Riverside Plaza
P. O. Box 16631
Columbus, OH 43216-6631
</TABLE>

The following shareholders beneficially owned 5% or more of the outstanding
Retail shares of the Money Market Fund as of September 11, 1996:

<TABLE>
<CAPTION> Percentage of
Number of Retail Outstanding Retail
Money Market Fund Shares Shares
- ----------------- ---------------- ------------------

<S> <C> <C>
John E. Guinness 19,862,228.00 6.29%
3354 Dorchester Road
Shaker Hts., OH 44120-3415
</TABLE>

To the Trust's knowledge, no shareholder beneficially owned 5% or more of
the outstanding Retail shares of the Government Fund as of September 11, 1996.

The following shareholders beneficially owned 5% or more of the outstanding
Retail shares of the Treasury Fund as of September 11, 1996:

<TABLE>
<CAPTION>
Percentage of
Number of Retail Outstanding Retail
Treasury Fund Shares Shares
- ------------- ---------------- ------------------

<S> <C> <C>
Johnson's Heating and 311,352.950 5.58%
Supplies, Inc.
P. O. Box 175
Norvelt, PA 15674

</TABLE>

The following shareholders beneficially owned 5% or more of the outstanding
Retail shares of the Tax Exempt Fund as of September 11, 1996:

<TABLE>
<CAPTION>
Percentage of
Number of Retail Outstanding
Tax Exempt Fund Shares Shares
- --------------- ---------------- -------------

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<PAGE> 78

<S> <C> <C>
Leon A. Weiss 3,211,556.00 5.26%
113 Saint Clair Avenue
NE #700
Cleveland, OH 44114-1214
</TABLE>

The following shareholders beneficially owned 5% or more of the outstanding
Retail shares of the Pennsylvania Tax Exempt Fund as of September 11, 1996.

<TABLE>
<CAPTION>
Percentage of
Pennsylvania Tax Exempt Number of Retail Outstanding Retail
Fund Shares Shares
- ----------------------- ---------------- ------------------

<S> <C> <C>
Frank's Auto Supply dba 514,000.00 21.47%
Autosupermarket
P. O. Box 1124
Uniontown, PA 15401-1124

John R. Echement 348,707.86 14.57%
102 Dutch Lane
Pittsburgh, PA 15236-4327

Pompei and Sons Inc. 345,000.00 14.41%
One Pompei Lane
Bentleyville, PA 15341

Recmix of Pennsylvania Inc. 262,000.00 10.95%
586 Plum Run Road
Canonsburg, PA 15317-9773

Green Acreas Contracting 251,000.00 10.49%
Co. Inc.
General Account
P.O. Box 463
Scottsdale, PA 15683-0463

Hartman Personnel Services Inc. 247,000.00 10.32%
Parent Account
1946 West 26th Street
Erie, PA 16508-1160

Marsula Electric Inc. 164,000.00 6.85%
575 Angew Road
Greensburg, PA 15601-9701

</TABLE>

FINANCIAL STATEMENTS
--------------------

The audited financial statements contained in the annual report for the
fiscal year ended May 31, 1996 are hereby incorporated herein by reference.
Copies of the Funds' annual reports may be obtained by

-41-

<PAGE> 79

calling the Trust at 1-800-622-FUND or by writing to the Trust at 4400
Computer Drive, Westborough, Massachusetts 01581.

The financial statements for the Predecessor Fund for the fiscal period May
1, 1996 through May 31, 1996 and for the fiscal year ended April 30, 1996 and
the period prior thereto are contained in the Predecessor Fund's Annual Report
to Shareholders (the "Financial Statements"), which has been filed with the
Securities and Exchange Commission and is incorporated into this Statement of
Additional Information by reference. The Financial Statements and the
information included in the Financial Highlights tables for the same periods
which appear in the Fund's prospectus have been audited by Coopers & Lybrand
L.L.P., independent accountants for the Predecessor Fund, whose report thereon
appears in such Annual Report. The Financial Statements in such Annual Report
have been incorporated herein and in the Pennsylvania Tax Exempt Fund's
Prospectus in reliance upon the report of said firm of independent accountants
given upon their authority as experts in accounting and auditing.

-42-

<PAGE> 80

APPENDIX A
----------

DESCRIPTION OF RATINGS

CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS
- ----------------------------------------------

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

"AAA" - This designation represents the highest rating assigned by Standard
& Poor's to a debt obligation and indicates an extremely strong capacity to pay
interest and repay principal.

"AA" - Debt is considered to have a very strong capacity to pay interest
and repay principal and differs from AAA issues only in small degree.

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

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

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

"BB" - Debt has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.

"B" - Debt has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The "B" rating category is also used for debt

A-1

<PAGE> 81

subordinated to senior debt that is assigned an actual or implied "BB" or "BB-"
rating.

"CCC" - Debt has a currently identifiable vulnerability to default, and is
dependent upon favorable business, financial and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The "CCC" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"B" or "B-" rating.

"CC" - This rating is typically applied to debt subordinated to senior debt
that is assigned an actual or implied "CCC" rating.

"C" - This rating is typically applied to debt subordinated to senior debt
which is assigned an actual or implied "CCC-" debt rating. The "C" rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.

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

"D" - Debt is in payment default. This rating is used when interest
payments or principal payments are not made on the date due, even if the
applicable grace period has not expired, unless S & P believes that such
payments will be made during such grace period. "D" rating is also used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.

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

"r" - This rating is attached to highlight derivative, hybrid, and certain
other obligations that S & P believes may experience high volatility or high
variability in expected returns due to non-credit risks. Examples of such
obligations are: securities whose principal or interest return is indexed to
equities, commodities, or currencies; certain swaps and options; and interest
only and principal only mortgage securities. The absence of an "r" symbol should
not be taken as an indication that an obligation will exhibit no volatility or
variability in total return.

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

"Aaa" - Bonds are judged to be of the best quality. They carry the smallest
degree of investment risk and are generally

A-2

<PAGE> 82

referred to as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.

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

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

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

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

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

(P)... - When applied to forward delivery bonds, indicates that the rating
is provisional pending delivery of the bonds. The rating may be revised prior to
delivery if changes occur in the legal documents or the underlying credit
quality of the bonds.

A-3

<PAGE> 83

Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols, Aa1,
A1, Ba1 and B1.

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

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

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

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

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

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

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

The following summarizes the highest four ratings used by Fitch for
corporate and municipal bonds:

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

"AA" - Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as

A-4

<PAGE> 84

bonds rated "AAA." Because bonds rated in the "AAA" and "AA" categories are not
significantly vulnerable to foreseeable future developments, short-term debt of
these issuers is generally rated "F-1+."

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

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

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

IBCA assesses the investment quality of unsecured debt with an original
maturity of more than one year which is issued by bank holding companies and
their principal bank subsidiaries. The following summarizes the rating
categories used by IBCA for long-term debt ratings:

"AAA" - Obligations for which there is the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial,
such that adverse changes in business, economic or financial conditions are
unlikely to increase investment risk substantially.

"AA" - Obligations for which there is a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial,
such that adverse changes in business, economic or financial conditions may
increase investment risk, albeit not very significantly.

"A" - Obligations for which there is a low expectation of investment risk.
Capacity for timely repayment of principal and interest is strong, although
adverse changes in business, economic or financial conditions may lead to
increased investment risk.

"BBB" - Obligations for which there is currently a low expectation of
investment risk. Capacity for timely repayment of principal and interest is
adequate, although adverse changes in

A-5

<PAGE> 85

business, economic or financial conditions are more likely to lead to increased
investment risk than for obligations in other categories.

"BB," "B," "CCC," "CC," and "C" - Obligations are assigned one of these
ratings where it is considered that speculative characteristics are present.
"BB" represents the lowest degree of speculation and indicates a possibility of
investment risk developing. "C" represents the highest degree of speculation and
indicates that the obligations are currently in default.

IBCA may append a rating of plus (+) or minus (-) to a rating below "AAA"
to denote relative status within major rating categories.

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

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

COMMERCIAL PAPER RATINGS
- ------------------------

A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt considered short-term in the relevant
market. The following summarizes the rating categories used by Standard and
Poor's for commercial paper:

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

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

"A-3" - Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.

"B" - Issues are regarded as having only a speculative capacity for timely
payment.

"C" - This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.

A-6

<PAGE> 86

"D" - Issues are in payment default.

Moody's commercial paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of 9 months. The following summarizes the rating categories used by
Moody's for commercial paper:

"Prime-1" - Issuers or related supporting institutions have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics: leading
market positions in well established industries; high rates of return on funds
employed; conservative capitalization structures with moderate reliance on debt
and ample asset protection; broad margins in earning coverage of fixed financial
charges and high internal cash generation; and well established access to a
range of financial markets and assured sources of alternate liquidity.

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

"Prime-3" - Issuers or related supporting institutions have an acceptable
capacity for repayment of short-term promissory obligations. The effects of
industry characteristics and market composition may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and the requirement for relatively high financial
leverage. Adequate alternate liquidity is maintained.

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

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

"D-1+" - Debt possesses highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or access to alternative
sources of funds, is

A-7

<PAGE> 87

outstanding, and safety is just below risk-free U.S. Treasury short-term
obligations.

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

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

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

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

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

"D-5" - Issuer has failed to meet scheduled principal and/or interest
payments.

Fitch short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years. The following
summarizes the rating categories used by Fitch for short-term obligations:

"F-1+" - Securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as having the strongest degree of assurance
for timely payment.

"F-1" - Securities possess very strong credit quality. Issues assigned this
rating reflect an assurance of timely payment only slightly less in degree than
issues rated "F-1+."

"F-2" - Securities possess good credit quality. Issues assigned this rating
have a satisfactory degree of assurance for timely payment, but the margin of
safety is not as great as the "F- 1+" and "F-1" ratings.

"F-3" - Securities possess fair credit quality. Issues assigned this rating
have characteristics suggesting that the degree of assurance for timely payment
is adequate; however, near-

A-8

<PAGE> 88

term adverse changes could cause these securities to be rated below
investment grade.

"F-S" - Securities possess weak credit quality. Issues assigned this rating
have characteristics suggesting a minimal degree of assurance for timely payment
and are vulnerable to near-term adverse changes in financial and economic
conditions.

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

Fitch may also use the symbol "LOC" with its short-term ratings to indicate
that the rating is based upon a letter of credit issued by a commercial bank.

IBCA assesses the investment quality of unsecured debt with an original
maturity of less than one year which is issued by bank holding companies and
their principal bank subsidiaries. The following summarizes the rating
categories used by IBCA for short-term debt ratings:

"A1+" - Obligations which posses a particularly strong credit feature are
supported by the highest capacity for timely repayment.

"A1" - Obligations are supported by the highest capacity for timely
repayment.

"A2" - Obligations are supported by a good capacity for timely repayment.

"A3" - Obligations are supported by a satisfactory capacity for timely
repayment.

"B" - Obligations for which there is an uncertainty as to the capacity to
ensure timely repayment.

"C" - Obligations for which there is a high risk of default or which are
currently in default.

A-9

<PAGE> 89

MUNICIPAL NOTE RATINGS AND VARIABLE RATE DEMAND OBLIGATIONS RATINGS
- -------------------------------------------------------------------

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

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

"SP-2" - The issuers of these municipal notes exhibit satisfactory capacity
to pay principal and interest.

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

Moody's ratings for state and municipal notes and other short-term loans
are designated Moody's Investment Grade ("MIG") and variable rate demand
obligations are designated Variable Moody's Investment Grade ("VMIG"). Such
ratings recognize the differences between short-term credit risk and long-term
risk. The following summarizes the ratings by Moody's Investors Service, Inc.
for short-term notes:

"MIG-1"/"VMIG-1" - Loans bearing this designation are of the best quality,
enjoying strong protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.

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

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

"MIG-4"/"VMIG-4" - Loans bearing this designation are of adequate quality,
carrying specific risk but having protection commonly regarded as required of an
investment security and not distinctly or predominantly speculative.

"SG" - Loans bearing this designation are of speculative quality and lack
margins of protection.

A-10

<PAGE> 90

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

A-11
<PAGE> 91
PROSPECTUS ARMADA
FUNDS
September 30, 1996 EQUITY
SERIES
(As Revised March 10, 1997)

ARMADA FUNDS LOGO
ARMADA MID CAP REGIONAL FUND Financial Power Close at Hand

ARMADA EQUITY GROWTH FUND

ARMADA EQUITY INCOME FUND

<PAGE> 92

ARMADA FUNDS

Supplement dated March 10, 1997
to the prospectus dated September 30, 1996
(as Revised March 10, 1997)

Investors who purchase Retail shares of the Armada Mid Cap Regional Fund during
the period from November 1, 1996 through March 31, 1997 will not be assessed
sales charges for such purchases.
<PAGE> 93

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Expense Table............................................................................. 2
Financial Highlights...................................................................... 4
Introduction.............................................................................. 7
Investment Objectives and Policies........................................................ 7
Investment Limitations.................................................................... 13
Yield and Performance Information......................................................... 14
Pricing of Shares......................................................................... 15
How to Purchase and Redeem Shares......................................................... 16
Distribution Agreement.................................................................... 21
Shareholder Services Plan................................................................. 22
Dividends and Distributions............................................................... 22
Taxes..................................................................................... 22
Management of the Trust................................................................... 23
Description of the Trust and its Shares................................................... 26
Custodian and Transfer Agent.............................................................. 27
Expenses.................................................................................. 28
Miscellaneous............................................................................. 28
</TABLE>

ARMADA FUNDS
- --------------------------------------------------------------------------------

This Prospectus describes shares in the following three investment funds
(the "Funds") of Armada Funds (the "Trust"), each having its own investment
objective and policies:

MID CAP REGIONAL FUND'S investment objective is to seek capital
appreciation by investing in a diversified portfolio of publicly traded equity
securities of issuers which are domiciled primarily in Ohio, Indiana, Kentucky
and Pennsylvania and contiguous states and other states in which National City
Corporation affiliates are located.

EQUITY GROWTH FUND'S investment objective is to seek a high level of total
return arising out of capital appreciation and income. The Fund invests in
common stocks and securities convertible into common stocks.

EQUITY INCOME FUND'S investment objective is to seek a competitive total
rate of return through investments in equity and equity equivalent securities
which carry premium current yields.

The net asset value per share of each Fund will fluctuate as the value of
its investment portfolio changes in response to changing market prices and other
factors.

National City Bank ("National City"), National City Bank of Columbus
("National City Columbus") and National City Bank of Kentucky ("National City
Kentucky") serve as investment advisers to the Equity Growth Fund and the Equity
Income Fund; National City individually serves as investment adviser to the Mid
Cap Regional Fund (each, an "adviser" and collectively, the "advisers").

SEI Financial Services Company (the "Distributor"), serves as the Trust's
sponsor and distributor. Each Fund pays a fee to the Distributor for
distributing its shares. See "Distribution Agreement."

This Prospectus sets forth concisely the information about the Funds that a
prospective investor should consider before investing. Investors should
carefully read this Prospectus and retain it for future reference. Additional
information about the Funds, contained in a Statement of Additional Information,
has been filed with the Securities and Exchange Commission ("SEC") and is
available upon request without charge by contacting the Trust at its telephone
number or address shown above. The Statement of Additional Information bears the
same date as this Prospectus and is incorporated by reference in its entirety
into this Prospectus.

September 30, 1996

(As Revised March 10, 1997)
<PAGE> 95

EXPENSE TABLE

<TABLE>
<CAPTION>
MID CAP MID CAP EQUITY EQUITY
REGIONAL REGIONAL GROWTH EQUITY GROWTH INCOME EQUITY INCOME
RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL
SHARES(1) SHARES SHARES(1) SHARES SHARES(1) SHARES
------- ------------- ------- ------------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on
Purchases............................... 3.75% None 3.75% None 3.75% None
Sales Charge Imposed on Reinvested
Dividends............................... None None None None None None
Deferred Sales Charge...................... None None None None None None
Redemption Fee............................. None None None None None None
Exchange Fee............................... None None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees............................ .75% .75% .75% .75% .75% .75%
12b-1 Fees(2) (after fee waivers).......... .05% .05% .05% .05% .05% .05%
Other Expenses............................. .50% .25% .45% .20% .50% .25%
---- ---- ---- ---- ---- ----
TOTAL FUND OPERATING EXPENSES(3)
(after fee waivers).............. 1.30% 1.05% 1.25% 1.00% 1.30% 1.05%
==== ==== ==== ==== ==== ====
</TABLE>

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

(1) The Trust has implemented a Shareholder Services Plan (the "Services Plan")
with respect to Retail shares in each of the Funds. Pursuant to the Services
Plan, the Trust enters into shareholder servicing agreements with certain
financial institutions under which they agree to provide shareholder
administrative services to their customers who beneficially own Retail
shares in consideration for the payment of up to .25% (on an annualized
basis) of the net asset value of such shares. For further information
concerning the Services Plan, see "Shareholder Services Plan."

(2) The Funds have in effect 12b-1 Plans pursuant to which each Fund may bear
fees in an amount of up to .10% of average daily net assets. As a result of
the payment of sales charges and 12b-1 fees, long-term shareholders may pay
more than the economic equivalent of the maximum front-end sales charge
permitted by the National Association of Securities Dealers, Inc. ("NASD").
The NASD has adopted rules which generally limit the aggregate sales charges
and payments under the Trust's Service and Distribution Plan ("Distribution
Plan") and Services Plan to a certain percentage of total new gross share
sales, plus interest. The Trust would stop accruing 12b-1 and related fees
if, to the extent, and for as long as, such limit would otherwise be
exceeded.

(3) The expense information in the table relating to each Fund has been restated
to reflect current fees. Waivers of 12b-1 fees are expected during the
current fiscal year. If the maximum distribution fee permitted under the
12b-1 Plan were imposed, Total Fund Operating Expenses would be 1.35% and
1.10%, 1.30% and 1.05% and 1.35% and 1.10% for the Retail and Institutional
shares of the Mid Cap Regional Fund, Equity Growth Fund and Equity Income
Fund, respectively.

2
<PAGE> 96

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

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Mid Cap Regional Retail Shares........................... $ 50 $77 $ 106 $188
Mid Cap Regional Institutional Shares.................... $ 11 $33 $ 58 $128
Equity Growth Retail Shares.............................. $ 50 $76 $ 104 $183
Equity Growth Institutional Shares....................... $ 10 $32 $ 55 $122
Equity Income Retail Shares.............................. $ 50 $77 $ 106 $188
Equity Income Institutional Shares....................... $ 11 $33 $ 58 $128
</TABLE>

THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATES OF RETURN. ACTUAL EXPENSES AND RATES OF RETURN MAY BE GREATER
OR LESS THAN THOSE SHOWN.

The purpose of this Expense Table is to assist an investor in understanding
the various costs and expenses that an investor in the Funds will bear directly
or indirectly. For more complete descriptions of these costs and expenses, see
"Financial Highlights," "Management of the Trust" and "Distribution Agreement"
in this Prospectus and the financial statements and related notes incorporated
by reference into the Statement of Additional Information for the Funds. Any
fees that are charged by affiliates of the advisers or other institutions
directly to their customer accounts for services related to investments in
shares of the Funds are in addition to and not reflected in the fees and
expenses described above.

3
<PAGE> 97

FINANCIAL HIGHLIGHTS

(For a Fund share outstanding throughout the period)

MID CAP REGIONAL FUND

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED PERIOD ENDED PERIOD ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
1996 1996 1995 1995
INSTITUTIONAL RETAIL INSTITUTIONAL(1) RETAIL(1)
------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period............ $ 11.38 $11.26 $ 10.00 $10.16
------- ------ ------- ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income......................... .08 .06 .10 .07
Net Gains on Securities
(Realized and Unrealized).................. 2.41 2.37 1.36 1.11
------- ------ ------- ------
Total from Investment Operations...... 2.49 2.43 1.46 1.18
------- ------ ------- ------
LESS DISTRIBUTIONS
Dividends from Net Investment Income.......... (.08) (.06) (.04) (.04)
Dividends in Excess of Net Investment
Income..................................... (.02) (.02) (.00) (.00)
Dividends from Net Realized Capital Gains..... (.67) (.67) (.04) (.04)
------- ------ ------- ------
Total Distributions................... (.77) (.75) (.08) (.08)
------- ------ ------- ------
Net Asset Value, End of Period.................. $ 13.10 $12.94 $ 11.38 $11.26
======= ====== ======= ======
TOTAL RETURN.................................... 22.64% 22.28%(3) 17.42%(2) 14.80%(2,3)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (in 000's).......... $99,294 $4,702 $ 50,993 $3,567
Ratio of Expenses to Average Net Assets
(after fee waivers)........................ 1.05%(4) 1.30%(5) 1.01%(2,4) 1.34%(2,5)
Ratio of Net Investment Income to Average Net
Assets (after fee waivers)................. .83%(4) .58%(5) 1.31%(2,4) 1.09%(2,5)
Portfolio Turnover Rate....................... 106% 106% 69% 69%
Average Commission Rate....................... $ 0.06 $ 0.06 N/A N/A
</TABLE>

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

(1) Institutional and Retail classes commenced operations on July 26, 1994 and
August 15, 1994, respectively.

(2) Annualized.

(3) Total Return excludes sales charge.

(4) The operating expense ratio and the net investment income ratio before fee
waivers by the Custodian for the Institutional class for the year ended May
31, 1996 would have been 1.06% and .82%, respectively. The operating expense
ratio and the net investment income ratio before fee waivers by the
Investment Adviser, Administrator, and Custodian for the Institutional class
for the period ended May 31, 1995 would have been 1.15% and 1.17%,
respectively.

(5) The operating expense ratio and the net investment income ratio before fee
waivers by the Custodian for the Retail class for the year ended May 31,
1996 would have been 1.32% and .56%, respectively. The operating expense
ratio and the net investment income ratio before fee waivers by the
Investment Adviser, Administrator, and Custodian for the Retail class for
the period May 31, 1995 would have been 1.38% and 1.05%, respectively.

4
<PAGE> 98

FINANCIAL HIGHLIGHTS

(For a Fund share outstanding throughout each period)

EQUITY GROWTH FUND

YEAR YEAR YEAR YEARD YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
1996 1996 1995 1995 1994 1994 1993
INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL
------------- ------ ------------- ------ ------------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period......... $ 14.77 $14.79 $ 13.66 $13.68 $ 13.78 $13.80 $ 13.13
--------- ------ --------- ------ ------- ------ -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income....................... .14 .10 .21 .18 .18 .15 .27
Net Gains on Securities..................... 3.46 3.47 1.21 1.21 .01 .00 .67
--------- ------ --------- ------ ------- ------ -------
Total Income from Investment Operations..... 3.60 3.57 1.42 1.39 .19 .15 .94
--------- ------ --------- ------ ------- ------ -------
LESS DISTRIBUTIONS
Dividends from Net Investment Income........ (.14) (.10) (.20) (.17) (.18) (.15) (.27)
Dividends in Excess of Net Investment
Income.................................... (.02) (.02) (.00) (.00) (.01) (.00) (.02)
Dividends from Net Realized Capital Gains... (.19) (.19) (.00) (.00) (.11) (.11) (.00)
Dividends in excess of Net Realized Capital
Gains..................................... (.00) (.00) (.11) (.11) (.01) (.01) (.00)
--------- ------ --------- ------ ------- ------ -------
Total Distributions......................... (.35) (.31) (.31) (.28) (.31) (.27) (.29)
--------- ------ --------- ------ ------- ------ -------
Net Asset Value, End of Period............... $ 18.02 $18.05 $ 14.77 $14.79 $ 13.66 $13.68 $ 13.78
========= ====== ========= ====== ======= ====== =======
TOTAL RETURN................................. 24.61% 24.34%(3) 10.62% 10.35%(3) 1.41% 1.12%(3) 7.20%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000s)............ $ 166,671 $6,013 $ 119,634 $5,974 $90,446 $7,521 $85,256
Ratio of Expenses to Average Net Assets
(after fee waivers)....................... 1.01%(4) 1.26%(5) 1.01%(4) 1.27%(5) 1.07% 1.32% .34%(4)
Ratio of Net Investment Income to Average
Net Assets (after fee waivers)............ 0.85%(4) .60%(5) 1.53%(4) 1.23%(5) 1.33% 1.08% 2.13%(4)
Portfolio Turnover Rate..................... 74% 74% 17% 17% 15% 15% 15%
Average Commission Rate..................... $ 0.06 $0.06 N/A N/A N/A N/A N/A

<CAPTION>
FOR THE PERIOD
YEAR YEAR YEAR YEAR YEAR DECEMBER 20,
ENDED ENDED ENDED ENDED ENDED 1989
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, (COMMENCEMENT OF
1993 1992 1992 1991 1991 OPERATIONS) TO
RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL(1) MAY 31, 1990
------- ------------- ------- ------------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period......... $13.13 $ 12.35 $12.35 $ 10.77 $12.04 $ 10.00
------ ------- ------ ------- ------ -------

INCOME FROM INVESTMENT OPERATIONS
Net Investment Income....................... .23 .30 .25 .31 .04 .13
Net Gains on Securities..................... .68 .78 .78 1.58 .27 .71
------ ------- ------ ------- ------ -------
Total Income from Investment Operations..... .91 1.08 1.03 1.89 .31 .84
------ ------- ------ ------- ------ -------
LESS DISTRIBUTIONS
Dividends from Net Investment Income........ (.23) (.30) (.25) (.31) (.00) (.07)
Dividends in Excess of Net Investment
Income.................................... (.01) (.00) (.00) (.00) (.00) (.00)
Dividends from Net Realized Capital Gains... (.00) (.00) (.00) (.00) (.00) (.00)
Dividends in excess of Net Realized Capital
Gains..................................... (.00) (.00) (.00) (.00) (.00) (.00)
------ ------- ------ ------- ------ -------
Total Distributions......................... (.24) (.30) (.25) (.31) (.00) (.07)
------ ------- ------ ------- ------ -------
Net Asset Value, End of Period............... $13.80 $ 13.13 $13.13 $ 12.35 $12.35 $ 10.77
====== ======= ====== ======= ====== =======
TOTAL RETURN................................. 7.00%(3) 8.90% 8.48%(3) 18.10% 21.82%(1,2,3) 20.09%(2)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000s)............ $7,707 $48,673 $2,767 $42,112 $1,389 $ 34,034
Ratio of Expenses to Average Net Assets
(after fee waivers)....................... .59%(5) .26%(4) .51%(5) .31%(4) .53%(2,5) .36%(2,4)
Ratio of Net Investment Income to Average
Net Assets (after fee waivers)............ 1.88%(5) 2.36%(4) 2.15%(5) 2.90%(4) 2.94%(2,5) 3.30%(2,4)
Portfolio Turnover Rate..................... 15% 9% 9% 11% 11% 5%
Average Commission Rate..................... N/A N/A N/A N/A N/A N/A

</TABLE>

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

(1) Retail class commenced operations on April 15, 1991.
(2) Annualized.
(3) Total Return excludes sales charge.
(4) The operating expense ratio and the net investment income ratio before fee
waivers by the Custodian for the Institutional class for the years ended May
31, 1996 and 1995 would have been 1.03% and .83% and 1.02% and 1.51%,
respectively. The operating expense ratio and the net investment income
ratio before fee waivers by the Investment Advisers for the Institutional
class for the years ended May 31, 1993, 1992 and 1991 and for the period
ended May 31, 1990 would have been 1.01% and 1.46%, 1.02% and 1.62%, 1.06%
and 2.15%, and 1.11% and 2.55%, respectively.
(5) The operating expense ratio and the net investment income ratio before fee
waivers by the Custodian for the Retail class for the years ended May 31,
1996 and 1995 would have been 1.28% and .58% and 1.28% and 1.22%,
respectively. The operating expense ratio and the net investment income
ratio before fee waivers by the Investment Advisers for the Retail class for
the years ended May 31, 1993 and 1992 and for the period ended May 31, 1991
would have been 1.26% and 1.21%, 1.27% and 1.40%, and 1.28% and 2.19%,
respectively.

5
<PAGE> 99

FINANCIAL HIGHLIGHTS

(For a Fund share outstanding throughout the period)

EQUITY INCOME FUND

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED PERIOD ENDED PERIOD ENDED
MAY 31, MAY 31, MAY 31, MAY 31
1996 1996 1995 1995
INSTITUTIONAL RETAIL INSTITUTIONAL(1) RETAIL(1)
------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period......... $ 11.01 $11.01 $ 10.00 $10.26
------- ------ ------- ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income...................... .34 .33 .34 .26
Net Gains on Securities
(Realized and Unrealized)............... 1.79 1.77 .94 .75
------- ------ ------- ------
Total from Investment Operations... 2.13 2.10 1.28 1.01
------- ------ ------- ------
LESS DISTRIBUTIONS
Dividends from Net Investment Income....... (.34) (.32) (.27) (.26)
Dividends from Net Realized Capital
Gains................................... (.14) (.14) (.00) (.00)
------- ------ ------- ------
Total Distributions................ (.48) (.46) (.27) (.26)
------- ------ ------- ------
Net Asset Value, End of Period............... $ 12.66 $12.65 $ 11.01 $11.01
======= ====== ======= ======
TOTAL RETURN................................. 19.72% 19.37%(3) 14.34%(2) 13.18%(2,3)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (in 000's)....... $61,978 $ 263 $ 36,194 $ 125
Ratio of Expenses to Average Net Assets
(after fee waivers)..................... 1.06%(4) 1.31%(5) .99%(2,4) 1.41%(2,5)
Ratio of Net Investment Income to Average
Net Assets (after fee waivers).......... 3.02%(4) 2.75%(5) 3.87%(2,4) 3.45%(2,5)
Portfolio Turnover Rate.................... 53% 53% 12% 12%
Average Commission Rate.................... $ 0.07 $ 0.07 N/A N/A
</TABLE>

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

(1) Institutional and Retail classes commenced operations on July 1, 1994 and
August 22, 1994, respectively.

(2) Annualized.

(3) Total Return excludes sales charge.

(4) The operating expense ratio and the net investment income ratio before fee
waivers by the Custodian for the Institutional class for the year ended May
31, 1996 would have been 1.08% and 3.00%, respectively. The operating
expense ratio and the net investment income ratio before fee waivers by the
Investment Advisers, Administrator, and Custodian for the Institutional
class for the period ended May 31, 1995 would have been 1.21% and 3.66%,
respectively.

(5) The operating expense ratio and the net investment income ratio before fee
waivers by the Custodian for the Retail class for the year ended May 31,
1996 would have been 1.32% and 2.74%, respectively. The operating expense
ratio and the net investment income ratio before fee waivers by the
Investment Advisers, Administrator, and Custodian for the Retail class for
the period ended May 31, 1995 would have been 1.45% and 3.40%, respectively.

6
<PAGE> 100

INTRODUCTION

The Trust is an open-end management investment company registered under the
Investment Company Act of 1940, as amended ("1940 Act"). Each Fund consists of a
separate pool of assets with separate investment objectives and policies, as
described below under "Investment Objectives and Policies." Each Fund is
classified as a diversified investment fund under the 1940 Act.

Shares of each Fund have been classified into two separate
classes -- Retail shares and Institutional shares. Retail shares and
Institutional shares represent equal pro rata interests in a Fund except that,
as described more fully below under "Shareholder Services Plan," the Trust has
implemented the Services Plan with respect to Retail shares in the Funds. Under
the Services Plan, only the beneficial owners of Retail shares bear the expenses
of shareholder administrative services which are provided by financial
institutions for their benefit (not to exceed .25% annually). See "Shareholder
Services Plan," "Dividends and Distributions" and "Description of the Trust and
Its Shares" for a description of the impact that the Services Plan may have on
holders of Retail shares.

INVESTMENT OBJECTIVES AND POLICIES

MID CAP REGIONAL FUND

The investment objective of the Mid Cap Regional Fund is to seek capital
appreciation by investing in a diversified portfolio of publicly traded equity
securities of issuers which are domiciled primarily in Ohio, Indiana, Kentucky
and Pennsylvania and contiguous states and other states in which National City
Corporation affiliates are located. Under normal conditions, at least 65% of the
value of the Fund's total assets will be invested in equity securities of
companies with market capitalizations ranging from $100 million to $2 billion
("Mid Cap Companies").

Because the Fund will invest in the securities of issuers which are
domiciled primarily in Ohio, Indiana, Kentucky and Pennsylvania, investment
return on the Mid Cap Regional Fund is dependant on the performance of a smaller
number of securities relative to the number held in other equity portfolios.
Consequently, the change in value of any one security may affect the overall
value of the Fund more than it would in another equity portfolio, and thereby
subject the market-based net asset value per share of the Fund to greater
fluctuations. In addition, the Fund is likely to be more susceptible to regional
economic, political and regulatory developments than other equity portfolios.

EQUITY GROWTH FUND

The investment objective of the Equity Growth Fund is to seek a high level
of total return arising out of capital appreciation and income. The Fund seeks
to achieve its objective by investing substantially all of its assets in a
diversified portfolio of common stocks and securities convertible into common
stocks. Under normal conditions, at least 80% of the Fund's total assets will be
invested in common stocks and securities convertible into common stocks. The
Fund's advisers select common stocks based on a number of factors, including
historical and projected earnings growth, earnings quality and liquidity, each
in relation to the market price of the stock. Stocks purchased for the Fund
generally will be listed on a national securities exchange or will be unlisted
securities with an established over-the-counter market. The Fund may also invest
up to 20% of its total assets at the time of purchase in American Depository
Receipts ("ADRs") and securities issued by foreign issuers.

During temporary defensive periods the Fund may invest in various short
term obligations de-

7
<PAGE> 101

scribed under "Common Investment Policies of the Funds."

EQUITY INCOME FUND

The investment objective of the Equity Income Fund is to seek a competitive
total rate of return through investments in equity and equity equivalent
securities which carry premium current yields. Under normal conditions, at least
65% of the value of the Fund's total assets will be invested in income-producing
common stocks and securities convertible into common stocks having a rating from
Standard & Poor's of BB or higher.

The Fund's advisers will generally try to select securities that provide a
higher yield than the general market and will generally dispose of those
securities as their yield approaches a market yield or they no longer meet
purchase criteria in other respects.

Exchange Rate-Related Securities. The Equity Income Fund may invest in
securities for which the principal repayment at maturity, while paid in U.S.
dollars, is determined by reference to the exchange rate between the U.S. dollar
and the currency of one or more foreign countries ("Exchange Rate-Related
Securities"). The interest payable on these securities is denominated in U.S.
dollars and is not subject to foreign currency risk and, in most cases, is paid
at rates higher than most other similarly rated securities in recognition of the
foreign currency risk component of Exchange Rate-Related Securities.

Investments in Exchange Rate-Related Securities entail certain risks. There
is the possibility of significant changes in rates of exchange between the U.S.
dollar and any foreign currency to which an Exchange Rate-Related Security is
linked. In addition, there is no assurance that sufficient trading interest to
create a liquid secondary market will exist for a particular Exchange
Rate-Related Security due to conditions in the debt and foreign currency
markets. Illiquidity in the forward foreign exchange market and the high
volatility of the foreign exchange market may from time to time combine to make
it difficult to sell an Exchange Rate-Related Security prior to maturity without
incurring a significant price loss.

Forward Currency Exchange Contracts. The Equity Income Fund may enter into
forward currency exchange contracts in an effort to reduce the level of
volatility caused by changes in foreign currency exchange rates or where such
transactions are economically appropriate for the reduction of risks inherent in
the ongoing management of the Fund. The Fund may not enter into such contracts
for speculative purposes. A forward currency exchange contract is an obligation
to purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of contract. Although such contracts tend to minimize the
risk of loss due to a decline in the value of the hedged currency, at the same
time they tend to limit any potential gain that might be realized should the
value of such currency increase. Consequently, the Fund may choose to refrain
from entering into such contracts. In connection with forward currency exchange
contracts, the Fund will create a segregated account of liquid assets, such as
cash, U.S. government securities or other liquid high grade debt obligations, or
will otherwise cover its position in accordance with applicable requirements of
the SEC.

During temporary defensive periods the Fund may invest in various short
term obligations described under "Common Investment Policies of the Funds."

COMMON INVESTMENT POLICIES OF THE FUNDS

Futures Contracts and Related Options

Each Fund may invest in futures contracts and options on futures contracts
for hedging purposes or to maintain liquidity.

Futures contracts obligate the Funds, at maturity, to take or make delivery
of certain securities or the cash value of a securities index. A Fund may sell a
futures contract in order to offset a decrease in the market value of its
portfolio securities that might otherwise result from a market decline. The
Funds may do so either to hedge the value of its portfolio of securities as a
whole or to protect

8
<PAGE> 102

against declines occurring prior to sales of securities in the value of the
securities to be sold. Conversely, the Funds may purchase a futures contract in
anticipation of purchases of securities. In addition, the Funds may utilize
futures contracts in anticipation of changes in the composition of its holdings.

Each Fund may purchase and sell call and put options on futures contracts
traded on an exchange or board of trade. When a Fund purchases an option on a
futures contract, it has the right to assume a position as a purchaser or seller
of a futures contract at a specified exercise price at any time during the
option period. When the Fund sells an option on a futures contract, it becomes
obligated to purchase or sell a futures contract if the option is exercised. In
anticipation of a market advance, the Fund may purchase call options on futures
contracts as a substitute for the purchase of futures contracts to hedge against
a possible increase in the price of securities which the Fund intends to
purchase. Similarly, if the value of the Fund's securities is expected to
decline, the Fund might purchase put options or sell call options on futures
contracts rather than sell futures contracts.

Each Fund intends to comply with the regulations of the Commodity Futures
Trading Commission ("CFTC") exempting it from registration as a "commodity pool
operator." The Funds' commodities transactions must constitute bona fide hedging
or other permissible transactions pursuant to such regulations. In addition, the
Funds may not engage in such transactions if the sum of the amount of initial
margin deposits and premiums paid for unexpired commodity options, other than
for bona fide hedging transactions, would exceed 5% of the liquidation value of
its assets, after taking into account unrealized profits and unrealized losses
on such contracts it has entered into; provided, however, that in the case of an
option that is in-the-money at the time of purchase, the in-the-money amount may
be excluded in calculating the percentage limitation. In connection with a
Fund's position in a futures contract or option thereon, it will create a
segregated account of liquid assets, such as cash, U.S. government securities or
other liquid high grade debt obligations, or will otherwise cover its position
in accordance with applicable requirements of the SEC.

The primary risks associated with the use of futures contracts and options
are:

(a) an imperfect correlation between the change in market value of the
securities held by the Funds and the price of the futures contracts and options

(b) possible lack of a liquid secondary market for a futures contract and
the resulting inability to close a futures contract when desired

(c) losses greater than the amount of the principal invested as initial
margin due to unanticipated market movements which are potentially unlimited

(d) the adviser's ability to predict correctly the direction of securities
prices, interest rates and other economic factors

For further information, see "Risk Factors, Investment Objectives and
Policies -- Futures Contracts and Options" and Appendix B in the Statement of
Additional Information.

Options

Each Fund may write covered call options, buy put options, buy call options
and sell or "write" secured put options on a national securities exchange and
issued by the Options Clearing Corporation for hedging purposes. Such
transactions may be effected on a principal basis with primary reporting dealers
in U.S. government securities in an amount not exceeding 5% of a Fund's net
assets, as described further in the Statement of Additional Information. Such
options may relate to particular securities or to various stock indices or bond
indices. Purchasing options is a specialized investment technique which entails
a substantial risk of a complete loss of the amounts paid as premiums to the
writer of the option.

A call option for a particular security gives the purchaser of the option
the right to buy, and a writer the obligation to sell, the underlying security
at the stated exercise price at any time prior to the expiration of the option,
regardless of the market price of the security. The premium paid to the writer
is the consideration for undertaking the obligations under the option contract.
A put option for a particular

9
<PAGE> 103

security gives the purchaser the right to sell the underlying security at the
stated exercise price at any time prior to the expiration date of the option,
regardless of the market price of the security. In contrast to an option on a
particular security, an option on a securities index provides the holder with
the right to make or receive a cash settlement upon exercise of the option.

Each Fund may purchase and sell put options on portfolio securities at or
about the same time that it purchases the underlying security or at a later
time. By buying a put, the Fund limits its risk of loss from a decline in the
market value of the security until the put expires. Any appreciation in the
value of and yield otherwise available from the underlying security, however,
will be partially offset by the amount of the premium paid for the put option
and any related transaction costs. Call options may be purchased by a Fund in
order to acquire the underlying security at a later date at a price that avoids
any additional cost that would result from an increase in the market value of
the security. Each Fund may also purchase call options to increase its return to
investors at a time when the call is expected to increase in value due to
anticipated appreciation of the underlying security. Prior to its expiration, a
purchased put or call option may be sold in a closing sale transaction (a sale
by a Fund, prior to the exercise of an option that it has purchased, of an
option of the same series), and profit or loss from the sale will depend on
whether the amount received is more or less than the premium paid for the option
plus the related transaction costs.

In addition, each Fund may write covered call and secured put options. A
covered call option means that a Fund owns or has the right to acquire the
underlying security subject to call at all times during the option period. A
secured put option means that a Fund maintains in a segregated account with its
custodian cash or U.S. government securities in an amount not less than the
exercise price of the option at all times during the option period. Such options
will be listed on a national securities exchange and issued by the Options
Clearing Corporation and may be effected on a principal basis with primary
reporting dealers in the U.S.

The aggregate value of the securities subject to options written by a Fund
will not exceed 25% of the value of its net assets. In order to close out an
option position prior to maturity, a Fund may enter into a "closing purchase
transaction" by purchasing a call or put option (depending upon the position
being closed out) on the same security with the same exercise price and
expiration date as the option which it previously wrote.

Options trading is a highly specialized activity and carries greater than
ordinary investment risk. Purchasing options may result in the complete loss of
the amounts paid as premiums to the writer of the option. In writing a covered
call option, a Fund gives up the opportunity to profit from an increase in the
market price of the underlying security above the exercise price (except to the
extent the premium represents such a profit). Moreover, it will not be able to
sell the underlying security until the covered call option expires or is
exercised or a Fund closes out the option. In writing a secured put option, a
Fund assumes the risk that the market value of the security will decline below
the exercise price of the option. The use of covered call and secured put
options will not be a primary investment technique of the Funds.

During temporary defensive periods the Funds may invest in various short
term obligations described below.

Foreign Securities and American Depository Receipts

Each Fund may invest in securities issued by foreign issuers either
directly or indirectly through investments in ADRs. ADRs are receipts issued by
an American bank or trust company evidencing ownership of underlying securities
issued by foreign issuers. ADRs may be listed on a national securities exchange
or may be traded in the over-the-counter market. ADR prices are denominated in
U.S. dollars; the underlying security may be denominated in a foreign currency.

10
<PAGE> 104

changes in exchange rates of foreign currencies and the possibility of adverse
changes in investment or exchange control regulations. There may be less
publicly available information about a foreign company than about a domestic
company. Foreign companies generally are not subject to uniform accounting,
auditing and financial reporting standards comparable to those applicable to
domestic companies. Further, foreign stock markets are generally not as
developed or efficient as those in the U.S., and in most foreign markets, volume
and liquidity are less than in the U.S. Fixed commissions on foreign stock
exchanges are generally higher than the negotiated commissions on U.S.
exchanges, and there is generally less government supervision and regulation of
foreign stock exchanges, brokers and companies than in the U.S.

With respect to certain foreign countries, there is a possibility of
expropriation or confiscatory taxation, limitations on the removal of funds or
other assets, or diplomatic developments that could affect investment within
those countries. Because of these and other factors, securities of foreign
companies acquired by the Funds may be subject to greater fluctuation in price
than securities of domestic companies. For further information, see "Risk
Factors, Investment Objectives and Policies" in the Statement of Additional
Information.

When-Issued Securities

Each Fund may purchase securities on a "when-issued" or delayed delivery
basis. These transactions are arrangements in which a Fund purchases securities
with payment and delivery scheduled for a future time. Each Fund expects that
commitments to purchase when-issued securities will not exceed 25% of the value
of its total assets under normal market conditions. The Funds do not intend to
purchase when-issued securities for speculative purposes but only for the
purpose of acquiring portfolio securities. In when-issued and delayed delivery
transactions, a Fund relies on the seller to complete the transaction; its
failure to do so may cause the Fund to miss a price or yield considered to be
attractive. For further information, see "Risk Factors, Investment Objectives
and Policies" in the Statement of Additional Information.

Short Term Obligations

During temporary defensive periods, each Fund may hold up to 100% of its
total assets in short term obligations (with maturities of 18 months or less)
such as domestic and foreign commercial paper, bankers' acceptances,
certificates of deposit and demand and time deposits of domestic and foreign
branches of U.S. banks and foreign banks, U.S. government securities, repurchase
agreements and guaranteed investment contracts ("GICs"). In the case of
repurchase agreements, default or bankruptcy of the seller may expose a Fund to
possible loss because of adverse market action or delays connected with the
disposition of the underlying obligations.

Further, it is uncertain whether the Fund would be entitled, as against a
claim by such seller or its receiver or trustee in bankruptcy, to retain the
underlying securities. Reverse repurchase agreements involve the risk that the
market value of the securities held by a Fund may decline below the price of the
securities it is obligated to repurchase. For further information, see "Risk
Factors, Investment Objectives and Policies" in the Statement of Additional
Information.

Lending Portfolio Securities

In order to generate additional income, each Fund may, from time to time,
lend its portfolio securities to broker-dealers, banks or other institutional
borrowers. A Fund must receive 100% collateral in the form of cash or U.S.
government securities. This collateral must be valued daily by the Fund's
adviser or advisers, and the borrower will be required to provide additional
collateral should the market value of the loaned securities increase. During the
time portfolio securities are on loan, the borrower pays the Fund involved any
dividends or interest paid on such securities. Loans are subject to termination
by the Fund or the borrower at any time. While a Fund does not have the right to
vote securities on loan, it intends to terminate the loan and regain the right
to vote if this is considered important with respect to the investment. A Fund
will only enter into loan arrangements with broker-dealers, banks or other
institutions which its adviser

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<PAGE> 105

or advisers have determined are creditworthy under
guidelines established by the Trust's Board of Trustees.

Securities of Other Investment Companies

Subject to 1940 Act limitations and pursuant to applicable SEC
requirements, each Fund may invest in securities issued by other investment
companies (including other investment companies advised by the advisers) which
invest in high quality, short-term debt securities and which determine their net
asset value per share based on the amortized cost or penny-rounding method. As a
shareholder of another investment company, a Fund would bear, along with other
shareholders, its pro rata portion of that company's expenses, including
advisory fees. These expenses would be in addition to the advisory and other
expenses that the Fund bears directly in connection with its own operations.
Investment companies in which a Fund may invest may also impose a sales or
distribution charge in connection with the purchase or redemption of their
shares and other types of commissions or charges. Such charges will be payable
by the Fund and, therefore, will be borne indirectly by its shareholders. For
further information, see "Risk Factors, Investment Objectives and Policies" in
the Statement of Additional Information.

Illiquid Securities

The Equity Growth Fund will not knowingly invest more than 10% of its net
assets and the Equity Income and Mid Cap Regional Funds will not knowingly
invest more than 15% of their respective net assets in securities that are
illiquid. Illiquid securities would generally include repurchase agreements and
GICs with notice/termination dates in excess of seven days and certain
securities which are subject to trading restrictions because they are not
registered under the Securities Act of 1933, as amended (the "1933 Act").

Each Fund may purchase securities which are not registered under the 1933
Act but which can be sold to "qualified institutional buyers" in accordance with
Rule 144A under the 1933 Act. Any such security will not be considered illiquid
so long as it is determined by the Board of Trustees or the Fund's adviser or
advisers, acting under guidelines approved and monitored by the Board, that an
adequate trading market exists for that security. This investment practice could
have the effect of increasing the level of illiquidity in a Fund during any
period that qualified institutional buyers become uninterested in purchasing
these restricted securities. The ability to sell to qualified institutional
buyers under Rule 144A is a recent development, and it is not possible to
predict how this market will develop. The Board will carefully monitor any
investment by a Fund in these securities.

Risk Factors Associated with Derivative Instruments

The Funds may purchase certain "derivative" instruments. Derivative
instruments are instruments that derive value from the performance of underlying
securities, interest or currency exchange rates, or indices, and include (but
are not limited to) futures contracts.

Like all investments, derivative instruments involve several basic types of
risks which must be managed in order to meet investment objectives. The specific
risks presented by derivatives include, to varying degrees, market risk in the
form of underperformance of the underlying securities, exchange rates or
indices; credit risk that the dealer or other counterparty to the transaction
will fail to pay its obligations; volatility and leveraging risk that, if
interest or exchange rates change adversely, the value of the derivative
instrument will decline more than the securities, rates or indices on which it
is based; liquidity risk that the Funds will be unable to sell a derivative
instrument when it wants because of lack of market depth or market disruption;
pricing risk that the value of a derivative instrument (such as an option) will
not correlate exactly to the value of the underlying securities, rates or
indices on which it is based; extension risk that the expected duration of an
instrument may increase or decrease; and operations risk that loss will occur as
a result of inadequate systems and controls, human error or otherwise. Some
derivative instruments are more complex than others, and for those instruments
that have been developed recently, data are lacking re-

12
<PAGE> 106

garding their actual performance over complete market cycles.

The risk to the Funds due to the use of derivatives will be limited to 10%
of the total value of each respective Fund's assets at the time of the
derivatives transaction. The advisers will evaluate the risks presented by the
derivative instruments purchased by the Funds, and will determine, in connection
with its day-to-day management of the Funds, how they will be used in
furtherance of the Funds' investment objectives.

Portfolio Turnover

Portfolio turnover will tend to rise during periods of economic turbulence
and decline during periods of stable growth. Each Fund's annual portfolio
turnover is not expected to exceed 100% under normal market conditions. For
further information, see "Risk Factors, Investment Objective and Policies" in
the Statement of Additional Information. Higher portfolio turnover may result in
increased taxable gains to shareholders (see "Taxes" below) and increased
expenses paid by the Fund due to transaction costs.

INVESTMENT LIMITATIONS

Each Fund is subject to a number of investment limitations. The following
investment limitations are matters of fundamental policy and may not be changed
with respect to a particular Fund without the affirmative vote of the Fund's
outstanding shares (as defined under "Miscellaneous"). (Other investment
limitations that also cannot be changed without a vote of shareholders are
contained in the Statement of Additional Information under "Risk Factors,
Investment Objectives and Policies.")

No Fund may:

1. Make loans, except that each Fund may purchase or hold debt instruments,
lend portfolio securities and enter into repurchase agreements in accordance
with its investment objective and policies.

2. Borrow money or issue senior securities, except that each Fund may
borrow from banks and enter into reverse repurchase agreements for temporary
purposes in amounts not in excess of 10% of the value of its total assets at the
time of such borrowing; or mortgage, pledge, or hypothecate any assets except in
connection with any such borrowing and in amounts not in excess of the lesser of
the dollar amounts borrowed or 10% of the value of the Fund's total assets at
the time of such borrowing. A Fund will not purchase securities while borrowings
(including reverse repurchase agreements) in excess of 5% of its total assets
are outstanding.

3. Purchase any securities which would cause 25% or more of the value of
its total assets at the time of such purchase to be invested in securities of
one or more issuers conducting their principal business activities in the same
industry, provided that

(a) there is no limitation with respect to obligations issued or guaranteed
by the U.S. government, its agencies or instrumentalities and repurchase
agreements secured by such obligations

(b) wholly owned finance companies will be considered to be in the
industries of their parents if their activities are primarily related to
financing the activities of their parents

(c) utilities will be classified according to their services, for example,
gas, gas transmission, electric and gas, electric, and telephone will each be
considered a separate industry

Additional investment limitations which are matters of fundamental policy
are as follows:

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<PAGE> 107

5. The Equity Growth Fund may invest no more than 10% of the value of its
net assets in illiquid securities, including repurchase agreements with
remaining maturities in excess of seven days, non-negotiable time deposits,
certificates of participation without corresponding remarketing agreements, and
other securities which are not readily marketable.

6. Neither the Equity Income Fund nor the Mid Cap Regional Fund may invest
more than 15% of the value of its net assets in illiquid securities. See
"Illiquid Securities" under "Investment Objectives and Policies -- Common
Investment Policies of the Funds."

For purposes of investment limitation No. 4, a security is considered to be
issued by the government entity (or entities) whose assets and revenues back the
security.

If a percentage limitation is satisfied at the time of investment, a later
increase or decrease in such percentage resulting from a change in value of a
Fund's securities will not constitute a violation of such limitation for
purposes of the 1940 Act. If a Fund exceeds the limitation on the holding of
illiquid securities, it will sell illiquid securities as necessary to maintain
the required liquidity when the advisers believe that it is in the best
interests of the Fund to do so.

YIELD AND PERFORMANCE INFORMATION

From time to time, the Trust may quote in advertisements or in reports to
shareholders each Fund's total return data for its Institutional shares and
Retail shares. The Funds calculate their total returns for each class of shares
on an "average annual total return" basis for various periods from the date they
commenced investment operations and for other periods as permitted under the
rules of the SEC. Average annual total return reflects the average annual
percentage change in value of an investment in the class over the measuring
period. Total returns for each class of shares may also be calculated on an
"aggregate total return" basis for various periods. Aggregate total return
reflects the total percentage change in value over the measuring period.

Both methods of calculating total return reflect changes in the price of
the shares and assume that any dividends and capital gain distributions made by
a Fund with respect to a class during the period are reinvested in shares of
that class. When considering average total return figures for periods longer
than one year, it is important to note that the annual total return of a class
for any one year in the period might have been greater or less than the average
for the entire period. The Funds may also advertise, from time to time, the
total returns of one or more classes of shares on a year-by-year or other basis
for various specified periods by means of quotations, charts, graphs or
schedules.

The "yield" quoted in advertisements of the Equity Income Fund refers to
the income generated by an investment in a class of shares of over a 30-day
period identified in the advertisement. This income is then "annualized." The
amount of income so generated by the investment during the 30-day period is
assumed to be earned and reinvested at a constant rate and compounded
semi-annually; the annualized income is then shown as a percentage of the
investment.

Shareholders should note that the total return and yield of Retail shares
will be reduced by the amount of shareholder servicing fees that are payable
under the Services Plan. See "Shareholder Services Plan."

Investors may compare the performance of each class of shares of a Fund to
the performance of other mutual funds with comparable investment objectives, to
various mutual fund or market indices

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<PAGE> 108

and to data or rankings prepared by independent services such as Lipper
Analytical Services, Inc. or other financial or industry publications that
monitor the performance of mutual funds. Comparisons may also be made to indices
or data published in Money Magazine, Forbes, Barron's, The Wall Street Journal,
The New York Times, Business Week, U.S.A. Today, CDA/Weisenberger, The American
Banker, Morningstar, Incorporated and other publications of a local, regional or
financial industry nature.

The performance of each class of shares of the Funds is based on historical
earnings and will fluctuate and is not intended to indicate future performance.
The investment return and principal value of an investment in a class will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. Performance data may not provide a basis for
comparison with bank deposits and other investments which provide a fixed yield
for a stated period of time. Changes in net asset value of a class should be
considered in ascertaining the total return to shareholders for a given period.
Total return data should also be considered in light of the risks associated
with a Fund's composition, quality, maturity, operating expenses and market
conditions. Any fees charged by financial institutions (as described in "How to
Purchase and Redeem Shares") are not included in the computation of performance
data but will reduce a shareholder's net return on an investment in a Fund.

PRICING OF SHARES

For purposes of pricing purchase and redemption orders, the net asset value
per share of each Fund is calculated as of the close of trading on the New York
Stock Exchange (the "Exchange") (generally, 4:00 p.m., Eastern Time) on each
Business Day as described below. Net asset value per share is determined on each
Business Day, except those holidays which the Exchange, or banks and trust
companies which are affiliated with National City Corporation (the "Banks"),
observe (currently New Year's Day, Dr. Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day,
Veterans' Day, Thanksgiving Day, and Christmas Day) ("Business Day"). Net asset
value per share of a particular class in a Fund is calculated by dividing the
value of all securities and other assets belonging to the Fund allocable to such
class, less the liabilities charged to that class, by the number of the
outstanding shares of that class.

With respect to each Fund, investments in securities traded on an exchange
are valued at the last quoted sale price for a given day, or if a sale is not
reported for that day, at the mean between the most recent quoted bid and asked
prices. Unlisted securities and securities traded on a national securities
market for which market quotations are readily available are valued at the mean
between the most recent bid and asked prices. Securities and other assets for
which no quotations are readily available are valued at their fair value under
procedures approved by the Board of Trustees. Absent unusual circumstances,
short-term investments having maturities of 60 days or less are valued on the
basis of amortized cost unless the Trust's Board of Trustees determines that
this does not represent fair value. The net asset value per share of each class
of shares of each Fund will fluctuate as the value of its investment fund
changes.

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<PAGE> 109

HOW TO PURCHASE AND REDEEM SHARES

DISTRIBUTOR

Shares in the Funds are sold on a continuous basis by the Trust's sponsor
and distributor. The Distributor is a registered broker/dealer with principal
offices located at Oaks, Pennsylvania 19456.

From time to time, the Distributor, at its expense, may offer promotional
incentives to dealers. As of the date of this Prospectus, the Distributor
intends to offer certain promotional incentives, including trips and monetary
awards, to NatCity Investments, Inc. and other affiliates of National City.

PURCHASE OF RETAIL SHARES

Financial institutions may charge certain account fees depending on the
type of account the Investor has established with the institution. (For
information on such fees, the Investor should review his agreement with the
institution or contact it directly.) In addition, certain financial institutions
may enter into shareholder servicing agreements with the Trust whereby a
financial institution would perform various administrative support services for
its customers who are the beneficial owners of Retail shares and would receive
fees from the Funds for such services of up to .25% (on an annualized basis) of
the average daily net asset value of such shares. See "Shareholder Services
Plan." To purchase shares, Investors should call 1-800-622-FUND(3863) or visit
their local NatCity Investments, Inc. office:

Shares may be purchased in conjunction with an individual retirement
account ("IRA") and roll-over IRAs where a designated custodian acts as
custodian. Investors should contact NatCity Investments, Inc., the Distributor
or their financial institutions for information as to applications and annual
fees. Investors should also consult their tax advisers to determine whether the
benefits of an IRA are available or appropriate.

The minimum investment is $2,500 for the initial purchase of Retail shares
in a Fund, except for purchases for an IRA or other retirement plan in which
event the minimum initial investment is $500. All subsequent investments for
Retail shares and IRAs are subject to a minimum investment of $250. Investments
made in Retail shares through a monthly savings program described below are not
subject to the minimum initial and subsequent investment requirements or any
minimum account balance requirements described in "Other Redemption
Information." Purchases for an IRA through the monthly savings program will be
considered as contributions for the year in which the purchases are made.

Under a monthly savings program, Investors may add to their investment in
the Retail shares of a Fund, in a consistent manner each month, with a minimum
amount of $50. Monies may be automatically withdrawn from a shareholder's
checking or savings account available through an investor's financial
institution and invested in additional Retail shares at the Public Offering
Price next determined after an order is received by the Trust. An Investor may
apply for participation in a monthly program by completing an application
obtained through a financial institution, such as banks, brokers, or dealers
selling Retail shares of the Funds, or by calling 1-800-622-FUND(3863). The
program may be modified or terminated by an Investor on 30 days written notice
or by the Trust at any time.

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<PAGE> 110

The Trust reserves the right to reject any purchase order.

SALES CHARGES APPLICABLE TO PURCHASES OF RETAIL SHARES

The Public Offering Price for Retail shares of each Fund is the sum of the
net asset value of the shares being purchased plus any applicable sales charge
per account, per Fund, which is assessed as follows:

<TABLE>
<CAPTION>
AS A % AS A % DEALERS'
OF OFFERING OF NET REALLOWANCE
PRICE PER ASSET VALUE AS A % OF
AMOUNT OF TRANSACTION SHARE PER SHARE OFFERING PRICE
- --------------------- ----------- ----------- --------------
<S> <C> <C> <C>
Less than $100,000... 3.75 3.90 3.75
$100,000 but less
than $250,000...... 2.75 2.83 2.75
$250,000 but less
than $500,000...... 2.00 2.04 2.00
$500,000 but less
than $1,000,000.... 1.25 1.27 1.25
$1,000,000 or more... 0.00 0.00 0.00
</TABLE>

Under the 1933 Act, the term "underwriter" includes persons who offer or
sell for an issuer in connection with the distribution of a security or have a
direct or indirect participation in such undertaking, but excludes persons whose
interest is limited to a commission from an underwriter or dealer not in excess
of the usual and customary distributors' or sellers' commission. The Staff of
the SEC has expressed the view that persons who receive 90% or more of a sales
load may be deemed to be underwriters within the meaning of this definition. The
Dealers' Reallowance may be changed from time to time.

No sales charge will be assessed on purchases of Retail shares made by:

(a) trustees and officers of the Trust

(b) directors, employees and participants in employee benefit/retirement
plans (annuitants) of National City Corporation or any of its affiliates

(d) qualified retirement plans purchasing shares through NatCity
Investments, Inc.

(e) individuals investing in a Fund by way of a direct transfer or a
rollover from a qualified plan distribution and subsequent transactions into the
same account where affiliates of National City Corporation are serving as a
trustee or agent

(f) investors purchasing Fund shares through a payroll deduction plan

(g) individuals investing in a Fund by way of an asset allocation program
sponsored by financial institutions, although certain account level fees may
apply.

REDUCED SALES CHARGES APPLICABLE TO PURCHASES OF RETAIL SHARES

The applicable sales charge may be reduced on purchases of Retail shares of
each Fund made under the Right of Accumulation or Letter of Intent, as described
below. To qualify for a reduced sales charge, Investors must so notify their
financial institutions or the Trust directly by calling 1-800-622-FUND(3863) at
the time of purchase. Reduced sales charges may be modified or terminated at any
time and are subject to confirmation of an Investor's holdings.

Right of Accumulation

Investors may use their aggregate investments in Retail shares in
determining the applicable sales charge. An Investor's aggregate investment in
Retail shares is the total value (based on the higher of current net asset value
or any Public Offering Price originally paid) of

(a) current purchases

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<PAGE> 111

(b) Retail shares that are already beneficially owned by the Investor for
which a sales charge has been paid

(d) Retail shares purchased by dividends or capital gains that are
reinvested

If, for example, an Investor beneficially owns Retail shares of a Fund with
an aggregate current value of $90,000 and subsequently purchases Retail shares
of that Fund having a current value of $10,000, the sales charge applicable to
the subsequent purchase would be reduced to 2.75% of the Public Offering Price.

Letter of Intent

An Investor may qualify for a reduced sales charge immediately upon signing
a nonbinding Letter of Intent stating the Investor's intention to invest during
the next 13 months a specified amount which, if made at one time, would qualify
for a reduced sales charge. The Letter of Intent option is included on the
account application which may be obtained from the Investor's financial
institution or directly from the Trust by calling 1-800-622-FUND(3863). If an
Investor so elects, the 13 month period may begin up to 30 days prior to the
Investor's signing the Letter of Intent. The initial investment under the Letter
of Intent must be equal to at least 4.0% of the amount indicated in the Letter
of Intent. During the term of a Letter of Intent, the Transfer Agent will hold
Retail shares representing 4.0% of the amount indicated in the Letter of Intent
in escrow for payment of a higher sales charge if the entire amount is not
purchased. Upon completing the purchase of the entire amount indicated in the
Letter of Intent, the escrowed shares will be released. If the entire amount is
not purchased within the 13 month period or is redeemed within one year from the
time of fulfillment, the Investor will be required to pay an amount equal to the
difference in the dollar amount of sales charge actually paid and the amount of
sales charge the Investor would have had to pay on the aggregate purchases if
the total of such purchases had been made at a single time.

PURCHASE OF INSTITUTIONAL SHARES

Institutional shares are sold primarily to Banks, as well as NAM customers
that are large institutions, ("Customers"). Institutional shares are sold
without a sales charge imposed by the Trust or the Distributor. However,
depending on the terms governing the particular account, the Banks or NAM may
impose account charges such as account maintenance fees, compensating balance
requirements or other charges based upon account transactions, assets or income
which will have the effect of reducing the shareholder's net return on his
investment in a Fund. There is no minimum investment.

If participating in an Asset Diversification Account, Customers may
purchase Institutional shares under a monthly savings program. Customers may add
to their investment in the Institutional shares of a Fund, in a consistent
manner each month, with a minimum amount of $50. Monies may be automatically
withdrawn from a shareholder's checking or savings account available through a
Customer's financial institution and invested in additional shares at the net
asset value per share next determined after an order is received by the Trust. A
Customer may apply for participation in a monthly program through the Customer's
Bank or NAM by completing an application. The program may be modified or
terminated by an Investor on 30 days written notice or by the Trust at any time.

It is the responsibility of the Banks and NAM to transmit their Customers'
purchase orders to the Transfer Agent and to deliver required funds on a timely
basis, in accordance with the procedures stated above. Institutional shares will
normally be held of record by the Banks or NAM. Confirmations of share purchases
and redemptions will be sent to the Banks and NAM. Beneficial ownership of
Institutional shares will be recorded by the Banks or NAM and reflected in the
account statements provided by them to their Customers.

The Trust reserves the right to reject any purchase order.

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<PAGE> 112

EFFECTIVE TIME OF PURCHASES

Purchase orders for shares of the Funds which are received by the Transfer
Agent prior to 4:00 p.m. (Eastern Time) on any Business Day are priced according
to the net asset value per share determined on that day plus any applicable
sales charge (the "Public Offering Price"). Immediately available funds must be
received by the Trust's custodian prior to 2:00 p.m. (Eastern Time) on the third
Business Day following the receipt of such order, at which time the order will
be executed. If funds are not received by such date, the order will not be
accepted and notice thereof will be given to the Bank or financial institution
placing the order. Purchase orders for which payment has not been received or
accepted will be returned after prompt inquiry to the sending Bank or
institution.

REDEMPTION OF RETAIL SHARES

REDEMPTION OF INSTITUTIONAL SHARES

WRITTEN REDEMPTION PROCEDURES

A shareholder of record may redeem shares in any amount by sending a
written request to the Armada Funds, P.O. Box 8421, Boston, Massachusetts
02266-8421. Redemption requests must be signed by each shareholder, including
each joint owner on redemption requests for joint accounts, in the exact manner
as the Fund account is registered, and must state the number of shares or the
amount to be redeemed and identify the shareholder account number and tax
identification number. For a redemption amount of $10,000 or more, each
signature on the written request must be guaranteed by a commercial bank or
trust company which is a member of the Federal Reserve System or FDIC, a member
firm of a national securities exchange or a savings and loan association. A
signature guaranteed by a savings bank or notarized by a notary public is not
acceptable. For a redemption amount less than $10,000, no signature guarantee is
needed. The Trust may require additional supporting documents for redemptions
made by corporations, fiduciaries, executors, administrators, trustees,
guardians and institutional investors.

TELEPHONE REDEMPTION PROCEDURES

A shareholder of record may redeem shares in any amount by calling
1-800-622-FUND(3863) provided the appropriate election was made on the
shareholder's account application.

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<PAGE> 113

Neither the Trust nor its Transfer Agent will be responsible for the
authenticity of instructions received by telephone that are reasonably believed
to be genuine. In attempting to confirm that telephone instructions are genuine,
the Trust and its Transfer Agent will use such procedures as are considered
reasonable, including recording those instructions and requesting information as
to account registration (such as the name in which an account is registered, the
account number and recent transactions in the account). To the extent that the
Trust and its Transfer Agent fail to use reasonable procedures to verify the
genuineness of telephone instructions, they may be liable for such instructions
that prove to be fraudulent and unauthorized. In all other cases, shareholders
will bear the risk of loss for fraudulent telephone transactions. The Trust
reserves the right to refuse a telephone redemption if it believes it is
advisable to do so. Procedures for redeeming retail shares by telephone may be
modified or terminated at any time by the Trust or the Transfer Agent.

OPTION TO MAKE SYSTEMATIC WITHDRAWALS

The Trust has available a Systematic Withdrawal Plan (the "Plan") for a
shareholder who owns shares of any Fund held on the Trust's transfer agent's
system. The Plan allows the shareholder to have a fixed minimum sum of $250
distributed at regular intervals. The shareholder's account must have a minimum
value of $5,000 to be eligible for the Plan. Additional information regarding
this service may be obtained from an investor's financial institution or the
Transfer Agent at 1-800-622-FUND(3863).

OTHER REDEMPTION INFORMATION

If any portion of the shares to be redeemed represents an investment made
by personal check, the Trust reserves the right to delay payment of the
redemption proceeds until the Transfer Agent is reasonably satisfied that the
check has been collected, which could take up to 15 calendar days from the date
of purchase. A shareholder who anticipates the need for more immediate access to
his investment should purchase shares by Federal funds, bank wire, certified or
cashier's check. Financial institutions normally impose a charge in connection
with the use of bank wires, as well as certified checks, cashier's checks and
Federal funds.

Payment to Shareholders for shares redeemed will be made within seven days
after receipt of the request for redemption.

EXCHANGE PRIVILEGE APPLICABLE TO RETAIL SHARES

The Trust offers an exchange program whereby Investors who have paid a
sales charge to purchase Retail shares of one or more of the Funds (each a "load
Fund") may exchange those Retail shares for Retail shares of another load Fund,
or another investment fund offered by the Trust without the imposition of a
sales charge (each a "no load Fund") at the net asset value per share on the
date of exchange. As a result, no additional sales charge will be incurred with
respect to such an exchange. Shareholders may also exchange Retail shares of a
no load Fund for Retail shares of another no load Fund at the net asset value
per share without payment of a sales charge. In addition, shareholders of a no
load Fund may exchange Retail shares for Retail shares of a load Fund subject to
payment of the applicable sales load. However, shareholders exchanging Retail
shares of a no load Fund which were received in a previous exchange transaction
involving Retail shares of a load Fund will not be required to pay an additional
sales charge upon notification of the reinvestment of the equivalent amount into
the Retail shares of a load Fund. Shareholders contemplating an exchange should
carefully review the Prospectus of the Fund into which the exchange is being
considered. An Armada Funds Prospectus may be obtained from NatCity Investments,
Inc., an Investor's financial institution or by calling 1-800-622-FUND(3863).

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<PAGE> 114

Any Retail shares exchanged must have a value at least equal to the minimum
initial investment required by the particular investment fund into which the
exchange is being made. Investors should make their exchange requests in writing
or by telephone to the financial institutions through which they purchased their
original Retail shares. It is the responsibility of financial institutions to
transmit exchange requests to the Transfer Agent. Investors who purchased shares
directly from the Trust should transmit exchange requests directly to the
Transfer Agent. Exchange requests received by the Transfer Agent prior to 4:00
p.m. (Eastern Time) will be processed as of the close of business on the day of
receipt; requests received by the Transfer Agent after 4:00 p.m. (Eastern Time)
will be processed on the next Business Day. The Trust reserves the right to
reject any exchange request. During periods of unusual economic or market
changes, telephone exchanges may be difficult to implement. In such event, an
Investor should mail the exchange request to his financial institution, and an
Investor who directly purchased shares from the Trust should mail the exchange
request to the Transfer Agent. The exchange privilege may be modified or
terminated at any time upon 60 days notice to shareholders.

SYSTEMATIC EXCHANGE PROGRAM APPLICABLE TO RETAIL SHARES

Shares of a Fund may also be purchased through automatic monthly deductions
from a shareholder's account from any Armada money market fund. Under a
systematic exchange program, a shareholder enters an agreement to purchase
shares of one or more specified funds over a specified period of time, and
initially purchases shares of one Armada money market fund in an amount equal to
the total amount of the investment. On a monthly basis, a specified dollar
amount of shares of the Armada money market fund is exchanged for shares of the
Funds specified.

DISTRIBUTION AGREEMENT

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<PAGE> 115

SHAREHOLDER SERVICES PLAN

The Trust has implemented the Services Plan with respect to Retail shares
in each of the Funds. Pursuant to the Services Plan, the Trust enters into
shareholder servicing agreements with certain financial institutions pursuant to
which the institutions render shareholder administrative services to their
customers who are the beneficial owners of Retail shares in consideration for
the payment of up to .25% (on an annualized basis) of the average daily net
asset value of such shares. Persons entitled to receive compensation for
servicing Retail shares may receive different compensation with respect to those
shares than with respect to Institutional shares in the same Fund. Shareholder
administrative services may include aggregating and processing purchase and
redemption orders, processing dividend payments from the Fund on behalf of
customers, providing information periodically to customers showing their
position in Retail shares, and providing sub-transfer agent services or the
information necessary for sub-transfer agent services, with respect to Retail
shares beneficially owned by customers. Since financial institutions may charge
their customers fees depending on the type of customer account the Investor has
established, beneficial owners of Retail shares should read this Prospectus in
light of the terms and fees governing their accounts with financial
institutions.

DIVIDENDS AND DISTRIBUTIONS

Dividends from the net investment income of the Equity and Equity Income
Funds are declared and paid quarterly; dividends from the net investment income
of the Mid Cap Regional Fund are declared and paid annually. With respect to
each Fund, net income for dividend purposes consists of dividends, distributions
and other income on the Fund's assets, less the accrued expenses of the Fund.
Any net realized capital gains will be distributed at least annually. Dividends
and distributions will reduce the Funds' net asset value per share by the per
share amount thereof.

TAXES

Each of the Funds intends to qualify as a separate "regulated investment
company" under the Internal Revenue Code of 1986, as amended (the "Code"). Such
qualification relieves a Fund of liability for federal income taxes to the
extent its earnings are distributed in accordance with the Code.

22
<PAGE> 116

federal income taxes, whether such income is received in cash or reinvested in
additional shares. (Federal income taxes for distributions to an IRA or to a
qualified retirement plan are deferred under the Code.) For corporate
shareholders, the dividends received deduction will apply to such distributions
to the extent of the gross amount of qualifying dividends received by the
distributing Fund from domestic corporations for the taxable year.

Substantially all of each Fund's net realized long-term capital gains, if
any, will be distributed at least annually to Fund shareholders. A Fund will
generally have no tax liability with respect to such gains and the distributions
will be taxable to Fund shareholders who are not currently exempt from federal
income taxes as long-term capital gains, regardless of how long the shareholders
have held Fund shares and whether such gains are received in cash or reinvested
in additional shares.

Prior to purchasing Fund shares, the impact of dividends or distributions
which are expected to be declared or have been declared, but not paid, should be
carefully considered. Any dividend or distribution declared shortly after a
purchase of shares prior to the record date will have the effect of reducing the
per share net asset value by the per share amount of the dividend or
distribution. All or a portion of such dividend or distribution, although in
effect a return of capital, may be subject to tax.

A taxable gain or loss may be realized by a shareholder upon his
redemption, transfer or exchange of Fund shares depending upon the tax basis of
such shares and their price at the time of redemption, transfer or exchange. If
a shareholder has held shares for six months or less and during that time
received a distribution taxable as a long-term capital gain, then any loss the
shareholder might realize on the sale of those shares will be treated as a long-
term loss to the extent of the earlier capital gain distribution. Generally, a
shareholder may include sales charges incurred upon the purchase of Fund shares
in his tax basis for such shares for the purpose of determining gain or loss on
a redemption, transfer or exchange of such shares. However, if the shareholder
effects an exchange of such shares for shares of another Fund within 90 days of
the purchase and is able to reduce the sales charges applicable to the new
shares (by virtue of the Trust's exchange privilege), the amount equal to such
reduction may not be included in the tax basis of the shareholder's exchanged
shares but may be included (subject to this limitation) in the tax basis of the
new shares.

Shareholders of the Funds will be advised at least annually as to the
federal income tax consequences of distributions made to them each year.
Shareholders are advised to consult their tax advisers concerning the
application of state and local taxes which may differ from federal tax
consequences described above.

The foregoing discussion is based on tax laws and regulations which were in
effect as of the date of this Prospectus; such laws and regulations may be
changed by legislative or administrative actions. The foregoing summarizes some
of the important tax considerations generally affecting the Funds and their
shareholders and is not intended as a substitute for careful tax planning.
Accordingly, potential investors should consult their tax advisers with specific
reference to their own tax situation.

MANAGEMENT OF THE TRUST

BOARD OF TRUSTEES

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<PAGE> 117

Trust and the fees and reimbursed expenses they receive in connection with each
meeting of the Board of Trustees they attend are included in the Statement of
Additional Information.

INVESTMENT ADVISERS

National City, National City Columbus and National City Kentucky serve as
investment advisers to the Equity Growth and Equity Income Funds and National
City serves as the investment adviser to the Mid Cap Regional Fund. The advisers
are wholly owned subsidiaries of National City Corporation. The advisers provide
trust and banking services to individuals, corporations, and institutions, both
nationally and internationally, including investment management, estate and
trust administration, financial planning, corporate trust and agency, and
personal and corporate banking. The advisers are member banks of the Federal
Reserve System and the Federal Deposit Insurance Corporation.

On June 30, 1996, the Trust Departments of National City, National City
Columbus and National City Kentucky had approximately $8.7 billion, $1.6 billion
and $5.1 billion, respectively, in assets under management, and National City,
National City Columbus and National City Kentucky had approximately $16.8
billion, $10.7 billion and $11.9 billion, respectively, in total trust assets.
Principal offices of each of the investment advisers are as follows:

National City
1900 East Ninth Street
Cleveland, Ohio 44114

National City Columbus
155 East Broad Street
Columbus, Ohio 43251

National City Kentucky
National City Tower
101 South Fifth Street
Louisville, Kentucky 40202

Subject to the general supervision of the Trust's Board of Trustees and in
accordance with the Mid Cap Regional, Equity Growth and Equity Income Funds'
investment policies, the advisers have agreed to manage such Funds, make
decisions with respect to and place orders for all purchases and sales of such
Funds' securities, and maintain such Funds' records relating to such purchases
and sales.

Lawrence E. Baumgartner is the person primarily responsible for the day to
day management of the Mid Cap Regional Fund. Mr. Baumgartner, employed by
National City as President of Broad Street Asset Management Co. since July 1994,
had been managing assets for The State Teachers Retirement System of Ohio since
1987 and has been the Asset Manager of the Mid Cap Regional Fund since its
inception.

The Equity Growth Fund is managed by the Equity Growth Style Team of
National City's Asset Management Group. Members of the team are Eric S. Fuchs,
Paul F. Rodgers, Michael J. McDermott, and Eugene March.

Eric S. Fuchs, a Vice President at National City, heads the management
team. His 20 years of equity investment experience encompasses research and
money management. After co-managing several equity funds at Twentieth Century,
he was an equity growth pension manager at Waddell & Reed Asset Management.

Paul F. Rodgers, a Chartered Financial Analyst and Vice President at
National City, has eight years of investment experience with the bank as a
research analyst and portfolio manager. He joined the Equity Growth Style Team
May 22, 1996.

Michael J. McDermott, a Vice President at National City, has 25 years of
investment experience. He brings broad experience in equity sector strategies
and technical analysis. A Chartered Financial Analyst, Mr. McDermott holds a BS
and MBA from the University of Toledo.

Eugene March, a Chartered Financial Analyst and an equity analyst with
National City, has been with the bank for 18 years. He holds an MBA from
Cleveland State. Eugene joined the Equity Growth Style Team January 1997.

The Equity Income Fund is managed by the Equity Value Style Team of
National City's Asset Management Group. Members of the team are

24
<PAGE> 118

James R. Kirk, David Cooley, Mary Jane Matts, Curtis Gross and Stephen Gutch.

A Chartered Financial Analyst, James R. Kirk heads the management team. He
is a Vice President and Chief Investment Strategist at National City and has
been part of the management team since September 28, 1995. Mr. Kirk's investment
experience includes a broad background in research, portfolio management and
general investment management. Prior to joining National City, he was Chief
Investment Officer at Society Asset Management.

David Cooley, a Vice President at National City, has eight years of
investment experience including fixed income research, equity research and
international equities management. Mr. Cooley is a Chartered Financial Analyst
and has been a member of the Equity Value Team since April 19, 1996. Prior to
that time, he was with Key Corp.

Mary Jane Matts is a Chartered Financial Analyst and a Vice President at
National City. She has eight years of investment experience including positions
in research, portfolio management and performance measurement. Prior to joining
the Equity Value Team on August 19, 1996, Ms. Matts was the Director of Equity
Research for Key Corp.

Curtis Gross, an equity analyst and a Trust Investment Officer with
National City, joined the Equity Value Team in December of 1996. Prior to
joining the group, Mr. Gross was an equity analyst for the past three years at
National City providing equity research to mutual fund and personal trust
portfolio managers. Prior to joining National City, Mr. Gross was with The
Prudential.

Stephen Gutch, an equity analyst with National City, has been part of the
Asset Management Group since June 1, 1996. Prior to joining the Equity Value
Team, Mr. Gutch was a corporate lender with the bank's Commercial Lending
Department.

For the services provided and expenses assumed pursuant to the Advisory
Agreements relating to the Equity Growth, Equity Income and Mid Cap Regional
Funds, the advisers are entitled to receive an advisory fee, computed daily and
payable monthly, at the annual rate of .75% of the average net assets of each of
these Funds. Shareholders should note that these fees are higher than those
payable by other investment companies. However, the Trust believes that the fees
are within the range of fees payable by investment funds with comparable
investment objectives and policies. The advisers may from time to time waive all
or a portion of their advisory fees to increase the net income of the Funds
available for distribution as dividends.

AUTHORITY TO ACT AS INVESTMENT ADVISERS

Banking laws and regulations, including the Glass-Steagall Act as presently
interpreted by the Board of Governors of the Federal Reserve System, (a)
prohibit a bank holding company registered under the Federal Bank Holding
Company Act of 1956 or any affiliate thereof from sponsoring, organizing, or
controlling a registered, open-end investment company continuously engaged in
the issuance of its shares, but (b) do not prohibit such a bank holding company
or affiliate from acting as investment adviser, transfer agent, or custodian to
such an investment company. The advisers believe that they may perform the
services for the Funds contemplated by their Advisory Agreements with the Trust
as described in such agreements and this Prospectus without violation of
applicable banking laws or regulations. However, there are no controlling
judicial precedents and future changes in legal requirements relating to the
permissible activities of banks and their affiliates, as well as future
interpretations of present requirements, could prevent the advisers from
continuing to perform services for the Trust. If the advisers were prohibited
from providing services to the Funds, the Board of Trustees would consider
selecting another qualified firm. Any new investment advisory agreement would be
subject to shareholder approval.

25
<PAGE> 119

pated, however, that any resulting change in the Trust's method of operations
would affect its net asset value per share or result in financial losses to any
shareholder.

If current restrictions preventing a bank or its affiliates from legally
sponsoring, organizing, controlling, or distributing shares of an investment
company were relaxed, the advisers, or an affiliate of the advisers, would
consider the possibility of offering to perform additional services for the
Trust. Legislation modifying such restrictions has been proposed in past
sessions in Congress. It is not possible, of course, to predict whether or in
what form such legislation might be enacted or the terms upon which the
advisers, or such an affiliate, might offer to provide such services.

ADMINISTRATOR

Under its Administration and Accounting Services Agreement with the Trust,
PFPC has agreed to provide the following services with respect to the Funds:
statistical data, data processing services and accounting and bookkeeping
services; prepare tax returns and certain reports filed with the SEC; assist in
the preparation of reports to shareholders and the preparation of the Trust's
registration statement; maintain the required fidelity bond coverage; calculate
each Fund's net asset value per share, net income, and realized capital gains
(losses); and generally assist the Funds with respect to all aspects of their
administration and operation. PFPC is entitled to receive with respect to each
Fund an administrative fee, computed daily and paid monthly, at the annual rate
of .10% of the first $200,000,000 of its net assets, .075% of the next
$200,000,000 of its net assets, .045% of the next $200,000,000 of its net assets
and .02% of its net assets over $600,000,000 and is entitled to be reimbursed
for its out-of-pocket expenses incurred on behalf of each Fund.

DESCRIPTION OF THE TRUST AND ITS SHARES

The Trust was organized as a Massachusetts business trust on January 28,
1986. The Trust is a series fund authorized to issue 36 separate classes or
series of shares of beneficial interest ("shares"). Six of these classes or
series, which represent interests in the Equity Growth Fund (Class H and Class
H -- Special Series 1), Equity Income Fund (Class M and Class M -- Special
Series 1) and Mid Cap Regional Fund (Class N and Class N -- Special Series 1),
are described in this Prospectus. Class H, Class M, and Class N shares
constitute the Institutional class or series of shares; and Class H -- Special
Series 1, Class M -- Special Series 1, and Class N -- Special Series 1 shares
constitute the Retail class or series of shares. The other Funds of the Trust
are:

Money Market Fund
(Class A and Class A -- Special Series 1)

Government Fund
(Class B and Class B -- Special Series 1)

Treasury Fund
(Class C and Class C -- Special Series 1)

Tax Exempt Fund
(Class D and Class D -- Special Series 1)

Fixed Income Fund
(Class I and Class I -- Special Series 1)

Ohio Tax Exempt Fund
(Class K and Class K -- Special Series 1)

National Tax Exempt Fund
(Class L and Class L -- Special Series 1)

Enhanced Income Fund
(Class O and Class O -- Special Series 1)

Total Return Advantage Fund
(Class P and Class P -- Special Series 1)

Pennsylvania Tax Exempt Fund
(Class Q and Class Q -- Special Series 1)

Intermediate Government Fund
(Class R and Class R -- Special Series 1)

GNMA Fund
(Class S and Class S -- Special Series 1)

Pennsylvania Municipal Fund
(Class T and Class T -- Special Series 1)

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<PAGE> 120

Each share has no par value, represents an equal proportionate interest in
the investment fund with other shares of the same class or series outstanding,
and is entitled to such dividends and distributions out of the income earned on
the assets belonging to such Fund as are declared in the discretion of the
Trust's Board of Trustees. The Trust's Declaration of Trust authorizes the Board
of Trustees to classify or reclassify any unissued shares into any number of
additional classes of shares and to classify or reclassify any class of shares
into one or more series of shares.

Shareholders are entitled to one vote for each full share held, and a
proportionate fractional vote for each fractional share held. Shareholders will
vote in the aggregate and not by investment Fund, except as otherwise expressly
required by law or when the Board of Trustees determines that the matter to be
voted on affects only the interests of shareholders of a particular investment
Fund. The Statement of Additional Information gives examples of situations in
which the law requires voting by investment Fund. In addition, shareholders of
each of the investment Funds will vote in the aggregate and not by class or
series, except as otherwise expressly required by law or when the Board of
Trustees determines the matter to be voted on affects only the interests of the
holders of a particular class or series of shares. Under the Services Plan, only
the holders of Retail shares in an investment Fund are, or would be entitled to
vote on matters submitted to a vote of shareholders (if any) concerning the
Services Plan. Voting rights are not cumulative, and accordingly, the holders of
more than 50% of the aggregate shares of the Trust may elect all of the trustees
irrespective of the vote of the other shareholders.

As of September 9, 1996, National City, National City Columbus, and
National City Kentucky held beneficially or of record approximately 18.63%,
17.51% and 3.55%, respectively, of the outstanding Institutional shares of the
Equity Growth Fund. As of the same date, National City, National City Columbus
and National City Kentucky held beneficially or of record approximately 56.43%,
3.08% and 3.50%, respectively, of the outstanding Institutional shares of the
Equity Income Fund and approximately 60.33%, 13.54% and 6.74%, respectively, of
the outstanding Institutional shares of the Mid Cap Regional Fund. Neither
National City, National City Columbus, nor National City Kentucky has any
economic interest in such shares which are held solely for the benefit of its
customers, but may be deemed to be a controlling person of the Funds within the
meaning of the 1940 Act by reason of its record ownership of such shares. The
names of beneficial owners and record owners who are controlling shareholders
under the 1940 Act may be found in the Statement of Additional Information.

CUSTODIAN AND TRANSFER AGENT

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<PAGE> 121

EXPENSES

Except as noted below, the Trust's advisers bear all expenses in connection
with the performance of their services. Each Fund of the Trust bears its own
expenses incurred in its operations including: taxes; interest; fees (including
fees paid to its trustees and officers); SEC fees; state securities
qualification fees; costs of preparing and printing prospectuses for regulatory
purposes and for distribution to existing shareholders; expenses related to the
Distribution Plan; advisory fees; administration fees and expenses; charges of
the custodian and Transfer Agent; certain insurance premiums; outside auditing
and legal expenses; costs of shareholders' reports and shareholder meetings; and
any extraordinary expenses. Each Fund also pays for brokerage fees and
commissions in connection with the purchase of its portfolio securities. Under
the Services Plan, the Retail shares in the Funds also bear the expense of
shareholder servicing fees.

MISCELLANEOUS

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

As used in this Prospectus, a "vote of the holders of a majority of the
outstanding shares" of the Trust or a particular investment fund means, with
respect to the approval of an investment advisory agreement, a distribution plan
or a change in a fundamental investment policy, the affirmative vote of the
lesser of (a) 50% or more of the outstanding shares of the Trust or such fund or
(b) 67% or more meeting if more than 50% of the outstanding shares of the Trust
or such fund are represented at the meeting in person or by proxy.

Inquiries regarding the Trust or any of its investment funds may be
directed to 1-800-622-FUND(3863).

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<PAGE> 122
ARMADA FUNDS LOGO BULK RATE
Oaks, Pennsylvania, 19456 U.S. POSTAGE
PAID
CLEVELAND, OH
ARMADA FUNDS PERMIT NO. 1535

INVESTMENT ADVISERS

AFFILIATES OF
NATIONAL CITY
CORPORATION

National City Bank
1900 East Ninth Street
Cleveland, Ohio 44114

National City Bank of Columbus
155 East Broad Street
Columbus, Ohio 43251

National City Bank of Kentucky
101 South Fifth Street
Louisville, Kentucky 40202

NC-056 (3/97)

<PAGE> 123

ARMADA FUNDS

STATEMENT OF ADDITIONAL INFORMATION

SEPTEMBER 30, 1996
(AS REVISED MARCH 10, 1997)

MID CAP REGIONAL FUND

EQUITY FUND

EQUITY INCOME FUND

<PAGE> 124

TABLE OF CONTENTS

Page
----

STATEMENT OF ADDITIONAL INFORMATION.............................. 1

RISK FACTORS, INVESTMENT OBJECTIVES AND POLICIES................. 1

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION................... 7

DESCRIPTION OF SHARES............................................ 10

ADDITIONAL INFORMATION CONCERNING TAXES.......................... 12

TRUSTEES AND OFFICERS............................................ 14

ADVISORY, ADMINISTRATION, DISTRIBUTION, CUSTODIAN
SERVICES AND TRANSFER AGENCY AGREEMENTS....................... 19

SHAREHOLDER SERVICES PLAN........................................ 23

PORTFOLIO TRANSACTIONS........................................... 24

AUDITORS......................................................... 25

COUNSEL.......................................................... 25

YIELD AND PERFORMANCE INFORMATION................................ 26

MISCELLANEOUS.................................................... 30

FINANCIAL STATEMENTS............................................. 33

APPENDIX A...................................................... A-1

APPENDIX B...................................................... B-1

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<PAGE> 125

STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------

This Statement of Additional Information should be read in
conjunction with the Prospectus of Armada Funds (the "Trust") that describes the
Equity, Equity Income and Mid Cap Regional Funds. The information contained in
this Statement of Additional Information expands upon matters discussed in the
Prospectus. No investment in shares of a Fund should be made without first
reading the Prospectus.

RISK FACTORS, INVESTMENT OBJECTIVES AND POLICIES
------------------------------------------------

ADDITIONAL INFORMATION ON FUND MANAGEMENT
- -----------------------------------------

Further information on the advisers' investment management
strategies, techniques, policies and related matters may be included from time
to time in advertisements, sales literature, communications to shareholders and
other materials. See also, "Performance Information" below.

Attached to this Statement of Additional Information is
Appendix A which contains descriptions of the rating symbols used by S&P, Fitch,
Duff, IBCA and Moody's for securities which may be held by the Funds.

FOREIGN CURRENCY TRANSACTIONS
- -----------------------------

In order to protect against a possible loss on investments
resulting from a decline or appreciation in the value of a particular foreign
currency against the U.S. dollar or another foreign currency or for other
reasons, the Equity Income Fund is authorized to enter into forward currency
exchange contracts. These contracts involve an obligation to purchase or sell a
specified currency at a future date at a price set at the time of the contract.
Forward currency contracts do not eliminate fluctuations in the values of
portfolio securities but rather allow the Fund to establish a rate of exchange
for a future point in time.

When entering into a contract for the purchase or sale of a
security, the Fund may enter into a forward foreign currency exchange contract
for the amount of the purchase or sale price to protect against variations,
between the date the security is purchased or sold and the date on which payment
is made or received, in the value of the foreign currency relative to the U.S.
dollar or other foreign currency.

When the advisers anticipate that a particular foreign
currency may decline substantially relative to the U.S. dollar or other leading
currencies, in order to reduce risk, the Equity Income Fund may enter into a
forward contract to sell, for a fixed

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<PAGE> 126

amount, the amount of foreign currency approximating the value of some or all of
the Fund's securities denominated in such foreign currency. Similarly, when the
obligations held by the Fund create a short position in a foreign currency, the
Fund may enter into a forward contract to buy, for a fixed amount, an amount of
foreign currency approximating the short position. With respect to any forward
foreign currency contract, it will not generally be possible to match precisely
the amount covered by that contract and the value of the securities involved due
to the changes in the values of such securities resulting from market movements
between the date the forward contract is entered into and the date it matures.
In addition, while forward contracts may offer protection from losses resulting
from declines or appreciation in the value of a particular foreign currency,
they also limit potential gains which might result from changes in the value of
such currency. The Fund will also incur costs in connection with forward foreign
currency exchange contracts and conversions of foreign currencies and U.S.
dollars.

A separate account consisting of liquid assets, such as cash,
U.S. Government securities or other liquid high grade debt obligations equal to
the amount of the Equity Income Fund's assets that could be required to
consummate forward contracts will be established with the Fund's custodian
except to the extent the contracts are otherwise "covered." For the purpose of
determining the adequacy of the securities in the account, the deposited
securities will be valued at market or fair value. If the market or fair value
of such securities declines, additional liquid securities will be placed in the
account daily so that the value of the account will equal the amount of such
commitments by the Fund. A forward contract to sell a foreign currency is
"covered" if the Fund owns the currency (or securities denominated in the
currency) underlying the contract, or holds a forward contract (or call option)
permitting the Fund to buy the same currency at a price no higher than the
Fund's price to sell the currency. A forward contract to buy a foreign currency
is "covered" if the Fund holds a forward contract (or call option) permitting
the Fund to sell the same currency at a price as high as or higher than the
Fund's price to buy the currency.

WHEN-ISSUED SECURITIES
- ----------------------

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<PAGE> 127

market daily. It is likely that a Fund's net assets will fluctuate to a greater
degree when it sets aside portfolio securities to cover such purchase
commitments than when it sets aside cash. Because a Fund will set aside cash or
liquid assets to satisfy its purchase commitments in the manner described, the
Fund's liquidity and ability to manage its fund might be affected in the event
its commitments to purchase when-issued securities ever exceeded 25% of the
value of its total assets.

When a Fund engages in when-issued transactions, it relies on
the seller to consummate the trade. Failure of the seller to do so may result in
the Fund's incurring a loss or missing an opportunity to obtain a price
considered to be advantageous.

VARIABLE AND FLOATING RATE OBLIGATIONS
- --------------------------------------

Each Fund may purchase variable and floating rate obligations
(including variable amount master demand notes) which are unsecured instruments
that permit the indebtedness thereunder to vary and provide for periodic
adjustments in the interest rate. Because variable and floating rate obligations
are direct lending arrangements between the Fund and the issuer, they are not
normally traded although certain variable and floating rate obligations, such as
Student Loan Marketing Association variable rate obligations, may have a more
active secondary market because they are issued or guaranteed by the U.S.
Government or its agencies or instrumentalities. Even though there may be no
active secondary market in such instruments, a Fund may demand payment of
principal and accrued interest at a time specified in the instrument or may
resell them to a third party. Such obligations may be backed by bank letters of
credit or guarantees issued by banks, other financial institutions or the U.S.
Government, its agencies or instrumentalities. The quality of any letter of
credit or guarantee will be rated high quality or, if unrated, will be
determined to be of comparable quality by the advisers. In the event an issuer
of a variable or floating rate obligation defaulted on its payment obligation, a
Fund might be unable to dispose of the instrument because of the absence of a
secondary market and could, for this or other reasons, suffer a loss to the
extent of the default.

SHORT TERM OBLIGATIONS
- ----------------------

Each Fund may invest in various short term obligations
including those described below.

Investments include commercial paper and other short term
promissory notes issued by corporations (including variable and floating rate
instruments). In addition, each Fund may invest in Canadian Commercial Paper
("CCP"), which is commercial paper issued by a Canadian corporation or a
Canadian counterpart of a U.S.

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<PAGE> 128

corporation, and in Europaper, which is U.S. dollar denominated commercial paper
of a foreign issuer. Each Fund may also acquire zero coupon obligations, which
have greater price volatility than coupon obligations and which will not result
in the payment of interest until maturity.

Bank obligations include bankers' acceptances, negotiable
certificates of deposit, and non-negotiable demand and time deposits issued for
a definite period of time and earning a specified return by a U.S. bank which is
a member of the Federal Reserve System. Bank obligations also include U.S.
dollar denominated bankers' acceptances, certificates of deposit and time
deposits issued by foreign branches of U.S. banks or foreign banks. Investment
in bank obligations is limited to the obligations of financial institutions
having more than $1 billion in total assets at the time of purchase. Each Fund
may also make interest bearing savings deposits in commercial and savings banks
not in excess of 5% of its total assets. Investment in non-negotiable time
deposits is limited to no more than 5% of a Fund's total assets at the time of
purchase.

Each Fund may also make limited investments in "GICs" issued
by U.S. insurance companies. When investing in GICs, a Fund makes cash
contributions to a deposit fund or an insurance company's general account. The
insurance company then credits to the Fund monthly a guaranteed minimum interest
which is based on an index. The insurance company may assess periodic charges
against a GIC for expense and service costs allocable to it, and the charges
will be deducted from the value of the deposit fund. A Fund will purchase a GIC
only when its advisers have determined, under guidelines established by the
Board of Trustees, that the GIC presents minimal credit risks to the Fund and is
of comparable quality to instruments that are rated high quality by one or more
rating agencies.

REPURCHASE AGREEMENTS
- ---------------------

Securities held by the Funds may be subject to repurchase
agreements. Under the terms of a repurchase agreement, a Fund purchases
securities from financial institutions such as banks and broker-dealers which
the Fund's advisers deem creditworthy under guidelines approved by the Board of
Trustees, subject to the seller's agreement to repurchase such securities at a
mutually agreed-upon date and price. The repurchase price generally equals the
price paid by the Fund plus interest negotiated on the basis of current short
term rates, which may be more or less than the rate on the underlying portfolio
securities. The seller under a repurchase agreement will be required to maintain
the value of collateral held pursuant to the agreement at not less than the
repurchase price (including accrued interest). If the seller were to default on
its repurchase obligation or become insolvent, the Fund holding such obligation
would suffer a loss to the extent that

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<PAGE> 129

the proceeds from a sale of the underlying portfolio securities were less than
the repurchase price under the agreement, or to the extent that the disposition
of such securities by the Fund were delayed pending court action. Although there
is no controlling legal precedent confirming that a Fund would be entitled, as
against a claim by such seller or its receiver or trustee in bankruptcy, to
retain the underlying securities, the Board of Trustees of the Trust believes
that, under the regular procedures normally in effect for custody of a Fund's
securities subject to repurchase agreements and under Federal laws, a court of
competent jurisdiction would rule in favor of the Trust if presented with the
question. Securities subject to repurchase agreements will be held by the
Trust's custodian or another qualified custodian or in the Federal
Reserve/Treasury book-entry system. Repurchase agreements are considered to be
loans by a Fund under the 1940 Act.

REVERSE REPURCHASE AGREEMENTS
- -----------------------------

Each Fund may borrow funds for temporary purposes by entering
into reverse repurchase agreements in accordance with its investment
restrictions. Pursuant to such agreements, a Fund would sell portfolio
securities to financial institutions such as banks and broker-dealers, and agree
to repurchase them at a mutually agreed-upon date and price. A Fund intends to
enter into reverse repurchase agreements only to avoid otherwise selling
securities during unfavorable market conditions to meet redemptions. At the time
a Fund enters into a reverse repurchase agreement, it will place in a segregated
custodial account assets such as U.S. Government securities or other liquid,
high grade debt securities consistent with the Fund's investment restrictions
having a value equal to the repurchase price (including accrued interest), and
will subsequently monitor the account to ensure that such equivalent value is
maintained. Reverse repurchase agreements involve the risk that the market value
of the securities sold by a Fund may decline below the price at which it is
obligated to repurchase the securities. Reverse repurchase agreements are
considered to be borrowings by the Fund under the Investment Company Act of
1940.

U.S. GOVERNMENT OBLIGATIONS
- ---------------------------

Each Fund may purchase obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities. Some of these obligations
are supported by the full faith and credit of the U.S. Treasury, such as
obligations issued by the Government National Mortgage Association. Others, such
as those of the Export-Import Bank of the United States, are supported by the
right of the issuer to borrow from the U.S. Treasury; others, such as those of
the Federal National Mortgage Association, are supported by the discretionary
authority of the U.S. Government to purchase the agency's obligations; and still
others, such as those of the Student Loan Marketing Association, are supported
only by the

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<PAGE> 130

credit of the agency or instrumentality issuing the obligation. No assurance can
be given that the U.S. Government would provide financial support to U.S.
Government-sponsored agencies or instrumentalities if it is not obligated to do
so by law. The Funds will invest in the obligations of such agencies or
instrumentalities only when the advisers believe that the credit risk with
respect thereto is minimal.

SECURITIES OF OTHER INVESTMENT COMPANIES
- ----------------------------------------

Each Fund currently intends to limit its investments in
securities issued by other investment companies so that, as determined
immediately after a purchase of such securities is made: (i) not more than 5% of
the value of the Fund's total assets will be invested in the securities of any
one investment company; (ii) not more than 10% of the value of its total assets
will be invested in the aggregate in securities of investment companies as a
group; and (iii) not more than 3% of the outstanding voting stock of any one
investment company will be owned by the Fund or by the Trust as a whole.

PORTFOLIO TURNOVER
- ------------------

The portfolio turnover rate for each Fund is calculated by
dividing the lesser of purchases or sales of portfolio securities for the year
by the monthly average value of the portfolio securities. The calculation
excludes U.S. Government securities and all securities whose maturities at the
time of acquisition were one year or less. Portfolio turnover may vary greatly
from year to year as well as within a particular year, and may also be affected
by cash requirements for redemptions of shares and by requirements which enable
the Fund to receive certain favorable tax treatment. Portfolio turnover will not
be a limiting factor in making fund decisions.

ADDITIONAL INVESTMENT LIMITATIONS
- ---------------------------------

In addition to the investment limitations disclosed in the
Prospectus, the Funds are subject to the following investment limitations which
may be changed with respect to a particular Fund only by a vote of the holders
of a majority of such Fund's outstanding shares (as defined under
"Miscellaneous" in the Prospectus).

No Fund may:

1. Purchase securities on margin, make short sales of
securities, or maintain a short position, except that each Fund may purchase and
sell futures contracts and options on futures contracts in accordance with its
investment objective.

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<PAGE> 131

2. Act as an underwriter of securities within the meaning of
the Securities Act of 1933 except insofar as it might be deemed to be an
underwriter upon disposition of certain portfolio securities acquired within the
limitation on purchases of restricted securities.

4. Purchase or sell commodities or commodity contracts or
invest in oil, gas, or other mineral exploration or development programs, except
that a Fund may: (a) to the extent appropriate to its investment objective,
invest in securities issued by companies which purchase or sell commodities or
commodity contracts or which invest in such programs; and (b) purchase and sell
futures contracts and options on futures contracts in accordance with its
investment objective. In addition, each Fund may enter into forward currency
contracts and other financial instruments in accordance with its investment
objective and policies.

5. Invest in any issuer for the purpose of exercising control
or management.

6. Purchase or retain securities of any issuer if the officers
or trustees of the Trust or the officers or directors of its investment advisers
owning beneficially more than one-half of 1% of the securities of such issuer
together own beneficially more than 5% of such securities.

In addition, the Equity Fund may not write or purchase put
options, call options, straddles, spreads, or any combination thereof, except
that the Fund may purchase and sell futures contracts and options on futures
contracts in accordance with its investment objective.

The Equity Income Fund and Mid Cap Regional Fund may not write
puts, calls or combinations thereof, except for transactions in: options on
securities, financial instruments, currencies and indices of securities; futures
contracts; options on futures contracts; forward currency contracts; interest
rate swaps; and similar instruments.

* * * * *

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
----------------------------------------------

Shares in the Trust are sold on a continuous basis by SEI
Financial Services Company (the "Distributor"), which has agreed to

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<PAGE> 132

use appropriate efforts to solicit all purchase orders. The issuance of shares
is recorded on the books of the Trust. To change the commercial bank or account
designated to receive redemption proceeds, a written request must be sent to an
investor's financial institution at its principal office. Such requests must be
signed by each shareholder, with each signature guaranteed by a U.S. commercial
bank or trust company or by a member firm of a national securities exchange.
Guarantees must be signed by an authorized signatory and "Signature Guaranteed"
must appear with the signature. An investor's financial institution may request
further documentation from corporations, executors, administrators, trustees or
guardians, and will accept other suitable verification arrangements from foreign
investors, such as consular verification.

The Trust may suspend the right of redemption or postpone the
date of payment for more than seven days for shares during any period when (a)
trading on the Exchange is restricted by applicable rules and regulations of the
SEC; (b) the Exchange is closed for other than customary weekend and holiday
closings; (c) the SEC has by order permitted such suspension; or (d) an
emergency exists as determined by the SEC.

There is no sales load charged on shares acquired through the
reinvestment of dividends or distributions on such shares.

For the fiscal year ended May 31, 1996, sales loads paid by
shareholders of the Equity, Equity Income and Mid Cap Regional Funds totalled
$9,792, $4,477 and $9,968, respectively.

Automatic investment programs such as the monthly savings
program ("Program") described in the Prospectus offered by the Funds permit an
investor to use "dollar cost averaging" in making investments. Under this
Program, an agreed upon fixed dollar amount is invested in Fund shares at
predetermined intervals. This may help investors to reduce their average cost
per share because the Program results in more shares being purchased during
periods of lower share prices and fewer shares during periods of higher share
prices. In order to be effective, dollar cost averaging should usually be
followed on a sustained, consistent basis. Investors should be aware, however,
that dollar cost averaging results in purchases of shares regardless of their
price on the day of investment or market trends and does not ensure a profit,
protect against losses in a declining market, or prevent a loss if an investor
ultimately redeems his shares at a price which is lower than their purchase
price. An investor may want to consider his financial ability to continue
purchases through periods of low price levels. From time to time, in
advertisements, sales literature, communications to shareholders and other
materials ("Materials"), the Trust may illustrate the effects of dollar cost
averaging through use of or comparison to an index such as the S&P 500 Index.

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<PAGE> 133

OFFERING PRICE PER RETAIL SHARE OF THE FUNDS
- --------------------------------------------

Illustrations of the computation of the offering price per
Retail share of the Funds, based on the value of the Funds' net assets and
number of outstanding shares on May 31, 1996 are as follows:

<TABLE>
<CAPTION>
TABLE
-----

EQUITY FUND
-----------

<S> <C>
Net Assets of Retail Shares................................... $6,012,523

Outstanding Retail Shares..................................... 333,129

Net Asset Value Per Share
($6,012,523 divided by 333,129)............................... $18.05

Sales Charge, 3.75% of
offering price (3.90% of
net asset value per share).................................... $0.70

Offering to Public............................................ $18.75

EQUITY INCOME FUND
------------------

Net Assets of Retail Shares................................... $263,139

Outstanding Retail Shares..................................... 20,796

Net Asset Value Per Share
($263,139 divided by 20,796).................................. $12.65

Sales Charge, 3.75% of
offering price (3.90% of
net asset value per share).................................... $0.49

Offering to Public............................................ $13.14
</TABLE>

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<PAGE> 134

<TABLE>
<CAPTION>
MID CAP REGIONAL FUND
---------------------

<S> <C>
Net Assets of Retail Shares................................. $4,701,642

Outstanding Retail Shares................................... 363,255

Net Asset Value Per Share
($4,701,642 divided by 363,255)............................. $12.94

Sales Charge, 3.75% of
offering price (3.90% of
net asset value per share).................................. $0.50

Offering to Public.......................................... $13.44
</TABLE>

EXCHANGE PRIVILEGE
- ------------------

Investors may exchange all or part of their Retail shares as
described in the Prospectus. Any rights an Investor may have (or have waived) to
reduce the sales load applicable to an exchange, as may be provided in a Fund
Prospectus, will apply in connection with any such exchange. The exchange
privilege may be modified or terminated at any time upon 60 days' notice to
shareholders.

By use of the exchange privilege, the Investor authorizes the
Trust's Transfer Agent or his financial institution to act on telephonic or
written instructions from any person representing himself or herself to be the
shareholder and believed by the Transfer Agent or the financial institution to
be genuine. The Investor or his financial institution must notify the Transfer
Agent of his prior ownership of Retail shares and account number. The Transfer
Agent's records of such instructions are binding.

DESCRIPTION OF SHARES
---------------------

The Trust is a Massachusetts business trust. The Trust's
Declaration of Trust authorizes the Board of Trustees to issue an unlimited
number of shares of beneficial interest and to classify or reclassify any
unissued shares of the Trust into one or more additional classes or series by
setting or changing in any one or more respects their respective preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption. Pursuant to
such authority, the Board of Trustees has authorized the issuance of 36 classes
or series of shares. Six of these classes or series, which represent interests
in the Equity Fund (Class H and Class H - Special Series 1), Equity Income Fund
(Class M and Class M - Special Series 1) and Mid Cap Regional Fund (Class N and
Class N - Special Series 1), are described in this Statement of Additional
Information and the related Prospectus.

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<PAGE> 135

Shares have no preemptive rights and only such conversion or
exchange rights as the Board of Trustees may grant in its discretion. When
issued for payment as described in the Prospectus, the Trust's shares will be
fully paid and non-assessable. In the event of a liquidation or dissolution of
the Trust or an individual Fund, shareholders of a Fund are entitled to receive
the assets available for distribution belonging to the particular Fund, and a
proportionate distribution, based upon the relative asset values of the
respective Funds, of any general assets of the Trust not belonging to any
particular Fund which are available for distribution.

Rule 18f-2 under the 1940 Act provides that any matter
required by the 1940 Act, applicable state law, or otherwise, to be submitted to
the holders of the outstanding voting securities of an investment company such
as the Trust shall not be deemed to have been effectively acted upon unless
approved by the holders of a majority of the outstanding shares of each
investment fund affected by such matter. Rule 18f-2 further provides that an
investment fund is affected by a matter unless the interests of each fund in the
matter are substantially identical or the matter does not affect any interest of
the fund. Under the Rule, the approval of an investment advisory agreement or
any change in a fundamental investment policy would be effectively acted upon
with respect to an investment fund only if approved by a majority of the
outstanding shares of such fund. However, the Rule also provides that the
ratification of the appointment of independent public accountants, the approval
of principal underwriting contracts, and the election of trustees may be
effectively acted upon by shareholders of the Trust voting together in the
aggregate without regard to a particular fund. In addition, shareholders of each
class in a particular investment fund have equal voting rights except that only
Retail shares of an investment fund will be entitled to vote on matters
submitted to a vote of shareholders (if any) relating to shareholder servicing
fees that are allocable to such shares.

-11-

<PAGE> 136

that such combination will not have a material adverse effect on shareholders of
any fund participating in such combination, and, in connection therewith, to
cause all outstanding shares of any fund to be redeemed at their net asset value
or converted into shares of another class of the Trust shares at net asset
value. In the event that shares are redeemed in cash at their net asset value, a
shareholder may receive in payment for such shares an amount that is more or
less than his original investment due to changes in the market prices of the
fund's securities. The exercise of such authority by the Board of Trustees will
be subject to the provisions of the 1940 Act, and the Board of Trustees will not
take any action described in this paragraph unless the proposed action has been
disclosed in writing to the fund's shareholders at least 30 days prior thereto.

ADDITIONAL INFORMATION CONCERNING TAXES
---------------------------------------

The following summarizes certain additional tax considerations
generally affecting the Trust and its shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Trust or its shareholders or possible legislative changes, and
the discussion here and in the Prospectus is not intended as a substitute for
careful tax planning. Potential investors should consult their tax advisers with
specific reference to their own tax situation.

Each Fund of the Trust will be treated as a separate corporate
entity under the Code and intends to qualify as a regulated investment company.
In order to qualify for tax treatment as a regulated investment company under
the Code, each Fund must satisfy, in addition to the distribution requirement
described in the Prospectus, certain requirements with respect to the source of
its income during a taxable year. At least 90% of the gross income of each Fund
must be derived from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of stocks, securities or foreign
currencies, and other income (including but not limited to gains from options,
futures, or forward contracts) derived with respect to the Fund's business of
investing in such stock, securities or currencies. The Treasury Department may
by regulation exclude from qualifying income foreign currency gains which are
not directly related to the Fund's principal business of investing in stock or
securities, or options and futures with respect to stock or securities. Any
income derived by a Fund from a partnership or trust is treated as derived with
respect to the Fund's business of investing in stock, securities or currencies
only to the extent that such income is attributable to items of income which
would have been qualifying income if realized by the Fund in the same manner as
by the partnership or trust.

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<PAGE> 137

Another requirement for qualification as a regulated
investment company under the Code is that less than 30% of a Fund's gross income
for a taxable year must be derived from gains realized on the sale or other
disposition of the following investments held for less than three months: (1)
stock and securities (as defined in Section 2(a)(36) of the 1940 Act; (2)
options, futures and forward contracts other than those on foreign currencies;
and (3) foreign currencies (and options, futures and forward contracts on
foreign currencies) that are not directly related to a Fund's principal business
of investing in stock and securities (and options and futures with respect to
stocks and securities). Interest (including original issue discount and, with
respect to taxable debt securities and non taxable debt securities acquired
after April 30, 1993, accrued market discount) received by a Fund upon maturity
or disposition of a security held for less than three months will not be treated
as gross income derived from the sale or other disposition of such security
within the meaning of this requirement. However, any other income which is
attributable to realized market appreciation will be treated as gross income
from the sale or other disposition of securities for this purpose.

Some investments held by a Fund may be subject to special
rules which govern the federal income tax treatment of certain transactions
denominated in terms of a currency other than the U.S. dollar or determined by
reference to the value of one or more currencies other than the U.S. dollar. The
types of transactions covered by the special rules include the following: (1)
the acquisition of, or becoming the obligor under, a bond or other debt
instrument (including, to the extent provided in Treasury regulations, preferred
stock); (2) the accruing of certain trade receivables and payables; and (3) the
entering into or acquisition of any forward contract, futures contract, option
and similar financial instrument. The disposition of a currency other than the
U.S. dollar by a U.S. taxpayer is also treated as a transaction subject to the
special currency rules. With respect to transactions covered by the special
rules, foreign currency gain or loss is calculated separately from any gain or
loss on the underlying transaction and is normally taxable as ordinary gain or
loss. The Treasury Department has issued regulations under which certain
transactions subject to the special currency rules that are part of a "section
988 hedging transaction" are not subject to the mark-to-market or loss deferral
rules under the Code. Gain or loss attributable to the foreign currency
component of transactions engaged in by a Fund which are not subject to the
special currency rules (such as foreign equity investments other than certain
preferred stocks) will be treated as capital gain or loss and will not be
segregated from the gain or loss on the underlying transaction.

The Trust will designate any distribution of long-term capital
gains of a Fund as a capital gain dividend in a written notice mailed to
shareholders within 60 days after the close of the

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<PAGE> 138

Trust's taxable year. Shareholders should note that, upon the sale or exchange
of Fund shares, if the shareholder has not held such shares for at least six
months, any loss on the sale or exchange of those shares will be treated as
long-term capital loss to the extent of the capital gain dividends received with
respect to the shares.

A 4% non-deductible excise tax is imposed on regulated
investment companies that fail to currently distribute an amount equal to
specified percentages of their ordinary taxable income and capital gain net
income (excess of capital gains over capital losses). Each Fund intends to make
sufficient distributions or deemed distributions of its ordinary taxable income
and capital gain net income each calendar year to avoid liability for this
excise tax.

If for any taxable year a Fund does not qualify for federal
tax treatment as a regulated investment company, all of such Fund's taxable
income will be subject to federal income tax at regular corporate rates without
any deduction for distributions to its shareholders. In such event, dividend
distributions (including amounts derived from interest on Municipal Bonds) would
be taxable as ordinary income to the Fund's shareholders to the extent of the
Fund's current and accumulated earnings and profits, and would be eligible for
the dividends received deduction for corporations.

Each Fund may be required in certain cases to withhold and
remit to the U.S. Treasury 31% of taxable dividends or gross proceeds realized
upon sale paid to shareholders who have failed to provide a correct tax
identification number in the manner required, or who are subject to withholding
by the Internal Revenue Service for failure to properly include on their return
payments of taxable interest or dividends, or who have failed to certify to the
Fund that they are not subject to backup withholding when required to do so or
that they are "exempt recipients."

TRUSTEES AND OFFICERS
---------------------

The trustees and executive officers of the Trust, their
addresses, principal occupations during the past five years, and other
affiliations are as follows:

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<PAGE> 139

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
POSITION WITH DURING PAST 5 YEARS
NAME AND ADDRESS THE TRUST AND OTHER AFFILIATIONS
- ---------------- ------------- ----------------------
<S> <C> <C>
Robert D. Neary* Trustee, President, Retired Co-Chairman of
32980 Creekside Drive and Chairman of the Ernst & Young, April 1984-
Pepper Pike, OH 44124 Board September 1993; Director,
Age 63 Cold Metal Products, Inc.,
since March 1994;
Director, Zurn Industries,
Inc. (plumbing products
and engineering and
construction services),
since June 1995.

Thomas R. Benua, Jr. Trustee Chairman, EBCO
564 Hackberry Drive Manufacturing Company and
Westerville, OH 43081 Subsidiaries (manufacture,
Age 51 sale and financing of
water coolers and
dehumidifiers), since January
1996 and President, January
1987 to January 1996; Vice
President and Executive
Committee Member of Ebtech
Corp., (market and sell
bottled and point-of-use
coolers) since March 1991.

Leigh Carter* Trustee Retired President and
13901 Shaker Blvd., #6B Chief Operating Officer,
Cleveland, OH 44120 BFGoodrich Company, August
Age 71 1986 to September 1990;
Director, Adams Express
Company (closed-end investment
company), since April 1982;
Director, Lamson & Sessions
Co. (producer of electrical
supplies for construction,
consumer power and
communications industry),
since April 1991; Director,
Petroleum & Resources Corp.,
since April 1987; Director,
Morrison Products
(manufacturer of blower fans
and air moving equipment),
since April 1983.
</TABLE>

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<PAGE> 140

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
POSITION WITH DURING PAST 5 YEARS
NAME AND ADDRESS THE TRUST AND OTHER AFFILIATIONS
- ---------------- ------------- ----------------------
<S> <C> <C>

John F. Durkott Trustee President and Chief
8600 Allisonville Road Operating Officer,
Indianapolis, IN 46250 Kittle's Home Furnishings
Age 51 Center, Inc., since
January 1982; partner, Kittles
Bloomington Property Company,
since January 1981; partner,
KK&D (Affiliated Real Estate
Companies of Kittle's Home
Furnishings Center), since
January 1989.

Richard W. Furst, Dean Trustee Professor of Finance and
600 Autumn Lane Dean, Carol Martin Gatton,
Lexington, KY 40502 College of Business and
Age 58 Economics, University of
Kentucky, since 1981;
Director, The Seed Corporation
(restaurant group), since
1990; Director; Foam Design,
Inc., (manufacturer of
industrial and commercial foam
products), since 1993;
Director, Studio Plus Hotels,
Inc., since 1994.

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<PAGE> 141

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
POSITION WITH DURING PAST 5 YEARS
NAME AND ADDRESS THE TRUST AND OTHER AFFILIATIONS
- ---------------- ------------- ----------------------
<S> <C> <C>

W. Bruce McConnel, III Secretary Partner of the law firm
Philadelphia National Drinker Biddle & Reath,
Bank Building Philadelphia, Pennsylvania
Broad & Chestnut Sts.
Philadelphia, PA 19107
Age 52

- --------------------
<FN>
* Messrs. Neary and Carter are considered by the Trust to be "interested
persons" of the Trust as defined in the 1940 Act.
</TABLE>

Each trustee receives an annual fee of $7,500 plus $2,500 for
each Board meeting attended and reimbursement of expenses incurred in attending
meetings. The Chairman of the Board is entitled to receive an additional $2,500
per annum for services in such capacity. For the year ended May 31, 1996, the
Trust's trustees and officers as a group received aggregate fees of $69,875. The
trustees and officers of the Trust own less than 1% of the shares of the Trust.

The following table summarizes the compensation for each of
the Trustees of the Trust for the fiscal year ended May 31, 1996:

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<PAGE> 142

<S> <C> <C> <C> <C>
Robert D. Neary, Trustee, $0 $0 $0 $0
Chairman and President

Thomas R. Benua, Jr., Trustee $11,375 $0 $0 $11,375

Leigh Carter, Trustee $11,375 $0 $0 $11,375

John F. Durkott, Trustee $11,375 $0 $0 $11,375

Richard W. Furst, Trustee $11,375 $0 $0 $11,375

J. William Pullen, Trustee $11,375 $0 $0 $11,375

Richard B. Tullis, Trustee $13,000 $0 $0 $13,000
</TABLE>

SHAREHOLDER AND TRUSTEE LIABILITY
- ---------------------------------

Under Massachusetts law, shareholders of a business trust may,
under certain circumstances, be held personally liable as partners for the
obligations of the trust. However, the Trust's Declaration of Trust provides
that shareholders shall not be subject to any personal liability for the acts or
obligations of the Trust, and that every note, bond, contract, order, or other
undertaking made by the Trust shall contain a provision to the effect that the
shareholders are not personally liable thereunder. The Declaration of Trust
provides for indemnification out of the trust property of any shareholder held
personally liable solely by reason of his being or having been a shareholder and
not because of his acts or omissions or some other reason. The Declaration of
Trust also provides that the Trust shall, upon request, assume the defense of
any claim made against any shareholder for any act or obligation of the Trust,
and shall satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Trust itself would be unable to meet its obligations.

The Declaration of Trust states further that no trustee,
officer, or agent of the Trust shall be personally liable for or on account of
any contract, debt, tort, claim, damage, judgment or decree arising out of or
connected with the administration or preservation of the trust estate or the
conduct of any business of the Trust; nor shall any trustee be personally liable
to any person for any action or failure to act except by reason of his own bad
faith, willful misfeasance, gross negligence, or reckless disregard of his
duties as trustee. The Declaration of Trust also provides that all persons
having any claim against the trustees or the Trust

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<PAGE> 143

shall look solely to the trust property for payment. With the exceptions
stated, the Declaration of Trust provides that a trustee is entitled to be
indemnified against all liabilities and expense, reasonably incurred by him in
connection with the defense or disposition of any proceeding in which he may be
involved or with which he may be threatened by reason of his being or having
been a trustee, and that the trustees, have the power, but not the duty, to
indemnify officers and employees of the Trust unless any such person would not
be entitled to indemnification had he been a trustee.

ADVISORY, ADMINISTRATION, DISTRIBUTION, CUSTODIAN
SERVICES AND TRANSFER AGENCY AGREEMENTS
-------------------------------------------------

ADVISORY AGREEMENTS
- -------------------

As described in the Prospectus, National City, National City
Columbus and National City Kentucky serve as investment advisers to the Equity
Fund, Equity Income Fund, and National City Bank alone serves as investment
adviser to the Mid Cap Regional Fund. Prior to September 26, 1990, only National
City and National City Columbus served as advisers to the Equity Fund. The
advisers are affiliates of National City Corporation, a bank holding company
with $51 billion in assets, and headquarters in Cleveland, Ohio and nearly 900
branch offices in four states. Through its subsidiaries, National City
Corporation has been managing investments for individuals, pension and
profit-sharing plans and other institutional investors for over 75 years and
currently manages over $36 billion in assets. From time to time, the advisers
may voluntarily waive fees or reimburse the Trust for expenses.

Pursuant to the Advisory Agreement, the Trust incurred
advisory fees in the following amounts for (i) the fiscal years ended May 31,
1996, 1995 and 1994: $1,114,914, $814,885 and $724,220 respectively, for the
Equity Fund; (ii) the fiscal years ended May 31, 1996 and 1995: $370,633 and
$131,109 (after waivers of $39,122) with respect to the Equity Income Fund; and
(iii) the fiscal years ended May 31, 1996 and 1995: $571,860 and $183,900 (after
waivers of $27,051) with respect to the Mid Cap Regional Fund.

Each Advisory Agreement provides that the advisers 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 performance of the Advisory Agreement,
except a loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the advisers in the
performance of their duties or from reckless disregard by them of their duties
and obligations thereunder. In addition, the advisers have undertaken

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<PAGE> 144

in the Advisory Agreements to maintain their policy and practice of conducting
their Trust Departments independently of their Commercial Departments.

The Advisory Agreement relating to the Equity Fund was
approved by the shareholders of such Fund on September 26, 1990. The Advisory
Agreements relating to the Equity Income and Mid Cap Regional Funds were
approved by their sole shareholder prior to the Funds' commencement of
investment operations. Unless sooner terminated, the Advisory Agreements will
continue in effect with respect to a particular Fund until September 30, 1997
and from year to year thereafter, subject to annual approval by the Trust's
Board of Trustees, or by a vote of a majority of the outstanding shares of such
Fund (as defined in the Funds' Prospectus) and a majority of the trustees who
are not parties to the Agreement or interested persons (as defined in the 1940
Act) of any party by votes cast in person at a meeting called for such purpose.
The Advisory Agreements may be terminated by the Trust or the advisers on 60
days written notice, and will terminate immediately in the event of its
assignment.

If expenses borne by a Fund in any fiscal year exceed expense
limitations imposed by applicable state securities regulations, the advisers
will reimburse the Trust for any such excess with respect to the Funds to the
extent described in any written undertaking provided by the advisers to such
state. To the Trust's knowledge, as of the date of this Statement of Additional
Information, the most restrictive expense limitation applicable to the Trust
provides that annual expenses (as defined by statute) may not exceed 2.5% of the
first $30 million, 2% of the next $70 million and 1.5% of the remaining average
net assets of a particular Fund. Such amount, if any, will be estimated,
reconciled and paid on a monthly basis. The fees Banks may charge to Customers
for services provided in connection with their investments in the Trust are not
covered by the state securities expense limitations described above.

ADMINISTRATION AND ACCOUNTING SERVICE AGREEMENT
- -----------------------------------------------

PFPC serves as the administrator and accounting agent to the
Trust. The services provided as administrator and accounting agent and current
fees are described in the Prospectus. Pursuant to the Administration and
Accounting Services Agreement, the Trust incurred the following fees to PFPC for
(i) the fiscal years ended May 31, 1996, 1995 and 1994: $148,244, $108,651 and
$96,563 respectively, for the Equity Fund; (ii) the fiscal years ended May 31,
1996 and 1995: $49,418 and $17,597 (after waivers of $5,100) with respect to the
Equity Income Fund; and (iii) the fiscal years ended May 31, 1996 and 1995:
$76,026 and $23,006 (after waivers of $5,121) with respect to the Mid Cap
Regional Fund.

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<PAGE> 145

DISTRIBUTION PLAN AND RELATED AGREEMENT
- ---------------------------------------

The Distributor acts as distributor of the Funds' shares
pursuant to its Distribution Agreement with the Trust as described in the
Prospectus. Shares are sold on a continuous basis.

Pursuant to Rule 12b-1 of the 1940 Act, the Trust has adopted
a Distribution Plan (the "Plan") which permits the Trust to bear certain
expenses in connection with the distribution of its shares. As required by Rule
12b-1, the Trust's 12b-1 Plan and related distribution agreement have been
approved, and are subject to annual approval by, a majority of the Trust's Board
of Trustees, and by a majority of the trustees who are not interested persons of
the Trust and have no direct or indirect interest in the operation of the Plan
or any agreement relating to the Plan, by vote cast in person at a meeting
called for the purpose of voting on the Plan and related agreement. In
compliance with the Rule, the trustees requested and evaluated information they
thought necessary to an informed determination of whether the Plan and related
agreement should be implemented, and concluded, in the exercise of reasonable
business judgment and in light of their fiduciary duties, that there is a
reasonable likelihood that the Plan and related agreement will benefit the Trust
and its shareholders.

Rule 12b-1 also requires that persons authorized to direct the
disposition of monies payable by a fund (in the Trust's case, the Distributor)
provide for the trustees' review of quarterly reports on the amounts expended
and the purposes for the expenditures.

Any change in the Plan that would materially increase the
distribution expenses of a Fund requires approval by its shareholders, but
otherwise, the Plan may be amended by the trustees, including a majority of the
disinterested trustees who do not have any direct or indirect financial interest
in the Plan or related agreement. The Plan and related agreement may be
terminated as to a particular Fund by a vote of the Trust's disinterested
trustees or by vote of the shareholders of the Fund, on not more than 60 days
written notice. The selection and nomination of disinterested trustees has been
committed to the discretion of such disinterested trustees as required by the
Rule.

The Trusts' Plan provides that each Fund will compensate the
Distributor for distribution expenses in an amount not to exceed .10% of such
fund's average net assets. Distribution expenses payable by the Distributor
pursuant to the Plan include direct and indirect costs and expenses incurred in
connection with advertising and marketing a fund's shares, and direct and
indirect costs and expenses of preparing, printing and distributing its
prospectuses to other than current shareholders. The Plan provides that the
Trust will pay the Distributor an annual base fee of $1,250,000 plus incentive
fees based upon asset growth payable

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<PAGE> 146

monthly and accrued daily by all of the Trust's investment funds with respect to
which the Distributor is distributing shares.

The Plan has been approved, and will continue in effect for
successive one year periods provided that such continuance is specifically
approved by (1) the vote of a majority of the trustees who are not parties to
the Plan or interested persons of any such party and who have no direct or
indirect financial interest in the Plan and (2) the vote of a majority of the
entire Board of Trustees.

For the fiscal years ended May 31, 1996 and 1995, the Trust
paid the previous distributor, 440 Financial Distributors, Inc. ("440
Financial") $71,862 and $67,272 with respect to the Equity Fund, $26,756 and
$10,408 with respect to the Equity Income Fund and $39,204 and $31,486 with
respect to the Mid Cap Regional Fund. Of the aggregate amount paid to 440
Financial by the Trust with respect to the Equity Fund approximately $1,752 and
$959 was attributable to postage, $1,651 and $3,919 was attributable to
communications with shareholders, $57,529 and $51,233 was attributable to
advertisement/promotions and $10,930 and $11,161 was attributable to general
compensation to 440 Financial. Of the aggregate amount paid to 440 Financial by
the Trust with respect to the Equity Income Fund approximately $621 and $119 was
attributable to postage, $586 and $4,192 was attributable to communications with
shareholders, $21,886 and $4,256 was attributable to advertisement/ promotions
and $3,663 and $1,842 was attributable to general compensation to 440 Financial.
Of the aggregate amount paid to 440 Financial by the Trust with respect to the
Mid Cap Regional Fund approximately $906 and $222 was attributable to postage,
$853 and $7,132 was attributable to communications with shareholders, $31,745
and $22,263 was attributable to advertisement/promotions and $5,700 and $1,869
was attributable to general compensation to 440 Financial.

CUSTODIAN SERVICES AND TRANSFER AGENCY AGREEMENTS
- -------------------------------------------------

National City Bank serves as the Trust's custodian with
respect to the Funds. Under its Custodian Services Agreement, National City Bank
has agreed to: (i) maintain a separate account or accounts in the name of each
Fund; (ii) hold and disburse portfolio securities on account of each Fund; (iii)
collect and make disbursements of money on behalf of each Fund; (iv) collect and
receive all income and other payments and distributions on account of each
Fund's portfolio securities; (v) respond to correspondence by security brokers
and others relating to its duties; and (vi) make periodic reports to the Board
of Trustees concerning the Funds' operations. National City Bank is authorized
to select one or more banks or trust companies to serve as sub-custodian on
behalf of the Funds, provided that it shall remain responsible for the
performance of all of its duties under the Custodian Services Agreement and
shall hold the Funds harmless from

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<PAGE> 147

the acts and omissions of any bank or trust company serving as sub-custodian.
The Funds reimburse National City Bank for its direct and indirect costs and
expenses incurred in rendering custodial services, except that the costs and
expenses borne by each Fund in any year may not exceed $.225 for each $1,000 of
average gross assets of such Fund.

State Street Bank and Trust Company (the "Transfer Agent")
serves as the Trust's transfer agent and dividend disbursing agent with respect
to the Funds. Under its Transfer Agency Agreement, it has agreed to: (i) issue
and redeem shares of each Fund; (ii) transmit all communications by each Fund to
its shareholders of record, including reports to shareholders, dividend and
distribution notices and proxy materials for meetings of shareholders; (iii)
respond to correspondence by security brokers and others relating to its duties;
(iv) maintain shareholder accounts; and (v) make periodic reports to the Board
of Trustees concerning the Funds' operations. The Transfer Agent sends each
shareholder of record a monthly statement showing the total number of shares
owned as of the last business day of the month (as well as the dividends paid
during the current month and year), and provides each shareholder of record with
a daily transaction report for each day on which a transaction occurs in the
shareholder's account with each Fund.

SHAREHOLDER SERVICES PLAN
-------------------------

As stated in the Prospectus, the Trust has implemented the
Services Plan with respect to Retail shares in each of the Funds. Pursuant to
the Services Plan, the Trust may enter into agreements with financial
institutions pertaining to the provision of administrative services to their
customers who are the beneficial owners of Retail shares in consideration for
the payment of up to .25% (on an annualized basis) of the net asset value of
such shares. Such services may include: (i) aggregating and processing purchase
and redemption requests from customers; (ii) providing customers with a service
that invests the assets of their accounts in Retail shares; (iii) processing
dividend payments from the Funds; (iv) providing information periodically to
customers showing their position in Retail shares; (v) arranging for bank wires;
(vi) responding to customer inquiries relating to the services performed with
respect to Retail shares beneficially owned by customers; (vii) forwarding
shareholder communications; and (viii) other similar services requested by the
Trust. Agreements between the Trust and financial institutions will be
terminable at any time by the Trust without penalty.

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<PAGE> 148

PORTFOLIO TRANSACTIONS
----------------------

Pursuant to their Advisory Agreements with the Trust, National
City, National City Columbus and National City Kentucky are responsible for
making decisions with respect to and placing orders for all purchases and sales
of portfolio securities for the Funds. The advisers purchase portfolio
securities either directly from the issuer or from an underwriter or dealer
making a market in the securities involved. Purchases from an underwriter of
portfolio securities include a commission or concession paid by the issuer to
the underwriter and purchases from dealers serving as market makers may include
the spread between the bid and asked price. Transactions on stock exchanges
involve the payment of negotiated brokerage commissions. There is generally no
stated commission in the case of securities traded in the over-the-counter
market, but the price includes an undisclosed commission or mark-up.

For the fiscal years ended May 31, 1996 and 1995, the Equity,
Equity Income and Mid Cap Regional Funds paid $265,644 and $80,991, $102,100 and
$68,108 and $356,904 and $217,900 in brokerage commissions, respectively.

While the advisers generally seek competitive spreads or
commissions, they may not necessarily allocate each transaction to the
underwriter or dealer charging the lowest spread or commission available on the
transaction. Allocation of transactions, including their frequency, to various
dealers is determined by the advisers in their best judgment and in a manner
deemed fair and reasonable to shareholders. The primary consideration is prompt
execution of orders in an effective manner at the most favorable price. Subject
to this consideration, dealers who provide supplemental investment research to
the advisers may receive orders for transactions by a Fund. Information so
received is in addition to and not in lieu of services required to be performed
by the advisers and does not reduce the fees payable to the advisers by the
Fund. Such information may be useful to the advisers in serving both the Trust
and other clients, and, similarly, supplemental information obtained by the
placement of business of other clients may be useful to the advisers in carrying
out their obligations to the Trust.

Portfolio securities will not be purchased from or sold to the
Fund's advisers, the Distributor, or any "affiliated person" (as such term is
defined under the 1940 Act) of any of them acting as principal, except to the
extent permitted by the SEC. In addition, a Fund will not give preference to its
advisers' correspondents with respect to such transactions, securities, savings
deposits, repurchase agreements and reverse repurchase agreements.

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<PAGE> 149

While serving as advisers to the Fund, National City, National
City Columbus and National City Kentucky have agreed to maintain their policy
and practice of conducting their Trust departments independently of their
Commercial Departments. In making investment recommendations for the Trust,
Trust Department personnel will not inquire or take into consideration whether
the issuer of securities proposed for purchase or sale for the Trust's account
are customers of the Commercial Department. In dealing with commercial
customers, the Commercial Department will not inquire or take into consideration
whether securities of those customers are held by the Trust.

Investment decisions for each Fund are made independently from
those for the other Funds and for other investment companies and accounts
advised or managed by the advisers. Such other Funds, investment companies and
accounts may also invest in the same securities as such Fund. When a purchase or
sale of the same security is made at substantially the same time on behalf of a
Fund and another investment company or account, the transaction will be averaged
as to price, and available investments allocated as to amount, in a manner which
the advisers believe to be equitable to the Fund and such other investment
company or account. In some instances, this investment procedure may adversely
affect the price paid or received by a Fund or the size of the position obtained
or sold by such Fund. To the extent permitted by law, the advisers may aggregate
the securities to be sold or purchased for a Fund with those to be sold or
purchased for other investment companies or accounts in order to obtain best
execution.

AUDITORS
--------

Ernst & Young LLP, independent auditors, with offices at Two
Commerce Square, 2001 Market Street, Suite 4000, Philadelphia, Pennsylvania
19103, serve as independent auditors of the Trust. The financial statements, as
of and for the period ended May 31, 1996, which are incorporated by reference in
this Statement of Additional Information, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report referred to elsewhere
herein, and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.

COUNSEL
-------

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<PAGE> 150

YIELD AND PERFORMANCE INFORMATION
---------------------------------

The Equity Income Fund's "yield" described in the Prospectus
is calculated by dividing each Fund's net investment income per share earned
during a 30-day period (or another period permitted by the rules of the SEC) by
the net asset value per share on the last day of the period and annualizing the
result on a semi-annual basis by adding one to the quotient, raising the sum to
the power of six, subtracting one from the result and then doubling the
difference. The Fund's net investment income per share earned during the period
is based on the average daily number of shares outstanding during the period
entitled to receive dividends and includes dividends and interest earned during
the period minus expenses accrued for the period, net of reimbursements. This
calculation can be expressed as follows:

a-b to the 6th power
Yield = 2 [(------) - 1]
cd + 1

Where: a = dividends and interest earned during the
period.

b = expenses accrued for the period (net of
reimbursements).

c = the average daily number of shares
outstanding during the period that were
entitled to receive dividends.

d = maximum offering price per share on the last
day of the period.

The Equity Income Fund calculates interest earned on debt
obligations held in its fund by computing the yield to maturity of each
obligation held by it based on the market value of the obligation (including
actual accrued interest) at the close of business on the last business day of
each 30-day period, or, with respect to obligations purchased during the 30-day
period, the purchase price (plus actual accrued interest) and dividing the
result by 360 and multiplying the quotient by the market value of the obligation
(including actual accrued interest) in order to determine the interest income on
the obligation for each day of the subsequent 30-day period that the obligation
is in the Fund. The maturity of an obligation with a call provision is the next
call date on which the obligation reasonably may be expected to be called or, if
none, the maturity date. With respect to debt obligations purchased by a Fund 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 such debt obligations.

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<PAGE> 151

Expenses accrued for the period (variable "b" in the formula)
include all recurring fees charged by a Fund to all shareholder accounts in
proportion to the length of the base period and the Fund's mean (or median)
account size. Undeclared earned income will be subtracted from the net asset
value per share (variable "d" in the formula). Undeclared earned income is the
net investment income which, at the end of the 30-day base period, has not been
declared as a dividend, but is reasonably expected to be and is declared as a
dividend shortly thereafter. For applicable sales charges, see "How to Purchase
and Redeem Shares -- Sales Charges Applicable to Purchases of Retail Shares" in
the Prospectus.

For the 30-day period ended May 31, 1996, the yields of the
Retail and Institutional shares of the Equity, Equity Income and Mid Cap
Regional Funds were 0.44% and 0.70%, 1.14% and 2.71% and 0.41% and 0.66%,
respectively.

Each Fund computes its "average annual total return" by
determining the average annual compounded rate of return during specified
periods that would equate the initial amount invested to the ending redeemable
value of such investment by dividing the ending redeemable value of a
hypothetical $1,000 initial payment by $1,000 and raising the quotient to a
power equal to one divided by the number of years (or fractional portion
thereof) covered by the computation and subtracting one from the result. This
calculation can be expressed as follows:

ERV to the 1/nth power
T = [(-----) - 1]
P

Where: T = average annual total return

ERV = ending redeemable value at the end of the
period covered by the computation of a
hypothetical $1,000 payment made at the
beginning of the period

P = hypothetical initial payment of $1,000

n = period covered by the computation, expressed
in terms of years

Each Fund computes its aggregate total returns by determining
the aggregate rates of return during specified periods that likewise equate the
initial amount invested to the ending redeemable value of such investment. The
formula for calculating aggregate total return is as follows:

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<PAGE> 152

ERV
T = (---) - 1
P

The calculations of average annual total return and aggregate
total return assume the reinvestment of all dividends and capital gain
distributions on the reinvestment dates during the period and include all
recurring fees charged to all shareholder accounts, assuming an account size
equal to such Funds' mean (or median) account size for any fees that vary with
the size of the account. The maximum sales load and other charges deducted from
payments are deducted from the initial $1,000 payment (variable "P" in the
formula). The ending redeemable value (variable "ERV" in the formula) is
determined by assuming complete redemption of the hypothetical investment and
the deduction of all nonrecurring charges at the end of the measuring period
covered by the computation.

The average annual total returns for the one year period
ending May 31, 1996 were 19.65% (after taking the sales load into account) and
24.34% (without taking into account any sales load), for the Equity Fund's
Retail Shares and 24.61% for the Equity Fund's Institutional shares. The average
annual total returns since the Equity Fund's commencement of operations through
May 31, 1996 were 11.22% (after taking into account the sales load) and 11.88%
(without taking into account any sales load), for its Retail shares and 12.11%
for the Institutional shares.

The average annual total returns for the one year period ended
May 31, 1996 were 14.88% (after taking the sales load into account) and 19.37%
(without taking into account any sales load), for the Equity Income Fund's
Retail shares and 19.72% for the Equity Income Fund's Institutional shares. The
average annual total returns since the Equity Income Fund's commencement of
operations through May 31, 1996 were 14.12% (after taking into account the sales
load) and 16.60% (without taking into account any sales load), for its Retail
shares and 17.09% for the Institutional shares.

The average annual total returns for the period ended May 31,
1996 were 17.68% (after taking the sales load into account) and 22.28% (without
taking into account any sales load), for the Mid Cap Regional Fund's Retail
shares and 22.64% for the Mid Cap Regional Fund's Institutional shares. The
average annual total returns since the Mid Cap Regional Fund's commencement of
operations through May 31, 1996 were 16.35% (after taking into account the sales
load) and 18.88% (without taking into account any sales load), for its Retail
shares and 20.19% for the Institutional shares.

The Funds may also from time to time include in Materials a
total return figure that is not calculated according to the

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<PAGE> 153

formulas set forth above in order to compare more accurately a Fund's
performance with other measures of investment return. For example, in comparing
a Fund's total return with data published by Lipper Analytical Services, Inc.,
CDA Investment Technologies, Inc. or Weisenberger Investment Company Service, or
with the performance of an index, a Fund may calculate its aggregate total
return for the period of time specified in the advertisement or communication by
assuming the investment of $10,000 in shares and assuming the reinvestment of
each dividend or other distribution at net asset value on the reinvestment date.
Percentage increases are determined by subtracting the initial value of the
investment from the ending value and by dividing the remainder by the beginning
value. A Fund does not, for these purposes, deduct from the initial value
invested any amount representing sales charges. A Fund will, however, disclose
the maximum sales charge and will also disclose that the performance data do not
reflect sales charges and that inclusion of sale charges would reduce the
performance quoted.

The Funds may also from time to time include discussions or
illustrations of the effects of compounding in Materials. "Compounding" refers
to the fact that, if dividends or other distributions on a Fund investment are
reinvested by being paid in additional Fund shares, any future income or capital
appreciation of a Fund would increase the value, not only of the original Fund
investment, but also of the additional Fund shares received through
reinvestment. As a result, the value of the Fund investment would increase more
quickly than if dividends or other distributions had been paid in cash.

In addition, the Funds may also include in Materials
discussions and/or illustrations of the potential investment goals of a
prospective investor, investment management strategies, techniques, policies or
investment suitability of a Fund, high-quality investments (with respect to the
Equity and Equity Income Funds), economic conditions, the relationship between
sectors of the economy and the economy as a whole, various securities markets,
the effects of inflation and historical performance of various asset classes,
including but not limited to, stocks, bonds and Treasury securities. From time
to time, Materials may summarize the substance of information contained in
shareholder reports (including the investment composition of a Fund), as well as
the views of the advisers as to current market, economic, trade and interest
rate trends, legislative, regulatory and monetary developments, investment
strategies and related matters believed to be of relevance to a Fund. The Funds
may also include in Materials charts, graphs or drawings which compare the
investment objective, return potential, relative stability and/or growth
possibilities of the Funds and/or other mutual funds, or illustrate the
potential risks and rewards of investment in various investment vehicles,
including but not limited to, stocks, bonds, Treasury securities and shares of a
Fund and/or other mutual funds. Materials may include a discussion of certain
attributes or benefits to be

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<PAGE> 154

derived by an investment in a Fund and/or other mutual funds (such as value
investing, market timing, dollar cost averaging, asset allocation, constant
ratio transfer, automatic accounting rebalancing, the advantages and
disadvantages of investing in tax-deferred and taxable investments), shareholder
profiles and hypothetical investor scenarios, timely information on financial
management, tax and retirement planning and investment alternatives to
certificates of deposit and other financial instruments. Such Materials may
include symbols, headlines or other material which highlight or summarize the
information discussed in more detail therein.

MISCELLANEOUS
-------------

The Trust bears all costs in connection with its organization,
including the fees and expenses of registering and qualifying its shares for
distribution under federal and state securities regulations. All organization
expenses are being amortized on the straight-line method over a period of five
years from the date of commencement of operations.

As used in the Prospectus, "assets belonging to a Fund" means
the consideration received by the Trust upon the issuance of shares in that
particular Fund, together with all income, earnings, profits, and proceeds
derived from the investment thereof, including any proceeds from the sale of
such investments, any funds or payments derived from any reinvestment of such
proceeds, and a portion of any general assets of the Trust not belonging to a
particular Fund. In determining a Fund's net asset value, assets belonging to a
particular Fund are charged with the liabilities in respect of that Fund.

The following shareholders beneficially owned 5% or more of
the outstanding Institutional shares of the Equity Income Fund as of September
11, 1996:

<TABLE>
<CAPTION>
Percentage of
Number of Outstanding
Institutional Institutional
Equity Income Fund Shares Shares
- ------------------- ------------- -------------
<S> <C> <C>
National City Non Contributory 2,150,975.750 35.27%
Pension Plan
National City Corporation
Attn: Karl A. Johns
Secretary, Pension Committee
1900 E. Ninth Street
Cleveland, Ohio 44114
</TABLE>

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<PAGE> 155
<TABLE>
<CAPTION>
Percentage of
Number of Outstanding
Institutional Institutional
Equity Income Fund Shares Shares
- ------------------- ------------- -------------
<S> <C> <C>
National City Non-Contributory 2,050,977.907 33.63%
Retirement Trust
Attn: Trust Mutual Funds
P. O. Box 94777
Cleveland, OH 44101

Integra Financial Pension Plan 1,018,297.530 16.70%
National City Bank of Pennsylvania
400 Fourth Avenue
Pittsburgh, PA 15222

National City Savings and 376,104.300 6.17%
Investment Plan
National City Corporation
1900 East Ninth Street
Cleveland, Ohio 44114
</TABLE>

The following shareholders beneficially owned 5% or more of
the outstanding Institutional shares of the Mid Cap Regional Fund as of
September 11, 1996:

<TABLE>
<CAPTION>
Percentage of
Number of Outstanding
Institutional Institutional
Mid Cap Regional Fund Shares Shares
- --------------------- ------------- -------------
<S> <C> <C>
National City 2,144,732.86 25.25%
Non Contributory
Pension Plan
Attn: Karl A. Johns
1900 East Ninth Street
Cleveland, Ohio 44114

National City Savings & 624,609.450 7.35%
Investment Plan
National City Corporation
1900 East Ninth Street
Cleveland, OH 44101

Integra Financial Pension Plan 528,771.380 6.23%
National City Bank of Pennsylvania
400 Fourth Avenue
Pittsburgh, PA 15222

Dispatch Printing Company 518,032.920 6.10%
c/o National City Bank of
Columbus
155 East Broad Street,
Trust Division
Columbus, OH 43251
</TABLE>

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<PAGE> 156
<TABLE>
<CAPTION>
Percentage of
Number of Outstanding
Institutional Institutional
Mid Cap Regional Fund Shares Shares
- --------------------- ------------- -------------
<S> <C> <C>
Cleveland Foundation 441,605.090 5.20%
c/o National City Bank, 8th Floor
1900 East Ninth Street
Cleveland, OH 44114
</TABLE>

The following shareholders beneficially owned 5% or more of
the outstanding Institutional shares of the Equity Fund as of September 11,
1996:

<TABLE>
<CAPTION>
Percentage of
Number of Outstanding
Institutional Institutional
Equity Fund Shares Shares
- ----------- ------------- -------------
<S> <C> <C>
Integra Financial Pension Plan 2,520,672.060 22.82%
National City Bank of
Pennsylvania
400 Fourth Avenue
Pittsburgh, PA 15222
</TABLE>

The following shareholders beneficially owned 5% or more of
the outstanding Retail shares of the Equity Income Fund as of September 11,
1996:

<TABLE>
<CAPTION>
Percentage of
Number of Outstanding
Equity Income Fund Retail Shares Retail Shares
- ------------------ ------------- -------------

<S> <C> <C>
Wheat First FBO 2,010.146 9.199%
A/C 3935-1781
Lawanah Harris IRA
WFS as custodian
U/A DTD 9/9/96
244 Natale Drive
Cortland, OH 44410

Wheat First FBO 1,168.196 5.346%
A/C 4176-5350
John E. Hoeffel &
Carol Hoeffel, Jten
972 Glenwood Ave.
Napoleon, OH 43545

Wheat First FBO 5,449.308 24.938%
Carrol C. Homans TTEE
or Allan and Carrol Homans
Declaration of Trust U/A 5/19/92
1190 Sugar Sands Blvd. Apt. 517
Riviera Beach, FL 33404
</TABLE>

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<PAGE> 157
<TABLE>
<CAPTION>
Percentage of
Number of Outstanding
Equity Income Fund Retail Shares Retail Shares
- ------------------ ------------- -------------
<S> <C> <C>
Wheat First FBO 1,548.741 7.087%
A/C 7970-4910
Melva D. Upshaw
WFS as custodian
U/A DTD 09/09/96
15100 Minerva Ave.
Dolton, IL 60419
</TABLE>

To the Trust's knowledge, no shareholder beneficially held 5%
or more of the outstanding Retail classes of the Equity or Mid Cap Regional
Funds as of September 11, 1996.

FINANCIAL STATEMENTS
--------------------

The audited financial statements contained in the annual report for the fiscal
year ended May 31, 1996 are hereby incorporated herein by reference. Copies of
the annual report may be obtained by calling the Trust at 1-800-622-FUND or by
writing to the Trust at 4400 Computer Drive, Westborough, Massachusetts 01581.

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<PAGE> 158

APPENDIX A
----------

DESCRIPTION OF RATINGS

CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS
- ----------------------------------------------

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

"AAA" - This designation represents the highest rating
assigned by Standard & Poor's to a debt obligation and indicates an extremely
strong capacity to pay interest and repay principal.

"AA" - Debt is considered to have a very strong capacity to
pay interest and repay principal and differs from AAA issues only in small
degree.

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

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

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

"BB" - Debt has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.

"B" - Debt has a greater vulnerability to default but
currently has the capacity to meet interest payments and principal repayments.
Adverse business, financial or economic conditions will likely impair capacity
or willingness to pay interest and repay principal. The "B" rating category is
also used for debt

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<PAGE> 159

subordinated to senior debt that is assigned an actual or implied "BB" or "BB-"
rating.

"CCC" - Debt has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial or economic conditions, it is not likely to
have the capacity to pay interest and repay principal. The "CCC" rating category
is also used for debt subordinated to senior debt that is assigned an actual or
implied "B" or "B-" rating.

"CC" - This rating is typically applied to debt subordinated
to senior debt that is assigned an actual or implied "CCC" rating.

"C" - This rating is typically applied to debt subordinated to
senior debt which is assigned an actual or implied "CCC-" debt rating. The "C"
rating may be used to cover a situation where a bankruptcy petition has been
filed, but debt service payments are continued.

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

"D" - Debt is in payment default. This rating is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S & P believes that such
payments will be made during such grace period. "D" rating is also used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.

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

"r" - This rating is attached to highlight derivative, hybrid,
and certain other obligations that S & P believes may experience high volatility
or high variability in expected returns due to non-credit risks. Examples of
such obligations are: securities whose principal or interest return is indexed
to equities, commodities, or currencies; certain swaps and options; and interest
only and principal only mortgage securities. The absence of an "r" symbol should
not be taken as an indication that an obligation will exhibit no volatility or
variability in total return.

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

"Aaa" - Bonds are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally

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

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

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

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

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

(P)... - When applied to forward delivery bonds,
indicates that the rating is provisional pending delivery of the
bonds. The rating may be revised prior to delivery if changes
occur in the legal documents or the underlying credit quality of
the bonds.

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Note: Those bonds in the Aa, A, Baa, Ba and B groups which
Moody's believes possess the strongest investment attributes are designated by
the symbols, Aa1, A1, Ba1 and B1.

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

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

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

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

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

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

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

The following summarizes the highest four ratings used by
Fitch for corporate and municipal bonds:

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

"AA" - Bonds considered to be investment grade and of
very high credit quality. The obligor's ability to pay interest
and repay principal is very strong, although not quite as strong as

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

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

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

IBCA assesses the investment quality of unsecured debt with an
original maturity of more than one year which is issued by bank holding
companies and their principal bank subsidiaries. The following summarizes the
rating categories used by IBCA for long-term debt ratings:

"AAA" - Obligations for which there is the lowest expectation
of investment risk. Capacity for timely repayment of principal and interest is
substantial, such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk substantially.

"AA" - Obligations for which there is a very low expectation
of investment risk. Capacity for timely repayment of principal and interest is
substantial, such that adverse changes in business, economic or financial
conditions may increase investment risk, albeit not very significantly.

"A" - Obligations for which there is a low expectation of
investment risk. Capacity for timely repayment of principal and interest is
strong, although adverse changes in business, economic or financial conditions
may lead to increased investment risk.

"BBB" - Obligations for which there is currently a low
expectation of investment risk. Capacity for timely repayment of
principal and interest is adequate, although adverse changes in

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business, economic or financial conditions are more likely to lead to increased
investment risk than for obligations in other categories.

"BB," "B," "CCC," "CC," and "C" - Obligations are assigned one
of these ratings where it is considered that speculative characteristics are
present. "BB" represents the lowest degree of speculation and indicates a
possibility of investment risk developing. "C" represents the highest degree of
speculation and indicates that the obligations are currently in default.

IBCA may append a rating of plus (+) or minus (-) to a rating
below "AAA" to denote relative status within major rating categories.

COMMERCIAL PAPER RATINGS
- ------------------------

A Standard & Poor's commercial paper rating is a current
assessment of the likelihood of timely payment of debt considered short-term in
the relevant market. The following summarizes the rating categories used by
Standard and Poor's for commercial paper:

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

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

"A-3" - Issues carrying this designation have adequate
capacity for timely payment. They are, however, more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the higher
designations.

"B" - Issues are regarded as having only a speculative
capacity for timely payment.

"C" - This rating is assigned to short-term debt obligations
with a doubtful capacity for payment.

"D" - Issues are in payment default.

Moody's commercial paper ratings are opinions of the ability
of issuers to repay punctually promissory obligations not having an original
maturity in excess of 9 months. The following summarizes the rating categories
used by Moody's for commercial paper:

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<PAGE> 164

"Prime-1" - Issuers or related supporting institutions have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
leading market positions in well established industries; high rates of return on
funds employed; conservative capitalization structures with moderate reliance on
debt and ample asset protection; broad margins in earning coverage of fixed
financial charges and high internal cash generation; and well established access
to a range of financial markets and assured sources of alternate liquidity.

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

"Prime-3" - Issuers or related supporting institutions have an
acceptable capacity for repayment of short-term promissory obligations. The
effects of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.

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

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

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

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

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

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<PAGE> 165

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

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

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

"D-5" - Issuer has failed to meet scheduled principal and/or
interest payments.

Fitch short-term ratings apply to debt obligations that are
payable on demand or have original maturities of generally up to three years.
The following summarizes the rating categories used by Fitch for short-term
obligations:

"F-1+" - Securities possess exceptionally strong credit
quality. Issues assigned this rating are regarded as having the strongest degree
of assurance for timely payment.

"F-1" - Securities possess very strong credit quality. Issues
assigned this rating reflect an assurance of timely payment only slightly less
in degree than issues rated "F-1+."

"F-2" - Securities possess good credit quality. Issues
assigned this rating have a satisfactory degree of assurance for timely payment,
but the margin of safety is not as great as the "F- 1+" and "F-1" ratings.

"F-3" - Securities possess fair credit quality. Issues
assigned this rating have characteristics suggesting that the degree of
assurance for timely payment is adequate; however, near-term adverse changes
could cause these securities to be rated below investment grade.

"F-S" - Securities possess weak credit quality. Issues
assigned this rating have characteristics suggesting a minimal degree of
assurance for timely payment and are vulnerable to near-term adverse changes in
financial and economic conditions.

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

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<PAGE> 166

Fitch may also use the symbol "LOC" with its short-term
ratings to indicate that the rating is based upon a letter of credit issued by a
commercial bank.

IBCA assesses the investment quality of unsecured debt with an
original maturity of less than one year which is issued by bank holding
companies and their principal bank subsidiaries. The following summarizes the
rating categories used by IBCA for short-term debt ratings:

"A1+" - Obligations which posses a particularly strong credit
feature are supported by the highest capacity for timely repayment.

"A1" - Obligations are supported by the highest capacity
for timely repayment.

"A2" - Obligations are supported by a good capacity for timely
repayment.

"A3" - Obligations are supported by a satisfactory capacity
for timely repayment.

"B" - Obligations for which there is an uncertainty as to the
capacity to ensure timely repayment.

"C" - Obligations for which there is a high risk of default or
which are currently in default.

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<PAGE> 167

APPENDIX B

As stated in the Prospectus, the Mid Cap Regional Fund (the
"Fund") may enter into certain futures transactions and options for hedging
purposes. Such transactions are described in this Appendix.

I. Index Futures Contracts
-----------------------

GENERAL. A stock index assigns relative values to the stocks
included in the index and the index fluctuates with changes in the market values
of the stocks included. Some stock index futures contracts are based on broad
market indexes, such as the Standard & Poor's Ratings Group 500 or the New York
Stock Exchange Composite Index. In contrast, certain exchanges offer futures
contracts on narrower market indexes or indexes based on an industry or market
segment, such as oil and gas stocks.

Futures contracts are traded on organized exchanges regulated
by the Commodity Futures Trading Commission. Transactions on such exchanges are
cleared through a clearing corporation, which guarantees the performance of the
parties to each contract.

The Fund may sell index futures contracts in order to offset a
decrease in market value of its portfolio securities that might otherwise result
from a market decline. The Fund may do so either to hedge the value of its Fund
as a whole, or to protect against declines, occurring prior to sales of
securities, in the value of the securities to be sold. Conversely, the Fund will
purchase index futures contracts in anticipation of purchases of securities. A
long futures position may be terminated without a corresponding purchase of
securities.

In addition, the Fund may utilize index futures contracts in
anticipation of changes in the composition of its Fund holdings. For example, in
the event that the Fund expects to narrow the range of industry groups
represented in its holdings it may, prior to making purchases of the actual
securities, establish a long futures position based on a more restricted index,
such as an index comprised of securities of a particular industry group. The
Fund may also sell futures contracts in connection with this strategy, in order
to protect against the possibility that the value of the securities to be sold
as part of the restructuring of the Fund will decline prior to the time of sale.

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II. Margin Payments
---------------

Unlike purchases or sales of portfolio securities, no price is
paid or received by the Fund upon the purchase or sale of a futures contract.
Initially, the Fund will be required to deposit with the broker or in a
segregated account with the Custodian an amount of cash or cash equivalents,
known as initial margin, based on the value of the contract. The nature of
initial margin in futures transactions is different from that of margin in
security transactions in that futures contract margin does not involve the
borrowing of funds by the customer to finance the transactions. Rather, the
initial margin is in the nature of a performance bond or good faith deposit on
the contract which is returned to the Fund upon termination of the futures
contract assuming all contractual obligations have been satisfied. Subsequent
payments, called variation margin, to and from the broker, will be made on a
daily basis as the price of the underlying instruments fluctuates making the
long and short positions in the futures contract more or less valuable, a
process known as marking-to-the-market. For example, when a particular Fund has
purchased a futures contract and the price of the contract has risen in response
to a rise in the underlying instruments, that position will have increased in
value and the Fund will be entitled to receive from the broker a variation
margin payment equal to that increase in value. Conversely, where the Fund has
purchased a futures contract and the price of the future contract has declined
in response to a decrease in the underlying instruments, the position would be
less valuable and the Fund would be required to make a variation margin payment
to the broker. At any time prior to expiration of the futures contract, the
advisers may elect to close the position by taking an opposite position, subject
to the availability of a secondary market, which will operate to terminate the
Fund's position in the futures contract. A final determination of variation
margin is then made, additional cash is required to be paid by or released to
the Fund, and the Fund realizes a loss or gain.

III. Risks of Transactions in Futures Contracts
------------------------------------------

There are several risks in connection with the use of futures
by the Fund as a hedging device. One risk arises because of the imperfect
correlation between movements in the price of the futures and movements in the
price of the instruments which are the subject of the hedge. The price of the
future may move more than or less than the price of the instruments being
hedged. If the price of the futures moves less than the price of the instruments
which are the subject of the hedge, the hedge will not be fully effective but,
if the price of the instruments being hedged has moved in an unfavorable
direction, the Fund would be in a better position than if it had not hedged at
all. If the price of the instruments being hedged has moved in a favorable
direction, this advantage will be partially offset by the loss on the futures.
If

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the price of the futures moves more than the price of the hedged instruments,
the Fund involved will experience either a loss or gain on the futures which
will not be completely offset by movements in the price of the instruments which
are the subject of the hedge. To compensate for the imperfect correlation of
movements in the price of instruments being hedged and movements in the price of
futures contracts, the Fund may buy or sell futures contracts in a greater
dollar amount than the dollar amount of instruments being hedged if the
volatility over a particular time period of the prices of such instruments has
been greater than the volatility over such time period of the futures, or if
otherwise deemed to be appropriate by the advisers. Conversely, the Fund may buy
or sell fewer futures contracts if the volatility over a particular time period
of the prices of the instruments being hedged is less than the volatility over
such time period of the futures contract being used, or if otherwise deemed to
be appropriate by the advisers. It is also possible that, where the Fund has
sold futures to hedge its Fund against a decline in the market, the market may
advance and the value of instruments held in the Fund may decline. If this
occurred, the Fund would lose money on the futures and also experience a decline
in value in its portfolio securities.

When futures are purchased to hedge against a possible
increase in the price of securities before the Fund is able to invest its cash
(or cash equivalents) in an orderly fashion, it is possible that the market may
decline instead; if the Fund then concludes not to invest its cash at that time
because of concern as to possible further market decline or for other reasons,
the Fund will realize a loss on the futures contract that is not offset by a
reduction in the price of the instruments that were to be purchased.

In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in the futures and the
instruments being hedged, the price of futures may not correlate perfectly with
movement in the cash market due to certain market distortions. Rather than
meeting additional margin deposit requirements, investors may close futures
contracts through off-setting transactions which could distort the normal
relationship between the cash and futures markets. Second, with respect to
financial futures contracts, the liquidity of the futures market depends on
participants entering into off-setting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced thus producing distortions. Third, from
the point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities market. Therefore,
increased participation by speculators in the futures market may also cause
temporary price distortions. Due to the possibility of price distortion in the
futures market, and because of the imperfect correlation between

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the movements in the cash market and movements in the price of futures, a
correct forecast of general market trends or interest rate movements by the
adviser may still not result in a successful hedging transaction over a short
time frame.

Positions in futures may be closed out only on an exchange or
board of trade which provides a secondary market for such futures. Although the
Fund intends to purchase or sell futures only on exchanges or boards of trade
where there appear to be active secondary markets, there is no assurance that a
liquid secondary market on any exchange or board of trade will exist for any
particular contract or at any particular time. In such event, it may not be
possible to close a futures investment position, and in the event of adverse
price movements, the Fund will continue to be required to make daily cash
payments of variation margin. However, in the event futures contracts have been
used to hedge portfolio securities, such securities will not be sold until the
futures contract can be terminated. In such circumstances, an increase in the
price of the securities, if any, may partially or completely offset losses on
the futures contract. However, as described above, there is no guarantee that
the price of the securities will in fact correlate with the price movements in
the futures contract and thus provide an offset on a futures contract.

Further, it should be noted that the liquidity of a secondary
market in a futures contract may be adversely affected by "daily price
fluctuation limits" established by commodity exchanges which limit the amount of
fluctuation in a futures contract price during a single trading day. Once the
daily limit has been reached in the contract, no trades may be entered into at a
price beyond the limit, thus preventing the liquidation of open futures
positions. The trading of futures contracts is also subject to the risk of
trading halts, suspensions, exchange or clearing house equipment failures,
government intervention, insolvency of a brokerage firm or clearing house or
other disruptions of normal activity, which could at times make it difficult or
impossible to liquidate existing positions or to recover excess variation margin
payments.

Successful use of futures by the Fund is also subject to the
advisers ability to predict correctly movements in the direction of the market.
For example, if the Fund has hedged against the possibility of a decline in the
market adversely affecting securities held by it and securities prices increase
instead, the Fund will lose part or all of the benefit to the increased value of
its securities which it has hedged because it will have offsetting losses in its
futures positions. In addition, in such situations, if the Fund has insufficient
cash, it may have to sell securities to meet daily variation margin
requirements. Such sales of securities may be, but will not necessarily be, at
increased prices which reflect the rising market. The Fund may

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have to sell securities at a time when it may be disadvantageous to do so.

IV. Options on Futures Contracts
----------------------------

The Fund may purchase and write options on the futures
contracts described above. A futures option gives the holder, in return for the
premium paid, the right to buy (call) from or sell (put) to the writer of the
option a futures contract at a specified price at any time during the period of
the option. Upon exercise, the writer of the option is obligated to pay the
difference between the cash value of the futures contract and the exercise
price. Like the buyer or seller of a futures contract, the holder, or writer, of
an option has the right to terminate its position prior to the scheduled
expiration of the option by selling, or purchasing an option of the same series,
at which time the person entering into the closing transaction will realize a
gain or loss. The Fund will be required to deposit initial margin and variation
margin with respect to put and call options on futures contracts written by it
pursuant to brokers' requirements similar to those described above. Net option
premiums received will be included as initial margin deposits.

Investments in futures options involve some of the same
considerations that are involved in connection with investments in futures
contracts (for example, the existence of a liquid secondary market). In
addition, the purchase or sale of an option also entails the risk that changes
in the value of the underlying futures contract will not correspond to changes
in the value of the option purchased. Depending on the pricing of the option
compared to either the futures contract upon which it is based, or upon the
price of the securities being hedged, an option may or may not be less risky
than ownership of the futures contract or such securities. In general, the
market prices of options can be expected to be more volatile than the market
prices on the underlying futures contract. Compared to the purchase or sale of
futures contracts, however, the purchase of call or put options on futures
contracts may frequently involve less potential risk to the Fund because the
maximum amount at risk is the premium paid for the options (plus transaction
costs). The writing of an option on a futures contract involves risks similar to
those risks relating to the sale of futures contracts.

V. Other Matters
-------------

Accounting for futures contracts will be in accordance with
generally accepted accounting principles.

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<PAGE> 172

PROSPECTUS ARMADA

September 30, 1996 FUNDS

(As Revised March 10, 1997) INCOME

SERIES
ARMADA TOTAL RETURN ADVANTAGE FUND

ARMADA FIXED INCOME FUND

ARMADA ENHANCED INCOME FUND ARMADA FUNDS LOGO
Financial Power Close at Hand
ARMADA GNMA FUND

ARMADA INTERMEDIATE GOVERNMENT FUND

<PAGE> 173

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Expense Table............................................................................. 2
Financial Highlights...................................................................... 4
Introduction.............................................................................. 10
Investment Objectives and Policies........................................................ 10
Investment Limitations.................................................................... 24
Yield and Performance Information......................................................... 26
Pricing of Shares......................................................................... 27
How to Purchase and Redeem Shares......................................................... 27
Distribution Agreement.................................................................... 33
Shareholder Services Plan................................................................. 33
Dividends and Distributions............................................................... 33
Taxes..................................................................................... 34
Management of the Trust................................................................... 35
Description of the Trust and Its Shares................................................... 37
Custodian and Transfer Agent.............................................................. 39
Expenses.................................................................................. 39
Miscellaneous............................................................................. 39
</TABLE>

- - SHARES OF THE ARMADA FUNDS ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED OR OTHERWISE SUPPORTED BY NATIONAL CITY BANK; NATIONAL
CITY BANK OF COLUMBUS; NATIONAL CITY BANK OF KENTUCKY; NATIONAL ASSET
MANAGEMENT CORPORATION, THEIR PARENT COMPANY OR ANY OF THEIR AFFILIATES OR ANY
BANK.
- - SHARES OF THE ARMADA FUNDS ARE NOT INSURED OR GUARANTEED BY THE U.S.
GOVERNMENT, FDIC, OR ANY GOVERNMENTAL AGENCY OR STATE.
- - AN INVESTMENT IN THE ARMADA FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.

2
<PAGE> 174

ARMADA FUNDS
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Oaks, Pennsylvania 19456 If you purchased your shares through NatCity Investments, Inc.
(formerly National City Investments Corporation), please call
your Investment Consultant for information.
For current performance, fund information, account redemption
information, and to purchase shares, please call
1-800-622-FUND(3863).
</TABLE>

This Prospectus describes shares in the following five investment funds
(the "Funds") of Armada Funds (the "Trust"), each having its own investment
objective and policies:

TOTAL RETURN ADVANTAGE FUND'S investment objective is to provide a total
rate of return, income and price appreciation greater than that of popular
market indices with similar maturity and quality characteristics. Under normal
market conditions, the Fund maintains an average dollar-weighted portfolio
maturity of two years above or below the average maturity of the Lehman Brothers
Government/Corporate Bond Index.
FIXED INCOME FUND'S investment objective is to provide as high a level of
current income as is consistent with prudent investment risk. The Fund invests
in high and medium grade bonds and other fixed income securities. Under normal
market conditions, the Fund maintains an average dollar-weighted portfolio
maturity of ten years or less.
ENHANCED INCOME FUND'S investment objective is to seek a total rate of
return greater than that of the Merrill Lynch 1-3 year Treasury Index. The Fund
will normally invest at least 80% of the value of its total assets in investment
grade debt securities of all types. However, up to 20% of the value of its total
assets may be invested in preferred stocks and other investments. Under normal
market conditions, the Fund intends to maintain an average dollar-weighted
portfolio maturity for its debt securities of from 1 1/2 to 4 years.
GNMA FUND'S investment objective is to seek the highest level of current
income consistent with preservation of capital and a high degree of liquidity by
investing primarily in mortgage pass-through securities guaranteed by the
Government National Mortgage Association. The Fund invests primarily in mortgage
pass-through securities guaranteed by the Government National Mortgage
Association.
INTERMEDIATE GOVERNMENT FUND'S investment objective is to seek preservation
of capital and a high degree of liquidity while providing current income. The
Fund invests primarily in obligations issued or guaranteed as to principal and
interest by the U.S. government and its agencies and instrumentalities.
The net asset value per share of each Fund will fluctuate as the value of
its investment fund changes in response to changing market prices and other
factors.
National City Bank ("National City"), National City Bank of Columbus
("National City Columbus") and National City Bank of Kentucky ("National City
Kentucky") serve as investment advisers to the Fixed Income Fund; National Asset
Management Corporation ("NAM") serves as investment adviser to the Enhanced
Income Fund and Total Return Advantage Fund; and National City serves as
investment adviser to the GNMA Fund and Intermediate Government Fund. These
investment advisers are referred to herein individually as an "adviser" and
collectively as the "advisers."
SEI Financial Services Company (the "Distributor"), serves as the Trust's
sponsor and distributor. Each Fund pays a fee to the Distributor for
distributing its shares. See "Distribution Agreement."
This Prospectus sets forth concisely the information about the Funds that a
prospective investor should consider before investing. Investors should
carefully read this Prospectus and retain it for future reference. Additional
information about the Funds, contained in a Statement of Additional Information,
has been filed with the Securities and Exchange Commission ("SEC") and is
available upon request without charge by contacting the Trust at its telephone
number or address shown above. The Statement of Additional Information bears the
same date as this Prospectus and is incorporated by reference in its entirety
into this Prospectus.
SHARES OF THE TRUST ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED OR OTHERWISE SUPPORTED BY, NATIONAL CITY BANK, NATIONAL CITY BANK OF
COLUMBUS, NATIONAL CITY BANK OF KENTUCKY, NATIONAL ASSET MANAGEMENT CORPORATION,
THEIR PARENT COMPANY OR ANY OF THEIR AFFILIATES, AND ARE NOT FEDERALLY INSURED
OR GUARANTEED BY THE U.S. GOVERNMENT, FEDERAL DEPOSIT INSURANCE CORPORATION, OR
ANY GOVERNMENTAL AGENCY OR STATE. INVESTMENT IN THE TRUST INVOLVES RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
September 30, 1996
(As Revised March 10, 1997)
<PAGE> 175

EXPENSE TABLE
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN FIXED FIXED ENHANCED ENHANCED
ADVANTAGE ADVANTAGE INCOME INCOME INCOME INCOME GNMA
RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL
SHARES(1) SHARES SHARES(1) SHARES SHARES(1) SHARES SHARES(1)
------------ ------------- ------- ------------- -------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES

Maximum Sales Charge Imposed
on Purchases................ 3.75% None 3.75% None 2.75% None 3.75%
Sales Charge Imposed on
Reinvested Dividends........ None None None None None None None
Deferred Sales Charge......... None None None None None None None
Redemption Fee................ None None None None None None None
Exchange Fee.................. None None None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Management Fees (after fee
waivers).................... 0%(2) 0%(2) .40%(2) .40%(2) 0%(2) 0%(2) .55%
12b-1 Fees (after fee
waivers)(3)................. .01% .01% .05% .05% .01% .01% .05%
Other Expenses................ .42% .17% .47% .22% .34% .24% .49%
---- ---- ---- ---- ---- ---- ----
TOTAL FUND OPERATING
EXPENSES
(after fee waivers)(2).... .43% .18% .92% .67% .35% .25% 1.09%
==== ==== ==== ==== ==== ==== ====

<CAPTION>
INTERMEDIATE INTERMEDIATE
GNMA GOVERNMENT GOVERNMENT
INSTITUTIONAL RETAIL INSTITUTIONAL
SHARES SHARES(1) SHARES
------------- ------------ -------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed
on Purchases................ None 3.75% None
Sales Charge Imposed on
Reinvested Dividends........ None None None
Deferred Sales Charge......... None None None
Redemption Fee................ None None None
Exchange Fee.................. None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Management Fees (after fee
waivers).................... .55% .55% .55%
12b-1 Fees (after fee
waivers)(3)................. .05% .05% .05%
Other Expenses................ .24% .46% .21%
---- ---- ----
TOTAL FUND OPERATING
EXPENSES
(after fee waivers)(2).... .84% 1.06% .81%
==== ==== ====
</TABLE>

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

(1) The Trust has implemented a Shareholder Services Plan (the "Services Plan")
with respect to Retail shares in each of the Funds. Pursuant to the Services
Plan, the Trust enters into shareholder servicing agreements with certain
financial institutions under which they agree to provide shareholder
administrative services to their customers who beneficially own Retail
shares in consideration for the payment of up to .25% (on an annualized
basis) of the net asset value of Retail shares of the Total Return Advantage
Fund, Fixed Income Fund, GNMA Fund and Intermediate Government Fund and/or
up to .10% (on an annualized basis) of the net asset value of Retail shares
of the Enhanced Income Fund. For further information concerning the Services
Plan, see "Shareholder Services Plan."

(2) The expense information in the table relating to each Fund has been restated
to reflect current fees. For the current fiscal year, the advisers will
voluntarily waive fees in the amount of .15% of the average daily net assets
of the Fixed Income Fund and NAM will waive its entire advisory fee of .55%
and .45% of the average daily net assets of the Total Return Advantage and
Enhanced Income Funds, respectively. Without such fee waivers, Total Fund
Operating Expenses would be .98% and .73% for the Retail and Institutional
shares of the Total Return Advantage Fund, respectively, .80% and .70% for
the Retail and Institutional shares of the Enhanced Income Fund,
respectively, and 1.07% and .82% for the Retail and Institutional shares of
the Fixed Income Fund, respectively. Additionally, waivers of 12b-1 fees are
expected to be in effect during the current fiscal year. If the maximum
distribution fee permitted under the 12b-1 Plan were imposed, Total Fund
Operating Expenses would be 1.07% and .82%, 1.12% and .87%, .89% and .79%,
1.14% and .89% and 1.11% and .86% for the Retail and Institutional shares of
the Total Return Advantage Fund, Fixed Income Fund, Enhanced Income Fund,
GNMA Fund and Intermediate Government Fund, respectively.

(3) The Funds have in effect 12b-1 Plans pursuant to which each Fund may bear
fees in an amount of up to .10% of average daily net assets. As a result of
the payment of sales charges and 12b-1 fees, long-term shareholders may pay
more than the economic equivalent of the maximum front-end sales charge
permitted by the National Association of Securities Dealers, Inc. ("NASD").
The NASD has adopted rules which generally limit the aggregate sales charges
and payments under the Trust's Service and Distribution Plan ("Distribution
Plan") and Services Plan to a certain percentage of total new gross share
sales, plus interest. The Trust would stop accruing 12b-1 and related fees
if, to the extent, and for as long as, such limit would otherwise be
exceeded.

2
<PAGE> 176

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

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Total Return Advantage Retail Shares................... $ 42 $ 51 $ 61 $ 90
Total Return Advantage Institutional Shares............ $ 2 $ 6 $ 10 $ 23
Fixed Income Retail Shares............................. $ 47 $ 66 $ 87 $146
Fixed Income Institutional Shares...................... $ 7 $ 21 $ 37 $ 83
Enhanced Income Retail Shares.......................... $ 31 $ 38 $ 47 $ 71
Enhanced Income Institutional Shares................... $ 3 $ 8 $ 14 $ 32
GNMA Fund Retail Shares................................ $ 48 $ 71 $ 95 $165
GNMA Fund Institutional Shares......................... $ 9 $ 27 $ 47 $104
Intermediate Government Fund Retail Shares............. $ 48 $ 70 $ 94 $162
Intermediate Government Fund Institutional Shares...... $ 8 $ 26 $ 45 $100
</TABLE>

THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATES OF RETURN. ACTUAL EXPENSES AND RATES OF RETURN MAY BE GREATER
OR LESS THAN THOSE SHOWN.

The purpose of this Expense Table is to assist an investor in understanding
the various costs and expenses that an investor in the Funds will bear directly
or indirectly. For more complete descriptions of these costs and expenses, see
"Financial Highlights," "Management of the Trust" and "Distribution Agreement"
in this Prospectus and the financial statements and related notes incorporated
by reference into the Statement of Additional Information for the Funds. Any
fees that are charged by affiliates of the advisers or other institutions
directly to their customer accounts for services related to an investment in
shares of any of the Funds are in addition to and not reflected in the fees and
expenses described above.

3
<PAGE> 177

FINANCIAL HIGHLIGHTS
(For a Fund share outstanding throughout the period)

TOTAL RETURN ADVANTAGE FUND

<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
MAY 31, 1996 MAY 31, 1995
----------------------------- ----------------------------
INSTITUTIONAL RETAIL INSTITUTIONAL(1) RETAIL(1)
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.......... $ 10.55 $10.54 $ 10.00 $10.16
-------- ------ -------- ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income....................... .70(2) .62(2) .65(2) .49(2)
Net Gains (Losses) on Securities
(Realized and Unrealized)................ (.24) (.22) .43 .40
-------- ------ -------- ------
Total from Investment Operations.... .46 .40 1.08 .89
-------- ------ -------- ------
LESS DISTRIBUTIONS
Dividends from Net Investment Income........ (.70) (.62) (.53) (.49)
Dividends in Excess of Net Investment
Income................................... (.12) (.14) (.00) (.02)
Dividends from Net Realized Capital Gains... (.31) (.31) (.00) (.00)
-------- ------ -------- ------
Total Distributions................. (1.13) (1.07) (.53) (.51)
-------- ------ -------- ------
Net Asset Value, End of Period................ $ 9.88 $ 9.87 $ 10.55 $10.54
======== ====== ======== ======
TOTAL RETURN.................................. 4.22% 3.74%(4) 12.52%(3,5) 12.65%(3,4,5)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (in 000's)........ $ 280,401 $2,040 $261,403 $ 106
Ratio of Expenses to Average Net Assets
(after fee waivers)...................... .13%(6) .36%(7) .18%(3,6) .31%(3,7)
Ratio of Net Investment Income to Average
Net Assets (after fee waivers)........... 6.67%(6) 6.12%(7) 7.23%(3,6) 6.92%(3,7)
Portfolio Turnover Rate..................... 268% 268% 166% 166%
</TABLE>

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

(1) Institutional and Retail classes commenced operations on July 7, 1994 and
September 6, 1994, respectively.

(2) Calculated based upon average shares outstanding.

(3) Annualized.

(4) Total Return excludes sales charge.

(5) Total returns have been annualized based upon the period from each class'
commencement date through May 31, 1995. Gross total returns of the
Institutional and Retail classes for the period were 11.22% and 9.14%,
respectively.

(6) The operating expense ratio and the net investment income ratio before fee
waivers by the Investment Adviser and Custodian for the Institutional class
for the year ended May 31, 1996 would have been .69% and 6.11%,
respectively. The operating expense ratio and the net investment income
ratio before fee waivers by the Investment Adviser, Administrator and
Custodian for the Institutional class for the period ended May 31, 1995
would have been .77% and 6.64%, respectively.

(7) The operating expense ratio and the net investment income ratio before fee
waivers by the Investment Adviser and Custodian for the Retail class for the
year ended May 31, 1996 would have been .89% and 5.59%, respectively. The
operating expense ratio and the net investment income ratio before fee
waivers by the Investment Adviser, Administrator and Custodian for the
Retail class for the period ended May 31, 1995 would have been .87% and
6.36%, respectively.

4
<PAGE> 178

FINANCIAL HIGHLIGHTS

(For a Fund share outstanding throughout each period)

FIXED INCOME FUND
The following information has been derived from financial statements audited
by Ernst & Young LLP, independent auditors, whose report is incorporated by
reference in the Statement of Additional Information. It should be read in
conjunction with the financial statements and related notes which are
incorporated by reference in the Statement of Additional Information. Additional
information about the performance of the Fixed Income Fund is contained in the
Trust's Annual Report to Shareholders, which may be obtained without charge by
contacting the Trust at its telephone number or address provided on page 1.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
1996 1996 1995 1995 1994 1994
INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL
------------- ---------- ------------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period............. $ 10.54 $10.60 $ 10.24 $10.30 $ 10.93 $10.98
-------- ------ ------- ------ ------- ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income........... .61 .59 .63 .61 .61 .58
Net Gains (Losses) on Securities
Realized and Unrealized....... (.22) (.23) .30 .30 (.59) (.58)
-------- ------ ------- ------ ------- ------
Total from Investment
Operations.................... .39 .36 .93 .91 .02 .00
-------- ------ ------- ------ ------- ------
LESS DISTRIBUTIONS
Dividends from Net Investment
Income........................ (.61) (.59) (.63) (.61) (.61) (.58)
Dividends in Excess of Net
Investment Income............. (.00) (.00) (.00) (.00) (.05) (.05)
Dividends from Net Realized
Capital Gains................. (.00) (.00) (.00) (.00) (.03) (.03)
Dividends in Excess of Net
Realized Capital Gains........ (.02) (.02) (.00) (.00) (.02) (.02)
-------- ------ ------- ------ ------- ------
Total Distributions............. (.63) (.61) (.63) (.61) (.71) (.68)
-------- ------ ------- ------ ------- ------
Net Asset Value, End of Period... $ 10.30 $10.35 $ 10.54 $10.60 $ 10.24 $10.30
======== ====== ======= ====== ======= ======
TOTAL RETURN..................... 3.79% 3.44%(3) 9.55% 9.26%(3) 0.00% (0.23%)(3)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
(000s)........................ $ 111,240 $6,216 $88,047 $5,527 $95,907 $5,480
Ratio of Expenses to Average Net
Assets (after fee waivers).... .80%(4) 1.04%(5) 0.85%(4) 1.09%(5) 0.83% 1.08%
Ratio of Net Investment Income
to Average Net Assets
(after fee waivers)........... 5.78%(4) 5.50%(5) 6.24%(4) 5.95%(5) 5.59% 5.34%
Portfolio Turnover Rate......... 45% 45% 42% 42% 34% 34%

YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
1993 1993 1992 1992 1991 1991
INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL(1)
------------- ---------- ------------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period............. $ 10.60 $10.63 $ 10.15 $10.15 $ 9.83 $10.11
------- ------ ------- ------ ------- ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income........... .70 .65 .81 .79 .76 .10
Net Gains (Losses) on Securities
Realized and Unrealized....... .46 .48 .45 .45 .39 .01
------- ------ ------- ------ ------- ------
Total from Investment
Operations.................... 1.16 1.13 1.26 1.24 1.15 .11
------- ------ ------- ------ ------- ------
LESS DISTRIBUTIONS
Dividends from Net Investment
Income........................ (.70) (.65) (.81) (.76) (.76) (.07)
Dividends in Excess of Net
Investment Income............. (.02) (.02) (.00) (.00) (.07) (.00)
Dividends from Net Realized
Capital Gains................. (.11) (.11) (.00) (.00) (.00) (.00)
Dividends in Excess of Net
Realized Capital Gains........ (.00) (.00) (.00) (.00) (.00) (.00)
------- ------ ------- ------ ------- ------
Total Distributions............. (.83) (.78) (.81) (.76) (.83) (.07)
------- ------ ------- ------ ------- ------
Net Asset Value, End of Period... $ 10.93 $10.98 $ 10.60 $10.63 $ 10.15 $10.15
======= ====== ======= ====== ======= ======
TOTAL RETURN..................... 11.32% 11.03%(3) 12.96% 12.64%(3) 12.20% 8.45%(2 ,3)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
(000s)........................ $95,246 $5,208 $40,414 $1,033 $34,664 $ 284
Ratio of Expenses to Average Net
Assets (after fee waivers).... .32%(4) .57%(5) .30%(4) .55%(5) .33%(4) 56%(2,5)
Ratio of Net Investment Income
to Average Net Assets
(after fee waivers)........... 6.46%(4) 6.21%(5) 7.84%(4) 7.57%(5) 8.34%(4) 7.89%(2,5)
Portfolio Turnover Rate......... 33% 33% 13% 13% 0% 0%

<CAPTION>
FOR THE PERIOD
DECEMBER 20,
1989
(COMMENCEMENT OF
OPERATIONS) TO
MAY 31, 1990
----------------
<S> <C>
Net Asset Value,
Beginning of Period............. $ 10.00
-------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income........... .33
Net Gains (Losses) on Securities
Realized and Unrealized....... (.24)
-------
Total from Investment
Operations.................... .09
-------
LESS DISTRIBUTIONS
Dividends from Net Investment
Income........................ (.26)
Dividends in Excess of Net
Investment Income............. (.00)
Dividends from Net Realized
Capital Gains................. (.00)
Dividends in Excess of Net
Realized Capital Gains........ (.00)
-------
Total Distributions............. (.26)
-------
Net Asset Value, End of Period... $ 9.83
=======
TOTAL RETURN..................... 2.21%(2)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
(000s)........................ $ 30,699
Ratio of Expenses to Average Net
Assets (after fee waivers).... .37%(2)
Ratio of Net Investment Income
to Average Net Assets
(after fee waivers)........... 8.34%(2)
Portfolio Turnover Rate......... 20%
</TABLE>

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

(1) Retail class commenced operations on April 15, 1991.

(2) Annualized.

(3) Total return excludes sales charge.

(4) The operating expense ratio and net investment income ratio before fee
waivers by the Custodian for the Institutional class for the years ended May
31, 1996 and 1995 would have been .82% and 5.76%, and .86% and 6.23%,
respectively. The operating expense ratio and net investment income ratio
before fee waivers by the Investment Advisers for the Institutional class
for the years ended May 31, 1993, 1992 and 1991 would have been .80% and
5.98%, .85% and 7.29%, and .88% and 7.79%, respectively.

(5) The operating expense ratio and the net investment income ratio before fee
waivers by the Custodian for the Retail class for the years ended May 31,
1996 and 1995 would have been 1.06% and 5.48%, and 1.10% and 5.94%,
respectively. The operating expense ratio and net investment income ratio
before fee waivers by the Investment Advisers for the Retail class for the
years ended May 31, 1993 and 1992 and for the period ended May 31, 1991
would have been 1.05% and 5.73%, 1.10% and 7.02%, and 1.11% and 7.34%,
respectively.

5
<PAGE> 179

FINANCIAL HIGHLIGHTS
(For a Fund share outstanding throughout the period)

ENHANCED INCOME FUND

<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
MAY 31, 1996 MAY 31, 1995
-------------------------- --------------------------
INSTITUTIONAL RETAIL INSTITUTIONAL(1) RETAIL(1)
-------------- ------- ---------------- ---------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period....... $ 10.16 $10.18 $ 10.00 $10.10
------- ------ ------- ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income.................... .58 .56 .51(2) .43(2)
Net Gains (Losses) on Securities
(Realized and Unrealized)............. (.05) (.05) .06 .06
------- ------ ------- ------
Total from Investment
Operations..................... .53 .51 .57 .49
------- ------ ------- ------
LESS DISTRIBUTIONS
Dividends from Net Investment Income..... (.58) (.56) (.41) (.41)
Dividends in Excess of Net Investment
Income................................ (.10) (.11) (.00) (.00)
------- ------ ------- ------
Total Distributions.............. (.68) (.67) (.41) (.41)
------- ------ ------- ------
Net Asset Value, End of Period............. $ 10.01 $10.02 $ 10.16 $10.18
======= ====== ======= ======
TOTAL RETURN............................... 5.36% 5.13%(4) 6.54%(3,5) 6.84%(3,4,5)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (in 000's)..... $ 66,918 $1,718 $ 60,467 $2,547
Ratio of Expenses to Average Net Assets
(after fee waivers)................... .23%(6) .33%(7) .21%(3,6) .32%(3,7)
Ratio of Net Investment Income to Average
Net Assets (after fee waivers)........ 5.72%(6) 5.55%(7) 5.70%(3,6) 5.89%(3,7)
Portfolio Turnover Rate.................. 98% 98% 36% 36%
</TABLE>

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

(1) Institutional and Retail classes commenced operations on July 7, 1994 and
September 9, 1994, respectively.

(2) Calculated based upon average shares outstanding.

(3) Annualized.

(4) Total Return excludes sales charge.

(6) The operating expense ratio and the net investment income ratio before fee
waivers by the Investment Adviser and Custodian for the Institutional class
for the year ended May 31, 1996 would have been .70% and 5.25%,
respectively. The operating expense ratio and the net investment income
ratio before fee waivers by the Investment Adviser, Administrator and
Custodian for the Institutional class for the period ended May 31, 1995
would have been .71% and 5.20%, respectively.

(7) The operating expense ratio and the net investment income ratio before fee
waivers by the Investment Adviser and Custodian for the Retail class for the
year ended May 31, 1996 would have been .80% and 5.08%, respectively. The
operating expense ratio and the net investment income ratio before fee
waivers by the Investment Adviser, Administrator and Custodian for the
Retail class for the period ended May 31, 1995 would have been .79% and
5.42%, respectively.

6
<PAGE> 180

FINANCIAL HIGHLIGHTS

The GNMA Fund and Intermediate Government Fund commenced operations on
August 10, 1994 as separate investment portfolios (the "Predecessor GNMA Fund"
and the "Predecessor Intermediate Government Fund," respectively, and
collectively, the "Predecessor Funds") of Inventor Funds, Inc., which was
organized as a Maryland corporation. On September 9, 1996, the Funds were
reorganized as new portfolios of the Trust. Prior to the reorganization, the
Predecessor Funds offered and sold Retail Shares that were similar to the Funds'
Retail Shares.

The financial highlights presented on page 8 set forth certain information
concerning the investment results of the Predecessor Funds' Retail Shares (the
series that is similar to the Retail Shares of the GNMA and Intermediate
Government Funds) for the fiscal period from May 1, 1996 to May 31, 1996, the
fiscal year ended April 30, 1996 and the fiscal period ended April 30, 1995. As
part of the reorganization, the fiscal year of the Predecessor Funds was changed
to coincide with the Trust's May 31 fiscal year. A one-month financial report
representing the Predecessor Funds' operations from May 1, 1996 through May 31,
1996 is being presented. The information was audited by Coopers & Lybrand
L.L.P., independent accountants for the Predecessor Funds, whose reports thereon
are contained in Inventor Funds' Annual Reports to Shareholders for the fiscal
year ended April 30, 1996 and the period ended May 31, 1996. Such financial
highlights should be read in conjunction with the financial statements and notes
thereto contained in Inventor Funds' Annual Reports to Shareholders and
incorporated by reference into the Statement of Additional Information relating
to the GNMA Fund and Intermediate Government Fund. Additional information about
the performance of the Predecessor Funds is contained in Inventor Funds' Annual
Reports to Shareholders, which may be obtained without charge by contacting the
Trust at its telephone number or address provided on page 1.

7
<PAGE> 181

FINANCIAL HIGHLIGHTS
(For a Fund share outstanding throughout the period)

PREDECESSOR GNMA FUND

<TABLE>
<CAPTION>
PERIOD FROM
MAY 1, 1996 YEAR ENDED PERIOD ENDED
THROUGH APRIL 30, APRIL 30,
MAY 31, 1996 1996 1995(1)
------------ ---------- ------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $ 10.12 $ 10.16 $ 10.00
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income.................................. .05 .66 .48
Net Realized and Unrealized Gains (Losses) on
Securities.......................................... (.09) .14 .16
------- ------- -------
Total from Investment Operations............... (.04) .80 .64
------- ------- -------
LESS DISTRIBUTIONS
Distributions from Net Investment Income............... (.05) (.66) (.48)
Distributions from Realized Capital Gains.............. (.00) (.18) (.00)
------- ------- -------
Total Distributions............................ (.05) (.84) (.48)
------- ------- -------
Net Asset Value, End of Period........................... $ 10.03 $ 10.12 $ 10.16
======= ======= =======
TOTAL RETURN(2).......................................... (.35)%(3) 7.97% 6.61%(3)
RATIO/SUPPLEMENTAL DATA
Net Assets, End of Period (000)........................ $ 60,532 $ 62,161 $ 42,212
Ratio of Expenses to Average Net Assets (after fee
waivers)............................................ .85%(4,5) .85%(5) .85%(4,5)
Ratio of Net Investment Income to Average Net Assets
(after fee waivers)................................. 6.33%(4,5) 6.30%(5) 6.68%(4,5)
Portfolio Turnover Rate................................ 1% 149% 226%
</TABLE>

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

(1) Commenced operations on August 10, 1994. The Fund did not offer
Institutional shares during the period covered by the Financial Highlights.

(2) Total Return does not reflect the sales charge.

(3) Not annualized.

(4) Annualized.

(5) The operating expense ratio and the net investment income ratio before fee
waivers for the period ended May 31, 1996, the year ended April 30, 1996 and
for the period ended April 30, 1995 would have been 1.28% and 5.90%, 1.29%
and 5.86% and 1.40% and 6.13%, respectively.

8
<PAGE> 182

FINANCIAL HIGHLIGHTS
(For a Fund share outstanding throughout the period)

PREDECESSOR INTERMEDIATE GOVERNMENT FUND

<TABLE>
<CAPTION>
PERIOD FROM
MAY 1, 1996 YEAR ENDED PERIOD ENDED
THROUGH APRIL 30, APRIL 30,
MAY 31, 1996 1996 1995(1)
------------ ---------- ------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $ 10.04 $ 10.02 $ 10.00
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income.................................. .05 .64 .44
Net Realized and Unrealized Gains (Losses) on
Securities.......................................... (.07) .07 .02
------- ------- -------
Total from Investment Operations............... (.02) .71 .46
------- ------- -------
LESS DISTRIBUTIONS
Distributions from Net Investment Income............... (.05) (.64) (.44)
Distributions from Realized Capital Gains.............. (.00) (.05) (.00)
------- ------- -------
Total Distributions............................ (.05) (.69) (.44)
------- ------- -------
Net Asset Value, End of Period........................... $ 9.97 $ 10.04 $ 10.02
======= ======= =======
TOTAL RETURN(2).......................................... (.19)%(3) 7.09% 4.75%(3)
RATIO/SUPPLEMENTAL DATA
Net Assets, End of Period (000)........................ $ 88,829 $ 89,901 $ 53,316
Ratio of Expenses to Average Net Assets (after fee
waivers)............................................ 0.85%(4,5) 0.85%(5) 0.85%(4,5)
Ratio of Net Investment Income to Average Net Assets
(after fee waivers)................................. 5.88%(4,5) 6.20%(5) 6.17%(4,5)
Portfolio Turnover Rate................................ 2% 94% 172%
</TABLE>

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

(1) Commenced operations on August 10, 1994. The Fund did not offer
Institutional shares during the period covered by the Financial Highlights.
(2) Total Return does not reflect sales charge.

(3) Not annualized.

(4) Annualized.

(5) The operating expense ratio and the net investment income ratio before fee
waivers for the period ended May 31, 1996, the year ended April 30, 1996 and
for the period ended April 30, 1995 would have been 1.25% and 5.48%, 1.25%
and 5.80% and 1.33% and 5.69%, respectively.

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INTRODUCTION

Shares of each Fund have been classified into two separate
classes -- Retail shares and Institutional shares. Retail shares and
Institutional shares represent equal pro rata interests in a Fund except that,
as described more fully under "Shareholder Services Plan," the Trust has
implemented the Services Plan with respect to Retail shares in the Funds. Under
the Services Plan, only the beneficial owners of Retail shares bear the expenses
of shareholder administrative services which are provided by financial
institutions for their benefit (not to exceed .25% annually with respect to the
Total Return Advantage, Fixed Income, GNMA and Intermediate Government Funds,
and .10% annually with respect to the Enhanced Income Fund). See "Shareholder
Services Plan," "Dividends and Distributions" and "Description of the Trust and
Its Shares" for a description of the impact that the Services Plan may have on
holders of Retail shares.

INVESTMENT OBJECTIVES AND POLICIES

TOTAL RETURN ADVANTAGE FUND

The investment objective of the Total Return Advantage Fund is to provide a
total rate of return, income and price appreciation greater than those of
popular market indices with similar maturity and quality characteristics. One
such index is the Lehman Brothers Government/Corporate Bond Index which is
composed of government securities and investment grade corporate securities with
an average maturity of approximately ten years and an average rating in the
highest rating category assigned by Moody's, S&P, Fitch, Duff or IBCA (defined
under "Ratings Criteria"). The Fund will normally invest at least 80% of the
value of its total assets in debt securities of all types, although up to 20% of
the value of its total assets may be invested in preferred stocks and other
investments. Under normal market conditions, the Fund maintains an average
dollar-weighted portfolio maturity of two years above or below the average
maturity of the Lehman Brothers Government/Corporate Bond Index.

Although the Total Return Advantage Fund normally invests substantially all
of its assets in investment grade debt securities, it may invest up to 15% of
its net assets in non-rated securities and securities rated below investment
grade (commonly referred to as "junk bonds"). For a discussion of risk factors
relating to such securities, see "Risks Related to Lower Rated Securities."

FIXED INCOME FUND

The investment objective of the Fixed Income Fund is to provide as high a
level of current income as is consistent with prudent investment risk. The Fund
seeks to achieve its objective by investing substantially all of its assets in a
fund of high and medium grade bonds and other fixed income securities. The Fund
normally invests at least 80% of the value of its total assets in debt
securities of all types, although up to 20% of the value of its total assets may
be invested in preferred stocks and other investments. In making investment
decisions, the Fund's advisers will consider such factors as current yield,
preservation of capital, maturity, yield to maturity, and the potential for
realizing capital appreciation. Under normal market conditions, the Fund
maintains an average dollar-weighted portfolio maturity of ten years or less.

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ENHANCED INCOME FUND

The investment objective of the Enhanced Income Fund is to seek a total
rate of return greater than that of the Merrill Lynch 1-3 year Treasury Index.
The Fund will normally invest at least 80% of the value of its total assets in
investment grade debt securities of all types. However, up to 20% of the value
of its total assets may be invested in preferred stocks and other investments.
In making investment decisions, the Fund's adviser will focus on a number of
factors, including yield to maturity, maturity, quality and the outlook for
specific issuers and market sectors. Under normal market conditions, the Fund
intends to maintain an average dollar-weighted portfolio maturity for its debt
securities of from 1 1/2 to 4 years. The two components of total rate of return
are current income and change in the value of portfolio securities. The Merrill
Lynch 1-3 Year Treasury Index is composed of Treasury Securities that mature in
one to three years. The average dollar-weighted maturity of the Index is
generally from 2 1/2 to 3 years. The Index is unmanaged, and its total rate of
return does not reflect the expenses that a mutual fund normally incurs. The
Fund's objective refers to a return after deduction of Fund expenses.

GNMA FUND

The investment objective of the GNMA Fund is to provide the highest level
of current income consistent with preservation of capital and a high degree of
liquidity.

The Fund invests primarily (at least 65% of its total assets under normal
conditions) in mortgage pass-through securities guaranteed by the Government
National Mortgage Association ("GNMA"). Any remaining assets may consist of:

(a) obligations of the U.S. Treasury

(b) obligations issued or guaranteed as to principal and interest by
agencies and instrumentalities of the U.S. government

(c) mortgage-backed securities issued by other government agencies and
privately issued mortgage-backed securities rated at least A by a Nationally
Recognized Security Rating Organization ("Rating Agency")

(d) repurchase agreements involving any of such obligations

(e) shares of money market investment companies investing exclusively in
such obligations

(f) futures on U.S. Treasury obligations. The Fund may also engage in
dollar rolls, short sales against the box and interest rate swaps.

Under normal market conditions, the estimated average life of the Fund's
holdings of mortgage pass-through and mortgage-backed securities will range
between 4 and 10 years.

In order to meet liquidity needs, the GNMA Fund may hold cash reserves, and
may, for temporary defensive purposes, invest up to 100% of its assets in Money
Market Instruments (as defined below).

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

The Fund reserves the right to engage in securities lending, although it
does not have the present intent of doing so during the current fiscal year. The
Fund may also borrow money in amounts up to 33 1/3% of its net assets.

INTERMEDIATE GOVERNMENT FUND

The investment objective of the Intermediate Government Fund is to preserve
capital and maintain a high degree of liquidity while providing current income.
The Fund seeks to achieve this objective by investing primarily (at least 65% of
the Fund's assets) in obligations issued or guaranteed as to principal and
interest by the U.S. government and its agencies and instrumentalities ("U.S.
Governments"). The Fund also invests in U.S. Treasury obligations and futures on
U.S. Treasury obligations. The Fund's dollar-weighted average maturity
ordinarily will be approximately five years; however, the adviser may vary this
average maturity substantially in anticipation of a change in the interest rate
environment. Nevertheless, under normal circumstances, the Fund will maintain a
dollar-weighted average maturity of between three and ten years.

In order to meet liquidity needs, the Intermediate Government Fund may hold
cash reserves, and may, for temporary defensive purposes, invest up to

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<PAGE> 185

100% of its assets in short term obligations (as described below).

The Fund may also purchase securities on a when-issued basis.

The Fund reserves the right to engage in securities lending, although it
does not presently have the intent of doing so. The Fund may also borrow money
in amounts up to 33 1/3% of its net assets.

COMMON INVESTMENT POLICIES OF THE FUNDS

Debt Securities

The Total Return Advantage, Fixed Income and Enhanced Income Funds may
invest in debt securities which may include: equipment lease and trust
certificates; corporate issues; collateralized mortgage obligations; state,
municipal and private activity bonds; obligations issued or guaranteed by the
U.S. government, its agencies or instrumentalities; securities of supranational
organizations such as the World Bank; participation certificates in pools of
mortgages, including mortgages issued or guaranteed by the U.S. government, its
agencies or instrumentalities; asset-backed securities such as mortgage-backed
securities, Certificates of Automobile Receivables ("CARS") and Certificates of
Amortizing Revolving Debts ("CARDS"); private placements; and income
participation loans. Each Fund normally limits investments in asset-backed
securities to under 50% of its net assets. The Total Return Advantage Fund,
Fixed Income Fund and Enhanced Income Fund normally limit investments in income
participation loans to under 10%, 5% and 20% of their respective net assets.
Some of the securities in which the Funds invest may have warrants or options
attached. Recognizing the increasing globalization of the securities markets,
each Fund may also invest in foreign securities, currencies, securities of
domestic issuers denominated in foreign currencies and related investments
described below.

The Intermediate Government Fund may invest in debt securities which may
include obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities. Certain federal agencies such as GNMA have been established
as instrumentalities of the U.S. government to supervise and finance certain
types of activities. Issues of these agencies, while not direct obligations of
the U.S. government, are either backed by the full faith and credit of the U.S.
(e.g. GNMA) or supported by the issuing agencies' right to borrow from the
Treasury. The issues of other agencies are supported by the credit of the
instrumentality, e.g., Federal National Mortgage Association ("FNMA").

Fund appreciation may result from an improvement in the credit standing of
an issuer whose securities are held or a general decline in the level of
interest rates or a combination of both. An increase in the level of interest
rates generally reduces the value of the fixed rate debt instruments held by a
Fund; conversely, a decline in the level of interest rates generally increases
the value of such investments. An increase in the level of interest rates may
temporarily reduce the value of the floating rate debt instruments held by a
Fund; conversely, a decline in the level of interest rates may temporarily
increase the value of those investments.

Ratings Criteria

The Fixed Income Fund invests only in debt securities which are rated at
the time of purchase within the three highest rating groups assigned by Moody's
Investors Service, Inc. ("Moody's") (Aaa, Aa and A), Standard & Poor's Ratings
Group ("S&P") (AAA, AA and A), Fitch Investors Service, Inc. ("Fitch") (AAA, AA
and A), Duff & Phelps Credit Rating Co. ("Duff") (AAA, AA and A) or IBCA, Inc.
("IBCA") (AAA, AA and A), or, if unrated, which are determined by the Fund's
adviser or advisers to be of comparable quality pursuant to guidelines approved
by the Trust's Board of Trustees.

The Enhanced Income Fund invests only in, and the Total Return Advantage
Fund invests substantially all of its assets in investment grade debt securities
which are rated at the time of purchase within the four highest rating groups
assigned by Moody's (Aaa, Aa, A and Baa), S&P (AAA, AA, A and BBB), Fitch (AAA,
AA, A and BBB), Duff (AAA, AA, A and BBB), or IBCA (AAA, AA, A and BBB), or, if
unrated, which are determined by the Funds' adviser to be of comparable quality

12
<PAGE> 186

pursuant to guidelines approved by the Trust's Board of Trustees.

Each of the Enhanced Income Fund and Total Return Advantage Fund normally
maintains a minimum, dollar-weighted average quality rating for its portfolio of
securities within the two highest rating categories assigned by one or more
rating agencies. Debt securities rated in the lowest investment grade debt
category (Baa by Moody's or BBB by S&P, Fitch, Duff or IBCA) may have
speculative characteristics; changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade securities.

In the event that subsequent to its purchase by a Fund, a rated security
ceases to be rated or its rating is reduced below investment grade, its adviser
will consider whether the Fund should continue to hold the security. The adviser
expects, however, to sell promptly any securities that are non-investment grade
as a result of such events that exceed 5% of a Fund's net assets where the
adviser has determined that such sale is in the best interest of the Fund.

Rating symbols are more fully described in Appendix A of the Statement of
Additional Information.

Risks Related to Lower Rated Securities Which May be Purchased by the Total
Return Advantage Fund

While any investment carries some risk, certain risks associated with lower
rated securities (commonly referred to as "junk bonds") are different than those
for investment grade securities. The risk of loss through default is greater
because lower rated securities are usually unsecured and are often subordinate
to an issuer's other obligations. Additionally, the issuers of these securities
frequently have high debt levels and are thus more sensitive to difficult
economic conditions, individual corporate developments and rising interest
rates. Consequently, the market price of these securities may be quite volatile
and may result in wider fluctuations in the Total Return Advantage Fund's net
asset value per share.

In addition, an economic downturn or increase in interest rates could have
a negative impact on both the markets for lower rated securities (resulting in a
greater number of bond defaults) and the value of lower rated securities held by
the Total Return Advantage Fund. Current laws, such as those requiring federally
insured savings and loan associations to remove investments in lower rated
securities from their funds, as well as other pending proposals, may also have a
material adverse effect on the market for lower rated securities.

The economy and interest rates may affect lower rated securities
differently than other securities. For example, the prices of lower rated
securities are more sensitive to adverse economic changes or individual
corporate developments than are the prices of higher rated investments. In
addition, during an economic downturn or period in which interest rates are
rising significantly, highly leveraged issuers may experience financial
difficulties, which, in turn, would adversely affect their ability to service
their principal and interest payment obligations, meet projected business goals
and obtain additional financing.

If an issuer of a security held by the Total Return Advantage Fund
defaults, the Fund may incur additional expenses to seek recovery. In addition,
periods of economic uncertainty would likely result in increased volatility for
the market prices of lower rated securities as well as the Fund's net asset
value. In general, both the prices and yields of lower rated securities will
fluctuate.

In certain circumstances it may be difficult to determine a security's fair
value due to a lack of reliable objective information. Such instances occur
where there is no established secondary market for the security or the security
is lightly traded. As a result, the Total Return Advantage Fund's valuation of a
security and the price it is actually able to obtain when it sells the security
could differ.

Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the value and liquidity of lower rated
securities held by the Total Return Advantage Fund, especially in a thinly
traded market. Illiquid or restricted securities held by the Fund may involve

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<PAGE> 187

special registration responsibilities, liabilities and costs, and could involve
other liquidity and valuation difficulties.

The ratings of Moody's, S&P, Fitch, Duff and IBCA evaluate the safety of a
lower rated security's principal and interest payments, but do not address
market value risk. Because the ratings of the rating agencies may not always
reflect current conditions and events, in addition to using recognized rating
agencies and other sources, the Fund's adviser performs its own analysis of the
issuers of lower rated securities purchased by the Fund. Because of this, the
Fund's performance may depend more on its own credit analysis than is the case
for mutual funds investing in higher rated securities.

The Total Return Advantage Fund's adviser continuously monitors the issuers
of lower rated securities held by the Fund for their ability to make required
principal and interest payments, as well as in an effort to control the
liquidity of the Fund so that it can meet redemption requests.

Asset-Backed Securities

The Total Return Advantage, Fixed Income and Enhanced Income Funds may
purchase securities that are secured or backed by mortgages or other assets
(i.e., automobile loans and credit card receivables) and are issued by entities
such as GNMA, FNMA, Federal Home Loan Mortgage Corporation ("FHLMC"), commercial
banks, financial companies, finance subsidiaries of industrial companies,
savings and loan associations, mortgage banks and investment banks.

Mortgage-Backed Securities. Asset-Backed Securities acquired by the Total
Return Advantage, Fixed Income and Enhanced Income Funds consist of both
mortgage and non-mortgage-backed securities. Mortgage-backed securities
represent an ownership interest in a pool of mortgages, the interest on which is
in most cases issued and guaranteed by an agency or instrumentality of the U.S.
government, although not necessarily by the U.S. government itself.
Mortgage-backed securities include collateralized mortgage obligations and
mortgage pass-through certificates. The GNMA and Intermediate Government Funds
may purchase securities that are secured or backed by mortgages and are issued
by entities such as GNMA, FNMA and FHLMC, and the GNMA Fund may also purchase
securities issued by commercial banks, savings and loan associations, mortgage
banks and investment banks.

Mortgage pass-through certificates, which represent interests in pools of
mortgage loans, provide the holder with a pro rata interest in the underlying
mortgages. One type of such certificate in which the Funds may invest is a GNMA
Certificate which is backed as to the timely payment of principal and interest
by the full faith and credit of the U.S. government. Another type is a FNMA
Certificate, the principal and interest of which are guaranteed only by FNMA
itself, not by the full faith and credit of the U.S. government. Another type is
a FHLMC Participation Certificate which is guaranteed by FHLMC as to timely
payment of principal and interest. However, like a FNMA security it is not
guaranteed by the full faith and credit of the U.S. government. Privately issued
mortgage backed securities will carry a rating at the time of purchase of at
least A by S&P or by Moody's or, if unrated, will be in the adviser's opinion
equivalent in credit quality to such rating. Mortgage-backed securities issued
by private issuers, whether or not such obligations are subject to guarantees by
the private issuer, may entail greater risk than obligations directly or
indirectly guaranteed by the U.S. government.

The yield and average life characteristics of asset-backed and
mortgage-backed securities differ from traditional debt securities. A major
difference is that the principal amount of the obligations may be prepaid at any
time because the underlying assets (i.e., loans) generally may be prepaid at any
time. As a result, if an asset-backed or mortgage-backed security is purchased
at a premium, a prepayment rate that is faster than expected will reduce the
expected yield to maturity and average life, while a prepayment rate that is
slower than expected will have the opposite effect of increasing the expected
yield to maturity and average life. Conversely, if an asset-backed or
mortgage-backed security is purchased at a discount, faster than expected
prepayments will increase, while slower than expected prepayments will decrease,
the expected yield to maturity and average life. Risks relating to the

14
<PAGE> 188

duration of a security may be enhanced if the security's yield to maturity is
extended or reduced if such security's yield to maturity is shortened. There can
be no assurance that the Trust's estimation of the duration of asset-backed and
mortgage-backed securities it holds will be accurate or that the duration of
such instruments will always remain within the maximum target duration. In
calculating the average weighted maturity of the Funds, the maturity of
asset-backed and mortgage-backed securities will be based on estimates of
average life.

Prepayments on asset-backed and mortgage-backed securities generally
increase with falling interest rates and decrease with rising interest rates;
furthermore, prepayment rates are influenced by a variety of economic and social
factors. In general, the collateral supporting non-mortgage, asset-backed
securities is of shorter maturity than mortgage loans and is less likely to
experience substantial prepayments. Like other fixed income securities, when
interest rates rise, the value of an asset-backed or mortgage-backed security
generally will decline; however, when interest rates decline, the value of an
asset-backed or mortgage-backed security with prepayment features may not
increase as much as that of other fixed income securities, and, as noted above,
changes in market rates of interest may accelerate or retard prepayments and
thus affect maturities. For further information, see "Risk Factors, Investment
Objectives and Policies" in the Statement of Additional Information.

These characteristics may result in a higher level of price volatility for
these assets under certain market conditions. In addition, while the trading
market for short-term mortgages and Asset-Backed and Mortgage-Backed Securities
is ordinarily quite liquid, in times of financial stress the trading market for
these securities sometimes becomes restricted.

Non-Mortgage-Backed Securities. The Funds may also invest in
non-mortgage-backed securities including interests in pools of receivables, such
as motor vehicle installment purchase obligations and credit card receivables.
Such securities are generally issued as pass-through certificates, which
represent undivided fractional ownership interests in the underlying pools of
assets. Such securities may also be debt instruments, which are also known as
collateralized obligations and are generally issued as the debt of a special
purpose entity organized solely for the purpose of owning such assets and
issuing such debt. Non-mortgage backed securities are not issued or guaranteed
by the U.S. government or its agencies or instrumentalities.

Non-mortgage-backed securities involve certain risks that are not presented
by mortgage backed securities. Primarily, these securities do not have the
benefit of the same security interest in the underlying 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. Most issuers
of motor vehicle receivables permit the servicers to retain possession of the
underlying obligations. If the servicer were to sell these obligations to
another party, there is a risk that the purchaser would acquire an interest
superior to that of the holders of the related motor vehicle 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
motor vehicle receivables may not have an effective security interest in all of
the obligations backing such receivables. Therefore, there is a possibility that
recoveries on repossessed collateral may not, in some cases, be able to support
payments on these securities.

REITs

The GNMA Fund may also invest in real estate investment trusts ("REITs")
which are trusts that invest primarily in commercial real estate or real
estate-related loans. The value of interests in REITs may be affected by the
value of the property owned or the quality of the mortgages held by the trust.

Foreign Securities, American Depository Receipts ("ADRs") and Foreign
Currencies

The Total Return Advantage, Fixed Income and Enhanced Income Funds may
invest in foreign securities including ADRs, securities of domestic issuers
denominated in foreign currencies, securities of foreign issuers denominated in
foreign currencies, securities of foreign issuers denominated in U.S. dollars,
and foreign currencies. ADRs are receipts

15
<PAGE> 189

issued by an American bank or trust company evidencing ownership of underlying
securities issued by foreign issuers. ADRs may be listed on a national
securities exchange or may be traded in the over-the-counter market. ADR prices
are denominated in U.S. dollars; the underlying security may be denominated in a
foreign currency.

Investments in foreign securities involve certain inherent risks, such as
political or economic instability of the issuer or the country of issue, the
difficulty of predicting international trade patterns, changes in exchange rates
of foreign currencies and the possibility of adverse changes in investment or
exchange control regulations. There may be less publicly available information
about a foreign company than about a domestic company. Foreign companies
generally are not subject to uniform accounting, auditing and financial
reporting standards comparable to those applicable to domestic companies. With
respect to certain foreign countries, there is a possibility of expropriation or
confiscatory taxation, limitations on the removal of funds or other assets, or
diplomatic developments that could affect investment within those countries.
Because of these and other factors, securities of foreign companies acquired by
the Funds may be subject to greater fluctuation in price than securities of
domestic companies. For further information, see "Risk Factors, Investment
Objectives and Policies" in the Statement of Additional Information.

Exchange Rate-Related Securities

The Total Return Advantage and Enhanced Income Funds may each invest in
securities for which the principal repayment at maturity, while paid in U.S.
dollars, is determined by reference to the exchange rate between the U.S. dollar
and the currency of one or more foreign countries ("Exchange Rate-Related
Securities"). The interest payable on these securities is denominated in U.S.
dollars and is not subject to foreign currency risk and, in most cases, is paid
at rates higher than most other similarly rated securities in recognition of the
foreign currency risk component of Exchange Rate-Related Securities.

Investments in Exchange Rate-Related Securities entail certain risks. There
is the possibility of significant changes in rates of exchange between the U.S.
dollar and any foreign currency to which an Exchange Rate-Related Security is
linked. In addition, there is no assurance that sufficient trading interest to
create a liquid secondary market will exist for a particular Exchange
Rate-Related Security due to conditions in the debt and foreign currency
markets. Illiquidity in the forward foreign exchange market and the high
volatility of the foreign exchange market may, from time to time, combine to
make it difficult to sell an Exchange Rate-Related Security prior to maturity
without incurring a significant price loss.

Forward Currency Exchange Contracts

The Total Return Advantage and Enhanced Income Funds may enter into forward
currency exchange contracts in an effort to reduce the level of volatility
caused by changes in foreign currency exchange rates or where such transactions
are economically appropriate for the reduction of risks inherent in the ongoing
management of the Funds. The Funds may not enter into such contracts for
speculative purposes. A forward currency exchange contract is an obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of contract. Although such contracts tend to minimize the
risk of loss due to a decline in the value of the hedged currency, at the same
time, they tend to limit any potential gain that might be realized should the
value of such currency increase. Consequently, a Fund may choose to refrain from
entering into such contracts. In connection with forward currency exchange
contracts, the Funds will create a segregated account of liquid assets, such as
cash, U.S. government securities or other liquid high grade debt obligations, or
will otherwise cover their position in accordance with applicable requirements
of the SEC.

Interest Rate Swaps

In order to protect its value from interest rate fluctuations, each of the
Total Return Advantage, Enhanced Income and GNMA Funds may enter into interest
rate swaps. The Funds expect to enter into these hedging transactions primarily
to preserve

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<PAGE> 190

a return or spread of a particular investment or portion of their holdings and
to protect against an increase in the price of securities the Funds anticipate
purchasing at a later date. Interest rate swaps involve the exchange by a Fund
with another party of their respective commitments to pay or receive interest
(i.e., an exchange of floating rate payments for fixed rate payments). The net
amount of the excess, if any, of a Fund's obligations over its entitlements with
respect to each interest rate swap will be accrued on a daily basis and an
amount of liquid assets, such as cash, U.S. government securities or other
liquid high grade debt securities, having an aggregate net asset value at least
equal to such accrued excess will be maintained in a segregated account by the
Fund's custodian. A Fund will not enter into any interest rate swap unless the
unsecured commercial paper, senior debt, or claims paying ability of the other
party is rated, with respect to the Enhanced Income and Total Return Advantage
Funds, either "A" or "A-1" or better by S&P, Duff or Fitch, or "A" or "P-1" or
better by Moody's or, with respect to the GNMA Fund, the claims paying ability
of the other party is deemed creditworthy and any such obligation the GNMA Fund
may have under such an arrangement will be covered by setting aside liquid high
grade securities in a segregated account. For further information, see "Risk
Factors, Investment Objectives and Policies" in the Statement of Additional
Information.

Futures Contracts and Related Options

The Total Return Advantage, Enhanced Income and Intermediate Government
Funds may invest in interest rate and bond index futures contracts and options
on futures contracts and the GNMA and Intermediate Government Funds may invest
in futures contracts on U.S. Treasury Obligations in order to offset an expected
decrease in the value of its fund that might otherwise result from a market
decline. The Funds may do so either to hedge the value of its portfolio
securities as a whole, or to protect against declines occurring prior to sales
of securities in the value of the securities to be sold. In addition, the Funds
may utilize futures contracts in anticipation of changes in the composition of
its holdings for hedging purposes or to maintain liquidity.

Futures contracts obligate a Fund, at maturity, to take or make delivery of
certain securities or the cash value of a contract or securities index. When
interest rates are rising, futures contracts can offset a decline in value of
the securities held by a Fund. When rates are falling or prices of securities
are rising, these contracts can secure higher yields for securities a Fund
intends to purchase. In addition, a Fund may utilize futures contracts in
anticipation of changes in the composition of its fund holdings.

The Total Return Advantage and Enhanced Income Funds may purchase and sell
call and put options on futures contracts traded on an exchange or board of
trade. When a Fund purchases an option on a futures contract, it has the right
to assume a position as a purchaser or seller of a futures contract at a
specified exercise price at any time during the option period. When a Fund sells
an option on a futures contract, it becomes obligated to purchase or sell a
futures contract if the option is exercised. In anticipation of a market
advance, a Fund may purchase call options on futures contracts as a substitute
for the purchase of futures contracts to hedge against a possible increase in
the price of securities which the Fund intends to purchase. Similarly, if the
value of a Fund's securities is expected to decline, the Fund might purchase put
options or sell call options on futures contracts rather than sell futures
contracts.

The Total Return Advantage, Enhanced Income, GNMA and Intermediate
Government Funds intend to comply with the regulations of the Commodity Futures
Trading Commission ("CFTC") exempting the Funds from registration as a
"commodity pool operator." A Fund's commodities transactions must constitute
bona fide hedging or other permissible transactions pursuant to such
regulations. In addition, a Fund may not engage in such transactions if the sum
of the amount of initial margin deposits and premiums paid for unexpired
commodity options, other than for bona fide hedging transactions, would exceed
5% of the liquidation value of its assets, after taking into account unrealized
profits and unrealized losses on such contracts it has entered into. In
connection with a Fund's position in a futures contract or option thereon, the
Fund will create a segregated account

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<PAGE> 191

of liquid assets, such as cash, U.S. government securities or other liquid high
grade debt obligations, or will otherwise cover its position in accordance with
applicable requirements of the SEC.

Risk Factors Associated with Futures and Related Options

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

Successful use of futures by the Funds also are subject to the advisers'
ability to predict correctly movements in the direction of securities prices,
interest rates and other economic factors. For example, if the Funds have hedged
against the possibility of a decline in the market adversely affecting the value
of securities held in their funds and prices increase instead, the Funds will
lose part or all of the benefit of the increased value of securities which they
have hedged because they will have offsetting losses in their futures positions.
In addition, in such situations, if a Fund has insufficient cash, it may have to
sell securities to meet daily variation margin requirements. Such sales of
securities may, but will not necessarily, be at increased prices which reflect
the rising market. The Funds may have to sell securities at a time when it may
be disadvantageous to do so.

Although the Total Return Advantage, Enhanced Income and Intermediate
Government Funds intend to enter into futures contracts and the Total Return
Advantage and Enhanced Income Funds into options transactions only if there is
an active market for such contracts, no assurance can be given that a liquid
market will exist for any particular contract at any particular time. See
"Illiquid Securities." Many futures exchanges and boards of trade limit the
amount of fluctuation permitted in futures contract prices during a single
trading day. Once the daily limit has been reached in a particular contract, no
trades may be made that day at a price beyond that limit or trading may be
suspended for specified periods during the trading day. Futures contracts prices
could move to the limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of futures positions and
potentially subjecting the Funds to substantial losses. If it is not possible,
or a Fund determines not, to close a futures position in anticipation of adverse
price movements, it will be required to make daily cash payments of variation
margin. In such circumstances, an increase in the value of the portion of the
Fund being hedged, if any, may offset partially or completely losses on the
futures contract.

The primary risks associated with the use of futures contracts and options
are:

(a) the imperfect correlation between the change in market value of the
securities held by a Fund and the price of the futures contract or option

(b) possible lack of a liquid secondary market for a futures contract and
the resulting inability to close a futures contract when desired

(c) losses greater than the amount of the principal invested as initial
margin due to unanticipated market movements, which are potentially unlimited

(d) the adviser's ability to predict correctly the direction of securities
prices, interest rates and other economic factors

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For a further discussion see "Risk Factors, Investment Objectives and
Policies -- Futures Contracts and Options" and Appendix B in the Statement of
Additional Information.

When-Issued Securities

Each Fund may purchase securities on a "when-issued" or delayed delivery
basis. These transactions are arrangements in which a Fund purchases securities
with payment and delivery scheduled for a future time. The Funds do not intend
to purchase when-issued securities for speculative purposes but only for the
purpose of acquiring portfolio securities. In when-issued and delayed delivery
transactions, a Fund relies on the seller to complete the transaction; its
failure to do so may cause the Fund to miss a price or yield considered to be
attractive. One form of when-issued or delayed delivery security that the GNMA
and Intermediate Government Funds may purchase is a "to be announced" ("TBA")
mortgage-backed security. A TBA transaction arises when a mortgage-backed
security, such as a GNMA pass-through security, is purchased or sold with the
specific pools that will constitute that GNMA pass-through security to be
announced on a future settlement date. Each Fund expects that commitments to
purchase when-issued securities will not exceed 25% of the value of its
respective total assets under normal market conditions. For further information,
see "Risk Factors, Investment Objectives and Policies" in the Statement of
Additional Information.

Variable and Floating Rate Obligations

The Funds may purchase rated and unrated variable and floating rate
instruments. These instruments may include variable amount master demand notes
and adjustable rate mortgages that permit the indebtedness thereunder to vary in
addition to providing for periodic adjustments in the interest rate. The absence
of an active secondary market with respect to particular variable and floating
rate instruments could, however, make it difficult for the Funds to dispose of
instruments if the issuer defaulted on its payment obligation or during periods
that the Funds are not entitled to exercise their demand rights, and the Funds
could, for these or other reasons, suffer a loss with respect to such
instruments. For a further description, see "Risk Factors, Objectives and
Policies" in the Statement of Additional Information.

Short Term Obligations

The Total Return Advantage, Fixed Income and Enhanced Income Funds will
ordinarily hold some short term obligations (with maturities of 18 months or
less) such as domestic and foreign commercial paper, bankers' acceptances,
certificates of deposit and demand and time deposits of domestic and foreign
branches of U.S. banks and foreign banks, reverse repurchase agreements, U.S.
Treasury bills, money market funds, and guaranteed investment contracts
("GICs"). Reverse repurchase agreements involve the risk that the market value
of the securities held by a Fund may decline below the price of the securities
it is obligated to repurchase.

All Funds may acquire repurchase agreements, which carry the risk that
default or bankruptcy of the seller may expose a Fund to possible loss because
of adverse market action or delays connected with the disposition of the
underlying obligations. Further, it is uncertain whether the Fund would be
entitled, as against a claim by such seller or its receiver or trustee in
bankruptcy, to retain the underlying securities.

The GNMA Fund may invest in reverse repurchase agreements in the form of
Dollar Rolls. Dollar Rolls are transactions in which securities are sold by the
Fund for delivery in the current month and the Fund simultaneously contracts to
repurchase substantially similar securities on a specified future date. Any
difference between the sale price and the purchase price is netted against the
interest income foregone on the securities sold to arrive at an implied
borrowing rate. Alternatively, the sale and purchase transactions can be
executed at the same price, with the Fund being paid a fee as consideration for
entering into the commitment to purchase. Dollar Rolls may be renewed prior to
cash settlement and initially may involve only a firm commitment agreement by
the Fund to buy a security. If the broker-dealer to whom the Fund sells the
security becomes insolvent, the Fund's right to repurchase the security may be
restricted. Other risks

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involved in entering into Dollar Rolls include the risk that the value of the
security may change adversely over the term of the Dollar Roll and that the
security the Fund is required to repurchase may be worth less than the security
that the Fund originally held.

To avoid any leveraging concerns, the GNMA Fund will place U.S. government
or other liquid, high grade debt securities in a segregated account in an amount
sufficient to cover its repurchase obligations.

For further information, see "Risk Factors, Investment Objectives and
Policies" in the Statement of Additional Information.

Receipts

The Intermediate Government Fund may invest in separately traded interest
and principal component parts of the U.S. Treasury obligations that are issued
by banks or brokerage firms and are created by depositing U.S. Treasury
obligations into a special account at a custodian bank. The custodian holds the
interest and principal payments for the benefit of the registered owners of the
certificates of receipts. The custodian arranges for the issuance of the
certificates or receipts evidencing ownership and maintains the register.
Receipts include "Treasury Receipts" ("TR's"), "Treasury Investment Growth
Receipts" ("TIGR's"), "Liquid Yield Option Notes" ("LYON's"), and "Certificates
of Accrual on Treasury Securities" ("CATS"). TIGR's, LYON's and CATS are
interests in private proprietary accounts while TR's are interests in accounts
sponsored by the U.S. Treasury.

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

U.S. Treasury Obligations

The GNMA Fund may invest in U.S. Treasury obligations consisting of bills,
notes and bonds issued by the U.S. Treasury, and separately traded interest and
principal component parts of such obligations that are transferable through the
Federal book-entry system known as STRIPS (Separately Traded Registered Interest
and Principal Securities).

Repurchase Agreements

Securities held by the Funds may be subject to repurchase agreements. Under
the terms of a repurchase agreement, a Fund purchases securities from financial
institutions such as banks and broker-dealers which the Fund's advisers deem
creditworthy under guidelines approved by the Board of Trustees, subject to the
seller's agreement to repurchase such securities at a mutually agreed-upon date
and price. The repurchase price generally equals the price paid by the Fund plus
interest negotiated on the basis of current short term rates, which may be more
or less than the rate on the underlying fund securities. The seller under a
repurchase agreement will be required to maintain the value of collateral held
pursuant to the agreement at not less than the repurchase price (including
accrued interest).

If the seller were to default on its repurchase obligation or become
insolvent, the Fund holding such obligation would suffer a loss to the extent
that the proceeds from a sale of the underlying fund securities were less than
the repurchase price under the agreements, or to the extent that the disposition
of such securities by the Fund were delayed pending court action. Although there
is no controlling legal precedent confirming that a Fund would be entitled, as
against a claim by such seller or its receiver or trustee in bankruptcy, to
retain the underlying securities, the Board of Trustees of the Trust believes
that, under the regular procedures normally in effect for custody of a Trust's
securities subject to repurchase agreements and under Federal laws, a court of
competent jurisdiction would rule in favor of the Trust if presented with the
question. Securities subject to repurchase agreements will be held by the
Trust's custodian or another qualified custodian or

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in the Federal Reserve/Treasury book-entry system. Repurchase agreements are
considered to be loans by a Fund under the 1940 Act.

Reverse Repurchase Agreements

The Total Return Advantage, Fixed Income and Enhanced Income Funds may
borrow funds for temporary purposes by entering into reverse repurchase
agreements in accordance with their respective investment restrictions. Pursuant
to such agreements, the Fund would sell Fund securities to financial
institutions such as banks and broker-dealers, and agree to repurchase them at a
mutually agreed-upon date and price. These Funds intend to enter into reverse
repurchase agreements only to avoid otherwise selling securities during
unfavorable market conditions to meet redemptions. At the time a Fund enters
into a reverse repurchase agreement, it will place in a segregated custodial
account assets such as U.S. government securities or other liquid, high grade
debt securities consistent with the Fund's investment restrictions having a
value equal to the repurchase price (including accrued interest), and will
subsequently monitor the account to ensure that such equivalent value is
maintained. Reverse repurchase agreements involve the risk that the market value
of the securities sold by a Fund may decline below the price at which it is
obligated to repurchase the securities. Reverse repurchase agreements are
considered to be borrowings by a Fund under the 1940 Act.

U.S. Government Obligations

The GNMA Fund may purchase obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities. Some of these obligations are
supported by the full faith and credit of the U.S. Treasury, such as obligations
issued by the GNMA. Others, such as those of the Export-Import Bank of the
United States, are supported by the right of the issuer to borrow from the U.S.
Treasury; others, such as those of the FNMA, are supported by the discretionary
authority of the U.S. government to purchase the agency's obligations; and still
others, such as those of the Student Loan Marketing Association, are supported
only by the credit of the agency or instrumentality issuing the obligation. No
assurance can be given that the U.S. government would provide financial support
to U.S. government-sponsored agencies or instrumentalities if it is not
obligated to do so by law. The Fund will invest in the obligations of such
agencies or instrumentalities only when the adviser believes that the credit
risk with respect thereto is minimal.

Short Sales

The GNMA Fund may engage in short sales of its securities. Selling
securities short involves selling securities the seller does not own (but has
borrowed) in anticipation of a decline in the market price of such securities.
To deliver the securities to the buyer, the seller must arrange through a broker
to borrow the securities and, in so doing, the seller becomes obligated to
replace the securities borrowed at their market price at the time of
replacement. In a short sale, the proceeds the seller receives from the sale are
retained by a broker until the seller replaces the borrowed securities. The
seller may have to pay a premium to borrow the securities and must pay any
dividends or interest payable on the securities until they are replaced.

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

Lending Portfolio Securities

In order to generate additional income, each Fund may, from time to time,
lend its portfolio securities to broker-dealers, banks or other institutional
borrowers. A Fund must receive 100% collateral in the form of cash or U.S.
government securities. This collateral must be valued daily by the Fund's
adviser or advisers, and the borrower will be required to provide additional
collateral should the market value of the loaned securities increase. During the
time portfolio securities are on loan, the borrower pays the Fund involved any
dividends or interest paid on such securities. Loans are subject to termination
by the Funds or the borrower at any time. While a Fund does not have the right
to vote securities on loan, it intends to terminate the loan

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<PAGE> 195

and regain the right to vote if this is considered important with respect to the
investment. A Fund will only enter into loan arrangements with broker-dealers,
banks or other institutions which its adviser or advisers have determined are
creditworthy under guidelines established by the Trust's Board of Trustees.

Securities of Other Investment Companies

Subject to 1940 Act limitations, each Fund may invest in securities issued
by other investment companies (including other investment companies advised by
the advisers) which invest in high quality, short-term debt securities and which
determine their net asset value per share based on the amortized cost or
penny-rounding method. As a shareholder of another investment company, a Fund
would bear, along with other shareholders, its pro rata portion of that
company's expenses, including advisory fees. These expenses would be in addition
to the advisory and other expenses that a Fund bears directly in connection with
its own operations. Investment companies in which a Fund may invest may also
impose a sales or distribution charge in connection with the purchase or
redemption of their shares and other types of commissions or charges. Such
charges will be payable by the Fund and, therefore, will be borne indirectly by
its shareholders. For further information, see "Risk Factors, Investment
Objectives and Policies" in the Statement of Additional Information.

Illiquid Securities

The Fixed Income Fund will not knowingly invest more than 10% of its net
assets, and the other Funds will not knowingly invest more than 15% of their
respective net assets, in securities that are illiquid. Illiquid securities
would generally include repurchase agreements, interest rate swaps and GICs with
notice/termination dates in excess of seven days and certain securities which
are subject to trading restrictions because they are not registered under the
Securities Act of 1933, as amended (the "1933 Act").

Risk Factors Associated with Derivative Instruments

The Funds may purchase certain "derivative" instruments. "Derivative"
instruments are instruments that derive value from the performance of different
securities, interest or currency exchange rates, or indices. The types of
derivative instruments that the Funds may purchase include (but are not limited
to) futures contracts, options, forward currency contracts and structured debt
obligations (including collateralized mortgage obligations, various floating
rate instruments and other types of securities).

Like all investments, derivative instruments involve several basic types of
risks which must be managed in order to meet investment objectives. The specific
risks presented by derivatives include, to varying degrees, market risk in the
form of underperformance of the underlying securities, exchange rates or
indices; credit risk that the dealer or other counterparty to the transaction
will fail to pay its obligations; volatility and leveraging risk that, if
interest or exchange rates change adversely, the value of the derivative
instrument will decline more than the securities, rates or indices on which it
is based; liquidity risk that a Fund will be unable to sell a derivative
instrument when it wants because of lack of market depth or market disruption;
pricing risk that the value of a derivative instrument (such as an option) will
not correlate exactly to the value of the underlying securities, rates or
indices on which it is based; extension risk that the expected duration of an
instrument may increase or decrease;

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and operations risk that loss will occur as a result of inadequate systems and
controls, human error or otherwise. Some derivative instruments are more complex
than others, and for those instruments that have been developed recently, data
are lacking regarding their actual performance over complete market cycles.

The advisers have determined that the risk features that most distinguish
derivatives from other investment instruments (and which heavily influence the
market, volatility and leveraging, liquidity, and pricing risks referred to
above) can be described generally as "structural risk." Structural risk refers
to the contractual features of an investment that can cause its total return to
vary with changes in interest rates or other variables. Structural risk is not
unique to derivatives, but because derivatives often are created through the
intricate division of the cash flows of the underlying security, they can (but
do not necessarily) present a high degree of structural risk. Structural risk
can arise from variations in coupon levels, principal, and/or average life.

The advisers have adopted the following internal policies concerning
management of the structural risk inherent in derivative instruments on behalf
of the Funds. The risk to the Funds due to the use of derivatives will be
limited to the principal invested in such instruments. With respect to the GNMA
and Intermediate Government Funds, where those Funds engage in short sales
"against the box," risk of loss will be limited to the value of the securities
"in the box." The advisers will evaluate the risks presented by the derivative
instruments purchased by the Funds, and will determine, in connection with their
day-to-day management of the Funds, how they will be used in furtherance of the
Funds' investment objectives.

Fixed Income Fund. The Fund may invest in moderate structural risk
derivatives containing features which can modestly or moderately alter the
timing and/or amount of principal return and/or amount of income return. This
would include, for example, investments that are subject to normal prepayment
variances experienced in mortgage pass-through securities. Periodic occurrence
of this degree of structural risk would not be expected to materially impact
overall Fund returns relative to its investment objective.

The Fund will not invest in high structural risk derivatives whose duration
(and hence return) can vary widely depending on moves in interest rates or other
contractual variables. Generally, these are instruments which are deemed to have
a high sensitivity to changes in interest rates, which could materially alter
the effective duration or coupon and return of the instruments.

The Fund may invest in mortgage-backed derivative securities, including
collateralized mortgage obligations ("CMOs"), provided that they are not
identified by the advisers as "high risk securities" by certain quantitative
tests that are generally accepted standards in the investment industry.

Other derivative instruments that are suitable for investment include:
asset-backed securities such as those backed by automobile loans or credit card
receivables. All such securities, however, must conform to the structural risk
standards stated above (i.e. not present high structural risk).

The advisers do not presently intend to invest in the following types of
derivatives on behalf of the Fund:

- - exchange rate-related securities

- - forward currency exchange contracts

- - interest rate swaps

- - futures contracts and related options

- - structured instruments, such as range notes, dual index notes, leveraged or
deleveraged bonds, inverse floaters, index amortizing notes and other
structured instruments having similar cash flow characteristics

Total Return Advantage Fund and Enhanced Income Fund. These Funds may
invest in derivative instruments having either moderate structural risk or high
structural risk characteristics (as described above in the section pertaining to
the Fixed Income Fund). There are no policy restrictions on specific types of
derivative instruments in which the Funds are permitted to invest. However,
structural risk is controlled by adherence to specific overall Fund parameters.
The Funds are managed in accordance with a policy goal that constrains the
potential variability of overall Fund duration and total return

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in relation to specified investment performance benchmarks. Fund exposure to
derivative instruments having high structural risk characteristics is targeted
at a maximum of 5.0% of each Fund's net assets with no individual position
greater than 1.0% of each Fund. Variability in total Fund duration caused by
these securities is targeted not to exceed 0.1 years in any one calendar year.

GNMA Fund. The adviser has adopted the following internal policy concerning
management of the structural risk inherent in derivative instruments on behalf
of the GNMA Fund:

The adviser does not presently intend to invest in the following types of
derivatives on behalf of the GNMA Fund:

- - exchange rate-related securities

- - forward currency exchange contracts

Intermediate Government Fund. The adviser does not presently intend to
invest in the following types of derivatives which are structured instruments,
such as range notes, dual index notes, leveraged or deleveraged bonds, inverse
floaters, index amortizing notes and other structured instruments having similar
cash flow characteristics.

Portfolio Turnover

Each Fund may engage in short term trading and may sell securities which
have been held for periods ranging from several months to less than a day. The
object of such short-term trading is to increase the potential for capital
appreciation and/or income by making fund changes in anticipation of expected
movements in interest rates or fixed income security prices or in order to take
advantage of what the Fund's adviser or advisers believe is a temporary
disparity in the normal yield relationship between two securities. Any such
trading would increase a Fund's turnover rate and its transaction costs. Higher
portfolio turnover may result in increased taxable gains to shareholders (see
"Taxes" below) and increased expenses paid by the Fund due to transaction costs.

INVESTMENT LIMITATIONS

Each Fund is subject to a number of investment limitations. The following
investment limitations are matters of fundamental policy and may not be changed
with respect to a particular Fund without the affirmative vote of the Fund's
outstanding shares (as defined under "Miscellaneous"). (Other investment
limitations that also cannot be changed without a vote of shareholders are
contained in the Statement of Additional Information under "Risk Factors,
Investment Objectives and Policies.")

No Fund may:

1. Make loans, except that each Fund may purchase or hold debt instruments,
lend portfolio securities and enter into repurchase agreements in accordance
with its investment objective and policies.

2. (a) This paragraph applies to the Total Return Advantage, Fixed Income
and Enhanced Income Funds. Borrow money or issue senior securities, except that
each Fund may borrow from banks and enter into reverse repurchase agreements for
temporary purposes in amounts not in excess of 10% of the value of its total
assets at the time of such borrowing; or mortgage, pledge, or hypothecate any
assets except in connection with any such borrowing and in amounts not in excess
of the lesser of the dollar amounts borrowed or 10% of the value of the Fund's
total assets at the time of such borrowing. A Fund will not purchase securities
while borrowings (including reverse repurchase agreements) in excess of 5% of
its total assets are outstanding.

(b) This paragraph applies to the GNMA and Intermediate Government Funds.
Neither Fund

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may borrow money or issue senior securities, except that each Fund may borrow
from anyone for temporary purposes in amounts not in excess of 5% of the value
of its total assets at the time of such borrowing; or the Fund may borrow from a
bank for non-temporary purposes, provided that the borrowing does not exceed
33 1/3% of the Fund's net assets. To the extent a bank borrowing exceeds 5% of
the Fund's total assets, asset coverage of at least 300% is required. The Fund
will not purchase securities while outstanding borrowings equal or exceed 5% of
its total assets. "Asset coverage" means that the Fund would be required to set
aside assets valued in an amount that is at least 300% of the amount borrowed.

(a) there is no limitation with respect to obligations issued or guaranteed by
the U.S. government, its agencies or instrumentalities and repurchase
agreements secured by such obligations

(b) wholly owned finance companies will be considered to be in the industries of
their parents if their activities are primarily related to financing the
activities of their parents

(c) utilities will be classified according to their services, for example, gas,
gas transmission, electric and gas, electric, and telephone will each be
considered a separate industry

(d) with respect to the GNMA Fund, there is no limit with respect to securities
issued by state and local governments

4. Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. government or its agencies or instrumentalities, if,
immediately after such purchase, more than 5% of the value of the Fund's total
assets would be invested in such issuer [or the Fund would hold more than 10% of
any class of securities of the issuer or more than 10% of the outstanding voting
securities of the issuer], except that up to 25% of the value of the Fund's
total assets may be invested without regard to such limitations. With respect to
the GNMA and Intermediate Government Funds, this investment limitation No. 4
does not apply to repurchase agreements involving securities issued or
guaranteed by the U.S. government or its agencies or instrumentalities.

Additional investment limitations which are matters of fundamental policy
are as follows:

5. The Fixed Income Fund may invest no more than 10% of the value of its
net assets in illiquid securities, including repurchase agreements with
remaining maturities in excess of seven days, non-negotiable time deposits,
certificates of participation without corresponding remarketing agreements, and
other securities which are not readily marketable.

6. Neither the Total Return Advantage Fund nor the Enhanced Income Fund may
invest more than 15% of the value of its net assets in illiquid securities. See
"Illiquid Securities" under "Risk Factors, Investment Objectives and Policies --
Common Investment Policies of the Funds."

For purposes of investment limitations No. 3 (with respect to the GNMA and
Intermediate Government Funds) and 4 (with respect to all Funds), a security is
considered to be issued by the government entity (or entities) whose assets and
revenues back the security.

If a percentage limitation is satisfied at the time of investment, a later
increase or decrease in such percentage resulting from a change in value of a
Fund's securities will not constitute a violation of such limitation for
purposes of the 1940 Act. If the Funds exceed their limitations on the holding
of illiquid securities, they will sell illiquid securities as necessary to
maintain the required liquidity when the adviser believes that it is in the best
interests of the Funds to do so.

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YIELD AND PERFORMANCE INFORMATION

From time to time, the Trust may quote in advertisements or in reports to
shareholders each Fund's yield and total return data for its Institutional
shares and Retail shares. The "yield" quoted in advertisements refers to the
income generated by an investment in a class of shares of a Fund over a 30-day
period identified in the advertisement. This income is then "annualized." The
amount of income so generated by the investment during the 30-day period is
assumed to be earned and reinvested at a constant rate and compounded
semi-annually; the annualized income is then shown as a percentage of the
investment.

The Funds calculate their total returns for each class of shares on an
"average annual total return" basis for various periods from the date they
commenced investment operations and for other periods as permitted under the
rules of the SEC. Average annual total return reflects the average annual
percentage change in value of an investment in the class over the measuring
period. Total returns for each class of shares may also be calculated on an
"aggregate total return" basis for various periods. Aggregate total return
reflects the total percentage change in value over the measuring period. Both
methods of calculating total return reflect changes in the price of the shares
and assume that any dividends and capital gain distributions made by a Fund with
respect to a class during the period are reinvested in shares of that class.
When considering average total return figures for periods longer than one year,
it is important to note that the annual total return of a class for any one year
in the period might have been greater or less than the average for the entire
period. The Funds may also advertise, from time to time, the total returns of
one or more classes of shares on a year-by-year or other basis for various
specified periods by means of quotations, charts, graphs or schedules.

Shareholders should note that the yield and total return of Retail shares
will be reduced by the amount of shareholder servicing fees that are payable
under the Services Plan. See "Shareholder Services Plan."

Investors may compare the performance of each class of shares of a Fund to
the performance of other mutual funds with comparable investment objectives, to
various mutual fund or market indices, respectively, and to data or rankings
prepared by independent services such as Lipper Analytical Services, Inc. or
other financial or industry publications that monitor the performance of mutual
funds. Comparisons may also be made to indices or data published in Money
Magazine, Forbes, Barron's, The Wall Street Journal, The New York Times,
Business Week, U.S.A. Today, CDA/Weisenberger, The American Banker, Morningstar,
Incorporated and other publications of a local, regional or financial industry
nature.

The performance of each class of shares of the Funds is based on historical
earnings and will fluctuate and is not intended to indicate future performance.
The investment return and principal value of an investment in a class will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. Performance data may not provide a basis for
comparison with bank deposits and other investments which provide a fixed yield
for a stated period of time. Changes in the net asset value of a class should be
considered in ascertaining the total return to shareholders for a given period.
Yield and total return data should also be considered in light of the risks
associated with a Fund's portfolio composition, quality, maturity, operating
expenses and market conditions. Any fees charged by financial institutions (as
described in "How to Purchase and Redeem Shares") are not included in the
computation of performance data but will reduce a shareholder's net return on an
investment in a Fund.

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PRICING OF SHARES

For purposes of pricing purchases and redemption orders, the net asset
value per share of each Fund is calculated as of the close of trading on the New
York Stock Exchange (the "Exchange") (generally, 4:00 p.m. Eastern Time). Net
asset value per share is determined on each business day, except those holidays
which the Exchange, or banks and trust companies which are affiliated with
National City Corporation (the "Banks"), observe (currently New Year's Day, Dr.
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving Day and
Christmas Day) ("Business Day"). Net asset value per share of a particular class
in a Fund is calculated by dividing the value of all securities and other assets
belonging to the Fund allocable to such class, less the liabilities charged to
that class, by the number of the outstanding shares of that class.

With respect to each Fund, investments in securities for which market
quotations are readily available are valued at their market values determined on
the basis of the mean between their current available bid and asked prices in
the principal market (closing sales prices if the principal market is an
exchange) in which such securities are normally traded. Securities and other
assets for which quotations are not readily available are valued at their fair
value under procedures approved by the Board of Trustees. Absent unusual
circumstances, short-term investments having maturities of 60 days or less are
valued on the basis of amortized cost unless the Trust's Board of Trustees
determines that this does not represent fair value. The net asset value per
share of each class of shares of each Fund will fluctuate as the value of its
investment fund changes.

HOW TO PURCHASE AND REDEEM SHARES

DISTRIBUTOR

Shares in the Funds are sold on a continuous basis by the Trust's sponsor
and distributor. The Distributor is a registered broker/dealer with principal
offices located at Oaks, Pennsylvania 19456.

PURCHASE OF RETAIL SHARES

Financial institutions may charge certain account fees depending on the
type of account the Investor has established with the institution. (For
information on such fees, the Investor should review his agreement with the
institution or contact it directly.) In addition, certain financial institutions
may enter into shareholder servicing agreements with the Trust whereby a
financial institution would perform various administrative support services for
its customers who are the beneficial owners of Retail shares and would receive
fees from the Funds for such services of up to .10% (on an annualized basis)
with respect to the Enhanced Income Fund and .25% (on an annualized basis) with
respect to the Total Return Advantage Fund, Fixed Income Fund, GNMA Fund and
Intermediate Government Fund of the average daily net asset value of such
shares. See "Shareholder Services Plan." To purchase shares, Investors should
call 1-800-622-FUND (3863) or visit their local NatCity Investments, Inc.
office:

<TABLE>
<S> <C>
Akron 1-800-229-0295
Cleveland 1-800-624-6450
Columbus 1-800-345-0278
Dayton 1-800-755-8723
Indianapolis 1-800-826-2868
Louisville 1-800-727-5656
</TABLE>

27
<PAGE> 201

<TABLE>
<S> <C>
Pittsburgh 1-800-282-1078
Toledo 1-800-331-8275
Youngstown 1-800-742-4098
</TABLE>

Shares may be purchased in conjunction with an individual retirement
account ("IRA") and rollover IRAs where a designated custodian acts as
custodian. Investors should contact NatCity Investments, Inc., the Distributor
or their financial institutions for information as to applications and annual
fees. Investors should also consult their tax advisers to determine whether the
benefits of an IRA are available or appropriate.

The minimum investment for the initial purchase of Retail shares in each
Fund is $2,500, except for purchases for an IRA or other retirement plan in
which event the minimum initial investment is $500. All subsequent investments
for Retail shares and IRAs are subject to a minimum investment of $250.
Investments made in Retail shares through a monthly savings program described
below are not subject to the minimum initial and subsequent investment
requirements or any minimum account balance requirements described in "Other
Redemption Information." Purchases for an IRA through the monthly savings
program will be considered as contributions for the year in which the purchases
are made.

Under a monthly savings program, Investors may add to their investment in
the Retail shares of a Fund, in a consistent manner each month, with a minimum
amount of $50. Monies may be automatically withdrawn from a shareholder's
checking or savings account available through an investor's financial
institution and invested in additional Retail shares at the Public Offering
Price next determined after an order is received by the Trust. An Investor may
apply for participation in a monthly program by completing an application
obtained through a financial institution, such as banks, brokers, or dealers
selling Retail shares of the Funds or by calling 1-800-622-FUND (3863). The
program may be modified or terminated by an Investor on 30 days written notice
or by the Trust at any time.

The Trust reserves the right to reject any purchase order.

SALES CHARGES APPLICABLE TO PURCHASES OF RETAIL SHARES

The Public Offering Price for Retail shares of the Total Return Advantage
Fund, Fixed Income Fund, GNMA Fund and Intermediate Government Fund is the sum
of the net asset value of the shares being purchased plus any applicable sales
charge per account, per Fund, which is assessed as follows:

<TABLE>
<CAPTION>
DEALERS'
AS A % AS A % REALLOWANCE
OF OFFERING OF NET AS A % OF
PRICE PER ASSET VALUE OFFERING
AMOUNT OF TRANSACTION SHARE PER SHARE PRICE
- --------------------- ----------- ----------- ------------
<S> <C> <C> <C>
Less than $100,000... 3.75 3.90 3.75
$100,000 but less
than $250,000...... 2.75 2.83 2.75
$250,000 but less
than $500,000...... 2.00 2.04 2.00
$500,000 but less
than $1,000,000.... 1.25 1.27 1.25
$1,000,000 or more... 0.00 0.00 0.00
</TABLE>

The Public Offering Price for Retail shares of the Enhanced Income Fund is
the sum of the net asset value of the shares being purchased plus any applicable
sales charge per account which is assessed as follows:

<TABLE>
<CAPTION>
DEALERS'
AS A % AS A % REALLOWANCE
OF OFFERING OF NET AS A % OF
PRICE PER ASSET VALUE OFFERING
AMOUNT OF TRANSACTION SHARE PER SHARE PRICE
- --------------------- ----------- ----------- ------------
<S> <C> <C> <C>
Less than $100,000... 2.75 2.83 2.75
$100,000 but less
than $250,000...... 1.75 1.78 1.75
$250,000 but less
than $500,000...... 1.00 1.01 1.00
$500,000 but less
than $1,000,000.... 0.50 0.50 0.50
$1,000,000 or more... 0.00 0.00 0.00
</TABLE>

28
<PAGE> 202

not in excess of the usual and customary distributors' or sellers' commission.
The Staff of the SEC has expressed the view that persons who receive 90% or more
of a sales load may be deemed to be underwriters within the meaning of this
definition. The Dealers' Reallowance may be changed from time to time.

No sales charge will be assessed on purchases of Retail shares made by:

(a) trustees and officers of the Trust

(b) directors, employees and participants in employee benefit/retirement
plans (annuitants) of National City Corporation or any of its affiliates

(d) qualified retirement plans purchasing shares through NatCity
Investments, Inc.

(f) investors purchasing Fund shares through a payroll deduction plan

(g) individuals investing in the Funds by way of an asset allocation
program sponsored by financial institutions, although certain account level fees
may apply

REDUCED SALES CHARGES APPLICABLE TO PURCHASES OF RETAIL SHARES

The applicable sales charge may be reduced on purchases of Retail shares of
each Fund made under the Right of Accumulation or Letter of Intent, as described
below. To qualify for a reduced sales charge, Investors must so notify their
financial institutions or the Trust directly by calling 1-800-622-FUND (3863) at
the time of purchase. Reduced sales charges may be modified or terminated at any
time and are subject to confirmation of an Investor's holdings.

Right of Accumulation

(a) current purchases

(b) Retail shares that are already beneficially owned by the Investor for
which a sales charge has been paid

(d) Retail shares purchased by dividends or capital gains that are
reinvested.

If, for example, an Investor beneficially owns Retail shares of the Fixed
Income Fund with an aggregate current value of $90,000 and subsequently
purchases Retail shares of that Fund having a current value of $10,000, the
sales charge applicable to the subsequent purchase would be reduced to 2.75% of
the Public Offering Price.

Letter of Intent

An Investor may qualify for a reduced sales charge immediately upon signing
a nonbinding Letter of Intent stating the Investor's intention to invest during
the next 13 months a specified amount which, if made at one time, would qualify
for a reduced sales charge. The Letter of Intent option is included on the
account application which may be obtained from the Investor's financial
institution or directly from the Trust by calling 1-800-622-FUND (3863). If an
Investor so elects, the 13-month period may begin up to 30 days prior to the
Investor's signing the Letter of Intent. The initial investment under the Letter
of Intent must be equal to at least 4.0% of the amount indicated in the Letter
of Intent. During the term of a Letter of Intent, the Transfer Agent will hold
Retail shares representing 4.0% of the amount indicated in the Letter of Intent
in escrow for payment of a higher sales charge if the entire amount is not
purchased. Upon completing the purchase of the entire amount indicated in the
Letter of Intent, the escrowed shares will be re-

29
<PAGE> 203

leased. If the entire amount is not purchased within the 13-month period or is
redeemed within one year from the time of fulfillment, the Investor will be
required to pay an amount equal to the difference in the dollar amount of sales
charge actually paid and the amount of sales charge the Investor would have had
to pay on the aggregate purchases if the total of such purchases had been made
at a single time.

PURCHASE OF INSTITUTIONAL SHARES

Institutional shares are sold primarily to Banks, as well as NAM customers
that are large institutions ("Customers"). Institutional shares are sold without
a sales charge imposed by the Trust or the Distributor. However, depending on
the terms governing the particular account, the Banks or NAM may impose account
charges such as account maintenance fees, compensating balance requirements or
other charges based upon account transactions, assets or income which will have
the effect of reducing the shareholder's net return on his investment in a Fund.
There is no minimum investment.

The Trust reserves the right to reject any purchase order.

EFFECTIVE TIME OF PURCHASES

REDEMPTION OF RETAIL SHARES

REDEMPTION OF INSTITUTIONAL SHARES

30
<PAGE> 204

may charge their Customers' accounts for services. Information relating to such
services and charges, if any, is available from the Banks.

WRITTEN REDEMPTION PROCEDURES

TELEPHONE REDEMPTION PROCEDURES

A shareholder of record also may redeem shares in any amount by calling
1-800-622-FUND(3863) provided the appropriate election was made on the
shareholder's account application.

OPTION TO MAKE SYSTEMATIC WITHDRAWALS

The Trust has available a Systematic Withdrawal Plan (the "Plan") for a
shareholder who owns shares of any Fund held on the Trust's transfer agent's
system. The Plan allows the shareholder to have a fixed minimum sum of $250
distributed at regular intervals. The shareholder's account must have a minimum
value of $5,000 to be eligible for the Plan. Additional information regarding
this service may be obtained from an investor's financial institution or the
Transfer Agent at 1-800-622-FUND(3863).

OTHER REDEMPTION INFORMATION

31
<PAGE> 205

If any portion of the shares to be redeemed represents an investment made
by personal check, the Trust reserves the right to delay payment of the
redemption proceeds until the Transfer Agent is reasonably satisfied that the
check has been collected, which could take up to 15 calendar days from the date
of purchase. A shareholder who anticipates the need for more immediate access to
his investment should purchase shares by federal funds, bank wire, certified or
cashier's check. Financial institutions normally impose a charge in connection
with the use of bank wires, as well as certified checks, cashier's checks and
federal funds.

Payment to shareholders for shares redeemed will be made within seven days
after receipt of the request for redemption.

EXCHANGE PRIVILEGE APPLICABLE TO RETAIL SHARES

The Trust offers an exchange program whereby Investors who have paid a
sales charge to purchase Retail shares of one or more of the Funds (each a "load
Fund") may exchange those Retail shares for Retail shares of another load Fund,
or another investment fund offered by the Trust without the imposition of a
sales charge (each a "no load Fund") at the net asset value per share on the
date of exchange. As a result, no additional sales charge will be incurred with
respect to such an exchange. Shareholders may also exchange Retail shares of a
no load Fund for Retail shares of another no load Fund at the net asset value
per share without payment of a sales charge. In addition, shareholders of a no
load Fund may exchange Retail shares for Retail shares of a load Fund subject to
payment of the applicable sales charge. However, shareholders exchanging Retail
shares of a no load Fund which were received in a previous exchange transaction
involving Retail shares of a load Fund will not be required to pay an additional
sales charge upon notification of the reinvestment of the equivalent amount into
the Retail shares of a load Fund. Shareholders contemplating an exchange should
carefully review the Prospectus of the fund into which the exchange is being
considered. An Armada Funds Prospectus may be obtained from NatCity Investments,
Inc., or an Investor's financial institution or by calling 1-800-622-FUND(3863).

SYSTEMATIC EXCHANGE PROGRAM APPLICABLE TO RETAIL SHARES

Shares of a Fund may also be purchased through automatic monthly deductions
from a shareholder's account from any Armada Funds money market fund. Under a
systematic exchange program, a shareholder enters an agreement to purchase
shares of one or more specified Funds over a specified period of time, and
initially purchases shares of one Armada money market fund in an amount equal to
the total amount of the investment. On a monthly basis, a specified dollar
amount of shares of the Armada money market fund is exchanged for shares of the
Funds specified.

32
<PAGE> 206

scribed previously in this prospectus. Because purchases of Retail Shares are
subject to an initial sales charge, it may be beneficial for an investor to
execute a Letter of Intent in connection with the systematic exchange program. A
shareholder may apply for participation in this program through his or her
financial institution or by calling 1-800-622-FUND(3863).

DISTRIBUTION AGREEMENT

SHAREHOLDER SERVICES PLAN

The Trust has implemented the Services Plan with respect to Retail shares
in each of the Funds. Pursuant to the Services Plan, the Trust enters into
shareholder servicing agreements with certain financial institutions pursuant to
which the institutions render shareholder administrative services to their
customers who are the beneficial owners of Retail shares in consideration for
the payment of up to .10% (on an annualized basis) with respect to the Enhanced
Income Fund and up to .25% (on an annualized basis) with respect to the Fixed
Income Fund, Total Return Advantage Fund, Intermediate Government Fund and GNMA
Fund of the average daily net asset value of such shares. Persons entitled to
receive compensation for servicing Retail shares may receive different
compensation with respect to those shares than with respect to Institutional
shares in the same Fund. Shareholder administrative services may include
aggregating and processing purchase and redemption orders, processing dividend
payments from the Trust on behalf of customers, providing information
periodically to customers showing their position in Retail shares, and providing
sub-transfer agent services or the information necessary for subaccounting, with
respect to Retail shares beneficially owned by customers. Since financial
institutions may charge their customers fees depending on the type of customer
account the Investor has established, beneficial owners of Retail shares should
read this Prospectus in light of the terms and fees governing their accounts
with financial institutions.

DIVIDENDS AND DISTRIBUTIONS

Dividends from the net investment income of the Funds are declared daily
and paid monthly. With respect to each Fund, net income for dividend purposes
consists of dividends, distributions and other income on the Fund's assets, less
the accrued expenses of the Fund. Any net realized capital gains will be
distributed at least annually. Dividends and distributions will reduce the
Funds' net asset values per share by the per share amount thereof.

Shareholders may elect to have their dividends reinvested in additional
full and fractional Fund shares of the same class of any Armada Funds at the net
asset value of such shares on the payment date. Shareholders must make such
election, or any revocation thereof, in writing to their Banks or financial
institutions. The election will become effective with respect to dividends and
distributions paid after its receipt.

33
<PAGE> 207

TAXES

Qualification as a regulated investment company under the Code for a
taxable year requires, among other things, that a Fund distribute to its
shareholders an amount equal to at least the sum of 90% of its investment
company taxable income and 90% of its net tax-exempt interest income, if any,
for such year. In general, a Fund's investment company taxable income will be
the sum of its net investment income and the excess of any net short-term
capital gain for the taxable year over the net long-term capital loss, if any,
for such year. Each Fund intends to distribute substantially all of its
investment company taxable income and net tax-exempt income each taxable year.
Such distributions by a Fund will be taxable as ordinary income to its
shareholders who are not currently exempt from federal income taxes, whether
such income is received in cash or reinvested in additional shares. (Federal
income taxes for distributions to an IRA or to a qualified retirement plan are
deferred under the Code.) Since all of each Fund's net investment income is
expected to be derived from earned interest, it is anticipated that no part of
any distribution will be eligible for the dividends received deduction for
corporations.

34
<PAGE> 208

The foregoing discussion is based on tax laws and regulations which were in
effect as of the date of this Prospectus; such laws and regulations may be
changed by legislative or administrative actions. The foregoing summarizes some
of the important tax considerations generally affecting the Funds and their
shareholders and is not intended as a substitute for careful tax planning.
Accordingly, potential investors should consult their tax advisers with specific
reference to their own tax situation.

MANAGEMENT OF THE TRUST

BOARD OF TRUSTEES

INVESTMENT ADVISERS

National City, National City Columbus and National City Kentucky ("National
City Banks") serve as investment advisers to the Fixed Income Fund and NAM
serves as the investment adviser to the Total Return Advantage and Enhanced
Income Funds. National City serves as investment adviser to the GNMA and
Intermediate Government Funds. The National City Banks and NAM are wholly owned
subsidiaries of National City Corporation. The National City Banks provide trust
and banking services to individuals, corporations, and institutions, both
nationally and internationally, including investment management, estate and
trust administration, financial planning, corporate trust and agency, and
personal and corporate banking. The National City Banks are member banks of the
Federal Reserve System and the Federal Deposit Insurance Corporation. NAM is a
registered investment adviser providing investment advisory and related
services.

On June 30, 1996, the Trust Departments of National City, National City
Columbus and National City Kentucky had approximately $8.7 billion, $1.6 billion
and $5.1 billion, respectively, in assets under management, and National City,
National City Columbus and National City Kentucky had approximately $16.8
billion, $10.7 billion and $11.9 billion, respectively, in total trust assets.
NAM had approximately $6.2 billion in assets under management. The principal
offices for each of the investment advisers are as follows:

National City
1900 East Ninth Street
Cleveland, Ohio 44114

National City Columbus
155 East Broad Street
Columbus, Ohio 43251

National City Kentucky
National City Tower
101 South Fifth Street
Louisville, Kentucky 40202

NAM
101 South Fifth Street
Louisville, Kentucky 40202

NAM manages the Total Return Advantage and Enhanced Income Funds, makes
decisions with respect to and places orders for all purchases and sales of the
Funds' securities and maintains the Funds' records relating to such purchases
and sales. The Investment Management Group of NAM makes the investment decisions
for these Funds. No person is primarily responsible for making recommendations
to the Investment Management Group.

The National City Banks manage the Fixed Income Fund and National City
manages the GNMA and Intermediate Government Funds. They make decisions with
respect to and place orders for all purchases and sales of the Funds'
securities, and maintain the Funds' records relating to such purchases and
sales. The Fixed Income Team of National City's Asset Management Group assumed
responsibility for the day-to-day management of the Funds as of May 2, 1996,
when the shareholders of the Predecessor Funds of the

35
<PAGE> 209

GNMA and Intermediate Government Funds approved the adviser. Members of the team
make decisions for the Funds. No person is primarily responsible for making
recommendations. Members of the team are:

- - Donald L. Ross, CFA, Director of the Fixed Income Team, has been with National
City since 1985. He specializes in the overall duration and yield curve
decisions.

- - Michael E. Santelli, CFA, Vice President, joined National City in 1995.
Previously, he was associated with Donaldson, Lufkin and Jenrette's Mortgage
research department since 1993. He specializes in the mortgage market.

- - Alex L. Vallecillo, Assistant Vice President, joined National City in 1996. He
traded corporate structured securities for Merrill Lynch in 1993, and was
associated with EDS from September 1990 through July 1992. He specializes in
the analysis of the corporate bond sector.

- - Stephen P. Carpenter, Vice President, joined National City in 1988. He has
more than 21 years of investment experience with expertise in the area of
municipal bonds -- taxable as well as tax-free -- and money market
instruments.

- - Stanley F. Martinez, Investment Officer, joined National City in 1996.
Previously he managed taxable money market funds for both private and public
institutions. Stanley's focus is on short duration management across all fixed
income sectors.

- - John C. Pfenenger, Vice President, joined National City in 1996. His
experience includes five years at Mitchell Hutchins in their quantitative
fixed income group. John now specializes in the management of the asset-backed
market.

- - Douglas J. Carey, Fixed Income Analyst, joined National City in 1995. Prior to
joining National City, Mr. Carey was a graduate assistant for the Economic
Department of Miami University from August 1994 through July 1995. He is
responsible for the development of econometric models used in economic and
interest rate forecasting, as well as fixed income sector relative valuation.

- - Marilou C. Hitt, Assistant Vice President, has worked in National City's Funds
Management Trading Department since 1984. Her responsibilities include fixed
income trading of government and corporate securities as well as short-term
taxable and tax-free money market instruments.

- - Frederick W. "Ted" Ramsey, Vice President of the Fixed Income Research Team,
oversees the Fixed Income Team's credit and research area. His experience
includes 25 years in corporate banking and credit administration, including 10
years as senior credit officer. In addition to his responsibilities as head of
credit research, Mr. Ramsey serves as credit advisor on new investment
opportunities and risk management guidelines.

- - Connie R. Chuhaloff joined National City in 1977. She has held
investment-related responsibilities since 1988. Ms. Chuhaloff also has a
background in both Trust and Branch Operations.

The investment advisers are entitled to receive advisory fees, computed
daily and payable monthly, at the annual rate of .55% of the average daily net
assets of each of the Total Return Advantage, Fixed Income, GNMA and
Intermediate Government Funds, and at the annual rate of .45% of the average
daily net assets of the Enhanced Income Fund. The advisers may from time to time
waive all or a portion of their advisory fees to increase the net income of the
Funds available for distribution as dividends.

AUTHORITY TO ACT AS INVESTMENT ADVISERS

36
<PAGE> 210

the Trust as described in such agreements and this Prospectus without violation
of applicable banking laws or regulations. However, there are no controlling
judicial precedents and future changes in legal requirements relating to the
permissible activities of banks and their affiliates, as well as future
interpretations of present requirements, could prevent the advisers from
continuing to perform services for the Trust. If the advisers were prohibited
from providing services to the Funds, the Board of Trustees would consider
selecting another qualified firm. Any new investment advisory agreement would be
subject to shareholder approval.

If current restrictions preventing a bank or its affiliates from legally
sponsoring, organizing, controlling, or distributing shares of an investment
company were relaxed, the advisers, or an affiliate of the advisers, would
consider the possibility of offering to perform additional services for the
Trust. Legislation modifying such restrictions has been proposed in past
sessions in Congress. It is not possible, of course, to predict whether or in
what form such legislation might be enacted or the terms upon which the
advisers, or such an affiliate, might offer to provide such services.

ADMINISTRATOR

DESCRIPTION OF THE TRUST AND ITS SHARES

Class I, Class O, Class P, Class R and Class S shares constitute the
Institutional class or series of shares; and Class I -- Special Series 1, Class
O -- Special Series 1, Class P -- Special Series 1, Class R -- Special Series 1
and Class S Special Series 1 shares constitute the Retail class or series of
shares. The other Funds of the Trust are:

Money Market Fund
(Class A and Class A -- Special Series 1)

37
<PAGE> 211

Government Fund
(Class B and Class B -- Special Series 1)

Treasury Fund
(Class C and Class C -- Special Series 1)

Tax Exempt Fund
(Class D and Class D -- Special Series 1)

Equity Growth Fund
(Class H and Class H -- Special Series 1)

Ohio Tax Exempt Fund
(Class K and Class K -- Special Series 1)

National Tax Exempt Fund
(Class L and Class L -- Special Series 1)

Equity Income Fund
(Class M and Class M -- Special Series 1)

Mid Cap Regional Fund
(Class N and Class N -- Special Series 1)

Pennsylvania Tax Exempt Fund
(Class Q and Class Q -- Special Series 1)

Pennsylvania Municipal Fund
(Class T and Class T -- Special Series 1)

Each share has no par value, represents an equal proportionate interest in
the investment fund with other shares of the same class or series outstanding,
and is entitled to such dividends and distributions out of the income earned on
the assets belonging to such fund as are declared in the discretion of the
Trust's Board of Trustees. The Trust's Declaration of Trust authorizes the Board
of Trustees to classify or reclassify any unissued shares into any number of
additional classes of shares and to classify or reclassify any class of shares
into one or more series of shares.

Shareholders are entitled to one vote for each full share held, and a
proportionate fractional vote for each fractional share held. Shareholders will
vote in the aggregate and not by investment fund, except as otherwise expressly
required by law or when the Board of Trustees determines that the matter to be
voted on affects only the interests of shareholders of a particular investment
fund. The Statement of Additional Information gives examples of situations in
which the law requires voting by investment fund. In addition, shareholders of
each of the investment funds will vote in the aggregate and not by class or
series, except as otherwise expressly required by law or when the Board of
Trustees determines the matter to be voted on affects only the interests of the
holders of a particular class or series of shares. Under the Services Plan, only
the holders of Retail shares in an investment fund are, or would be entitled to
vote on matters submitted to a vote of shareholders (if any) concerning the
Services Plan. Voting rights are not cumulative, and accordingly, the holders of
more than 50% of the aggregate shares of the Trust may elect all of the trustees
irrespective of the vote of the other shareholders.

As of September 9, 1996, National City, National City Columbus and National
City Kentucky held beneficially or of record approximately 13.71%, 22.88% and
8.69%, respectively, of the outstanding Institutional shares of the Fixed Income
Fund; National City and National City Kentucky held beneficially or of record
approximately 5.74% and 56.59%, respectively, of the outstanding Institutional
shares of the Enhanced Income Fund; and National City, National City Columbus
and National City Kentucky held beneficially or of record approximately 19.54%,
3.56% and 70.32%, respec-

38
<PAGE> 212

tively, of the outstanding Institutional shares of the Total Return Advantage
Fund. Neither National City, National City Columbus, nor National City Kentucky
has any economic interest in such shares which are held solely for the benefit
of its customers, but may be deemed to be a controlling person of the Funds
within the meaning of the 1940 Act by reason of its record ownership of such
shares. The names of beneficial owners and record owners who are controlling
shareholders under the 1940 Act may be found in the Statement of Additional
Information.

CUSTODIAN AND TRANSFER AGENT

EXPENSES

Except as noted below, the Trust's advisers bear all expenses in connection
with the performance of their services. Each Fund of the Trust bears its own
expenses incurred in its operations including: taxes; interest; fees (including
fees paid to its trustees and officers); SEC fees; state securities
qualification fees; costs of preparing and printing prospectuses for regulatory
purposes and for distribution to existing shareholders; expenses related to the
Distribution Plan; advisory fees; administration fees and expenses; charges of
the custodian and Transfer Agent; certain insurance premiums; outside auditing
and legal expenses; costs of shareholders' reports and shareholder meetings; and
any extraordinary expenses. Each Fund also pays for brokerage fees and
commissions in connection with the purchase of its portfolio securities. Under
the Services Plan, the Retail shares in the Funds also bear the expense of
shareholder servicing fees.

MISCELLANEOUS

Shareholders will receive unaudited semi-annual reports and annual
financial statements audited by independent auditors.

Inquiries regarding the Trust or any of its investment funds may be
directed to 1-800-622-FUND(3863).

39
<PAGE> 213

LOGO NOTES
<PAGE> 214

LOGO NOTES
<PAGE> 215
ARMADA FUNDS LOGO BULK RATE
Oaks, Pennsylvania, 19456 U.S. POSTAGE
PAID
CLEVELAND, OH
ARMADA FUNDS PERMIT NO. 1535

INVESTMENT ADVISERS

AFFILIATES OF
NATIONAL CITY
CORPORATION

National Asset
Management Corporation
101 South Fifth Street
Louisville, Kentucky 40202

National City Bank
1900 East Ninth Street
Cleveland, Ohio 44114

National City Bank of Columbus
155 East Broad Street
Columbus, Ohio 43251

National City Bank of Kentucky
101 South Fifth Street
Louisville, Kentucky 40202

NC-057 (3/97)

<PAGE> 216

ARMADA FUNDS

STATEMENT OF ADDITIONAL INFORMATION

SEPTEMBER 30, 1996
(AS REVISED MARCH 10, 1997)

TOTAL RETURN ADVANTAGE FUND

FIXED INCOME FUND

ENHANCED INCOME FUND

GNMA FUND

INTERMEDIATE GOVERNMENT FUND

This Statement of Additional Information is not a prospectus but should be read
in conjunction with the current prospectus for the above Funds of Armada Funds
(the "Trust"), dated September 30, 1996 (as revised March 10, 1997) (the
"Prospectus"). A copy of the Prospectus may be obtained by calling or writing
the Trust at 1-800-622-FUND, Oaks, Pennsylvania 19456.

<PAGE> 217

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

PAGE
----

STATEMENT OF ADDITIONAL INFORMATION......................................... 1

RISK FACTORS, INVESTMENT OBJECTIVES AND POLICIES............................ 1

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION.............................. 12

DESCRIPTION OF SHARES....................................................... 15

ADDITIONAL INFORMATION CONCERNING TAXES..................................... 17

TRUSTEES AND OFFICERS....................................................... 20

ADVISORY, ADMINISTRATION, DISTRIBUTION, CUSTODIAN
SERVICES AND TRANSFER AGENCY AGREEMENTS................................. 24

SHAREHOLDER SERVICES PLAN................................................... 29

PORTFOLIO TRANSACTIONS...................................................... 29

AUDITORS.................................................................... 32

COUNSEL..................................................................... 32

YIELD AND PERFORMANCE INFORMATION........................................... 32

MISCELLANEOUS............................................................... 37

FINANCIAL STATEMENTS........................................................ 42

APPENDIX A................................................................. A-1

APPENDIX B................................................................. B-1

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STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------

This Statement of Additional Information should be read in
conjunction with the Prospectus of Armada Funds (the "Trust") that describes the
Fixed Income, Enhanced Income and Total Return Advantage, Intermediate
Government and GNMA Funds. The information contained in this Statement of
Additional Information expands upon matters discussed in the Prospectus. No
investment in shares of a Fund should be made without first reading the
Prospectus.

The Intermediate Government Fund and GNMA Fund commenced
operations on August 10, 1994 as separate investment portfolios (the
"Predecessor Intermediate Government Fund" and the "Predecessor GNMA Fund",
collectively the "Predecessor Funds") of Inventor Funds, Inc. which was
organized as a Maryland corporation. On September 9, 1996, the Predecessor Funds
were reorganized as new portfolios of Armada. Prior to the reorganization, the
Predecessor Funds offered and sold shares of stock that were similar to Armada's
Retail shares of beneficial interest.

RISK FACTORS, INVESTMENT OBJECTIVES AND POLICIES
------------------------------------------------

ADDITIONAL INFORMATION ON FUND MANAGEMENT
- -----------------------------------------

Further information on the advisers' investment management
strategies, techniques, policies and related matters may be included from time
to time in advertisements, sales literature, communications to shareholders and
other materials. See also, "Yield and Performance Information" below.

ASSET-BACKED SECURITIES
- -----------------------

Each Fund may purchase asset-backed securities, which are
securities backed by mortgages, installment contracts, credit card receivables
or other assets. Asset-backed securities represent interests in "pools" of
assets in which payments of both interest and principal on the securities are
made monthly, thus in effect "passing through" monthly payments made by the
individual borrowers on the assets that underlie the securities, net of any fees
paid to the issuer or guarantor of the securities. The average life of
asset-backed securities varies with the maturities of the underlying
instruments, and the average life of a mortgage-backed instrument, in
particular, is likely to be substantially less than the original maturity of the
mortgage pools underlying the securities as a result of mortgage prepayments.
For this and other reasons, an asset-backed security's stated maturity may be
shortened, and the security's total return may be difficult to

<PAGE> 219

predict precisely. Asset-backed securities acquired by a Fund may include
collateralized mortgage obligations ("CMOS") issued by private companies.

Each Fund may invest in securities the timely payment of
principal and interest on which are guaranteed by the Government National
Mortgage Association ("GNMA") a wholly-owned U.S. Government corporation within
the Department of Housing and Urban Development. The market value and interest
yield of these instruments can vary due to market interest rate fluctuations and
early prepayments of underlying mortgages. These securities represent ownership
in a pool of federally insured mortgage loans. GNMA certificates consist of
underlying mortgages with a maximum maturity of 30 years. However, due to
scheduled and unscheduled principal payments, GNMA certificates have a shorter
average maturity and, therefore, less principal volatility than a comparable
30-year bond. Since prepayment rates vary widely, it is not possible to predict
accurately the average maturity of a particular GNMA pool. GNMA securities
differ from conventional bonds in that principal is paid back to the certificate
holders over the life of the loan rather than at maturity. The scheduled monthly
interest and principal payments relating to mortgages in the pool are "passed
through" to investors. In addition, there may be unscheduled principal payments
representing prepayments on the underlying mortgages. Although GNMA certificates
may offer yields higher than those available from other types of U.S. Government
securities, GNMA certificates may be less effective than other types of
securities as a means of "locking in" attractive long-term rates because of the
prepayment feature. For instance, when interest rates decline, the value of a
GNMA certificate likely will not rise as much as comparable debt securities due
to the prepayment feature. In addition, these prepayments can cause the price of
a GNMA certificate originally purchased at a premium to decline in price to its
par value, which may result in a loss.

There are a number of important differences among the agencies
and instrumentalities of the U.S. Government that issue mortgage-related
securities and among the securities that they issue. Mortgage-related securities
guaranteed by the GNMA include GNMA Mortgage Pass-Through Certificates (also
known as "Ginnie Maes") which are guaranteed as to the timely payment of
principal and interest by GNMA and such guarantee is backed by the full faith
and credit of the United States. GNMA is a wholly-owned U.S. Government
corporation within the Department of Housing and Urban Development. GNMA
certificates also are supported by the authority of GNMA to borrow funds from
the U.S. Treasury to make payments under its guarantee. Mortgage-backed
securities issued by the FNMA include FNMA Guaranteed Mortgage Pass-Through
Certificates (also known as "Fannie Maes") which are solely the obligations of
the FNMA and are not backed by or entitled to the full faith and credit of the
United States, but are supported by the right of the issuer to borrow from the
Treasury. FNMA is a government-sponsored

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<PAGE> 220

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

Non-mortgage asset-backed securities involve certain risks
that are not presented by mortgage-backed securities. Primarily, these
securities do not have the benefit of the same security interest in the
underlying 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 have given 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 services to retain possession of the
underlying obligations. If the servicer were to sell these obligations to
another party, there is a risk that the purchaser would acquire an interest
superior to that of the holders of the related 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 an effective security interest in all of the
obligations backing such receivables. Therefore, there is a possibility that
recoveries on repossessed collateral may not, in some cases, be able to support
payments on these securities.

FOREIGN CURRENCY TRANSACTIONS
- -----------------------------

In order to protect against a possible loss on investments
resulting from a decline or appreciation in the value of a particular foreign
currency against the U.S. dollar or another foreign currency or for other
reasons, the Enhanced Income and Total Return Advantage Funds are authorized to
enter into forward currency exchange contracts. These contracts involve an
obligation to purchase or sell a specified currency at a future date at a price
set at the time of the contract. Forward currency contracts do not eliminate
fluctuations in the values of fund securities but

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<PAGE> 221

rather allow a Fund to establish a rate of exchange for a future
point in time.

When entering into a contract for the purchase or sale of a
security, these Funds may enter into a forward foreign currency exchange
contract for the amount of the purchase or sale price to protect against
variations, between the date the security is purchased or sold and the date on
which payment is made or received, in the value of the foreign currency relative
to the U.S. dollar or other foreign currency.

When the Enhanced Income and Total Return Advantage Funds'
adviser anticipates that a particular foreign currency may decline substantially
relative to the U.S. dollar or other leading currencies, in order to reduce
risk, a Fund may enter into a forward contract to sell, for a fixed amount, the
amount of foreign currency approximating the value of some or all of the Fund's
securities denominated in such foreign currency. Similarly, when the obligations
held by a Fund create a short position in a foreign currency, the Fund may enter
into a forward contract to buy, for a fixed amount, an amount of foreign
currency approximating the short position. With respect to any forward foreign
currency contract, it will not generally be possible to match precisely the
amount covered by that contract and the value of the securities involved due to
the changes in the values of such securities resulting from market movements
between the date the forward contract is entered into and the date it matures.
In addition, while forward contracts may offer protection from losses resulting
from declines or appreciation in the value of a particular foreign currency,
they also limit potential gains which might result from changes in the value of
such currency. A Fund will also incur costs in connection with forward foreign
currency exchange contracts and conversions of foreign currencies and U.S.
dollars.

A separate account consisting of liquid assets, such as cash,
U.S. Government securities or other liquid high grade debt obligations equal to
the amount of the Enhanced Income and Total Return Advantage Funds' assets that
could be required to consummate forward contracts will be established with the
Funds' Custodian except to the extent the contracts are otherwise "covered." For
the purpose of determining the adequacy of the securities in the account, the
deposited securities will be valued at market or fair value. If the market or
fair value of such securities declines, additional liquid securities will be
placed in the account daily so that the value of the account will equal the
amount of such commitments by the Funds. A forward contract to sell a foreign
currency is "covered" if a Fund owns the currency (or securities denominated in
the currency) underlying the contract, or holds a forward contract (or call
option) permitting the Fund to buy the same currency at a price no higher than
the Fund's price to sell the currency. A forward contract to buy a foreign
currency is "covered" if a Fund holds a forward contract (or call option)

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<PAGE> 222

permitting the Fund to sell the same currency at a price as high as or higher
than the Fund's price to buy the currency.

INTEREST RATE SWAPS
- -------------------

The Enhanced Income, Total Return Advantage and GNMA Funds may
enter into interest rate swaps for hedging purposes and not for speculation.
These Funds will typically use interest rate swaps to preserve a return on a
particular investment or portion of its Fund or to shorten the effective
duration of their Fund investments. Interest rate swaps involve the exchange by
a Fund with another party of their respective commitments to pay or receive
interest, such as an exchange of fixed rate payments for floating rate payments.

The Enhanced Income, Total Return Advantage and GNMA Funds
will only enter into interest rate swaps on a net basis, (i.e., the two payment
streams are netted out, with a Fund receiving or paying, as the case may be,
only the net amount of the two payments). Inasmuch as these transactions are
entered into for good faith hedging purposes, the Funds and their adviser
believe that such obligations do not constitute senior securities as defined in
the 1940 Act and, accordingly, will not treat them as being subject to the
Funds' borrowing restrictions. The net amount of the excess, if any, of the
Funds' obligations over their entitlements with respect to each interest rate
swap will be accrued on a daily basis and an amount of liquid assets, such as
cash, U.S. Government securities or other liquid high grade debt securities,
having an aggregate net asset value at least equal to such accrued excess will
be maintained in a segregated account by the Funds' custodian.

If there is a default by the other party to an interest rate
swap transaction, the Fund involved will have contractual remedies pursuant to
the agreements related to the transaction. The swap market has grown
substantially in recent years with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swap market has become relatively liquid in
comparison with markets for other similar instruments which are traded in the
Interbank market.

FUTURES CONTRACTS AND RELATED OPTIONS
- -------------------------------------

The Enhanced Income and Total Return Advantage Funds may
purchase and sell futures contracts and may purchase and sell call and put
options on futures contracts. The GNMA and Intermediate Government Funds may
purchase and sell futures contracts only on U.S. Treasury obligations. For a
detailed description of futures contracts and related options, see Appendix B to
this Statement of Additional Information.

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<PAGE> 223

INCOME PARTICIPATION LOANS
- --------------------------

The Fixed Income, Enhanced Income and Total Return Advantage
Funds may make or acquire participations in privately negotiated loans to
borrowers. Frequently, such loans have variable interest rates and may be backed
by a bank letter of credit; in other cases they may be unsecured. Such
transactions may provide an opportunity to achieve higher yields than those that
may be available from other securities offered and sold to the general public.

Privately arranged loans, however, will generally not be rated
by a credit rating agency and will normally be liquid, if at all, only through a
provision requiring repayment following demand by the lender. Such loans made by
a Fund may have a demand provision permitting the Fund to require repayment
within seven days. Participations in such loans, however, may not have such a
demand provision and may not be otherwise marketable. Recovery of an investment
in any such loan that is illiquid and payable on demand will depend on the
ability of the borrower to meet an obligation for full repayment of principal
and payment of accrued interest within the demand period, normally seven days or
less (unless the Fund determines that a particular loan issue, unlike most such
loans, has a readily available market). As it deems appropriate, the Board of
Trustees of the Trust will establish procedures to monitor the credit standing
of each such borrower, including its ability to honor contractual payment
obligations.

WHEN-ISSUED SECURITIES
- ----------------------

Each Fund may purchase securities on a "when-issued" basis
(i.e., for delivery beyond the normal settlement date at a stated price and
yield). When a Fund agrees to purchase when-issued securities, the custodian
sets aside cash or liquid portfolio securities equal to the amount of the
commitment in a separate account. Normally, the custodian will set aside
portfolio securities to satisfy a purchase commitment, and in such a case a Fund
may be required subsequently to place additional assets in the separate account
in order to ensure that the value of the account remains equal to the amount of
the Fund's commitment, marked to market daily. It is likely that a Fund's net
assets will fluctuate to a greater degree when it sets aside portfolio
securities to cover such purchase commitments than when it sets aside cash.
Because a Fund will set aside cash or liquid assets to satisfy its purchase
commitments in the manner described, the Fund's liquidity and ability to manage
its fund might be affected in the event its commitments to purchase when-issued
securities ever exceeded 25% of the value of its total assets.

When a Fund engages in when-issued transactions, it
relies on the seller to consummate the trade. Failure of the
seller to do so may result in the Fund's incurring a loss or

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<PAGE> 224

missing an opportunity to obtain a price considered to be advantageous.

VARIABLE AND FLOATING RATE OBLIGATIONS
- --------------------------------------

Each Fund may purchase variable and floating rate obligations
(including variable amount master demand notes) which are unsecured instruments
that permit the indebtedness thereunder to vary and provide for periodic
adjustments in the interest rate. Because variable and floating rate obligations
are direct lending arrangements between a Fund and the issuer, they are not
normally traded although certain variable and floating rate obligations, such as
Student Loan Marketing Association variable rate obligations, may have a more
active secondary market because they are issued or guaranteed by the U.S.
Government or its agencies or instrumentalities. Even though there may be no
active secondary market in such instruments, a Fund may demand payment of
principal and accrued interest at a time specified in the instrument or may
resell them to a third party. Such obligations may be backed by bank letters of
credit or guarantees issued by banks, other financial institutions or the U.S.
Government, its agencies or instrumentalities. The quality of any letter of
credit or guarantee will be rated high quality or, if unrated, will be
determined to be of comparable quality by the advisers. In the event an issuer
of a variable or floating rate obligation defaulted on its payment obligation, a
Fund might be unable to dispose of the instrument because of the absence of a
secondary market and could, for this or other reasons, suffer a loss to the
extent of the default.

SHORT TERM OBLIGATIONS
- ----------------------

The Fixed Income, Enhanced Income and Total Return
Advantage Funds may invest in various short term obligations including those
described below.

Investments include commercial paper and other short term
promissory notes issued by corporations (including variable and floating rate
instruments). In addition, The Fixed Income, Enhanced Income and Total Return
Funds may invest in Canadian Commercial Paper ("CCP"), which is commercial paper
issued by a Canadian corporation or a Canadian counterpart of a U.S.
corporation, and in Europaper, which is U.S. dollar denominated commercial paper
of a foreign issuer. Each such Fund may also acquire zero coupon obligations,
which have greater price volatility than coupon obligations and which will not
result in the payment of interest until maturity.

-7-

<PAGE> 225

Reserve System. Bank obligations also include U.S. dollar denominated bankers'
acceptances, certificates of deposit and time deposits issued by foreign
branches of U.S. banks or foreign banks. Investment in bank obligations is
limited to the obligations of financial institutions having more than $1 billion
in total assets at the time of purchase. The Fixed Income, Enhanced Income and
Total Return Advantage Funds may also make interest bearing savings deposits in
commercial and savings banks not in excess of 5% of its total assets. Investment
in non-negotiable time deposits is limited to no more than 5% of each such
Fund's total assets at the time of purchase.

The Fixed Income, Enhanced Income and Total Return Advantage
Funds may also make limited investments in a Guaranteed Investment Contract
("GIC") issued by U.S. insurance companies. When investing in GICs, a Fund makes
cash contributions to a deposit fund or an insurance company's general account.
The insurance company then credits to that Fund monthly a guaranteed minimum
interest which is based on an index. The insurance company may assess periodic
charges against a GIC for expense and service costs allocable to it, and the
charges will be deducted from the value of the deposit fund. A Fund will
purchase a GIC only when its advisers have determined, under guidelines
established by the Board of Trustees, that the GIC presents minimal credit risks
to the Fund and is of comparable quality to instruments that are rated high
quality by one or more rating agencies.

U.S. GOVERNMENT OBLIGATIONS
- ---------------------------

The Fixed Income, Enhanced Income, Total Return Advantage and
Intermediate Government Funds may purchase obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities. Some of these
obligations are supported by the full faith and credit of the U.S. Treasury,
such as obligations issued by the Government National Mortgage Association.
Others, such as those of the Export-Import Bank of the United States, are
supported by the right of the issuer to borrow from the U.S. Treasury; others,
such as those of the Federal National Mortgage Association, are supported by the
discretionary authority of the U.S. Government to purchase the agency's
obligations; and still others, such as those of the Student Loan Marketing
Association, are supported only by the credit of the agency or instrumentality
issuing the obligation. No assurance can be given that the U.S. Government would
provide financial support to U.S. Government-sponsored agencies or
instrumentalities if it is not obligated to do so by law. The Funds will invest
in the obligations of such agencies or instrumentalities only when the advisers
believe that the credit risk with respect thereto is minimal.

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<PAGE> 226

SECURITIES OF OTHER INVESTMENT COMPANIES
- ----------------------------------------

LENDING OF PORTFOLIO SECURITIES
- -------------------------------

The Intermediate Government Fund may lend securities pursuant
to agreements requiring that the loans be continuously secured by cash,
securities of the U.S. government or its agencies, or any combination of cash
and such 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
one-third of the value of its total assets taken at fair market value. The Fund
will continue to receive interest on the securities lent while simultaneously
earning interest on the investment of the cash collateral in U.S. government
securities. However, the 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 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.

PORTFOLIO TURNOVER
- ------------------

The portfolio turnover rate for each Fund is calculated by
dividing the lesser of purchases or sales of portfolio securities for the year
by the monthly average value of the portfolio securities. The calculation
excludes U.S. Government securities and all securities whose maturities at the
time of acquisition were one year or less. Portfolio turnover may vary greatly
from year to year as well as within a particular year, and may also be affected
by cash requirements for redemptions of shares and by requirements which enable
the Trust to receive certain favorable tax treatment. Portfolio turnover will
not be a limiting factor in making fund decisions.

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<PAGE> 227

ADDITIONAL INVESTMENT LIMITATIONS
- ---------------------------------

In addition to the investment limitations disclosed in the
Prospectus, the Funds are subject to the following investment limitations which
may be changed with respect to a particular Fund only by a vote of the holders
of a majority of such Fund's outstanding shares (as defined under
"Miscellaneous" in the Prospectus).

No Fund may:

1. Purchase securities on margin, make short sales of
securities, or maintain a short position, except that (i) each Fund may purchase
and sell futures contracts and options on futures contracts in accordance with
its investment objective; and (ii) the GNMA Fund may obtain short term credits
as necessary for the clearance of securities transactions and make short sales
"against the box" as described in the Prospectus.

2. Act as an underwriter of securities within the meaning of
the Securities Act of 1933 except insofar as it might be deemed to be an
underwriter upon disposition of certain portfolio securities acquired within the
limitation on purchases of restricted securities.

3. Purchase or sell real estate, or, in the case of the GNMA
and Intermediate Government Funds, real estate limited partnerships, except that
the Fixed Income, Enhanced Income and Total Return Advantage Funds may invest in
securities secured by real estate or interests therein or issued by companies or
investment trusts which invest in real estate or interests therein.

4. Purchase or sell commodities or commodity contracts or
invest in oil, gas, or other mineral exploration or development programs, except
that a Fund may: (a) to the extent appropriate to its investment objective,
invest in securities issued by companies which purchase or sell commodities or
commodity contracts or which invest in such programs; and (b) purchase and sell
futures contracts and options on futures contracts in accordance with its
investment objective. In addition, the Fixed Income, Enhanced Income and Total
Return Advantage Funds may enter into forward currency contracts and other
financial instruments in accordance with its investment objective and policies.

5. Invest in any issuer for the purpose of exercising control
or management.

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<PAGE> 228

7. Pledge, mortgage or hypothecate assets, except to secure
borrowings permitted by the Fund's investment limitations in aggregate amounts
not to exceed 33 1/3% of the Fund's total assets taken at current value at the
time of the incurrence of such loan.

8. Acquire more than 10% of the voting securities of any one
issuer, provided that this limitation shall apply only as to 75% of the Fund's
net assets.

9. Purchase securities of other investment companies, except
as permitted by the Investment Company Act of 1940 and the rules and
regulations thereunder.

10. Issue senior securities (as defined in the Investment
Company Act of 1940), except in connection with permitted borrowings as
described above or as permitted by rule, regulation or order of the Securities
and Exchange Commission.

In addition, the Fixed Income, GNMA and Intermediate
Government Funds may not write or purchase put options, call options, straddles,
spreads, or any combination thereof, except that the Funds may purchase and sell
futures contracts and options on futures contracts in accordance with their
investment objectives.

The Enhanced Income Fund and Total Return Advantage Fund may
not write puts, calls or combinations thereof, except for transactions in:
options on securities, financial instruments, currencies and indices of
securities; futures contracts; options on futures contracts; forward currency
contracts; interest rate swaps; and similar instruments.

The GNMA and Intermediate Government Funds may not invest in
illiquid securities in an amount exceeding, in the aggregate, 15% of their
respective net assets.

The GNMA and Intermediate Government Funds may not purchase
securities of any company which has (with predecessors) a record of less than
three years continuing operations, if, as a result, more than 5% of the total
assets of each such Fund (taken at current value) would be invested in such
securities.

The foregoing percentages will apply at the time of purchase
of a security. If a Fund exceeds its limitation on the holding of illiquid
securities, it will sell illiquid securities as necessary to maintain the
required liquidity when the adviser believes it is in the best interests of the
Fund to do so.

* * * * *

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<PAGE> 229

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
----------------------------------------------

Shares in each Fund are sold on a continuous basis by SEI
Financial Services Company (the "Distributor"), which has agreed to use
appropriate efforts to solicit all purchase orders. The issuance of shares is
recorded on the books of the Trust. To change the commercial bank or account
designated to receive redemption proceeds, a written request must be sent to an
investor's financial institution at its principal office. Such requests must be
signed by each shareholder, with each signature guaranteed by a U.S. commercial
bank or trust company or by a member firm of a national securities exchange.
Guarantees must be signed by an authorized signatory and "Signature Guaranteed"
must appear with the signature. An investor's financial institution may request
further documentation from corporations, executors, administrators, trustees or
guardians, and will accept other suitable verification arrangements from foreign
investors, such as consular verification.

The Trust may suspend the right of redemption or postpone the
date of payment for more than seven days for shares during any period when (a)
trading on the Exchange is restricted by applicable rules and regulations of the
SEC; (b) the Exchange is closed for other than customary weekend and holiday
closings; (c) the SEC has by order permitted such suspension; or (d) an
emergency exists as determined by the SEC.

There is no sales load charged on shares acquired through the
reinvestment of dividends or distributions on such shares.

For the fiscal year ended May 31, 1996, sales loads paid by
shareholders of the Fixed Income, Enhanced Income and Total Return Advantage
Funds totalled $4,002, $6,935 and $1,240, respectively.

For the one-month fiscal period ended May 31, 1996, no sales
loads were paid by shareholders of the Predecessor GNMA and Intermediate
Government Funds. For the fiscal year ended April 30, 1996, sales loads paid by
shareholders of the Predecessor GNMA and Intermediate Government Funds totalled
$1,391.24 and $8,175.50, respectively.

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<PAGE> 230

Investors should be aware, however, that dollar cost averaging results in
purchases of shares regardless of their price on the day of investment or market
trends and does not ensure a profit, protect against losses in a declining
market, or prevent a loss if an investor ultimately redeems his shares at a
price which is lower than their purchase price. An investor may want to consider
his financial ability to continue purchases through periods of low price levels.
From time to time, in advertisements, sales literature, communications to
shareholders and other materials ("Materials"), the Trust may illustrate the
effects of dollar cost averaging through use of or comparison to an index such
as the S&P 500 Index or Lehman Intermediate Government Index.

OFFERING PRICE PER RETAIL SHARE OF THE FUNDS
- --------------------------------------------

Illustrations of the computation of the offering price per
Retail share of the Fixed Income, Enhanced Income and Total Return Advantage
Funds, based on the value of the Funds' net assets and number of outstanding
shares on May 31, 1996 are as follows:

TABLE
-----

FIXED INCOME FUND
-----------------
<TABLE>
<S> <C>
Net Assets of Retail Shares............................ $ 6,216,191

Outstanding Retail Shares.............................. 600,711

Net Asset Value Per Share
($6,216,191 / 600,771)................................. $ 10.35

Sales Charge, 3.75% of
offering price (3.90% of
net asset value per share)............................. 0.40

Offering to Public..................................... $ 10.75
</TABLE>

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<PAGE> 231

ENHANCED INCOME FUND
--------------------
<TABLE>

<S> <C>
Net Assets of Retail Shares............................. $ 1,717,579

Outstanding Retail Shares............................... 171,392

Net Asset Value Per Share
($1,717,579 / 171,392).................................. $ 10.02

Sales Charge, 2.75% of
offering price (2.80% of
net asset value per share).............................. 0.28

Offering to Public...................................... $ 10.30
</TABLE>

TOTAL RETURN ADVANTAGE FUND
---------------------------
<TABLE>

<S> <C>
Net Assets of Retail Shares............................. $ 2,040,140

Outstanding Retail Shares............................... 206,613

Net Asset Value Per Share
($2,040,140 / 206,613).................................. $ 9.87

Sales Charge, 3.75% of
offering price (3.90% of
net asset value per share).............................. 0.38

Offering to Public...................................... $ 10.25
</TABLE>

Illustrations of the computation of the offering price per Retail share of the
Fund, based on the value of the Predecessor GNMA and Intermediate Government
Funds' net assets and number of outstanding shares on April 30, 1996 are as
follows:

INTERMEDIATE GOVERNMENT
FUND
-----------------------
<TABLE>
<S> <C>
Net Assets of Retail Shares.............................. $89,901,309

Outstanding Retail Shares................................ 8,952,005
Net Asset Value Per Share
($89,901,309 / 8,952,005)................................. $ 10.04

Sales Charge, 4.00% of
offering price (4.18% of
net asset value per share)................................ $ 0.42

Offering to Public........................................ $ 10.46
</TABLE>

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<PAGE> 232

GNMA FUND
---------
<TABLE>
<S> <C>
Net Assets of Retail Shares.................................$62,160,843

Outstanding Retail Shares.................................... 6,142,810

Net Asset Value Per Share
($62,160,843 / 6,142,810....................................$ 10.12
Sales Charge, 4.00% of
offering price (4.15% of
net asset value per share)..................................$ 0.42

Offering to Public..........................................$ 10.54
</TABLE>

EXCHANGE PRIVILEGE
- ------------------

By use of the exchange privilege, the Investor authorizes the
Trust's Transfer Agent or his financial institution to act on telephonic or
written instructions from any person representing himself or herself to be the
shareholder and believed by the Transfer Agent or the financial institution to
be genuine. The Investor or his financial institution must notify the Transfer
Agent of his prior ownership of Retail shares and account number. The Transfer
Agent's records of such instructions are binding.

DESCRIPTION OF SHARES
---------------------

The Trust is a Massachusetts business trust. The Trust's
Declaration of Trust authorizes the Board of Trustees to issue an unlimited
number of shares of beneficial interest and to classify or reclassify any
unissued shares of the Trust into one or more additional classes or series by
setting or changing in any one or more respects their respective preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption. Pursuant to
such authority, the Board of Trustees has authorized the issuance of 36 classes
or series of shares. Ten of these classes or series, which represent interests
in the Fixed Income Fund (Class I and Class I - Special Series 1), Enhanced
Income Fund (Class O and Class O - Special Series 1), Total Return Advantage
Fund (Class P and Class P - Special Series 1), GNMA Fund (Class S and Class S -
Special Series 1) and Intermediate Government Fund

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<PAGE> 233

(Class R and Class R - Special Series 1) are described in this Statement of
Additional Information and the related Prospectus.

Shares have no preemptive rights and only such conversion or
exchange rights as the Board of Trustees may grant in its discretion. When
issued for payment as described in the Prospectus, the Trust's shares will be
fully paid and non-assessable. In the event of a liquidation or dissolution of
the Trust or an individual Fund, shareholders of a Fund are entitled to receive
the assets available for distribution belonging to the particular Fund, and a
proportionate distribution, based upon the relative asset values of the
respective Funds, of any general assets of the Trust not belonging to any
particular Fund which are available for distribution.

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<PAGE> 234

net asset value; or (c) combine the assets belonging to an investment fund with
the assets belonging to another investment fund of the Trust, if the Board of
Trustees reasonably determines that such combination will not have a material
adverse effect on shareholders of any fund participating in such combination,
and, in connection therewith, to cause all outstanding shares of any fund to be
redeemed at their net asset value or converted into shares of another class of
the Trust shares at net asset value. In the event that shares are redeemed in
cash at their net asset value, a shareholder may receive in payment for such
shares an amount that is more or less than his original investment due to
changes in the market prices of the fund's securities. The exercise of such
authority by the Board of Trustees will be subject to the provisions of the 1940
Act, and the Board of Trustees will not take any action described in this
paragraph unless the proposed action has been disclosed in writing to the fund's
shareholders at least 30 days prior thereto.

ADDITIONAL INFORMATION CONCERNING TAXES
---------------------------------------

The following summarizes certain additional tax considerations
generally affecting the Trust and its shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Trust or its shareholders or possible legislative changes, and
the discussion here and in the Prospectus is not intended as a substitute for
careful tax planning. Potential investors should consult their tax advisers with
specific reference to their own tax situation.

Each Fund of the Trust will be treated as a separate corporate
entity under the Code and intends to qualify as a regulated investment company.
In order to qualify for tax treatment as a regulated investment company under
the Code, each Fund must satisfy, in addition to the distribution requirement
described in the Prospectus, certain requirements with respect to the source of
its income during a taxable year. At least 90% of the gross income of each Fund
must be derived from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of stocks, securities or foreign
currencies, and other income (including but not limited to gains from options,
futures, or forward contracts) derived with respect to the Fund's business of
investing in such stock, securities or currencies. The Treasury Department may
by regulation exclude from qualifying income foreign currency gains which are
not directly related to a Fund's principal business of investing in stock or
securities, or options and futures with respect to stock or securities. Any
income derived by a Fund from a partnership or trust is treated as derived with
respect to the Fund's business of investing in stock, securities or currencies
only to the extent that such income is attributable to items of income which
would

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<PAGE> 235

have been qualifying income if realized by the Fund in the same manner as by the
partnership or trust. Some of the investments that the Funds may make (such as
equipment lease and trust certificates) may not be securities or may not produce
qualifying income. Therefore, it may be necessary for the advisers to restrict
the investments of the Funds to ensure that nonqualifying income does not exceed
10% of its total gross income for a taxable year.

Another requirement for qualification as a regulated
investment company under the Code is that less than 30% of a Fund's gross income
for a taxable year must be derived from gains realized on the sale or other
disposition of the following investments held for less than three months: (1)
stock and securities (as defined in Section 2(a)(36) of the 1940 Act); (2)
options, futures and forward contracts other than those on foreign currencies;
and (3) foreign currencies (and options, futures and forward contracts on
foreign currencies) that are not directly related to a Fund's principal business
of investing in stock and securities (and options and futures with respect to
stocks and securities). Interest (including original issue discount and, with
respect to taxable debt securities, accrued market discount) received by a Fund
upon maturity or disposition of a security held for less than three months will
not be treated as gross income derived from the sale or other disposition of
such security within the meaning of this requirement. However, any other income
which is attributable to realized market appreciation will be treated as gross
income from the sale or other disposition of securities for this purpose.

Some investments held by a Fund may be subject to special
rules which govern the federal income tax treatment of certain transactions
denominated in terms of a currency other than the U.S. dollar or determined by
reference to the value of one or more currencies other than the U.S. dollar. The
types of transactions covered by the special rules include the following: (1)
the acquisition of, or becoming the obligor under, a bond or other debt
instrument (including, to the extent provided in Treasury regulations, preferred
stock); (2) the accruing of certain trade receivables and payables; and (3) the
entering into or acquisition of any forward contract, futures contract, option
and similar financial instrument. The disposition of a currency other than the
U.S. dollar by a U.S. taxpayer is also treated as a transaction subject to the
special currency rules. With respect to transactions covered by the special
rules, foreign currency gain or loss is calculated separately from any gain or
loss on the underlying transaction and is normally taxable as ordinary gain or
loss. Gain or loss attributable to the foreign currency component of
transactions engaged in by a Fund which are not subject to the special currency
rules (such as foreign equity investments other than certain preferred stocks)
will be treated as capital gain or loss and will not be segregated from the gain
or loss on the underlying transaction.

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<PAGE> 236

The Trust will designate any distribution of long-term capital
gains of a Fund as a capital gain dividend in a written notice mailed to
shareholders within 60 days after the close of the Trust's taxable year.
Shareholders should note that, upon the sale or exchange of such Funds' shares,
if the shareholder has not held such shares for at least six months, any loss on
the sale or exchange of those shares will be treated as long-term capital loss
to the extent of the capital gain dividends received with respect to the shares.

A 4% non-deductible excise tax is imposed on regulated
investment companies that fail to currently distribute an amount equal to
specified percentages of their ordinary taxable income and capital gain net
income (excess of capital gains over capital losses). Each Fund intends to make
sufficient distributions or deemed distributions of its ordinary taxable income
and capital gain net income each calendar year to avoid liability for this
excise tax.

If for any taxable year a Fund does not qualify for federal
tax treatment as a regulated investment company, all of such Fund's taxable
income will be subject to federal income tax at regular corporate rates without
any deduction for distributions to its shareholders. In such event, dividend
distributions (including amounts derived from interest on Municipal Bonds) would
be taxable as ordinary income to the Fund's shareholders to the extent of the
Fund's current and accumulated earnings and profits, and would be eligible for
the dividends received deduction for corporations.

Each Fund may be required in certain cases to withhold and
remit to the U.S. Treasury 31% of taxable dividends or gross proceeds realized
upon sale paid to shareholders who have failed to provide a correct tax
identification number in the manner required, or who are subject to withholding
by the Internal Revenue Service for failure to properly include on their return
payments of taxable interest or dividends, or who have failed to certify to the
Fund that they are not subject to backup withholding when required to do so or
that they are "exempt recipients."

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<PAGE> 237

TRUSTEES AND OFFICERS
---------------------

The trustees and executive officers of the Trust, their
addresses, principal occupations during the past five years, and other
affiliations are as follows:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
POSITION WITH DURING PAST 5 YEARS
NAME AND ADDRESS THE TRUST AND OTHER AFFILIATIONS
- ---------------- --------- ----------------------
<S> <C> <C>
Robert D. Neary* Trustee, President Retired Co-Chairman of
32980 Creekside Drive and Chairman of the Ernst & Young, April 1984-
Pepper Pike, OH 44124 Board September 1993; Director,
Age 63 Cold Metal Products, Inc.,
since March 1994;
Director, Zurn Industries,
Inc. (plumbing products
and engineering and
construction services),
since June 1995.

Thomas R. Benua, Jr. Trustee Chairman, EBCO
564 Hackberry Drive Manufacturing Company and
Westerville, OH 43081 Subsidiaries (manufacture,
Age 51 sale and financing of
water coolers and
dehumidifiers), since
January 1996 and President,
January 1987 to January
1996; Vice President
and Executive Committee
Member of Ebtech Corp.,
(market and sell bottled
and point-of-use coolers)
since March 1991.

Leigh Carter* Trustee Retired President and
13901 Shaker Blvd., #6B Chief Operating Officer,
Cleveland, OH 44120 BFGoodrich Company, August
Age 71 1986 to September 1990;
Director, Adams Express
Company (closed-end investment
company), since April 1982;
Director, Lamson & Sessions
Co.(producer of electrical
supplies for construction,
consumer power and
communications industry),
since April 1991; Director,
Petroleum & Resources Corp.,
since April 1987; Director,
Morrison Products (manufacturer
of blower fans and air
moving equipment), since
April 1983.
</TABLE>

-20-

<PAGE> 238
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
POSITION WITH DURING PAST 5 YEARS
NAME AND ADDRESS THE TRUST AND OTHER AFFILIATIONS
- ---------------- --------- ----------------------
<S> <C> <C>
John F. Durkott Trustee President and Chief
8600 Allisonville Road Operating Officer,
Indianapolis, IN 46250 Kittle's Home Furnishings
Age 51 Center, Inc., since
January 1982; partner,
Kittles Bloomington
Property Company, since
January 1981; partner,
KK&D (Affiliated Real
Estate Companies of
Kittle's Home Furnishings
Center), since January
1989.

Richard W. Furst, Dean Trustee Professor of Finance and
600 Autumn Lane Dean, Carol Martin Gatton,
Lexington, KY 40502 College of Business and
Age 58 Economics, University of
Kentucky, since 1981;
Director, the Seed
Corporation (restaurant
group), since 1990; Director,
Foam Design, Inc.(manufacturer
of industrial and commercial
foam products), since
1993; Director, Studio
Plus Hotels, Inc.,
since 1994.

J. William Pullen Trustee President and Chief
Whayne Supply Company Executive Officer, Whayne
1400 Cecil Avenue Supply Co. (engine and
P.O. Box 35900 heavy equipment
Louisville, KY 40232-5900 distribution), since 1986;
Age 57 President and Chief
Executive Officer,
American Contractors
Rentals & Sales (rental
subsidiary of Whayne
Supply Co.), since
1988.

</TABLE>

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<PAGE> 239

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
POSITION WITH DURING PAST 5 YEARS
NAME AND ADDRESS THE TRUST AND OTHER AFFILIATIONS
- ---------------- --------- ----------------------
<S> <C> <C>
Richard B. Tullis Trustee Chairman Emeritus, Harris
5150 Three Village Drive Corporation (electronic
Lyndhurst, Ohio 44124 communication and
Age 82 information processing
equipment), since October
1985; Director, NACCO
Materials Handling Group,
Inc. (manufacturer of
industrial fork lift
trucks), since 1984;
Director, Hamilton
Beach/Proctor-Silex, Inc.
(manufacturer of household
appliances), since 1990;
Director, Waste-Quip, Inc.
(waste handling
equipment), since 1989.

W. Bruce McConnel, III Secretary Partner of the law firm
Philadelphia National Drinker Biddle & Reath,
Bank Building Philadelphia, Pennsylvania
Broad & Chestnut Sts.
Philadelphia, PA 19107
Age 52

Neal J. Andrews Treasurer Vice President and
PFPC, Inc. Director of Investment
400 Bellevue Parkway Accounting, PFPC, Inc.,
Wilmington, DE 19809 since 1992; prior thereto,
Age 31 Senior Auditor, Price
Waterhouse, LLP

- --------------------
<FN>
* Messrs. Neary and Carter are considered by the Trust to be "interested
persons" of the Trust as defined in the 1940 Act.
</TABLE>

Each trustee receives an annual fee of $7,500 plus $2,500 for
each Board meeting attended and reimbursement of expenses incurred in attending
meetings. The Chairman of the Board is entitled to receive an additional $2,500
per annum for services in such capacity. For the year ended May 31, 1996, the
Trust's trustees and officers as a group received aggregate fees of $69,875. The
trustees and officers of the Trust own less than 1% of the shares of the Trust.

The following table summarizes the compensation for each of
the Trustees of the Trust for the fiscal year ended May 31, 1996:

-22-
<PAGE> 240
<TABLE>
<CAPTION>

Pension or
Retirement
Benefits Accrued
Aggregate as Part of Estimated Total
Name of Compensation the Trust's Approval Benefits Compensation
Person, Position from the Trust Expenses Upon Retirement from the
---------------- -------------- -------- --------------- Trust
-----
<S> <C> <C> <C> <C>
Robert D. Neary, Trustee, $0 $0 $0 $0
President and Chairman

Thomas R. Benua, Jr., Trustee 11,375 $0 $0 11,375

Leigh Carter, Trustee 11,375 $0 $0 11,375

John F. Durkott, Trustee 11,375 $0 $0 11,375

Richard W. Furst, Trustee 11,375 $0 $0 11,375

J. William Pullen, Trustee 11,375 $0 $0 11,375

Richard B. Tullis, Trustee 13,000 $0 $0 13,000

</TABLE>

SHAREHOLDER AND TRUSTEE LIABILITY
- ---------------------------------

Under Massachusetts law, shareholders of a business trust may,
under certain circumstances, be held personally liable as partners for the
obligations of the trust. However, the Trust's Declaration of Trust provides
that shareholders shall not be subject to any personal liability for the acts or
obligations of the Trust, and that every note, bond, contract, order, or other
undertaking made by the Trust shall contain a provision to the effect that the
shareholders are not personally liable thereunder. The Declaration of Trust
provides for indemnification out of the trust property of any shareholder held
personally liable solely by reason of his being or having been a shareholder and
not because of his acts or omissions or some other reason. The Declaration of
Trust also provides that the Trust shall, upon request, assume the defense of
any claim made against any shareholder for any act or obligation of the Trust,
and shall satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Trust itself would be unable to meet its obligations.

The Declaration of Trust states further that no trustee,
officer, or agent of the Trust shall be personally liable for or on account of
any contract, debt, tort, claim, damage, judgment or decree arising out of or
connected with the administration or preservation of the trust estate or the
conduct of any business of the Trust; nor shall any trustee be personally liable
to any person for any action or failure to act except by reason of his own bad
faith, willful misfeasance, gross negligence, or reckless disregard of his
duties as trustee. The Declaration of Trust also provides that all persons
having any claim against the trustees or the Trust

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<PAGE> 241

ADVISORY, ADMINISTRATION, DISTRIBUTION, CUSTODIAN
SERVICES AND TRANSFER AGENCY AGREEMENTS
-------------------------------------------------

ADVISORY AGREEMENT
- ------------------

As described in the Prospectus, National City, National City
Columbus and National City Kentucky serve as investment advisers to the Fixed
Income Fund; and National Asset Management Corporation ("NAM") serves as
investment adviser to the Enhanced Income and Total Return Advantage Funds.
National City alone serves as investment adviser to the GNMA and Intermediate
Government Funds. Prior to September 26, 1990, only National City and National
City Columbus served as advisers to the Fixed Income Fund. The advisers are
affiliates of National City Corporation, a bank holding company with $51 billion
in assets, and headquarters in Cleveland, Ohio and nearly 900 branch offices in
four states. Through its subsidiaries, National City Corporation has been
managing investments for individuals, pension and profit-sharing plans and other
institutional investors for over 75 years and currently manages over $36 billion
in assets. From time to time, the advisers may voluntarily waive fees or
reimburse the Trust for expenses.

Pursuant to the Advisory Agreement, the Trust incurred
advisory fees in the following amounts for (i) the fiscal years ended May 31,
1996, 1995 and 1994: $588,875, $481,437 (after waivers of $12,158) and $601,710
(after waivers of $322,518), respectively, for the Fixed Income Fund; (ii) the
fiscal years ended May 31, 1996 and 1995: $0 (after waivers of $298,505) and $0
(after waivers of $236,026) with respect to the Enhanced Income Fund; and (iii)
the fiscal years ended May 31, 1996 and 1995: $0 (after waivers of $1,545,558)
and $0 (after waivers of $1,176,389) with respect to the Total Return Advantage
Fund.

For the one-month fiscal period ended May 31, 1996, the fiscal
year ended April 30, 1996 and the period from August 10, 1994 (commencement of
operations) through April 30, 1995, Integra Trust Company ("Integra"), the
investment adviser to the Predecessor Intermediate Government and GNMA Funds,
earned advisory fees of (i) $53,654 and $36,971; (ii) $602,602 and $385,463; and

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<PAGE> 242

(iii) $132,372 and 178,282, respectively. Integra waived advisory fees during
the same periods in the amounts of (i) $11,464 and $9,583; (ii) $130,371 and
$107,340; and (iii) $76,919 and $72,352, respectively.

Each Advisory Agreement provides that the advisers 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 performance of the Advisory Agreement,
except a loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the advisers in the
performance of their duties or from reckless disregard by them of their duties
and obligations thereunder. In addition, the advisers have undertaken in their
Advisory Agreements to maintain their policy and practice of conducting their
Trust Departments independently of their Commercial Departments.

The Advisory Agreement relating to the Fixed Income Fund was
approved by the shareholders of the Fund on September 26, 1990. The Advisory
Agreement with respect to the Enhanced Income and Total Return Advantage Funds
was approved by their sole shareholder prior to the Funds' commencement of
investment operations. The Advisory Agreement with respect to the GNMA and
Intermediate Government Funds was approved by their respective sole shareholders
prior to their commencement of operations. Unless sooner terminated, each
Advisory Agreement will continue in effect with respect to each Fund to which it
relates until September 30, 1997 and from year to year thereafter, subject to
annual approval by the Trust's Board of Trustees, or by a vote of a majority of
the outstanding shares of such Fund (as defined in the Fund's Prospectus) and a
majority of the trustees who are not parties to the Agreement or interested
persons (as defined in the 1940 Act) of any party by votes cast in person at a
meeting called for such purpose. Each Advisory Agreement may be terminated by
the Trust or the advisers on 60 days written notice, and will terminate
immediately in the event of its assignment.

If expenses borne by a Fund in any fiscal year exceed expense
limitations imposed by applicable state securities regulations, the Fund's
advisers will reimburse the Trust for any such excess with respect to the Fund
to the extent described in any written undertaking provided by the advisers to
such state. To the Trust's knowledge, as of the date of this Statement of
Additional Information, the most restrictive expense limitation applicable to
the Trust provides that annual expenses (as defined by statute) may not exceed
2.5% of the first $30 million, 2% of the next $70 million and 1.5% of the
remaining average net assets of a particular Fund. Such amount, if any, will be
estimated, reconciled and paid on a monthly basis. The fees banks and NAM may
charge to Customers for services provided in connection with their

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<PAGE> 243

investments in the Trust are not covered by the state securities
expense limitations described above.

ADMINISTRATION AND ACCOUNTING SERVICE AGREEMENT
- -----------------------------------------------

PFPC serves as the administrator and accounting agent to the
Trust. The services provided as administrator and accounting agent and current
fees are described in the Prospectus. Pursuant to the Administration and
Accounting Services Agreement, the Trust incurred the following fees to PFPC for
(i) the fiscal years ended May 31, 1996, 1995 and 1994: $107,068, $89,856 and
$109,402, respectively for the Fixed Income Fund; (ii) the fiscal years ended
May 31, 1996 and 1995: $866,336 and $37,396 (after waivers of $14,882) with
respect to the Enhanced Income Fund; and (iii) the fiscal years ended May 31,
1996 and 1995: $260,951 and $150,557 (after waivers of $55,353) with respect to
the Total Return Advantage Fund.

For the one-month fiscal period ended May 31, 1996, the fiscal
year ended April 30, 1996 and the period from August 10, 1994 (commencement of
operations) through April 30, 1995, SEI Financial Management Corporation, a
wholly-owned subsidiary of SEI Corporation, served as administrator to the
Predecessor Intermediate Government and GNMA Funds and earned the following
fees: (i) $13,797 and $9,507; (ii) $154,955 and $99,119; and (iii) $65,623 and
$52,643, respectively.

DISTRIBUTION PLAN AND RELATED AGREEMENT
- ---------------------------------------

The Distributor acts as distributor of the Funds' shares
pursuant to its Distribution Agreement with the Trust as described in the
Prospectus. Shares are sold on a continuous basis.

Pursuant to Rule 12b-1 of the 1940 Act, the Trust has adopted
a Distribution Plan (the "Plan") which permits the Trust to bear certain
expenses in connection with the distribution of its shares. As required by Rule
12b-1, the Trust's 12b-1 Plan and related distribution agreement have been
approved, and are subject to annual approval by, a majority of the Trust's Board
of Trustees, and by a majority of the trustees who are not interested persons of
the Trust and have no direct or indirect interest in the operation of the Plan
or any agreement relating to the Plan, by vote cast in person at a meeting
called for the purpose of voting on the Plan and related agreement. In
compliance with the Rule, the trustees requested and evaluated information they
thought necessary to an informed determination of whether the Plan and related
agreement should be implemented, and concluded, in the exercise of reasonable
business judgment and in light of their fiduciary duties, that there is a
reasonable likelihood that the Plan and related agreement will benefit the Trust
and its shareholders.

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<PAGE> 244

Rule 12b-1 also requires that persons authorized to direct the
disposition of monies payable by a fund (in the Trust's case, the Distributor)
provide for the trustees' review of quarterly reports on the amounts expended
and the purposes for the expenditures.

Any change in the Plan that would materially increase the
distribution expenses of a Fund requires approval by its shareholders, but
otherwise, the Plan may be amended by the trustees, including a majority of the
disinterested trustees who do not have any direct or indirect financial interest
in the Plan or related agreement. The Plan and related agreement may be
terminated as to a particular Fund by a vote of the Trust's disinterested
trustees or by vote of the shareholders of the Fund, on not more than 60 days
written notice. The selection and nomination of disinterested trustees has been
committed to the discretion of such disinterested trustees as required by the
Rule.

The Trust's Plan provides that each fund will compensate the
Distributor for distribution expenses in an amount not to exceed .10% of such
fund's average net assets. Distribution expenses payable by the Distributor
pursuant to the Plan include direct and indirect costs and expenses incurred in
connection with advertising and marketing a fund's shares, and direct and
indirect costs and expenses of preparing, printing and distributing its
prospectuses to other than current shareholders. The Plan provides that the
Trust will pay the Distributor an annual base fee of $1,250,000 plus incentive
fees based upon asset growth payable monthly and accrued daily by all of the
Trust's investment funds with respect to which the Distributor is distributing
shares.

The Plan has been approved, and will continue in effect for
successive one year periods provided that such continuance is specifically
approved by (1) the vote of a majority of the trustees who are not parties to
the Plan or interested persons of any such party and who have no direct or
indirect financial interest in the Plan and (2) the vote of a majority of the
entire Board of Trustees.

For the fiscal years ended May 31, 1996 and 1995, the Trust
paid the previous distributor, 440 Financial Distributors, Inc. ("440
Financial") a total of $50,496 and $51,163 with respect to the Fixed Income
Fund, $4,453 and $8,805 with respect to the Enhanced Income Fund and $18,798 and
$27,748 with respect to the Total Return Advantage Fund. Of the aggregate amount
paid to 440 Financial by the Trust with respect to the Fixed Income Fund,
approximately $1,310 and $988 was attributable to postage, $1,232 and $3,867 was
attributable to communications with shareholders, $40,090 and $36,019 was
attributable to advertisement/promotions and $7,864 and $10,289 was attributable
to general compensation to 440 Financial. Of the aggregate amount paid to 440
Financial by the Trust with respect to the Enhanced Income Fund, approximately

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<PAGE> 245

$0 and $102 was attributable to postage, $0 and $2,364 was attributable to
communications with shareholders, $0 and $1,088 was attributable to
advertisement/promotions and $4,453 and $5,251 was attributable to general
compensation to 440 Financial. Of the aggregate amount paid to 440 Financial by
the Trust with respect to the Total Return Advantage Fund, approximately $0 and
$340 was attributable to postage, $0 and $3,319 was attributable to
communications with shareholders, $0 and $3,801 was attributable to
advertisement/ promotions and $18,798 and $20,289 was attributable to general
compensation to 440 Financial.

Class A Shares of the Predecessor Intermediate Government and
GNMA Funds were subject to a plan adopted pursuant to Rule 12b- 1 under the 1940
Act (the "Plan"). The Plan provided for reimbursement to the Predecessor Fund's
distributor of the Fund's distribution expenses, including (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 Inventor's shares excluding the distributor's expenses
for travel, communication, compensation and benefits for sales personnel; and
(4) any other expenses reasonably incurred in connection with the distribution
and marketing of Class A shares subject to approval by a majority of
disinterested directors of Integra. For the fiscal years ended April 30, 1996
and for the period from August 10, 1994 (commencement of operations) through
April 30, 1995), the Predecessor Intermediate Government Fund and the
Predecessor GNMA Fund paid $0 and $0, respectively, in 12b-1 fees.

CUSTODIAN SERVICES AND TRANSFER AGENCY AGREEMENTS
- -------------------------------------------------

National City Bank serves as the Trust's custodian with
respect to the Funds. Under its Custodian Services Agreement, National City Bank
has agreed to: (i) maintain a separate account or accounts in the name of each
Fund; (ii) hold and disburse fund securities on account of each Fund; (iii)
collect and make disbursements of money on behalf of each Fund; (iv) collect and
receive all income and other payments and distributions on account of each
Fund's fund securities; (v) respond to correspondence by security brokers and
others relating to its duties; and (vi) make periodic reports to the Board of
Trustees concerning the Funds' operations. National City Bank is authorized to
select one or more banks or trust companies to serve as sub-custodian on behalf
of the Funds, provided that it shall remain responsible for the performance of
all of its duties under the Custodian Services Agreement and shall hold the
Funds harmless from the acts and omissions of any bank or trust company serving
as sub-custodian. The Funds reimburse National City Bank for its direct and
indirect costs and expenses incurred in rendering custodial services, except
that the costs and expenses borne by each Fund in any year may not exceed $.225
for each $1,000 of average gross assets of such Fund.

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<PAGE> 246

State Street Bank and Trust Company the "Transfer Agent")
serves as the Trust's transfer agent and dividend disbursing agent with respect
to the Funds. Under its Transfer Agency Agreement, it has agreed to: (i) issue
and redeem shares of each Fund; (ii) transmit all communications by each Fund to
its shareholders of record, including reports to shareholders, dividend and
distribution notices and proxy materials for meetings of shareholders; (iii)
respond to correspondence by security brokers and others relating to its duties;
(iv) maintain shareholder accounts; and (v) make periodic reports to the Board
of Trustees concerning the Funds' operations. The Transfer Agent sends each
shareholder of record a monthly statement showing the total number of shares
owned as of the last business day of the month (as well as the dividends paid
during the current month and year), and provides each shareholder of record with
a daily transaction report for each day on which a transaction occurs in the
shareholder's account with each Fund.

SHAREHOLDER SERVICES PLAN
-------------------------

As stated in the Prospectus, the Trust has implemented the
Shareholder Services Plan (the "Services Plan" with respect to Retail shares in
each of the Funds. Pursuant to the Services Plan, the Trust may enter into
agreements with financial institutions pertaining to the provision of
administrative services to their customers who are the beneficial owners of
Retail shares in consideration for the payment of up to .25% (on an annualized
basis) in the case of the Fixed Income Fund, Total Return Advantage, GNMA and
Intermediate Funds, and .10% (on an annualized basis) in the case of the
Enhanced Income Fund of the net asset value of such shares. Such services may
include: (i) aggregating and processing purchase and redemption requests from
customers; (ii) providing customers with a service that invests the assets of
their accounts in Retail shares; (iii) processing dividend payments from the
Funds; (iv) providing information periodically to customers showing their
position in Retail shares; (v) arranging for bank wires; (vi) responding to
customer inquiries relating to the services performed with respect to Retail
shares beneficially owned by customers; (vii) forwarding shareholder
communications; and (viii) other similar services requested by the Trust.
Agreements between the Trust and financial institutions will be terminable at
any time by the Trust without penalty.

PORTFOLIO TRANSACTIONS
----------------------

Pursuant to their Advisory Agreement with the Trust, National
City, National City Columbus and National City Kentucky are responsible for
making decisions with respect to and placing orders for all purchases and sales
of Fund securities for the Fixed Income Fund. Pursuant to its Advisory Agreement
with the Trust,

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<PAGE> 247

NAM is responsible for making decisions with respect to and placing orders for
all purchases and sales of fund securities for the Enhanced Income and Total
Return Advantage Funds. Pursuant to its Advisory Agreement with the Trust,
National City alone is responsible for making decisions with respect to and
placing orders for all purchases and sales of fund securities for the GNMA and
Intermediate Government Funds. The advisers purchase Fund securities either
directly from the issuer or from an underwriter or dealer making a market in the
securities involved. Purchases from an underwriter of Fund securities include a
commission or concession paid by the issuer to the underwriter and purchases
from dealers serving as market makers may include the spread between the bid and
asked price. Transactions on stock exchanges involve the payment of negotiated
brokerage commissions. There is generally no stated commission in the case of
securities traded in the over-the-counter market, but the price includes an
undisclosed commission or mark-up.

For the fiscal years ended May 31, 1996 and 1995, the Fixed
Income and, Enhanced Income Funds did not pay any brokerage commissions. For the
fiscal year ended May 31, 1996, the Total Return Advantage Fund did not pay any
brokerage commissions and for the fiscal year ended 1995, the Fund paid $14,093
in brokerage commissions.

For the one-month fiscal period ended May 31, 1996 and the
fiscal year ended April 30, 1996, the Predecessor GNMA and Intermediate
Government Funds did not pay any brokerage commissions.

While the advisers generally seek competitive spreads or
commissions, they may not necessarily allocate each transaction to the
underwriter or dealer charging the lowest spread or commission available on the
transaction. Allocation of transactions, including their frequency, to various
dealers is determined by the advisers in their best judgment and in a manner
deemed fair and reasonable to shareholders. The primary consideration is prompt
execution of orders in an effective manner at the most favorable price. Subject
to this consideration, dealers who provide supplemental investment research to
the advisers may receive orders for transactions by a Fund. Information so
received is in addition to and not in lieu of services required to be performed
by the advisers and does not reduce the fees payable to them by the Funds. Such
information may be useful to the advisers in serving both the Trust and other
clients, and, similarly, supplemental information obtained by the placement of
business of other clients may be useful to the advisers in carrying out their
obligations to the Trust.

Fund securities will not be purchased from or sold to the
Funds' advisers, the Distributor, or any "affiliated person" (as such term is
defined under the 1940 Act) of any of them acting

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<PAGE> 248

as principal, except to the extent permitted by the SEC. In addition, a Fund
will not give preference to its advisers' correspondents with respect to such
transactions, securities, savings deposits, repurchase agreements and reverse
repurchase agreements.

While serving as advisers to the Trust, National City,
National City Columbus and National City Kentucky have agreed to maintain their
policy and practice of conducting their Trust departments independently of their
Commercial Departments. As adviser to the Enhanced Income and Total Return
Advantage Funds, NAM has similarly agreed to maintain its policies and the
practices of conducting its investment management activities independently of
the Commercial Departments of all banking affiliates. In making investment
recommendations for the Trust, personnel will not inquire or take into
consideration whether the issuer of securities proposed for purchase or sale for
the Trust's account are customers of the Commercial Department. In dealing with
commercial customers, the Commercial Department will not inquire or take into
consideration whether securities of those customers are held by the Trust.

The Trust is required to identify any securities of its
"regular brokers or dealers" during its most recent fiscal year. At May 31,
1996, (a) the Total Return Advantage Fund held Prudential Insurance corporate
bonds with a value of 5,557,838 and maturing on July 15, 2015; (b) the Enhanced
Income Fund held a (i) Merrill Lynch Home Equity Loan, Series 1992-1, Class A
security in the amount of $975,519 and maturing on January 1, 1998, (ii) a
Merrill Lynch Trust, Series 10, Class B security in the amount of $876,015 and
maturing on November 1, 2000 and (iii) a Prudential Home Mortgage Securities
Co., Series 1993-14, Class A-12 security in the amount of $265,778 and maturing
on May 14, 1997. Prudential Insurance, Prudential Home Mortgage Securities Co.,
Merrill Lynch and Merrill Lynch Trust are considered "regular brokers or
dealers" of the Trust. Prudential-Bache Securities is the parent of Prudential
Insurance and Prudential Home Mortgage Securities Co. and Merrill Lynch, Pierce,
Fenner & Smith, Inc. is the parent of Merrill Lynch and Merrill Lynch Trust.

Investment decisions for each Fund are made independently from
those for the other Funds and for other investment companies and accounts
advised or managed by the advisers. Such other Funds, investment companies and
accounts may also invest in the same securities as such Fund. When a purchase or
sale of the same security is made at substantially the same time on behalf of a
Fund and another investment company or account, the transaction will be averaged
as to price, and available investments allocated as to amount, in a manner which
the advisers believe to be equitable to the Fund and such other investment
company or account. In some instances, this investment procedure may adversely
affect the price paid or received by a Fund or the size of the position obtained
or

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<PAGE> 249

sold by such Fund. To the extent permitted by law, the advisers may aggregate
the securities to be sold or purchased for a Fund with those to be sold or
purchased for other investment companies or accounts in order to obtain best
execution.

AUDITORS
--------

Ernst & Young LLP, independent auditors, with offices at Two
Commerce Square, 2001 Market Street, Suite 4000, Philadelphia, Pennsylvania
19103, serve as independent auditors of the Trust. The financial statements, as
of and for the period ended May 31, 1996 for the Fixed Income, Enhanced Income
and Total Return Advantage Funds, which are incorporated by reference in this
Statement of Additional Information, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report referred to elsewhere herein,
and are included in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.

COUNSEL
-------

YIELD AND PERFORMANCE INFORMATION
---------------------------------

Each Fund's "yield" described in the Prospectus is calculated
by dividing each Fund's net investment income per share earned during a 30-day
period (or another period permitted by the rules of the SEC) by the net asset
value per share on the last day of the period and annualizing the result on a
semi-annual basis by adding one to the quotient, raising the sum to the power of
six, subtracting one from the result and then doubling the difference. Each
Fund's net investment income per share earned during the period is based on the
average daily number of shares outstanding during the period entitled to receive
dividends and includes dividends and interest earned during the period minus
expenses accrued for the period, net of reimbursements. This calculation can be
expressed as follows:

a-b 6
Yield = 2 [(------) - 1]
cd + 1

Where: a = dividends and interest earned during the
period.

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<PAGE> 250

b = expenses accrued for the period (net of
reimbursements).

c = the average daily number of shares
outstanding during the period that were
entitled to receive dividends.

d = maximum offering price per share on the last
day of the period.

Each Fund calculates interest earned on debt obligations held
in its fund by computing the yield to maturity of each obligation held by it
based on the market value of the obligation (including actual accrued interest)
at the close of business on the last business day of each 30-day period, or,
with respect to obligations purchased during the 30-day period, the purchase
price (plus actual accrued interest) and dividing the result by 360 and
multiplying the quotient by the market value of the obligation (including actual
accrued interest) in order to determine the interest income on the obligation
for each day of the subsequent 30-day period that the obligation is in the Fund.
The maturity of an obligation with a call provision is the next call date on
which the obligation reasonably may be expected to be called or, if none, the
maturity date. With respect to debt obligations purchased by a Fund 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 such debt obligations.

For the 30-day period ended May 31, 1996, the yields of the
Retail and Institutional shares of the Fixed Income Fund, Enhanced Income Fund
and Total Return Advantage Fund were 5.40% and 5.86%, 5.45% and 5.64%, and 6.43%
and 6.93%, respectively.

For the 30-day periods ended May 31, 1996 and April 30, 1996,
the yields of the Predecessor GNMA and Intermediate Government Funds were 5.62%
and 6.05%, and 6.21% and 5.55%, respectively.

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<PAGE> 251

Each Fund computes its average annual total return by
determining the average annual compounded rate of return during specified
periods that would equate the initial amount invested to the ending redeemable
value of such investment by dividing the ending redeemable value of a
hypothetical $1,000 initial payment by $1,000 and raising the quotient to a
power equal to one divided by the number of years (or fractional portion
thereof) covered by the computation and subtracting one from the result. This
calculation can be expressed as follows:

ERV 1/n
T = [(-----) - 1]
P

Where: T = average annual total return

ERV = ending redeemable value at the end of the
period covered by the computation of a
hypothetical $1,000 payment made at the
beginning of the period

P = hypothetical initial payment of $1,000

n = period covered by the computation, expressed
in terms of years

ERV
(-----) - 1
P

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<PAGE> 252

The average annual total returns for the Fixed Income Fund's
one year period ending May 31, 1996 were (0.41)% (after taking the sales load
into account) and 3.44% (without taking into account any sales load), for its
Retail shares and 3.79% for its Institutional shares. The average annual total
returns since the Fixed Income Fund's commencement of operations through May 31,
1996 were 6.90% (after taking into account the sales load) and 7.53% (without
taking into account any sales load), for its Retail shares and 7.77% for its
Institutional shares. The Fixed Income Fund commenced operations on December 20,
1989.

The average annual total returns for the Enhanced Income
Fund's one year period ending May 31, 1996 were 2.22% (after taking the sales
load into account) and 5.13% (without taking into account any sales load), for
its Retail shares and 5.36% for its Institutional shares. The average annual
total returns since the Enhanced Income Fund's commencement of operations
through May 31, 1996 were 4.12% (after taking into account the sales load) and
5.84% (without taking into account any sales load), for its Retail shares and
5.91% for its Institutional shares. The Retail share class of the Enhanced
Income Fund commenced operations on September 9, 1994 and the Institutional
share class of the Enhanced Income Fund commenced operations on July 7, 1994.

The average annual total returns for the Total Return
Advantage Fund's period ending May 31, 1996 were (0.15)% (after taking the sales
load into account) and 3.74% (without taking into account any sales load), for
its Retail shares and 4.22% for its Institutional shares. The average annual
total returns since the Total Return Advantage Fund's commencement of operations
through May 31, 1996 were 5.05% (after taking into account the sales load) and
7.41% (without taking into account any sales load), for its Retail shares and
8.07% for its Institutional shares. The Retail share class of the Total Return
Advantage Fund commenced operations on September 6, 1994 and the Institutional
share class of the Total Return Advantage Fund commenced operations on July 7,
1994.

The average annual total return for the Predecessor
Intermediate Government Fund's one-month fiscal period ending May 31, 1996 and
one year period ending April 30, 1996 were (4.20%) and 2.78% (after taking the
sales load into account) and (0.19%) and 7.09% (without taking into account any
sales load). The average annual total return since the Predecessor Intermediate
Government Fund's commencement of operations through the one-month fiscal period
ending May 31, 1996 and April 30, 1996 were 4.06% and 4.38% (after taking into
account the sales load) and 6.46% and 6.91% (without taking into account any
sales load). The Predecessor Intermediate Government Fund commenced operations
on August 10, 1994.

The average annual total returns for the Predecessor GNMA
Fund's one-month fiscal period ending May 31, 1996 and one

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<PAGE> 253

year period ending April 30, 1996 were (4.32%) and 3.68% (after taking the sales
load into account) and (0.35%) and 7.97% (without taking into account any sales
load). The average annual total returns since the Predecessor GNMA Fund's
commencement of operations through the one-month fiscal period ending May 31,
1996 and April 30, 1996 were 5.46% and 5.95% (after taking into account the
sales load) and 7.89% and 8.52% (without taking into account any sales load).
The Predecessor GNMA Fund commenced operations on August 10, 1994.

The Funds may also from time to time include in Materials a
total return figure that is not calculated according to the formulas set forth
above in order to compare more accurately a Fund's performance with other
measures of investment return. For example, in comparing a Fund's total return
with data published by Lipper Analytical Services, Inc., CDA Investment
Technologies, Inc. or Weisenberger Investment Company Service, or with the
performance of an index, a Fund may calculate its aggregate total return for the
period of time specified in the advertisement or communication by assuming the
investment of $10,000 in shares and assuming the reinvestment of each dividend
or other distribution at net asset value on the reinvestment date. Percentage
increases are determined by subtracting the initial value of the investment from
the ending value and by dividing the remainder by the beginning value. A Fund
does not, for these purposes, deduct from the initial value invested any amount
representing sales charges. A Fund will, however, disclose the maximum sales
charge and will also disclose that the performance data do not reflect sales
charges and that inclusion of sale charges would reduce the performance quoted.

The Funds may also from time to time include discussions or
illustrations of the effects of compounding in Materials. "Compounding" refers
to the fact that, if dividends or other distributions on a Fund investment are
reinvested by being paid in additional Fund shares, any future income or capital
appreciation of a Fund would increase the value, not only of the original Fund
investment, but also of the additional Fund shares received through
reinvestment. As a result, the value of the Fund investment would increase more
quickly than if dividends or other distributions had been paid in cash.

In addition, the Funds may also include in Materials,
discussions and/or illustrations of the potential investment goals of a
prospective investor, investment management strategies, techniques, policies or
investment suitability of a Fund, high-quality investments, economic conditions,
the relationship between sectors of the economy and the economy as a whole,
various securities markets, the effects of inflation and historical performance
of various asset classes, including but not limited to, stocks, bonds and
Treasury securities. From time to time, Materials may summarize the substance of
information contained in shareholder reports (including the investment
composition of a

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<PAGE> 254

Fund), as well as the views of the advisers as to current market, economic,
trade and interest rate trends, legislative, regulatory and monetary
developments, investment strategies and related matters believed to be of
relevance to a Fund. The Funds may also include in Materials charts, graphs or
drawings which compare the investment objective, return potential, relative
stability and/or growth possibilities of the Funds and/or other mutual funds, or
illustrate the potential risks and rewards of investment in various investment
vehicles, including but not limited to, stocks, bonds, Treasury securities and
shares of a Fund and/or other mutual funds. Materials may include a discussion
of certain attributes or benefits to be derived by an investment in a Fund
and/or other mutual funds (such as value investing, market timing, dollar cost
averaging, asset allocation, constant ratio transfer, automatic accounting
rebalancing, the advantages and disadvantages of investing in tax-deferred and
taxable investments), shareholder profiles and hypothetical investor scenarios,
timely information on financial management, tax and retirement planning and
investment alternatives to certificates of deposit and other financial
instruments. Such Materials may include symbols, headlines or other material
which highlight or summarize the information discussed in more detail therein.

MISCELLANEOUS
-------------

The Trust bears all costs in connection with its organization,
including the fees and expenses of registering and qualifying its shares for
distribution under federal and state securities regulations. All organizational
expenses are amortized on the straight-line method over a period of five years
from the date of commencement of operations.

As used in the Prospectus, "assets belonging to a Fund" means
the consideration received by the Trust upon the issuance of shares in that
particular Fund, together with all income, earnings, profits, and proceeds
derived from the investment thereof, including any proceeds from the sale of
such investments, any funds or payments derived from any reinvestment of such
proceeds, and a portion of any general assets of the Trust not belonging to a
particular Fund. In determining a Fund's net asset value, assets belonging to a
particular Fund are charged with the liabilities in respect of that Fund.

The following shareholders beneficially owned 5% or more of
the outstanding Institutional shares of the Enhanced Income Fund as of September
11, 1996:

-37-

Percentage of
Number of Outstanding
Institutional Institutional
Enhanced Income Fund Shares Shares
- -------------------- ------------- -------------
<S> <C> <C>
Denison University Operating
Fund 996,776.640 14.51%
Attn: Seth H. Patton
Granville, OH 43023

Whayne Supply Co. 837,778.770 12.19%
Attn: Ora Nell Burke
P.O. Box 35900
Louisville, KY 40232

Key Trust Company 553,780.664 8.06%
FBO SLHA Endowment
P.O. Box 94870
Cleveland, OH 44101

Hayes Utley & Associates 463,853.350 6.75%
Insurance Agency
6100 Dutchmans Lane
Louisville, KY 40205
</TABLE>

The following shareholders beneficially owned 5% or more of
the outstanding Institutional shares of the Total Return Advantage Fund as of
September 11, 1996:
<TABLE>
<CAPTION>

Percentage of
Number of Outstanding
Total Return Institutional Institutional
Advantage Fund Shares Shares
- -------------- ------------- -------------
<S> <C> <C>
Applachian Regional Healthcare 2,035,778.450 6.93%
Attn: Frank McCracken
1220 Harrodsburg
Lexington, KY 40533

Ferro Corporation 1,999,764.810 6.80%
Mr. Paul Richard
1000 Lakeside Avenue
Cleveland, OH 44114
</TABLE>

-38-

Percentage of
Number of Outstanding
Total Return Institutional Institutional
Advantage Fund Shares Shares
-------------- ------------- -------------
<S> <C> <C>
The Community Foundation of 1,889,987.940 6.43%
Louisville
c/o National City Bank of
Kentucky
101 South Fifth Street,
Trust Division
Louisville, KY 40202

University of Louisville 1,803,287.660 6.13%
Attn: Larry Goldstein
Belknap Campus Service
Complex
Louisville, KY 40292

Appalachian Regional Healthcare 1,513,408.980 5.15%
Attn: Paula Eden
P.O. Box 8086
Lexington, KY 40533
</TABLE>

The following shareholders beneficially owned 5% or more of
the outstanding Institutional shares of the Fixed Income Fund as of September
11, 1996:

<TABLE>
<CAPTION>
Percentage of
Number of Outstanding
Fixed Income Fund Institutional Institutional
- ----------------- Shares Shares
------------- ------------
<S> <C> <C>
Integra Financial Pension 2,497,570.460 20.36%
Plan
National City Bank of
Pennsylvania
400 Fourth Avenue
Pittsburgh, PA 15222
</TABLE>

To the Trust's knowledge, no shareholder beneficially owned 5%
or more of the outstanding Institutional shares of the GNMA Fund or the
Intermediate Government Fund as of September 11, 1996.

The following shareholders beneficially owned 5% or more of
the outstanding Retail shares of the Total Return Advantage Fund as of September
11, 1996:

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<PAGE> 257

Percentage of
Number of Outstanding
Total Return Advantage Fund Retail Shares Retail Shares
- --------------------------- ------------- -------------
<S> <C> <C>
INTRAC 200,556.217 96.252%
Attn. Gary Ream
8840 Woodfield Crossing Boulevard
Indianapolis, IN 46240
</TABLE>

The following shareholders beneficially owned 5% or more of
the outstanding Retail shares of the Fixed Income Fund as of September 11, 1996:
<TABLE>
<CAPTION>

Percentage of
Number of Outstanding
Fixed Income Fund Retail Shares Retail Shares
- ----------------- ------------- -------------
<S> <C> <C>
Wheat First FBO 48,842.377 11.548%
A/C 1252-8594
BF Beverage Company, Inc.
3150 Shelby Street
Indianapolis, IN 46227

INTRAC 96,713.252 22.867%
Attn. Gary Ream
8840 Woodfield Crossing Boulevard
Indianapolis, IN 46240
</TABLE>

The following shareholders beneficially owned 5% or more of
the outstanding Retail shares of the Enhanced Income Fund as of September 11,
1996:
<TABLE>
<CAPTION>

Percentage of
Number of Outstanding
Enhanced Income Fund Retail Shares Retail Shares
- -------------------- ------------- -------------
<S> <C> <C>
Wheat First FBO 31,356.757 15.323%
A/C 1252-8594
BF Beverage Company, Inc.
3150 Shelby Street
Indianapolis, IN 46227

Wheat First FBO 11,848.597 5.79%
A/C 1882--1041
FNB Cust
Harvey M. Brunner Jr. IRA
700 Brick Mill Run Apt. 106
Westlake, OH 44145
</TABLE>

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<PAGE> 258

Percentage of
Number of Outstanding
Total Return Advantage Fund Retail Shares Retail Shares
- --------------------------- ------------- -------------
<S> <C> <C>
INTRAC 151,161.675 73.867%
Attn. Gary Ream
8840 Woodfield Crossing Boulevard
Indianapolis, IN 46240
</TABLE>

The following shareholders beneficially owned 5% or more of
the outstanding Retail shares of the GNMA Fund as of September 11, 1996:
<TABLE>
<CAPTION>

Percentage of
Number of Outstanding
GNMA Fund Retail Shares Retail Shares
- --------- ------------- -------------
<S> <C> <C>
Allmerica Trust Company 3,657.602 31.18%
Cust. FBO
IRA A/C Virginia A. Jasek
1701 Iowa Drive
West Mifflin, PA 15122-3931

Allmerica Trust Company 3,119.304 26.59%
Cust.
For the IRA Account
FBO R/O Helen M. Weyer
2600 Mohawk Drive
White Oak, PA 15131-3121

Allmerica Trust Company 2,082.842 17.75%
Cust.
For the IRA Account
FBO R/O William C. Rodgers
177 C Pennwood Avenue
Pittsburgh, PA 15218-1458

June C. Muraco & Joseph E. 1,441.520 12.29%
Muraco JTTEN
116 Patterson Avenue
Carnegie, PA 15106-2827

Edith De Shantz & Herman H. 982.362 8.37%
De Shantz JTTEN
747 Hampshire Avenue
Pittsburgh, PA 15216-3763

Marsula Electric Inc. 164,000.00 6.85%
575 Angew Road
Greensburg, PA 15601-9701
</TABLE>

The following shareholders beneficially owned 5% or more of
the outstanding Retail shares of the Intermediate Government Fund as of
September 11, 1996:

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<PAGE> 259

Percentage of
Intermediate Number of Outstanding
Government Fund Retail Shares Retail Shares
- --------------- ------------- -------------
<S> <C> <C>
Allmerica Trust Company 2,206.013 100.00%
Cust.
For the IRA Account
FBO William J. Fortwangler
353 Conniston Avenue
Pittsburgh, PA 15210-3231
</TABLE>

FINANCIAL STATEMENTS
--------------------

The audited financial statements contained in the annual
report for the Fixed Income, Enhanced Income and Total Return Advantage Funds
for the fiscal year ended May 31, 1996 are hereby incorporated herein by
reference. Copies of the annual report may be obtained by calling the Trust at
1-800-622-FUND or by writing to the Trust at 440 Computer Drive, Westborough,
Massachusetts 01581.

The financial statements for the Predecessor GNMA and
Intermediate Government Funds for the fiscal period May 1, 1996 through May 31,
1996 and for the fiscal year ended April 30, 1996 and the periods prior thereto
are contained in those Funds' Annual Reports to Shareholders (the "Financial
Statements") which have been filed with the Securities and Exchange Commission
and are incorporated into this Statement of Additional Information by reference.
The financial Statements and the information included in the Financial
Highlights tables for the same periods which appear in the Funds' prospectuses
have been audited by Coopers & Lybrand L.L.P., independent accountants for the
Predecessor GNMA and Intermediate Government Funds, whose reports thereon appear
in such Annual Reports. The Financial Statements in such Annual Reports have
been incorporated by reference herein and in the Funds' Prospectuses in reliance
upon the reports of said firm of independent accountants given upon their
authority as experts in accounting and auditing.

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<PAGE> 260

APPENDIX A
----------

DESCRIPTION OF RATINGS

CORPORATE LONG-TERM DEBT RATINGS
- --------------------------------

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

"AAA" - This designation represents the highest rating
assigned by Standard & Poor's to a debt obligation and indicates an extremely
strong capacity to pay interest and repay principal.

"AA" - Debt is considered to have a very strong capacity to
pay interest and repay principal and differs from "AAA" issues only in small
degree.

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

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

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

"BB" - Debt has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.

"B" - Debt has a greater vulnerability to default but
currently has the capacity to meet interest payments and principal repayments.
Adverse business, financial or economic conditions will likely impair capacity
or willingness to pay interest and repay principal. The "B" rating category is
also used for debt

A-1

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